Marketing research of Arriva Plc - Essay Example

?Marketing Research of Arriva Plc Table of Contents Introduction 4 2.Brief of Arriva Plc 5 3.Task A 5 3 Internal Analysis 5 3 1.Value Chain Analysis 6 3.2.External Analysis 9 3.2.1.PEST Analysis 9 3.2.2.Porter’s Five Forces Analysis 10 3.3.Summary of Analysis-SWOT 11 4.Task B 12 4.1.Aims and Objectives of Marketing 12 4.2.Identification and Segmentation of Target Market 13 4.3.Strategic Directions 13 4.3.1.TOWS Matrix 13 4.3.2.Generic Strategy 15 4.4.Marketing Mix 16 4.4.1.Product 16 4.4.2.Price 16 4.4.3.Promotion 16 4.4.4.Place 16 4.4.5.Process 17 4.4.6.Physical Evidence 17 4.4.7.People 17 5.Conclusion and Recommendation 17 Reference 20 1. Introduction The global market scenario has been changing constantly due to a number of factors. Firstly the globalisation is the prime factor that has brought major developments in the field of the trade and business. The degree of competition has increased significantly and every company is trying to gain a higher market position in term of market share and profitability. Globalisation has offered better market opportunities to the global business. On the other, it has also intensified competition. For example, free trade policy is an outcome of globalisation which is one of the major drivers of competition. In this regard, Hope and Maeleng have defined the free trade policies as “competition enhancing device” (Hope and Maeleng, 1998, p.61). However, globalisation has also offered other benefits to combat with such fierce competition like technical advancements, rational thought process, resources, multiple business theories and concept etc. Unlike the traditional concept, the management in post modern organisation has realised their priorities for achieving sustainability. For example, managements are more focusing on developing healthy relationship with customers and employees. Moreover, the management of post modern organisation are able to distinguish between ‘selling’ and ‘marketing’. Marketing is broader and better concept and many scholars and academic have developed many marketing tools and theories for achieving sustainable competitive advantages. Most of successful business organisations have incorporated these tools and have achieved their overall common organisation goals. This paper will aim to frame a marketing strategy using multiple marketing models, theories, and tools for Arriva Plc. The marketing analysis will be developed based on the internal and external analysis using marketing analysis tools and model. 2. Brief Description of Arriva Plc Arriva Plc is one of leading transport service provider in the entire Europe. Primarily, this multi-national corporation is a UK-based based company and it was founded by T.S. Cowie during 1938 in Sunderland. Initially, the founder, T.S. Cowie started the venture for selling second hand motor cycle and later in 1960, he also started retailing motor car. Finally, the company entered in the transportation business by acquiring Grey-Green Bus Company. By the end of 1996, it became one of the largest bus transport service providers in London. “Arriva was born in 1997: when it acquired “Unibus Holdings in Denmark” which is its first international expansion with Europe market (Arriva plc-a, n.d.). Arriva was acquired by Deutsche Bahn, a leading logistics and passenger service providers in August 2010. Currently, Arriva is present in 12 major countries of Europe and it has acquired major market share in these countries that has made it one of third largest transport service provider in European market. Considering its history, the company has grown with non-organic strategy i.e. by acquiring a number of firms. Currently, including its associated companies, it has nearly 47500 employees and it is operating in 12 countries with more than 16,150 vehicles generating more than 3billion revenue per year (Arriva plc-b, n.d.). 3. Task A 3.1. Internal Analysis Before framing a set of plausible and effect marketing strategies it is necessary to assess the internal condition of the company. Marketing strategies are directly related to every aspects of business and hence, internal analysis will include value chain, financial analysis and analysis of its current strategy. 3.1.1. Value Chain Analysis Value chain analysis is very helpful in shaping the internal strengths and for developing core competencies. Moreover it also focuses on the major weakness (Needles, Powers and Crosson, 2007, p.838). Value chain model is developed my Michael E. Porter includes all necessary primary and supporting activities. The following figure presents value chain of service firms. Figure 1: Value Chain for Services (Source: Gabriel, 2006, p.16) Based on the above figure, the internal factors can be analysed. In the process, the values of the organisation must be evaluated. In order to offer bets services to its passengers, it has incorporated certain values that includes safety of passengers and employees, respect to diversified culture with honesty, reduce environmental negative impacts, team working by developing healthy relationship, strive meet customers’ needs, creating long term value for stakeholders. These six values are helpful for its high quality operation that has offered it an upper hand position in the market (Arriva plc-c, n.d.). To begin with, the vast and strong operation in UK and other European countries is the most vital strength of Arriva. One of the core competencies in this regard is that Arriva has been quite effective in winning and retaining new and existing contracts. For example, a company report disclosed that contracts in 2010 has grown by 2.2% as many new contracts are won in countries like, Denmark Malta and the Netherlands, and existing contracts are retained in the countries like Denmark, Italy, Slovakia and Poland. Specifically, In London, the company has experienced the fastest growth (Arriva plc-d, 2011). The excellent operational performance has proved to be greater customer retentions with lower operations and with higher operational profits. One of major reason behind this efficient performance is the new quality buses and coaches that have also led to reduce commercial mileage costs. Besides, it has also gained “the exclusive rights to import VDL (formerly DAF) bus and coach chassis and products” adding value to its fleet (Arriva plc-e, n.d.). 