Marketing Management Essay, Research Paper
"Marketing ideas have made singularly little penetration into
the centres of influence of the construction industry. To some extent this
follows from the character of the industry as an agglomeration of service
organisations, not without structural relationship to one another, but serving a
clientele from which individuals seek service very infrequently." (Jepson
& Nicholson, 1972: p.1) Although times have and are changing the above
statement despite being written over twenty five years ago is still to some
extent very true. The subject of this assignment is a construction firm that has
recently designed and implemented a marketing management strategy. The objective
of this assignment is fourfold, firstly the company?s approach to marketing
management will be documented this will then be related to marketing management
theory Then by analysing data collected through research the effectiveness of
the strategy will be discussed. Finally using marketing management theory as a
foundation recommendations will be made to identify where the initial strategy
could be improved in order to promote future business development and success,
in line with the strategic mission of the company. The organisation in question
has strong foundations, since it?s incorporation in the mid fifties turnover
has grown in line with inflation. In 1984 the Company was purchased by the son
of the original managing director, he took up the role of new managing director.
By the beginning of the 1990?s it became apparent that the company had reached
a stage where it was no longer a small "hands-on" enterprise. The
level of turnover and number of employees had increased at such a rate that the
organisation now employed a sizeable management team. All with an experienced
technical background in the fields of surveying, estimating or site management
and who had either progressed through the ranks of this firm or other
organisations of a similar size and nature. The company was at the time of the
initial implementation of this initiative inexperienced in marketing management
and strategy. However, the senior personnel realised the company had reached a
stage where future business growth wasn?t just going to come from hard work,
doing the job well and relying on a good reputation. The view was taken that it
was necessary to pursue new ventures to bring about growth and development. The
Company has a large contracting portfolio with contracts completed for public
and private clients in the commercial and industrial sectors. Appendix A shows
the diversification with the selection of recently completed projects and list
the clients for whom work has been carried out. The reason for a firm of this
size carrying out such a wide range of activities is largely based on the belief
that in such a competitive industry as construction it has been necessary to
take on whatever type of work was available in order to maintain a consistent
order book. In developing the company?s marketing management strategy numerous
workshops were held, attending these were the company directors and two senior
managers. Information on the company was gained from interviews with the persons
attending these workshops. There are many reasons for running a business, this
company wanted to be clear on why it wanted to improve or introduce the
marketing effort so that appropriate goals can be set. The aim of wanting to
grow the business by increasing sales while at the same time sustaining the
level of profit margin is the underlying factor in this case. Turnover could be
increased very easily as most of the work is procured on an invitation to tender
basis where the deciding factor is almost always price, however, "buying
in" work will not necessary have a long term positive effect. The secondary
objective was to secure profitable business relationships. These objectives are
reflected in the mission statement in the appendix B. The development of the
mission statement was the start of the company?s marketing management
initiative. The company?s overall objective in the eye?s of the leaders was
defined. It was thought the development of a mission statement would provide the
foundation needed. Perhaps the implementation of a mission statement doesn?t
have a direct link to the theory of marketing management however it?s place in
the overall field of strategy is illustrated below. "A firm?s mission is
top management?s view of what the organisation seeks to do and become over the
long term. Expressed in the form of a mission statement it provides a publicly
available summary of the long term goals of a firm?s top managers."
(Barney, 1997: p.10) After the preliminary stage it was decided that careful and
critical examination of the company would be needed. The questions of what do we
do well and what do we do badly ? were asked, however, analysis of "what we
do?" was first necessary. Previously there had been no formal
categorisation so the next step was to analyse the business in relation to
it?s markets. It became apparent that this was impossible without analysing
the different business activities and categorising the market areas. The
categories for such a division were decided upon as being type of client, sector
of work, type of work, type of contract and location of work. These divisions
produced provided the workshop team initially with the sufficient tools for
analysing the business. The areas highlighted under these headings are shown in
appendix C. This way of thinking doesn?t have a direct link to marketing
management theory but can be proved to be a form of market segmentation. For the
construction industry the application of marketing theory in order to segment
the market is not directly appropriate, but it can be applied in the way stated
to produce effective results as the common goal is the "identification of
target markets". Even though demographic, ethnic, religious and national
classification are not appropriate as regards construction, industry own
classifications appear to make data collection and analysis possible.
