Strategic Management Report

Page 1

Contents 1. Executive Summary 2. Cleaning Industry 3. Porter’s Five Forces 4. PESTEL Analysis 5. SWOT Analysis 6. VRIO Framework 7. Problem Identification (Opportunities) & Solutions 8. Success Measures 9. References

1


1. Executive Summary We live in a world which is changing rapidly and in this changing world, cleaning sector is getting bigger day by day. Mutlubiev is a home and office cleaning company which is well-known in the cleaning sector in Turkey. Their purpose is to clean customers’ houses and offices with professional, educated employees. Mutlubiev guarantees 100% customer satisfaction. Well trained staff are covered by industry-leading insurance to give the customer best service. The company offers affordable and optional cleaning services and according to recent customer needs. It is a professional cleaning service that customers can trust. Mutlubiev offers different options such as window cleaning, refrigerator or oven cleaning. Mutlubiev does everything to satisfy their customer demands. We identify some problems during the analysis of the company. Firstly, the company needs to convert its temporary advantage (personality tests) to a sustainable advantage. Furthermore, because of the possibility of imitation of other cleaning companies, some of the advantages may be temporary. Moreover, there is no doubt that environmental consciousness is drawing more attention than ever. It goes without saying that a great number of customers care about recycling and environmental problems recently. To be able to convert sources into a sustainable advantage, the company should emphasize their strengths by creating effective marketing strategies such as catchy ad campaigns which can help the company to increase customers by 10%. By changing their methods, Mutlubiev can start to clean walls again, they can make an additional 45.600TL each year. By purchasing environment-friendly steam cleaning machines, Mutlubiev can earn at least 4680TL yearly if used by 3 potential customers.

2


2. Current Situation and Facts of Cleaning Industry The ICA Group and World Federation of Building Service Contractors summarized the common global issues of the cleaning industry. According to their study; the tasks require low-skilled employees, making it accessible to people who do not possess a higher education and/or a decent work experience. Furthermore, it permits a team approach, which can provide a supportive work environment for new or inexperienced workers. Additionally, it only requires a modest capital investment. Nevertheless, these low barriers to entry make commercial cleaning an intensely competitive business. Given the low-skilled nature of the work and low barriers to entry, the industry is intensely competitive and yields modest profit margins. These factors keep wages low and tempt many contractors to use and exploit undocumented workers, a practice that persists in urban centers with large immigrant populations. About local cleaning industry Teshiad released an article: In order to ensure the desired development of the industry, the public administration should promote a number of measures. Industrial Cleaning Industry in Turkey is excluded from the current legal practices. In general, the industry is not supported by a regulatory or inspection at all. Also, to ensure effective and efficient service, companies should invest in technology and education. They should be competitive about their service quality before pricing strategy. In conclusion, R&D Newsletter of Ä°zmir Chamber of Commerce suggested that cleaning companies need to understand customer demands thoroughly and they should evaluate how to fulfill these demands with the least costly method and work on how to respond emergency requests of customers.

3


3. Porter’s Five Forces Threat of new entrants: HIGH There is an increasing number of new brands appearing on the market with similar prices. Government agencies can limit or even bar entry by demanding licenses and permits. National governments usually use tariffs and trade restrictions (anti-dumping rules, local content requirements, and quotas) but in this industry, entry barriers are relatively low and there are no regulations for the cleaning industry. Also, there is no consumer switching cost and zero capital requirements. Given the low-skilled nature of the work and low barriers to entry, the industry is intensely competitive and yields modest profit margins. Besides, none of the company names are well-known. Current companies may possess cost advantage but in the cleaning industry, all firms have an access to get the best and the cheapest raw materials. Currently, the market potential is attracting foreign players. As a result of the high construction activity and economic growth, establishing a cleaning firm is significantly expanding.

Bargaining power of suppliers: LOW Cleaning products are not differentiated, there are no costs of switching, therefore, cleaning companies have low bargaining power also, large amounts of substitute products are available in the market. Most of the materials are easy to find, consequently suppliers cannot increase prices, otherwise, they will lose market share. Suppliers do not demand an additional technology to produce chemical products. Accordingly, there is no threat of integration in the future.

