The Automobile Association in Britain - Essay Example

? Company Analysis Introduction The Automobile Association (The AA) is a British company established in 1905 as a motoring association. The company changed operations in 1999 after a demutualization process that saw change of ownership to a private limited company. The company changed operations to providing car insurance, driving lessons, breakdown cover, loans and motoring advice, among other services. The AA Motoring Trust was established in 2002 to spearhead the company’s road and public safety activities. The Automobile Association merged with Saga Group in 2007 to form Acromas Holdings (Campwell, Stonehouse & Purdie 2004, p. 59). According to the company’s handbook (1935, p 10), the company began its business by erecting numerous roadside dangers and other warning signs. The company was in charge of road signs until early 1930s when the local authorities took control of the signs. The achievements gained by the company were destroyed when most of their road signs were destroyed during the Second World War. By then, the company had erected approximately 6,500 direction signs and 15,000 village signs (The Automobile Association Handbook). The company published an AA Member’s Special Handbook in 1908. By using the handbook, the company’s clients could find the location of AA agents across the country and mechanics. The clients also received free legal services for one year (Passmore 2003, p. 62). The company has grown from a small company to become on the leading companies in the world. The motor insurance service has grown to become one of the largest in London and the United Kingdom at large. The insurance industry is experiencing growth that is generated by new entrants with new products and way of doing things. It is due to these factors that the company needs to explore means of ensuring that it remains among the best service providers in this industry. SWOT Analysis Strengths The Automobile Association has various strengths that it can exploit to gain a competitive edge in the market. The first strength the company has built over the years is its reputation of being reliable in providing services. The company’s clients need not worry when they are in some form of discomfort since they trust in the company to deliver. The company is also renowned for having qualified and competent staff. This includes qualified mechanics for the garage sections and the staff in other areas. Weaknesses Despite having the above notable strengths, the company also has some weaknesses that can be exploited by the competitors. The competitors in the British market arise from firms such as RAC and Green Flag and Direct Line and a host of many other small players (Harison & John, 2008). The second placed RAC is becoming a serious threat to the existence of the company. The company offers all the services that the Automobile Association offers in addition to security services. This therefore means that the company has a more complete package than the Automobile Association even though they are still young in client size. The second weakness of the company is the high employee turnover. On one hand, the rivals lure some of the employees away from the company with huge salaries. Since the Automobile Association is renowned for having top class employees, the competitors target these employees instead of struggling to breed their own. On the other hand, some of the employees such as mechanics use the money from their savings to open their own businesses using the reputation of having worked for the Automobile Association. Opportunities The current economic condition is tough on some people. This people however require motor insurance and other related services. These types of people will therefore look for cheaper options that also provide quality and reliable services. The company can gain from such people by introducing products for all classes of people. The other option that could be more profitable is for the company to merge with one of the competitors such as RAC. This would increase clients’ size and increase scale of operations. Threats As indicated earlier, the current economic situation is the main influence behind some of the threats the company may face. For instance, if the clients feel that the rates of Automobile Association are high, they will shift to one of the rival company such as Green Flag and Direct Line if they are offering the same services at a lower price. The other challenge is the improvement of the public transport means in many countries. If more people switch to using public means, there will be reduced need for the services provided by the Automobile Association (Bensoussan & Fleisher, 2013). Segmentation Segmentation as postulated by Crespy (1986) basically means the division of the U.S. Market into different sections that have different characteristics as defined by the organization. Segmenting the U.S. market is necessary for the organization as it will enable it to be in a position match the needs of the customers better. Therefore, it will enhance the profitability of the firm and increase its opportunities of growth. The necessity to segment the Hong market is as a result of the increasing diversity of the market and enhancing the competitive position of the firm in the market. In order to realize the various groups existing in the U.S. Market, it is necessary y to break down the entire market into three groups using their behaviors, psychology and geographical (behavioural, Psychographic and geographic). Despite these three, others such as the physiographic also exist. Behavioural Under this approach, the consumers could be divided into various sub-sections based on their level of purchase or transactions, the level of consumption or use of the products, the consumption of media and the use and application of technology. Psychological This approach involve establishment of consumer groups basing on their lifestyles, personality and the way they perceive life or goods. In addition, some consumers that have certain attitudes towards consumption of some goods are also categorised using this approach. Physiographic The category postulates that segments within the market are based on certain factors such as the demographic features of the consumers (age, gender and the size of the family among others), their levels of consumption, levels of education, culture, ethnicity and the social class among many more. The population living in U.S. is not different from any other and it is therefore supposed to be segmented basing on these three approaches. The segmentation is vital in rekindling the good performance of the firm (Levy, 2012). Strategic Business Management Unit Strategy Clock This is the most suitable method to develop strategies for the