[Update] Jacobs Engineering Group SWOT Analysis / SWOT Matrix | jacobs engineering – Australia.xemloibaihat

A SWOT analysis is a framework that is used to analyze a company’s competitive positioning in its business
environment. This can be used by Jacobs Engineering Group, and will involve the identification of its internal Strengths (S)
and Weaknesses (W) followed by the identification of the Opportunities (O) and Threats (T) it faces in its
extensivelyrnal business environment.

Jacobs Engineering Group is among the leading firms within its industry, and it needs to retain this position.
Jacobs Engineering Group is carefully reviewing its SWOT analysis and using it to make strategic decisions. For a SWOT
analysis to be conducted of the firm, an interactive process needs to be undertaken by coordinating among all
the departments of the firm such as finance, marketing, operations, human resource, logistics, strategic
planning, management information systems etc.

A SWOT matrix is a 2×2 matrix that has the internal strategic factors listed in the first row; Strengths and
Weaknesses. It has the external strategic factors listed in the second row; Opportunities and Threats. This
SWOT strategic framework allows company managers to easily view all of the company’s strengths, weaknesses,
opportunities and threats in one matrix.

Internal
Strengths
Weaknesses

External
Opportunities
Threats

The SWOT analysis matrix helps in the development of 4 types of strategies by managers. These are:

• Strengths-Opportunities Strategies (SO): This involves using internal strengths to take
  advantage of opportunities.
• Weaknesses-Opportunities Strategies (WO): This involves improving on the company’s
  weaknesses by making use of the opportunities.
• Strengths-Threats Strategies (ST): This involves the using of strengths to minimize the
  weaknesses.
• Weaknesses-Threats Strategies (WT): This involves the elimination of weaknesses to combat
  the threats.

The main objective of the SWOT analysis is to help in identifying the strategies that can be used by the
company to build on its strengths, eliminate its weaknesses while making the most of opportunities and
countering threats.

SWOT Analysis of Jacobs Engineering Group

Strengths of Jacobs Engineering Group

• Distribution and Reach: Jacobs Engineering Group has a large number of outlets in almost every state, supported by a
  strong distribution network that makes sure that its products are available easily to a large number of
  customers in a timely manner.
• Cost Structure: Jacobs Engineering Group’s low cost structure helps it produce at a low cost and sell its products at a
  low price, making it affordable for its customers.
• Dealer Community: Jacobs Engineering Group has a strong relationship with its dealers that not only provide them with
  supplies but also focus on promoting the company’s products and training.
• Financial Position: Jacobs Engineering Group has a strong financial position with consecutive profits in the past 5
  years, along with accumulated profit reserves that can be used to finance future capital expenditures.
• Jacobs Engineering Group has a large asset base, which provides it with better solvency.
• Return on Capital Expenditure: Jacobs Engineering Group has been successfully able to generate positive returns on the
  capital expenditure it has incurred on various projects in the past.
• Automation: of various stages of production has allowed the more efficient use of resources and reducing
  costs. It also allows for consistency in quality of its products and provides the ability to scale up and
  scale down production as per the demand in the market.
• Skilled Labor force: Jacobs Engineering Group has invested extensively in the training of its employees that has
  resulted in it employing a large number of skilled and motivated employees.
• Jacobs Engineering Group has a diversified workforce, with people of many geographical, racial, cultural and
  educational backgrounds that help the company by bringing in diverse ideas and methodologies of doing
  things.
• Jacobs Engineering Group has qualified and accredited professionals working under in its team.
• Entering new markets: Jacobs Engineering Group’s innovative teams have allowed it to come up with new products and enter
  new markets. It has been successful in past, in most of the initiatives it has taken in new markets.
• Social Media: Jacobs Engineering Group has a strong presence on social media with more than millions of followers on the
  three most famous social media platforms: Facebook, Twitter and Instagram. It has high levels of customer
  engagement on these platforms with low customer response time.
• Website: Jacobs Engineering Group has a well-functioning and interactive website that draws a large number of internet
  traffic and sales.
• Product Portfolio: Jacobs Engineering Group has a large product portfolio where it provides products in a large range of
  categories. It has a number of unique product offerings that are not provided by competitors.
• The geography and location of Jacobs Engineering Group provide it with a cost advantage in serving its customers, when
  compared to that with the competition.
• Jacobs Engineering Group has a well-established IT system that ensures efficiency in its internal and external
  operations.
• Jacobs Engineering Group owns a number of intellectual property rights that include trademarks and patents. These allow
  it exclusivity over its products and competitors cannot copy or reverse engineer them.
• Jacobs Engineering Group is a brand that has been in the market for years, and people are aware of it. This makes its
  brand awareness high.
• Its products have maintained quality over the years and are still valued by customers, who find it as good
  value for the amount of money that they pay.
• Partnerships: Strategic partnerships are established by Jacobs Engineering Group with its suppliers, dealers, retailers
  and other stakeholders. This allows it to leverage them if need be in the future.

