Strategic Marketing Management: Case Study of The Compass Group’s Inc.

Mission statement

The Compass Group’s mission is “to assist the company’s clients in accomplishing their financial objectives” (Cleeland 2004 p 16). The company adopts a group approach whereby there are attorneys who help in ensuring that the customers get maximum assistance to meet their demands. More over, the company has adopted strategies to form alliances with other similar companies that share a common objective in order to ensure that the services offered to the customers meet the current market standards (p 22).

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Financial summary

From the company’s records, it is clear that it has managed to maintain an average turnover per year of £m 6,927 for the last five years. The profits before tax have been on an average of £m 387 per year. The Earnings per Share have been on an average of 14.81p per share while the dividends per share have been 8p per share.

Market View

According to Compass Group (2009 p 12), the company is usually focused on the outsourcing market in food services on contract basis. In combination to the food services, the company offers complementary products depending on consumer needs. It targets markets in the countries that have a promising future in terms of economic growth and market expansion. On the other hand, the marketing strategy narrows down to the financial sectors that have a great potential for marketing its products. According to the company’s estimates, the entire food services market hit the £150 billion mark last year, with less than 50% food services being outsourced. The estimates further indicated that the annual growth of this market is 5% (High Beam Research 2001 p 6). This is an indicator of fast growth, which highlights the company’s prospects in the food services market.

The company has adopted a positioning strategy which enables it to offer its services in different sectors and also sell its services worldwide. This is a major strategy that has been essential in terms of monitoring the changes occurring in the market whereby the upcoming opportunities are utilized maximally. On the other hand, the company has been able to establish partnerships with most of the consumers of its products. This partnership has been significant in the efforts to market its products since the partners allow the company to make use of their amenities for the purpose of offering services locally. This enables the management to target the consumers in the sense that services are offered depending on the local demand. This means that assumptions of the consumers needs by the management are minimal since they get a direct solution to their needs as a result of their direct enquiries.

These strategies help in meeting the consumers directly and taking their views in regard to how they would like the services to be offered. The consumers meet the company’s representatives in a range of institutions such as schools, hospitals and such places where it is easy to gain access to a large number of consumers. The use of such facilities has enabled the company to expand its market share and hence an increased turnover. While moving to the facilities where consumers are found, the company ensures that the quality of products is maintained in order to ensure that consumers are satisfied. It offers the same quality products as those in the urban supermarkets and food shops. This strategy is appreciated by consumers since it is cost saving for they do not have to travel to urban centers to make a purchase. The organization has adopted innovativeness which has been effective in ensuring that the food services offered by the organization are of desirable quality. This is enhanced through branding (Andrews 1987 p 45).

In order to expand the consumer base, the company has designed certain models that are significant in establishing contracts with those who sell the services on their behalf. These function as the organization’s outlets. Their contract agreement with the company usually differs depending on the manner in which the product is offered. In case the contractor is selling the products at a subsidized price, the company pays the operating expenditures, whose repayment is negotiated with the contractor and charged later on. This cost is referred to as management fee. If there are no subsidies offered, the contractor is charged a fixed price for the services dealt with. This price usually varies depending on the consumer dynamics.    While the company is contracting, it has the mandate to determine the prices of the services that the contractor may put on offer in order to ensure that losses do not occur. The company offers some compensation to the contractor for using their facilities. This is mainly practiced in the entertainment sector (Los Angeles Times 1994 p 13).

SWOT Analysis

Strengths

The organization is a major provider of services globally as well as food items. Services include workplace organization while food items include as simple as beverage products such as coffee. The organization has a number of staffs who are experienced in virtually every sector in which it offers products and services. This enables it to take advantage of many opportunities that arise in the food and services industry. For example, there are experts in organizing cultural events, there are workers who are capable of offering quality food services, and others are perfect in offering cleaning services amongst a wide range of services. This is a strong aspect of marketing since the company can take advantage of any available opportunity.

