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The main objective of the professional management agency is to provide the right support to the core business operations. It is the objective of a facility management agency to provide this support in a relevant manner, having the precise excellence at a cost which is competitive in the market (Barrett and Baldry, 2003). The chapter encompasses an introduction to the facility management services, an insight into market overview and a detailed analysis of the industry with relevant management models.
2.1 Industry introduction
From the late 1980s, facilities management has steadily secured its foothold as an industry and profession within the facility and construction industry. Twenty years ago, the word facility mostly would seem to mean block in the plumbing but the then pioneers had to persevere hard to gain the credibility which the industry is enjoying today (Eley, 2001). The emergence of FM as a discipline and industry during the late 1980s and early 1990s provided a link between the previously discrete industries of real estate and construction in India (Varcoe 2000). However, facilities management in India is comparatively a new industry in India (Tay and Ooi 2001, Gilleard et al. 1994). The reports of companies developing an assimilated approach of viewing the buildings as a working environment and strategic asset are on the rise (Pitt and Hinks 200). The firm's facility operations cannot exist in strategic isolation if the firm has to efficiently exploit its resources to uphold the delivery of its core services (Amaratunga and Baldry 2002).
Facility management agency in India is a professional company that offers its customers with a dedicated team to solve and maintain their day to day activities and the problems/ issues related with it. Employing a facility management company has the following advantages:
Safe, healthy and secure environment to work for the employees
Improved efficiency in the cost of operation of the facility
Reliable and standardized systems for management of the facility
Improved quality of service
Improved life span of assets and its associated cost of maintenance
2.2 Market Overview
Fig 2.1: Indian facility management market division
Source: International Facility Management, 2008
The facility management industry in India has an enormous capability to generate revenue. The experts have predicted the facility management industry to reach 6 Billion (USD) by the beginning of financial year of 2012 in India. This could be witnessed by the high rise in the number of international facility management agencies who have entered the Indian sub continent market. These agencies are not just confined to metropolitan cities but are also expanding their base in Tier 1 and Tier 2 cities of India. Despite the availability of enormous opportunity in the Indian market, very few agencies are professional and organised in their approach towards facility management. CB Richard has a centralised quality monitoring team which acts as an implementing and governing body for standardised processes in the facilities managed by them in India. Thus it would enable them to have superior professionalism in their approach. The facility management industry in India has also witnessed a rise in the number of joint ventures and acquisitions in the recent past. The major players are particularly interested in such strategies to expand their business. Indian operation of CB Richard Ellis has been purely on solo basis and has not decided to merge its operations with another organisation. This has enabled them to adhere to their centralised approach towards facility management in India.
Fig 2.2: Target audience for facility management industry in India
Source: Researcher, 2010
In India, construction of office buildings with multiple facilities is a trend set up due to its sudden growth in the field of IT industry. IT sector in India has set in motion a chain reaction which enabled in the betterment of internal infrastructure. With improvement in the mall cultures, international schools, increase in the number of manufacturing firms, the growth in the real estate and banking sectors have been the by-product of IT growth in India. For major projects, the buildings are constructed with wide range of facilities like food & beverage, gymnasiums, health centres and other facilities. These projects are also supported by centralized air-cons, uninterrupted power supply, water recycling plants, etc. These office blocks entail the use of high level of management and attention due to the high level of expectation from the company and its employees. An efficient management is important to maintain these buildings in order to avoid high running costs (Chan et al, 2001). A robust maintenance practice is important to compliment the company's functions. Chan et al (2001), also recognises that the facility operations are not clearly visible and generally failed to be noticed by the management. Due to such deficiencies in India much of the manpower is wasted and results in an abysmal planned preventive maintenance schedules which deviates from its actual purpose.
