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ADT Security Company’s Strategic Management Essay (Critical Writing)


Introduction

This paper aims to analyze the Australian electronic security Solutions Company ADT. To do so, the first section of this paper will concentrate on the background of ADT, products and services, the marketplace, customers, suppliers, mission, vision and values, and the key strategies of the company. The next chapter will focus on the internal economic environment, organisational structure, strengths and weaknesses, competitive forces within the ADT, roles of personnel, ADT in Australia, product management, reporting mechanisms, enterprise report, and service level reporting.

The final section of this report highlights the External Opportunities and Threats, PESTEL framework, Porter’s five forces model, dealing with these forces, external environmental economic analysis and so on. On the other hand, section four will consider the impact of the external economic environment on ADT and this section includes strategic management, strategic plan, and internal control, and governance, management of economic aspects of ADT against external impact. However, the subsequent chapters will concentrate on the impact of ADT on the external economic environment, recommendation, conclusion, and reflection of the case study of ADT.

Outline of ADT

Background of ADT

ADT established in 1874 for delivering telegraphs, but it is now the global market leader in the security business, which offers intrusion, smoke detection and life safety solutions to protect the people and property. ADT offers Integrated Systems if the customers want complex and multilayered protection along with both theft protection and money-back service guarantee.

Also, this company provides services for home, commercial and retail customers and ADT reported that it has more than six million customers of its home security products along with 500 multinational companies, top 50 national and regional bank holding and most of the airports of 70 countries, and Federal Courthouse (Authorized Dealer, 2011). ADT Security’s alarm solutions are intended to identify trespasser, its video surveillance and digital recording devices assist managing visual information, and swipe cards and keypad access facilitate the customer to keep track of visitor and worker movements, and many surveillance cameras for banks (ADT, 2011).

However, different people need different solutions, different banks and industry require a different type of security measures, such as the solution for a large home and small home should not be same. Therefore, ADT concentrates on the market research to identify the actual requirements of the customers, customer behaviour of different target groups to develop the products and services according, and it spent huge amount money for research and developments, for instance, it spent $100 million in R&D in 2006.

Year Historical overview
1874 ADT has stated its journey
The 1880s Introduced interactive communication between customers and the company
The 1890s Introduced advance electronics products and generated 70 per cent of net profit from this sector
1901 Western Union becomes the parent company of ADT
1909 Control handover to AT&T
From 1910 to 1930 launched emergency call systems, and fire alarm systems to protect the people from burglar and other fire-related risks
War Years The company was bound to introduce new automatic services as most of the employees were joined in the armed force
Post-war 1969 Enlisted in New York Stock exchange
1984 This company was a takeover by the Hawley Group
1990 Introduced many security solutions including access control and closed-circuit television
1996 It changed its name
1997 Acquired by Tyco International Ltd (SAS, 2011)
Present position Successfully operated to serves millions of customers worldwide and earns more than 40% of the net profits of Tyco International

Table 1: Overview of the company. Source: Self-generated from ADT (2011).

Products and Services

Australian electronic security Solutions Company provides a wide range of products and services to residential, commercial, educational, governmental, retail and industrial customers those would be discussed in the following table –

List of the Products Product Features and Quality
Home Security
Security Solutions (Basic & Complex Solutions) As emergencies may arise at any moment, people should prepare with a single ADT Security system to protect family members from burglary and fire. However, Security Solutions includes Fast alarm response, intruder detection, CCTV, Door entry system, Carbon monoxide gas leakage detection alerts, Security Alarm Monitoring system, and so on (ADT, 2011)
IndiPendant Personal Alarms This system helps the senior members to live alone and they just have to press the button to get assistance from ADT Emergency Response Specialist of the Security Response Centre and the team members also contact with the relatives (ADT, 2011)
Retail Security Solutions
Electronic Article Surveillance (EAS) EAS systems design to assist the retailers to increase sales and protect revenues by rising open merchandising opportunities while decreasing internal theft; however, this system includes Detection Systems, Labels, Label Deactivators, Hard Tags, Hard Tag Detachers, and Benefit Denial (ADT, 2011)
Global Source Tagging This is one of the most important products which ADT provides from 40 years to save the products from shoplifters and this tagging solution includes unrivalled system performance with excellent reliability in detection and deactivation, optimal source tagging solutions with the high-speed application, largest and most comprehensive solution options (ADT, 2011)
Store Business Intelligence The aim of this system is to assessing store business performance, managing store operations and ultimately developing profitability as well as performance (ADT, 2011);
SmartEAS This system designs for retailers to transform retail devices into a multi-faceted, which will develop loss avoidance programs, and operations
RFID Solutions Radio Frequency Identification products are scalable and interoperable, offering highest flexibility for end-users of the technology as it incorporated existing information infrastructures of the users to altering business needs. However, it also helps the customers to maintain automatic tracking of inventory and supply chain management system (ADT, 2011)
Essentials Package This solution contains many features such as tags, labels, pedestals, deactivators and detachers to developing profitability level
Commercial Security
Monitored CCTV Services – Visual Observation This security system help to solve the problems by visually monitoring and taking appropriate measures;
Intelligent Access Program (IAP) IAP has designed to improve access to the Australian road network, and IVU designed to meet both regulatory as well as business requirements;
Quality Maintenance Plan (QMP) This security system is significant to make sure that the security products if ADT like Access Control, Alarms system, CCTV and EAS would work properly.
Guards and Patrols ADT provides security human resources to customers with 80,000 monitored lines to controlling mobile patrol and static guard services all over this country, and this service includes-
  • Mobile Patrol Services
  • Alarm response
  • Random Patrol Services
  • Permanent Patrol Services
  • Concierge Guards
  • Static or Rover Guards
Others ADT also offers Virtual Guards, ADT IP Connect, and Commercial Security Demonstration system.

Table 2: A product line of ADT. Source: Self-generated from ADT (2011).

Market Place

ADT operates in competitive national and international markets and competes with numerous manufacturers and service providers those offer lower price, for example, ADT Security provides service mainly in Australia and New Zealand through ADT Worldwide has a business operation in many countries in the globe including North America.

Customers

According to the annual report 2010 of Tyco International, ADT mainly serves four major target customer groups such as home-based customers, commercial, governmental and retail customers etc.

Residential customers

Usually this group includes family members or proprietors of small houses, tenants or joint family members of apartments;

Commercial customers

This category involved with retailers, small and medium-sized firms, banking and insurance companies, industrial zones, medical and hospital services, and commercial outlets;

Government customers

This category involved with administrators, central, state and local governments, defence ministry, education ministry and main transportation providers;

Others

ADT Security also served an electronic security system to the customers to protect their mail and other systems of the personal computer from hackers and vertical customers such as retail and banking customers appreciate it.

Customer Charter

ADT’s persistence towards customer service and socially responsible behaviour has been the motivating strength behind it repute; from the very beginning, the company tried to provide the best quality services to be delivered at the right time. The company contemplates that its consumers possess the right to be familiar with the level of service that they can anticipate from ADT constantly; therefore, it has designed the charter in a user-friendly way to make things easier in practice assisting the customers to save time and effort.

Supplier

Tyco International (2010) pointed out that ADT Worldwide partners with suppliers to put together the core values of their relationships with the suppliers aimed to the sustainability of the supply chain including corporate social responsibility and ethical standards designed by Tyco that deliver with following foundational programs-

Green Supply Chain

In 2010, the company introduced its green supply chain approach as a major tool of supply chain management where sustainability and CSR1 are the basic foundation and organised the strategic roadmap integrating with environmentally conscious suppliers supported and measured with energy audit named ‘Treasure Hunts’ and during that year the company procured 27,000 units of energy-efficient vehicles. In the coming years, the company plans to build up more strapping environmental partnerships with its large number of critical suppliers well fitted to carbon management initiatives with innovative programs by exchanging skills and information.

Supplier Diversity

ADT Worldwide always makes every effort to build a long-lasting relationship with its wide range of suppliers fitted with highly innovative solutions towards the sourcing assortment acquainted with momentous possibilities of benefits from the diversified suppliers and the company argued it as a way getting hold of competitive advantage to meet customer’s needs, enhance sales, and improve further business opportunities. The integration of diversified supply chain has resulted in strong brand image, increased revenue generation and accelerated shareholders value creation.

Under such strategic choice, the ADT introduced guideline for the framework of supply chain diversity and the company started its practice to purchasing its raw material form a small business, woman entrepreneurs, minorities, and economically backward communities of US society. It has evidenced in 2010, which the company procured 6.6% of its procurements from the USA, which was 5.5% in the previous year supporting NMSDC2 and WBENC3 and the coming year it dreams to get more improvement.

