“Marketing ideas have made singularly little penetration intothe centres of influence of the construction industry. To some extent thisfollows from the character of the industry as an agglomeration of serviceorganisations, not without structural relationship to one another, but serving aclientele from which individuals seek service very infrequently. ” (Jepson& Nicholson, 1972: p. 1) Although times have and are changing the abovestatement despite being written over twenty five years ago is still to someextent very true.
The subject of this assignment is a construction firm that hasrecently designed and implemented a marketing management strategy. The objectiveof this assignment is fourfold, firstly the company’s approach to marketingmanagement will be documented this will then be related to marketing managementtheory Then by analysing data collected through research the effectiveness ofthe strategy will be discussed. Finally using marketing management theory as afoundation recommendations will be made to identify where the initial strategycould be improved in order to promote future business development and success,in line with the strategic mission of the company. The organisation in questionhas strong foundations, since it’s incorporation in the mid fifties turnoverhas grown in line with inflation.
In 1984 the Company was purchased by the sonof 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 reacheda stage where it was no longer a small “hands-on” enterprise. Thelevel of turnover and number of employees had increased at such a rate that theorganisation now employed a sizeable management team. All with an experiencedtechnical background in the fields of surveying, estimating or site managementand who had either progressed through the ranks of this firm or otherorganisations of a similar size and nature.
The company was at the time of theinitial implementation of this initiative inexperienced in marketing managementand strategy. However, the senior personnel realised the company had reached astage 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 itwas necessary to pursue new ventures to bring about growth and development. TheCompany has a large contracting portfolio with contracts completed for publicand private clients in the commercial and industrial sectors. Appendix A showsthe diversification with the selection of recently completed projects and listthe clients for whom work has been carried out. The reason for a firm of thissize carrying out such a wide range of activities is largely based on the beliefthat in such a competitive industry as construction it has been necessary totake on whatever type of work was available in order to maintain a consistentorder book.
In developing the company’s marketing management strategy numerousworkshops were held, attending these were the company directors and two seniormanagers. Information on the company was gained from interviews with the personsattending these workshops. There are many reasons for running a business, thiscompany wanted to be clear on why it wanted to improve or introduce themarketing effort so that appropriate goals can be set. The aim of wanting togrow the business by increasing sales while at the same time sustaining thelevel of profit margin is the underlying factor in this case.
Turnover could beincreased very easily as most of the work is procured on an invitation to tenderbasis where the deciding factor is almost always price, however, “buyingin” work will not necessary have a long term positive effect. The secondaryobjective was to secure profitable business relationships. These objectives arereflected in the mission statement in the appendix B. The development of themission statement was the start of the company’s marketing managementinitiative. The company’s overall objective in the eye’s of the leaders wasdefined.
It was thought the development of a mission statement would provide thefoundation needed. Perhaps the implementation of a mission statement doesn’thave a direct link to the theory of marketing management however it’s place inthe overall field of strategy is illustrated below. “A firm’s mission istop management’s view of what the organisation seeks to do and become over thelong term. Expressed in the form of a mission statement it provides a publiclyavailable 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 andcritical examination of the company would be needed.
The questions of what do wedo well and what do we do badly ? were asked, however, analysis of “what wedo?” was first necessary. Previously there had been no formalcategorisation so the next step was to analyse the business in relation toit’s markets. It became apparent that this was impossible without analysingthe different business activities and categorising the market areas. Thecategories for such a division were decided upon as being type of client, sectorof work, type of work, type of contract and location of work. These divisionsproduced provided the workshop team initially with the sufficient tools foranalysing the business.
The areas highlighted under these headings are shown inappendix C. This way of thinking doesn’t have a direct link to marketingmanagement theory but can be proved to be a form of market segmentation. For theconstruction industry the application of marketing theory in order to segmentthe market is not directly appropriate, but it can be applied in the way statedto produce effective results as the common goal is the “identification oftarget markets”. Even though demographic, ethnic, religious and nationalclassification are not appropriate as regards construction, industry ownclassifications appear to make data collection and analysis possible.
“Market segmentation is the analysis of the total demand in a market intoits constituent parts, so that different sets of consumers, with distinctiveneeds and behavioural patterns, can be identified,” (Page, 1995:p. 40) Itwould become apparent later that the market segmentation would be extremelyuseful when analysing markets. At this moment the initial divisions would helpthe effort of gathering information from various sources enabling criticalanalysis of the company. “From the customer’s point of view, theinformation process is the least visible of all the marketing functions.
