D ECISION FOR A SME S TRATEGIC A NALYSIS OF A M ARKET E NTRY C ONFRONTING A C ORPORATE C HALLENGE : A

MASTER THESIS A BUSINESS-SOLVING PROJECT

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ONFRONTING A

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ORPORATE

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HALLENGE

:

A

S

TRATEGIC

A

NALYSIS OF A

M

ARKET

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NTRY

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ECISION FOR A

SME

“Do the Internal Capabilities of a SME fit with the needs of a new

market?”

by

GEARTSJE VAN LINGEN

University of Groningen Faculty of Economics and Business MSc BA Small Business and Entrepreneurship

Preface

With the completion of this master thesis, my Master of Business Administration, with a specialization in Small Business & Entrepreneurship, has come to an end. My intention of this thesis was to apply my theoretical knowledge that I have acquired the last five years to an actual firm. The concept of strategy has always sparked my interest, and thus I was very pleased to perform a strategic analysis for a SME. Also, I wanted to shed a different light on a small business, a theoretical approach to analyze the firm thoroughly which enables a firm to make strategic decisions. I found the challenge to balance theory and practice interesting and also extremely relevant for my own future as this is what I intend to do after university, be active in the management team of a small business and engage in strategic decision-making.

Abstract

This research attempts to bridge the gap between literature and practice by creating a strategic analysis model for a small firm. This business solving project concerns a SME confronted with the challenge to enter a new market. With the help of the resource-based view a strategic fit analysis was performed to see if the firm can be successful with its pre-entry resources and capabilities. Despite the fact that in the beginning it seemed difficult for this firm to obtain a sustainable competitive advantage, the strategic analysis provided valuable insights for this SME, than can strengthen its position in the new market. By focusing on those capabilities that hold competitive superiority or contribute to the markets strategic industry factors, the firm can increase its competitive position in the new market.

Key words: Strategic Analysis, SME, Market Entry, RBV, Internal Organization, External Environment, Market Development, Strategic Fit, Sustainable Competitive Advantage

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ABLE OF

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ONTENT 1 Introduction ... 6 1.1 Company Overview ... 7 1.2 Problem Description ... 8 1.2.1 Targeted Market ... 8 1.2.2 Research Formulation ... 10 1.3 Research Approach ... 10 2 Literature Review ... 13 2.1 Internal Analysis ... 13 2.1.1 Strategy Development ... 14

2.1.2 Resource-Based View & SMEs ... 15

2.1.3 Resources and Capabilities ... 17

2.2 External Analysis ... 18

2.2.1 Rivalry ... 18

2.2.2 Barriers to Entry ... 19

2.2.3 Selection Systems ... 20

2.2.4 Strategic Industry Factors ... 21

2.3 Assessment of Strategic Fit ... 22

2.3.1 Importance of Pre-Entry & Required Resources & Capabilities ... 22

2.3.2 Strategic Fit Framework ... 23

2.3.3 Key Capabilities ... 25

2.4 Conceptual Research Model ... 27

3 Methodology ... 28

3.1 Data Collection ... 28

3.1.1 Respondent Selection ... 29

3.2 Data Analysis ... 29

3.3 Validity and Reliability ... 30

4 Analysis & Discussion ... 31

4.1 Internal Analysis ... 31

4.1.1 Strategy development ... 31

4.1.2 Firm heterogeneity of resources ... 33

4.1.3 Capabilities ... 35

4.1.4 Lack of resources and capabilities ... 36

4.1.5 Selected Cases from the Target Market ... 37

4.2.1 The Cases ... 38

4.2.2 The Market ... 44

4.2.3 Rivalry ... 44

4.2.4 Barriers to Entry ... 47

4.2.5 Selection System ... 48

4.2.6 Strategic Industry Factors ... 49

4.3 Strategic Fit ... 51

4.4 Evaluation of Market Opportunity ... 55

5 Conclusions & Recommendations... 59

5.1 Concluding Remarks ... 59

5.2 Recommendations ... 61

5.3 Academic and Managerial Contribution ... 62

6 References ... 63

7 Appendices ... 68

7.1 Conceptual Research Plan ... 68

7.2 Interview Questions Linked to Theory ... 69

List of tables

1 Cases Previous Industrial Projects 11

2 Additional External Sources 12

3 Internal Interviews 12

4 General Characteristics of SIFs (Amit & Schoemaker, 1993) 21

5 Competitiveness Tests (Rangone, 1999) 26

6 Sources of Information for Conceptual Model 29

7 Verkley’s Resources and Capabilities 33

8 Capabilities of Verkley 35

9 Verkley’s added Value in Selected Cases 37

10 Overview of External Perception of Verkley’s Capabilities 43

11 Competition in the New Market 45

12 Selectors for Previous Industrial Projects 49

13 SIFs of the Market 50

14 Key Capability’s Matrix 53

15 Outcome Competitive Tests 55

16 Interview Questions Linked to Theory 68

List of figures

1 Desired Market Entry 9

2 Ansoff’s Matrix of Product-Market Strategies (Ansoff, 1957) 14

3 Porter’s Five Forces Model (Porter, 1979) 18

4 The Resource Tree (Rangone, 1999) 24

5 Strategic Fit Framework 25

6 Key Capabilities Matrix 25

7 Conceptual Research Model for Entering a New Market 27

8 Verkley’s Strategic Fit Framework 52

1

I

NTRODUCTION

Firms operating in today’s market place are confronted with challenging circumstances as it appears difficult to maintain and improve sales, market share, and profitability (Lonial & Carter, 2015). In times of economic downturn every firm has to make strategic decisions to survive. Especially small firms, who do not have as many resources as large firms do in order to deal with severe drops in demand. Small Medium Enterprises (SMEs) can not acquire new market share as easily as large firms, due to its limited product lines or services, or unfamiliar reputation, nor can it benefit from internal scale economies (Dean, Brown, & Bamford, 1998). Strategic literature falls short in providing useful frameworks for small firms to apply when facing difficult decisions. Therefore, a strategic analysis framework will be developed.