Suppliers Selection

Emphasising upon global corporate citizenship, ADT Worldwide engaged to enhance its community partnership in every area as possible in both developed and developing nations where its staff subsist and works carrying a great weight on cultural and ethical issues. To selecting suppliers the main emphasis has given on life safety, voluntary approaches and freshwater concerns while the company tag up with educational institutions for volunteers to encounter fire protection and other natural crisis management.

Mission, Vision and Values of ADT

ADT performs according to the prerequisite objectives and its present mission is to provide peace of mind to its customers by offering “best-in-class solutions” that assist to get safer environments; as a result, the team members of R&D work hand to introduce an innovative solution for the customers. Also, this company has two other missions, such as, it would like to create strong customer base by providing the best service delivery, and it will reduce staff turnover rate, as most of the employees of this company are dynamic, efficient and talent. However, the subsequent figure demonstrates more elaborately –

Mission of ADT.
Figure 1: Mission of ADT. Source: Self-generated from ADT (2011).

Vision of ADT

From the very beginning, ADT was regulated by its long-term goals and it has already settled its vision that is it wants to be most trusted company by offering security solutions to assist customers and protect property (ADT, 2011).

Values ADT

ADT values its people, as it believes that “ADT is its people” and the security staff give the highest effort with endless passion and integrity to bring adequate changes, introduce innovative products, take responsibilities. Furthermore, this company is operated by adopting the following values.

Integrity

The employees ADT work with corporate integrity to ensuring the highest standards of customers’ demand and energetically protect its property by complying all policies and laws of the company.

Teamwork

ADT ensures excellent working environment to the employees to work as a team, which encourages them to use their innovative powers, creativity and results and to develop leadership quality, motivation, communication skills, and to promote full participation and career development.

Excellence

Australian electronic security solutions company ADT is regularly working together to improve products, processes and quality of the services. Also, ADT employees always strive to understand the business process of users to assist their goals.

Accountability

The management team and the employees of ADT try to fulfil all the commitments they make and take personal responsibility for all activities and outcomes because they work to develop their diversity management system by introducing disciplinary environment.

Customer Service

It provides outstanding customer service as its strategy is to provide the best customer service by the trust, expectations and needs of both internal and external customers to build a strong relationship with them to increase loyal customer base.

Values of ADT.
Figure 2: Values of ADT. Source: – self-generated from ADT (2011).

Strategy

ADT has maintained some specific strategies such as –

Cost Control

One of the main strategies of ADT is to maintain cost-cutting strategies by several methods. However, it is one of the key policies of the business is to make its production process leaner by introducing several approaches (for instance, just in time approach, total quality management, total productive maintenance, etc) by replacing unproductive human resources with latest technological assistance.

Corporate Governance

Besides Enron and Worldcom, the parent company of ADT was one of the main offenders of corporate scandal as the non-executive directors were considered an unsuccessful scrutinizes of administration due to lack of independence, proper regulation and non-compliance of recommendations. As a result, the board of directors of this company is now formed by the provision of the Sarbanes-Oxley Act of 2002 and the board focuses on the performance of the auditors in terms of reporting and the independent directors for organizing remuneration policy;

Customer Care

With a vision to make sure more convenient customer service and support easier installation process to the services, the strategy of ADT is to provide after-sales services with a fully automatic system with IT integration;

Leadership

The top management of ADT believes that for such a large business like Tyco, it is significant to make sure that the leadership qualities of the managers remain intact in the future. Therefore, it would like to train the managers to reduce the claim of insider dealings and another internal conflict by improving leadership qualities of potential managers and executives;

Efficiency Development Program

As ADT is mainly security service providers, the top management has planned to focus on increasing the efficiency level of employees at every level by arranging regular training to develop risk management skills and upgrading security services for satisfying the customers;

Ansoff Matrix

This matrix is a significant tool while the company intends to expand its business to earn more profits from the national and international market, so, it considers –

Market penetration

This strategy has played a vital role while ADT expands its business in an existing market with existing products, for instance, ADT has more than 40,000 static guards with 80,000 monitored lines to serve Guards and Patrols solutions, which could be extended by following market penetration strategy in all state if Australia.

Market Development

Pearce & Robinson (2006) stated this strategy is suitable for new markets through current products and service line and ADT is now focusing on Chinese and Indian market and it has already entered the Asia Pacific zone.

Ansoff Matrix.
Figure 3: Ansoff Matrix. Source: Self-generated.

Product Development

Hitt, Ireland, & Hoskisson (2001) pointed out that product development refers to develop a new product in the existing markets and this strategy is too effective for ADT as it has enough financial capacity to take a risk by offering new services as it can get customer’s acceptance to the loyal customers;

Diversification

Kotler & Armstrong (2006) argued diversification refers to develop a new product for new markets by diversifying its business; so, ADT can expand its operation in the third world countries through offering premium services to the new zone.

Co-operative strategies

ADT Security Solutions could enlarge its business field by adopting many strategies such as cooperative strategies and this plan play vital rile while the company fall in serious economic pressure from production to marketing.

  • By the composition of strategic alliances, ADT Security could combine the resources, assets, capital, and core competencies with other security service providers for gaining the mutual interest; however, ADT applies this strategy time-to-time like Western Union became the parent company of ADT in 1901;
  • On the other hand, ADT could regain the market position by signing the Joint- ventures agreement with local competitors; for instance, ADT can contract with Perth Security Services and TMS to be benefited by sharing assets as both companies have significant footstep in Australian regional market though they are not offering diversified products.

Outline of Internal Economic Environment and Associated Processes of ADT

Internal Economic Environment of ADT Security Australia

Mark Norton, the MD 4of ADT Worldwide, Australia, admired the internal growth of market facilitated the company to come into big acquisitions like a signature, which is a chronological result of market trust, dependency and existing goodwill, moreover the market fortunate the company to set up standards and collaborate with minimum effort.

ADT (2009) reported that the business unit ADT Worldwide have evidenced Australia a most raising market for its Electronic Security Products, due to global financial crisis all over the world the company lost a major revenue growth by reducing sales while Australian market contributed 10.7 % growth.

The internal economic environment of ADT worldwide in Australia is highly favourable while the market facilitated 6% organic growth in fire services of Australia and generated US$ 360 million of sales revenue in the first quarter of 2009. In Australian market due to alleviated demand in the first quarter of 2009, the operating profit has recorded US$ 6 million, which is a 73% less than a previous year including operating return of 1.7% with lucrative indicators to be noted that the provided the Australian market has provided ADT Worldwide with greater flexibility than any other market.

Organisational Structure

Tyco Electronics (2008) pointed out that the ADT Australia maintain the Organisational structure that has named as ESH Structure to safeguard the environmental issues, healthily concerns and safety measure from the top-level management to bottom-line employees. ESH Structure was introduced in 2008 while miscreants at their workplace on duty killed about three of the ADT staff. ESH Structure has implemented as a deliberate process that has been scrutinised board of directors by the board of directors to keep the highest emphasis on the organisational structure followed by the management and all workers, this structure deliberate with the steps as below.

Board of directors

The board of directors formed with eleven directors with a chair and CEO among them four comes from the governance committee who are responsible to look after EHS performance. This body concerned with full direction and observation and day-to-day maintenance of the EHS engagement and reports the improvements to the board.

The Chair and CEO

The Chair and CEO appoint with dynamic leadership, supervision and deliver a guide for the management in the route to the execution of EHS while the chairperson takes part in the cyclic EHS evaluation and nourish for performance improvement.

Business Unit

AFP (2009) reported that the Tyco international has been organised with five business wings such as ADT, Fire Protection, Tyco Safety Products, Flow Control, Electrical and Metal Products where all the business units have an individual president, who is responsible to control production unit to administration unit. Different level service managers of the business units are liable to make certain that the respective procedure of that unit fully acts by all valid environmental regulation as well as safety measures directed by the EHS standards of Tyco International Ltd.

Organisational Structure ADT.
Figure 4: Organisational Structure ADT. Source: Self Generated from AFP (2009).

Corporate Role of EHS

The corporate role of EHS engagement within the global operation has been conducted under the close leadership of senior management deeply concerned with EHS factors while all the business units and subsidiaries bring in to practise of similar strategies to gain the ultimate objectives of the organisation to generate accelerated business success and to emphasis on Tyco’s global vision.