Weaknesses of Jacobs Engineering Group

• Research and Development: Even though Jacobs Engineering Group is spending more than the average research and
  development expenditure within the industry, it is spending way less than a few players within the industry
  that have had a significant advantage as a result of their innovative products.
• High Day Sales Inventory: The time it takes for products to be purchased and sold are higher than the
  industry average, meaning that
  Jacobs Engineering Group builds up on inventory adding unnecessary costs to the business.
• Rented Property: A significant proportion of the property that Jacobs Engineering Group owns is rented rather than
  purchased. It has to pay large amounts of rent on these adding to its costs.
• Low current ratio: The current ratio that shows the company’s ability to meet its short term financial
  obligations, is lower than the industry average. This could mean that the company could have liquidity
  problems in the future.
• The company has low levels of current assets compared to current liabilities, and this can create
  liquidity problems for it in operations.
• Cash flow problems: There is a lack of proper financial planning at Jacobs Engineering Group regarding cash flows,
  leading to certain circumstances where there isn’t enough cash flow as required leading to unnecessary
  unplanned borrowing.
• Integration: Jacobs Engineering Group’s current structure and culture have resulted in the failure of various mergers
  aimed at vertical integration.
• Diversification in the workforce: The workforce at Jacobs Engineering Group is concentrated with mostly local workers,
  and low amounts of workers from other racial backgrounds. Lack of diversification makes it difficult for
  employees from different racial background to adjust at the workplace, leading to loss of talent.
• Market Research: Jacobs Engineering Group has not conducted market research within the market that is serves since the
  past 2 years. As a result, it is making decisions based on 2 years old data, while customer needs may have
  evolved over time.
• High employee turnover rates: Jacobs Engineering Group has a higher employee turnover rate compared to competitors. This
  means that it has more people leaving the job, and as a result, it is spending more on training and
  development as employees keep leaving and joining.
• Quality Control: Jacobs Engineering Group has a lower budget for its quality control department than competitors. This
  leads to lack of consistency and the possibility of damage to quality across its various outlets.
• Lack of legal experience and legal department employees are not highly qualified.
• A few products have a high market share, while most of the products have a low market share. This reliance
  on a few products makes
  Jacobs Engineering Group vulnerable to external threats if these few products suffer for any reason.
• The workload is a high per worker as there are fewer workers than the actual work required. This puts
  workers under psychological stress and is likely to be less productive.
• Worker morale is low due to company culture and politics that have grown in recent years.
• Competition and qualified employees have been leaving the organisation in recent years, which could mean a
  shortage of good talent for the company in the upcoming years.
• The decision making is highly centralized, and decisions by teams need to be approved by certain
  officials. This reduces efficiency in operations by making them more time consuming. It also leads to
  reduced innovation.
• The performance appraisal is not in a systematic manner. People are often not appraised for their
  performance. This leads to lower work morale and lack of promotion opportunities for employees.