Opportunities

Few industries have adopted the strategy whereby the organization is competent in almost all the sectors of the food services business. There are opportunities for offering these services in industries, offices and almost in all workplace settings. More over, the organization is competent in the distribution of its products and services through its clients who are distributed globally. This makes it possible for it to offer effective services even in foreign countries. On the other hand, the many years that the organization has been in operation has helped in building consumers’ confidence thereby maintaining a strong market share. Consumers also understand that they can get complementary products and services on choosing this company. Those who require such kind of product mix always prefer the organization (Compass Group 2009 p 26).

Weaknesses

There are not many instances that indicate weaknesses in the organization apart from a few that usually face organizations in general, such as the ability to maintain highly qualified professionals who require high salaries than the organization can afford within its budget. The major weakness is the involvement in various contracting scandals for example the scandal in which its foreign subsidiary was involved in Liberia in the UN peace keeping mission in 2006, and the scandal of Iraq where again the US government was charged unnecessary high prices in the provision of services to soldiers in Iraq in 2003. The two scandals were carried out by Eurest, which is one of the company’s subsidiaries (Compass Group 2009 p 31).

Threats

Threats are also not many, and they are general to any other company offering similar services. These include the current financial crisis that has led to the collapse of many industries and a reduction of consumers’ income due to loss of jobs. These may affect the level of consumption of the organization’s products. However, it has not had adverse impacts on the organization’s profitability. There are minimal threats from competitors who may decide to imitate the organization’s offerings. This is because the products and services offered are of superior quality and are consumer oriented (Compass Group 2009 p 37).

Assumptions

The organization uses assumptions in developing its financial reports. These are useful in determining the policies of the organization. The assumptions are made depending on past occurrences in the organization’s history. These are usually risky in regard to the face value of the assets. It makes assumptions in regard to the income taxes whereby the organization has to deal with global tax changes due to its world wide operations, good will whereby the company is faced with the task of assessing whether good will has undergone any depreciation as stipulated in the policies of accounting and also the post employment compensation whereby the organization has to make assumptions in regard to the policy of annual increment of the benefit schemes (Cleeland 2004 p 23).

Marketing objectives and strategies

The organization’s marketing objectives are mainly focused on ensuring that shareholders and consumers are given satisfactory value by ensuring that they get the maximum of what they pay for. In order to achieve this, it ensures that it maintains a stable growth in regard to the markets that it has chosen to venture in. The organization ensures that they target prospective markets for their products and services, which are significant in enhancing its growth in a global perspective. This is enhanced through strengthening provision of these services and products on contract basis globally, mainly in the economic sectors that are identified as promising. On the other hand, the clients who undertake the contracts for services provision are selected carefully in order to ensure that only those who are ready to provide the services at relatively affordable costs to the consumers are chosen. Moreover, it is also ascertained that these providers are capable of offering the best quality products and services (Cleeland 2004 p 26).

The organization has set up a worldwide performance structure which enables it to maintain a powerful culture of provision of products and services. Its performance is driven by the contractor’s ability to market the organization’s products and the sales volume, the ability of consumers to purchase the products and the prevailing market prices for food. It also ensures that it has a strong corporate culture as well as profound social responsibility in all the organization’s operations. This includes workplace and environmental safety observance and good organizational behavior. These are meant to help in maintaining a strong organizational strategy (Cleeland 2004 p 28).

Porter Five Force Analysis for the Company’s Market Attractiveness

The company enjoys the absence of the threat of products that the consumers can use as substitutes since it provides them mostly on the basis of demand. This ensures that products are unique and offered specifically to satisfy a particular need amongst the consumers. It also minimizes a possibility of consumers responding negatively to changes in prices due to lack of substitutes. The prices are also set with the consumers in mind, and the organization controls the prices that its contractors can charge (Porter 1980 p 131). This means that the costs charged on the products can not be a threat in regard to the consumers’ expectations. The products are usually highly differentiated due to the fact that the consumers are always in focus when it comes to their development. This improves their acceptance in the market.