Council of the EHS Leadership

In every three months, this council of senior management concerned with EHS issues come into interaction, exchange views, and provide direction to the every business unit larders to strengthen the further drives and to assess progress. Under the supervision of this Council of the EHS Leadership, all Tyco’s employees get purposeful groundwork to represent EHS all over the organisation strongly.

Organization Chart
Source: Tyco International (2010)

SW Analysis

Strengths

Some stronger criteria of ADT are –

  • ADT Security has long experience in this service industry as it was established in 1874
  • ADT has strong brand awareness in the global market;
  • It has many experts, dynamic, highly motivated, and well-trained security officers, static security guards, and other service providers;
  • However, 41% of Tyco International’s total profit has generated from two main subsidiaries and these are – the ADT Security and fire security;
  • ADT Security Services always appreciates recruitment of paramount R&D personnel and it created about 100 jobs from 2006 to 2010, and it has over 1,000 staff in South Florida (Pounds & Sentinel, 2010);
  • Also, ADT has many qualified engineers and scientists all over the world, who engage to introduce modifying security solutions considering the latest technologies;
  • It has effective audit procedure to measure internal risks, key credit risks, liquidity risks, market risks, the profitability of new security solutions in the Australian market;
  • Many large companies have collapsed due to a lack of corporate governance practices and ADT’s financial position was not stable in 2009 (Tyco International, 2010). However, the corporate governance system of ADT is outstanding while they follow ethical code, best practices, disclosure rules and relevant laws to operate its business smoothly; therefore, it was easy for the ADT to recover its position from the global financial crisis and to capture large market shares. On the other hand, the Audit Committee has authority to conduct investigations regarding the internal controlling system, remuneration policy and annual reporting to manage the company perfectly in terms of the integrity of the financial statements, internal and external performance of the company;
  • It has an innovative idea and promotional plan to increase annual sales revenue; therefore, it offers free system “ADT monitored Home Security System Valued at $850” with simple terms and conditions (HSS, 2011);
  • Buyer Zone (2011) provided a price Quotes of ADT for the customers where it was found that home security services depending on the needs of home and family of the customers
  • On the other hand, the diversified product line is one of the strong competitive advantages of the company in the Australian security market;
  • ADT can offer its products and services at a low price, for example, only $1 per day to Secure customers’ residence (HSS, 2011);
  • In conclusion, ADT Security Services has unique expertise and incessant competitive advantage over competitors along with economies of scale, strong internal supply chain management system, positioning strategy, pricing strategy remarkable performance in customer care service and successful execution of potential plans;
  • Also, it has strong administrative control over the security guards;
  • In 2010, ADT’s total revenues were $ 7.4 billion, which covers 44% net revenues of the group (Tyco International, 2010).
ADT Monitoring Packages.
Figure 5: ADT Monitoring Packages. Source: Authorized Dealer (2011).

Weaknesses

Some vulnerable factors are

  • According to the annual report of ADT’s Parent company Tyco, this company is paying a relatively high salary to their security officers, executives, and other employees (Tyco International, 2010);
  • ADT follows cost-effective strategy and become successful to control over cost, but some segment of Tyco failed to minimise the operating expenses in the recessionary period; therefore, the success of ADT is undermining at the time of evaluation of the integrated performance of the parent company;
  • The construction industry has adversely affected by the global financial crisis; as a consequence, the system installation and service segment of ADT was seriously affected, which reflected on the integrated financial statements (ADT, 2011);
  • ADT has to suffer trouble with expatriate recruiting and selection procedure to reduce staff redundancy rate;
  • The share price of ADT is decreasing in the stock market;
  • Although attrition rates for customers in ADT reduced from previous years by 13.3%, these rates may amplify in the future because of customer dissatisfaction or low price service of competitors’ offerings;
  • IT security and fraud risk, complete dependence on technology, Industrial action, key risk management system of the company, and increasing rate of legal claims boost the operating costs,
  • Under the ongoing recessionary economy, many competitors of ADT, for example, Perth Security Services and TMS generated huge revenue with brand reputation and Australian market shares.

Roles of personnel

ADT (2011) pointed out that its employees serve customers with local expertise, but the service quality is in global strength at 500 facilities globally with thousands of large size project installed where the personnel are dedicated to providing a total solution. ADT personnel are well trained to provide service solution for all sorts of complex situation including their design, develop, maintenance and management including customers’ needs and compliance to the local legal compliance in the country of operation.

Starting from the manufacturing stage, ADT employees carry out all kinds of risks management assessment process design and plan the system solution while they deliberate visit the customers’ site frequently as required to ensure highest protection and success of concerned risks, following diagram represent the ADT personnel’s service and skill orientations are –

ADT personnel Strength.
Figure 6: ADT personnel Strength. Source: ADT (2011, p.8).

ADT in Australia

Annual Report (2010) reported that Tyco has generated US$ 17000 million net sales revenues in 2010 where 44 % contribution came from ADT Security; the company has a long persistence in Australia with remarkable market share and huge satisfied customer base. The Australian operation has to face the tremendous challenge of few large competitors, high tax burden and beat about the bush of foreign currency exchange rates almost 10% for the transaction made for fright, customs and conversion.

Tyco International (2011) reported that ADT’s operation in Australia lead that to come in a common platform with Signature Security to intensify and support service deliverance in the Australian region and declared and accusation of AU$ 171 million that comes into excruciation from 1st April 2011 and the acquired business would be conducted under the banner of ADT Security.

Notably, the Signature Security is the most vital player in the ESS 5 the market of Australia including New Zealand and continuing its successful operation will complete set up of its ESS at ninety thousand residential and commercial premises where it generates about AU$ 180 million of sales revenue per annum. At the same time, ADT Security, the wings of the Tyco International Ltd is the global leader of ESS business with a strong customer base of nine million worldwide and generate almost US$ 7.7 billion per annum and it is expected that such acquisition would facilitate the company go generate very rapidly higher revenues growth in near future.

Product Management

Tyco International (2010) mentioned that the ADT deals with ESS6 product and services for all sorts of housing, business, educational institution, private and public offices, industrial projects, and marketplaces and the functionality of ESS involved with the monitoring of thief apprehension alarm, fire-detecting alarm and associated life safety products concerned to face any crisis. The EES product and service segment carried out to detect interference, design, and develop a system to respond to detect intrusion, control right of entry, and act in response to the movement of fire, dust, smokes, ecological crisis, and disturbed industrial process failure and to encounter control system by utilising electronic, electric, magnetic and RFID 7 technologies.

Tyco Electronics (2003) argued that Product management of ADT securities has long integrated with the Total Quality Management 8 system to ensure customer satisfaction starting from customer’s necessities, analysis the needs with processes outline that assist to designing the product and services satisfactory to the loyal customers integrating with the processes in control.

Assessing the different organisational structure, size, and belongings, the TQM process of Tyco aimed to ensure product quality keeping full attention to the recorded needs of the customer by ensuring product features and service quality with benchmarking.

Total Quality Management. 
Figure 7: Total Quality Management. Source: Tyco Electronics (2003).

Moreover, the clear characteristics of the TQM process of Tyco have aimed to form a system, fit it appropriately, let it work hazard-free, by confirming reliability, validity, maintenance, extension, and user-friendliness with several other facilities for customers choice. Tyco maintains its product management categories marked QS–9000. (QS) and TL- 9000 those fully comply with ISO- 9001 and ISO- 9004 standardisation and above (Tyco Electronics, 2003).

Reporting Mechanisms

Tyco Annual report (2010) mentioned that it has been maintaining the existing accounting doctrine those are commonly conventional in the USA and to do so, the company must weigh up its market position including its long and short-term assets determination and publishing the financial report for the investors and stakeholders at a regular basis. Rather than the formal reporting Tyco international including ADT, frequent conduct different reporting to assess involved risk at its operation level, which the identify as annual impairment analysis associated with a high cost that affects on the announced earning reports. To overcome such charges those adversely distress the financial situation and reported earnings, the company has its reporting wings with high expertise.

To administer its reporting mechanism company has weighted up its obligations under TSA 9and determined that the evidenced burden is satisfactory to enfold the associated cost reduction for the company within this agreement. ADT security Australia further added supplementary impairments at its several reporting wings to predict future risks rather than formal AIA 10and capable to adjust its liabilities by shifting factors and concerned situation and all such initiatives facilitated the company to present clear and manipulation free cash flow statements easygoing for both the investors and taxation.

