KCI Case study

1. Prepared by:
Victoria Gnatoka
RBS, Riga, March 26, 2013

2. Porter’s 5
force analysis
External
analysis
Internal
analysis
SWOT
History of KCI
Problem
definition and
alternatives
Strategy selection
and
implementation

4. $131 million revenues in 2009
900 employees
Operates out of 12 states
Provides consulting, engineering and
environmental construction
management services

5. Founded in 1955 in Baltimore County, Maryland
In 1977 and in 1987 the company was purchased
In 1988 iniciated employee buyout and became a
majority employee-owned company
In 1998 became 100% employee-owned

16. Political and Legal Forces
• Tenders are highly regulated and government projects are very price-sensitive.
Economical Forces
• Engineering skills are already in short supply in many regions creating pressure on
labour costs.
•The economic downturns affect the industry very much.
Global Forces
• Rapidly increasing numbers of engineers from Asia and India in the global workforce,
who work at lower cost.

17. Social Forces
• Demand for engineering services is growing rapidly and the human capital with the
correct skills is in short supply.
• Flexible high school education system.
• Young engineers can not compete on a global level.
Technological Forces
• Infrastructure is aging, and needs renovation.
• Technology development.

20. Capital productivity through deferred federal and state tax
payments;
Employee productivity through increased motivation as a part
of the ESOP;
Experience accumulated over 50 years;
Broad range of management capabilities and expertise in each
discipline;
Full-service management – provides clients with a single
resource for all their engineering and surveying needs related to
building and infrastructure projects.

21. Chosen by customers not on low bid but on qualifications;
Provides customer oriented compliance services because of:
 Vast knowledge of federal and state laws and environmental
regulations;
 Perfect and various technical skills;
 Analytical abilities;
A high qualified team of GIS experts, database analysts,
enterprise system architects, programmers, technicians;
Supported by state-of-art hardware and software

22. Project managers serve as an extension to the owners staff;
Can offer customers better design and budget by:
 Identifying potential problems ahead;
 Providing effective solutions;
 Considering technical and budgetary alternatives;
 Anticipating and avoiding future disputes;
 Improving maintainability, operability and reliability

23. Innovative constructing process and methods for:
 Design-bid-build delivery system
 Public-private partnership
Cost effective strategies grounded in sound science;
Top-high qualified team of environmental scientists and
engineers in-house:
 Ensures scientific approach to subsurface, geophysical investigations,
soil/water permitting, environmental compliance;
 Specializes in environmental and land use planning, terrestrial and
aquatic assessment, wetland creation and mitigation design, stream
restoration, permitting, fish passage design, environmental
construction management

24. Differentiation and narrow specialization for
each project
Helping to lower costs for customers through
efficient processes and scientifically based
technologies
Word of mouth and references from previous
projects

25. Effective capital productivity and employee
commitment to the company
Effective use of newest scientific achievements
in compliance with superior quality to meet
best customer needs and expectations
Unique capabilities in each discipline company
is operating in

26. Strengths Weaknesses
Company’s 50 years experience and
reputation
Commitment to innovation
Strong position in public sector
Intellectual capital: employees knowledge
and expertise
Quality-focused , customer-oriented
company
Low ROCE (5-6%)
80% of revenues comes from public
sector
Business processes are not standardized
Very technical marketing
Opportunities Threats
Create partnerships and expand in US and
abroad
Aging infrastructure could create demand
for KCI services
Move to private sectors
Capture new talents from emerging
economies
High competition within the industry
Reduced governmental and private sector
spending
Price sensitive customers
Competitors creates partnerships and
alliances

27. Regions are very protective of their resources
and don’t think for the good of the company
Employees do not quite understand the need in
coming reorganization
Economic uncertainty

28. How to keep business sustainable
in changing environment

29. Change the company structure from geographical to
discipline based
Pros
HQ is already functioning discipline based
Accounting is discipline based
Shared resources for the whole company
Cons
Services provided are very local
Might loose the local presence

30. Seek for new markets outside US
Pros
Growth potential with current partners
Can use current services virtually
Cons
Different legislation in different countries
Also other markets are mature

31. Grow by acquiring competitors
Pros
Natural growth of market share
Getting experienced employees
Cons
Different company cultures
Load to financial resources

32. Current market share of
KCI is ~0.2% - no risk to
become dominating
Can reduce company’s
overheads
Services require local
presence
Easy way to get additional
experienced resources
Mixed approach, but mostly growing by
acquiring competitors

33. “Just announced that our stock price increased by 14% in 2012”
“Industry is recovering: 427 out of 500 firms reported domestic
profits with 256 firms reporting increasing backlog”
“We had our best year in the last ten with revenues hitting $146
million and record profits”
“Our biggest changes were the acquisitions of two firms, one in
Texas and one in South Carolina”