Opportunities of Jacobs Engineering Group

• Internet: there has been an increase in the number of internet users all over the world. This means that
  there is an opportunity for
  Jacobs Engineering Group to expand their presence online; by using the internet to interact with its customers.
• E-commerce: There has been a new trend and a growth in sales of the e-commerce industry. This means that a
  lot of people are now making purchases online. Jacobs Engineering Group can earn revenue by opening online stores and
  making sales through these.
• Social Media: there has been an increase in the number of social media users worldwide. The three social
  media platforms; Facebook, Twitter and Instagram, have shown the greatest number of increase in monthly
  active users. Jacobs Engineering Group can use social media to promote its products, interact with customers and collect
  feedback from them.
• Technological developments: technology comes with numerous benefits among many departments. Operations can
  be automated to reduce costs. Technology enables better data to be collected on customers and improves on
  marketing efforts.
• There has been an increase in average household income along with an increase in consumer spending
  following the recession. This will result in growth in Jacobs Engineering Group’s target market with new customers that
  can be attracted towards the business.
• Population: the population has been growing and is expected to grow at a positive rate for the upcoming
  years. This is beneficial for Jacobs Engineering Group as there will be an increase in the number of potential customers
  that it can target.
• Inflation: The inflation rate has been low and is expected to remain low in the next two years. This is an
  opportunity for
  Jacobs Engineering Group as its cost of inputs would remain low for the next two years.
• Interest rate: Lower interest rates than compared to previous years provides an opportunity for Jacobs Engineering Group
  to undergo expansion projects that are financed with loans at a cheaper interest rate.
• Green government drive: this provides an opportunity for Jacobs Engineering Group for the sale of Jacobs Engineering Group’s products
  to federal and state government contractors.
• Transport Industry: the transport industry has been flourishing in the past few years, and shows growth
  potential in the future. This has reduced the costs of transportation, which is beneficial for Jacobs Engineering Group as
  it will lower its overall costs.
• Tax policy: the governments’ reduction in tax rate is beneficial for Jacobs Engineering Group as a lower amount would be
  expensed out as a tax.
• The government has also announced a subsidy on the sale of environmentally friendly goods in this sector.
  Jacobs Engineering Group can focus on these environmentally friendly products and make use of this opportunity.
• Tourism: growth in tourism is beneficial for Jacobs Engineering Group as it will provide new potential customers that it
  can target in order to gain market share.
• Skilled workers: increase in education and training by numerous institutes has increased the amount of
  skilled labor available within the country. This means that if Jacobs Engineering Group is able to hire skilled labor, it
  would have to spend less on training and development, therefore, saving costs.
• The growth in consumer spending in the economy is likely to increase consumption for Jacobs Engineering Group’s
  products.
• A number of new niche markets have opened up that are growing. Jacobs Engineering Group can sell products in these
  markets and take advantage.
• Globalisation: Increased globalisation does not restrict Jacobs Engineering Group to its own country. It can extend its
  operations to other countries, entering into these markets and making use of the opportunities that lie in
  these markets.
• Consumers within the industry are becoming more conscious of health, and this is a segment that is
  growing. Jacobs Engineering Group can take advantage by manufacturing products that are beneficial to customer’s health.
• Trade barriers have been reduced on the import of goods. This will reduce the costs incurred on inputs for
  production.
• Regulations have loosened in recent years making it easier for businesses to carry out their operations.

Threats of Jacobs Engineering Group

• Technological developments by competitors; New technological developments by a few competitors within the
  industry pose a threat to
  Jacobs Engineering Group as customer attracted to this new technology can be lost to competitors, decreasing
  Jacobs Engineering Group’s overall market share.
• Suppliers: The bargaining power of suppliers has increased over the years with the decrease in the number
  of suppliers. This means that the costs of inputs could increase for Jacobs Engineering Group.
• New entrants: there have been numerous players that have entered the market and are gaining market share
  by gaining existing companies’ market share. This is a threat to Jacobs Engineering Group as it can lose its customers to
  these new entrants.
• Increasing competition: there has been an increase in competition within the industry putting downward
  pressure on prices. This could lead to reduced revenue for Jacobs Engineering Group if it adjusts to the price changes, or
  loss of market share if it doesn’t.
• Exchange Rate: the exchange rate keeps fluctuating and this affects a company like Jacobs Engineering Group that has
  sales internationally, while its suppliers are local.
• Political uncertainties in the country prove to be a barrier in business, hindering performance at times
  and making the business incur unnecessary costs.
• The fluctuating interest rates in the country do not provide a stable financial and economic environment.
• Consumer tastes are changing, and this puts pressure on companies to constantly change their products to
  meet the needs of these customers.
• Regulations on international trade keep changing, and this requires compliance by companies if they are to
  operate globally.
• Substitute products available are also increasing, which is threat collectively for the whole industry as
  consumption of current products decrease.
• The rise in prices of fuel has increased in the input costs for Jacobs Engineering Group. These costs have also
  increased as other industries that provide inputs for this company also have suffered from increasing fuel
  prices, thereby charging more.
• Increased promotions by competitors have been a threat for Jacobs Engineering Group. On most media, there is more
  clutter than ever, and customers are bombarded with multiple messages. This reduces the effectiveness of
  promotional messages by Jacobs Engineering Group.
• Constant technological developments require the workforce to be trained accordingly as the inability to
  keep up with these changes can lead to loss of business for Jacobs Engineering Group.

