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Strategic Management and Decision Making Case Study: Plumbing Company

10794 words (43 pages) Dissertation

10th Dec 2019 Dissertation Reference this

Tags: ManagementBusiness Strategy

Table of Contents

1. Executive Summary…………………………………………………………………………….6

2. Company………………….…………………………………………………………………………..7

2.1   History and Evolution…………….………………………………………………….7

2.2   Mission and Major Goals…………………………………………………………….8

2.2.1. & 2.2.2. Mission Statement………………………………………………………9

2.2.3. Current Long-Term Objectives……………………….………………………….9

2.3   Current Strategies……………………………………………………………………10

2.3.1. Corporate-Level Strategies……………………………………………………..10

2.3.2. Competitive/Business-Level Strategies…………………………………………10

2.2.3. Functional……………………………………………………………….………11

2.4   Strategic Consistency..……………..……………………………………………….11

3. Competitive Environment.…………………………………………………………….………11

3.1   Industry Definition……….………………………………………………………….11

3.2   Relevant Trends Assessment………………………………….……………………13

3.2.1. Economic……………………………………………………………………….13

3.2.2. Political-Legal…………………………………………………………………..13

3.2.3. Socio-Cultural…………………………………………………………………..14

3.2.4. Technological………………………….………………………………………..15

3.2.5. Competitive……………………………………………………………………..16

3.3   Analysis of Company’s Competitive Environment..……………………………….16

3.3.1. Rivalry Among Competing Firms………………………………………………17

3.3.2. Potential Entry of New Competitors…………………………………………….17

3.3.3. Potential Development of Substitute Products………………………………….18

3.3.4. Bargaining Power of Suppliers…………………………………………….……18

3.3.5. Bargaining Power of Consumers……………………………….………………19

3.4   Challenges Facing the Industry.…………………………………..……………………19

3.4.1.-3.4.3. Ethics, Laws, and Social Responsibility………………………………….19

3.5   External Analysis (Opportunities and Threats)…………..…………………………20

3.5.1. External Factor Evaluation (EFE) Matrix……………………………………….20

3.5.2. Analysis of Key External Factors………………………………..……………..21

3.5.3. Competitive Profile Matrix (CPM)…………………………………………………………….21

3.5.3.1. Discussion of the Choice of Competitors……………………………….21

3.5.3.2. Analysis of Key Success Factors………………………….…………….22

4. Internal Strengths and Weaknesses……………………………………………………………23

4.1   Internal Factor Evaluation (IFE) Matrix…………….………………………………23

4.2   Financial Analysis of the Firm………………………………………………………24

4.3   Analysis of Key Internal Factor………….…………………………………………26

5. SWOT Analysis/Assessment of Alternatives…………………………………………………26

5.1   SO Strategies………………………………………………………………………..26

5.2   WO Strategies…….………..……………………………………………………….27

5.3   ST Strategies…..…….………………………………………………………………27

5.4   WT Strategies……..………………………………………………………………..27

5.5   SPACE Matrix……….……………………………………………………………..28

6. Recommendations………………………………………………………………………………29

6.1   Recommendation #1………………….……………………………………………..29

6.1.1. Financial Impact……………….………………………………………………..30

6.1.2. Cost/Benefit Analysis…………………………………………………………..31

6.2   Recommendation #2………………..………………………………………………32

6.2.1. Financial Impact………………………………………………….……………..32

6.2.2. Cost/Benefit Analysis…………………………………………………………..33

6.3   Recommendation #3………………..………………………………………………34

6.3.1. Financial Impact………………………………………………………………..34

6.3.2. Cost/Benefit Analysis…………………………………………………………..35

6.4   Quantitative Strategic Positioning Matrix (QSPM)…………………………………36

7. Implementation.………………………………………………………………….……………37

7.1   Implementation Steps (7.1.1.-7.1.6.)………………….…………………………….37

Recommendation 1: 25 mile, Regional Social Media Advertising Campaign………..37

Recommendation 2: Develop Cross-Training Program………………………………..39

Recommendation 3: Bundle Products and Services………………….……………….40

7.2   Necessary Changes…………………………………………………………………41

7.2.1. Structural…………………………..……………………………………………41

7.2.2. Cultural………………………………………………………………………….41

8. Evaluations……………………………………………………………………………………42

8.1   Recommendation #1…………………………………………………………………42

8.1.1. Evaluation Measure 1…………………………………………………………..42

8.1.2. Evaluation Measure 2………………………….……………………………….42

8.2   Recommendation #2………..………………………………………………………42

8.2.1. Evaluation Measure 1…………………………………………………………..42

8.2.2. Evaluation Measure 2…………….…………………………………………….43

8.3   Recommendation #3………………………………………………….……………..43

8.3.1. Evaluation Measure 1…………………………………………………………..43

8.2.2. Evaluation Measure 2……………………………………………………………43

References….……………………………….…………………………………………………….44

1         Executive Summary

