Service Quality Audit: Jones Lang LaSalle - Case Study Example

It’s time for a Marketing Audit For Jones Lang LaSalle TABLE OF CONTENTS Executive Summary 2 Introduction 3 Environmental scan 3 a. Political factors 3 b. Economic factors 4 c. Social factors 5 d. Technological factors 5 e. Environmental factors 5 Customer analysis 6 Competitive analysis 6 Stakeholders’ analysis 7 SWOT 8 Conclusion 9 Annexes 11 References 13 Your Name Marketing Service Quality Report Date submitted It’s time for a Marketing Audit For Jones Lang LaSalle Executive Summary A market audit is done for Jones Lang Salle to provide an insight on the current performances of the company and to review objectively the challenges of the external environment faced by the company. Jones Lang LaSalle is a financial and professional services firm dealing in real estate. It is a company doing a service marketing that is intangible and satisfaction of customers is based on their experience and expectations of the company. The company boasts of 50 years of experience in this field, operating in 78 offices in 13 countries across the region. It employs over 19,700 employees in more than 1,000 locations including 200 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.8 billion square feet worldwide. Mission of the company is to create and deliver real value for clients, shareholders and its own people in a complex world that is constantly changing. Study found out that there are strengths and weaknesses in its operations that could be the basis for a new marketing plan of JLL. -Introduction The need for a marketing audit is more pronounced today during the time of current recession. Marketing strategies that worked well before during boom times few years ago might be obsolete strategies today. Companies that performed well in the past are now affected badly due to recession. One service industry that is suspected to be hardest hit is the real estate sector wherein Jones LangLaSalle, the subject of this research, belongs. In this context, it is now necessary for JLL to know current situation of their business, effectiveness of their current marketing strategies so that they may plan future strategies of operation. This could be done through the conduct of a marketing audit. The marketing audit proposed for this company will be composed of an environmental scan, PEST analysis, customer analysis, competitor analysis and stakeholder’s analysis. 1. Environmental scan. An environmental scan using the model of PEST analysis is used in the gathering of information about the external environment of JLL. PEST analysis is study of the political, economic, social and technological factors that could be affecting operations of JLL. This tool is useful in understanding risks associated with market (the need for the product or service) growth or decline, potential and direction for the organization (Gillespie Foundation of Economics) a. Political factors. These refer to government policy such as the degree of intervention in the economy. What goods and services does a government want to provide? What are its priorities in terms of business support? In terms of support and intervention for the real estate sector, Hong Kong’s policy action in 2010-2011 has singled out the country’s volatile property market as their most immediate and pressing need. The area that concerns Jones Lang LaSalle is the governments’ pronouncement to boost the supply of apartments and help potential homebuyers enter the housing market. The plan involves commitment of the government to provide sufficient land supply for the private residential market and subsidized housing program to assist the medium class society to buy small to medium flats. One of the government’s programs is to provide flats for 5,000 first-time buyers, who will be allowed to rent the flat up to five years at a fixed rent and then they will have the opportunity to purchase the flats they rent within a specified timeframe (Hong Kong Chief Executive Outlines Priorities in 2010-2011 Policy Address) Economic factors. The economic factors that concern Jones Lang LaSalle are interest rates, and economic growths because higher interest rates may deter investment because it costs more to borrow. Government is supportive of the real estate as it has introduced several reforms to prevent the risk of a housing market bubble arising from the low interest rates and ample liquidity in the global financial system. (US Department of State, 15 March 2011) Interest rate in Hong Kong is 0.50 percent. Interest rate in Hong Kong from 1988 to 2010 was 4.64 percent reaching a high of 8.0 in 2000 and a record low of 0.50 in 2008. Hong Kong ranks as the 7th lowest interest rate bearing country (Trading Economics, 2011). In terms of economic growth, Hong Kong has shown that it has recovered from recession as its GDP showed a strong growth that is up by 7.2% in 2011 as compared to last year. (Lau, 2011) U.S. Department of State (15 March 2011) refers to Hong Kong as one of the world’s most open and dynamic