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

markets that the company would compete in the next step was organising a

promotional strategy in these area. Following the apportionment of a marketing

budget discussions were held in order to decide 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 company?s name was also planned through

promoting the company through it?s 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 it?s 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 it?s 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 it?s efforts in

particular sectors. This narrowing of it?s portfolio in some areas (no

residential or transport) and diversification (design & build) into others

seems to have had a positive effect. When comparing the company?s 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

company?s 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)

Marketing?s 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 don?t 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 team?s 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 it?s

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 team?s 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, it?s markets and it?s customers.

It also provides the focus for the organisation?s strategy for business

success. The workshop team?s method of segmentation links directly to the

Department of Trade and Industry?s 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 company?s 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 company?s

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 UK?s 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. What?s

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 tomorrow?s 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.