To be successful, managers have to identify and understand the factors that affect firm performance. This is particularly important for SMEs as they have to cope with limited resources and have to invest wisely. Resource-based theorists have argued that a firm’s unique portfolio of tangible and intangible resources influences the rate and direction of a firm’s expansion (Mishina et al., 2004). This indicates the difference between two major literature streams in determining a firm’s competitive advantage. There are two views on sources of competitive advantage. The first view is the industry structure view which is often associated with Porter (1980). This view is mainly concerned with the structural characteristics of the external environment and the firm’s relative position in the industry. (Dyer & Singh, 1998). The second view, the resource-based view (RBV), focuses on firm heterogeneity rather than industry structure (Barney, 1991; Rumelt, 1984, 1991; Wernerfelt, 1984; Dyer & Singh, 1998). Besanko et al. (2013) argue that a firm’s profitability is determined by a firm’s market and the firm’s position in that market. Hence, small firms have to find a way to evaluate opportunities themselves by taking into account the external environment as well as their own resources.

strategic fit analysis to deliver strategic decision-making advice. This chapter will first provide a company description to give more insight into the current status of Verkley and the way it wants to develop. Then, the problem situation will be outlined specifically to indicate what needs to be taken into account as the main research objective. Lastly, the research approach will be discussed.

1.1

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OMPANY

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VERVIEW

Verkley, located in Drachten and active in the north of the Netherlands, began their business of installing cables and pipelines in 1964. Over the span of 50 years it has grown to become a specialist in underground infrastructure as well as above the surface, both in large infrastructural projects and small-scale connections in residential areas. The company is not searching for a wider geographical market place to operate in, but rather aims to improve their position in the current market and increase business similar activities in new markets.

Verkley is an expert in installing new cable and pipeline networks and renovating existing ones. They can offer modifications, maintenance activities and repairs on the network according to high standards due to the operations for the utility sector, which requires the highest quality control norms. When exceptional or difficult situations are faced, Verkley especially has the appropriate experience and equipment to circumvent obstacles. Besides the operational qualities and expertise, there is a highly educated and experienced workforce of engineers who are very involved throughout the projects from design to execution. Unlike most of their competitors, Verkley obtains specialized people from every discipline. These features together provide a unique quality of Verkley, that they have all the required people in-house, and can provide customized solutions for many problems. Additionally, Verkley has the right certificates to work with medium and low voltage cables and possesses technologies which are usually too heavy or too expensive for installers and electricians, for instance specific drilling equipment. Its small size compared to competitors could be seen as a disadvantage, however, it also facilitates the ability to react quickly to customer demands, and contributes to the speed and flexibility of their operations. Due to the experience they have gained in the utilities sector they have a lot of expertise to offer for other sectors. They can serve as a central coordinator of the facilitation of a complete underground network, thinking ahead and preventing future problems that lead to lower costs in the long run for customers. Its most valuable skills are expertise, professionalism and efficiency.

forced the firm to downsize. The firm decided to focus on their core business, the installation of large cable and pipeline networks for utility related firms. In addition, it aims for business development, which implies the search for new markets where to offer similar activities. The firm does not aim for high diversification in its activities as this strategy was followed in the past and the firm had to face financial difficulties having trouble meeting its financial obligations. However, little is known about potential customers outside its current field. Some of its current customers or partners are also active in fields, which seem to be interesting for Verkley as well as they have been involved in some projects. As previously mentioned in the introduction , the main objective of Verkley is to create more work using their existing operational resources.

1.2

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ROBLEM

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ESCRIPTION

Verkley wants to decrease the vulnerability of their current position in which they are very much dependent on the few large players and contracts in the market. Therefore, it aims to explore engaging in this new market more. The firm is interested in identifying its role in a new market and how to position itself accordingly. Additionally, what the obstacles will be in trying to enter this market and if the existing players are willing to cooperate or if it is better to approach the end-customers? Do potential customers experience trouble with how the underground work is done currently? Verkley is willing to innovate or adjust if that is what the market requires, however, they need better knowledge of the market in order to decide whether it is worth the investment.

1.2.1TARGETED MARKET

In an article from Brooks (1995), the importance of the correct market definition is emphasized, as it is not always obvious which stakeholders are involved in a new market. Firms producing similar products do not necessarily have to be competitors if they, for instance, target a different customer group. Therefore, the market needs to be described to examine the relevant stakeholders and their roles. Industries consist of firms producing similar products, while markets are defined as sets of customers served by sets of suppliers, where both sets are defined in terms of products and services and geographic location (Brooks, 1995).

specialized and able to perform in the most efficient way. Therefore, they need to be involved earlier and become known amongst important players.

The activities they are currently performing are related to the required utility services in the industrial construction sector. Also, they can provide cable or pipeline networks for a facility’s own distribution network. For instance, a dairy factory needs to distribute the milk all over the facility. Other potential opportunities are perceived in sustainable solutions, which could be seen as a niche in numerous industries. This implies that developments in its existing market could as well be applied in the ‘new’ market. Additionally, maintenance and management could be a potential niche market, which needs to be researched. Another concept the firm intends to initiate in this market is ‘park-management’, which implies a long-term relationship with the end-customer or other stakeholders to manage all the networks (e.g. energy, water, data, other cables and pipelines) outside the actual building. This symbolizes a ‘design, build, and maintenance concept (operate & finance could also be included), to deliver more value to and unburden customers. Accordingly, it is very important to be knowledgeable about the main players in this market as relationships are crucial. Figure 1 symbolizes the perceived market opportunity.

FIGURE 1 – DESIRED MARKET ENTRY

2) Pipelines for own distribution: These activities consist of the additional efforts Verkley could perform in the new market, not related to utility services. Private pipeline networks are also an existing activity of Verkley but not something directly related to the activities they perform in their current market. The combination of the utility services and private pipeline networks creates a specific advantage for Verkley as it can deliver a complete package as an underground network facilitator.

3) Sustainable solutions: Represents an additional market potential, which Verkley could (if this exists) contribute to due to its highly skilled workforce of engineers. Verkley is interested if there is a demand for such a niche but, do customers really aim for sustainability? Is it a good opportunity to chase after?

4) Maintenance: Similar to the sustainable solutions, maintenance and management for a long-term period is an opportunity perceived by the firm which needs more research in order to be seen as feasible. In contrast to their current ‘project-based’ activities, and thus short-term, this enables a longer working relationship with customers.

1.2.2RESEARCH FORMULATION

According to the firm’s current situation, a strategic analysis of the perceived opportunity will be very valuable. The central question of this research will be:

Can Verkley be successful in competing in a new market?

In order to answer this question several sub-questions arise. What are the firm’s vision, key resources and capabilities?

What are the characteristics of the most important actors, competitive processes and resources and capabilities needed to operate in construction in the industrial sector?

Do the resources and capabilities of Verkley fit with the need of the new market?

What is the strategic value of Verkley’s performance and can it create a (sustained) competitive advantage in the target market?

