Critical Reasons of Losing Market Share to Competitors | Applus + Velosi Failure Story

Main Problem faced by Applus+ Velosi was its obsolete machinery which result in losing big projects from oil&gas sector in Pakistani market. Also, they were losing competitive edge in the market due to manual working style of labor while other competitors moved towards latest equipments and machinery certified by ISO standards to automate the working procedure.

Methodology methods

Qualitative techniques are used to explain how employees at Applus+ Velosi think and behave in certain ways. Data were collected via observations and conversations (informal interviews). Reason behind conducting individual interviews is its advantages like respondents might be persuaded to share private views they may be reluctant to express in a more open forum. We conducted an interview at Islamabad office located at Plot No. 198, Street No. 1, Industrial Area, I-10/3, Street 1, Islamabad 44000. We had a meeting with Mr. Muhammad Qasim who is currently working as Business Development Manager at Applus+ Velosi Islamabad branch. He provided all the information relevant for our project to conclude the solution for the problem.

Kotter’s integrative model of organizational dynamics

Employees and other tangible assets

Human Capital Outlook is composed of 150 plus employees inclusive of Technical Managers/Inspection Engineers/Inspectors/Technicians etc. Plant information carries Inspection Services using number of Conventional/Old Equipment’s like Ultrasonic, Radiography, Dye Penetration Inspection, Magnetic Particle Inspection, Hardness Testing, UT thickness monitoring etc. On the other hand SGS and Inspectest purchased number of latest and modern Non-Conventional/New equipment’s like Ultrasonic TOFD (Time of flight diffraction), PAUT (Phase Array Ultrasonic), Digital Radiography, On Site Metallography, CDM (Crack Depth Measurement),Corrosion Mapping by A-Scanning, MPI (Positive Metal Identification).

Therefore, VISP invested huge an amount of Rs 50 million, to purchase most modern and advanced Equipment’s as listed above in order to compete in the market, won the OGDCL bid and not only entered in the competitive market, but also earned huge profit in executing the MIA services of OGDCL.

Social system

Applus Velosi is a multi-national firm which carries strong HR Policies in terms of managing the employees. Moreover, the overall environment of the organization is friendly with strict implementation on the policies. Higher management arrange events and bonuses to keep the employees cheerful. The overall culture shows the following insights:-

  1. A sense of responsibility and empowerment
  2. The ability to work as part of a diverse team
  3. The ability of maintaining professionalism in an informal working environment

Technology

Applus Velsoi uses different techniques to solve the problems including inspection services using number of Conventional/Old Equipment’s like Ultrasonic, Radiography, Dye Penetration Inspection, Magnetic Particle Inspection, Hardness Testing,UT thickness monitoring etc.

On the other hand SGS and Inspectest purchased number of latest and modern Non-Conventional/New equipment’s like Ultrasonic TOFD (Time of flight diffraction),PAUT (Phase Array Ultrasonic),Digital Radiography, On Site Metallography, CDM (Crack Depth Measurement),Corrosion Mapping by A-Scanning, MPI (Positive Metal Identification).

External environment

External environment which directly affect Applus Velosi is its competitors who got projects from Oil & Gas, Energy, Construction, Cement, Textile and Automotive sectors. Moreover, it had a huge effect on Applus Velosi clients. To maintain the image and profitability of the organization in the long run company needed to change the current state of the organization.

Dominant Coalition

Objectives of the organization is to become a service provider of choice in the Public & Private Sectors of Pakistan, especially in Oil & Gas, Energy, Construction, Cement, Textile, Automotive sectors etc.

Since VISP is an ISO 9001-2008 certified company and according to ISO, formula of Continual Improvement was implemented and advanced training and Certifications within the country as well as abroad is a regular feature, and staff is being trained to enhance their professional skills in their field of specializations and salary packages are being revised @ 10% every year and gratuity/End service benefits have been announced and efforts are being made to retain the key company staff.

  1. Human Capital upgrade
  2. Equipment upgrade
  3. Service diversification
  4. Improved PR of the organization

Improved Marketing / Business Development efforts. Company has hired full time Country Business Development Manager, who is well experienced and fully devoted to bring more business within Pakistan, and from Middle Eastern region. 

