Marketing Analysis of Speedy Hire Plc - Case Study Example

PESTLE ANALYSIS Speedy Hire Plc work in UK which has relatively stable political environment. Considered as a secular country with strong market orientation, UK is currently experiencing slight slow down into its economic activity mainly due to subprime crisis and there is a possibility that housing markets, on overall, may cool down thus reducing the demand for hire industry however, market for the hire equipments were growing as the growth in the market during 2006 has been 6.6% whereas 2007 estimates are 121.5 GBP. The growing inflow of the immigrants into the country has increased the requirements for the housing sector in the country and the reduced cyclicality has allowed companies to anticipate the market trends more effectively. Companies including Speedy Hire Plc within this sector is continuously relying on the information technology therefore there will be increased dependence on technology in the future also. Legal environment in the country is favorable. Environmental concerns for companies are increasingly becoming a burning issue for the hire industry and it is believed that companies successfully addressing environmental issues will competitive advantage in the future. Company, Competitors, Competition Starting with a very humble beginning, Speedy Hire Plc is now considered as top company in UK for hire market and is listed on Stock Exchange. Speedy Hire Plc is a business to business company and operates through two divisions of Tool Hire and Equipment Hire. The Tool hire division operates through five regional companies with 235 depots whereas Equipment Hire division also operates through the five businesses with 126 depots. Over the period of time, company has made an organic growth and now considered as one of the major players in the market. The competitive landscape in the market is changing. The market historically remain divided into two product lines however this traditional demarcation is changing and market seems to be consolidating. The increasing environmental concerns and increased use of information technology are the two factors which are further pushing the competition to the limits. This further aggravates the fact that there are very low barriers to entry into the market therefore there remains a great threat of new entrants into the market also. Besides small players mushroomed at local level can be considered as bigger threat also. Porter’ Five Forces As discussed above that the barriers to entry are low in the market therefore there is a strong possibility of new entrants making into the market however considering the cost of doing business, this force may not be as powerful as perceived. Further, the increased level of consolidation in the market can also help Speedy Hire Plc to successfully withstand this force. The increasing emphasis on environmental concerns is increasing the buying power of the buyers thus this force can be considered as more powerful and possess the capability to alter the competitive landscape of the industry. Since switching cost in this industry is low as the increasing consolidation and blurring of industry lines have given the buyers’ opportunity to prefer hire rather than purchase and due to the low cost of switching, there is a strong probability of threat from the substitutes. Since the industry is undifferentiated therefore there is a very lesser degree of suppliers’ power in the industry. Overall, the competitive rivalry in the market is high as changing buying patterns and the anticipated growth only to fuel the rivalry between the players in the market. Porter’s three strategies Porter’s three strategies include cost leadership, differentiation and focus. Speedy Hire Plc works in an industry which is largely undifferentiated therefore the probability of offering the differentiated products to gain the competitive advantages is remote. Differentiation in the case of Speedy is not through the product strategy which you are right, is the same as everywhere else in the market. However, Speedy are not producers, they are suppliers and their differentiation comes from the added value, like their attention to safety or how they work with their customers.   Product Market Analysis In product Market analysis, we will be considering BCG matrix. Speedy Hire has two divisions i.e. Tool Hire and Equipment Hire. 1) With the available information from the case, it seems that the Equipment hire division of the company is its cash cow whereas its tool hire division is star in nature. Considering the growth of the business especially in Equipment hire division. The increased consolidation into this segment of the business gives it status of Cash Cow where it continues to provide healthy returns to the company to fund other business ventures. Besides Tool hire division is star in nature because of the fact that this division is continually expanding into new areas. Further, catering the changing patterns of consumers give this division the status of Star within the company. Porters Value Chain Porter’s value chain analysis is divided into two main areas of primary as well as secondary or supporting activities. These activities will be defined generically with special emphasis on Speedy Hire Plc. The Inbound logistics activities of the company include receiving, storing, inventory control and transportation of these inventories. As discussed in the case, Speedy Hire has a large network spread all over the country with many depots giving it enough infrastructural advantage to store, receive and manage inventory control. Operations of the company are divided into two main divisions with supporting activities distinguished according to the geographical location and equipment specification. Company’s tool hire division operations are segregated according to the geographical locations whereas the equipment hire division operations are segregated based on the equipment specification. Outbound logistics of the company include various depots and stores besides a modern fleet of more than 1800 vehicles which help company to reach its customers. Its modern fleet is also considered as its most differentiated aspect of doing business also. Company operates an integrated marketing approach which allows it to be closer to its customers. Not only this, company has been able to develop mainly through its marketing activities and by improving upon its service delivery as well as continuous development of its information technology framework and highly motivated human resource base. SWOT analysis In its essence, SWOT analysis is a very simple tool of assessing the strengths, weaknesses, Opportunities and threats of the organization. However, deep down its one of the strongest strategic tools which if applied correctly can provide many strategic insights into the company’s internal and external environment. One of the basic assumption behind the development of SWOT as a tool is that it assumes that managers can plan the alignment of firm’s resources with its environment (Novicevic, et al, 2004). Strengths: 1) Higher level of consumer acceptability in the market. 