3.1.1.1. Current Strategy Arriva’s current strategy mainly aims to move around greater customer services for higher customer retention. Arriva is one of biggest transport services providers in Europe. However, it key competitors like Stagecoach, First Group, National Express and Go-Ahead are major threat for the company’s market share. Therefore, it is constantly trying to bring improvement in its services. The company has realised that offer perfect service is not possible due to congestion and traffic delays. Hence, in order to overcome these, it has also partnered with multiple local authorities of respective countries. Besides, innovations are also major components of its strategy. It strives to introduce innovative ideas and services for improving customer services, for better service delivery, greater safety environment, and efficient management of water and energy (Arriva plc-f, n.d.). Arriva has been operating multiple countries where market scenarios are quite different and it has efficient developed country specific strategy for each market. Basically, the company has focused on the liberalized market where trade policies are quite flexible. Its offers transport services with two major business models i.e. contractual services and deregulated service. Its overall strategy for transportation business include six major aspect including capitalising the opportunities; investing for acquisition; focusing on gaining and retaining new and existing contracting; building a better relation with stakeholders; improving the existing services and operations; and respecting and improving employees’ skills (Arriva plc-g, n.d.). 3.1.1.2. Financial Strength-100 With growing its business in entire Europe, the company has gained a better financial position as it revenues and operational profits are constantly improving. The following table depict financial performance based on divisional results. Table 1: Financial Performance: Divisional Results, 2009 (Source: Arriva plc-h, 2009) 3.2. External Analysis The external environment of a company mainly includes the macro-economic factors and industry. In this regard, the PEST and Porter’s five forces are the two most effective strategic analysis tools for macro-environmental and industry analysis respectively. PEST model includes for aspects of macro-economic including political, economic, technological and social; whereas, Porter’s five forces of industry includes five drivers including bargaining power of buyers and supplier, threat from new entrants and substitutes, and existing rivalry (CIMA, 2007) 3.2.1. PEST Analysis Arriva has been always aiming for expanding its business in the liberal countries and hence it is chosen to expand its market in 12 major countries. Europe is the most developed continent in world as most of counties in Europe are highly developed and stable in terms for political and economic conditions. The countries like UK, Czech Republic, Netherlands, Denmark, Italy, and Spain etc are highly developed. Moreover, the average purchasing power and GDP of the countries are quite higher indicating greater availability of the customers. Arriva has also been revived greater government support from these countries as it has been constantly new contracts. In most of the countries, Arriva is mainly offering bus transportation services. However, in case of rail services, it is yet to receive greater liberalisation in many counties. For example, in the countries like Italy, Portugal, Spain etc rail services has not been liberalised yet. On the other hand, it has expanded it bus services in these countries as governments have offer better policies (Arriva plc-i, n.d.). UK is the most attractive market for Arriva as the highest sales revenues are generated from this region. Arriva is facing two types f market in UK. In London, the bus market is regulated and rests of UK, it is deregulated. UK is a strong economy that adds value to its operation in UK region. The GDP as per purchasing power and per capital income is nearly $2.173 trillion and $34,800 respectively. Besides, the legal and judiciary systems are aim to offer better protections to business organisation. European nations are mainly driven by the Western culture and people are open to new modern thinking. The overall literacy rate in the European countries where Arriva is present is more than 97% on an average. Better scope of livelihood has led to enhance their economic conditions. Moreover, in terms of technology, European nations are quite developed. Better accessibilities of technologies for transportation are another major factor behind its rapid market expansion. Government has also made significant contribution to offer better infrastructure like better roads and communications (CIA, 2011). 3.2.2. Porter’s Five Forces Analysis UK and other European countries are highly populated and significant amount of passengers are easily available. However there are other big competitors and substitutes are available and switching costs are also very low. These factors intensify the buyers’ bargaining power. The suppliers’ groups mainly include vehicle and fuel suppliers. In Europe a large of vehicle suppliers are available and as Arriva have greater market exposure, it can avail suppliers form different European countries that makes suppliers’ bargaining power very low. However, increasing prices of fuels and other equipments increases suppliers bargaining power. The overall suppliers bargaining power is moderate. The European land transportation industry is mainly dominated by five major organisations including Arriva, Stagecoach, First Group, National Express and Go-Ahead. Moreover, many markets are regulated by respective governments. These two factors lead to reduce the threat from new entrants. On the hand, this business requires