It is,nevertheless, the basis of all marketing activity. If the product / service issaid to be the cornerstone of marketing, then it must be remembered that goodproducts / services accurately reflect the needs and wants of customers, whichcan only be ascertained by gathering information. Information provides the meansfor a company to fulfil the marketing concept,” (Lancaster & Reynolds,1995: p. 57) Examination of the company began by using the personal experience ofthe persons attending the workshop.
In this forum, lists were made of thingsthat were likely to happen in the business environment which could havebeneficial or negative effects on the company’s fortunes. Subjects that wereconcentrated on were, new technology such as Information Technology and thelatest building methods, the development of communication methods and any knowndevelopments within local and general government. This type of analysis of themacro environment could be perceived as a form of STEP or PEST analysis. From itthe company compiled a list, developed from the personal experience of theworkshop members, of all the external factors affecting the organisation. Further factors relating to the proximate macro environment about markets andcompetitors were also noted.
These environmental factors are in a broadercontext 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 spinningnew opportunities and threats and understand the importance of continuouslymonitoring and adapting to the changing environment. ” (Kotler, 1997 :p. 147)The next stage was the development of the organisation’s strengths weaknessesopportunities and threats through a SWOT analysis.
First came the opportunitiesand threats using the results of the analysis of the external environmentalfactors. Using a pragmatic approach all things on the horizon which could have anegative effect on the business. Including not knowing key competitors wellenough, changes in government spending. It was found the most of the threatswere also opportunities and vice versa, depending on how a firm made predictionsand reacted to changes. From the list produced the top three items that: had anextremely high probability of happening and a potentially high impact on thebusiness were identified.
Following this the internal factors were considered,highlighting the sectors that the panel believed they were good at (internalstrengths) and areas were they were lacking in some way and where there waspotential for dangerous situations (internal weaknesses). This type of SWOTanalysis gave the firm “the means by which to identify it’s own strengthsand weaknesses as they relate to external opportunities and threats. “(McDonald, 1995: p. 28) Following SWOT analysis further investigation into thebusiness was required as the SWOT had only dealt with the personal views andexperience of senior personnel. The various business classifications broughtabout following segmentation were analysed for the preceding five years. Factorsanalysed were profit, turnover, levels of enquiries and level of competition.
Asmost of the work in the building industry is gained through tendering andselective tendering the competition factor would be the average number ofcompanies tendering for a particular project. All agreed profit margin analysiswas particularly important as profit margin was fundamental to both survival andfuture growth. Insufficient margins are unlikely to give the business thefreedom to choose the best strategic option because of the impact on break evenlevels. From the data analysis the following conclusions were drawn, themajority of the company’s turnover came from work on schools and colleges andthe industrial sector from the construction of warehouses and other similarbuildings.
Over recent years there had been a swing, however, towards work inthe leisure industry. Industrial and commercial work had risen while public workhad remained constant as the overall turnover increased. As far as profitabilitywas concerned it was difficult to see any particular definite trend as to themore 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 andhad proved profitable but was also considered an area where the company lackedexperience. Repair and maintenance work accounted for a small percentage ofturnover but was highly profitable. Location analysis didn’t prove anyparticular use apart from the fact that contracts carried out outside the northwest region were generally for existing clients.
At this stage the companydidn’t have the set-up and was reluctant to venture further a field unless itwas to carry out work for valued clients. Following the analysis and informationgathering stage, the workshop team were in a situation where numerous internaland external factors affecting the company’s ability to achieve profit andsales had been identified. They were asking the question How do we reach ourgoal using the results of the analysis undertaken? In order to make marketingmanagement decisions some kind of formal marketing planning would now berequired. “There can be little doubt that marketing planning is essentialwhen we consider the increasingly hostile and complex environment in whichcompanies operate” (McDonald, 1995: p. 21) The team focused their attentionon the options for development.
Stay offering our regular clients the sameservices which would only be possible with the large clients that carryoutregular building work and profitability would need to be maximised by reducingcosts through increased efficiency. Provide a new type of service to existingclients possibilities included offering regular repair and maintenance serviceor offering the “complete service” from the initial design stage tothe finished product. The advantage would be that the company would be dealingwith clients where good stable relationship existed but the disadvantage was thecompany’s unfamiliarity. Another option was to offer the “usual”service to a wider range of clients, not necessarily meaning a different type ofclient but to increase the marketing effort as regards selling the company orperhaps by widening the geographic region. This type of strategy undertaken bythe company fits well with the theory of product / market expansion.