Enterprise Report

Tyco Electronics (2008) urged that it has been maintaining the GRI 11 orientation for its enterprise-level reporting while its environmental and safety measures have resulted in quick expansion from different socio-economic aspects. For instance, the rate of staff injury during duty was 16.1 per cent in 2007 and dramatically shifted to 2.29 per cent in 2008 by adopting GRI orientation. Such improvement has made the company high level ambitious to adopt the process within other segments of the enterprise reporting including wide-ranging scrutinising, situational analysis, identification and to take reporting towards preventive efforts to safeguard the workplace environment.

Meanwhile, in 2008 ADT worldwide gained accelerated progress at its environmental efforts by dropping wastage and air release about 80 per cent in comparison to 2007, though the company confessed that it has remarkably increased TRI chemicals wastes in its production and project outlets while the global record for such waste incensement is 8.3 per cents in this period.

It is also notable that the company has to lose 15 per cent of its annual achievement due to lack of wastewater management. For Enterprise Reporting concerned with ethical issues, Tyco and its all other business units introduced Ombudsman office that is highly pledged towards reliability, standard maintenance, and uphold core values like truthfulness, brilliance, collaboration, and accountability. It is also necessary to mention that the company slickly follow the TRI12 introduced by the US regularity authorities and gained the company’s waste reduction at an increasing rate.

Service Level Reporting – Availability

For Service level reporting of ADT Worldwide regarding the customer’s service, the company has five hundred service points while the company has capabilities to serve every customer at any service point Meanwhile, with customers service the company has capabilities to provide live support online without any time barrier.

Regarding the staff service, the company has strong ethical standard while the company maintain zero tolerance for ethical violation and it has set up Ombudsman office to ensure the best process to resolve and progress at any level any conflicting situation or organisational hazards. The setting of Ombudsman office, ADT Worldwide has introduced nation-to-nation different configurations that are confidential to each other and people from anywhere any place could connect by toll-free connection to come in to touch with Ombudsman for any issues and the raised matter will scrutinize and resolved within shortest possible time.

Analysis of Internal economic environment

The above discussion demonstrates that ADT Security generates a significant portion of Tyco International’s total profit and it has strong financial capabilities to enter in the new market by following several strategies and develop a new product for the existing market and new market. At the same time, it has experienced huge loss due to global economic downturn, but it has successfully changed their economic position within a very short time (Australian market contributed 10.7 % growth), which also demonstrates the internal financial strength of the company. On the other hand, the internal economic environment of ADT Security also based on the organisational structure, performance of the staff of ADT, reporting system and other factors.

Outline of the External Economic Environment and Associated Processes of ADT

OT Analysis of ATD

Opportunities

ADT Security has huge opportunities, for instance –

  • ADT Security is a highly diversified company; as a result, it can launch new products easily in this competitive market as ADT offers industrial products, such as, Monitored CCTV Services, IAP, QMP, Guards and Patrol; at the same time, it has a significant presence in retail businesses, for instance, Electronic Article Surveillance, Global Source Tagging, REID, RFID Solutions (ADT, 2011);
  • It has a huge opportunity to be the world market leader as ADT worldwide generated about 41% net profits of Tyco International’s integrated net profits (Tyco International, 2010);
  • However, ADT has unlimited scope to provide high-quality products and quick customer service with high satisfaction to the residential customers. It offers security solutions for all family members; therefore, this segment may be one of the most potential sectors for the company to generate more revenues;
  • ADT mainly focused on developing countries to operate its business, but it has an enormous opportunity in Asian developing countries like India;
  • Acquired by Tyco opens a pew dimension for the ADT to enter a new zone with diversified product lines;
  • Tyco International forecasted the last three years’ financial data of the company which showed that its annual revenue has increased dramatically in 2010 from ADT Security;
  • ADT has string financial capabilities to takeover or enters joint venture contracts with medium-sized companies to spread out its business worldwide.

Threats

Some challenging issues are-

  • Local competitors that offer segmented products and services are the main threats of ADT. According to the report of the Australian Bureau of Statistics (2006, p.3), there is at least 44,898 police and 52,768 security service providers for Australian total population 19,855,288;
  • However, the major competitors of ADT are local licensed and experienced service providers like True local, Nite Star Security, Paradise Security, MC Security Guards, Pilon Security Services, National Security Training Academy, National Security Training Academy, Lynx Security Services (SA) Pty. Ltd, TMS, PSG Australia and so on;
  • Although these competitive products and services of low-cost manufacturers are present in the primary phases of development and test marketing, if the marketers of these companies were to be insistently marketed and get market acceptance, ADT’s ability to develop could be negatively affected;
  • The main apprehensive threat for ADT Security is the global financial crisis because the long-lasting recessionary period was one of the major causes if falling sales in 2009;
  • Unstable market situation, volatility in currency exchange rates, raw material prices and unstable interest rates and other risk factors may become a future challenge for the company;
  • According to the annual report 2010 of Tyco, possible threats of the company are higher receivable delinquencies and bad debts, or cancellations of sales orders, and a slowdown in established financial services activities, lower cost manufactures and so on.
  • However, other major challenges of ADT Security are obedience with a wide range of non-US rules and regulations, taxation policies, political and economic conditions in Australia and other countries where it operates, the threat of nationalization and expropriation.

The PESTEL framework of ADT

PEST analysis for ADT.
Figure 8: PEST analysis for ADT. Source: – self-generated from David (2008).

Political factors

This factor always affects the operational system of the companies, such as FDI policy, rules and regulation of national and international counties, hostile attitudes of the government of foreign countries, unstable political situation of a certain place, different issues connected with taxation policy, and entry requirements affect the company (Griffin, 2006). On the other hand, world’s largest electronic security company ADT has to consider many other factors, for example, customer protection, government contracts, international trade, ecological safety, fire safety codes, labour law, licensing laws, rules related with import and export of goods and technologies across international borders and many other challenges.

Economic factors

Many large multinationals adversely affected because of the global financial crisis changed the customer behaviour, but ADT Security has experienced continuous economic growth in this recessionary period though it faced some problem in the initial stage. According to the annual report 2010 of Tyco International, the operating income of ADT and Fire Protection Services businesses jointly was $1.6 billion while operating loss of these companies was $1.5 billion in the previous year.

However, ADT has regained its goodwill with constant growth by implementing cost control actions in the recessionary period and reshaping its strategies to overcome such crisis. However, the following figure shows that integrated share price of Tyco International in London stock exchange has been increased from the second quarter of 2009 though it was the highest position in 2007.

 Basic Chart of ADT’s parent company Tyco.
Figure 9: Basic Chart of ADT’s parent company Tyco. Source: Yahoo Finance (2011).

Socio-cultural factors

ADT Security has committed to ensuring a very friendly working environment and a casual corporate culture that respects all its employees and encourages them in different perspectives (ADT, 2011). To ensure such a working environment, ADT keeps a close observation to scrutinise the recruitment and selection process to protect racial biases.

As a result, ADT recruits employees from the local and international market considering candidate’s merit, potentiality, educational background, experience, skills, character and manner. On the other hand, the diversity management of ADT has already ensured equal opportunities, fair treatment, mutual respect and trust for all employees irrespective of ethnic group, race, and gender groups, political affiliation, and cultural backgrounds, which inspire the employees while developing superior solutions.

Technological factor

Innovative technologies are changing the entire security system; therefore, ADT continues to advance its technology; for instance, it uses advanced-technologies including electronic system and information technology to expand service range from home to governmental level. As the core business of ADT is to offer security alarm monitoring services, the company has sufficient IT facilities and it utilizes necessary resources and technical infrastructure to develop its technology sector and to maintain computerized and manual control procedures in the security system.

However, the company has taken technological support from parents company Tyco International and other companies like IBM. However, ADT Security has enough experienced and qualified researcher, engineers, sub-contracted technicians, and project management team to produce an innovative security system (ADT, 2011, p.5). Company profile 2010 of ADT Security reported that most of the activities of the company based on technology and it also included some features of technology, for instance, Acousto-Magnetic technology, Ultra·Max™ technology, surveillance technology including outdoor CCTV equipment, and combination of superior wireless and wired network technology to hold the network demanding video and alarm traffic (ADT, 2011).

Environmental factor

Tyco International and its subsidiary ADT spend huge fund in different levels of examination and cleanup connected to ecological remediation issues at some sites because the staff and research team of ADT focus on reduction of pollution and keep the environmental concern in mind. However, the annual report 2010 of Tyco confirmed that it is difficult to predetermine these costs though the accountants make it clear that it has no adverse impact on the company (Tyco International, 2010).

