Strategy Selection, Implementation and Evaluation

External Environment Analysis: Quanta Services Inc.

Abstract

This paper undertakes a general external environment analysis of Quanta Services, Inc., which is an American company that provides integrated solutions for companies in telecommunications, gas pipeline, electric power, and cable industries. A PESTEL analysis done shows that the company faces a host of threats due to the changing economic, technological, and social factors. It can leverage the current technologies to drive its goals and objectives, and shun competition, which is the most significant threat.

External Environment Analysis

The Company Overview

Quanta Services, Inc. is an American company based in Houston, Texas that provides outsourcing services, such as network infrastructure design, engineering, construction and maintenance services for companies in industries such as gas pipeline, telecommunication, electrical power, and broadband cable. According to Mergent Online, Quanta Services is mainly in the service industry as it provides services to businesses and final customers. Actually, the company provides services to government and private-sector clients in areas, such as airport fueling, highway systems, light rail control systems, and wind power generation among others. It was founded in 1997 by three associates, Kevin Miller, Steven Colmar, John Colson, and William Parkhouse. Today, the company has made progress and has over 13,000 employees, offices and field offices in all the 50 states and Canada. It has the required professionalism, resources, and manpower to work on local, national, and regional projects.

The founders’ aimed at providing solutions to organizations in the electric power, pipeline, industrial, and telecommunication industries (About Quanta, 2020). These industries were growing in popularity as the customers became accustomed to the products and services provided by the players in these industries. The extent of these organizations meant they needed to outsource services and solutions that Quanta provided. Also, the founders had made projections and anticipated these industries could converge, become a large enterprise that will need extensive services. It explains the reasons why the organization has experienced tremendous growth in the last one-two decades.

The company’s initial vision and goal was to primarily focus on outsourcing opportunities with electric utilities. However, it became apparent that the transmission industry was being phased out as the utilities were not launching telecommunications subsidiaries. Convergence became the norm where electric power, cable television, and gas pipeline comprised of the larger enterprises that were mainly coordinated using the same technologies and business approaches. Quanta did not have any options but to expand and cast its net wider. To achieve this, the aim was to grow through acquisition, but Colson decided to exploit the stock market to raise capital. Though the founders had reservations, the company’s portfolio and vision resonated with the investors and by the end of 1999, it had raised over $100 million, which was used to acquire additional 40 companies (Quanta Services Inc.. 2020). The acquisitions focused on companies in the various industries earlier outlined.

At the turn of the millennium, the company’s financial performance was unappealing, which generated a lot of concerns. It was challenging for the company to integrate the newly acquired companies and create a profit. Beginning 2003, the company took steps to control operational costs and reorganized the operations along the industry lines. It was still challenging and in 2005 was able to turn the tables and recorded a net income of $29.6 net revenue and $1.86 billion in sales. A substantial amount of the revenues resulted from the damages caused by the Hurricane that lashed the Gulf Coast. Efforts to rebuild the damaged industries created a market for the company. It was also apparent the company was positioned for a greater future, as it had already cultivated a reputation. Fast forward to 2019, the company recorded $3.35 billion in revenues, which was a 12% increase over the 2018 third quarter (Quanta Services Reports First Quarter 2019 Results, 2019). The leadership of the company led by Earl Austin Jr., the CEO, Derrick Jensen, the chief financial officer, and Jayshree Desai, the chief corporate officer, has been credited with the expansive growth and profitability (Quanta Services Inc.. 2020). The team will oversee even more growth in the next few years.

Evaluation of the General Environment

Fundamentally, an environment comprises of the external conditions and forces with the potential to influence an organization (Evaluating the External Environment: Environment). The environmental factors may be termed as the general environment of the industry environment. The former, which is looked into by this project, comprises of factors, such as social, political, and technological trends among others. On the other hand, the latter comprises of the competitive forces that influence the organizational performance.

