Proposal of a marketing strategy



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6.4 Customers


The portfolio of customers partly corresponds with the one of product portfolio since realisation products are usually offered only to the customers comming from B2B sector. Business items and services are however offered to both groups. Final customers make less than 10 percent of total income of the company. We are therefore going to discuss only business customers.

6.4.1 B2B Customers


Typical customers in this cathegory are architects or planning studios, in other words those who do not consume the offered product or service directly, but include them into their own products towards final customers. Further members of B2B sector can be in the case of Styl 2000 investors producing non-residential buildings not dessigned for production (e.g. parking houses, shopping centres etc.) or the construction companies working directly for these investors, or governmental agencies and governmental administrative parts (e.g. universities, academical institutes, post office etc.).

Architects and planning studios


There are 2350 architects and representants of planning studios and agencies addressed periodically with offers or just consultations and informations on new products and solutions. Most of these customers appreciate having constant supply of information because that way they are prepared and able to offer their customers more professional services and advice. It is task of business representants to take care of them in order to achieve loyal customers for long-term cooperation. Individual approach is therefore more than welcome.

Investors


Both private and public investors are not interested in gaining information continiously all year around, but appreciate having solutions ready at the moment of deciding important contracts. No matter whether they are independent or bound by governmental rules on contract assignment, the most important part of business with them is personal relationship or close contact.

Construction companies


Among all B2B partners, construction companies are led mainly by conditions offered, be it price, delivery or additional services conditions (e.g. possibility of instalments, transport of goods free of charge directly onto the building site etc.). To create a loyal relationship is very difficult since their behaviour is rather opportunistic.

7 COMPANY´S SITUATION ANALYSIS


Before coming to the proposal of a new marketing plan it is worth carrying out a complex analysis consisting of part analysis of all key factors which influence the observed company. In this way the present strategy can be evaluated. That is why we are going to use PEST analysis, SWOT and Financial Analysis and also intracompany analysis of its current marketing strategy in order to generate not only a basis for evaluating up-to-date strategy, but also to be able to propose changes or even a new strategy.

7.1 PEST Analysis


First we will discuss the industrial branch as a whole. PEST analysis uncovers the conditions which are imposed upon the company through political and legal, economical and social features of its environment. As the company´s main activity covers trading with building materials and assuring their assembly we consider it best to go out of data describing the building industry.

7.1.1 Political Environment


The Czech government is planning and gradually implementing unpopular changes in distribution of social welfare. Mortages were easily accessible not only thanks to the well-being of the Czech economy, but also thanks to the openhanded politics of contribution on building activities, and will no longer drive demand in this industry area. Due to expected cuts in governmental support of privite homes by individuals, i.e. a flat or a house, demand will probably sink. Tax increase from 5 to 9 percent could also influence demand as Matyáš, chairman of the Czech Construction Trade Union, said55.
Another important factor crimping construction demand is the legal process of acquiring building permission. This is administratively a very demanding procedure56 carrying over from the past without changes which inhibits construction demand and can lead to slow-down in building industry. According to a KPMG study57 inhibiting factors are also high bribe rate, insufficient payment morale, imperfect legislation or difficulties in the enforcement of liability.
The above mentioned factors will impose important threats onto the company in form of decreased demand from both public and private sphere and increased cost through increased risks in financial areas and general business relationship to other companies and/or bodies operating in the market.

7.1.2 Economical Environment


The Czech economy is still growing – starting from 2001 with 70.4 of Purchasing Power Standards58 to 81.9 forecasted for the year 2008. Real GDP growth rate increases every year as well, in the past years even enormously, the years 2008 and 2009 are however predicted to show significant slow-down in the growth rate. This is according to a survey applied by Eurostat agency going to be mirrored also in gross value added59 in the construction industry where growth rate has experienced a slight slow-down in comparison to previous years. Average gross annual earnings as well as Total Household Consumption Expenditure are growing as FIG. 10 shows.

FIG. 10 Average Gross Annual Earnings and Total Household Consumption Expenditure60




Year

2006


2005

2004


2003

2002


2001

2000


1999

1998


1997

1996


Proportion of GDP in %

2006


2005

2004


2003

2002


ECU/EUR

Year



Resource: Eurostat, Average Gross Annual Earnings; Total Household Consumption Expenditure
The above mentioned data could be positive for construction industry because having higher annual earnings means to invest more into residential and non-residential buildings and also growing consumption of households predicts higher demand, we must however compare them with other economy indicators of the Czech Republic. Basic data on the economic development of the Czech Republic is stated TAB. 25 below. Even though GDP, both per capita and percentually, is constantly growing, building production revenues seem to have reached their peak in 2006. The total of the building production revenues in 2007, despite a growing inflation rate and much higher prices than in the previous year, was more than 9 percentage points lower and predicted slow-down in this field of industry.

TAB. 25 Basic Data of The Czech Economy



Real economy indicators

2004

2005

2006

2007

GDP

mld. CZK, c.p.

2 814,8

2 987,7

3 231,6

3 557,7

GDP per capita

CZK/inhab.,c.p.