Aqua plumbing and Air has been in business since 1974. The company was founded and created by John Miller, who is now retired, as a plumbing business. After 22 years of operation, Aqua expanded their services to include plumbing, heating, and air conditioning. Within another few years, Aqua added electrical and water treatment services. Aqua has grown to be one of the most well-known and trusted plumbers, HVAC, and electricians in the Sarasota/Bradenton and surrounding areas. Aqua is still a small company, with only 150 employees, and strives on building strong customer relationships and conquering the local industry.

Although Aqua has been a local industry leader for over 40 years, there is a lack of crossover in services for individual customers. Having a diverse range of services is great for Aqua, but the real issue arises when each customer is choosing to have all of their home services done. Some customers do not think of Aqua for each service, because they are not aware of all the services that Aqua offers. Our goal is to improve cross marketing for the different services provided by Aqua and to enhance customer knowledge on all of Aqua’s services. In order to enhance the awareness of services provided by Aqua, it begins with employee knowledge and comfortability. We need to make sure employees have the current, correct knowledge and feel comfortable talking to customers about Aqua’s different services. Then we need to analyze compensation programs and training, and find a way to ensure customers hear about all the services that Aqua provides.

Throughout careful consideration and collaboration we identified internal strengths and weaknesses, and external opportunities and threats for Aqua in their industry. We gathered information about Aqua’s competitors and the industry that Aqua operates in. From here, we were able to create an IFE and EFE matrix, and conduct a SWOT analysis. We identified attractive alternatives from SO, WO, ST, and WT strategies for Aqua. Based off our findings, we developed three reasonable recommendations to improve Aqua’s cross marketing.

Our first recommendation is to develop and launch a 25 mile, regional social media advertising campaign (W1, W10, T8, T9). Second, we recommend to develop cross-training program with incentives for completion among Aqua staff (W2, S10, T4, T5). Last, we recommend to bundle Aqua’s products and services together (S10, T2, T3, W1). Once Aqua implements our recommendations, the public should recognize Aqua as a company that performs all of the following services: residential and commercial plumbing, water treatment, HVAC, and electrical. In order to ensure the public is aware of all of their services, Aqua can question all of their new customers to determine how they heard about Aqua and what knowledge they have about Aqua’s services.

2       The company

 

2.1. History and Evolution

In 1974, Aqua was created and only offered plumbing services. 22 years later, in 1996, Aqua expanded from just plumbing services to plumbing, heating, and air conditioning services. In 2016, the founder John Miller retired, and two long-term employees, Chuck Jacobson and Skip Santon became co-owners of Aqua. Since 2017, there are more than 75 service vehicles proudly serving the Sarasota and Manatee areas with residential and commercial plumbing, water treatment, HVAC, and electrical services.  Aqua is affiliated with the industry’s top organizations nationally and locally. Just to name a few, Better Business Bureau Accredited, Ask the Seal, Business Ethics Alliance, Carrier Factory Authorized Dealer, Water Quality Association, Rotary Club, PHCC, MACCA, and The Greater Sarasota Chamber of Commerce.

Aqua is located in Sarasota, just east of I-75 on Fruitville Road. Aqua currently serves the Sarasota, Bradenton, and surrounding areas including: Sarasota, Lakewood Ranch, University Park, Bradenton, Siesta Key, Longboat Key, Venice, Manatee and surrounding areas that need commercial and residential plumbing, water treatment, HVAC and electrical services.

Aqua offers several services including: commercial and residential plumbing, water treatment, HVAC, and electrical. Throughout all the different departments, Aqua Plumbing and Air employs roughly 150 people. Each department has maintenance technicians, residential consultants, four levels of sales representatives, and call dispatchers. Aqua has partnered with the following companies to be able to install and provide plumbing products for customers: American Water Heaters, Kohler, Insinkerator, Seisco, Moen, Gerber, BioOne, Rheem, and AO Smith. Aqua provides the following Carrier air condition and heating products by being a factory authorized dealer: air conditioners and heat pumps, boilers, ductless systems, fan and evaporator coils, furnaces, geothermal heat pumps, indoor air quality, packaged products, thermostats, and controls.