These research questions will be addressed in different sections of this strategic analysis. Relevant literature will aid to set up a framework for these questions.

1.3

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ESEARCH

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PPROACH

external perspective on the fact that Verkley is targeting this new market. Subsequently, the framework will be applied to analyze the market opportunity for strategic fit and eventually, evaluate the strategic fit between the firm’s internal factors with the needs of the new market. Five cases were identified to analyze the activities performed by Verkley in the target market in the past, directly or indirectly. Insights will be derived on how the firm was previously involved in projects and what their position was in the course of events. These cases concern projects related to the industrial sector which were not generated by actively seeking opportunities in this market but due requests from external stakeholders. Hence, the assumption is made that possibly there is a lot more value to obtain from these type of projects. These cases provide an opportunity to see which qualities of Verkley are valuable and moreover, which factors play an important role. A case selection is provided in Table 1. Within these case studies, several interviews will be conducted with the most important stakeholders.

Project Industry Project description Contact person

I Frisia Zout B.V., Harlingen (2007) A salt processing factory

Verkley is involved with many maintenance projects and the installation of new pipeline.

Tjeerd Tjeerdema – Frisia, final customer

Ex1 II Suikerunie, Hoogkerk (2011) A sugar processing factory

Verkley has been involved on a small scale for mainly drilling activities and larger cables and pipes.

Sybren Kroles – VIB, contractor Ex2 III REC Omrin, Harlingen (2011) An incineration factory

Greenfield construction project of an industrial factory where Verkley did all the engineering and execution of the cables and pipes related to the factory’s own production.

Lammert de Graaf – Jorritsma, contractor Ex3 IV Friesland Campina, Leeuwarden (2012) A dairy processing factory

Verkley has aimed to gain some projects here as a sub-contractor but has not succeeded yet.

Willem Iedsma – Friesland Campina, final customer Ex4 V Aware & Fonterra, Heerenveen (2014) A dairy processing factory

Verkley was approached to solve problems with the in-door installation of large cables in a new factory.

Alex van Dalen – Beenen, contractor

Ex5

Further, other important industry participants which have been working with Verkley in previous projects or might be interesting to cooperate in the future will also be interviewed. This broadens the boundaries of what is defined as ‘the market’, as not all kinds of participants will be represented by the five cases. These stakeholders are presented in Table 2. The first one is considered interesting due to its current relationship with Verkley and possible overlapping business. The second one is interesting as it is an intermediary, mediating between firms in the dairy industry, using its own network of relationships and acquaintances. The third one is interesting because it involves an employee of Verkley who is currently posted within Campina for the completion of an energy-related project, which is related to the construction of a new factory.

Company Activities Interviewee

Faber Construction company Minko Schat Ex6

Jongsma Solutions Agency company in dairy industry Wietze Jongsma Ex7 Friesland Campina/Verkley A posted employee of Verkley Henk Haanstra Ex8

TABLE 2 – ADDITIONAL EXTERNAL SOURCES

Internal research regarding the firm’s strengths and weaknesses will provide insight on the possibilities of Verkley and what they can offer. The activities Verkley is able to perform in these industrial projects is the design and building of gas-, water-, electricity-, and data-networks, as well as a network of pipes for the distribution of the industrial facility’s own products, e.g. water for cooling, dairy, salt, etc. The market opportunity analysis needs to indicate whether the activities of Verkley are valuable to the market. Internal interviews will be conducted to obtain insight in the core competences of Verkley and how this best suits with the new market potential.

Interviewee Position within the firm

Erik Blauw CEO In1

Douwe Tijsma CFO In2

Nanne de Vries COO In3

Wierd Kuipers Engineer / Project Manager In4

Jos Peterson Project Manager In5

2

L

ITERATURE

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EVIEW

This strategic analysis attempts to build a framework in order to ease decision making for the specific managerial challenge of an SME attempting to enter a new market. When analyzing a market opportunity, a firm’s decision is affected by its own strengths as well as the features of the market. Due to a broad range of issues and restraining implications that SMEs are facing, strategic decision making can be very complex. A strategic advice for approaching the new market needs to be developed. This can involve either entering or refraining from entering the market, depending on which investment considerations are made. When there is an opportunity to expand business, a market opportunity analysis is an instrument that determines the feasibility of entering or expanding operations in particular markets for goods and/or services. Besides judging the availability of capabilities needed to pursue the opportunity, it also helps to provide information needed to successfully attract and serve customers and outperform competitors (Golicic, McCarthy, & Mentzer,2003). As situations for both the internal and external environment of a firm constantly change, it is a challenge to manage opportunities successfully (de Wit & Meyer, 2004). Relevant topics from strategy literature will be applied to build a framework specifically designed for this case study.

This chapter is structured as follows: The first section will cover the relevant literature to perform an internal analysis, focusing the importance of the vision of the firm and its boundaries followed by the firm’s core competences, resources and capabilities from a resource-based perspective. Then, literature about performing an external analysis will be discussed, using Porter’s Five Forces Model as a starting point, but adapting his findings for this particular situation in which there is an emphasis on barriers to entry and the selectors. As a result, the Strategic Industry Factors will be identified by this approach. Next, the strategic fit will be assessed, judging whether the organization and environment fit together and if it could lead to a strong competitive position. Lastly, based on the key capabilities that result from the fit analysis recommendations will be given regarding which investment decisions should be made.

2.1

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NTERNAL

A

NALYSIS

2.1.1STRATEGY DEVELOPMENT

In order to assess the attractiveness of the business opportunity, the strategic path the firm intends to follow needs to be clear. It is important that the opportunity also contributes to the firm’s strategic goals. First, the vision the firm has for the market opportunity needs to be framed. Secondly, the firm boundaries reflect the possibilities in terms of firm growth, either sales or employees.

Vision

The main question that should be the foundation for every firm’s vision is: What must we do differently next year to get closer to our strategic intent? as was formulated by Hamel and Prahalad (1989). Strategic intent is described as the desired leadership position and the criteria the firm will use to achieve this. For a strategic analysis this subject is crucial as it is a guide for all the decisions the firm will face. Also, in a situation such as this, it is important that a new opportunity will fit with the vision that management has developed for the firm. A vision aids managerial decisions concerning which products and markets should and should not have resources invested in it (Schoemaker, 1992). Thus, it is important to outline the firm’s strategic intentions and growth aspirations. When companies are seeking a new market to enter into in order to achieve business growth, there are several strategies that can be utilized in this decision making process. Ansoff’s matrix (1957) presents four different product-market strategies, which are each considered a statement of a product line and the corresponding mission which the products are formed to accomplish (Figure 2).