Limitations of the SWOT Analysis of Jacobs Engineering Group

Even though the SWOT analysis is an effective tool, it has certain limitations as well.

• Its major limitation is the fact that there can be an overlap of strengths and weakness, with a single
  factor being both a strength and a weakness. For example, a large number of outlets can be a strength in a
  growing economy or a weakness if the economy is going through a recession.
• The matrix is not an end as it does not show how to achieve the objectives. It should be used as a
  starting point to make strategic decisions.
• The assessment done through a SWOT analysis is a static one and does not take into consideration the
  changes that take place in the competitive environment.
• The factors listed down in a SWOT analysis may be overemphasized by the company.
• There are certain interrelationships between the internal and external factors that the SWOT Matrix
  overlooks.

Weighted SWOT analysis of Jacobs Engineering Group

In response to the above mentioned limitations, a weighted SWOT analysis can be conducted for Jacobs Engineering Group that
involves assigning weightage to each of the strengths and weaknesses mentioned in the SWOT analysis for
Jacobs Engineering Group. It also involves estimating the probability of an event occurring in the external environment.
This allows managers to focus on the important factors, and give less consideration to the less important
ones.

The limitation of the weighted SWOT analysis is that it does not look at how holistically different factors
affect the business when combined.

Example of weighted SWOT analysis

For Jacobs Engineering Group, the strength for strong distribution can be given a higher weight than the strength for the
skilled labor force.

Advanced SWOT analysis/SWOT Matrix

Jacobs Engineering Group SWOT analysis lists down the strengths, weaknesses, opportunities and threats to any organisation,
but does not tell management what can be done by these. To overcome this limitation and help develop
strategies that are appropriate, an advanced SWOT analysis or TOWS matrix is used. This lists down the
Strengths-Opportunities (SO) strategies that involve using strengths to take advantage of opportunities. It
lists the Strengths-Threats (ST) strategies that involve using strengths to fight of threats. It involves the
Weaknesses-Opportunities strategies that involve converting weaknesses to strengths by using opportunities.
Lastly, Weakness-Threats (WT) strategies involve overcoming weaknesses to avoid threats.

Strengths

• Jacobs Engineering Group has a Strong Distribution network with a large number of outlets.
• It has a low-cost structure, which provides it with an advantage over the competition.
• It has a strong financial position with positive profits reported in the past few years. It also
  has a strong asset base.
• It has a skilled labour force that is highly qualified, innovative and diversified.
• It has a strong presence on social media.

Weaknesses

• A high proportion of property in use by
  Jacobs Engineering Group is on rent, and rental charges need to be paid.
• Low amounts of spending on research and development as compared to the competition.
• It has a high employee turnover rate, with low employee motivation and working morale.
• It has liquidity problems with low quick ratio; the level of current assets is less than current
  liabilities. It also faces cash flow problems.

Opportunities

• Internet users are increasing around the world. E-commerce is also growing with the increase in
  internet usage.
• Social media users are increasing worldwide.
• Household income is increasing and so is the consumer spending. Inflation in the economy is
  expected to remain low.
• Growth in environmentally friendly products and services. Government is offering subsidies on
  these.
• Interest rates are low, which provides an investment opportunity for large projects.

SO Strategies

• Increase marketing to attract consumers to spend (S1, S3, O3).
• Use its presence on social media for marketing and to attract customer towards its website (S5,
  O2, O3).
• Develop environmentally friendly products through innovation, at a low cost so that they could
  be sold at a low price (S2, S4, O4).
• Market products at low prices by offering discounts. This would help increase sales in volumes
  and is feasible due to low inflation and cost (S2, O3).

WO Strategies

• Finance ownership of the property through low interest rate to increase the proportion of owned
  property to rented property (W1, O5).
• Increase payrolls, provide incentive packages and benefits to employees to reduce turnover and
  improve work morale. This could be possible as costs are low currently. (W3, O3)

Threats

• There is a threat of new entrants coming into the market.
• The exchange rate has been devalued.
• Fuel price has risen in recent years making inputs expensive.
• Competition within the industry is increasing.
• More substitute products are now available.