Power of buyers: HIGH Customers are price sensitive, they can easily switch service providers, and they are pretty well informed about cleaning and average costs of service. There are few big players in cleaning sector and numerous cleaning service providers are available. Hiring an independent maid is common among customers due to lower fees. Cutting down prices burdens companies due to the complexity of the economic environment.

4


Threat of substitutes: MEDIUM As for substitutes, independent maids are available to the customers. Substitutes hold some advantages since they are more economical in comparison and, customers can trust them more if they are recommended by their acquaintances. Also, they don’t have any restrictions in cleaning compared to service providers. However, those employees cannot be as trustworthy and effective as Mutlubiev employees. Mutlubiev is doing a background research and conducting psychological tests before hiring someone. To increase efficiency, employees receive training after they are hired. Additionally, a crew can be requested for big houses and Mutlubiev provides its own cleaning products.

Competitive Rivalry: INTENSE Competitors are numerous in cleaning service industry and sizes of companies are equal. There are not any dominant players in the industry, brand loyalty is insignificant and the services are undifferentiated. However, Mutlubiev has gained various competitive advantages in the market by doing background research and psychological tests before hiring someone, by being able to send cleaning crew to big houses and by providing cleaning products. Although, competitors are cheaper than Mutlubiev.

4. PESTEL Analysis Political & Legal Factors: Government regulations, legal issues, political stability, and laws are the most effective factors in the national cleaning industry.Constant changes in law can cause disruptions in this business sector, so the company has to consider employment laws such as minimum wages and hour limit that people allowed to work. If the minimum wage goes up, the company will lose profit as they will have to pay for higher wages. Political instability is one of the biggest barriers in Turkey for any business venture. Frequent strike or blockade activities slow down daily activities and pose a great threat for any type of business to handle their activities. Due to political movements and general crisis in the country, businesses will face jeopardizing situations.

5


Economic Factors: Economic factors include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions. Unstable economic conditions affect buying-power of customers as it gets worse, willingness to pay decreases; as a consequence, the services offered by the company will be more likely unwanted.

Social Factors: In the long run, people are becoming more independent and career-oriented. They are getting busy day by day. It’s almost impossible for most of the employed people in Turkey to maintain the tidiness and cleanliness of their house along with their everyday hectic schedule. Also, as mothers are entering the workforce, they are rather relieved if there is a viable alternative service which can help them to ensure safety and cleaning service of their house. All these social changes are increasing the scope of the business and motivate them to invest as much in order to make it more competitive.

Technologic Factors: Investing in different types of equipment can minimize working hours. Also, new tech attracts different customer segments, for instance, if a household is sensitive to chemical products vapor machines can be used for cleaning. However, it can be disadvantageous involving in technology, spending money and keeping up to date with the latest technology is inconvenient for the company.

Environmental Factors: Growing awareness of the potential impacts of climate change is transforming companies regarding the method of operations and the products they offer, both creating new markets and diminishing or destroying existing ones. New environmental regulations force businesses to watch out and invest in green products.

6


5. SWOT Analysis Strengths: The company provides package deals different from competitors which make Mutlubiev stand out as it is a unique selling point. Package deals are good options for customers. There is also another option for offices and larger areas. Mutlubiev provides Highquality service due to the training the cleaner receive and what and how the services are provided. It is very important to customize the cleaning service for the client. Mutlubiev offers extras such as window cleaning, refrigerator, and oven cleaning, ironing (15pieces or 30 pieces) and balcony cleaning. Employees go through psychological and personality tests before they hired. Mutlubiev trains its employees to understand the expectations of their clients. They will provide the needed tools to exceed these expectations. It is very vital to have a high level of customer service. If the customer is not satisfied with the cleaning, they have the right to have their money back. The service is tailored to each client’s home and lifestyle. Mutlubiev does everything to satisfy their customer demands and they have a system called ‘%100 satisfaction policy’. The goal is to achieve a 100% customer satisfaction rate. The main focus of the company is service quality. They are committed to providing their customers superior service above other companies currently in the industry.

Weaknesses: Many consumers use independent maids, it may be difficult to convince these consumers to switch to a service corporation. The company avoids doing wall cleaning- which is important for some customers, however, it can be risky and most of the employees want to avoid the task. There are countless opportunities for companies using environmentfriendly products and customers may prefer to choose such companies.