2.4 Industry Trend
With a global economy, swift product cycles, limitation in funds and resources and improvement in the field of technology, a lone company may not have the potential to sustain and improve its stand in the Indian market (Stanek, 2004). The extremely competitive and unpredictable business atmosphere stimulates firms to collaborate with other firms to remain competitive in the market (Varis, 2004). Most of the large scale and mid scale firms are employing professional agencies in their business modules to gain their expertise to improve its competitiveness (Leino, 2004). The fast changing technology and intense competition in the global market has compelled firms to be more flexible and acclimatize faster (Hallikas et al, 2002). This has stimulated companies to form develop close relationship with professional agencies like facility management companies to maintain their day to day activities which provides an improved "value for money". It has triggered the trend of shifting the internal support functions of the firm with the service rendered from an outside professional agency. Thus it gave a shape to the facility management industry in the late 1990s in India (Bochner et al, 2002). This was witnessed by the fact wherein the increased number of builder chose to partnership with professional facility management agencies to provide services of operations and maintenance of the building and its associated systems and also to cater to the requirements of the end users.
2.5 Preiser's POE model
Fig 2.3: Preiser's POE Model
Source: Preiser, W. et al (1991)
The standardisation and globalization of majority of the structures, office blocks, etc. have paved ways for consistent toolkits such as POE models to be conceptualized and implemented in practice (Preiser, 2001). The POE model considers three approaches for its execution (Preiser, 2002). Level 1, indicative phase, of the POE model provides an indication of major success and failure of the building's overall performance. This is executed by an experienced individual who has been exposed and familiarized with the building type. The duration of data collection process is short and the findings are reported formally (Barret and Baldry, 2003). The level 2, investigative phase, follows an approach based on the findings of previous level. Contrasting to the previous level the evaluators relies on more sophisticated data collection techniques to produce results. The evaluators undertake state of art literature reviews and study similar facilities. Thus analysis is made on the reason why the problem has occurred and identifies solutions (Barret and Baldry, 2003). Thus recommendations are suggested to the specific problems that were identified. Level 3, diagnostic phase, not just aims at improving the particular facility being evaluated but also influences the future design of similar facilities. This is a long term process and the results drawn are long term oriented (Turpin-Brooks & Viccars, 2006). Level 2 and level 3 of POE model undertake a thorough extensive study of buildings efficiency and provides increased time commitment for data collection as well as in the data analysing stages (Turpin-Brooks & Viccars, 2006). Thus this model can be used to improve the efficiency of CB Richard Ellis. This would enable them come out with innovative solutions to the clients and also can results in preventive actions in similar facilities. This may aid in fulfilling CB Richard Ellis aim of being an organisation dedicated to be a one-stop solution to real estate and its derivatives.
The variance in cultures among different geographic regions is critical factor and should be dealt effectively while implementing POEs on the similar buildings in different countries which have varied cultural values (Preiser, 2001). Since India is a country with diversified cultural values it is important for CB Richard Ellis to consider this critical factor before implementing this strategic model.
Client organisations with recurring building programmes evidently realise the importance of POE and are prepared to invest on a limited basis in conducting the research (Preiser, 2001). The companies have complex approach and constantly changing requirements due to which varied services may be required. For example, the occupants and governments in the Indian market have pressed on "green life styles" in their day to day activities and operations. They tend to impel the outsourced organisations to follow such activities in their premises (Eley, 2001). By employing POE, CB Richard Ellis could choose the "green policies" that are currently being followed by them in similar facilities in India. This would enable them in developing and implementing strategies which would aim at optimising the resources to deliver increased output in India.
POE is a critical tool which could be used to evaluate a wide range of facility related problems. The productivity of the building and employee satisfaction with the workplace can be acquired using POE model (Tarricone, 1999). This could aid CB Richard Ellis in understanding its efficiency in delivering outputs that was expected from the building by the clients to meet the core business interests. POE model basically can assess the degree of efficiency of the building in delivering the needs and requirements of business (Tarricone, 1999). Thus in case if CB Richard Ellis falls short in delivering the expected outputs it can take necessary corrective measures to reach the desired level. By aiding to the business interest it can be a strategic partner in protecting the core business values of the client in India.