2.2. Mission and Major Goals

Aqua does not have a mission statement established, however, Aqua follows a set of values as their guideline for decision making. Aqua’s set of values is a mnemonic device: Accountability Quality Uncompromising service Assurance and trust. Although thankfulness is not included in Aqua’s set of values, Aqua is very thankful for all of its customers. Aqua’s major goal is not necessarily to expand into other areas, but rather to continue to build wonderful customer relationships.

2.2.1 & 2.2.2 Mission Statement

“Our mission is to provide customers (1) in the Sarasota, Bradenton, and southwest Florida area (3) with quality products and uncompromising services of commercial and residential plumbing, water treatment, HVAC and/or electrical services (2). Our experienced and knowledgeable employees (9) are always up to date on the newest technology in our industry (4) and strive for 100% customer satisfaction (7). All of our affordable staff are courteous, uniformed professional who are bonded and fully insured for your protection (6) and strive to provide the lowest prices possible with the highest quality service in the area (5). We offer the best products for our customer and environment, so we can build customer relationships with repeat customers for all of our services (8). This is how we became the area’s most trusted name since 1974.”

2.2.3. Current Long-Term Objectives

  1. In two years, Aqua would like to employ an attorney in the building, because it costs more to continuously talk to an attorney that is not on payroll. Currently, Aqua talks to their attorney at least once a week, so employing an attorney in the building would be more effective for Aqua.
  2. Aqua has been in business for over forty years, and throughout expanding and adding services, Aqua has accumulated debt. Within five years, Aqua desires to be debt free.

 

2.3. Current Strategies

2.3.1. Corporate-Level Strategies

We are analyzing a relatively small company. Since Aqua is locally owned and operated, Aqua does not have any corporate-level strategies to follow.

2.3.2. Competitive/Business-Level Strategies

Aqua focuses more on Michael Porter’s strategy, type five: best value. Rather than following differentiation or cost leadership strategies, Aqua drives to offer the best value possible in the area. Compared to Aqua’s competitors, Aqua has the cheapest prices for the highest quality of service/products provided in the area.

Aqua is trying to save money in places they can afford. For example, all Aqua drivers are not allowed to be on the phone while driving to save money on insurance, and in the long run by reducing car accidents and lawsuits. Aqua’s first step of gaining repeat customers is building customer relationships. Aqua strives to build these relationships so the customers will call Aqua for their next needed service or refer Aqua to their friends and family. Once the customer is comfortable with Aqua’s service professional and services, the customer will call them back. Aqua makes the customer comfortable by no product/service ever be suggested unless the customer needs it. One of Aqua’s strategies to get customer to use Aqua for multiple services, is to have Aqua employees have an open view when visiting the customer’s house and telling the customer about all of their services offered. If a customer gets a service done that day that had nothing to do with the reason Aqua was called out for originally, the Aqua employee will receive a compensation bonus.

 

2.3.3. Functional

Aqua maintains up to date certification in all of their service areas. They currently have a pipeline system that they are implementing for customers to be able to utilize different services from them. Also, they are implementing an incentive program for their employees to encourage them to cross sell products/services from different departments.

2.4. Strategic Consistency

Aqua’s functional strategies are not as consistent with their desired outcome as they should be. Their functional strategies could be implemented better. There seems to be a lack of strategic consistency throughout the different departments that prevents the company from successfully cross marketing the different services to customers. The current functional strategies do not support the current long term goals. There are no corporate strategies because Aqua is not a corporation.

3         Competitive Environment

 

3.1. Industry Definition

The range of products Aqua offers would affiliate them to the plumbing, electrical, heating and air conditioning, and water treatment industries. Therefore, to accurately assess Aqua’s competitive environment, defining each individual industry is valuable.

Plumbing. This industry includes individual contractors who install and maintain plumbing fixtures, fittings, and equipment. Although they are commonly known for unclogging drains and fixing leaks, plumbers in the United States also design and install household pipes and drains, gas cooking and heating appliances, and bathroom venting systems. Contractors, like Aqua, also provide commercial and new construction plumbing services (Stivaros, 2017).