Formal organizational arrangements

Formal organizational arrangements include structure and operating systems of the organization. Applus Velosi has a decentralized structure which carries independent authority over the branches (Islamabad, Lahore, Karachi & Multan). Hierarchy of the organization include Director, Regional Business Managers, Technical Managers & operation managers. Job design of the organization carries Job rotation for the labor and technical staff who need to work in fields. Moreover, Job enrichment is present in doing the tasks as it is directly linked to job rotation and also it gives motivation to the employees. Job enrichment gives more control and managerial access to perform tasks and responsibilities.

Critical Reasons of Losing Market Share to Competitors | Applus + Velosi Failure Story
Kotter’s integrative model

SWOT Diagnostic Model

In a business perspective, SWOT is very useful technique to understand your strength and weakness and also for external factors threats and opportunities. It helps to sustain niche in the market. On the other hand on a career perspective it helps to advantage you for yourself and can make you able to be productive for organisations.

Strengths

The strengths of our approach comes from offering a global service while meeting local needs. Applus and Velosi achieves this because we operate in all the world’s major established and emerging markets.

The company has following strengths before they tend to lose the projects.

  • Global leaders in Risk Based, NDT, Lifting Equipment, Pipelines & Pre/ post shipment Inspection
  • Among fastest growing Third Party Inspection companies in Asia
  • Among top three Third Party Inspection companies of Pakistan
  • Human Capital Outlook: 150 plus employees (inclusive of Technical Managers/Inspection Engineers/Inspectors/Technicians etc.)

They had the nomination at Association of South East Asian Nation (ASEAN)

Weaknesses

Weaknesses is a common term which every company or firm has to encounter usually. At Applus and Velosi they had a weakness to avoid modern up gradation of their technologies and equipment. On the other had their competitors SGS Pakistan (Pvt) Ltd., Inspectest and TUV Austria , was able to get these projects. Main reason for their capturing project is their lasted technology like

  • Ultrasonic TOFD (Time of flight diffraction)
  • PAUT (Phase Array Ultrasonic)
  • Digital Radiography
  • On Site Metallography
  • CDM (Crack Depth Measurement)
  • Corrosion Mapping by A Scanning
  • MPI (Positive Metal Identification) (Photographs attached)

Opportunity

While discussing all the issues in SWOT analysis the last one is Opportunities. Every company seek for opportunity to avail it and become market leaders. At Applus and Velosi they lack that opportunity or has not been able to validate market that new machinery and equipments were needed in the market for new projects. To give a tough competiton Applus and velosi has to get the latest equipments and machinery certified by ISO standards to automate the working procedure.

Threats

Although threat is a concerning matter for any company because they have competitors and they have to be aware of their competitors to give them a tough competition. In this case Applus and Velosi has a threat from a competitor SGS and Inspectest because they had a market capturing strategy which Applus and Velosi avoid it and results in losing the projects. About RS 50 million of modern equipment were purchased by the competitors by which new projects were given to them.

On the other hand the labour was still working on the old style for work. The training and skill set developing of Applus and velosi were old fashioned which is also a reason to lose market share.

McKinsey's 7S Model

In McKinsey model, the 7 elements of Applus+ Velosi are separated into the ‘soft’ and ‘hard’ areas. Strategy, structure and systems are hard areas are easier to detect and control as compared to soft elements. On the other hand, soft elements, styles, staff, skills and shared values are harder to manage.

Since VISP was carrying out its Inspection Services using number of Conventional/Old Equipment’s like

  • Ultrasonic
  • Radiography
  • Dye Penetration Inspection, etc.

which eventually resulted in losing big projects from oil & gas sector in Pakistani market. Also, they lose competitive edge in the market due to manual working style of labor.

Strategy

VISP invested huge an amount of Rs, 50 million, to purchase most modern and advanced Equipment’s as listed below in order to compete in the market, won the OGDCL bid and not only entered in the competitive market, but also earned huge profit in executing the MIA services of OGDCL.

  • Ultrasonic TOFD (Time of flight diffraction),
  • PAUT (Phase Array Ultrasonic),
  • Digital Radiography,
  • On Site Metallography,
  • Staff were trained to operate new equipment’s
  • Well-formed plans that were executed

Structure

To overcome conflicts in organization

  • Business divisions were made
  • Units were organized
  • Old staff was well informed of their new duties
  • Employee report to manager manually.
  • Agile training (IT & Business)
  • Systems

Improved Marketing / Business Development efforts. Company has hired full time Country Business Development Manager, who is well experienced and fully devoted to bring more business within Pakistan, and from Middle Eastern region.