Opportunities: The cleaning industry is one of the fastest growing segments of Turkey. Although there are lots of competitors in the cleaning service space, there is a good reason for this competition; demand is high. Turkish building-cleaning services market soars 167% over 2007-2012, reaching TL14.8 billion. Industry profits rise by 165% over review period to TL7.8 billion. There is a significant increase in working population. Industry expected to increase by 141% over forecast period, reaching TL34.2 billion in 2018. It is 7


estimated that the cleaning industry generated total revenue of 39.6 billion Euros worldwide. Using green products are receiving a massive amount of public relations attention. Potential competition is already in the market. Such as temizlikyolda.com or evebirilazim.com.

Threats: The market size is considerable and growing with plenty of room for both small local and established national competitors. The state of the economy may sway customers to go with a cheaper competitor or view this service as a luxury. Other competitors started to differentiate themselves by using environment-friendly products. Green cleaning refers to using cleaning methods and products with environment-friendly ingredients and procedures which are designed to preserve human health and environment quality.

6. VRIO Framework for Hiring Maids, Providing Services and Receiving Feedback from Customers 1. During the hiring procedure, Mutlubiev is doing background research, psychological tests and gives training to the potential workers. Value: It is important for customers to trust someone that enters and works for hours in their house, which makes these procedures crucial for Mutlubiev and the customers. By providing these services, the company can guarantee that they’re sending safe and trustable cleaners to their houses. However on the other side, competitors are hiring people over recommendations, since they don’t know their background and psychological conditions, those employees cannot be as trustworthy as Mutlubiev’s employees. During the hiring process, competitors are hiring experienced workers, which cannot guarantee that this person has the accurate knowledge and skill to be efficient during the cleaning process. To be able to avoid this kind of problem, Mutlubiev is training each worker before hiring them.

8


Applying psychological test is a rare feature for Mutlubiev. Due to those hiring steps, Mutlubiev is easily eliminating the competitors. Therefore, this resource gave a temporary competitive advantage to the company.

2. Providing Service Value: When Mutlubiev provides service, they send cleaning crews. Other firms are just using one person who will clean to customer’s house. Thus, -

Cleaning team bring their own cleaning products with them. It creates value for

single and this feature does not exist within competitors. -

The cleaning team is more than 3 or 4 people so it makes easier to clean a house

and they finish the work much earlier in comparison to 1 cleaner. It makes a huge advantage for customers who do not leave the house an stay with the cleaner crew. It is a time saving for clients. They don’t have to wait a long time. For instance; some clients may not feel safe to call someone for cleaning so they don’t want to leave them alone. Mutlubiev aims to get rid of all of them. Thanks to their crew structure, they finish the work in a short time. -

The crew is up to 4 people and there is a team leader who inspects and controls the

organization and the quality of cleaning. Other three employees are responsible for cleaning the house properly. Team leader is helping to make this process neater and faster -

It is basically more efficient. Three cleaners are spending the same energy and

effort and it ensures the same quality of cleaning in each part of the house. Customers meet their requests and they are satisfied Rareness: Mutlubiev supplies cleaning products and this feature does not exist in competitors, so it creates rareness for the company.

9


Imitability: All these different features mentioned above can imitate easily by other competitors. Consequently, this resource gives a temporary competitive advantage to the company.

3. Receiving feedback from customers Value: Mutlubiev provides 100% customer satisfaction guarantee. If customers are not satisfied with the cleaning, they can get back their money and also, Mutlubiev will send another team for free to clean the house again. This creates a valuable source to the company. Rareness: Since competitors are providing the same services, this source is not rare. Therefore, this resource gives a competitive parity to the company.

7. Problem Identification (Opportunities) & Solutions 1. The company needs to convert its temporary advantage (personality tests) to a sustainable advantage. Creating a valuable and rare resource is not easy, thus, we want to prevent others from imitating this advantage. 2. Rivals of Mutlubiev provide wall-cleaning by charging an additional fee. Nevertheless, Mutlubiev had to eliminate this task since the company received numerous complaints after cleaning. Some customers are sensitive about this and they shift companies just for the wall-cleaning option. 3. Sending a cleaning crew instead of one maid is the most important difference of Mutlubiev. However, this feature can easily be copied, therefore, it only gives a temporary competitive advantage to the company. 4. Environmental consciousness consumers are increasing and recycling is a growing trend. Therefore, using a steam cleaning machine (non-chemical cleaning) is an important opportunity that the company can catch up.