FIGURE 2 – ANSOFF’S MATRIX OF PRODUCT-MARKET STRATEGIES

product-market strategy, product-market development, is perceived as a possible direction of the firm for the target market and therefore, the market opportunity analysis will concern this subject.

Firm Boundaries

Defining a firm’s boundaries is essential when considering a new market entry as it illustrates what is inside the firm regarding its resources and activities. Firm boundaries are often described as dynamic because they change over time due to, for instance, technological changes (Afuah, 2001) or changing market conditions. Regarding an SMEs small size, it is also important to keep in mind the possibilities in terms of organizational growth, as this affects the decision in which resources to invest in. Instead of internal growth, using external entities for generating resources might be a profitable or less risky alternative for firms, and hence, a better option when its resources are scarce. A positive feature of the small scale is that the SME has the capability to adapt relatively quickly to changing customer needs and changing environments (Levy & Powell, 1998).

An article by Jewell, Flanagan, and Lu (2014) addresses the issue of scale and scope for construction professional service (CPS) firms, and the key influences impacting different types of growth. Verkley offers both knowledge intensive activities, which are core activities for a CPS firm (Jewell et al., 2014), as well as the final execution of projects. The characteristics of CPS firms perfectly apply to Verkley as their activities are usually: location-specific; often client-led; highly customized output; extrinsic demand; project-based; heterogeneous; and knowledge-intensive (Jewell et al., 2014). While these specific details about a CPS firm are very applicable, the firm does not aim for extensive growth in the long-term, as it intends to remain a relatively small firm, it is interesting to know what the limit for growth is. A CPS firm can include several multidimensional specializations such as architecture, engineering, environmental services, geotechnical engineering, landscape architecture, urban planning, and surveying (Lu, Ye, Flanagan, & Jewell, 2013). Diversification possibilities exist in services, markets, geographic markets, or a combination of any of these for CPS firms, aiming for the highest revenues and profitability derived from its resources. For an SME, it is highly important to set the boundaries for these diversification options, as it has to decide how to allocate its resources carefully. A firm can be creative in terms of acquiring knowledge or resources from outside the firm if it does not own it itself. By making efficient use of the market, a small firm can benefit from the economies of scale the market is able to produce. Therefore, an SME is capable of competing with larger integrated firms, and hence, overcoming the negative effects of its smallness.

2.1.2RESOURCE-BASED VIEW &SMES

opportunities and threats as the source of gaining high levels of firm performance. However, some authors have criticized that in this view, the external market has received too limited attention (Priem & Butler, 2001; Ngo & O’Cass, 2012). More recent literature also emphasized the demand side of the firm and the concept of value, as a firm’s capacity to generate value for its customers is crucial (Barney, 2001; Priem & Butler, 2001, Mol & Wijnberg, 2011). Nevertheless, RBV continues to focus on achieving a superior competitive position for a firm, by selecting, choosing or poaching strategic resources. (Adegbesan, 2009; Capron & Chatain, 2008; Makadok, 2001; Rao & Drazin, 2002; Mol & Wijnberg, 2011)

The resource-based view is particularly useful for SMEs because they possess fewer resources than their larger competitors. Since they are resource constrained, focusing on how to exploit those limited resources efficiently and effectively is highly important, but yet, still little exists in literature regarding how they cope with that (Runyan, Huddleston, & Swinney, 2007). The lack of resources can be hindering but may also create a clear focus for the small firm, as it has to concentrate on the limited resources it has.

In literature little attention has been paid to SMEs and how its management should support a strategic analysis (Rangone, 1999) and consequently, how a SME has to make its investment decisions. This is a crucial aspect as a SME usually only has limited funding available. Yet, resources, which are non-economic and immobile, may benefit the small firms most (Runyan et al., 2007). Small firms operating in relatively benign environments are able to survive with inferior resources. But, in order to excel as a firm or to compete in hostile environments, a firm’s resources or capabilities need to be superior (Covin & Slevin, 1989; Runyan et al., 2007).

2.1.3RESOURCES AND CAPABILITIES

The uniqueness of a firm’s resources is a central concept in the resource-based view and is crucial for determining the firm’s competitiveness. Therefore, it is of strategic importance for a firm’s management to identify, develop, protect and deploy resources and capabilities in a way that it contributes to a firm’s sustainable competitive advantage (Amit & Schoemaker, 1993). Various scholars define the core concepts, resources and capabilities, differently, but for this research, the interpretation of Amit and Schoemaker (1993) is applied. Resources are described as stocks of available factors that are owned or controlled by the firm. Examples of resources are physical assets, human, financial (internally generated funds), or organizational resources (including external relationship networks), skills, know-how and competencies, brand and reputation (Rangone, 1999; Grant, 1991; Hall, 1992). Capabilities refer to a firm’s capacity to make use of or combine these resources in the organizational process to influence the desired outcome of that process (Amit & Schoemaker, 1993). These can be tangible or intangible processes developed over time and can be seen as ‘invisible assets’ (Amit & Schoemaker, 1993). With their bundle of resources and capabilities, firms aim to be successful and, in this case specifically, expand into a new market. To achieve this successfulness, the resources and capabilities need to possess some strategic value. The concept of strategic value will be described in detail in chapter 2.3 on Strategic Fit. The firm’s strategic assets or resources are defined as the set of difficult to trade and imitate, scarce, appropriable and specialized resources and capabilities that lead to a competitive advantage (Amit & Schoemaker, 1993).

2.2

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XTERNAL

A

NALYSIS

The central belief of the so-called industry structure is that long-term profitability is achieved from optimally understanding and coping with the external environment. Therefore, now that the internal perspective of achieving a firm’s competitiveness has been discussed, a focus will be on the important features of the targeted market, which affect the applicability of a firm’s internal qualities.

Porter’s (1979) introduction of the Five Forces Model (Figure 3) had a great impact on this stream of literature that stresses the importance of the environment and is still a very influential model. This external analysis will be tailor-made for this firm in this particular situation. Hence, Porter’s Model will be taken into account as a starting point, but only the relevant aspects will be discussed along with additional theoretical findings on entry barriers and selectors. Thus, the aim of linking these theories is to find the sources of competitiveness according to the market, which will be defined as the Strategic Industry Factors (SIFs) (Amit and Schoemaker,1993).