Automobile Association. According to Griffin (2011, p 13), this method has an advantage over the other models due its flexibility. The method only requires a basic understanding of the target market and their needs. The second advantage is that this method touches on the most sensitive areas of the business i.e. the company’s strengths, weaknesses, opportunities and threats. Therefore, strategies formed based o the analysis on the analysis of the four areas can help a business to compete effectively in the market. This method suits The Automobile Association since its strengths, weaknesses, opportunities and threats are identifiable. Bowman’s strategy clock can be applied to The Automobile Association since it operates in an open market where the customers are at will to choose the best service provider. The Automobile Association and other companies in this industry have to maintain a competitive edge for them to attract customers. Under the strategy clock, a company can either apply differentiation, focused differentiation, high price/ low value, low value/standard and low quality/low price strategies to gain a competitive edge over its rivals (Daft, 2012). Due to its rich history and reputation, the company would benefit more if it applied differentiation. Under this method, the product should set two types of prices; high prices and low prices products. Consumers will go for the high value products with high prices due to the perceived quality of value. Most of The Automobile Association clients are loyal to the company due to the reliable services offered by the company. It is therefore unlikely that the high price segment will not attract clients (Hill & Jones 2009, p. 302). Obviously, the high-end clients that subscribe to the company’s services will be the first casualties o f this move. By attracting more customer t to this segment, the company will gain higher margins. The company also has an option under this method to reduce their prices. This will help the company to achieve a greater market share, which will also increase the firm’s client size and subsequent increase in revenues (Martin & Thompson, 2010, p. 41). The company can also adopt focused differentiation where it can offer high value services at premium prices. This will target a particular niche in the market. This is applicable if the current state of competition graduates to become fierce. The other methods under the mode may not be feasible for the company due to long term sustainability. First Mover Dominance The Automobile Association has a strategic advantage in the strength that it was among the first companies to offer services to automobile owners. This has therefore helped the company to gain a substantial market share, which has made it to top the list in this industry. According to Orcullo (2008, p.38), the first mover dominance indicates that the first mover will always have an advantage of time over the competitors . The company has done well in maintaining the top position by introducing new products to the clients to get a hold on them. The company should therefore rely on this strength to dominate the market by continuing to introduce more products to its wide client base. BCG Matrix The Automobile Association is a company with different products in different markets. The BCG Matrix divides the company’s products into different categories i.e. cash cows, stars, question marks and dogs. The cash cows are the products or business units that have a large market share but in a mature industry that is experiencing slow growth (Poctor, 2000). These products or business units however require minimal investment in terms of capital. For instance, the insurance and driving school wing of the company are cash cows. The market for these products has matured in most regions due to many players in the market. The company can therefore benefit more by using the money generated from these products for diversification (Ward 2003, p. 211). Shekhar (2010, p. 120), points out that a star is a product or business unit that enjoys a substantial market share in an industry that is experiencing rapid growth. Due to the rapid growth, these products/units require constant employment of resources for them to continue generating cash. Shekhar further emphasizes that the stars graduate to become cash cows when the industry finally matures. The breakdown services have few players in some countries that The Automobiles Association has presence. The company should therefore expand the its operations concerning the production of the stars (Morden, 1988). A question mark or problem child is a business unit that has a diminutive market share in an industry that is experiencing rapid growth (Alkhafaji, 2003). Alkhafaji (2003, p.111) further stressed that such products/units require substantial amount of resources to be invested in them for them to become stars. The company has few of this products but focus should be put in developing more products in these category since they will help the company in the future when they mature to be stars (Daft, Kendrick & Vershinina 2012, p. 79). Amason (2011, p.56) describes a dog as a product/business unit that operates in a mature industry but it has a small market share. Such products ties up capital that could otherwise be used to carry out other projects. Such products are scrapped off or if it is a business unit, the best move is to liquidate the unit. In this case, it would be more appropriate for the company to acquire the other providers in this segment to increase volume. Most of the company’s products are in this category but the company is gaining profits due to the client size. The BCG matrix can be use by The Automobile Association in allocation of resources to products. It may also help the company in evaluating the competitiveness of products in the market and the amount of resources invested in the product for decision-making (Harison & John 2008, p. 127). Strategy Development Market Penetration The company should aim at developing strategies that will help it in gaining a competitive edge over its rivals by penetrating the market more than the rivals’ level of penetration. This is vital since the industry is rapidly growing and therefore failure to put implement competitive measures may lead to reduction in market and profitability. The strategies should also be developed to ensure that the reputation of the company is protected and if possible help to build it even more. The strategies should aim at penetrating the untapped potential markets. These include expanding operations to other countries and introducing new products to the existing customers. The new products should be innovative enough. There is would be failure for the new products to achieve the perceived success once they are launched (Wiltcher & Chau 2010, p. 127). Product Communication: Integrated Communication Strategies IMC is a vital tool for all firms wishing to venture into a given market and increase their competitiveness. As noted by Instinct and Reason (2006), IMC strategic planning is crucial in the marketing of the products and services offered by Automobile Association. The strategy ensures that every person in the targeted market receives the unified message of a new cruise line offering unique services in the industry. The objectives set forth for IMC of the Automobile Association could be drawn from the marketing mix, intention to increase the sales, recognition of the brand and the promotion of the services offered by the Automobile Association (Mills, 2002). Therefore, the IMC objectives of the Automobile Association are: To increase awareness of the services offered by the Automobile Association under its new products. The marketing objective is to increase the interest and adoption of the Automobile Association as the number one vehicle insurance option for car owners. Targeted Market and Duration The IMC strategies employed by the Automobile Association target all customers using the firm’s services. However, the specific target markets include all car owners, tourists and any other passenger travelling to Sydney from Singapore or vice versa for any reason. In addition, the IMC strategies will help the firm increase its awareness among the residents of all cities that the Automobile Association will dock as they are potential passengers too. The program will be launched six months before the ship begins its operations. This is mainly to increase the awareness of the new cruise firm before its official launch. Six months after the launch of the program, Automobile Association will presume that the targeted market is aware of the new company and that they can now begin using the company’s services. The effectiveness of the IMC program launched by Automobile Association will be evaluated 12 months after the launch of the firm, which will be 18 months after the launch of the IMC strategies. After its evaluation, the company will revise the strategies where necessary and improve on areas that have performed poorly. Creative Approach or Message Strategy The initial step of awareness could be enhanced using creative strategies that involve marketing the new cruise line among the passengers. The marketing of the Automobile Association services could be done using direct marketing of the Automobile Association services along the Singapore Sydney route. Direct marketing may include a call to make immediate action by passengers using devices that are easy to use in a bid to sell the services offered by the Automobile Association. The Automobile Association should establish the position of an IMC director, who will be responsible for making specific offers to the public concerning cruise activities of the ship. This may include the director telling the locals through the public relations representatives the good services offered by the firm. The information provided by the IMC director should be measurable, testable, and flexible thereby allowing the potential passengers make their offers to the firm (Hingerty, 2007). Integrated Marketing Communications Options Considered The first step in the establishment of the IMC strategies for Automobile Association is the establishment of awareness of the services and products being offered by the Automobile Association through its car insurance services. The awareness could be created through increased promotion of the new cruise ship and the advertisements of the new company in the media. The media could be the print, audio or the broadcast media. Increased awareness is one of the initial steps in establishing a good brand name (Travel Research Centre, 2006). The print media such as newspapers and tourism magazines could be used to increase awareness. The electronic media could be used where the firm could develop a website and the site advertised electronically in order to increase awareness of the firm among many passengers using the route. In addition, Billboards could be used. These could be places in various destination cities such as Brisbane, Bali and Cairns among others (Dunning, 2006). Through increased awareness, passengers will gain interest in the new company and the services that it offers. They will evaluate the products and services and compare them to the competitors in the industry. Where the services are better, they will make a decision of using the Automobile Association. At first, they will try out the services and the in case they are pleased, they will adopt them, hence develop loyalty to the company. Diversification Long-term sustainability is vital to any organization therefore, it should be considered during strategy development. With time, more companies will enter this industry with new products and trading styles. The company should therefore explore diversification of operations to other forms of businesses that may not necessarily be in the automobile industry. Diversification however is also risky since the company may get into other business that may not be profitable as anticipated. This will mean that the company will have invested time and money with no returns. Acquisition The Automobile Association has been in existence for a long period therefore it has accumulated a deep capital base. The company should therefore be in a position to evaluate the new entrants and acquire those that pose threats to the company such as RAC. These may help to introduce innovation into the business since many entrants’ device new methods of doing business to ouster the existing ones. Acquisitions may however dilute the organizational culture that has been cultivated by the company over the years. List of References AlKhafaji, A 2003, Strategic Management: Formulation, Implementation, and Control in a dynamic Environment, The Haworth Press, New York. Amason, A 2011, Strategic Management: From Theory to Practice, Taylor and Francis, New York. Automobile Association, 1935, The Automobile Association Handbook, Abe, London. Bensoussan, B & Fleisher, C 2013, Analysis without paralysis: 12 Tools to make better strategic Decisions, Pearson, New Jersey. Campwell, D, Stonehouse, G., & Purdie, T 2004, Global and Transnational Business : strategy and management,Wiley and Sons, San Francisco. Daft, R 2012, The New Era of Management,Cengage, New York. Daft, R., Kendrick, M & Vershinina N 2012, Management, Seng Lee Press, Singapore. Griffin, R 2011, Management, Cenage, New York. Harison, J & John, C 2008, Foundations of Strategic Management, Cengage, New York. Hill, C & Jones, G 2009, Strategic Management: An Integrated Approach, Cengage, New York. 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