Undertaking a Market Audit - Essay Example

?Marketing Audit Table of Contents Table of Contents 2 Marketing Audit 4 UK Fragrance Market & Burberry Corporation Ltd 5 (2) Internal &External Marketing Analysis 6 PEST Analysis 6 Porter’s Five Forces Model 7 (3) Benefits of Internal &External Marketing Analysis 10 (4) Challenges Faced by Burberry in Implementing the Models 11 Conclusion 12 Reference List 13 Introduction Marketing Audit (MA) is a critical, systematic and impartial review and performance appraisal of the entire marketing operation (Brownlie, 2000). The appraisal will include the assessment of the objectives, policies, methods, operations, assumptions and the techniques employed to implement the techniques which help in achieving the objectives (Brownlie, 2000). MA would include internal analysis of the organization like evaluation of marketing activities, policies, functional procedures, core marketing mix elements and various other factors which affect the functioning of the organization. The audit includes careful analysis of the company’s strategic business units as well as the internal procedures. MA is prognostic in nature and provides recommendations for improving the performance, process and increasing the organizational outcome of the company. It would provide formal mechanisms of the systematic examination of internal and external marketing activities of the organization. It requires the usage of various tools which includes control charts that indicate the existing marketing situation and the crisis. A MA is useful to measure the various marketing crisis and also discover the various issues which lead to the increase in the sales of the company (Kling, 2000).The objective of the study would be to understand the concept of marketing audit and its effect on business activities. The author of the study would try to understand the utility and the method of conducting marketing audit in of the UK fragrance market. MA would be conducted to understand the internal functioning of the company. The chosen fragrance company is Burberry which is an UK based luxury fashion House. Marketing Audit According to Kotler (1977 cited in Kling, 2000), MA is a systematic examination of an organization’s marketing objectives, strategies and performance. The prime objective of the company is to understand the techniques that help in utilizing the resources of the company effectively and generate recommendations, which help in utilizing the existing process. MA lays emphasis on how effectively the marketing department performs its functions especially in areas of promotion and distribution. It can be performed by individuals within and outside the organization. The internal auditor can be senior manager or top manager whereas the external auditor could be expert marketing consultants, who have the potential of performing audit on a regular basis (SPA Professional Academy, 2010).The various forms of MA would include self audit, audit from across, audit from above, company task force audit and outside audit. The MA process would involve three major activities: Pre Audit Process: This involves activities which determine who will conduct activities and the timings of the audit activities. It also establishes the scope, methodology and objectives. The Audit Process Data Collection: This requires the assembling of information about the macro environment, industry, marketing mix and the company. It is expensive and a time consuming process of the marketing audit. Information Analysis: This involves evaluation of data collected in an attempt to provide an inclusive picture of the company’s marketing program. (1) UK Fragrance Market & Burberry Corporation Ltd The chosen market for the study is the UK fragrance market which is one of the most booming industries. It has been prospering in spite of the challenging economy and the net market sales increased by 4.5 percent and reached around ?1.38 billion. The net sales of the UK fragrance market were larger than the mass market, which generated more than 82 percent of the market value (EuroMonitor, 2012). The highest revenue generator in the fragrance market was the female perfumes. New product development plays an integral role in the market and is the key in maintaining and creating consumer interest, for example, the seasonal and limited-edition products are important methods to attract potential customers. Female fragrances are the central arena for new introductions, which account for nearly two thirds of the new launches. In the year 2011 the net retail sales of fragrances in the UK grew by 7 percent to reach a market valuation of ?1.1 billion. This was slightly less than the 8% value growth in 2010 (Key Note, 2012). Burberry is one of the most renowned fashion houses which specialize in manufacturing exclusive clothing line, perfume and toiletries collection. Burberry is a British based fashion house which is headquartered in London. The company was established in the year 1856 and the first clothing line was introduced in the year 1880 in the first store at Basingstoke (Burberry, 2013e). The main focus of the company is to launch an exquisite clothing line and perfume collection (Burberry, 2013b) The company has been successful in launching several innovative and fashionable clothing line and perfume collection since the past few years The company has come a long way since then and their stock was listed in the year 2002. They introduced its online store in October, 2006 (Burberry, 2013a). (2) Internal &External Marketing Analysis The marketing environment consists of the factors outside marketing that affect the marketing ability to establish and maintain successful relationships with its target customers. Marketing environment would constitute of factors which influence the company