FIGURE 3 – PORTER’S FIVE FORCES MODEL

2.2.1RIVALRY

Porter (1979) described strategy as a way to deal and cope with competition, consisting of more than the established rivalry in the industry. Besides the regular competitors who offer similar products or services, also buyers, suppliers, substitutes and competitors are included in the Five Forces Model. He argued that the intensity of these forces determines a firm’s competitiveness and profitability (Porter, 1979). For this paper’s analysis each force will be evaluated for its appropriateness. In this particular case the bargaining power of suppliers is assumed to be irrelevant to take into consideration, as it is not strong enough. Suppliers of cables and pipes do not have unique products to offer, and thus, have little power. As well for substitutes and new products or services, considering the scope of this research it is impossible to consider every future threat or future development, so it will not be taken

into account. However, industry rivalry is seen as a strong force, which requires some in-depth research for this analysis. The existing competition and the buyers seem to have a large role, in the new market. Due to the fact that the competitive environment consists of a relatively small group of larger competitors, they have a lot of market power. More knowledge about existing competitors and their position in the market increases the firm’s understanding and assessment of the market opportunity. A comparison among competition also indicates what resources and capabilities are required or are rare and may be highly valuable. Hence, it is important to know how competitors behave and how they compete. This information contributes to the market opportunity analysis to see if it is worth it to invest time and money in targeting this market. For instance, will there be more than one project per year? Additionally, the threat of new entrants is considered relevant as the firm aims to be an entrant itself and needs to know how accessible the market is. Therefore, the barriers to entry will be discussed. Another way to examine the dynamics of the competitive environment is by looking at the selection systems present in that market. The selection system will be applied to investigate the bargaining power of the buyers and also, the influence of other selectors. After all, the goal of entering a new market is to target a new group of buyers.

When Porter (1979) is referring to industry rivalry, he is addressing multiple external effects influencing the competitive behavior of a firm. When this paper addresses rivalry, it only implies the competition Verkley has to face in the new market. The goal of this paper is not only to find out the forces of industry rivalry, but to find out what is required in this market and if Verkley is able to compete in that environment.

2.2.2BARRIERS TO ENTRY

severely impeding for a new firm in the market, as the existing distribution network might not be interested in working with new firms.

An important factor that is addressed by Pehrsson (2009) is the impact of barriers on entry timing. He argues that “Once a new competitor has entered the market, it is difficult to match the performance of the incumbents due to extensive customer loyalties established previously. For the entrant firm, this creates severe obstacles to customer access, hence, they face extensive obstacles, increased barriers.” The author suggests that the strategy of the firm should be adjusted for the barriers that it faces in the new market. The target market is not a new one, and thus, the existing ties that have already been formed could be an obstacle for a new firm. If it appears that the barriers in the market are extremely low, the firm has to realize that competition might increase severely due to other firms entering as well.

2.2.3SELECTION SYSTEMS

The selection system provides a description of the way in which winners are distinguished from the losers (Gemser & Wijnberg, 2002). To increase the chance of being successful in entering a new market, the entrant firm needs to find out which actors in the market are crucial in terms of value creation. Awareness of how value is generated and also interpreted by other players in the market is needed to understand a competitive process (Mol & Wijnberg, 2007). If a firm is truly convinced it has something valuable to offer the firms in the industry, but this value is not recognized by anyone, it makes no sense to enter that market. By creating value it engages in the competitive process in that particular market (Wijnberg, 2004). A framework of the selection system was developed to describe and analyze the characteristics of the actors who are being selected, the actors who are selecting (the selectors), and the nature of relations between both groups (Wijnberg, 2004). The distinction between who selects and who is being selected is related to who has the strongest market power. In the end it is all about who provides the work for the contractors. Wijnberg (2004) suggests three different types of selection systems, traditional (market) selection, peer selection, or expert selection. In reality it appears that there is usually a particular mix of these different types. These selection systems are important to realize as it determines who has to be contacted or targeted in order to achieve competitive success.

Söhnchen & Albers, 2010). Taking into account the selection system theory leads to a focus on those specific actors who are important in order to be selected for projects.

Further, this theory addresses an important link with the internal analysis, concerning the examination of resources and, how these are evaluated and rewarded. A critical issue from the resource-based view is the identification of value, which is crucial but not clearly explained (Mol & Wijnberg, 2011). Something that is perceived as valuable by the firm but not by the market will not benefit the firm. Therefore, the desired result from this external analysis is an identification of the factors that are considered valuable by important stakeholders.

2.2.4STRATEGIC INDUSTRY FACTORS

When the important rivals, entry barriers and selectors are identified, the SIFs of this market will be recognized. These indicate what is highly valued in this industry and can initiate success in this market. Eventually, an organization’s success depends on a match with these SIFs and its own strengths (Vasconcellos & Hambrick, 1989; Amit & Schoemaker, 1993). Amit and Schoemaker (1993) argue that certain heterogeneous resources and capabilities can become SIFs, which are then the prime determinants of economic rents. They are determined at the market level through complex interactions among the firm’s competitors, customers, regulators, innovators external to the industry and other stakeholders (Amit & Schoemaker, 1993; p36). Some general characteristics of SIFs are outlined in Table 4. In the end it is all about creating value for the customers (Mol & Wijnberg, 2011), which will be represented by these SIF’s.

General characteristics of strategic industry factors (SIF)

1 Determined at the market level through complex interactions among industry rivals, new entrants, customers, regulators, innovators, suppliers, and other stakeholders

2 Strategic in that they are subject to market failures and may be the basis for competition among rivals

3 The bundle of SIF changes over time and is not known ex ante

4 Development takes time, skill, and capital, they may be specialized to particular uses 5 Investments in them are largely irreversible (e.g. entail sunk costs)

6 Their value to any particular firm may depend on its control of other factors – the complementarity property. For instance the value of a firm’s product design capability may depend upon the effectiveness of its distribution network.

7 Not all aspects of their developments and interactions will be known or controllable

2.3

A

SSESSMENT OF

S

TRATEGIC

F

IT

After discussing the internal organization and external environment and its important aspects, their interaction needs to be assessed. In strategic literature, the concept of ‘fit’ is considered fundamental as it comes from the initial strategy paradigm of aligning organizational resources with environmental opportunities and threats (Venkatraman & Camillus, 1984) and is fundamental for competitive advantage and high performance (Amit & Schoemaker, 1993; Miller, 1996; Pehrsson, 2009). These authors address two distinct conceptualizations of strategy, the process or content of strategy. The process of strategy reveals how a strategy is developed, the process of aligning patterns (Venkatraman & Camillus, 1984). Content of strategy refers to what has to be done, in terms of fit, it means focusing on the strategic actions needed to match those different environmental conditions. Before a firm can focus on the content of fit, the process of fit needs to be completed. As the resource-based view discusses the internal qualities like competitive advantages, strategic fit aims for an extended view where the firm’s resources and capabilities should be appropriate for the external environment. Strategic fit is defined as the situation in which the internal and external elements relevant for a company are in line with each other and with the corporate strategy.