high capital investments with better relations with government to gain contracts. Therefore, threats from the new entrants are very low. There are large numbers of transport services available apart from bus and rail services. In this regard, low cost airline is the greatest threat. The companies like RyanAir, EasyJet etc are offering the lowest cost making the switching cost of customers’ too low. Moreover, airline is the fastest mode of transportation. Besides, Arriva has identified ‘car’ as its major competitor. Many people own their cars and prefer to avoid public transport. Therefore, threat from substitute is highly intensified. The bus and rail service sectors are mainly dominated by five giants namely Arriva, Stagecoach, First Group, National Express and Go-Ahead, and these big five have gained nearly 69% of total market shares. Each of these companies has their dominance in specific regions that reduces the level of competition (Ruddick, 2011). 3.3. Summary of Analysis-SWOT Strengths: The most crucial strength of Arriva Plc is its strong operations for bur services in 12 countries. Besides, it has also acquired a huge fleet of new vehicles that reduces its operational cost. Moreover, it is also efficient in gaining and retaining contacts that also helps it to achieve a stable financial position. Weakness: The major weakness or Arriva Plc is that in rail services it has not Able to performing better than its key competitors. Moreover, in many countries it is outperformed by its key rivals. Opportunities: The European Transport market is constantly liberalizing that creates major opportunities in many European counties. Besides, in UK rail services, open access and franchises can offer a better hold in rain services (Arriva plc-d, 2011). Threats: The rise of low cost airlines and increasing use of cars are two prime and the most significant threats for Arriva. Moreover, the decline of UK tourism market may create major harm to its revenue. 4. Task B 4.1. Aims and Objectives of Marketing Competition in European land transport industry is very low as each market leaders are enjoying their respective market shares. For Arriva, the major threats are the rise of low cost airline services and increasing use of cars. In Europe most of counties are having greater purchasing power and they capable to own a car or to avail airline services for short distance. On the other hand, decline of tourism industry of UK and Spain are increasing risk to its revenue. Therefore, the primary marketing goal for Arriva Plc is to encourage people to use public transport like bus and trains offered by Arriva. Besides, Arriva has estimated total transport of Arriva to be more than €100 billion and Arriva must aim to capture the largest share of market. Some of very specific marketing objectives are stated below for the next three years. To endorse the benefits of using public transport To attract more number of people to use public transport. To develop a creative marketing mix that aims to offer higher value that airline service and than using personal cars. To developed brand image as the most efficient bus and rail transport service provider with better safety and comfort level. 4.2. Identification and Segmentation of Target Market Currently, Arriva is in 12 European countries and there is high probability of getting potential passengers. However, generally, people with middle income groups are more prone to use public transportation system but the main goal of the marketing plan is to encourage people for public transport who are constantly using air transport and personal cars. Therefore, the target market will include higher middle income group as well as middle income group. Besides, the major focus will also be on the tourists. The specific market segmentations are given below. Age: All ages Income: Higher income to middle income Gender: Male and Female Characteristics: Users of cars and airline services; tourists and other general publics Geographic: People available in 12 European countries 4.3. Strategic Directions 4.3.1. TOWS Matrix TOWS matrix is helpful to develop probable strategic direction by situation analysis. Primarily the situation analysis is based on the identified strength (S), weakness (W), opportunities (O) and threats (T). It combines in the external opportunities and threats with the internal strengths and weaknesses. In the previous sections the specific SWOT has been explained on basis of external and internal analysis. The following figure shows that how TOWS matrix is helpful in strategy formulation. Figure 2: TOWS Matrix (Source: Koontz and Weihrich, 2006, p.108) The above TOWS matrix presents four strategic matrixes against the internal and external factors. Arriva Plc should concentrate of each of the strategic matrix. WT strategy aims to overcome the underlying weakness and threats. Arriva PLC is facing weakness in its rail services and low cost airlines and use of cars are major threats. Hence, it must try to developed strategic alliance with government and other partners for expanding its rail network that will help it in achieving higher economies of scale. Finally, it can offer substantially lower cost rail fares than airlines to attract customers. WO strategy strives to overcome the weaknesses to cater underlying opportunities. UK and European countries are attempting to liberalize its transportation including rail and bus services. Hence, Arriva should overcome its weaknesses to cater these opportunities by taking development strategy like better operational process for rail services. Next, ST strategy aims to prepare for potential threats using current strengths. In case of bus services, Arriva’s operational efficiency is its core competency. It must try to provide better and lower cost services to attract tourists by offering touring packages at lower cost. Finally, SO strategy is meant to use the prevailing strength to cater opportunities. Its fleet is quite efficient and consist of new vehicle. At present it is in 12 European countries and hence, it must try to enter other European countries seeking to liberalise its transportation services (Weihrich, n.d. p.11). 