Market Planning for the Market Penetration of a Financial Services Unit for First Response Finance - Report Example

MARKET PLANNING FOR THE MARKET PENETRATION OF A FINANCIAL SERVICES UNIT (QUASI-BANK) FOR FIRST RESPONSE FINANCE, UK TABLE OF CONTENT Executive Summary........................................................................3 Introduction.....................................................................................4 Role of Market Planning.................................................................4 Market Audit ….............................................................................6 External Audit.................................................................................6 Competitor Analysis.......................................................................9 Internal Audit..................................................................................10 Current Strategy and Marketing Mix..............................................11 Marketing Strategy Recommendations...........................................11 References.......................................................................................13 – 14 Executive Summary This paper examines the expansion of First Response Finance, a car loan entity in the UK into another niche – the provision of financial services including quasi-banking services. To this end, a marketing audit is conducted to provide a scientific method of analysing the external environment of the UK, the UK financial services industry and the internal capabilities and resources of FRF. The analysis indicates that the UK is emerging from a major credit crunch which has led to emphasis on regulating the financial services industry. However, the UK economy has recovered and this provides the impetus for the further development and enhancement of the financial services industry. In terms of the markets, consumers are individualised in their outlook. The competitive environment shows that the main threat to FRFs Financial Service Unit are smaller entities like FRF. There are also major threats from banks who are “suppliers” under the Porters Five Force Model. Threats of new entrants also exist. FRF has some strengths and this include their focus and their competency in running their line of business, which is in the car loan business. They have a moderate stock of capital. On the other hand, their weakness is steeped in the fact that their firm is focused. The strategy of FRF involves advertising and staying focused on the car loan niche. In order to attain results, it is recommended that FRF must consider training their staff and bringing on new staff members. They have to rely on existing infrastructure and brand identity. From there, a new financial service brand can emerge and be nurtured over the medium-term. There must be marketing risk analysis as well as the targeting of individualised consumers alongside maintaining an international focus or outlook. Introduction This paper is to be presented to the managing director of First Response Finance (FRF), a UK-based motor finance company that intends to commence a banking service in the country (First Response – About, 2014). First Response commenced trading in January 2000 and it provides motor finance throughout the country for the acquisition of new and used vehicles (First Response Home Page, 2014). The company has its head office in Nottingham but has a presence in Glasgow and Manchester. First Response seeks to expand its scope and provide banking and financial services. Based on this, the paper will provide a medium-term market planning that will enable FRF to meet its market entry obligations. To this end, the following objectives will be explored: 1. An insight into the importance of market planning to FRF 2. An analysis of the market audit of the business environment of FRF 3. An evaluation of the current strategy and recommendations for the implementation of a medium-term market plan. Role of Market Planning Market planning is seen as some kind of systematic and structural approach used by a firm to present its products and services to the markets. “Market planning is a system of adopting a mission statement, conduction SWOT analysis, assumptions, market objectives, marketing strategies and programmes for the promotion and sale of a firms products and/or services” (Payne and McDonald, 2012; p553). This implies that market planning has the fundamental focus of creating definite and specific processes and structures that gets a firm to gauge things on the market and come up with ways of selling its products through the markets. This involves a conscious and well planned method and process of analysing the markets and presenting the products. “Marketing planning is a systematic process involving the assessment of resources and the marketing opportunities and threats” (Donelly and Harrison, 2010: p8). This implies that marketing planning involves examining things on the markets through a scientific method and coming up with the opportunities and threats on the market in order to provide a means through which the products of the firm can be sold and made available to consumers. This involves a coordinated approach that enables the firm to position itself in an appropriate section of the markets (Donelly and Harrison, 2010). Beamish and Ashford (2007) on the other hand view marketing planning from a tactical perspective and they state that it is an activity that underpins product-based objectives, such as product development, product line extension, product differentiation and product positioning. Thus, the essence of market planning is to create a structured and conscious method of dealing with consumer needs and expectations in order to attain the best results in either presenting a firms product to the market or capturing and holding on to market