Meaning theroute chosen to achieve company goals through the range of services it offers toits chosen market segments. The simplification of the firm’s competitivesituation into only the two dimensions of products and markets. Despite notactually using a framework such as Ansoff’s expansion matrix the group managedto simplify their task to produce a logical path towards their objectives. “Marketing objectives are about each of the four main categories of theAnsoff matrix, market extension, product development, market penetration anddiversification. ” (Baker, 1993: p.
85) During the planning stage it becameclear that two strategies were equally attractive. However, it would benecessary to focus on one particular one very clearly for a given time becauseresources are likely to be too limited to spread thinly. The plan of action wasto stay the same for six months to consolidate customers, to ensureprofitability and develop the action plan investigating the marketing methodsneeded in the months to come. Following this the idea was to push forward andtarget new customers enlarging the client base and awareness of the companywithin the current sectors that the company was already involved. “Theremay be any number of strategic options, which give us the chance to be creativein thinking about a variety of routes that might be chosen to achieve companyand marketing objectives” (Lancaster and Massingham, 1993: p. 354) Finallythe product development strategic option was employed, where the plan was towiden and develop it’s range of services for existing clients.
The sectors ofwork with traditionally a higher share of turnover or where the company hadexperienced growth in recent years were areas targeted. Together with thesectors where the trend was towards increased number of new enquiries and theareas of least or diminishing competition. Although design and build work lookedan attractive option on the face of it, potentially highly profitable and anarea of low exploitation by the competition. It requires specialist resourcessome of which the company did not possess, however, there was the option ofoutsourcing certain constituents of work.
The company was also inexperienced inthis area showing that it is a risky proposition. However, continued explorationof this area was agreed at the firm’s current pace. Having determined therange of segments in which they will participate, and nature of services to beoffered, the next decision in formulating the marketing strategy is to determinethe utilisation of individual elements of the marketing mix and the relativedegree of reliance to be placed on each. In accomplishing the market developmentstrategy of promoting the company’s range of services to a wider audience thework group fitted to the theory of the marketing mix.
Hence the allocation ofthe 4 P’s, product, price, place and promotion. “The marketing mix is aset of market tools that the firm uses to pursue it’s marketing objectives inthe target market” (Kotler, 1997: p. 92) Having determined the desiredmarkets that the company would compete in the next step was organising apromotional strategy in these area. Following the apportionment of a marketingbudget discussions were held in order to decide the best way of using thisallocation. In this idea of market development the company would attempt to sellits range of services to a wider market. The communication of the firm’sreputation and ability to the targeted markets was necessary.
One source of suchmarkets was a database of forthcoming planning applications for building workthat the company thought would be of benefit to subscribe to. Mail shots wouldbe sent to the companies on this database and to large local companies in thecommercial and industrial sectors and a follow up call strategy would beimplemented. Further promotion of the company’s name was also planned throughpromoting the company through it’s assets and the projects being worked on. Sign boards were to be redesigned and the policy was introduced that allprojects would display these in prominent positions. Company vehicles and plantwould also be in a good state of repair and display the company logo. Goodrelations with the press were keen to be developed so that coverage could begiven to occasions such as foundation stone laying and official openings.
Aswell as the clients the company also planned mail shots and a follow up callstrategy for firms offering professional services relating to the buildingindustry such as architects project managers and design companies. The price asregards building contracting is largely determined by the amount of margin to beadded to the build up of the estimate for the project. Price is almost alwaysconsidered as being the single most important factor for the client as 99% ofcontracts are let to the lowest bidder. “The setting of the correct priceis of enormous importance in marketing – both in getting the product accepted bythe target market, and in generating sufficient revenue for the organisation. “(Page, 1995:p.
120) Factors taken into consideration in determining the level ofprofit margin to be added to the tender build-up are contract workload, natureof work(location, client etc. ), number of competitors and recently reportedresults. It was agreed that use would be made of the analysis undertaken formarketing purposes when making the commercial decision of the level of profitmargin to be added to a project. We have seen how the firms approach tomarketing management links closely to theory. Now the effectiveness of thisapproach shall be analysed and it’s success shall be measured.
It has been twoyears since the implementation of the initial marketing plan and it is assumedthat sufficient time has past to draw conclusions as to it’s effectiveness. The obvious ways of determining this is by the analysis of financial informationand statistical data. However, not only has financial information andstatistical data been collected relating to the internal environment of the firmbut also data has been collected about the external environment i. e. theeconomic climate, the building industry and about local companies andcompetitors during this period.
The company has experienced both growth inturnover and not only sustained the level of profitability but increased this. This is largely down to the fact that it has concentrated it’s efforts inparticular sectors. This narrowing of it’s portfolio in some areas (noresidential or transport) and diversification (design ; build) into othersseems to have had a positive effect. When comparing the company’s performanceto the rest of the industry (Appendix D) we can see that most of the areas thecompany chose were areas that the industry as a whole experienced growth.