2) Mature company with stable growth patterns. 3) Large network of sales points 4) Modern fleet 5) Strong marketing efforts. Weaknesses 1) Segregation of business on two lines only may create management problems. 2) Not so developed information technology set up. 3) Reliance on road transport as the only mean of transportation. Opportunities 1) Online business may provide high growth avenues to the company. 2) Diversification into other areas such as car hires may provide new avenues of business. 3) Increasing inflow of immigrants. Threats 1) Low cost producers mushroomed across various geographical areas. 2) Low cost of entry into the market. 3) Threats of internet companies. Resource and Capabilities Analysis Organizations gain competitive advantages because of their assets, resources and capabilities. This mix of its resources provides organization a unique competitive position in the market which differ it from the other players in the market. Speedy Hire Plc has two main and core capabilities. First, its geographical dispersion across the country and availability of large and modern fleet of vehicles which allow delivering in more rapid and prompt way. Further, the organization has the strong bond with its customers through strong marketing efforts. The use of integrated marketing strategies is probably its biggest secondary capability which allows it a smooth access to its target market. ANSOFF Matrix Developed in late 1950’s. The ANSOFF matrix is one of the most important tools for business to decide upon their growth strategies. (www.mindtools.com,2008). It provides a quick and simple way of deciding upon the growth strategies while working into any industry or sector. However, there are various arguments against ANSOFF Matrix as the basic means of addressing the growth of the business. The main argument that is often put forward is the basic difference behind the dynamics of the small and large business. ANSOFF Matrix does not take into account different dimensions of dynamics behind the growth strategies being adapted by both small as well as large firms. (Watts, Cope,Hulme, 1998) ANSOFF Matrix provides four important and different growth strategies in terms of existing products and new products and existing markets and new markets. These four strategies include: 1) Market Penetration 2) Market Development 3) Product Development 4) Diversification The market penetration strategy outline that the firm tend to further capture its existing markets whereas market development strategy necessitate that the organization tend to develop new markets. Product development also entails the development of new products whereas diversification requires that the company must look for other business areas also. Considering the information provided in the case study, it seems that market development can be an ideal strategies for Speedy Hire Plc to pursue. Though Market penetration is also a viable strategy as UK market is anticipated to grow however considering the low barriers to entry and high prospects of growth in markets other UK, there is a strong chance that Speedy Hire can develop markets in Australasia and rest of Europe. Firm has strong fleet therefore transporting equipments and tools from one place to another is always its strength therefore it would be ideal for the firm to look for market development and look for Greenfield projects outside UK to capture better growth prospects. McKinsey Matrix McKinsey Matrix tends to project the strength of a business unit against the industry attractiveness. As Speedy Hire has two strategic business units in the shape of equipment hire and tool hire therefore the analysis for this matrix would be limited to these two only. Considering the industry attractiveness, the case study provides ample evidence regarding the attractiveness of the industry showing strong growth patterns into the industry. The total market for the both tool and equipment hire increased at the rate of 6.6% during 2006 and the overall market have outsmarted the UK economy itself therefore considering the stable demand patterns and growing market, we suggest that the firm is in grow position in the matrix as both the units are in right industry with strong attractiveness. We suggest that the company should continue to build on this position rather than considering diversification into other areas such as car hire. TOWS Matrix TOWS Matrix suggest as to how the company can use its strengths to withstand its threats and how opportunities are used to cover up for the weaknesses of the company. As we already know that the company has large and modern fleet, strong geographical presence and strong communication bond with its customers therefore we believe that through its strengths and opportunities, company would be able to tackle threats and weaknesses. Analysis of Market entry alternatives. Considering the above analysis, we suggest that Speedy Hire Plc should concentrate on developing new markets. Though the domestic market provide a very good opportunity but low cost of entry into the market make it more vulnerable. It would therefore strategically a good decision to go for market development rather than adapting any other strategy by the company. References 1. www.mindtools.com. (2008). The Ansoff Matrix. Available: http://www.mindtools.com/pages/article/newTMC_90.htm. Last accessed 29 May 2008. 2. Watts, Gerald, Cope, Jason, Hulme. Michael. (1998). Ansoff’s Matrix, pain and gain. International Journal of Entrepreneurial Behaviour & Research. 4 (2), 101-111. 3. Novicevic, Milorad M., Harvey, Michael, Autry, Chad W,Bond III. (2004). Dual-perspective SWOT: a synthesis of marketing intelligence and planning. Marketing Intelligence & Planning. 22 (1), Pp84-94. Read More