To fully understand the general environment, a PESTEL analysis will be undertaken. Each of the letters represents a particular factor as follows. P is for political factors, which covers the influence of the government in shaping business (Evaluating the External Environment: Evaluating the General Environment). Such a party can draft policies, including tax policies and tariffs that may impact the business. An organization must respond to the demands that are made by local, state, and federal governments. Quanta is one of the American companies that have leveraged tax cuts that were announced going into 2018. The cuts were estimated to contribute to about 2.5% growth of the GDP. Also, the unemployment which was a record-time low meant that organizations could find readily available labor (Mezak, 2018). These outcomes resulted from political changes that occurred following the inauguration of the current administration.

E stands for the economic conditions in which a business organization operates. It entails factors such as inflation, interest rates, and unemployment rates among other factors. The US experienced an economic crisis in the 2008-2009 period, which greatly impacted business performance. When conditions are not normal, business performance tends to decline. A company must make predictions that will ensure that proper measures are put in place to avoid a future crisis. Economically, the US is definitely framed in a global context, meaning the economic performance is directly influenced by the global economic performance. Currently, the economy is impacted leading to outcomes, such as rising unemployment rates and declining consumer spending, which affects market performance, Quanta is not immune to the development, and it sees reducing market performance as the consumer involvement is declining by the day.

S stands for social factors, such as the changing demographic profile of the customers and cultural trends, among others (Evaluating the External Environment: Evaluating the General Environment). Such changes are inevitable as the society evolves and goes through transitions that are facilitated by factors such as immigration and globalization. A company must be aware of the changing social factors to position itself in response to the needs of the markets. In the US, the millennial generation shows different cultural attributes when compared to the older generations. Today, the millenials who are expected to take over the job and consumer markets by 2035 prefer the continued use of technology. As such, Quanta needs to employ an approach that provides solutions that meet the demands of the millennial generation. It will change the way of life as the digital technologies will become a utility that facilitates business performance.

T stands for technology, which entails the improvement in technologies that are used in the facilitation of the creation and delivery of goods and services. Such a change is inevitable as industries are continually seeking better ways of realizing business functions. A modern company needs to invest and leverage the current technologies in a bid to drive growth and profitability. Quanta has deployed technologies in the various areas, and uses them to engage clients who come from across the US and Canada. However, the company needs to invest in newer technologies such as cloud computing, which enable better management of resources as well as access.

E stands for the environment. It includes the physical environment in which a business operates. Pollution, natural calamities, and weather patterns are among environmental factors that may impact a business. Most of such outcomes are unpredictable, but measures can be implemented to lower the extent of harm that can be caused. For instance, safety during performance can be focused on. The environmental awareness that is experienced today affects the performance of Quanta. Customers are showing a trend where they want to associate with environmentally and socially responsible companies. As such, Quanta is now making budgetary allocations for corporate social responsibility roles that are mainly about environmental conservation and pollution control via working with external partners. Quanta wants to be part of the current generation of companies that are putting efforts in environmental conservation.

L stands for the legal aspects that may tend to influence business activities. Factors such as employment laws and antitrust laws must be adhered to as failure to do so may attract heavy penalties and fines. There are new legislations that are put in place at the local, state, and national levels that influence business activities. The organization and its workers must meet each of them. Today, US companies are facing litigation for failing to implement the Americans with Disabilities Act (ADA). It requires business organizations to allocate resources for promoting accessibility of the people with disabilities. Also, they should ensure such persons are never discriminated against. Quanta works with such individuals and finds more about what it can do to create a positive environment for all people.

A Trend that Will Impact the Company

The trends in technology will have an impact on the performance of the organization. Today, technological tools are influencing the manner in which business goals are met. Earlier, the company relied on old approaches that were tiresome and time-consuming. For instance, finding a practical solution to a problem called for the collection and analysis of data, which requires specific skills and competencies. However, the landscape is being changed by the emerging technologies that are now enabling easier and faster approaches to performance. For example, there are powerful simulation software that are used to create virtual environment where data is manipulated to provide a potential solution.

The company has continually deployed technology to meet business goals. However, it needs to do more and access even better technologies that will centralize its resources, which will be leveraged when meeting business functions. An example is the use of cloud-computing technologies that allow for rapid sharing of resources as well as communication. A virtual work environment can be created enabling the teams to approach problems collectively without the need to be in the same physical environment. Such a move will save on time and allow autonomy. The workers will feel in control and will be motivated to promote retention and productivity. In essence, Quanta can realize more goals and objectives if it can invest more and hire individuals with competent skills in the use of modern technologies in the management of the enterprises and business functions.