Thiscould perhaps prove that the external analysis made by the workshop team,despite not being data analysis, was beneficial. Now critical analysis of themarketing management strategy recommending improvements and changes to promotefuture business success and development. Firstly, the stages taken by thecompany in developing the marketing management function relate directly to thatof theory and therein provide the perfect framework for the critical analysis. Analysing marketing opportunities, developing marketing, planning marketingprograms and implementing the strategies is in essence the way that the workshopteam organised itself during this initiative.
“As a management functionmarketing involves the process of analysis, planning, implementation andcontrol. ” (Lancaster and Massingham, 1993: p. 8) On the surface thecompany’s approach seems logical and well applied and as we have seen it seemsto have had a positive affect in some areas. However, I believe that the actualsignificance of the marketing concept has not been realised. “When applyingthe marketing concept the firm seeks to evaluate market opportunities beforeproduction, assess potential demand for the good, determine the productcharacteristics desired by consumers, predict the prices consumers are willingto pay, and then supply goods corresponding to the needs and wants of targetmarkets more effectively than competitors. ” (Bennett, 1996 :171)Marketing’s contribution to business success lies in its commitment todetailed analysis of future opportunities to meet customer needs.
The centralfocus of the business has to be the customer, marketing management has to takethe lead in researching the customer and the markets in order to developstrategies. The ideas don’t have to be new ones just ones that are potentialgood for business success and development then the company can strive to becomemore profitable in these areas thus either creating value for the customer or byreducing costs so that the firm can compete better with the competitors. It hasto be agreed that the detailed analysis of the company was a particularly usefulexercise. However, in spite of this it is still an old fashioned productionorientated company or perhaps is part way between production and customeroriented.
The markets are segmented but the act of understanding the customersvalues and needs are not performed. The workshop team’s analysis of theexternal environment curtailed at the PEST analysis, which was in itself onlypersonal views brought about by experience. While this type of analysis can bebeneficial it is not usually wholly accurate. Further detailed analysis of themacro environment is undoubtedly required if the company is to understand it’scustomers requirements and capitalise by being one step ahead of thecompetition. “Changes and trends in the macro environment give rise to someof the most significant opportunities and threats that any organisation faces. Companies which fail to recognise and take account of changes in theirenvironment have, in the past, either failed to capitalise on theiropportunities or – worse still – have suddenly realised that their markets havedisappeared.
” (Lancaster and Massingham, 1998: p. 26) A successful externalanalysis needs to be directed and purposeful. There is always the danger that itwill become an endless process resulting in an excessively descriptive report. Without discipline and direction, volumes of useless descriptive material caneasily be generated.
The external analysis process should not be an end initself. It should be motivated throughout by a desire to affect strategy and itshould contribute to the decision of the application of investment, by doing allof these it will be responsible for the development of a sustainable competitiveadvantage. External analysis can also contribute to the marketing managementstrategy by identifying significant trends, future events, opportunities andthreats. It has to be recognised that by identifying these areas threats to oneorganisation can become opportunities for another in being able to sustaincompetitive advantage. “Attempting to lay any sort of plans for the futurewithout first gathering enough information is not only foolish, it alsodemonstrates dangerous tendencies towards complacency and arrogance. Knowingthat information must be gathered is one thing, knowing how much and what togather is quite another.
” (Fidfield, 1992: p. 39) As the customers are thefocus of the marketing concept the first logical step when beginning marketingmanagement is to analyse the customers. The workshop team’s approach tosegmentation was the right platform. However, as we saw their segmentation forthis type of industry is applied differently than that of other differentindustries that tend to be referred to in marketing theory. Nevertheless,through segmentation we can identify customer groups that respond differentlythan other customer groups. The way that the workshop team undertook the task ofdefining the segments was good as it identified the variables that candifferentiate between one project and another.
Following this the subdivisionwas useful because it recognised the broad categories like to the industry wereto vague. In essence the divisions proved to be effective and can be linked tothe industry standard. The act of segmentation opens the doors for analysis ofthe industry, an individual organisation, it’s markets and it’s customers. It also provides the focus for the organisation’s strategy for businesssuccess. The workshop team’s method of segmentation links directly to theDepartment of Trade and Industry’s method of segmentation when analysing thewhole of the construction industry for government statistics. For this reason itis very easy to collect data and analyse the external sectors and then link thisto the company’s own business.
