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Situational Analysis. Thanks

DICORE INTERNATIONAL STRATEGIC ANALYSIS Contents Executive Summary3 Introduction4 Background: Dicore International, A Global Drilling Services Company4 Issue Identification6 Issue Identification – Equipment Utilization Rates6 Issue Identification – Profitability Linked to Commodity Prices6 Issue Identification – Pricing Model Concerns7 Issue Identification – Investment Return Expectation from Shareholders8 Issue Identification – Providing Services in the Southwestern Region8 Issue Identification – Succession Planning9 Issue Identification – Challenging Regulatory Environment9 Situational Analysis10 Current Business Environment and Company Position Analysis10 Competitor Analysis11 Porter’s Five Forces Analysis12 SWOT Analysis14 Analysis Summary14 Strategic Alternatives/Evaluation15 Leadership and Staffing Strategy for Expansion18 Recommendation20 Implementation Plan21 Conclusion0 Bibliography1 Appendix3 SWOT Analysis Detail3 Strengths of Dicore International3 Weaknesses of Dicore International3 Opportunities for Dicore International4 Threats for Dicore International4 PESTEL Analysis4 Calculations for Cost Comparison and Analysis0 Organic Growth – Core Drilling Services0 Blackstone Acquisition – Rotary & Core Drilling Services1 Blackstone Acquisition – Rotary Only to Start (Initially no Core Drilling)2 Mineral Price History0 Statement of Earnings1 Statement of Financial Position2 Statement of Cash Flows3 Company Ratios4 Key Competitor Ratios4 Statement of Earnings5 Statement of Financial Position6 Executive Summary The strategic goal for the Dicore International (Dicore) is to improve company profitability through increasing market share and building investor confidence. The strategies investigated have been analyzed and a recommendation and implementation strategy has been prepared to execute on the strategic vision. Multiple strategic opportunities for expansion into the Southwestern market have been analyzed and are covered in extensive detail in this report. Based on the evidence collected the recommendation is to grow through acquisition of a current market participant in the region. An acquisition of the company Blackstone Drilling and expanding the business operations to include core drilling services is endorsed. This strategic plan will secure operations for Dicore in the region and leverage on the experience of the existing company. When the acquisition is complete the addition of rotary drilling and expansion into core drilling services can be added to enhance the suite of services provided by the company in the region. The implementation plan will be delivered in stages: Acquisition Planning and Financing, Acquisition Execution and Regulatory Compliance, Onboarding and Training, Expansion of Services. A plan had been developed to facilitate the acquisition and a detailed execution strategy is provide in this report. The following high-level summary outlines the recommendations for implementation. The initial phase is key to the strategic vision and will need to be executed effectively for the plan to be successful. The planning phase is critical in ensuring that the financial resources are in place to facilitate a successful acquisition without overextending the business. Once this phase is complete, the regulatory and legal components of the acquisition can begin. When the acquisition is complete, the onboarding and training of employees can begin. This phase will ensure that the new employees are educated in the culture and values of Dicore. The expansion of services is contingent on the success of the acquisition plan and may be expedited based on company performance in the region to increase equipment utilization rates. Introduction A strategic alternative assessment has been completed on possible opportunities for the future of this organization. This report provides an in-depth analysis of industry trends and opportunities to improve both the organization’s profitability and increase shareholder confidence. These alternatives have been rigorously reviewed and analyzed prior to determining a recommendation for the best course of action (Tavana & Banerjee, 1995). An implementation plan to execute on the strategic alternative is also provided. Growth of the company into South-west region has been identified as an opportunity for the company. This report will analyze this strategic issue based on the evidence and provide recommendations on the best course of action. Background: Dicore International, A Global Drilling Services Company Publicly Traded: $80 Million shares outstanding currently traded at $0.97/share (Bremner & Grasby, 2019) Dicore provides global services and is a leader in the drilling industry. Dicore has specialization and experience in facilitating the mining function for water and extraction of natural resources. Providing services on five continents and operating in 27 countries, the company has broad and vast experience in the industry. Experience gained through the course of their operations makes them uniquely positioned in the industry as both a technical and established drilling company (Bremner & Grasby, 2019). The various techniques in the drilling industry can be performed as a result of the specialized equipment and the highly skilled work force (Longyear, 2019). Specialized technical core drilling must be performed by a skilled and experienced driller. Rotary drilling is a less technical drilling technique used primarily in water drilling, oil and gas activities (Longyear, Rotary Drilling, 2019) or subsequent to retrieving a deep core sample (Bremner & Grasby, 2019). Investment in equipment is critical to the success of a drilling company (Market Watch, 2019). To facilitate this expansion, the company needs to have enough funds to invest in capital assets (Fortune Business Insights, 2019). This is a public company with access to both the equity and debt markets for capital. There are few market competitors as there are significant cost barriers associated with entry (Bremner & Grasby, 2019). Recent company performance has fallen. To improve the financial position and restore investor confidence, the company is looking to expand its growth and profitability (Dickson, 2019). As part