  • Training to old staff
  • Coaching them

Support groups in form of foreigner trainees

Feedback from participants in the focus groups

Staff

Existing staff were trained that how they operate machines, predict future conflicts and help their managers in firm growth.

some employees were needed for software operations of modern machineries. They were motivated by successful business growth and will rewarded with business shares, of which market value is rising.

Style

Autocratic management style was used because subordinates were not skilled and less trustworthy to fulfill these new tasks.

Managers holds decision making powers.

Top-down and one-way communication network was used to give orders.

Deserving Staff was promoted to the next grade.

Advanced Training and Certifications were imparted to all relevant Staff/Engineers.

Pay packages and Daily allowance of the staff were enhanced and 5% incentive and bonus was announced from the profit and distributed among all, who were involved in the project.

Shared Values

There were following shared values between employees.

Most of them were from the same organizational culture means the existing staff who knows the company’s norms, values, laws and regulations well.

Staff was so flexible to adopt new changes in the organization and have skills to learn new tasks.

They were able to perform well in the team and groups.

They already spend a long time with each other so they have trust on each other.

Skills

Staff is being trained to enhance their professional skills in their field of specializations.

Possible Solutions

Problem

Main problem faced by Applus+ Velosi was its obsolete machinery which result in losing big projects from oil & gas sector in Pakistani market. Also, they were losing competitive edge in the market due to manual working style of labor while other competitors moved towards latest equipments and machinery certified by ISO standards to automate the working procedure. To obtain big projects in the Pakistani market again, Applus+ Velsosi needed to import similar machinery & equipments to sustain in the market. Moreover, they needed to train their staff (labor) to work effectively by knowing the softwares and automation system of machinery.

Human Capital

Advanced Training and Certifications were imparted to all relevant Staff from different training organizations such as schlumberger and weatherford, these companies provide trainings to oil and gas professionals in the field of exploration, drilling and production. The training included theory and practical tasks. They also hired experienced and trained professionals from the field of oil industry from all over the world which boosted their technical strength.

Remunerations, perks and Daily allowance of the employees were increased and five percent incentive and bonus was announced from the profit and distributed among all, who were involved in the project. After completion of projects certificates were awarded to hardworking staff.

Machinery’s Modernization

Since VISP were doing its Inspection using a number of outdated tools like Ultrasonic, Radiography, Dye Penetration Inspection, Magnetic Particle Inspection, Hardness Testing, UT thickness monitoring etc.

On the other hand, SGS and Inspectest were using latest and modern technologies like Ultrasonic TOFD (Time of flight diffraction) PAUT (Phase Array Ultrasonic) Digital Radiography, On Site Metallography CDM (Crack Depth Measurement), Corrosion Mapping by A-Scanning, MPI (Positive Metal Identification)

After comparing their equipments with other competitors, they come to know that they are lacking modern machinery, Therefore VISP invested a lot of money about Rs 50 million, to buy most updated, sophisticated and advanced tools as listed above in order to grab different services projects in the market, after updating they won the OGDCL bid and not only entered in the competitive market, but also earned a lot of money in accomplishing the MIA services of OGDCL.

Improved Marketing / Business Development efforts

Improved marketing and business development is important to hired full time Country Business Development Manager who is well experienced and fully devoted to bring more business within Pakistan, and from Middle Eastern region.

Hierarchical arrangements in the organization

Hieratical management in the organization is very important people need Advanced Training and Certifications were imparted to all relevant Staff. Pay packages and Daily allowance of the staff were enhanced and 10 percent incentive and bonus was announced from the profit and distributed among all who were involved in the project Deserving Staff was promoted to the next grade these changes pay important role in the performance of organization and necessary to compete with other organization

Improved PR of the organization

Public relation helps companies to create a workable plan to tap the attention of clients.        Public relation also helps in improving the relationship of a company with the public. Public relation means promoting the right thing by using publicity and other non-paid communication tactics to inform people. Public relation has many benefits and important for the business like

  • Enhancing media relations
  • Improved relations with employees
  • Better engagement with community
  • Strengthening ties with Government bodies/officials
  • Crisis management

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