Amit and Schoemaker (1993) also addressed the complementarity of the resource-based view and the industry analysis framework for determining a firm’s profitability. Even though a firm might possess valuable assets, as mentioned by the resource-based view previously, it will not always be an indicator for success as their applicability and relevance ultimately depends on the complex interaction with the requirements of the market (Amit & Schoemaker, 1993). Therefore, it is crucial to discuss the overlapping and missing factors between the internal and external analysis.

2.3.1IMPORTANCE OF PRE-ENTRY &REQUIRED RESOURCES &CAPABILITIES

& Lieberman, 2002). Furthermore, firms have to also decide what kind of product or service they want to offer that distinguishes them from current competitors. The possibilities for diversifying firms mentioned by the authors are entering new related or unrelated markets, geographic expansion, new market niches or new industries (Helfat & Lieberman, 2002). The relationship between diversifying firms and their resource-base was already discussed by Penrose (1995). She found that firms learn over time and become more efficient in using their resources. Besides, they tend to enter industries requiring resources similar to the firm’s pre-entry resource and capability profiles. Moreover, Teece et al. (1994) point out that the opportunity perceived by firms to enter a new, either related or unrelated, market is often emerging because of the availability of excess resources. Compared to new enterprises, existing firms usually obtain a larger base of resources and capabilities, which could also be deployed in other markets. Hence, Helfat and Lieberman (2002) found that diversifying entrants with relevant pre-entry experience tend to perform better than other entrants, not only regarding initial success of entry but also long-run survival rates and market shares. However, it might be challenging to point out the set of relevant pre-entry resources that will be most useful in the new market (Carroll, Bigelow, Seidel, & Tsai, 1996; Helfat & Lieberman, 2002). Moreover, it is important to note that although previous experience is highly beneficial for post-entry success, firms which have been successful in the past should be cautious not to overlook potential critical gaps in their resource base (Helfat & Lieberman, 2002).

2.3.2STRATEGIC FIT FRAMEWORK

FIGURE 4 – THE RESOUCE TREE (RANGONE, 1999)

Rangone (1999) suggests that firms explicitly or implicitly, consciously or unconsciously put the strategic focus on one or more of the three generic capabilities. Studying a firm’s resources and capabilities according to these three generic ones, provides a better view on the strengths of the firm and where its focus lies. Rangone’s model is slightly adjusted for this specific strategic analysis, where the key performances will be referred to as SIFs from now on. The SIFs indicate what factors are critical according to the market. In this way, a better evaluation of a match and potential adjustments can be made. The definitions of the generic capabilities according to Rangone (1999) are provided below.

- Innovation capability: the ability to develop new products and processes, and achieve superior technological and/or management performance (e.g., development cost, time-to-market, etc.) - Production capability: the ability to produce and deliver products to customers, while ensuring

competitive priorities, such as quality, flexibility, lead time, cost, dependability, etc.

- Market management capability: the ability to market and sell its products effectively and efficiently (e.g., customer loyalty)

FIGURE 5 – STRATEGIC FIT FRAMEWORK

The adjusted model (Figure 5) shows the model that will be applied for this strategic analysis. First, the perceived strategic focus regarding the generic capability the firm is pursuing, like innovation, production or marketing management needs to be established. This should be done both by an internal and an external perspective, as it indicates if both have the same understanding of the market and what is important. Second, the SIFs should be determined and applied to the model. SIFs can be either specific capabilities or resources or other important indicators for success. Third, the resources and capabilities possessed by Verkley should be incorporated in the model. Lastly, the critical resources and capabilities of the firms will be checked for their match with the requirements of the market (Figure 6).

FIGURE 6 – KEY CAPABILITIES MATRIX

2.3.3KEY CAPABILITIES

capabilities, which was addressed by Helfat and Lieberman (2002). However, if only capabilities that suit this definition would be included, the firm risks to ignore other potentially valuable capabilities. Therefore, also the capabilities that are a misfit between the external and the internal analysis will be included to see if they hold any strategic value. A capability with strategic value that is present within the company might be something that can be adjusted or redeveloped in order to fit with the market needs. In that way a new strategic capability can be created. On the contrary, a crucial factor, which is required in the target market but not available within the firm could be an option for investment. Since the firm wants to stay close to its core business, the factor has to be evaluated for its suitability with existing practices and available resources. These capabilities could be crucial for a sustainable success in the market, thus, worthwhile to invest in.

Thereafter, the tests of strategic value will provide an indication of which capabilities, fit or misfit, carry strategic value for the firm and hence, should be invested in. As not all resources contribute significantly to a firm’s competitive advantage, a firm’s resources need to be assessed for their strategic value. Barney (1991) makes a distinction between a competitive advantage and a sustained competitive advantage. He explains a competitive advantage as a value creating strategy, which is not simultaneously implemented by a current or potential competitor. When a value creating strategy is implemented by a firm that is also not able to be duplicated by competitors, it is said to have a sustained competitive advantage (Barney, 1991). Determination of those critical resources can be achieved by performing certain ‘tests’ specifically developed by multiple researchers (Barney, 1991; Wernerfelt, 1989; Zahra & Das, 1993; Amit & Schoemaker, 1993; Collis & Montgomery, 1995; Mahoney & Pandian, 1992; Porter, 1991; Grant, 1991; Prahalad & Hamel, 1990) and the most important ones selected by Rangone (1999) (Table 5). Finding the strategic value of the firm’s capabilities assists in evaluating the market opportunity in terms of how the firm and the target market complement each other.