of Dicore International’s strategies to grow the company and increase its revenue, Calvin is tasked to manage the proposed expansion into the southwestern United States. In 2007, Dicore began operating in northern Minnesota using its Canadian assets and personnel. Although the operation was successful at the time, Dicore eventually ceased its operations in the region in the year 2009. Now that an expansion is being proposed, Calvin believes that establishing a permanent operating facility in the region is vital to the success of the expansion. The southwestern US is an ideal location for the expansion as almost 50% of all mineral exploration in the US occurs in that region (Bremner & Grasby, 2019). The company has seen declines in stock performance and in the short term, the organization needs to focus on improving cash flow and gaining access to capital to grow the operations (Kerr, 2019). By focusing on efficiencies and increasing the return on investment (Robinson, 2015), the organization will make strides towards achieving their long-term objectives of improved stock performance and company growth (Bremner & Grasby, 2019). In order to understand the current position of the company and the industry attractiveness, a thorough internal and external analysis of the company and mining exploration and drilling industry has been performed (Maverick, 2015). By having a strong understanding of the issues and challenges within the industry, Dicore will be able to proactively mitigate risk and take advantage of new opportunities. This will guide the company to achieve their long-term goals of increased profitability and improved market share (Bremner & Grasby, 2019). Issue Identification Issue Identification – Equipment Utilization Rates In 2012 it was determined that the utilization rates were lower than expected. Dicore’s core drills and rotary drills recorded 45 per cent and 85 per cent utilization rates respectively. To address this issue, the organization needs to compare the core service against the rotary service based on overall contribution (OEE, 2019). Underutilized equipment rates indicate that assets are not used to maximize revenue (Bremner & Grasby, 2019). Moreover, it is not getting the appropriate return on its investments. Capital investment in equipment generates revenue for the organization through maximizing equipment utilization. A low utilization rate results in a higher cost per unit therefore reducing the overall profit of Dicore (Altice Business, 2019). Shareholders anticipate a strong return on the investment in capital. A low return would detract investors from investing in the company therefore decreasing its capabilities to increase its capital. Causes for the underutilized drill rates needs to be investigated. Each service’s overall contribution also needs to be considered to determine whether to pull back on core drilling services to cut costs and promote rotary drilling services or vice versa. To successfully lead the North American expansion, the company would need to ensure that its core and rotary drilling services are being utilized to maximize profits. Issue Identification – Profitability Linked to Commodity Prices There is a direct correlation between mineral prices and the profitability of companies in the mining sector. Mineral prices are driven by the demand for the commodity. A higher demand for minerals means that it is more valuable and vice versa. When prices for a mineral are high, there is more incentive to drill and mine for the resource (Baker & Mayfield, 1998). When commodity prices are low there will be fewer new exploration startups and some existing projects may be terminated as they are no longer viable from an economic perspective (Gourinchas, 2009). Normally it would not be sensible to invest in mining and exploration when the demand is low. Recent data shows that prices for metals have fallen since the beginning of the year (Exhibit 1). Similarly, gold prices have continued to fall since August 2012 (Exhibit 2). On the other hand, expenditures for nonferrous explorations have gone up from $17.25 billion to $21.5 billion with prices trending upward since 2009. In 2012, overall profits in the industry also decreased by 49 per cent from last year leading to a decrease in capital spending for the year 2013. Despite this, Dicore’s executives decided to move forward with the expansion. It is vital for Paul to determine which minerals in the region are currently profitable and will be profitable for the foreseeable future. It is important that the company employ consistent forecasting methodologies. Failing to do so will expose the company to risks including missing out on opportunities to profit from the increased market price or incurring unnecessary expenditures for mining minerals that are not profitable (Lette, 2016). It is important that the company analyzes current trends in the industry and the demand variances for different minerals in global location for extracting those resources. Issue Identification – Pricing Model Concerns Pricing model is marked up based on cost of service implementation. Due to the high skill requirement needed from the drillers and the cost of the equipment, drilling companies mark up costs of services at 40%. If efficiencies and cost reductions are identified in providing the services, it would result in a lower overall revenue generation. The pricing model should be reviewed to ensure that optimizations and innovations are rewarded with a greater return on the investment (Hinterhuber & Liozu, 2012). There is currently a global shortage of skilled drilling personnel. The company will need to mitigate the risk related to attracting and retaining talent (Matti, 2019). When new projects are being researched, the mining companies will initiate quotes for services to various drilling companies. The request for proposal (RFP) process includes prospective project requirements and requested deliverables. The proposals submitted by the drilling company in the bid should include pricing information based on the information provided but also include provisions to account for project delays, unforeseen challenges and contingencies to ensure a reasonable return of investment (Lex Mundi

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