Competitors are usually a major determinant of the performance in any organization. In a way, they compel a business to improve the quality of its products. This field is profitable, which is a major factor that attracts competitors in the business (p 137). However, the organization has already established a strong relationship with its customers and therefore there is no threat in regard to competitors. It has a unique strategy whereby products are developed according to the demands of the consumers. Under such circumstances, it is usually difficult for competitors to imitate such products due to the variations. The only competition that may arise is a situation whereby the competitors may develop new strategies to encourage consumers to order services from them. This may not be a major threat since in the years that the company has been in operation; it has managed to attract many customers through offering quality products. More over, the company offers its products at a low price while maintaining profits, meaning that any company that may enter the market can not compete at that price without making losses.

In certain circumstances, companies may compete without necessarily lowering the prices of products. This usually succeeds through innovations whereby they differentiate their products in order to ensure that they introduce new commodities that are likely to catch the attention of consumers (Mintzberg and Waters 1985 p 71). However, this is not a threat since the company produces differentiated products that satisfy a wide range of consumer desires, meaning that other companies may end up producing the same products, but the organization’s history in regard to product quality may outdo the upcoming producers. The food and hospitality services industry continues to grow and therefore competitors might continue increasing. However, the strategy whereby the organization has established subsidiaries in many foreign countries is significant in countering this competition. Upcoming competitors usually find it difficult to enter in virtually any market that the company has established a strong consumer base. With its foreign subsidiaries, the organization is capable of performing better than competitors. Advertising expenses are usually not a major problem since the organization mainly depends on its popularity amongst its consumers. It is therefore able to minimize its advertising expenses, which enables it to reduce the cost of its products far below that of competitors.

Even though there are several upcoming industries offering the same services as the organization, customers sensitivity to prices is controlled in the sense that no other competitor at the moment may have the capability of offering the same services at low prices as Compass Group. The inability of similar companies to produce at a lower cost thereby reducing their product prices to attract customers is a major barrier to effective competition. The company therefore leads in the consumer preference with regard to product prices. The number of firms providing similar products is not high and therefore there is no possibility of firms competing for buyers. On the other hand, the firm offers distribution services and therefore does not depend on the same distribution channels as competitors.

Suppliers are usually a major determinant of the cost of the end product. The more they charge on raw materials, the higher the prices of products (Grant 1991 p 115). The firms that require supplies for the products in this industry are few; hence the suppliers can not unnecessarily raise the price of raw materials. In other words, the market for such supplies is low. Unless the number of firms offering such services increase to become more than the suppliers, it is not likely that the prices of raw materials will increase. The organizational culture on the other hand ensures that employees are contented with their works as well as compensation thereby ensuring that the organization does not face problems with personnel or labor unions like many firms in the industry do. All these factors enhance the competitiveness of the industry.

Due to the fact that the organization has grown to a large extent over the years, it works in the form of strategic business units. The management is usually focussed on maintaining these SBUs within the “leader”, as it is represented in the shell directional matrix. This is where the SBUs utilize many opportunities in the market, thereby maintaining the company’s competitiveness. The company tends to concentrates its resources towards the strategic business unit. These have been useful in ensuring that the company is competitive in all sectors. There are various Strategic Business Units which include; marketing research and product development units for food and drinks, information analysis unit, as well as catering services unit amongst others (David 2009 p 36). These have been useful in breaking down tasks, which would otherwise have been difficult for the organization to manage as one large department. Each unit has its own strategies of meeting its targets. These add up to the overall targeted objectives of the organization, a fact that has enabled it to be competitive in virtually all sectors.

 

The marketing environment is dynamic and changes keep on occurring. These changes are caused by external factors depending on the social changes as well as environmental factors. Technological advancement is also a major influence in regard to the operating environment of the business. As new technology emerges, new products are developed, and consumer behaviour changes. The financial market also influences the productivity of the business, especially when the market becomes unstable due to inflation, changes in consumer income due to economic crisis, changes in interest rates amongst others. In order for the organization to be competitive, it is important to keep track of the changes occurring in the marketing environment. This determines the destiny of an organization (Grant 1991 p 78).

Through the PESTEL analysis, the organization has been able to cope with the changes in the political domain. It operates internationally and therefore it benefits from the principles of the WTO. This means that political interference in the company’s operations may not be a major threat. Economic factors are the major threat to the organization’s expansion globally, for example during the current financial crisis; many companies have closed down leading to a reduction in consumers due to unemployment. Interest rates have also risen in the last 5 years, which is also attributed to the financial crisis. However, the company offers essential services and therefore it is likely to remain strong even under the crisis (Williamson et al 2003 p 62).