directly and indirectly. The marketing environment can be divided into macro and micro environment. The macro environment affects the company activities immediately and micro environment factors do not affect the company activities immediately. The micro environment factor comprises suppliers, distributors, competitors etc. Macro environment factors comprise demographic, economic, socio cultural and legal factors. Firstly, a macro and micro environment analysis would be conducted to understand the impact of the external factors on the business activities of Burberry. PEST Analysis The PEST analysis is instrumental in identification of the external threat faced by the fragrance industry at the present moment. Political Presently, the corporate tax rate in UK is 23 percent which has been revised recently by the government of UK (Government of UK, 2011). The government of UK has increased the corporate tax rate of the multinational companies to recover from the current economic slowdown. The established fashion house and fragrance companies have kept their plans on penetrating further into the UK markets on a hold. Economic Factors Currently, UK is recovering from an economic slowdown however; the fragrance market is booming and has been growing since the year 2011. The net sales of the fragrance industry increased by 4.5 percent and reached around ?1.38 billion (Mintel, 2012). The growth of the fragrance industry has slowed down in the year 2012, but it still managed to generate revenue more than the mass market generating 82 percent of the market value. Social Factors The increase in the net sales of the fragrances signifies the popularity and demand of the product in UK. Due the economic slowdown the fashion house companies have started offering discounts and rebates on various fashion products. This has led to the common people of UK in indulging in several luxury and comfort goods (Key Note, 2012). Technological Technological innovation has helped in the manufacturing of high quality branded perfumes and fragrances (Burberry, 2013c). Technological investment in fragrance industry leads to the development of high quality and valuable fashion products meant for regular and occasional wear (Burberry, 2013d). Porter’s Five Forces Model Before developing marketing strategy Burberry needs to identify the forces which have an impact on the profitability of the industry. The five forces will be discussed as follows: Threat of new entrants: Since, the fragrance market is booming the established fashion house companies like Versace, Chanel, Burberry plan to expand further and introduce new and limited edition ranges of perfumes for attracting potential customers. The UK fragrance market is expected to reach a market valuation of $45.6 million by the end of the year 2018 with new and innovative launches (Bodimeade, 2013). Bargaining power of suppliers The fragrance and perfume industry is totally dependent on the timely supply and delivery of perfumes for fashion shows, exhibitions and varies other reasons. The profitability of the industry has attracted several suppliers and the bargaining power of suppliers is very high in this industry. Bargaining power of buyers The fragrances and perfumes are usually high priced (Credit Suisse, 2012) and this is because huge amount of investment is done in developing a product. Each fashion product is unique and costly and therefore the customers are bound to pay higher prices for each of the fashion products. Therefore, it can be said that the bargaining power of buyers is very high in this industry. Threat of substitutes Even though the fashion companies are offering fragrances and perfumes at a relatively lower price at the present moment the products are not easily affordable by the common people. The high price of the perfumes and fragrances has led to the emergence of fashion companies who manufacture products at a relatively lower price. The economic slowdown has lowered the purchasing power of the common people and they have started purchasing fashion products manufactured by local companies. The threat of substitutes is high in this industry. From the above PEST and Porter’s Five Forces Model it can be observed that the expansion of established fragrance companies into the UK markets and the emergence of new companies into the market are presently favourable. However, the increasing corporate tax rate would hold their plans for expanding into the markets further. Thus, it would be advisable if Burberry plans to expand into UK markets by the end of the year 2016. An internal analysis would help in identification and assessing the strong and weak points of Burberry which would lead to identification of the company’s current strategic position. Strength The company has a large network of retail, wholesale and licensing channels worldwide It is one of the biggest fashion houses of UK offering exclusive perfume fragrance ranges. It has been granted the Royal Warrants by Queen Elizabeth II and the Prince of Wales The company has a strong brand presence and designed effective advertising techniques The brand is sponsored by eminent celebrities like Emma Watson and David Craig Weakness The perfumes and fragrances are usually high priced and the target customers of the brand are usually customers with high income range. The company focuses too much on the manufacturing of exclusive and occasional perfume wear instead of regular wear (3) Benefits of Internal &External Marketing Analysis The internal and macro environmental analysis has helped in identifying the current market situation of the fragrance industry and how Burberry can utilize its strength to the optimum level. These strategies will help to yield additional profits and develop strategies and garner attention from potential clients. Internal