ST Strategies

• Use a strong distribution network to reach out to customers and fight off new entrants into the
  market (S1, T1).
• Use its strong financial position to invest in intellectual property rights. This would help
  compete with increasing competition in the market (S3, T4).
• Use its innovative teams to find cheaper alternatives to fuel so that these could be used,
  thereby reducing costs (S4, O3).

WT Strategies

• Increase spending on research and development to enable Jacobs Engineering Group to better compete with
  competition (W2, T4).
• Provide incentives, increase engagement, or provide a better work environment to retain talent.
  This will ensure that employees don’t leave and join competitors (W3, T4).

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Oxford.

Address:
111 S. Arroyo Parkway

Pasadena, California 91105

U.S.A.

Telephone: (626) 578-3500

Fax: (626) 578-6916

Statistics:

Public Company
Incorporated: 1957 as Jacobs Engineering Co.
Employees: 9,600
Sales: $2.1 billion (1998)
Stock Exchanges: New York
Ticker Symbol: JEC
SICs: 8711 Engineering Services; 8741 Management Services; 7349 Building Maintenance Services, Not Elsewhere Classified

Company History:

111 S. Arroyo ParkwayPasadena, California 91105U.S.A.(626) 578-3500(626) 578-69161957 as Jacobs Engineering Co.9,600$2.1 billion (1998)New YorkJEC8711 Engineering Services; 8741 Management Services; 7349 Building Maintenance Services, Not Elsewhere Classified

Jacobs Engineering Group Inc. designs, builds, and operates on a contract basis a wide variety of processing plants primarily for use in the petroleum, minerals, and environmental waste industries. Jacobs Engineering was moving in the 1990s from a medium niche in the world of industrial engineering to compete with such giants as Fluor Corporation and Bechtel Corporation on major domestic and international projects. Jacobs Engineering provided an unmatched rate of return on equity for its shareholders in the late 1990s and, most remarkably, carried no long-term debt.

Company Origins

Of Lebanese descent, Joseph J. Jacobs viewed his own entrepreneurial success in the context of the traditional emphasis among the Lebanese on commerce and self-reliance. Jacobs grew up in Brooklyn, New York, the son of a Lebanese notions peddlar who became wealthy during World War I by selling straight razors. When the safety razor was subsequently invented the Jacobs family fortune went downhill and young Joseph Jacobs was forced to scramble for extra dollars wherever he could. With strong encouragement from his mother, Jacobs stayed in school and eventually graduated from the Polytechnic Institute of Brooklyn in 1937 with a degree in engineering.

Unable to find steady work in the midst of the Great Depression, Jacobs began teaching at Polytechnic while working on advanced degrees. In 1942, he earned a doctorate in chemical engineering and took a position as senior chemical engineer at Merck & Company in Rahway, New Jersey, where he was involved in the development of vitamin processing and the manufacture of DDT and penicillin. Strongly influenced by the Lebanese tradition of being in business for oneself, Jacobs started his own business in 1947 following a stint at Chemurgic Corporation in Richmond, California. Founding the Jacobs Engineering Company as both a consulting agency and as a manufacturers’ representative for makers of large-scale equipment in the processing industry, Jacobs relocated the firm to Pasadena in anticipation of the phenomenal growth that would soon occur in southern California.

Because of a potential conflict of interest between his role as consultant and his work as a broker, Jacobs took pains to advise his clients of his dual professions and to maintain the highest possible standards of integrity with both groups of business associates. Regarding honesty as one of the basic tenets of his business philosophy, Jacobs told the Newcomen Society in 1980, “Play it straight, deal with honesty and integrity, and you’ll get your share. My Lebanese heritage … is never really very far from me.”

At first, the sales work expanded more quickly than the consulting end of the business, and by 1954 Jacobs had added four more men to handle sales while he and Stan Krugman concentrated on design consultation. Among their initial consulting clients were such companies as Eston Chemical, Southwest Potash Company (later AMAX Inc.), and Kaiser Aluminum & Chemical, for which Jacobs Engineering provided varied services including feasibility studies, the analysis of proposed new processes, and the development of flowsheets.