4.3.2. Generic Strategy The prime competition of Arriva is with its substitute services i.e. cars and low cost airline services. Gaining a competitive advantage against this industry forces is quite challenging. Therefore, Arriva must aim to focus on the strategies that create sustainable competitive advantages. In this regard, Porter has developed a generic strategy matrix that identifies four basic strategies and it is presented below. Figure 3: Generic Strategy Framework (Source: Stonehouse et al, 2009, p.175) Considering the prevailing threat and competition from the substitute transportation services, Arriva must try to follow the cost leadership. The fact is that road transport is less comfortable and more time consuming than air travels and personal car. However the only two major factors that encourage bus and rail services are lower cost fares and short distance travelling. Therefore, Arriva must try to strike with much lower prices and greater comfort level than air travels. 4.4. Marketing Mix 4.4.1. Product Arriva Plc is in service sectors offering bus and rail services. Arriva must design its services considering its main competition driving factor i.e. substitutes service. In the process of designing services, Arriva must focus on better comfort, safety, and timely & frequent service delivery. 4.4.2. Price As Arriva aims to gain low cost leadership, it must offer lowest cost in industry. Moreover, it also needs to compare its pricing strategies with other mode of transports and competitors. For reducing its cost, it must acquire more fuel-efficient vehicle with better safety and comfort level. Moreover, it also needs to increase its economies of scale for offering lower prices. 4.4.3. Promotion Convincing the users of low cost passengers to use rail and convincing the users of personal cars to use bur services is a tough task. It must deliver this massage to target consumers in an innovative way. In this regard, Arriva must promote the benefit of using bus and pool vehicle in terms of savings and environmental benefits. 4.4.4. Place Arriva must try to identify the major transportation routes for buses and rail where large number of passengers can be available. The selection of new routes should consider the necessity of target market people. For The short distance for airlines is long distance for rail services. Therefore, it must expand its long distance rail services. 4.4.5. Process The process must ensure greater flexibility, safety and comfort level. Moreover, the process offered by Arriva must try to gain customers trust with convenient and value added services. 4.4.6. Physical Evidence In transportation services, the vehicles are physical evidence and these vehicle must be innovative that will aim to offer great comfort and safety to passengers. Moreover, the design and colour of vehicle must signify the local culture. 4.4.7. People ‘People’ in service sectors are one of the most critical aspects. It is the people through which the services are delivered. In case of Arriva’s transportation business, the drivers of bus, trains and other helping employees like ticket checkers, services boys etc are service provider. Therefore, Arriva must ensure highly efficient drivers for better safety levels and other employees also should be well trained for high valued customer services 5. Conclusion and Recommendation This paper has attempted to present a marketing plan for the one of leading transport service providers of bus and rail services. This marketing plan has been developed on basis of internal and external analysis which has been conducted using multiple strategic analytical tools like PEST model and Porter’s five forces. The strategy formulation has also been developed using multiple marketing models and tools like TOWS, generic strategy, marketing mix etc. The overall the marketing plan has been focuses on certain specific marketing goals and objectives for the next three years. The marketing analysis section disclosed that the competition among the market leader is comparatively lower than threat from substitute like low cost airlines and personal cars. Therefore, framing strategies against these two forces are quite difficult as people find these two substitute mode of transportation more convenient due better comfort and fast services. However, in light of this issues, based on developed strategies, some plausible set of recommendations are given below. For offering low cost services with the best comfort and safety, Arriva must acquire the latest fleet of vehicles that will also helpful in reducing operational cost. The drivers and other service providers must offer better training for cost efficient operations. For example, drivers must operate the vehicles to generate highest mileage at optimum level of fuel. Arrive must promote the advantages of suing pool vehicles like bus and trains. It must focus on lower expenses, time management, social and environmental benefits of using public transport. It must offer special services for disabled and aged people for example better accessibility and special seat arrangements for them. Arriva should also focus on in-bound tourist and should offer best transport tourism packages. For example, it should choose the bus and rail routes with tourist attractions and destinations. Besides, it also other services like foods, entertainments within the bus and rail services for tourists. Finally, the most important is task of Arriva is to gain more contracts and maintain the exiting one by offering best services to the economies in behalf of ruling government. It must strive to develop a better relationship with governments to receive more number of contracts. Reference Arriva plc-a, (No date). Arriva – Overview: Company profile. [Online]. Available at: http://www.arriva.co.uk/arriva/en/about_arriva/company_profile/overview/. 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Available at: http://www.usfca.edu/fac_staff/weihrichh/docs/tows.pdf. [Accessed on August 08, 2011]. Read More