Social factors do not present a threat since people of all ages can make their own choice in regard to the organization’s products. More people on the other hand are increasingly willing to work and therefore provision of services can not be hampered by lack of personnel. Technological advancement on the other hand has led to the improvement of products and services, making the organization even more competitive. Global warming is an environmental factor that has led to an increase in the prices of raw materials for food production. This has led to a rise in the prices of food which is a major threat to the sales volume. However, this is a natural phenomenon and people understand that it has led to poor productivity of land and water which are the major source of raw materials for food stuffs. The legal framework is not a threat since the organization has strategies for fulfilling the requirements of the domestic and international laws in offering its services.

With an enabling environment as the one that the organization is presented with currently, the organization can become the leading multinational service provider. It has to make several assumptions which will enable it to develop future plans and objectives. In the first place, it has to be assumed that there will be no adverse changes in the marketing environment that will affect the organization’s competitiveness. The main objectives to be accomplished for the organization to become a leading multinational service provider include; expanding its consumer base abroad, improving its services far above those of competitors and maintaining highly qualified professionals to lead it to success (Williamson et al 2003 p 71).

In order to achieve this international status in service provision, several strategies to be employed include; investing more on marketing research, establishment of more foreign subsidiaries in the countries that will be identified to have a high potential for consumption of the company’s products, focusing on innovations that will improve on product differentiation and quality, and focusing on human resources in order to maintain professionals who are capable of improving the organization’s productivity. On the other hand, strategies to maintain the current consumers are significant while on the other hand trying to attract more. These can be maintained through offering attractive discounts while maintaining high standards of quality.

 

Fig. 1.1: Table representing the schedule of activities over a period of three years and their financial implications for Compass Group

Year Strategy Financial Implication
2010 Marketing research to establish the areas with high potential for consumption of the company’s products ·         Increased consumer base which translates to high turnover of more than £m 6,927 per year
Focusing on human resources in order to maintain the skilled workers who will help in the achievement of company goals ·         Increased expenditure on salaries and promotion of career development

·         Increased output and high turnover

·         Improved organizational competitiveness through innovation

2011 Assessment of the potential of foreign subsidiaries in marketing products ·         Expansion of foreign markets
Establishment of more foreign subsidiaries ·         Increased expenditure on establishment of facilities

·         Increased output and consumer base

 

2012 Evaluation of progress and improvement on the strategies that fail to accomplish the set goals, as well as more market research and establishment of subsidiaries ·         Extra monitoring costs and establishment of facilities

·         Increased output and higher turn over through the foreign subsidiaries

 

Bibliography

  1. Andrews K. 1987. The Concept of Corporate Strategy, 3RD edition, Richard D Irwin.
  2. Cleeland N. 2004. Outsourcing Firms Focus of Unions, Spartanburg,
  3. Compass Group 2009. Compass Group and First Data Introduce New Consumer Loyalty Program, Business Wire.
  4. David G. Compass Group Selects BravoSolution to Streamline Supply Management, Cygnus Business Media.
  5. Grant, R. M. 1991. The Resource-Based Theory of Competitive Advantage: Implications for Strategy Formulation. California Management Review, vol. 33, 3, pp. 114-136.
  6. High Beam Research 2001. Compass Group, Food & Drink Weekly.
  7. Los Angeles Times 1994. Flagstar to Sell Canteen to British Caterer – Mergers: Compass Group will pay $450 million for the food services and vending business, Spartanburg,
  8. Mintzberg, H., & Waters, J. 1985. Of Strategies, Deliberate and Emergent. Strategic Management Journal, vol. 6, pp. 257-272.
  9. Porter M 2007. Competitive Strategy: Techniques for Analyzing Industries and Competitors, Simon & Schuster.
  10. Williamson D., Cooke P., Jenkins W. and Moreton M. K. 2003. Strategic Management and Business Analysis, Butterworth-Heinemann.
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