.. ide the best way of using this allocation. In this idea of market development the company would attempt to sell its range of services to a wider market. The communication of the firm’s reputation and ability to the targeted markets was necessary. One source of such markets was a database of forthcoming planning applications for building work that the company thought would be of benefit to subscribe to. Mail shots would be sent to the companies on this database and to large local companies in the commercial and industrial sectors and a follow up call strategy would be implemented.
Further promotion of the companys name was also planned through promoting the company through its assets and the projects being worked on. Sign boards were to be redesigned and the policy was introduced that all projects would display these in prominent positions. Company vehicles and plant would also be in a good state of repair and display the company logo. Good relations with the press were keen to be developed so that coverage could be given to occasions such as foundation stone laying and official openings. As well as the clients the company also planned mail shots and a follow up call strategy for firms offering professional services relating to the building industry such as architects project managers and design companies. The price as regards building contracting is largely determined by the amount of margin to be added to the build up of the estimate for the project.
Price is almost always considered as being the single most important factor for the client as 99% of contracts are let to the lowest bidder. “The setting of the correct price is of enormous importance in marketing – both in getting the product accepted by the target market, and in generating sufficient revenue for the organisation.” (Page, 1995:p.120) Factors taken into consideration in determining the level of profit margin to be added to the tender build-up are contract workload, nature of work(location, client etc.), number of competitors and recently reported results. It was agreed that use would be made of the analysis undertaken for marketing purposes when making the commercial decision of the level of profit margin to be added to a project. We have seen how the firms approach to marketing management links closely to theory. Now the effectiveness of this approach shall be analysed and its success shall be measured.
It has been two years since the implementation of the initial marketing plan and it is assumed that sufficient time has past to draw conclusions as to its effectiveness. The obvious ways of determining this is by the analysis of financial information and statistical data. However, not only has financial information and statistical data been collected relating to the internal environment of the firm but also data has been collected about the external environment i.e. the economic climate, the building industry and about local companies and competitors during this period. The company has experienced both growth in turnover and not only sustained the level of profitability but increased this.
This is largely down to the fact that it has concentrated its efforts in particular sectors. This narrowing of its portfolio in some areas (no residential or transport) and diversification (design & build) into others seems to have had a positive effect. When comparing the companys performance to the rest of the industry (Appendix D) we can see that most of the areas the company chose were areas that the industry as a whole experienced growth. This could perhaps prove that the external analysis made by the workshop team, despite not being data analysis, was beneficial. Now critical analysis of the marketing management strategy recommending improvements and changes to promote future business success and development. Firstly, the stages taken by the company in developing the marketing management function relate directly to that of theory and therein provide the perfect framework for the critical analysis. Analysing marketing opportunities, developing marketing, planning marketing programs and implementing the strategies is in essence the way that the workshop team organised itself during this initiative.
“As a management function marketing involves the process of analysis, planning, implementation and control.” (Lancaster and Massingham, 1993: p.8) On the surface the companys approach seems logical and well applied and as we have seen it seems to have had a positive affect in some areas. However, I believe that the actual significance of the marketing concept has not been realised. “When applying the marketing concept the firm seeks to evaluate market opportunities before production, assess potential demand for the good, determine the product characteristics desired by consumers, predict the prices consumers are willing to pay, and then supply goods corresponding to the needs and wants of target markets more effectively than competitors.” (Bennett, 1996 :171) Marketings contribution to business success lies in its commitment to detailed analysis of future opportunities to meet customer needs. The central focus of the business has to be the customer, marketing management has to take the lead in researching the customer and the markets in order to develop strategies. The ideas dont have to be new ones just ones that are potential good for business success and development then the company can strive to become more profitable in these areas thus either creating value for the customer or by reducing costs so that the firm can compete better with the competitors.
It has to be agreed that the detailed analysis of the company was a particularly useful exercise. However, in spite of this it is still an old fashioned production orientated company or perhaps is part way between production and customer oriented. The markets are segmented but the act of understanding the customers values and needs are not performed. The workshop teams analysis of the external environment curtailed at the PEST analysis, which was in itself only personal views brought about by experience. While this type of analysis can be beneficial it is not usually wholly accurate. Further detailed analysis of the macro environment is undoubtedly required if the company is to understand its customers requirements and capitalise by being one step ahead of the competition.
“Changes and trends in the macro environment give rise to some of the most significant opportunities and threats that any organisation faces. Companies which fail to recognise and take account of changes in their environment have, in the past, either failed to capitalise on their opportunities or – worse still – have suddenly realised that their markets have disappeared.” (Lancaster and Massingham, 1998: p.26) A successful external analysis needs to be directed and purposeful. There is always the danger that it will become an endless process resulting in an excessively descriptive report. Without discipline and direction, volumes of useless descriptive material can easily be generated. The external analysis process should not be an end in itself. It should be motivated throughout by a desire to affect strategy and it should contribute to the decision of the application of investment, by doing all of these it will be responsible for the development of a sustainable competitive advantage.
External analysis can also contribute to the marketing management strategy by identifying significant trends, future events, opportunities and threats. It has to be recognised that by identifying these areas threats to one organisation can become opportunities for another in being able to sustain competitive advantage. “Attempting to lay any sort of plans for the future without first gathering enough information is not only foolish, it also demonstrates dangerous tendencies towards complacency and arrogance. Knowing that information must be gathered is one thing, knowing how much and what to gather is quite another.” (Fidfield, 1992: p.39) As the customers are the focus of the marketing concept the first logical step when beginning marketing management is to analyse the customers. The workshop teams approach to segmentation was the right platform. However, as we saw their segmentation for this type of industry is applied differently than that of other different industries that tend to be referred to in marketing theory.