The management of this company pointed out that all employees have a contribution to control pollution level, particularly in the case of asbestos, which is the serious cause of personal injury. Nowadays, the companies have a concern on this issue to avoid the risk of personal injury lawsuits; therefore, it is important to ensure a clean environment in the workplace. In 2010, the parent group Tyco faced more than 4700 cases related to asbestos and the subsidiaries like ADT Security experienced 3500 personal injury lawsuits in Australia and other countries.

Legal Factors

This is one of the most important factors to security solutions provider ADT because this company has to contact with the customers and some agreements also with influential customers such as governmental and commercial customers are more sensitive groups. However, ADT always operates consistent with the company’s internal rules and regulation, for instance, this company considers corporate governance policies and the decision of the board of directors of Tyco International.

On the other hand, legal factors are significant in case of patent filing or grant, and trademark rights for a long time because ADT considers the local law that indicates trademark issue is subject to the Australian law while operated in this country. To avoid legal proceedings and unusual costs in this regard, ADT has to follow Australian corporate law such as Corporations Act 2001.

Nature of economic conditions in the external environment

The external economic environment has a significant effect on the national economy because of the implication of global and interstate trade; however, IMF reported that global economy grew by 3.9% in 2010 and the Australian economy has been strengthening over 2010 because of a recovery in private sector demand, particularly in the investment sector.

Porter’s five forces model of ADT

Porter (2004) pointed out that market competition should evaluate by the following five forces –

The threat of New Entrants

The threats of new entrants are comparatively small for the Australian electronic security solutions company as the new company has to face many obstacles to pierce the market particularly the key obstacle to entering into this industry is the enormous start-up costs. As a result, it is rather difficult for the new electronics security solutions providers to capture a large part of the market at first instance despite having high demand in the global market.

However, new companies may find it easy to pierce the market if the marketer if security solution providers focus on the niche market rather than the mass market. On the other hand, threats of new entrants would be too high if the existing large companies enter in the new market with huge capital investment, more innovative products and workforce (Johnson, Seholes & Whittington, 2008). It is important to mention that ADT is already a successful, renowned, and moneymaking business, while new security solution provider has to be competing with less experience staff and hostile competition.

Porter’s 5 forces model for ADT. 
Figure 10: Porter’s 5 forces model for ADT. Source- Self-generated from Porter (2004).

Bargaining power of the buyer

The bargaining power of the buyer is little though the market demand for the products including Basic & Complex Security Solutions, IndiPendant Personal Alarms, Global Source Tagging, RFID Solutions, EAS, QMP, Guards and Patrols is too high in the global market. The bargaining power is low in this industry though it differs by the operational area that means buyers have limited power if there have no alternative solution providers. At the same time, ADT has long experience and serves with the customer’s faith, which helps the company to reduce buyers’ bargaining power. Also, the power is low because few small medium-sized competitors offer diversified products, but the switching off cost is high for the customers.

Bargaining Power of Suppliers

Cohen & Roussel (2005) pointed out that suppliers play a vital role for the well functioning of the company because the pricing strategy, production level, and the quality of the products mostly depend on the suppliers. Chopra & Meindl (2008) stated that various factors influenced the performance of the suppliers such as production area of raw materials supplier, availability of the products, political circumstances, global financial condition, transport facilities, transportation costs, and many other external and internal factors.

However, the bargaining power of the suppliers in this industry is moderately low and Tyco international have strong supply chain management system. On the other hand, ADT Security maintains a good relationship with the suppliers and contracts them with flexible clause because most of the suppliers of this company are the subsidiary of Tyco International such as Tyco EMMA is the internal supplier of Tyco International.

Threats of a substitute product

The functions, services and products feature of the Security Solution industry is completely different from other industries. The performance of the business depends on the technological development over time, customer behaviour, market reputation and the trust of customers on the services of the company. As a result, it is not easy to determine the risk of substitute products while the competitors enter the market with modern substitute technology.

However, Australian electronic security solution ADT is the highly diversified company in own industry and has a long experience to serve the customers with reliance those would minimise the threat of substitute products. At the same time, the risk of substitute product is little for ADT Security because the company updated its product line time-to-time by technological development, market demand, and customer behaviour.

Rivalry among competitors

According to the annual report, 2010 of Tyco International, the electronic security services business is extremely competitive and fragmented with some key corporations and lots of minor local and international manufactures and service providers. This report further added that in the general competition is depends mainly on the price compared with the quality of service, but ADT concentrates on the quality of its electronic security services, the image of brands, awareness, knowledge of the customers’ security requirements, advance technological developments, and so on.

In this case, ADT has faced the pressure of both direct and indirect competitors particularly some indirect players are threat for some segment of the business as they have strong market share and customer base from their limited segments. To avoid such competition, ADT has radically extended its systems amalgamation potentialities that support the company to provide complete solutions to customers, which completely incorporate security and fire offerings into broad IT networks, business operations and supervision tools, and procedure mechanization and control systems. However, the subsequent figure demonstrates the competitive position of the direct competitors of Tyco International –

Direct Competitor Comparison of ADT’s parent company Tyco.
Figure 11: Direct Competitor Comparison of ADT’s parent company Tyco. Source: Yahoo Finance (2011).

Besides large international companies, ADT has to compete with numerous small and medium sizes regional and local competitors like –

  • Lynx Security Services: This company was established in 2000 as a family business to provide quality security personnel in South Australia (LSS, 2005);
  • Perth Security Services: fully insured with over $20,000,000 PSS company has been served from the last 20 years and ensures security systems for shopping centres, apartment, commercial and industrial locations (PSS, 2011). This company has ensured quality services by fully trained, professional and licensed employees, and it has already achieved National Australian Achiever Awards for nine times and own prestigious Security Industry and Crime Prevention award in 2002 (PSS, 2011); therefore, this company became serious threats for few segments of ADT;
  • Paradise Security Australia: With great success and professionalism, this company has been supplying security nationwide to commercial customers and home residents; however, it services include Alarms, Surveillance Safes and locks, Camera and Digital CCTV, Mobile Patrols, Static Security Guards, Cash Escorting (CIT), and so on (PSA, 2009);
  • MC Security Services: It provides security services across various customer needs in Melbourne, Sydney and Brisbane (MCSS, 2011);
  • TMS: this company was established by John Tapiata in 1990 to provide Security, Maintenance, Cleaning and Training services, and the most effective and professional solution TMS working hard to develop industry standards and expectation (TMS, 2011);
  • Nitestar Security Group: this company was started its journey in 1995 and was acquired by Bob Dean in 2004 to offering cost-effective, independently tailored security and risk management solutions (NSG, 2011).

Dealing with Porter’s competitive forces

Basic strategy

The basic strategy of ADT is to concentrate on strategies to attain organic growth targets and organize cash for expansion and value creation; therefore, ADT always upgrade its technology and invest in its businesses to strengthen its long-term competitive potentiality for both its products and services. At the initial stage, ADT tries to classify business objectives and structuring strategies, implementation procedures and controlling system by evaluating actual performance;

 Porter’s generic strategy for ADT Security.
Figure 12: Porter’s generic strategy for ADT Security. Source: Self-generated.

Cost Leadership

ADT has already implemented this strategy to capture significant parts of the market shares in the global market; therefore, it asks very nominal price for the installation or purchases its products and services (Buyer Zone, 2011);

Differentiation

From the very beginning, ADT Security was highly diversified company as it has been maintained porter’s diversification strategy (ADT, 2011). Also, it had decided product development considering both horizontal and vertical expansion strategy and it follows a divestiture strategy to highlight more on core business units to stop the operation of loss projects. However, horizontal differentiation strategy is more effective for the Australian market of ADT as it allows delivering unique items with new features to the target customers;

Focus

ADT can attain high market share and growth by focusing on one or more market sectors as focus on many areas may cause problems in the internal and external management segment.

External Environmental Economic Analysis

From the above discussion, it can be said that ADT has a huge contribution to reshaping the business structure of the parent Tyco International as Tyco has experienced the adverse impact of the global financial crisis and many other corporate claims. However, Tyco was also involved with the corporate fraud like Enron and Worldcom, but the management of ADT Security helped the parent company to regain its reputation by implementing the strategy, obeying the provision of Sarbanes-Oxley Act of 2002, ethical codes and maintaining corporate governance system (CNN, 2003). On the other hand, ATD Security has also supported the parent company to recover from financial loss, as ADT is a highly diversified company, which has global operation and reputation to the customers.