"Market segmentation is the analysis of the total demand in a market into
its constituent parts, so that different sets of consumers, with distinctive
needs and behavioural patterns, can be identified," (Page, 1995:p.40) It
would become apparent later that the market segmentation would be extremely
useful when analysing markets. At this moment the initial divisions would help
the effort of gathering information from various sources enabling critical
analysis of the company. "From the customer?s point of view, the
information process is the least visible of all the marketing functions. It is,
nevertheless, the basis of all marketing activity. If the product / service is
said to be the cornerstone of marketing, then it must be remembered that good
products / services accurately reflect the needs and wants of customers, which
can only be ascertained by gathering information. Information provides the means
for a company to fulfil the marketing concept," (Lancaster & Reynolds,
1995: p.57) Examination of the company began by using the personal experience of
the persons attending the workshop. In this forum, lists were made of things
that were likely to happen in the business environment which could have
beneficial or negative effects on the company?s fortunes. Subjects that were
concentrated on were, new technology such as Information Technology and the
latest building methods, the development of communication methods and any known
developments within local and general government. This type of analysis of the
macro environment could be perceived as a form of STEP or PEST analysis. From it
the company compiled a list, developed from the personal experience of the
workshop members, of all the external factors affecting the organisation.
Further factors relating to the proximate macro environment about markets and
competitors were also noted. These environmental factors are in a broader
context and are ones that the organisation has little or no control, however,
they could highlight the marketing opportunities and threats of the future.
"Successful companies recognise that the environment is constantly spinning
new opportunities and threats and understand the importance of continuously
monitoring and adapting to the changing environment." (Kotler, 1997 :p.147)
The next stage was the development of the organisation?s strengths weaknesses
opportunities and threats through a SWOT analysis. First came the opportunities
and threats using the results of the analysis of the external environmental
factors. Using a pragmatic approach all things on the horizon which could have a
negative effect on the business. Including not knowing key competitors well
enough, changes in government spending. It was found the most of the threats
were also opportunities and vice versa, depending on how a firm made predictions
and reacted to changes. From the list produced the top three items that: had an
extremely high probability of happening and a potentially high impact on the
business were identified. Following this the internal factors were considered,
highlighting the sectors that the panel believed they were good at (internal
strengths) and areas were they were lacking in some way and where there was
potential for dangerous situations (internal weaknesses). This type of SWOT
analysis gave the firm "the means by which to identify it?s own strengths
and weaknesses as they relate to external opportunities and threats."