Pultar (2000) says that the important factor for a company building is the attitude of the employees towards it. The POE model emphasizes a great deal on the reaction and experience of the inhabitants of the building and it is one of the critical factors in the process of data collection. This would throw ample light on the issues faced by the employees, thus, in evaluating the performance of the building in supporting the business objectives (Pultar, 2000). CB Richard Ellis can capture the essence of these surveys and take necessary corrective actions to deliver performance oriented results to the clients in India. This would also contribute to improving the efficiency of the employees. Thus, it can be a strategic partner to the client's core business objectives which act as an added incentive to gain competitive advantage in India.
Most of the professional facility management organisations in India carry out regular technical assessments such as efficiency of mechanical instruments, testing the structure, etc at planned intervals. But performance of the building will not be solely contributed by the efficiency of these mechanical and structural elements. These elements act as catalyst in improving the experience of the employee in the building (Preiser and Vischer, 2005). A POE model differs in such aspects as it also addresses subjects such as occupant performance, employee satisfaction and productivity. It is a critical model which binds the human requirement with performance of the building (Preiser, 1995). It would deliver outputs which would guide CB Richard Ellis in orienting itself to serve the Indian market better.
The Preiser's POE does not have a single defined approach. The approaches that needs to be followed are selected and the decision is reached considering the distinctive requirements and purpose of the having the evaluation (Leaman, 2003). The Preiser's POE model can be summarised as follows:
The outcomes and statistics of the evaluation should be able to be matched and compared with the reviews and analysis done in prior
The time factor required to conduct the analysis is minimal
The results are high in quality and content
The applicability to the given situation is very high
The reliability is high as it would deliver similar results when by different individuals in similar situations
It addresses the issues with respect to the activities, requirements and aims of the user who is using the building
2.6 Porter's five forces
From the firm's point of view, the most relevant and important aspect of the competitive environment is the industry in which the firm competes (Ormanidhi & Stringa 2008). The competitive forces acting on the facility management industry in the Indian market would decide the degree of profitability and sustainability of CB Richard Ellis in India. Porter's model of generic competitive strategies is an important synthesis of Porter's research and teaching experience within strategy and industrial economics. Since the publication of this model in 1980, Porter (1998 and 2004) has confirmed his belief that firms should pursue one of his recommended strategies in order to succeed (Ormanidhi & Stringa 2008).
According to Porter (1998), a firm can identify its strengths and weaknesses relative to the actual state of competition by analysing the industry in terms of the five competitive forces. The main argument to support this is that a firm can take offensive or defensive action by knowing the effects of each of the competitive forces and try to insulate itself against the pressure exerted by these forces. Although the first consideration for a firm is to place itself against the competitive forces in a "defendable" position, Porter thinks that firms can affect the competitive forces by their own actions (Ormanidhi & Stringa 2008).
2.6.1 Threat of New Entrants
The threat of new entrants could be classified as relatively high. Previous decade has witnessed many competitors entering the facility management industry in India. The threat of new entrants to an industry would cause the industry to go into a higher capacity and the aim to increase the market share exerts pressure on the firms to modify its pattern of functioning in order to compete (Porter, 2008). This is due to the high potential of the facility management industry and a relatively low initial cost involved. The requirement of high initial capital requirement can deter the new entrants (Porter, 2008). The suppliers would deliver the goods and services with a relatively comfortable credit period which works in favour of the new entrants in India. The industry is in its growth stage and with innovative approach can easily capture the market. The new entrants can use channels such as cost leadership or product differentiation to penetrate the market. The entry barrier and exit barrier being relatively low the industry has high threat from new entrants.
2.6.2 Threat of Substitutes
Threat of substitutes is high for facility management industry in India. A substitute is the one which achieves the identical or similar objectives as the product offered by an industry by different means (Porter, 2003). The internal team of facility management executives is the threat that is largely faced by the facility management industry in India. This may act as a hindrance to the growth of CB Richard Ellis in the Indian market. A high threat of substitutes may result in bringing down the profitability of the industry (Porter, 2008). The facility management industry being new in India, the companies usually are keen on continuing their facility as a part of internal administration department. This could result in lower profitability for CB Richard Ellis in India. This could be a serious threat to the industry as many companies may not be very inclined towards having their facility managed by an outsourced company. The threat of substitutes can be reduced considerably having offering services which are of much higher quality and the cost incurred is competitive (Narayanan & Fahey, 2005). Thus CB Richard Ellis can educate the buyers about its superior quality of service at a competitive price which can aid in reducing the threat of substitutes.