Impact of the External Economic Environment on ADT

It has identified that several factors seriously influence upon the exterior business and economic environmental issues of ADT while such issues generate previously experienced or very new nature of risk, uncertainty, as well as contingencies those never the company faced. The most powerful factor in influencing ADT is the constantly changing economic situation. Economic conditions will determine the cost of goods and services and their availability. Specific influences might include the cost of energy, labour, and materials; currency fluctuations; the cost of money; accessibility of new capital; and the effects of natural disasters.

Competition and market share are the major concerns in planning for a company’s success. The company should consider several issues in its external environment, which are that it must be conscious of rival competition, new entrants into the marketplace, be alert for new products, and competition for suppliers, labour and customers. In competing for market share a company must be cost conscience while producing a quality product and maintaining excellent service to keep customer loyalty.

There are other external factors like the economic and political conditions in international markets, including governmental changes and restrictions on the ability to transfer capital across borders, the ratings on the company’s debt and the ability to refinance the outstanding indebtedness, the ability to operate within the limitations imposed by financing arrangements and to maintain our credit ratings.

On the other hand, interest rate fluctuations and other changes in borrowing costs, ADT’s ability to execute the portfolio refinement and acquisition strategy, and its ability to integrate acquired businesses, the ability to achieve cost savings in connection with the company’s restructuring initiatives are also external economic factors for ADT. Also, some issues are seriously harmful to the goodwill and/or long-lived assets of the company, for instance, the impact of fluctuations in the price of common shares of the parent company and consequences of ADT’s internal investigations and governmental investigations concerning the Company’s governance, management, internal controls and operations including its business operations outside the home country.

After the stock went down in 1999, rumours began to spread about Tyco’s International accounting procedures. It was clear that Tyco was producing irregular financial accounts, but was denied by Tyco’s leaders. Here, it is important to mention that ADT’s top executives had indicted and convicted of fraud charges stemming from both improper accounting practices as well as improper personal use of company funds. The company continues to be subject to several lawsuits stemming from the actions of its prior senior management.

Adverse outcomes of these matters could influence its financial condition, results of operations or cash flows. As a result, such issues generate seriously hazardous legislative and regulatory penalization like imposing fines while statement possibly will influence on the economic soundness and ultimately put a stopple to satisfying commitment concerned with the outstanding debt. The company’s positive and high quality operating performance is commendable despite the accelerating weakness in global non-residential construction and project-related end-markets.

The Organisational Strategy against External Environment

To encounter with several influential external issues those have a measurable impact upon the regular business operation of the company, the management has taken some favourable initiatives with the aim to empowering the company with internal strength during 1982-86 (Sillyfer, 2008). Such objectives were gained by decentralizing the administrative powers of the company into three independent, but interrelated departments, those are separate from units running at a loss, and further attention has been given to the concerns with complete control, administrative cost decline, along with encouraging subsidiaries to utilise an advantageous global set of connections to purchasing raw materials cost-effectively.

The company’s business strategy includes acquiring companies and making investments that complement their existing businesses. These acquisitions and investments could be unsuccessful or consume significant resources, which would adversely affect its operating results during 1986 to 2005; the company sustained its business growth through acquisition of several similar business concerns, which the company considered profitable and helpful to become the industry leader (Sillyfer, 2008).

However, following the unethical behaviour of some of the managers in the company, the reputation of the company fell in 2002. As a result, investors needed to be reassured that immediate reform was going to take place and so, parent of ADT’s board chooses a new CEO Ed Breen, who made some necessary changes in management were needed to maintain the company’s ethics (Dittman, 2007).

Strategic Plan against External Environment Impact

Putting Tyco’s past behind them and starting on a clean slate would take some managerial planning. The company’s future rested on their ability to plan strategically and tactically. Tyco has utilized several techniques to ensure better planning that will assist them in their daily operations. A subsidiary of Tyco Fire and Security Services, SimplexGrinnell, attended the Security Advisory Council Summit. The lessons learned from the summit have changed the management operations in this sector of Tyco’s fire protection industry (Tyco International, 2007). SimplexGrinnell modified its products tailoring them by their customers’ businesses to mitigate the risks and fears implanted by September 11, 2001, terrorist attacks on America (Tyco International, 2007).

However, some of the operational changes had made due to management’s deep concern to increase in the budgetary system for the implantation of high quality and extensive training program for customers as they evaluated systems integrators have needs for further operational changes. These modifications in daily operations do more than affect Tyco as a company, but impact individuals outside the company as well. With the company making changes to how they do business, they must also look at having contingency plans in place in case of failure.

Strategic Management Connecting The External Environment of ADT

By adopting both short term and long-run strategic planning along with inflexible financial necessities to conduct further profitable acquisitions, Tyco derived bring its success with the aim to turning itself as a market share leader within the industry. The company prolonged its commitment to provide a cost-effective solution for far above the ground quality of product and services as a top-class manufacturer, though the management was aimed at controlling cost and maximising profit. Tyco was successful in gaining such objectives by accelerating profit, gaining enhanced market share, and driving standard index rather than the previous poor level. The company has also decided to develop standards to maintain principles and behaviours that define relationships with supplier partners. Suppliers are urged for reporting wrongdoing.

Management of Economic Aspects of ADT against External Impact

One of the reasons to go global was the management of the economic environment. The company perceived that this would help it to reduce operational efficiencies and cost savings. It reduced direct costs by reducing the cost of managing multiple partners to one, meet compliance requirements and ensure corporate security standards and strengthening business relationship between customer and installation partner. It minimized operational costs by increasing supplier accountability, end-to-end efficiencies and timely notifications and faster resolution of issues. ADT managed its strategic costs by sharing information and the customers’ investment decisions are in-line with ADT’s strategic roadmap for technology, a faster resolution to problems, and global accounts receive preferential treatment (ADT, 2011)

However, the parent company of ADT has identified and adjusted several management techniques that were hard lessons to learn from the legal and ethical battles with the former CEO to the social responsibilities in reorganizing the executive branch (Tyco International, 2010). The parent company has shown it can excel through diversity and move forward with the operations of the company. With the other subsidiaries such as SimplexGrinnell looking out for their customers, they have shown how the different planning techniques can work well and keep Tyco moving in a positive direction even during extreme circumstances.

Internal Control and Governance of ADT against External Impact

The new CEO Edward Breen brought numerous changes in the company and Breen’s first months as CEO were extremely difficult. He undertook drastic actions to set Tyco on the road to recovery by restructuring its business practices, restoring Tyco’s reputation, and instituting standards of ethics and integrity while guarding against managerial misconduct.

This was accomplished by replacing top executives and “firing” the Board of Directors, replacing them with individuals whose leadership and integrity was above reproach. He also supported internal reforms, such as a reporting structure where the four top executives report directly to the Board of Directors. He also installed and independent audit function, appointed an ombudsman to resolve disputes, and supported educational programs aimed at re-establishing ethical behaviour and social responsibility.

As a world-class corporation, ADT must act responsibly in all facets of operation through its goal to be a profitable corporation is dependent upon sound planning the execution of these plans. Due to unforeseen circumstances, ADT’s business and reputation suffered drastically; however, they have rebounded nicely because of strong leadership and planning, and ADT has regained market share and increased profits, earning the respect of the business community and the public.

Impact of ADT on the External Economic Environment

This chapter aims to observe the influence of the Australian security solution ADT on the external economic environment. To do so, this part will explain major factors of ADT with practical evidence considering the internal management system that shapes the external economic environment to some extent in a few years ago. On the other hand, this section presents how the internal activities of the company influenced the government to change the rules.

Meanwhile, ADT is the globally broaden its horizons with huge diversification, which generate noteworthy goods and services for its worldwide customers at four different business sectors such as security system, electronic appliance, medical supplies along with engineering goods and services.

However, Tyco has operations in over 100 countries, which indicates that ADT has a presence in most of the business zone including Australia. Involving with a huge number of subsidiaries in different locations throughout the globe, the management planning of the company carries vital importance while in 2005 Tyco has generated the enhanced revenue of $40 billion engaging with around 250,000 employees globally (Tyco International, 2010).

It is most vital for Tyco to triumph over unexpected complications and challenges to sustain its position at the top of the industry players. To gain the goals of tremendous of Tyco it would be highly prioritised to pointing out its legal barriers, ethical dilemmas, as well as rising factors of CSR to prepare further technological and operational strategies involving contingencies.