Electrical. This industry performs electrical wiring and installation, and installation and service to electrical equipment. This services can be performed as new work, additions, alterations, maintenance, or repairs (O’Hollaren, 2017).

Heat and Cooling. This industry includes businesses that install or service, heating, ventilation, air-condition (HVAC) and refrigeration equipment (Stivaros, 2017). Similar to the plumbing and electrical industries, HVAC services can be conducted on both residential and commercial buildings.

Residential Water Treatment. According to the industry report by IBISWorld, water treatment is division of the broad water supply and irrigation industry in the US. This industry is comprised of firms — often times government entities — who operate water treatment and water supply systems (Madigan, 2017). Although they are a private company, Aqua is a member of this industry in a sector that is becoming “increasingly prevalent” (Madigan, 2017). Therefore, by definition, Aqua finds a portion of their service attached to this industry.

Considering Aqua’s association among the industries above, the material presented will bring cohesion to the most important elements of each industry into one collective competitive environment.

3.2. Relevant Trends Assessment

There are many forces that influence business for Aqua. First, the temperature of Florida creates a need for constant air conditioning, which also means that there is a consistent need for air conditioning repairs year round. However, that also means that there is a lack of need for heating in Florida except for a couple weeks out of the year. Also, pollution has been a problem because it is contaminating water in Florida. This creates a need for the water treatment department.

3.2.1. Economic

In an assessment of Aqua’s external environment and the economic trends that affect the business, the most relevant trend is the economic growth due to population growth in Sarasota and Manatee counties. In an article by the Sarasota Herald Tribune, Le Coz (2016) references a report by the United States Census Bureau found that Sarasota-Bradenton has grown by an average rate of 3.7% from 2011 to 2015. Between 2014 and 2015 alone, Sarasota-Bradenton — the service are for Aqua — grew by nearly 20,000 residents.

This is a positive trend for Aqua because of the booming construction market. New residents, implies an increase in the building of new homes and businesses, as residents will need a place to live and work. This growth of economic activity, therefore, represents an opportunity for Aqua and their industry as most of their services are completed on residential and commercial structures.

 

3.2.2. Political-Legal

Environmental concerns are becoming the most relevant force affecting many industries. From auto manufacturers to Starbucks, industries are transforming the way they do business to be proactive on this pressing topic. The environmental force is so strong in fact, that it must be mentioned in the political-legal sphere for its influence in shaping national, state, and local policy, and from there, its influence on Aqua’s industry. Although all of Aqua’s services have required conformity with long standing state and local regulations, the pressure from environmental forces is causing an increasing trend of environmental laws and policy that are aimed at reducing the harmful impact of businesses on the environment.

For Aqua, however, this trend presents them with an opportunity. New policies and regulations could require new accreditations in addition to the current standards, therefore limiting the entry of competitors. For example, even the current HVAC industry has limitations for new franchises. According to a report from IBISWorld, the Environmental Protection Agency and the Clean Air Act, “impose liabilities on past and present owners of hazardous material…” who “face substantial fines or license revocation,” if they fail to comply (Stivaros, 2017).
3.2.3. Socio-Cultural

As already noted above, there are two socio-cultural trends in Aqua’s domestic environment that are so relevant they are also affecting political and economic factors — the demographic growth of Sarasota-Bradenton and the emphasis on environmental responsibility (Bonnell, 2015). These factors that represent the greatest opportunities for Aqua are discussed.

According to Emily Le Coz of the Sarasota Herald Tribune:

“People are moving in droves to the Sunshine State, fueling a substantial population boom reminiscent of the 1980 and ‘90s that picks up speed with every annual US Census update” (Coz, 2016).

This growth provides Aqua’s industry with a positive trend and opportunities for growth. Rich Doty, GIS coordinator and UF researcher, for example, says that one potential problem from this growth is access to abundant, clean water (Coz, 2016). For Aqua however, this could expand their market for residential water treatment services.  Emily Le Coz, also notes in her article for the Herald Tribune that, “A lot of people like the climate, and they want to get away from brutal winters.” Fortunately for Aqua, this also proves to be potential opportunity for more routine maintenance through their HVAC services.

Today, the trend toward environmental sustainability is stronger than ever. According to Ashlan Bonnell, “consumer attitudes toward sustainability are trending optimistically, reaching an all-time high” (Bonnell, 2015). For Aqua, their most notable presence in response to this trend is in their electrical services. In the following section we will discuss a way Aqua can capitalize on the “green” trend by utilizing a new technological trend.