Nevertheless, through segmentation we can identify customer groups that respond differently than other customer groups. The way that the workshop team undertook the task of defining the segments was good as it identified the variables that can differentiate between one project and another. Following this the subdivision was useful because it recognised the broad categories like to the industry were to vague. In essence the divisions proved to be effective and can be linked to the industry standard. The act of segmentation opens the doors for analysis of the industry, an individual organisation, its markets and its customers. It also provides the focus for the organisations strategy for business success.
The workshop teams method of segmentation links directly to the Department of Trade and Industrys method of segmentation when analysing the whole of the construction industry for government statistics. For this reason it is very easy to collect data and analyse the external sectors and then link this to the companys own business. The data has been collected from various sources and this is stated in the appendix D. The conclusion are drawn below. The output of the construction industry for work done for the industrial sector is relatively small. The current output for this sector is estimated to be 3.26 bn, where as the total output of the industry as a whole is in excess of 55bn. The problem with this particular sub sector is the manufacturing sector has not grown by very much, steel has undergone radical changes and coal has all but disappeared.
Fewer factories and warehouses are being built. For the company the only work undertaken in the industrial sector is the construction and major alteration to warehouses, it is a large and important part of the companys turnover. Clearly the prospects for the industrial sector are less favourable than for those of the others. In general, there has been no change in the pattern of investment and, although there has been an increase in the value of orders in the private sector, it is not large enough to make a significant difference to future output of the construction industry. However, the level of output for work carried out in relation to warehouses is increasing year on year despite the shift from a manufacturing to a service economy. The deciding factor is whether or not this will continue to be the case.
Commercial construction is a much more important sector in that it represents nearly 39.8% of the output of the construction industry. It is highly cyclical and very sensitive to changes in economic conditions. The sector has been favourably affected by privatisation. In the private sector the sub sections of offices shops and entertainment are the dominant factors. While for the public sector output is concentrated in the areas of education and health. The overall trends for both are positive, however, there is a strong element of volatility in the output and the orders, for private sector work.
There are still a large number of small and medium sized firms in the industry but this number is declining. Design and build has been a growth area in the construction industry in recent years. Design and Build is where on organisation takes responsibility for both functions on behalf of a client. As the market for building contractors has become more competitive and margins have been squeezed tighter the contractors sought other ways of increasing competitive advantage by offering the full service it had dual benefits for client and contractor. Design and build projects do have an attraction nevertheless there are pitfalls to this market. “To the detriment of the traditional architects practice, recent times have brought about the augmentation of design and build contractors. It appears to be an increasingly preferred method of tendering for private concerns in the light industrial and commercial sectors.
More recently research suggests some building contractors have paid the penalty for entering the new sector with little experience. The attractiveness of low competition and perceived greater margins had blinded the judgment some what.” (Ashworth, 1998: p.7) The identification of trends within the industry can provide vital information as to the current and future state of the various sectors. The correct prediction of future trends is the key to achieving the competitive edge. “Trends within the market can affect current and future strategies and assessments of market probability.” (Aaker, 1995: p.26) In the construction industry clear trends can be identified. The long term trend in the industrial sector has been a move away from manufacturing towards a service-based economy causing overall decline in the industrial sector. Decline also in coal mining and steel based industries causing construction firms connected with these areas to switch their efforts to other activities.
In the commercial sector an appreciable amount of traditionally public sector work has been transferred to the private sector though the privatization of industries. Increase in demand for entertainment and leisure activities and the consequent increase in demand for the necessary facilities. Despite objections from various pressure groups, large commercial centers are increasing in number. There is a demand for modern offices adaptable to the requirements of information technology and computerization, together with the recognition of the fact that the working environment has a significant effect on the performance of individuals. When analyzing the external environment using PEST the company needs to have a list of areas to investigate for each of the four factors; political, economic, social and technological.
Political factors could be to look at the effect of a change of government would have on spending in the public sector. The state of play as regards the ability to obtain grants from the European commission. Changes in the requirements for obtaining planning permission. Changes in the health and safety regulations. Economic factors to be looked out for would be situation with the UKs Gross Domestic Product. Which industries are experiencing increased investment as this is likely to lead to increased construction activities. Change in the demand for new buildings that will be suitable for changing needs of other industries for example the needs of a high technology environment. Changes in interest and exchange rates have large effects on construction projects.
Development grant awards for various regions and sectors such as the national lottery. Social factors that could be identified are as follows. Inner city regeneration and outer city development would bring about an increased requirement for construction work. Environmentalist pressure for the extension of the Green Belt and other current environmental factors. Demographic changes leading to increased need for special housing. Changes in social trends and consumer behavior.
Technological factors that could potentially provide the company with competitive advantage can be identified by looking at the following areas. Increased use of information technology. Innovations in construction techniques for example the greater use of pre-fabricated elements. Further development in high technology creating a need for suitable buildings. Using the information gathered from an appraisal of the external environment we need to turn the information into action.
Whats important is to search through the environment for specific opportunities which appear to be open to our organization. It takes time to develop new services and develop new markets. If there is a hint that new market possibilities are likely to open then we should plan our time accordingly to gain the maximum benefit. As well as identifying the opportunities in tomorrows market place it is also important that we clearly identify the threats which may appear in the business environment. The important thing is not just to identify the threats but to be able to do something about them.