ADT Security system is a large company with its holding company Tyco International Ltd. Since it is a very large company with many branches worldwide, it contributes in the countries where it operates by conducting business, as a result, more people are recruited and providing jobs for the people of that country. On the other hand, if the company were too liquidating, it would lead to the losses of jobs of a large number of people, which would also amount to huge economic losses for the country. As the income of a large number of people of the country is using their jobs at ADT, so it also helps in raising the national income of the country and thus, an increase in the per capita GDP growth.

As an MNC13, the growing strength and capabilities including its enlarged size and strong power it has been influencing people worldwide in an accelerated rate while such drive has generated insights for the competitors to rethink about Tyco’s success. They influence the global economy and thus contribute to alleviating poverty. It is important to note that global market players like Tyco run their business in the periphery of manufacture, worldwide trading activities, and foreign investments-policies focusing most on the external economic influences and many other financial indicators.

This also leads to making foreign direct investments in different countries for establishing different business plants for production, which leads to a large number of exports and contribute to an important part of this international trade. The fall of these corporations also have a significant impact on the value the currency of the host country and therefore, a change in the condition of ADT affects the countries in which it operates in many ways.

External Economic Drivers due to the Impact of ADT on the External Environment

Many large companies had collapsed in 2002 due to non-compliance of the companies’ code of conduct. Also, multinational companies like Enron, Worldcom, Tyco International, HealthSouth and many other multinational had collapsed for the misrepresentation or corporate fraud in financial reports and other mismanagement of corporate governance system (Waller, 2002).

However, the fall of these companies had a huge impact to change the disclosure requirements and the management accounting system of the United States, the UK and other developed and developing countries. Subsequently, the US government enacted Sarbanes-Oxley Act 2002, the UK government passed Companied passed Companies Act 2009 to protect the accountants from earning management, and the Australian policymakers reinforced auditor independence and developed accounting management and disclosure rule under the (CLERP 9)14 of 2004. As a consequence, the internal management system and financial perforce of ADT has a large impact on the external environment as ADT is the subsidiary of Tyco International (FSF, 2010).

Simultaneously, a good number of multifaceted peripheral economic-factors are present affecting the company and creating increasing concern for which it needs to care about some essentials, which maintain the improvement of the MNC’s actions, together with scientific-advancement and transformation of countrywide-guidelines; such advancements help to create simple business structure and appreciates cost-effectiveness for fruitful actions of the production plants.

According to the corporate profile of ADT, it spent more than US$100 million in R&D in 2006 to find even better ways to help protect our world (ADT, 2011). Through its global experience and close partnerships with other sister companies, ADT can deliver seamless, customized systems for projects of virtually any size. As part of the world’s largest security company, ADT can upgrade and innovate continuously. There is a consistent focus, though, behind their diverse state-of-the-art solutions, which is to help protect their clients and their assets the best way possible.

Changes in national policies also affect such large corporations as ADT, such as that sometimes the governments of different countries impose taxes on multinational corporations, which are largely detrimental for the company. In other cases, the government implements laws which restrict foreign direct investments or they might make regulations which bind the foreign companies to provide a share of their branch of the company in the host country to the government of that country.

Impact of ADT on the External Economic Environment Due to Philanthropic Activities

ADT also extends its commitment beyond business matters into the communities around the world and ADT (2011) in Featured projects reported that this company is also engaging the expertise and workforce to invest strategically philanthropic resources to effect sustainable change resulting in healthy, vital communities where employees live and work. Security service provider ADT is involved in many socially responsible programs on the national and international levels. They have taken a multi-tiered approach to philanthropy.

It works with and donates to charitable organizations. It assists the Community Health and Safety, Environmental Issues and Educational Achievement (ADT, 2011). The parent company of ADT also sponsors a non-profit foundation, Water for People, bringing safe water, sanitary facilities and working latrines to towns in Central America. In this regard, ADT the security service provider has developed Code Adam to safeguard children from becoming lost or abduct (ADT, 2011). Also, it provides retailers, banks, recreational attractions with a method to locate children within their establishment quickly.

Notes on ethical dilemma

In 2002, Tyco International become bankrupt and the executives charged for their activities as well as aligned with corporate scandal and ethical dilemmas of the management, which affected the performance of ADT. During this time, the scandal of Tyco, Enron and WorldCom have seriously shocked the corporate world and as a whole, the society and the legislators were forced to bring new Act like SOX to prevent corporate fraud.

Thus, it is rational to present the negative attitudes of the executives for that period. At the same time, the management team of ADT and Tyco experienced financial losses in 2008, but the company successfully recovered their position only for the performance of the executive, which demonstrates the positive side of the executives’ behaviour. As a result, this paper has aligned to consider both the positive and negative side of the executive’s behaviour with relevant and true information of two different periods. For example, top executives are now key strength of the company as they think the company first, but their behaviour was the threat of the company as they were liable for corporate fraud in 2002.

Recommendation and Conclusion

Recommendation

Divestiture

ADT is a highly diversified company, as a result, it introduces many products and services for the target customers, but many products get no acceptance to the customers. In this circumstance, the company follows divestiture strategy to stop the operation of such units as its ultimate goal is to concentrate on profitable units and increase revenue by decreasing operating costs, eliminating major risks, applying divestiture strategy and restructuring its core business units. Before selling its not profitable units, ADT Security should consider the overall debt position, net losses from this unit, and strategic problems to assess major risks, financial capabilities, innovative ideas, supply chain, reputation, business structure, and other factors because it has no interest to sell profitable business units.

Expansion

Australian electronic security Solutions Company ADT should expand its business in the local market especially should focus on the states where people need more protection from criminals to save their properties. However, ADT can follow any of the suitable strategies to enter these new markets.

Vertical expansion

ADT should assess the market demand at the time of vertical expansion.

International growth

Besides expansion in the local market, it should consider an expansion strategy in the international market. To build a strong customer base, ADT should expand its business in a highly-populated area such as India, China, Bangladesh and other developing countries.

Less competition

ADT should find out some region where market competition is absent, which will bring huge success if the company can enter successfully in these regions.

Cost Leadership

ADT should follow a cost leadership strategy and should support its cost-cutting strategies by several methods to be a market leader in the Australian market.

Research

ADT should increase its budget by 15% to market research as proper market research is important to identify future market trends and customer demand.

Risk management

ADT has effective audit procedure to measure internal risks, key credit risks, liquidity risks, market risks, the profitability of new security solutions in the Australian market. ADT should prepare loss alleviation plan to avoid the risk of financial loss and help the company to establish well financial management system during bad economic times like the global financial crisis.

Acquisition

ADT should try to acquire the major competitors of the local market as under the ongoing recessionary economy, many competitors of ADT, for example, Perth Security Services and TMS generated huge revenue with brand reputation and Australian market shares;

Joint venturing

Joint venturing with similar companies is one of the most effective strategies to share the assets and technology of the other companies and increase market share. However, this report identified that ADT follows this strategy from the very beginning of its operation;

Restructuring the pricing strategy

It should regional and segmented pricing strategy as most of the target customer groups like to purchase at a lower price.

Recruitment and selection policy

The management of ADT should concentrate on the recruitment and selection procedure to reduce staff turnover particularly leave of expatriates is the subject of huge cost for the company.

Conclusion

ADT always gives the effort to build a long-lasting relationship with its wide range of suppliers and customers (home, commercial, and retail customers) to develop outstanding supply chain management and increase sales revenue. Security service provider ADT’s business influenced by the number of external factors like political factors include the government impose new taxation policy and pass new legislation to create barriers of its operation.

On the other hand, global financial meltdown adversely affected on the sales revenue of ADT in 2008, but the company successfully regain its market position by implementing of new strategies though it should require time to regain its position in the stock market. However, ADT values the talents of the employees, and it secured their pension fund and other facilities by the international market, therefore, its recruitment procedure designed to hire global talents for technical sectors. At the same time, the research team of ADT always eager to introduce the advance solution, as they know the implementation of innovative technologies is the key success factor of this industry.

ADT has to focus on the rules and regulation of the governments of home and abroad; however, this company is bound to follow the provisions of Corporations Act 2001 to operate in Australia. Security solution market is a highly competitive industry where the bargaining power of the buyer and threat from new entrants is comparatively low though there are available security solution providers and the existence of entry barriers. On the other hand, Australian security service provider ADT has enough financial capabilities along with the advance technological base, which helps the company to cope up with the threats of substitute products.