analysis would help in developing effective strategic planning by reviewing the present position of the company and consider the opportunities for investment purposes in valuable projects. The above internal analysis has helped in evaluating and examining the different aspects of the company by evaluating the business solutions, individual capabilities, customers and organizational capabilities. This internal analysis would help the management to review and assess the separate business aspects, which can improve the business situation. The PEST and Porter’s Five Forces model would help in developing effective business strategies and building competitive sustainable advantages. The management of Burberry would develop marketing strategies, which focuses on the manufacturing of regular perfume wear. High priced and exclusive perfume wear would attract only a handful of the customers hence, the management should develop strategies meant for attracting a larger customer base. The summation of the short, medium and long term benefits would be as follows: PEST & Porter’s Five Forces Model Internal (Strength & Weakness) Short Term Helps in identification of the immediate faults and errors in the existing process (RICC Centre, 2012). Whether the company has been able to yield the expected Return on Investment (ROI) and judge whether the company is able to yield good returns if there is effective implementation. Medium Term This will allow brain storming sessions, which can ultimately lead to the emergence of several new ideas and strategies. Brainstorming sessions will enable one to understand whether the employees can be team players or not (RICC Centre, 2012). A competitor analysis would help the management in understanding whether Burberry of offering similar or non similar products of its competitors to its customers. Long Term This will help in identifying the potential markets for further expansion and yielding additional profits. In this stage Burberry can develop strategies, which will help in evaluation of the existing product and service development process. (4) Challenges Faced by Burberry in Implementing the Models Although, the internal and external analysis would help in determination of the present strategic position of Burberry it is not necessary that the management would understand the concepts of internal and external analysis easily. It has been observed that the process of implementation is time consuming and quite costly. Thus, the management of Burberry should evaluate all the strategies with consideration to develop effective marketing plans. Conclusion Thus, it is observed that with effective implementation of effective marketing strategies the company can expand further into the fragrance market by laying emphasis on the manufacture of regular and occasional perfume wear. Although, the company is one of the most coveted fashion house of the world, marketing tools like PEST, Porter’s Five Forces model and internal analysis would help in determination of internal strength and weakness of the existing systems and procedures, which can be beneficial or hamper the productivity of the company. These models should also serve the purpose of a guide in accomplishment of the goals and objectives of the organization. Reference List Bodimeade, M., 2013. Global perfume market driven by the demand for celebrity inspired scents. Yahoo Finance, [online] 14 May. Available at: < http://uk.finance.yahoo.com/news/global-perfume-market-driven-demand-000000558.html > [Accessed 25 July 2013]. Brownlie, D.T., 2000. The marketing audit: A metrology and explanation. Marketing Intelligence & Planning, 2(1), pp.04-12. Burberry, 2013a. History. [online] Available at: [Accessed 25 July 2013]. Burberry, 2013b. Brand Business Culture. [online] Available at: < http://www.burberryplc.com/about_burberry/brand_business_culture > [Accessed 25 July 2013]. Burberry, 2013c. Leverage the Franchise. [online] Available at: < http://www.burberryplc.com/about_burberry/our_strategy/leverage-the-franchise > [Accessed 25 July 2013]. Burberry, 2013d. Pursue Operational Excellence. [online] Available at: < http://www.burberryplc.com/about_burberry/our_strategy/pursue-operational-excellence > [Accessed 25 July 2013]. Burberry, 2013e. Great Brand, Great Company. [online] Available at: < http://www.burberryplc.com/corporate_responsibility/great_brand_great_company?WT.ac=Great+brand%2c+great+company > [Accessed 25 July 2013]. Credit Suisse, 2012. Burberry Group. [online] Available at: < http://www.iseg.utl.pt/aula/cad602/Analise_Burberry_200403.pdf > [Accessed 25 July 2013]. EuroMonitor, 2012. Fragrances in the United Kingdom. [online] Available at: < http://www.euromonitor.com/fragrances-in-the-united-kingdom/report > [Accessed 25 July 2013]. Key Note, 2012. Executive Summary. [online] Available at: < http://www.keynote.co.uk/market-intelligence/view/product/10614/cosmetics-%26-fragrances/chapter/1/executive_summary >[Accessed 25 July 2013]. Kling, N.D., 2000. The marketing audit: An extension of the marketing control process. Managerial Finance, 2(1), pp.23-26. Mintel, 2012. The Men's and Women's Fragrance Market. [online] Available at: < http://store.mintel.com/mens-and-womens-fragrances-uk-september-2012 > [Accessed 25 July 2013]. RICC Centre, 2012. SWOT Analysis and PEST Analysis. [online] Available at: < http://riccentre.ca/wp-content/uploads/2012/01/Session-1-Takeaways-Guidlines.pdf >[Accessed 25 July 2013]. SPA Professional Academy, 2010. The Marketing Audit. [online] Available at: < http://www.spa-pa.co.uk/downloads/resources/SPA%20Professional%20Academy%20-%20Marketing%20Audit.pdf >[Accessed 25 July 2013]. Government of UK, 2011. Corporate Tax Rate. [online] Available at: < https://www.gov.uk/corporation-tax-rates >[Accessed 25 July 2013]. Read More