The data has been collected from varioussources 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 sectoris relatively small. The current output for this sector is estimated to be ?3. 26bn, 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 notgrown by very much, steel has undergone radical changes and coal has all butdisappeared. Fewer factories and warehouses are being built. For the company theonly work undertaken in the industrial sector is the construction and majoralteration to warehouses, it is a large and important part of the company’sturnover. Clearly the prospects for the industrial sector are less favourablethan for those of the others.
In general, there has been no change in thepattern of investment and, although there has been an increase in the value oforders in the private sector, it is not large enough to make a significantdifference to future output of the construction industry. However, the level ofoutput for work carried out in relation to warehouses is increasing year on yeardespite the shift from a manufacturing to a service economy. The deciding factoris whether or not this will continue to be the case. Commercial construction isa much more important sector in that it represents nearly 39. 8% of the output ofthe construction industry. It is highly cyclical and very sensitive to changesin economic conditions.
The sector has been favourably affected by privatisation. In the private sector the sub sections of offices shops and entertainment arethe dominant factors. While for the public sector output is concentrated in theareas 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 mediumsized firms in the industry but this number is declining. Design and build hasbeen a growth area in the construction industry in recent years.
Design andBuild is where on organisation takes responsibility for both functions on behalfof a client. As the market for building contractors has become more competitiveand margins have been squeezed tighter the contractors sought other ways ofincreasing competitive advantage by offering the full service it had dualbenefits for client and contractor. Design and build projects do have anattraction nevertheless there are pitfalls to this market. “To thedetriment of the traditional architects practice, recent times have broughtabout the augmentation of design and build contractors. It appears to be anincreasingly preferred method of tendering for private concerns in the lightindustrial and commercial sectors. More recently research suggests some buildingcontractors have paid the penalty for entering the new sector with littleexperience.
The attractiveness of low competition and perceived greater marginshad blinded the judgment some what. ” (Ashworth, 1998: p. 7) Theidentification of trends within the industry can provide vital information as tothe current and future state of the various sectors. The correct prediction offuture trends is the key to achieving the competitive edge. “Trends withinthe market can affect current and future strategies and assessments of marketprobability. ” (Aaker, 1995: p.
26) In the construction industry clear trendscan be identified. The long term trend in the industrial sector has been a moveaway from manufacturing towards a service-based economy causing overall declinein the industrial sector. Decline also in coal mining and steel based industriescausing construction firms connected with these areas to switch their efforts toother activities. In the commercial sector an appreciable amount oftraditionally public sector work has been transferred to the private sectorthough the privatization of industries.
Increase in demand for entertainment andleisure activities and the consequent increase in demand for the necessaryfacilities. Despite objections from various pressure groups, large commercial centersare increasing in number. There is a demand for modern offices adaptable to therequirements of information technology and computerization, together with therecognition of the fact that the working environment has a significant effect onthe performance of individuals. When analyzing the external environment usingPEST the company needs to have a list of areas to investigate for each of thefour factors; political, economic, social and technological.
Political factorscould be to look at the effect of a change of government would have on spendingin the public sector. The state of play as regards the ability to obtain grantsfrom the European commission. Changes in the requirements for obtaining planningpermission. Changes in the health and safety regulations. Economic factors to belooked out for would be situation with the UK’s Gross Domestic Product. Whichindustries are experiencing increased investment as this is likely to lead toincreased construction activities.
Change in the demand for new buildings thatwill be suitable for changing needs of other industries for example the needs ofa high technology environment. Changes in interest and exchange rates have largeeffects on construction projects. Development grant awards for various regionsand sectors such as the national lottery. Social factors that could beidentified are as follows. Inner city regeneration and outer city developmentwould bring about an increased requirement for construction work.
Environmentalist pressure for the extension of the Green Belt and other currentenvironmental factors. Demographic changes leading to increased need for specialhousing. Changes in social trends and consumer behavior. Technological factorsthat could potentially provide the company with competitive advantage can beidentified by looking at the following areas. Increased use of informationtechnology. Innovations in construction techniques for example the greater useof pre-fabricated elements.
Further development in high technology creating aneed for suitable buildings. Using the information gathered from an appraisal ofthe external environment we need to turn the information into action. What’simportant is to search through the environment for specific opportunities whichappear to be open to our organization. It takes time to develop new services anddevelop new markets.
If there is a hint that new market possibilities are likelyto open then we should plan our time accordingly to gain the maximum benefit. Aswell as identifying the opportunities in tomorrow’s market place it is alsoimportant that we clearly identify the threats which may appear in the businessenvironment. The important thing is not just to identify the threats but to beable to do something about them.