2.6.3 Threat of Buyers
The facility industry in the Indian market being highly competitive, the buyers have a large degree of control with the different agencies to choose from. The consumers or buyers who are powerful would often flex their power in order to bring down the costs incurred to them. This could demand improved quality of service offered or may even increase the scope of service which would bring down the profitability of the industry (Porter, 2008). Even though India being a large market, the availability of large number of multinationals and local companies would incline the bargaining powers to the buyers. However, the suppliers may weaken the buyer power by having products and services that are distinctive and not easily available in the market (Porter, 2003). Thus, the unique process and back-up support provided by the multinationals in the Indian facility management industry would weaken the bargaining power of price sensitive customer to a considerable extent as they would have to settle down to lesser known agencies. This may favour CB Richard Ellis from the powerful buyers bringing down their profits to a large extent in India. The difference in pricing would work in favour of the facility management industry which may further contribute to weakening the bargaining power.
2.6.4 Threat of Suppliers
The bargaining power of suppliers could be considered low in the Indian market. Strong suppliers can grab high profits for their service by demanding high costs for their services which could limit profitability of the industry (Porter, 2006). The high profits are charged by the suppliers mainly when the pool of suppliers catering to an industry is low (Narayanan & Fahey, 2005). The facility management companies in India have a wide base of vendors who can provide quality service at a competitive cost. The availability of large pool of vendors who can offer quality service at short notice would make the threat of suppliers low in India. In the Indian market, with most of the supplies being ingeniously produced, the companies have different modes to access the supplies which can further weaken the bargaining power of suppliers. The suppliers also offer large credit periods to the companies which tilts the balance in favour of the industry in India.
2.6.5 Competitive rivalry
Even though the industry is relatively new the threat of competitors are very high. The competitive rivalry could be witnessed in many forms such as providing price discounts in the services offered, improvement in the services, offering new products and services, merging with other professional organisations (Porter, 2008). Established multi - national facility management organisation like Jones Lang Lassalle, Cushman Wakefield, Johnson Controls, etc have entered the Indian market which has further intensified the competitive rivalry for CB Richard Ellis in India. These giant multi-nationals have tie-up with local Indian facility management companies in order gain competitive advantage and to gain an insight into the Indian market. CB Richard Ellis, in India, is an independent company which depends solely on its own expertise to counter these global giants. Thus, with professional multinational facility management companies making their way into Indian market along with local competitors have made the industry highly competitive for CB Richard Ellis. Competitors resorting to techniques such as product differentiation, cost leadership, niche market, etc the companies are forced to innovate in order to remain competitive in the market (Porter, 2003).
2.7 Atkin's Model for developing facility management strategy
2. Services review
3. Resource audit
1. Generation of
2. Evaluation of
3. Selection of
2. People and
Fig 2.4: Atkin's Model for developing facility management strategy
Source: Atkin, B. and Brooks, A., (2000)
For efficient and effective facility management robust strategies must be implemented within the overview of strategic business plan. The materialisation of facility management strategy is a critical task that must be carried out meticulously using the apt techniques and means (Atkin and Brooks, 2000). Recognition of such strategies formed after carrying out such extensive examination is a key to the company's success (Porter, 1985). CB Richard Ellis could analyse, develop and implement strategies using this model to remain competitive in the Indian market. Also, it would aid CB Richard Ellis in understanding the feasibility of the implemented strategies and the level to which the strategies have been effective. The strategic business plan for facility management has three main stages:
2.7.1 Strategic Analysis
Strategic analysis would enable a company to elevate their understanding on the core concepts which are guiding the industry and would enable the company to make better decisions in order to curtail the competitive forces acting on them (Grant, 2005). This would aid CB Richard Ellis in understanding the fundamental requirements of the Indian market. On analysing the Green revolution in the Indian facility management market CB Richard Ellis have launched "CBRE Eco Green Knights" to assist its clients in creating an educated and ecologically aware workforce. Assessment of objectives and expectations of the clients, reviewing the current level of service offered by the company and the audit of resource required to meet the expectation of the clients is the critical factor for success for the facility management industry (Atkin and Brooks, 2000). These factors are important in order to comprehend the diverse expectations of the clients. The service review would divulge the superiority of the service offered by CB Richard Ellis to its buyers in comparison with other competitors like JLL-M, C&W, etc. The resource audit would impart the current level of expertise to meet competitive forces in the Indian market.