275 770

291 938

314 765

344 644

GDP

%, r/r, real

4,5

6,4

6,4

6,5

Building production –revenues

%, r/r, real

4,5

3,7

13,8

4,1

Services – revenues

%, r/r, real

3,2

3,0

5,0

7,0

Inflation rate

%, r/r, average

2,8

1,9

2,5

2,8

Industry production prices

%, r/r, average

5,7

3,0

1,6

4,1

Building production prices

%, r/r, average

3,7

3,0

2,9

4,1

Market services prices

%, r/r, average

2,3

-0,3

3,3

1,6

Resource: Czech Statistical Office, Real Economy Indicators
Here are two contradictory streams, one promissing for the industry, the other one rather sceptical. We see the explanation in restructuring of expenses from those oriented towards constructions of accomodation to those covering food and energies. This economical situation represents threat to building industry since it does not allow the demand for construction products to flourish and/or makes investors cut off investments and look for cheaper solutions. However we can also believe that investors will prefer investing into longlasting materials with better services saving them additional cost and will be forced to consider thoroughly all risks when choosing cheaper materials. And this is opportunity for a company operating with best services and good materials.

7.1.3 Social Environment


The total population of the Czech Republic has been growing constantly from the year 2003 starting at 10 203 269 and having so far reached 10 381 130 (in the year 2008). It is highly probable, however, that this progress will experience a change since population projections made by Eurostat agency predict constant decrease in the next 40 years, so that in the year 2050 the Czech Republic may not have even 9 million inhabitants.
When considering the living conditions of people in the Czech Republic there are many opportunities for the building industry as a whole since more than half of Czechs live in an appartment house and more than 60% have accomodation which was built before 1990. Above this also 23% of the inhabitants of the Czech republic in average of all classes live in rented accomodation. (see TAB. 26) Old houses, mainly appartment houses, are expected to be perceived as insufficient for current potential investors into new accomodation. Good conditions in the social field present also strong age-groups becoming rapidly independent, wealthier and willing to live in their own accomodation.

TAB. 26 Households Total by Net Money Income per Person - Deciles - Housing Characteristics



 

Net money income (in CZK)
















lowest 10%

second 10%

third 10%

fourth 10%

fifth 10%

sixth 10%

seventh 10%

eighth 10%

ninth 10%

highest 10%

Number of households

402 994

402 845

403 033

402 460

402 610

402 284

403 435

402 740

402 769

402 501

Detached, semi-detached house

39,2

44,5

45,2

47,6

46,4

45,2

46,7

42,8

39,1

34,4

Apartment house

60,0

55,0

54,2

51,2

52,3

54,1

52,7

56,7

60,5

65,3

Residence

- before 2000



73,4

80,6

85,3

88,9

88,3

90,1

88,1

84,3

77,6

71,4

- after 2000

26,6

19,4

14,7

11,1

11,7

9,9

11,9

15,7

22,4

28,6

Own accomodation

45,4

57,4

57,0

62,1

60,6

61,4

64,3

63,6

58,6

56,1

Rented or others

54,6

42,6

43,0

37,1

39,4

38,6

35,7

36,4

41,4

43,9

Resource: adapted according to the Czech Statistical Office
Growth of population in the Czech Republic as well as coming of baby-boomers from the 70´s are signs of opportunities for construction companies, mainly for those who will be able to address these technically better equipped people, i.e. mainly per internet. Also TAB. 26 offers opportunity in form of a large number of people living in rented accomodation and those living in residences older than 8 years.

7.1.4 Technology


Strong competition in the field of the building industry is heavily influenced by the technical status quo of the industry. New materials mostly with the attribute of being „environmentally-friendly“ are emerging and are driving traditional materials out. This wide range of materials brings also into this so far very conservative industry branch the appearance of a well-known term „frustrated by over-choice“. All persons concerned are presented with many options with very similar physical features, differing mostly only in appearance (even though today´s producers are able to manufacture one material resembling another) and in price. These conditions seem to polarize customers into two main groups – innovators and conservatives. While the first mentioned are interested particularly in hi-tec products, those latter group referenced tend to evaluate products according to their prices. Rapid technical changes make wholesare more dependent on their suppliers, which means having to wait for the strategy to be chosen by the supplier when deciding how best to satisfy his customers.
Another important characteristics concerning technical environment is the fact that the Czech republic joined the European Union. Even though this fact might seem to be more of a political or economic argument, the technological environment benefited from this membership more than ever expected. The Czech market has since that time been influenced by new technologies coming from western countries as well as new building methods. Also people deciding on materials to be used for a specific building have broadened their view and became more demanding in their sense of high quality. This process started after 1990 but was even more boosted by the above mentioned event.
The threat posed through technology is caused by coming of new and cheap substitutes to traditional materials and allowing so new potential competitors to entry the industry. Another problem of a quickly developing technology are high cost in order to keep pace with competitors – this could also became a threat for the company. Opportunity can be seen in shortening time of assembly, in other words saving time of investors through quicker realisation.
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