The elderly population in China is increasing at an alarming rate. Today, the demand for nursing homes and shelters has become eminently high as compared to the limited supply. It is with this profound reason that the Old Apartment (OA) was founded with the main purpose of bridging the wide gap between this demand and supply. Established in 2001, the OA aims at improving the standards of living for the elderly population. The aim of the company’s creation is to serve the primary purpose of providing home and nursing care solution to the vast majority of aging people residing in China. It mainly focuses on meeting the home needs and demands of the elderly population by constructing suitable and excellent structures as shelters. The firm has also managed to cut an edge over its competitors based on its recognition among the best construction companies in China. The OA has successfully constructed and developed both large- and small-scale construction. Currently, the company’s main objective is to provide excellent residential homes for the outgrowing number of the elderly aged 65 years or above. The need of the company to make an increase in its annual profit margin has also influenced this shift of focus on residential nursing homes for the aging population.
The Vision of the Company
The OA’s interest to invest in designing and constructing homes for the elderly population in China is to improve the living standards and conditions of the elderly. The company’s vision is to construct as many homes as possible. The intention behind this is to meet the growing needs and demands of the aged population of China.
The Aim of the Company
The major goals of the OA are:
- To provide the best home and nursing care solutions for the elderly population living in China;
- To improve the quality of living standards for the elderly population residing in China;
- To be the top among the residential and nursing home construction companies in China;
- To ensure that the company attains the maximum profit with an increased profit margin;
- To develop financial resources for new construction of affordable housing;
- To facilitate innovative models to reduce the costs of housing production.
According to China’s National Bureau of Statistics (CNBS), the proportion of the elderly population in China had reached approximately 10% in the year 2015. Out of the 10% population, there were 62,649,017 males and 68,200,980 females (Attané and Gu 1). The CNBS also projected a high-level increase in this percentage of the aged people by 2025 (Attané and Gu 3). Some serious problems associated with an aging population exist in China. The number of the elderly people in China is huge as it represents 20% of the world’s elderly population and 50% of the Asian elderly population (Attané and Gu 2). According to several demographic-based studies, China has transitioned into an accelerated state of rapid population aging in an underdeveloped economy (Attané and Gu 5). Even though the Chinese government had put aside policies (such as the one-child population policy or Single Child Family Program) for population control, such an unprecedented rise has reintroduced an economic burden to the government. Although China has had a remarkable economic growth and development, such a fast-paced increase in the aging population negatively transform the country into a lower-middle-income earning state in the near future. This is because of the fact that the youths entering the workforce is far less as compared to the vast elderly population now exiting China’s workforce. This drags down the economic growth as labor as a factor of production becomes limited and scarce. The effects of the rise in the elderly population is today portrayed in the form of social and fiscal pressure that would eventually create the need for inviting immigrants who will fill up the gap left by the existing workforce. This has more so created a wide array of challenges for the government, which has found it difficult to fully support and take care of the ever-growing elderly population. It is with this profound reason that OA was initiated with the sole purpose of assisting the government in providing some of the vital needs for the aged people.
Aside from the company’s need to meet the demands of the elderly population, it also aims to cut an edge over its vast competitors who also seek to capture the wide market share. In addition, the firm seeks to widen its profitability margin by getting a larger market share as compared to other local and international construction companies. Thus, it is vital for the OA to provide the best construction services to the clients. The nursing homes need to attain or even surpass the quality standards to attract more clients from the rising elderly people in China. First, the company aims at establishing a robust and sustainable internal home structure. Consequently, it plans to employ erudite and skilled personnel who provide services that match the needs and preferences of the clients. These skilled personnel will serve in different departments available in the OA. Since employees are an important part of any given organization, the OA plans to provide sufficient training programs for the staff members. This is in line with the primary intent of ensuring of honing the employees’ skills whilst also making sure that they offer up-to-par services.
The OA’s objective of increasing its profitability levels depends on its ability to attract more customers who are in need of a home solution. Thus, it is vital for the company to integrate stellar marketing skills and techniques. To add on to the objective of honing the employees’ skills, the OA also seeks to adapt to proper and effective marketing techniques. Although the numbers of the elderly people in China are growing significantly, the number of companies ventured into providing residential and nursing homes for the aged are increasing as well.
For any company to operate sufficiently there is a need for finances which are in the form of a capital. Since the OA aims at expanding its services by venturing into construction, repair and redesigning old homes for the increasing elderly population, the firm seeks to raise its finances. With time, the company aims at reducing its marginal costs to increase its overall profitability. It will thereby need to cut on its expenditure by reducing waste and maximizing on using the limited resources to decrease the capital used on inputs of production. In addition, the OA aims at cutting a number of its numerous departments by merging. This will lead to a slight reduction in human labor as only a few employees will be needed to perform two or more responsibilities. Indeed, this will be helpful in cutting the company’s cost of labor and other resources. In addition, the firm aims at expanding its branch company which mainly focuses on recycling biodegradable wastes to produce biogas that is usually sold to the customers. Thus, the company seeks to introduce gasification process which is more convenient and cost efficient process of producing byproduct gas in the form of biogas or methane gas.