Test Explanation

Competitive superiority

Evaluates if and to what extent the resource contributes to differentiating the company from its competitors

Imitability Analyzes actual and potential competitors’ difficulty in imitating the resource, due, for example, to its physical uniqueness, path dependency, casual ambiguity or economic deterrence

Duration Measures if the resource’s benefits will also be generated in the long term Appropriability Verifies if the company owning the resource is able to exploit the generated

advantages in the market

Substitutability Assesses how difficult it is for competitors to replace the resource with an alternative that gives the same advantages

Up till now, these theoretical concepts have facilitated how a model can be developed to perform a strategic analysis. Subsequently, decisions can be made involving the content of strategy, which will lead to actions that need to be taken in order to actually realize a ‘fit’. For example, expansion of volume, vertical integration or diversification (Venkatraman & Camillus, 1984). Considering that the result of the strategic analysis will most likely not indicate a perfect fit, a way to achieve fit has to be found. Strategic intent does not have to incorporate a perfect fit between resources and opportunities, a misfit challenges the firm to close that gap by building new advantages (Hamel & Prahalad, 1989). The obstacles that need to be overcome will indicate the steps that are needed to bring the organization and the environment together.

2.4

C

ONCEPTUAL

R

ESEARCH

M

ODEL

The goal of the research is to understand the new market and its main actors, and to provide a strategy on whether and how to enter this market. The outline of the theoretical aspects have led to a conceptual research model as shown in Figure 7. This model assists in performing a strategic analysis of a market opportunity, specifically a market-entry decision. The internal analysis gives insight to the firm’s vision, firm boundaries and its resources and capabilities it possesses to operate and be successful in the new market. Basically, it will outline what the firm is good at and what it has to offer. Then, the external analysis will outline what is needed in the market. By investigating the rivalry, barriers to entry and the appropriate selection system, the SIFs will appear. The combination of the internal resources and capabilities, and the SIFs is the foundation of the strategic fit analysis. The alignment between both is crucial in order to be successful in a new market. From this analysis, the key capabilities will arise which can be either capabilities that fit the environment or the ones that still need some development in order to achieve a fit. After the strategic value of these resources and capabilities is tested, an investment decisions can be made.

3

M

ETHODOLOGY

This paper is based on a business-solving problem and is of an exploratory nature. The concepts used for this qualitative research all stem from academic literature. Figure 9 in the appendix 7.1 illustrates how the research was initially formed.

3.1

D

ATA

C

OLLECTION

Collection of data was mainly done by performing field research. By conducting interviews both internally and externally, an in-depth understanding of the situation will be obtained that is required for a strategic analysis. The main objective of the in-depth interviews internally was to find out the desired scale and scope, the strategic intentions, and the key resources and capabilities. The external analysis consists of a market and competitive analysis with inclusion of customers, competitors and potential suppliers or partners. The external stakeholders were interviewed after the internal interviews were performed and, therefore, the interviewees could be confronted with the findings up until that point. This contributed to some discussion and specific definition of the answers. In order to address all the specific aspects of the conceptual model (Figure 7), different groups of interviewees were addressed. These were mentioned in Table 1, 2 and 3 in the introduction. Table 6 below indicates which interviewees contributed to finding answers for the specific sections of the conceptual model. The interviews only covered questions regarding either the internal analysis or the external analysis, however, the information acquired was implemented to the model to find strategic fit (Figure 8, Table 14). Additionally, mainly the internal capabilities were assessed to find the strategic value of the key capabilities (Table 15). Finally, in order to advise substantiated investment decisions, all the sources of information were included to form a deliberate suggestion. The researcher was involved for every aspect of the conceptual model as a continuous evaluation of the usefulness of the information is required. Conceptual Model Interviewees related to previous industrial Projects (Table 1) Additional External Sources (Table 2) Internal interviewees (Table 3) Researcher Internal Analysis X X External Analysis X X X Strategic Fit X X X X Key Capabilities X X Investment Decision X X X X

The interviews were conducted in a semi-structured way consisting of open questions. An interview guide was made in order to make sure that all the theoretical aspects would be included, and is included in appendix 7.3. The main goal was to gather as much information from the interviewees as possible. Hence, during the interviews it was ensured that the interviewees felt free to say things that might not be an answer to a question directly, but might give an indication of how the market and the selection of contractors works. It was assured that all the questions asked were related to the literature as Table 16 in appendix 7.2 indicates. All the questions are linked to the theoretical framework, however, it really depends on the answer the interviewee provides in order to establish to which topic it contributes. It was also taken into account that some questions might be difficult to answer for interviewees unfamiliar with this way of thinking, a strategic way. In order to decrease the respondent bias, the interviews were held in the local language, which is Dutch. This was done to make sure the interviewee felt most comfortable and able to share their ideas and feelings on the case and related questions asked.

3.1.1RESPONDENT SELECTION

The internal data was only collected from the management team of Verkley and two project managers as they have the most relevant insight in strategic issues like this particular situation. For the external analysis, relevant stakeholders from the targeted market were interviewed, but also data from other sources was used. The presented cases in Table 1 were used to identify important stakeholders from the targeted market. It was attempted to only interview people who had been involved with the decision-making process, which succeeded in most cases, except for Project I as the initial selection is many years ago. By interviewing relevant stakeholders from these cases about their opinion about Verkley and the target market a comparison with Verkley’s own perception of the market and its capabilities can be made.

3.2

D

ATA

A

NALYSIS

3.3

V

ALIDITY AND

R

ELIABILITY

4

A

NALYSIS

&

D

ISCUSSION

The internal and external analysis will be presented in different sections, discussing the concepts mentioned in the theoretical framework. This will be followed with a strategic fit analysis, assessing the compatibility of the internal and external factors. Lastly, the market opportunity will be evaluated to see if entering the market can be worth investing in for Verkley.

4.1

I

NTERNAL

A

NALYSIS

This internal analysis is structured according to the literature mentioned in the literature review and aimed to answer the first sub-question “What are the firm’s vision, key resources and capabilities?”. First, some of Verkley’s fundamental factors of strategy development will be discussed. Second, the RBV introduced the relevance of firm heterogeneity for superior firm performance, hence, the focus of the analysis will be on the firm’s resources and capabilities. Last, as this analysis concerns a SME, also the scarcity of resources needs to be dealt with, and how the firm deals with that shortcoming. 4.1.1STRATEGY DEVELOPMENT

Vision

Due to the fact that the developments in Verkley’s existing market are difficult to predict, in terms of volume and continuity a certain amount of contracts need to be generated to maintain a stable organization. This specifically is the main goal of Verkley, maintaining a stable and profitable organization. Entering a new market can offer an extra pillar for the firm, meaning that the existing market should realize a decent profit in order for the firm continue operations, but the new market can provide the ‘icing on the cake’ in terms of financial returns. Instead of international growth aspirations, the firm wants to focus only on the Dutch market, in particular the north of the Netherlands. Verkley’s reason for market expansion is to create an extended customer-base, which enables utilizing excess productive capacity. Additionally, because there will be more than one market to target, also the risks will be spread and the firm will be less dependent on its current customers and market. The firm seems to aim for some form of scale advantages but not scope, as it wants to stick to its core activities.