10


Solutions: In advertisements, the structure of crew (4 maids and 1 supervisor) can be highlighted to ensure quicker and quality cleaning. The customers will be informed that cleaning process, which takes almost a whole day will be completed just in 3 hours. These three characteristics will especially be emphasized in advertisings to make customers think that this system only belongs to Mutlubiev.

By emphasizing company's recruitment method in ads, Mutlubiev can give an assurance to customers about the trustworthiness of employees. Customers will know that employees tested by the company beforehand can be a good reason to prefer Mutlubiev. Also to subdue competitors, customers will be induced with the information of the hiring procedure to ensure that it is only practiced by Mutlubiev.

The reason behind complaints was that stains were appearing on walls after cleaning. When we questioned several users, we learned that damp cloth creates stains and they have to clean walls with a dry cloth as well.Mutlubiev has to make changes in this process by assigning two people. One of the maids should clean walls first, and the other maid should use a dry cloth after.

Mutlubiev can purchase steam cleaning machines. These machines can be purchased at reasonable prices. Consequently, the company will be able to offer a steam cleaning alternative. This allows Mutlubiev to reach environmentally sensitive customers and people who have an allergy to chemical products.

11


8. Success Measures 1. Advertising Psychologic tests process and sending cleaning crew instead of one maid will be emphasized in advertisements. The company can gain market share by using this competitive advantage and with that, customer rate will be increased by %10. 2. Wall-Cleaning Mutlubiev approximately cleans 100 houses in one month. If the company includes wallcleaning as an extra service, we estimated that half of Mutlubiev’s customers will use it. The average wall-cleaning fee is 40TL, and if 50 customers use this service, 2000TL of extra revenue (2000*12= 24000TL) will be earned. Every month potential customers of Mutlubiev change their decision because of wall cleaning service, the company misses five customers, just because wall-cleaning service is not offered. At least, 160 TL (120TL house cleaning + 40TL wall cleaning) will be earned from one customer if Mutlubiev includes this extra service. The company will earn 5*160= 1800 in a month and 21.600 TL in one year as extra revenue. 3. Steam Cleaning Machine: Steam cleaning method is attracting customers who have allergies, roughly, 3 customers will be added if they use machines. For steam cleaning, Mutlubiev must purchase 2 steam machines (230 per machine). The total cost is 460TL, however, there will be a decrease in detergent usage, 10*3= 30, and 360TL revenue will be gained in a month. At least, 4320TL revenue is earned from 3 customers in a year, with steam machines and a decrease in detergent costs 4320TL and the amount will be enhanced to 4680TL.

12


9. References 'Temizlik Ve Hizmet Sektörüne Bakış... - Halkla İlişkiler İletişim Platformu. N.p., 2015. Web. 23 Nov. 2015. 'TESHİAD 30 Milyar Dolarlık Ortadoğu Pazarına Giriyor! - Sabah Gazetesi'. N.p., 2015. Web. 23 Nov. 2015. The Worldwide Cleaning Industry. 1st ed. London: World Federation of Building Service Contractors, 2010. Print. BAŞLANGIÇ, Beril. Temizlik Sektörünün Genel Degerlendirilmesi. 1st ed. İzmir: İzmir Ticaret Odası - AR&GE BÜLTEN, 2007. Print. Mumcular, Zafer. 'Endüstriyel Temizlik Sektörü Dünü, Bu Günü, Yarını…'. Teshiad.org.tr. N.p., 2014. Web. 23 Nov. 2015. Euromonitor.com,. 'Building-Cleaning Services In Turkey: ISIC 7493'. N.p., 2015. Web. 24 Nov. 2015.

13


Turn static files into dynamic content formats.

Create a flipbook
Issuu converts static files into: digital portfolios, online yearbooks, online catalogs, digital photo albums and more. Sign up and create your flipbook.