Larger Contracts in the 1950s and 1960s

In 1956 Jacobs Engineering landed its largest contract to date. Kaiser Aluminum, wishing to build a new and quite large alumina plant for which its own in-house engineers lacked the requisite technological experience, asked Jacobs Engineering to assume design responsibilities for the project. Although this was new territory and represented a somewhat daunting venture, Jacobs Engineering did the job, hiring an extra 20 designers to help with the complex project, and Kaiser built it as specified and to the satisfaction of everyone involved. Moreover, a decade later when Kaiser wanted to expand the plant threefold they called in Jacobs Engineering to come up with the additional designs. In 1960, Jacobs Engineering won another important contract, this time from Southwest Potash for the design and construction of a potash flotation plant. Until this point in the company’s history, Jacobs Engineering had not taken on any construction work, regarding the industry as unprofessional. However, the job for Southwest Potash dispelled that idea for Joseph Jacobs, and his company then offered a full range of both engineering and construction services.

A near disaster in 1962 illustrated the qualities that enabled Jacobs Engineering to grow from a tiny local outfit to one of international importance. The company built another plant for Southwest Potash, this one in Vicksburg, Mississippi, which was equipped with a novel process for making potassium nitrate. When the plant developed serious problems shortly after start-up, Jacobs and a team of his top engineers moved to Vicksburg for six months so that the problems could be corrected as quickly as possible. After months of intensive repair work the plant proved to be of sound design, making Southwest Potash a happy customer and adding to Jacobs Engineering’s growing reputation for going the extra distance to achieve its clients’ full satisfaction. It was a demonstration of commitment and agility that few of the larger companies in the field could have matched, and on such quality performances Jacobs Engineering based its growth.

Parlaying its reputation for hard work and integrity into a period of sustained growth during the 1960s, Jacobs Engineering snatched smaller contracts away from the industry’s larger competitors and convinced larger potential customers of their capabilities. By 1967 Jacobs Engineering had opened offices around the country, encouraging each to emulate the main office’s entrepreneurial bent and willingness to take risks and assume responsibility. Joseph Jacobs’ hope was that each of the branch offices would duplicate the parent company’s own strengths, and by and large they were able to do so. By 1970 Jacobs Engineering had grown to the point where it was advantageous to take the company public. Primarily as a way of rewarding employees with stock options, Jacobs Engineering went public; however, the founder’s family maintained control of approximately 40 percent of the stock, and the company tried to retain the atmosphere of a family-run business.

Continued Expansion in the 1970s

Sales in 1972 reached $70 million and Jacobs Engineering began to pursue international as well as domestic contracts. As early as 1964, Jacobs Engineering had been interested in a projected potash recovery plant to be built by Jordan on the Dead Sea. Trading on the experience gained in working for Southwest Potash, Jacobs Engineering was selected to prepare a technical evaluation of the project and, after a decade-long hiatus due to the Arab-Israeli war of 1967, eventually signed a contract to design and build a $450 million plant for the Jordanian government. According to Joseph Jacobs, speaking fluent Arabic, was instrumental in landing this huge job. The project was handled by Jacobs Engineering’s international division based in Dublin, Ireland, which subcontracted much of the heavy construction work to a British company. Because Jacobs Engineering handled the assignment without a hitch, it was asked upon completion in the late 1970s to operate the plant as well.

Merging with the Pace Companies of Houston, Texas, in 1974, Jacobs Engineering recorded skyrocketing sales of $250 million in fiscal 1977, quadruple that of five years earlier. The Pace Companies brought to Jacobs Engineering a strong presence in the Gulf Coast industries of petroleum refining and petrochemicals, which remained staple ingredients of Jacobs Engineering’s revenue mix thereafter. With the addition of Pace and its resounding success in the Middle East, Jacobs (which changed its name to Jacobs Engineering Group) set its sights on yet bigger game, hoping one day to rival industry leaders such as Fluor and Bechtel.

Believing that his company had become too large to remain under his personal guidance, Joseph Jacobs made several attempts in the late 1970s to delegate executive authority along the lines favored by his much larger competitors. In 1976 Jacobs hired the first of a series of company presidents and later added a string of executive vice-presidents intended to help the firm pursue further large international contracts like the Jordanian potash project. “Jacobs’ concern with management may be coming just in time,” wrote a sentiment shared by those who believed that a single entrepreneur could not handle the administration of a mature corporation.