share. This brings to bear that scientific methods and processes of presenting products and getting the products to be accepted in order to attain expectations of the firm. Therefore the essence of conducting market planning for First Response Finance is to create a structured and organised system through which the firm can analyse the external environment and competitors in the financial service industry. From there, there could be recommendations on how to position FRF in order to enter the UK financial service industry. This will provide a structured and scientific method through which we can figure out issues on the market and match the resources of FRF with the realities on the ground in order to attain optimal results from our marketing programme. Market Audit Wilson identifies that a business or organisation operates in an environment. There are various variables like government policy, economic conditions, technological and sociological factors that come together to define the environment within which a firm will operate (Wilson, 2005). These factors have an impact on the markets and affect the way consumers will be influenced by a firms marketing campaign. Philip Kotler stated that a marketing audit is a “comprehensive, systematic, independent and periodic examination of a company or business units marketing environment, objectives, strategies and activities with a view of determining problem areas, opportunities and recommending a plan of action to improve a companys performance” (Avasarikar and Chordiya, 2007). This involves three main components, the examination of the internal environment, external environment and competitor or industry position a firm operates within to come up with proper strategies for the attainment of objectives (Wilson, 2005). External Audit The UK finance industry has various dynamics that work together to provide a given system through which firms like FRFs new financial subsidiary will operate within. External analysis is conducted by examining the political, economic, sociological, technological components of a business (Henry, 2008). Political The UK financial services sector is regulated significantly by the government. The Financial Services Act (2004) provides the core framework within which the financial sector is regulated and hence, an entity like FRFs finance unit will have to be sensitive to these rules and regulations (Singh, 2012). This will require a certain stock of capital and guarantees from other insurance entities and other deposits that will enable a firm to provide sureties before licenses are offered. The financial service industry is also concerned with major laws that relates to the protection of consumers. This include different rules and regulations about how financial services must serve their customers and how these processes must go be carried out. The regulatory environment of the UK is unstable. There are new laws and regulations that relate to financial services because they are accused by the banks and populist groups that accuse such institutions for causing the global financial crisis. Thus, there is the need for a firm to analyse its risks and come up with the best ways of dealing with them in order to remain successful in their diversification into the financial service industry. Economic The current unemployment figures of the UK are quite high. There are now a lot of people who rely on social and other welfare payments to survive. Hence, there is the need for banks to find ways of providing services for such persons in order to target such persons and assist them through the rescission and difficult times. There is massive competition due to the changes and challenges that UK banks went through in the 2007 – 2009 recession (Thompson and Martin, 2010). Therefore big banks and entities have also diversified into the niches of microbanking and similar services. This is because they are forced to work harder and attain more results. Therefore, there are major constraints placed upon these entities and they have to work harder and attain more results and meet objectives. European Union law has also influenced UK banking regulations. There is the need for firms to provide services for bankers and also provide equal rights to other workers and persons from other EU nations. This provides major regulations and rules that have an impact on the economy of the UK and a bank must find ways of dealing with such additions and circumstances. However, on the average, the UK economy has been picking up since 2012 and the GDP has been growing steadily. This has led to a trend whereby the economy seem to be injecting much money and resources which can provide some promise for more savings in the UK in the coming years. Sociological Socially, the UK society is one that is highly individualistic and this enables a firm to operate a banking entity with products and services that meets individual needs and expectations. The growth in people seeking the quality of life is important and vital for various soft aspects of a firm. Also, issues like the diversification of the UK economy and the protection of minority rights provides some restrictions on financial intermediaries in their conduct with people. Technological The growth of fibre-optics in the UK has created the impetus for online banking to be conducted and this is a standard practice in most firms (Cresswell, 2013). Thus, there is the need for a firm that is serious about competing in the industry to have the various accoutrements to deal with the competition given by other service providers. Also, the provision of international bank wire services and international online backing services is important. This is because most consumers in the UK conduct various businesses in different parts around the world. Competitive Environment In order to conduct an analysis of the