(McDonald, 1995: p.28) Following SWOT analysis further investigation into the
business was required as the SWOT had only dealt with the personal views and
experience of senior personnel. The various business classifications brought
about following segmentation were analysed for the preceding five years. Factors
analysed were profit, turnover, levels of enquiries and level of competition. As
most of the work in the building industry is gained through tendering and
selective tendering the competition factor would be the average number of
companies tendering for a particular project. All agreed profit margin analysis
was particularly important as profit margin was fundamental to both survival and
future growth. Insufficient margins are unlikely to give the business the
freedom to choose the best strategic option because of the impact on break even
levels. From the data analysis the following conclusions were drawn, the
majority of the company?s turnover came from work on schools and colleges and
the industrial sector from the construction of warehouses and other similar
buildings. Over recent years there had been a swing, however, towards work in
the leisure industry. Industrial and commercial work had risen while public work
had remained constant as the overall turnover increased. As far as profitability
was concerned it was difficult to see any particular definite trend as to the
more and less profitable sector of work. As regards the other areas of analysis,
design and build work had increased steadily over the last couple of years and
had proved profitable but was also considered an area where the company lacked
experience. Repair and maintenance work accounted for a small percentage of
turnover but was highly profitable. Location analysis didn?t prove any
particular use apart from the fact that contracts carried out outside the north
west region were generally for existing clients. At this stage the company
didn?t have the set-up and was reluctant to venture further a field unless it
was to carry out work for valued clients. Following the analysis and information
gathering stage, the workshop team were in a situation where numerous internal
and external factors affecting the company?s ability to achieve profit and
sales had been identified. They were asking the question How do we reach our
goal using the results of the analysis undertaken? In order to make marketing
management decisions some kind of formal marketing planning would now be
required. "There can be little doubt that marketing planning is essential
when we consider the increasingly hostile and complex environment in which
companies operate" (McDonald, 1995: p.21) The team focused their attention
on the options for development. Stay offering our regular clients the same
services which would only be possible with the large clients that carryout
regular building work and profitability would need to be maximised by reducing
costs through increased efficiency. Provide a new type of service to existing
clients possibilities included offering regular repair and maintenance service
or offering the "complete service" from the initial design stage to
the finished product. The advantage would be that the company would be dealing
with clients where good stable relationship existed but the disadvantage was the
company?s unfamiliarity. Another option was to offer the "usual"
service to a wider range of clients, not necessarily meaning a different type of
client but to increase the marketing effort as regards selling the company or
perhaps by widening the geographic region. This type of strategy undertaken by
the company fits well with the theory of product / market expansion. Meaning the
route chosen to achieve company goals through the range of services it offers to
its chosen market segments. The simplification of the firm?s competitive
situation into only the two dimensions of products and markets. Despite not
actually using a framework such as Ansoff?s expansion matrix the group managed
to simplify their task to produce a logical path towards their objectives.
"Marketing objectives are about each of the four main categories of the
Ansoff matrix, market extension, product development, market penetration and
diversification." (Baker, 1993: p.85) During the planning stage it became
clear that two strategies were equally attractive. However, it would be
necessary to focus on one particular one very clearly for a given time because
resources are likely to be too limited to spread thinly. The plan of action was
to stay the same for six months to consolidate customers, to ensure
profitability and develop the action plan investigating the marketing methods
needed in the months to come. Following this the idea was to push forward and
target new customers enlarging the client base and awareness of the company
within the current sectors that the company was already involved. "There
may be any number of strategic options, which give us the chance to be creative
in thinking about a variety of routes that might be chosen to achieve company
and marketing objectives" (Lancaster and Massingham, 1993: p.354) Finally
the product development strategic option was employed, where the plan was to
widen and develop it?s range of services for existing clients. The sectors of
work with traditionally a higher share of turnover or where the company had
experienced growth in recent years were areas targeted. Together with the
sectors where the trend was towards increased number of new enquiries and the
areas of least or diminishing competition. Although design and build work looked
an attractive option on the face of it, potentially highly profitable and an
area of low exploitation by the competition. It requires specialist resources
some of which the company did not possess, however, there was the option of
outsourcing certain constituents of work. The company was also inexperienced in
this area showing that it is a risky proposition. However, continued exploration
of this area was agreed at the firm?s current pace. Having determined the
range of segments in which they will participate, and nature of services to be
offered, the next decision in formulating the marketing strategy is to determine
the utilisation of individual elements of the marketing mix and the relative
degree of reliance to be placed on each. In accomplishing the market development
strategy of promoting the company?s range of services to a wider audience the
work group fitted to the theory of the marketing mix. Hence the allocation of
the 4 P?s, product, price, place and promotion. "The marketing mix is a
set of market tools that the firm uses to pursue it?s marketing objectives in
the target market" (Kotler, 1997: p. 92) Having determined the desired