economies. Accordingly, report said Hong Kong has no public debt, a strong legal system and ample foreign exchange reserves. Wei Chin (2003) in a paper presented at conference on realty issues in Brisbane, Australia, stated that lending rates have an effect in the rental values in Hong Kong. His study suggested that developments of office markets in southeast Asia are linked with economic factors such as unemployment, GDP, interest rates and lending rates while demand side variables are not much affected by these Social factors. This section discusses an investigation in the changes in social trends in Hong Kong that can impact the demand for Jones LangLaSalle’s products. Hong Kong has a population of 7.097 as of 2010 and has a population growth of 0.9%. It is reported to be one of the most densely populated in the world with an overall density of about 6,426 people per square kilometer (CIA World Factbook). Technological factors: Hongkong’s population is computer savvy as in 2009, 63.6% of its establishments have personal computers, 60.0% of establishments have internet connections and 20% of establishments have websites. The government has devoted to R& D expenditure in 2009 amounts to HK$ million 12,833.00 and 0.79% as a ratio of GDP.(Hong Kong Statistics) Environmental factors: Factors to consider along this area is the growing interest to protect the environment, so much so, that the general move towards environmentally friendly process and products affects business operations. Environmental factors affecting Jones Lang LaSalle are ordinances that affect construction such as noise control, water pollution, waste disposal and air pollution (EPD Summary of Environmental Legislations). Company’s investments in energy efficiency and sustainability earned a Gold Award in the Mayor of London’s Green 500 Awards. 2. Customer analysis. This section analyzes the customers of the Jones LangLaSalle in its different real estate portfolio, needs of the customers, and the products and services of the company that will satisfy these needs. Clients/customers Needs Product/services of company 1. Multinationals Location for headquarters in Asia Agency leasing 2. Corporate occupiers Office rentals Real estate outsourcing service 3. Local real estate market Housing Sale of housing properties 4. Local Companies Office rentals Facility management 5. New markets Developments in Cairo, Vancouver and Zurich Research & development 6. Investors/stockholders Investments Corporate finance Source: Jones Lang LaSalle Annual Report 2010. 3. Competitive Analysis – The analysis begins with the list of competitors of JLL, finding their competitive strength and weaknesses and strategies used. The ratios and comparison found in Table 1 in Annex 1 could be interpreted as strength and weaknesses of the companies. Competitors of JLL are CB Richard Ellis Group, Cushman and Wakefield Inc. (privately held), Grub & Ellis Company and the industry. CBG is the closest direct competitor of JLL that exhibits strength in earnings and in operations. The other three competitors showed weaknesses in performance because of negative net income and earnings per share. Services offered by CB Richard Ellis Group, Inc. are similar to those tendered by JLL in the realty service management. However there are other services not found in the JLL portfolio. For instance, the company also offers outsourcing services that comprise a suite of corporate services, including transaction management, project management, facilities management, strategic consulting, portfolio management, and other services to corporations, health care institutions, and public sector entities with real estate portfolios. In addition, its outsourcing services consist of asset services, such as property management, construction management, marketing, leasing, accounting, and financial services for income-producing office, industrial, and retail properties owned by local, regional, and institutional investors. Further, the company provides investment management services to pension plans, foundations, endowments, and other organizations investing in real estate . CBG uses newsletters, blogs and internet as investment tools. 4. Stakeholders’ analysis. This is a research technique done to identify and assess the importance of stakeholders that may influence success of the company. A stakeholder’s analysis is started by mapping the possible interested parties, as shown below.’ Your boss Shareholders Government Senior executives Alliance partners Trades associations Your coworkers Suppliers The press Your team Lenders Interest groups Customers Analysts The public Prospective customers Future recruits The community Your family The list is narrowed down to the real stakeholders, then their interest to the project is specified and an assessment of impact is observed (See Table 2, Annex ) From this argument, the potential strategies for obtaining support or reducing obstacles are designed. SWOT ANALYSIS Based on information gathered from external environment research, strength, weakness, opportunities and threat is outlined for JLL. Analysis is also based on the service marketing theories that include product, pricing, promotion, placement, people and physical evidence. STRENGTH Physical evidence: Presence in competitive positions in key markets. Financially strong. Intangible service: Expertise in corporate outsourcing, investment Sales and investment management. Contact to people: Link to employees, business, geographies and technologies.. Weakness Pricing: is affected by interest rate. Cannot be controlled. Business easily affected by economy Opportunity Intangible evidences: Rebound of economy, growing interest on corporate rentals and growing investments and government housing priorities Threat Product: Facing Stiff competition and environment restrictions Intangible evidence: Environment regulations and market share of competitors Conclusion What is the market for JLL’s product like now? Is it growing? Based on the information gathered, the market wherein the company’s product is in is growing. The trend of economic growth in Hong Kong shows that recession is over in this country. Opportunities seen is the rebound of economy as interests of multinationals on corporate rentals as well as local business are a good sign for the real estate portfolio of JLL. Government policy in giving housing to its people boosts the building rental markets. JLL should be prepared to take advantage of this opportunity. Investment markets show the growing trust of investors that could only be interpreted as satisfaction of customers on the services of JLL. What should be strengthened because it is a threat is the response of JLL to the strategies of competitors that is eating up a bigger share of the market. To establish its leadership, as one of JLL’s objectives, it should focus on innovative services to satisfy the changing needs of clients. Compliance with environmental rules and regulations particularly on construction and pollutions should be attended to as this is one of the stakeholders concern. Weakness to respond to volatility of market is a difficult situation. Fluctuations and interest rates are beyond the scope of JLL, but it could adopt measures of cost flexibility because of the economies of scale. Being a big company, it has competitive advantage to purchasing, negotiations and other bargaining positions. What is encouraging in the market situation is the strength displayed by JLL. For 2010, it has recovered from a decline of sales in 2009. Survey reports send signals that the trend for corporate rentals is encouraging. This should be keenly followed and observed by JLL and should prepare strategies to respond to the needs of the market. Annex 1 Table 1. Direct competitors of JLL JLL CBG PVT1 GBE Industry Market Cap: 2.94B 5.28B N/A 35.52M 286.78M Employees: 40,300 31,000 13,0001 5,200 157.00 Qtrly Rev Growth (yoy): 24.20% 21.40% N/A -8.10% 31.70% Revenue (ttm): 3.20B 5.52B 1.55B1 564.88M 64.05M Gross Margin (ttm): 34.99% 41.72% N/A 7.91% 57.11% EBITDA (ttm): 344.33M 623.10M N/A -37.04M 18.73M Operating Margin (ttm): 8.45% 9.45% N/A -10.48% 21.53% Net Income (ttm): 166.87M 223.68M -125.50M1 -74.00M N/A EPS (ttm): 3.76 0.77 N/A -1.12 0.12 P/E (ttm): 17.98 21.61 N/A N/A 21.40 PEG (5 yr expected): 0.54 0.93 N/A -0.07 0.94 P/S (ttm): 0.93 0.98 N/A 0.07 4.40   CBG = CB Richard Ellis Group, Inc. Pvt1 = Cushman & Wakefield, Inc. (privately held) GBE = Grubb & Ellis Company Industry = Property Management 1 = As of 2009   Yahoo Finance. Jones Lang LaSalle Inc. Competitors http://finance.yahoo.com/q/co?s=JLL+Competitors Table 2. Stakeholders’ Analysis Stakeholder Stakeholder interest in the project Assessment of impact Potential strategies for obtaining support or reducing obstacles Importance of support Government Monetary policy i.e. interest rate High and low interests affects the realty industry Maintaining stability of housing prices High Prospective customers Low cost housing Affordability of construction Economies of scale High Corporate occupiers Availability of office spaces Growth of business Provide the needs of potential customers High New overseas clients Prospects for housing, realty and investment Growth of business overseas Research & Development & profile study. High Analysts, press group Operation and management Negative or positive reviews affect operations Provide updated information for guidance in market analysis. Medium Shareholders Profitability & shares Investments Assurance of ROI High Family and co-workers Personal interest of income and work Work attitude Provide incentives Low REFERENCES Berger, Roland. 11 April 2011. Multinationals ranked Shanghai, Hong Kong and Singapore as top 3 locations for headquarters in the region. Viewed 14 August 2011 EPD Summary of environmental legislations. Laws and Regulations. Environmental Protection Department, Government of Hong Kong. Viewed 14 August 2011 Gillespie Foundation of Economics. PESTEL Analysis of the Environment Viewed 15 August 20121 Hong Kong Statistics 2011. Viewed 15 August 2011 Read More