FREE ESSAY ON MARKETING MANAGEMENT STRATEGY OF AN SME

MARKETING MANAGEMENT STRATEGY OF AN SME

Investigating and Measuring the Effect Of The Firm's Recent Implementation of a Marketing
Management Strategy And Relating The Concepts and Thinking Behind This Orientation to
Theory. Applying Marketing Management Theory To Produce Recommendations For Future
Business Success and Development.
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 judgement 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
privatisation 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 centres are increasing in number. There is
a demand for modern offices adaptable to the requirements of information technology and
computerisation, together with the recognition of the fact that the working environment
has a significant effect on the performance of individuals.
When analysing 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 behaviour. 
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 organisation. 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. As general rule if spotted they can generally be n