Strategic analysis is could be regarded as the driving factor which results in a pattern of important decisions which (a) direct the company in its connection with its environment (b) influences the internal constitution and processes followed by the firm and (c) centrally influences the company's performance (Hambrick, 1980). Jones Lang LaSalle has merged with the Indian facility management group - Meghraj Groups to become one of the largest in India to counter the diversified need of Indian market. For strategic analysis to be successful, the following analysis is important.
Fig 2.5: Strategic analysis
Source: Researcher, 2010
It is very important for strategic analysis to critically map the core requirement and capability of the company to the industry requirements which are characterized in connection with the competitors, clients and industry suppliers (Grant, 2005). CB Richard Ellis is actively participating to certify its clients from "Leader in Energy and Environmental Design or LEED" certification by Green Building Council, United States (1988). Thus, strategic analysis is utilized to comprehend the dynamic state in which the key business decisions are associated with the company's current facility provision and projected requirements (Atkin and Brooks, 2009).
2.7.2 Developing Strategic Solutions
While developing solution the company must consider the requirements that need to be done in order to maintain the current services which are being offered and the ways and means to improve them. Also, it should develop long term vision that considers the impending changes that influence the industry and its clients (Atkin & Brooks). The current trend of energy conservation practice stimulated CB Richard Ellis in 2008 to form "Engineer's group" where in a team of specialised engineers were brought on a common platform to draft and develop energy conservation measures. Once approved, these measures would be implemented in the client's facilities.
Fig 2.6: Developing strategic solutions
Source: Researcher, 2010
Generation, evaluation and selection are the key steps in the process of developing a strategic solution. The generation of a strategy begins with the objective of company's service innovation effort and a complete knowledge of the way in which these service innovation goals would match up to the broader business goals (Cooper and Edgett, 2010). The generation of a strategy is considered in order to compliment the requirements and requisites of the industry. Innovation is an uncertain process and the success or failure of the company depends on it. Thus, it becomes important to critically evaluate the generated option (Tidd, 1997). Evaluation provides a clear picture of practical perception by the picture by the clients (Jin Na, 2008). Evaluation process would weigh the options generated in the generation process in consideration with the real time constraints to identify its feasibility, flexibility and suitability. The business environment of a company in the Indian market includes an array of external forces which influences the business decisions and outcomes (Zahay and Griffin, 2004). Selection process could be termed as a function of cost, i.e. mainly the effort needed to implement the strategy, and benefits, i.e. mainly the degree to which the strategy addresses the issues that were considered in the analysis (Payne and Bettman, 1988). CB Richard Ellis, in India, guides its clients and leads the global phenomenon of "Earth Hour" on March 28 where millions of individuals around the world would switch off their lights for an hour. These strategies have aided CB Richard Ellis in not just creating awareness but also being a strong competitor in the Indian facility management industry.
2.7.3 Strategy Implementation
The strategies are not useful until the associated individuals employ it in their activities and adopt different and improved actions because of it (Little, 1975). Thus it becomes important for the strategies developed in the previous stages to be implemented in a manner which would result improved decision making. CB Richard Ellis, in India, undertakes training program for its employees in the regional headquarters to communicate and implement the new strategies that are being developed.
Fig 2.7: Strategy implementation process
Source: Researcher, 2010
The successful implementation of a strategic option would rely, to a large extent, on the attitudes and interests of the concerned individuals (Little, 1975). The key factor in the implementation process is the communication between the decisions makers and the individuals who are affected by implementing the strategy. Also, it is very important to communicate to the individuals who are expected to bring about this implementation process (Bodily and Allen, 1999). CB Richard Ellis also conducts online interactions with employees to create awareness of the different strategies being implemented and to generate interest among its employees to implement the new strategies. This would also act as an important platform to gain valuable feedback.