The OA would add more to its capital as biogas itself has a wide array of uses. The community mainly uses biogas or methane gas for purposes such as cooking. In addition, biodegradable wastes such as kitchen wastes may be recycled to produce compost manure and fertilizers. The company will thus sell the produced compost manure to the agricultural farmers. In turn, it would generate more income which it will utilize as capital necessary for implementing nursing home and residential home construction and development for the vast elderly population. Since construction companies require an extensive outlay of resources, securing ample finances through several inlets such as the recycling project would evidently help in the company’s operations and sustainability. In addition, the OA aims at introducing skilled and erudite financial advisors who would be able to effectively and sufficiently manage the firm’s cash flow with the intent of ensuring that it attains maximum returns in the form of profit.
A plethora of factors continues to determine the success of the OA. One of the necessities includes the availability of skilled labor. The latter is the backbone of any given construction company. The efforts of the employees are simply related to the quality of the services given to the customers. This is because of the employees work in specific departments such as research and development, operations and management department, which will all contribute to either success or failure. Thus, the OA may fully befit if it invests in honing the skills of its employees. In addition, the proper use of capital is vital in ensuring the company maintains its operational activities, thus avoiding bankruptcy or worse, dissolution of the firm. Also, marketing techniques act as a factor that determines the success of the company. Amidst a broad range of different construction companies, proper marketing techniques are certainly a necessity. If the OA invests in excellent marketing techniques, then it will capture a wider share market as compared to other companies.
Support from the government will also largely influence the success of the construction company. The government should relax strict measures regarding the development and advancement of the construction company. In essence, it should support the venture by reducing tax rates and by subsidizing on the cost of resources that the construction company usually purchased.
Why the Initial Strategy Performed Well?
One of the initial strategies the OA has adapted is the development of a recycling firm. The company has invested in an energy production enterprise that utilizes biodegradable wastes, such as food wastes, which release byproduct in the form of biogas or methane gas. Furthermore, the firm has developed a gasification process which is more effective in gas production. Through this, the OA has been able to generate income which it utilizes in the form of capital.
Why the Initial Strategy did not Perform Well?
The OAC has merged some of its departments to help reduce the cost of production. This has also enabled the firm to increase its profitability margin. The management’s decision to take over all the responsibilities of other departments like that of the operational department is what derailed the company from achieving success. Before the integration of several departments, each of them performed its responsibilities separately. The main departments before the integration were development, sales, research, operations and project departments among others. Even though the aim of joining different departments was to abate the unnecessary expenditure, the quality of the construction works was not up to the standard. The organization’s spirit of teamwork greatly interfered with as the different departments merged. Thus, no clear directions or aims would have otherwise directed each team from every department to achieve the overall company goals. Many bureaucracy problems also derailed the entire company from performing its tasks. That is the reason why the firm failed to cut an edge over some of its better-organized competitors.
- Customer’s loyalty and trust
- Skilled labor
- Production quality
- Rapid increase of the elderly population
- Advanced technology that is utilized in construction procedures
- Good brand name
- Poor management
- Bureaucracy problems
- Poor team work due to marginalized departments
- Increased cost of production
- Stringent government policies
- New and stiff competitors
- Increase in tax rates
- Change in tastes and preferences
- Changes in government politics and policies
- Expansion of the business
- Diversification of the business by investing in the energy production industry that utilizes cost efficient biodegradable products
- Changes in population age as the elderly population increases
- Technological advancements that are employed in construction procedures and processes
Ways of Contracting Unprofitable Operations
For the OA to avoid further unprofitable operations, it may consider expanding its own business to reach a larger population of the target market. This may take place through internationalization, expansion and diversification. Internationalization is defined as the process through which a firm expands its business outside the domestic market (Rugman et al. 52). To successfully enter the new global markets, the company should adapt to newly formed entry strategies. This is because they would likely have to face various threats such as competitive market, cultural differences, discerning tastes and preferences, new international policies among many other threats (Rugman et al. 102).
Besides, the company may enter additional lines of business that offer new related services and products. It may introduce the sale of products that are usually required for construction purposes. To add to this, the company may employ its own staff members who would handle the construction works, thus reducing the cost of outsourcing construction workers from different companies. The enterprise may also expand itself by entering the new markets within China. They may do this by opening new branches that all clients would access. Furthermore, they may adapt to new marketing techniques that may incorporate new technologies for advertising purposes. Effecting change is indeed a daunting task. But the company can maneuver through the myriad of challenges by using Kurt Lewin’s eight step model of change.
Attané, Isabelle and BaochangGu. (eds). Analyzing China’s Population: Social Change in a New Demographic Era.Springer, 2014.
Rugman, Alan M., Simon Collinson, and Rajneesh Narula.International Business.Upper Saddle Pearson, 2017.