Subsequent events proved that thinking wrong, at least in the case of Jacobs Engineering. As Joseph Jacobs reduced his involvement in day-to-day management, the company went after ever larger contracts just as the country plunged into the severe recession of 1982-83. Profits shrank and then disappeared in a small but steady wave of red ink, while revenues fell by an astonishing 50 percent to around $200 million in 1984. The cause of this disaster was twofold. The sudden infusion of extra management saddled the company with a high overhead; worse yet, the enlarged executive staff naturally sought to justify its existence by a corresponding increase in revenues. Jacobs Engineering found itself bidding on so-called fixed-price contracts, as opposed to cost-reimbursable jobs favored by Joseph Jacobs. In the weak economic conditions, competition was brutal for the available fixed-price contracts, which typically included the gigantic engineering projects now pursued by Jacobs Engineering. Thus, Jacobs Engineering was awarded a smaller number of larger-than-average contracts yielding little if any profit.

Scaling Back in the 1980s

Distressed by swollen overhead costs and managerial complacency, in 1985 Joseph Jacobs came “roaring back from retirement,” as put it, to save his once gleaming creation. The chairman fired almost half of the company’s 2,300 employees, including 8 of 14 vice-presidents, and generally returned the company to its old-fashioned methods of the previous three decades–a time when “we made all our decisions standing in the hall,” as Jacobs told magazine. Starting with a fresh determination not to bid on fixed-price contracts regardless of their appeal, Jacobs Engineering ceded the biggest projects to its bigger rivals, concentrating instead on medium-sized process plants and specialty construction, such as a research and development center for Lockheed Missiles and Space Company in Austin, Texas, a $65 million project, and an addition to the Community Hospital of San Gabriel, California, costing around $20 million. In particular, Jacobs Engineering began lobbying for the many projects suddenly available in the area of environmental safety and clean-up, which typically require a high level of technical competence but not necessarily a contractor of great size. In other words, Joseph Jacobs left to his competitors the battle for mere revenue dollar volume and restored his company’s emphasis on what he called the “net return on brainpower”–a ratio based on the amount of profit divided by number of employees to measure the profitable productivity per each of his highly skilled engineers.

The results of this program were astonishing. Between 1987 and 1991 Jacobs Engineering returned an industry best 22.4 percent on shareholders equity while also managing to increase sales by an average of 37 percent annually, which also topped the industry by a wide margin–all this without incurring any long-term debt. Annual reports in the early 1990s revealed that the company had literally zero debt; according to a 1992 index of leading engineering firms which listed the median debt to capital ratio as 25 percent, with several companies reporting figures well over 40 percent, Jacobs Engineering’s ratio was given as 0.0 percent.

In the early 1990s, Jacobs Engineering Group enjoyed a balanced sales mix, having long since shed its former dependence on the petroleum industry. Again, with the emphasis on smaller, high-tech, higher margin contracts, Jacobs Engineering provided a broad variety of engineering services. From its earlier work in the minerals, fertilizers, and petrochemical segments, Jacobs Engineering had diversified into the areas of pharmaceuticals, biotechnology, and sterile facilities, along with the already mentioned opportunities in environmental protection projects. The company was the third largest domestic hazardous waste contractor, with 25 percent of its professional staff dedicated to environmentally driven projects. A 1987 buyout of Robert E. McKee Corporation (formerly the construction arm of Santa Fe Southern Pacific Corporation) gave the company added strength in the construction end of its business.

In 1992 Jacobs stepped down as CEO, and Noel Watson, an employee at Jacobs Engineering for 32 years, replaced him at the head of the company. Watson focused the company on two of its most profitable and growing segments: government-financed environmental cleanup jobs and facilities design and construction for the biopharmaceutical industry. In 1993 ten percent of Jacobs’ annual revenue came from government contracts, but those contracts generated 20 percent of the company’s pretax profits. Jacobs pursued this area in the mid-1990s with several government projects. In a joint venture with industry leader Fluor, Jacobs was awarded a contract in 1993 to clean up former uranium production facilities in Fernold, Ohio. The $2.2 billion contract was expected to generate as much as $40 million in profit for Jacobs. The company was also developing clean-up plans with the U.S. Navy for several sites in the southwestern United States and with the Department of Energy for a weapons plant in Colorado. With clean-ups at military bases and weapons sites on the rise, Jacobs anticipated its environmental division would grow 20 to 30 percent a year throughout the 1990s.

Expansion in the 1990s

Watson also targeted the biotech industry for further investment. As the young biotech industry matured in the 1990s, Jacobs Engineering wanted to be in the position to build the specialized plants they would need for product development To that end, Jacobs purchased Triad Technologies and Sigel Group in the early 1990s, two companies that expanded Jacobs’ expertise in designing and constructing biotechnology facilities.