competitor environment, the tool that is used in most contexts is the Porters Five Force Analysis Model. This provides an insight into various stakeholders and various players in the industry and how they work together under five main threats to a business (Hill and Jones, 2011). They are: Threat of new entrants Threats of substitutes Bargaining power of buyers Bargaining power of suppliers Competitive rivalry (Porter, 2008). Threats of new Entrants The barriers in entering the financial industry is somewhat low. This is because many small scale entities provide similar services and hence, they can easily integrate into the sector with ease Threats of Substitutes Most individuals will want to use banks and other well established brands like HSBC and Barclays Bank. Bargaining Power of Buyers This is minimal because consumers of FRFs future financial service cannot easily form their own banks Bargaining Power of Suppliers This include other major entities like reinsurance entities and other larger financial service providers who will help the FRFs financial service to thrive. Such entities are major entities and they can cause a lot of competitive challenges to FRF. Competitive Rivalry This involves the rivalry of small entities in the financial service industry. And they include different entities that target small scale organisations and low earning individual. There are many entities in this category and they pose a direct threat to FRF. Internal Audit STRENGTHS WEAKNESSES - Strong niche control - Moderately Capital stock - Strategic location of headquarters (Nottingham) - Strong linkages to underwriting and insurance entities - Award winner in national car financing categories - Structured systems and methods of work - Extremely focused on car loans - Lack of staff with knowledge of financial services industry - Limited capital base for expansion OPPORTUNITIES THREATS - Building on the existing niche of affairs - Utilise capital stock to expand into the financial service industry - Grow the firm from the Nottingham base - Build brand image based on awards and utilise the structures and systems of the current entity. - Difficulty in building an image as a financial service entity - Internal staff cannot be integrated into the new staff base without much training - Capital base for expansion limited so must use the existing facilities. Current Strategy and Marketing Mix The current strategy of First Response is to focus on the car financing industry. They try to get consumers that are blacklisted and cannot take car loans anywhere. Through the use of various techniques, they are able to secure loans and provide various services in order to deal with the matters and issues relating to their car financing. When loans are given, FRF has ways of getting customers to pay back. This involves various strategies and processes that are used to track consumers. The marketing mix of FRF involves the use of various processes and strategies to advertise in the media. This include televisions, radio, online and other mediums through which they get an exposure and consumer attention. They also use agents in various towns and cities around the UK where they are able to get customers interested on a commission basis. Marketing Strategy Recommendations Based on the market audit, it is feasible and possible for FRF to survive and succeed in the conventional financial services industry. This can be done through various processes and activities. In order to succeed in this field, the following recommendations are put forward: 1. FRF must build on the existing niche of customers. This will be done through the recruitment of loan holders and migration of previous customers accounts to the new banking sector. Such individuals can be targeted through CRM and encouraged to deposit into the financial service accounts of the new subsidiary of FRF. 2. Staff members in FRF must be trained and given enough experience towards marketing and running a new financial service entity. 3. Rely on existing infrastructure and staff members to come up with a base for the expansion and growth of the FRF Finance Unit 4. Build the FRF Finance image separately from the FRF car loans entity. The new brand management must be steeped in the previous successes in the FRF brand. 5. A marketing risk management team must be formed with qualified legal experts to analyse risks about FSA compliance, EU law analysis and other legal risks. 6. Individualised consumers must be targeted through adverts and marketing campaigns that are tailored on such persons. References Avasarikar, P and Chordiya, S. B. (2007) Marketing Research Pune: Nirali Prakashan Beamish, K. and Ashford, R. (2007) Marketing Planning London: Routledge Cresswell, P. (2013) Totally Debt Free Lifestyle London: Lulu Publications. Donelly, R., and Harrison, G. (2010) CIM Coursebook: The Marketing Planning Process London: Routledge First Response – About (2014) About First Response Finance [Online] Available at: http://www.firstresponsefinance.co.uk/about-first-response-finance Retrieved: February 28, 2014. First Response Home Page (2014) Need Used Car Finance, We Offer a Quick and Simple Car Finance Product [Online] Available at: http://www.firstresponsefinance.co.uk/car-credit Retrieved: February 28, 2014. Henry, E. (2008) Strategic Management Oxford: Oxford University Press. Hill. C and Jones, G. (2011) Strategic Management Theory Mason, OH: Cengage Payne, A. and McDonald, M. (2012) Marketing Planning for Services London: Routledge. Porter, M. E. (2008) Competitive Strategy New York: Simon and Schuster Singh, D. (2012) Banking Regulation of the UK and US Financial Markets Surrey: Ashgate Publishing. Thompson, J. L and Martin, F. (2010) Strategic Management: Awareness and Change Mason, OH: Cengage Wilson, A. (2005) Marketing Audit Handbook London: Kogan Page. Read More