The resource planning in the implementation strategy aids the company in understanding the leverage it has in implementing the strategy. It also guides the company within the limits with which it should operate while implementing the selected strategic options (Carey, 2008). CB Richard Ellis has a team of professionals who are based out of the headquarters to monitor the successful implementation of the strategy by conducting audits and interviews at the client's premises. This would also provide an increased leverage in the implementation process. This could also result in better communication to the clients and can obtain a clear understanding of the outcomes of the implemented strategy.
2.8 Growth Strategy
Fig 2.8: Growth model for CB Richard Ellis
Source: Derived from Ansoff growth matrix (1957) and Porter (1980) generic strategies
A relevant growth strategy is an integral part for a company to compete in the market (Pleshko and Heiens, 2008). The growth strategies generally encourage innovation in the core strategy followed by the company (Baghai et al, 2009). Porter (1980) developed three generic competitive strategies which are considered as the classic of strategic thinking (Miller and Dess, 1993). The Ansoff's (1957) growth matrix and Porter's (1980) have been tactfully combined to develop a growth strategy which would aid CB Richard Ellis gaining its foothold in the Indian facility management market.
2.8.1 Market Penetration
By employing this approach, the firm will be looking for an increase in the percentage of share in the present market with the existing products. This could be done by converting non users in to users, by persuading current users to use more or by gaining market share from its competitors (Richardson and Evans, 2007). Since facility management is a service oriented product the concept of persuading current users to use more would be irrelevant. CB Richard Ellis can improve its business development by creating awareness among the non users to understand the benefits of having a dedicated professional agency to manage its facility in the Indian market. By having unique services the company gain the market share from its competitors. CB Richard Ellis, in India, has deployed dedicated professionals in each of its branch offices to in order to penetrate the local market better.
2.8.2 Market Development
Here the firm tries to discover and create new segments in the market for the existing service that are being offered by them (Richard and Evans, 2007). CB Richard Ellis can explore opportunities in these new markets to remain competitive and improve its profitability. The government building and most hospitals in India are being managed by the internal team for facility management. This is an important area which could be explored and it has a tremendous potential to generate high profits in the Indian market. But presently, CB Richard Ellis manages only one government office which is located in "Tidal Park", Chennai. The challenge in market development is in understanding how genuine and sustainable are the new markets (Peet, 2008). Since the hospitals, schools, government offices, etc expects to operate in a cost effective manner, it would be an ideal target market for CB Richard Ellis to harvest.
2.8.3 Product Development
This refers to the creation of new services that could be offered to the current market which the company is being catering to (Richard and Evans, 2007). Facility management agencies in India encompass all the requirements that could be offered to the client. Hence product development would very complex for CB Richard Ellis in India. The product development process could be done by offering improvements to the current products, improving the service range and through innovation in the service offered (Peet, 2008). This could be achieved by providing value added services to the clients that offers higher "value of money" to the clients. The facility management can share more responsibility in the client's day to activities. CB Richard Ellis, in India, have launched "Earth hour programmes", "Energy star programme", "LEED Certification programmes", etc. in the clients premises as an value added service. The transport department of the clients are being transitioned as the responsibility of the facility management team. These "value add" programs can be tactfully used as an product development process.
The differentiation strategy from porter's generic strategy is an important strategy to fight the competition in a industry which comprises of equally competent rivals (Murray, 1988). The differentiation strategy insists the firm to offer or design a product or service that is distinguishes itself in the industry as being unique. This would allow the company to gain an competitive advantage in the market (Dess and Davis, 1982). The green movements, energy conservation procedures, certification by LEEDs, ISO certification for the process followed are some of the differentiation strategies that could be adopted and implemented at the client's facility. This would provide industry wide recognition and the degree of uniqueness would also help the facility management agency in improving their profitability. This could aid CB Richard Ellis increasing their market share. Threat of buyers being high in the Indian facility management industry, differentiation strategy can aid in reducing the bargaining power.