However, the use of technologies is surrounded by uncertainties in relation to the safe and secure use of the technologies. There are emerging data privacy laws that require businesses to meet certain milestones where failure means an organization can be sued for negligence. It is still uncertain how the laws will look in the future. Investing in the technologies outlined means creating a wider pool of applications, which are exposed to data breaches among other cyber-crimes. If new laws emerge, especially at the state level, the organization may face a challenge as it is unlikely that any company can achieve 100% immunity to cyber-attacks mainly due to the ever-evolving hacking tools (Janssen, Wimmer & Deljoo, 2015). For best outcomes, the company must invest in technologies that prioritize the security of data and systems to avoid a situation where sensitive data may be exposed to unauthorized third parties.

A Strategic Analysis of the Company

The quanta’s vision is to become a leader in providing integrated solutions to companies in the electric power, pipeline, and telecommunication industries. The mission statement entails putting people at the center of the business processes to benefit employees, customers, shareholders, and communities (About Us, 2020). These are the two elements that usually guide the business performance and productivity.

Richard Rumelt (2011) asserts that failure to face a problem is one of the hallmarks of a bad strategy. Rumelt emphasizes that a business must be able to face its problem and design strategies that will create the needed results. Quanta has failed to address one of the key problems it faces. Currently, there are new entrants are providing business solutions across the industry and are better placed because they provide solutions in a particular industry (End-Market Prospects to Aid Quanta Amid Stiff Competition, 2020). It means they can focus on a single problem and ensure it is effectively addressed. Quanta needs to devise a mechanism that will help it shutter the emerging competition.

In addition, an effective strategy needs to tap a true source of advantage (Bradley, Hirt & Smit, 2011). Quanta needs an advantage for it to retain its customers in the wake of the rising levels of competition. Though it has attempted to tap into more areas through acquiring more companies, it is clear that an advantage is not realized. An organization must strive to achieve functional excellence (Leinwand & Mainardi, 2019). It enables the business to meet its performance goals and objectives in a manner that realizes the customer demands. Quanta needs to pursue functional excellence, which will allow it to deliver quality services to customers and suppress the competition that is staged by the new entrants.

Conclusion

Quanta Services, Inc. is one of the companies that have struggled to realize their long-term goals. It has recently shown excellent financial performance as it meets the needs of the customers who spread across the US and Canada. It is not immune to the various political, economic, social, technological, environmental, and legal factors that influence performance. Technology needs to be deployed to improve functional excellence, hence enable it to address the threat of competition staged by the new entrants. It should focus on the key markets and ensure all the customers are fully satisfied. The study is important as it points the general environment of a business and the various factors and conditions that influence business performance.

References

About Quanta. (2020, March 17). Retrieved from Quanta Services: https://www.quantaservices.com/about-quanta/

Bradley, C., Hirt, M., & Smit, S. (2011, July 16). Have you tested your strategy lately? Retrieved from McKinsey: https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/have-you-tested-your-strategy-lately

End-Market Prospects to Aid Quanta Amid Stiff Competition. (2020, January 18). Retrieved from Yahoo Finance: https://finance.yahoo.com/news/end-market-prospects-aid-quanta-155303069.html

Janssen, M., Wimmer, M. A., & Deljoo, A. (2015). Policy Practice and Digital Science. New York, NY: Springer.

Leinwand, P., & Mainardi, C. (2019, August 14). Creating a strategy that works. Retrieved from Strategy for Business: https://www.strategy-business.com/feature/Creating-a-Strategy-That-Works

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Quanta Services Inc. (2020, February 27). Retrieved from Bloomberg: https://www.bloomberg.com/profile/company/PWR:US

Quanta Services Reports First Quarter 2019 Results. (2019, May 02). Retrieved from Prnewswire: https://www.prnewswire.com/news-releases/quanta-services-reports-first-quarter-2019-results-300842492.html

Rumelt, R. (2011, July 11). The perils of bad strategy. Retrieved from McKinsey: https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-perils-of-bad-strategy