Once again aiming to compete with the industry leaders, Jacobs needed a stronger presence internationally. With foreign contracts accounting for only 16 percent of Jacobs’ annual revenues in 1992, Jacobs lagged far behind the overseas activity of rivals Foster Wheeler, Fluor, and Bechtel. To narrow the gap, Jacobs purchased the U.K. companies H&G Process Contracting and H&G Contractors in 1993. Humphreys & Glasgow, as the companies were collectively known, were among Europe’s most widely recognized contractors.

By 1993 the company had fully recovered from the hard years of the mid-1980s. Not only did the company earn $6.5 million on revenues of $26.6 million in fiscal 1992, but it also held a record backlog of $1.8 billion in contracted business.

Some of that profitability went toward funding further acquisitions. In 1994 Jacobs bought CRS Sirrine Engineers and CRSS Constructors for $38 million. The purchase moved Jacobs Engineering into design and construction for the paper and semiconductor industries. Although the company paused to catch its breath in 1995 and make headway on its backlog, in 1996 Jacobs’ acquisitions spree continued. That year it further expanded its presence in Europe by purchasing 49 percent of Serete Group, an engineering company that primarily served in the government sector and specialized in communications. In 1997 Jacobs formed a joint venture with Stone & Webster that would also extend its reach internationally. Named Stone & Webster/Humphreys & Glasgow Ltd., the venture would design and construct power plants in India. The same year, Jacobs purchased CPR Engineering and incorporated the specialist in paper plant engineering as a division.

As Jacobs Engineering grew in size, it maintained an impressive performance record. In 1997 it boasted an almost 16 percent five-year return on capital, and it beat out its rivals in terms of sales growth: a five-year average of 12.4 percent. For fiscal year 1998 the company reported record revenues of $2.1 billion and record net income of $54 million. The company expected a continued rise in revenues and income based on its backlog of $3.33 billion.

Late in 1998 Jacobs was discussing a possible merger with Sverdrup Corporation; if the merger were accomplished the resulting company would have 1998 revenues of approximately $3 billion. According to Watson, “Together, we would immediately emerge as a national leader in three very important and expanding markets: public sector buildings, civil engineering and infrastructure, and federal sector operations and maintenance.”

Principal Subsidiaries: Jacobs Constructors, Inc.; J.E. Merit Constructors, Inc.; Robert E. McKee, Inc.; Jacobs Applied Technology, Inc.; The Pace Consultants, Inc.; Triad Technologies, Inc.; Payne & Keller Company, Inc.

Further Reading:

Barnett, Chris, “Managing by Instinct,” December, 1985.

“Jacobs Buys Santa Fe’s McKee,” July 30, 1987.

“Jacobs Engineering’s Goal: Quintupling by 1986,” August 13, 1981.

“Jacobs Engineering Enters Merger Talks with Sverdrup Corp.,” November 6, 1998, p. A8.

“Jacobs Eyes Smaller Jobs,” December 2, 1982.

Jacobs, Joseph J., New York: Newcomen Society in North America, 1980.

“A Loner Relaxes His Grip,” November 21, 1977.

Lubove, Seth, “Thank You, Jack Welch,” January 13, 1997, pp. 102-03.

Poole, Claire, “Faster, Better, Cheaper,” January 6, 1992.

“Potash Project Taps Dead Sea Salts,” May 28, 1981.

Taylor, John H., “After the Pink Slips,” August 2, 1993, p. 51.

Barnett, Chris, “Managing by Instinct,”December, 1985.”Jacobs Buys Santa Fe’s McKee,”July 30, 1987.”Jacobs Engineering’s Goal: Quintupling by 1986,”August 13, 1981.”Jacobs Engineering Enters Merger Talks with Sverdrup Corp.,”November 6, 1998, p. A8.”Jacobs Eyes Smaller Jobs,”December 2, 1982.Jacobs, Joseph J.,New York: Newcomen Society in North America, 1980.”A Loner Relaxes His Grip,”November 21, 1977.Lubove, Seth, “Thank You, Jack Welch,”January 13, 1997, pp. 102-03.Poole, Claire, “Faster, Better, Cheaper,”January 6, 1992.”Potash Project Taps Dead Sea Salts,”May 28, 1981.Taylor, John H., “After the Pink Slips,”August 2, 1993, p. 51.

Source: , Vol. 26. St. James Press, 1999.