3.2.4. Technological

Across Aqua’s industries, technological trends are medium to low. Generally, “the most common use of technology is being used in booking and referral services,” “computerization of residential and commercial buildings,” and “energy-efficient and smart HVAC systems (Stivaros, 2017). Fortunately, one of the ways Aqua can stay ahead of this trend is through the investigation of rainwater preservation systems. Rainwater preservation systems harvest rainwater to reuse for non-potable purposes. According to the plumbing industry report by online database IBISWorld, “Rainwater preservation systems are becoming a key area of growth for niche plumbing operators” (Stivaros, 2017).

 

3.2.5. Competitive

Unfortunately for Aqua, the biggest threat to the organization in the domestic environment is the heavy and increasing presence of competitors. The chief reason for this trend arises from employees for Aqua and other competing firms who learn the necessary skills to conduct business and then leave their firm in entrepreneurial pursuits. The Fact Finder tool by the US Census Bureau is helpful in understanding the weight of this force. The 2015 report of County Business Patterns reveal that in Sarasota and Manatee counties alone, 359 establishments are identified as being a part of the plumbing and HVAC industry; in 2014 the number was 342. This reveals that for the plumbing and HVAC contractors industry in Sarasota-Manatee County, there was a 5% increase in the number of competitors from 2014 to 2015.

Furthermore, industry reports from IBISWorld confirm for the plumbing, electrical, and HVAC industries that competition is “high” and either “steady” or “increasing.” One excerpt from the industry report on plumbing states, “Small-scale contractors…compete for a share of relatively narrow regional markets” (Stivaros, 2017). In the following section, one can gain a better understanding of the forces that affect the competitive market by study the environment using Porter’s Five Forces Model.

3.3. Analysis of the Company’s Competitive Environment

Analysis of the company’s competitive environment (Porter’s Five Forces Model):

The following section describes forces that affect a firm’s competitive environment. These forces were first described by Michael Porter and are ranked on a scale from high to low. This is helpful in evaluating Aqua’s competitive environment because they can provide insight for “developing strategies to gain a competitive advantage” (David, 2015).

3.3.1. Rivalry Among Competing Firms

For Aqua, rivalry among competing firms is high and increasing. As written above, the plumbing industry is comprised of mostly small contractors who battle for small shares in their markets and the same is true of electric and HVAC services. The leading causes of this force are the number of competing firms, the similarity in size of Aqua’s competitors, and the similarity between the products and services that are offered.

For example, a comparison between Aqua’s and Cool Today’s websites quickly reveal the similarities between the two companies. Aqua’s website features four links embedded in icons of the services they offer (Aquaplumbingsarasota.com, n.d.). Likewise, Cool Today’s site also shows three icons, characterizing their services, that you can click on to learn more (Cooltoday.com, n.d.).

3.3.2. Potential Entry of New Competitors

With rivalry among competing firms high, it is important to further analyze four other forces to determine how Aqua might gain a competitive advantage. Another important area to look at is the potential for entry of new competitors. For Aqua and other firms within their industry, there are few barriers preventing other establishments from starting up. As a result, potential entry of new competitors is high. Therefore, one can infer that this contributes to the increasing rivalry among firms in Aqua’s industry as well.

It is important to note however, that for Aqua, the barriers that do prevent other businesses from succeeding, such as customer satisfaction and certifications, favor older companies. According to research, customers are likely to hire companies whose services are rated as being higher in satisfaction. As the Plumbers in the US industry report says, “The principal basis for competition in this industry is an established reputation for delivering satisfactory service.” Likewise, the electrician industry report on IBISWorld states, “Electricians…primarily compete on the basis of price, reputation…relationships with customers…and experience of personnel” (O’Hollaren, 2017). Therefore, although few barriers of entry exist, unless competitors can offer better services or new products, they are unlikely to increase rivalry.

3.3.3. Potential Development of Substitute Products

As the old saying goes, “there is no substitute for hard work.” This saying reflects another force that influences the competitive market for Aqua — potential development of substitute products. For Aqua’s industry the potential for development of substitute products is low. The major reason for this is that even though the materials used in repair may differ from firm to firm the service itself does not change. For example, although a company may develop a new technology to repair leaking pipes, that does not change the nature of the service i.e. fixing a leak. Therefore, one can conclude that this force does not represent a heavy influence on the rivalry among competitors in Aqua’s industry.