Verkley aims to obtain a leading position, and become known regarding solving projects that require special attention in terms of engineering and construction. The objective to develop into the best but not the largest will be a long-term objective, The management is in that sense aware of the need for a long-term strategy, but due to the current situation of the firm, which is not yet very stable, the focus remains on a short-term survival strategy. On average the firm constructs plans on a one-to-two-year basis. A rather risk-averse attitude prevails in the organization as it has recently recovered from a period of financial distress, with the help from a new investor providing financial funding. As the firm wants to make progress again in terms of firm development and for profit-seeking reasons, the decision to explore a new market was made. The danger of remaining stuck in ‘business as usual’ is present, resulting from the fact that the firm is in a state right now that the main focus is to survive, instead of going forward. Obviously, every firm wants to ‘go forward’, however, it is about the actual steps that still have to be made. In fact all the practices the firm is performing can be performed by other competitors as well. Nevertheless, somehow the firm has to distinguish themselves to become top-of-mind for decision-makers when considering the industry of assembling underground cable and pipeline networks.

Firm Boundaries

As was mentioned, the firm does not want to be the largest competitor and be competing on price but rather be known for the quality of work it is delivering. Turnover in 2013 was close to 12 million euro which is aimed to increase to approximately 20 million euro over a span of about five years. Unfortunately, this year’s earnings turned out lower than budgeted, a turnover of approximately 11 million euro. The profit earned does not meet the expectations, which management blames to a disappointing turnover1. The current income is perceived as the minimal amount that needs to be yielded. If the firm for instance does not reach the desired turnover next year, it has to somehow scale down again (in terms of employees, like it did when it faced financial distress in the past) in order to become a healthier organization. Obviously, this is not the firm’s first intention, it intends to manage a fixed work force of approximately 100 employees (currently 80), but that is a goal from the current point of view. The management realizes that the situation might be different in two years from now, which could imply that the firm would grow above 100 employees. This depends on the future developments of the firm, if Verkley decides to add a new activity to the scope of services, new personnel could be required. As a construction professional service firm Verkley is aiming for slight diversification in terms of market boundaries, but it intends to maintain close to its current scope of activities. Yet, the firm highly values their flexibility, which should not be endangered due to organizational growth. Operational flexibility stems from the relatively small size of the organization

1 _{One of its larger customers, Alliander, decided not to invest too much in its distribution network this year, but}

and is considered as a valuable attribute. Currently, the firm responds to increased demand by hiring temporary workers through employment agencies.

Regarding the products and services the firm is offering, the scope should stay relatively small, as the firm lacks the resources (financial, organizational, human, etc.) to handle many different products or services. In the past, the firm had engaged in a very large base of relatively divergent activities, which is also perceived by many of the long-term employees as the reason for the financial distress in 2012. Activities that require a complete new set of resources and capabilities are not desired, rather the existing resource base should be applicable to the new market. This again indicates that increasing the scale of activities is important. A larger output is desired, which is a reason for exploring a new market.

4.1.2FIRM HETEROGENEITY OF RESOURCES

Because the resource-based view is central in this strategic analysis, the firm’s resources and capabilities will be outlined. They are displayed in Table 7 below. The structure indicates the different types of resources controlled by the firm and consequently, the capabilities that stem from those resources. The middle row represents the resources, which were defined as stocks of available factors that are owned or controlled by the firm. The right row shows the firm’s capabilities, which refer to a firm’s capacity to make use of or combine these resources in the organizational process to influence the desired outcome of that process. Some capabilities are combinations of different types of resources, and that makes them more valuable as it becomes more difficult to copy. The value assessment of the resources and capabilities will be performed in the section called evaluation of market opportunity, as first the match between the internal and external factors will be measured.

Resources Capabilities

Physical assets The headquarters in Drachten is owned by Verkley and there is another location in

Groningen. Regarding machines, they own three different drilling technique machines, of which one is very unique, called bursting.

All the needed equipment to do the activities of installing cable and pipe networks are possessed by Verkley. This consists of materials that are required in order to operate all kinds of vehicles and tools.

Very experienced with different types of trenchless drilling techniques, which it can perform from designing to the execution. The firm is also able to perform assembling and installation of cable and pipeline networks, also from design to execution (electricity, gas, water, heating, etc).

Human resources

Highly experienced workforce of approximately 80 employees.

Highly educated and experience engineers. Employees of different disciplines (civil,

electronic, and mechanical engineers and experts in the field of gas and geometry), even though they are only a few, every relevant discipline is represented.

people of different disciplines.

Organizational resources

A factor that is not a resource but does influence the capabilities that Verkley developed over the years is the fact that Verkley is a relatively small firm compared to its competitors. The firm is characterized by a flat organization.

Verkley has an effective internal communication network which is supported by internal mailing system and tablets to provide employees with up-to-date information.

Due to having a flat organization and internal communication and control system, the firm is low in organizational complexity that enables being easily approachable for customers and to facilitate quick responses to customers.

Financial resources

Despite of the financial difficulties Verkley had to survive, the fact that a credible investor guarantees the business increases Verkley’s credibility in business. It implies that it is a healthy organization as an investor would not get involved in an unprofitable firm. Thus, having an investor provides support and funds, as the investor is also willing to invest in new opportunities.

A monthly report is sent to the investor which requires close monitoring of the firm’s activities. Combined with the flat

organization, it enables the firm to maintain a high level of control and the outcome of its

performance.

Skills, know-how and competencies

The long-term experience, 50 years active in the business, accumulated to a lot of know-how in their specific field.

The firm operates according to high quality and safety regulations. Also, the firm obtains the required certificates which are obligatory to perform certain activities.

There is a long list of ‘proven activities’ from the CKB, which shows that in its own field, Verkley is able to perform a wide range of activities.

Being flexible due to its small scale and experience. Actions can be taken quickly and if situations shift the firm is able to adjust quickly too. Instead of buying all resources Verkley uses the market efficiently when specific

equipment or people are not possessed.

Brand and reputation

Verkley is a firm that exists for 50 years now, and thus, has a well-known brand name. There seems to be a high customer satisfaction among their regular customer base.

Recently the firm has invested in an improved website, showing they have the potential to be active in different markets.

Due to its long time experience, it has become an expert in the field of cables and pipes and is also recognized for this specific expertise. Because engineering as the execution of a project can be performed, it aims to be an all-round provider of the network installation.