However, the business is very competitive and fragmented with some local and international firms such as General Electrics Co, Honeywell International, United Technologies Corporation (UTX) are main international competitors and Lynx Security Services, Perth Security Services, Paradise Security Australia, Nitestar, MC Security Service Co, and other small companies are the local competitors. Some specific strategies of ADT are controlling cost to maximise profits, maintaining good corporate governance system, taking care of the customer to increase sales and increasing the efficiency level of employees to ensure quality services.

Also, the company concentrates on carrying out its plans to gain its operational targets, for instance, reforming management profitably and shifting product line with new technology, investing more on the potential areas, adopt many strategies like cooperative strategies and market penetrating strategies, ensuring equal opportunity for the employees to enhance team spirit, and so on. However, this paper has pointed out key strengths of the company, for instance, long experience, brand awareness, motivated employees, assets, promotional activities, quality products and service, annual revenue, strong administrative control and so on.

Moreover, this case study has identified external weaknesses such as remuneration policy, operating expense of parent company, global financial crisis, performance in the stock exchange, and some other issues. It has also notified many threats (the major competitors and low-cost manufacturers) and opportunities (new product developments, and market expansion).

Reflection of the case study of ADT Australia

My research project with the case study of a company- ADT and its nature of economic conditions both in the internal and external environment Implications is the first phase of research including the depth observation for a rapidly growing business entry with long historical background in the international business. I have considered this case study as an initial stage for my second phase of a dissertation with another observation from an economic case study where I wish to investigate how diverse types of business firms are experiencing to drive in the international market with their strategic plan and to what extent they are successful.

Within the present case study, I have gone through the objectives in my mind to investigate and experience with ADT, Australia and I have addressed three major questions throughout the case study –

  • What kinds of resources and capabilities enabled the ADT Australia to sustain in the market with the leading position, and how its strategies turned it as a global leader in the electric and electronic security market?
  • How the internal economic environment and associated processes of ADT stimulated its increasing growth and shaped its strong presence both at home and abroad?
  • How has the external economic environment and associated strategy of ADT enabled it to deal with competitive forces

Before conducting the case study, I have aligned to be familiar with the case study approach of Yin (2003) who has demonstrated ‘case study’ as a modern approach of research methodology rather than the classic viewpoint of research design. To adopt the approach of Yin (2003) in the case study of ADT Australia, exceptional potency and capabilities to deal with an occupied assortment of evidence, documentation, analysing the facts and findings, interaction with people, interviewing, data analysis, and observations to come in conclusion. By performing the case study of ADT Australia, I have gained huge insight and competent on the economic situation of the company and the practical experience that the company belongs to and I accredited my understanding with the case study, which has the generalised academic suggestion to the given case scenario rather than an ordinary proposition to the readers.

So far can understand the case study approach of research has aligned with the traditional approach of research to reply to the questions rose from the case scenario of what- why, or how and pointed to the clarification addressed by the answers are exploratory. With the aim of my present research with ADT, Australia is to understand the company’s chronological development through its different internal and external process, but my ultimate objective is to identify emerging economic features of the company, it business model, strategy, and competitive forces comparing with theoretical framework like Porter’s Five Force’ analysis.

Taking into account of such vision, I learnt that for a case study of a company it is essential to start from the organisation’s establishment, its gradual improvement, whether it has any merger or accusation, its product attributes, the marketplace, customer base, its mission, vision, strategy, supply chain, organisational structure. Along with the factors above, it is also emergence for a case study of a company to identify its internal and external influential factors to identify its strength and weakness arguing with opportunities and threat. On the other hand, through the study, I felt another emergence to interview the employees of ADT, Australia to learn more about the company’s strategic goals and growth, but due to limitation of time and budgetary constrain, it was beyond reach and depended on the case scenario.

Reference List

ADT (2009) Rising Dollar Sinks Revenues, Despite Positive Organic Growth in Security’s Recurring Revenue and in Fire’s Top-Line Revenue. Web.

ADT (2011) Company Profile – ADT Security: Helping protect your world. Web.

ADT (2011) Corporate profile of ADT security solutions. Web.

ADT (2011) Electronic Article Surveillance. Web.

ADT (2011) Featured Projects. Web.

ADT (2011) Global Source Tagging. Web.

ADT (2011) IndiPendant Personal Alarms. Web.

ADT (2011) Mission, Vision and Values of ADT. Web.

ADT (2011) Radio Frequency Identification. Web.

ADT (2011) Security Alarm Monitoring. Web.

ADT (2011) SmartEAS – EAS Detection System. Web.

ADT (2011) Store Business Intelligence. Web.

AFP (2009) Tyco & Treasury Strategies Inc. International Treasury Re-Engineering and Automation. Web.

Australian Bureau of Statistics (2006) Security Services, Australia, 1998-99. Web.

Authorized Dealer (2011) ADT Monitoring Packages. Web.

Buyer Zone (2011) Compare FREE Price Quotes on Home Security Systems. Web.

Chopra, S., & Meindl, P. (2008) Supply Chain Management. 3rd ed. New Delhi: Pearson Prentice Hall.

CNN (2003) Web.

Cohen, S. & Roussel, J, (2005) Strategic Supply Chain Management. 2nd ed. London: McGraw-Hill.

David, F. (2008) Strategic Management: Concepts and Cases. 12th ed. London: Prentice Hall.

Dittman, L. (2007) Raising the Bar on Governance: Are Boards Up To the Task? Financial Executive Magazine. Web.

FSF (2010) Principles of Corporate Governance – Australia. Web.

Griffin, R. W. (2006) Management. 8th ed. New York: Houghton Mifflin Company.

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2001) Strategic Management. 4th ed. South-Western Thomson Learning.

HSS (2011) Best alarm systems. Web.

Johnson, G. Seholes, K. & Whittington, R. (2008) Exploring Corporate Strategy: Text & Cases. 8th ed. London: FT Prentice Hall.

Kotler, P. & Armstrong, G. (2006) Principles of Marketing. 11th ed. Prentice-Hall of India Private Limited.

LSS (2005) Lynx Security Services (SA) Pty. Ltd. Web.

MCSS (2011) MC Security Services Pty Ltd. Web.

NSG (2011) Nitestar Security Group. Web.

Pearce II, J. A. & Robinson, R. B. (2006) Strategic Management. 8th ed. London: McGraw-Hill.

Porter, M. E. (2004) Competitive Strategy. Export Edition. New York: The Free Press.

Pounds, M. H. & Sentinel, S. (2010) ADT Security Services to create 100 jobs over five years. Web.

PSA (2009) Paradise Security Australia Pty Ltd. Web.

PSS (2011) Perth Security Services. Web.

SAS (2011) TYCO LTDS: Tyco International to Acquire Signature Security. Web.

Sillyfer (2008) Web.

TMS (2011) TMS, Security, Maintenance, Cleaning & Training. Web.

Tyco Electronics (2003) Total Quality Management: Quality Manual 102–1. Web.

Tyco Electronics (2008) Environment, Health and Safety 2008 Report. Web.

Tyco International (2007) SimplexGrinnell Gathers Valuable Systems Integration Insights at – Security Advisory Council Summit. Web.

Tyco International (2010) Annual Report 2010 of Tyco International. Web.

Tyco International (2010) Annual Review 2010 of Tyco International. Web.

Tyco International (2011) Media Release. Web.

Waller, C. J. (2002) The US Economy in 2002. Web.

Yahoo Finance (2011) Basic Charts of Tyco International. Web.

Yahoo Finance (2011) Web.

Yin, R. K. (2003) Case Study Research: Design and Methods. 3rd ed. Beverly Hills, CA: Sage.

Footnotes

  1. Corporate Social Responsibility.
  2. National Minority Supplier Diversity Council.
  3. Women’s Business Enterprise National.
  4. Managing Director.
  5. Electronic Security Services.
  6. Electronic Security Systems.
  7. Radio Frequency Identification.
  8. TQM.
  9. Tax Sharing Agreement.
  10. Annual Impairment Analysis.
  11. Global Reporting Initiative.
  12. Toxic Release Inventory.
  13. Multinational Corporations.
  14. Corporate Law Economic Reform Program Act.
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IvyPanda. "ADT Security Company's Strategic Management." July 24, 2020. https://ivypanda.com/essays/adt-security-companys-strategic-management/.

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IvyPanda. 2020. "ADT Security Company's Strategic Management." July 24, 2020. https://ivypanda.com/essays/adt-security-companys-strategic-management/.

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IvyPanda. (2020) 'ADT Security Company's Strategic Management'. 24 July.

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