3.3.4. Bargaining Power of Suppliers

For all the forces that affect competition among firms, bargaining power of suppliers appears to be the force that Aqua has the highest advantage in. The main reason for Aqua’s advantage in this area is their unique backward integration strategy to gain control of their plumbing supplies. Having an Aqua owned company in-house protects them from potential shortages of materials and also ensures all of their plumbing materials are compatible.

It is not only there plumbing sector that has low supplier bargaining power. In addition to their advantage in plumbing, Aqua also serves as an authorized Carrier air conditioning and heating product supplier. This gives Aqua an increased advantage over many of their competitors in terms of pricing and quality.

3.3.5. Bargaining Power of Consumers

Unfortunately for the industries Aqua is linked to, bargaining power of consumers as a force is high. The reasons are standard or undifferentiated products, and the ability for consumers to switch easily to competing firms. This is most easily recognized as the force underlying our strategic analysis. It is not difficult for a potential customer to conduct a quick internet search and choose from one of many service contractors for either their electrical, HVAC, or plumbing needs.

3.4. Challenges Facing the Industry

3.4.1.-3.4.3. Ethics, Laws, and Social Responsibility

In business, the biggest challenges often facing companies and industries are not problems with individual products but with organization or industry values. Companies today are expected to be transparent and honest, socially responsible, and acting in accordance with federal, state and local laws. Unfortunately, this does not always happen and even honest companies are associated with the dishonest firms as unethical, socially irresponsible, or worse corrupt for bad business practices. The biggest challenges to Aqua’s industry are unethical and socially irresponsible practices.

To address these challenges, Aqua’s values include a transparent statement of accountability, quality, and trust. Their website also boasts affiliation to 18 local and national associations including the Better Business Bureau, Business Ethics Alliance, Green Business Partners CAI, and Community Associations Institute, to name a few. In addition to these, Aqua also identifies and works to repair these challenges through modest and unadvertised involvement in community organizations and non-profits.

3.5. External Analysis (Opportunities and Threats)

3.5.1. External Factor Evaluation (EFE) Matrix

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3.5.2. Analysis of Key External Factors

We are focusing on helping Aqua Plumbing and Air gain effective cross-marketing for their different services that they provide. The external factors that we have identified are ones that could either help or hinder the possibility for successful cross-marketing. The opportunities show that there is plenty of need for every service that Aqua has to offer, which could help Aqua gain new customers. However, the main threat for Aqua is the fact that there is an abundance of similar competition that customers have to choose from. We will focus on maximizing the opportunities for Aqua, and overcoming the threats that affect Aqua’s cross-marketing.

3.5.3. Competitive Profile Matrix (CPM)

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3.5.3.1. Discussion of the Choice of Competitors

The competitors that we have chosen to evaluate are Cool Today, and Terry’s Plumbing and Air Conditioning. The reason that we have chosen these two competitors is because they both specialize in similar services that Aqua Plumbing and Air provides. Also, both of these competitors are competing in the same area as Aqua. This means that they are direct competitors for Aqua.

 

3.5.3.2. Analysis of Key Success Factors

One of the key success factors that Aqua has over its direct competitors is driver safety. Aqua prides itself on having drivers that do not use a phone at all while driving. There is a system in place that tracks each driver and stores all of the data from the route they drive to the speed that they drive. Also, Aqua has great customer service from their dispatchers to their mechanics that visit the customers at their homes. Next, the customers that do use the services from Aqua continue to use Aqua throughout their lives. Lastly, Aqua prices their services just right and do not want to overcharge customers. This builds a level of trust between the company and the customer. Other companies will take advantage of their customers in order to make a larger profit.

4       Internal Strengths and Weaknesses

4.1. Internal Factor Evaluation (IFE) Matrix

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4.2. Financial Analysis of the Firm

There is no way to directly compare Aqua to its competitors since private firms do not like to give away their financials, so we must compare Aqua to business and industry standards. The most relevant ratios will be described as follows.

The best way to compare a business with such standards is with financial ratios. The most notable liquidity ratios are the current ratio and quick ratio. The current ratio measures the ability of Aqua to pay its short and long-term debts; a score below 1 would indicate Aqua is unable to pay its debts if they came due at this point. The quick ratio measures Aqua’s ability to pay its short-term debts with its most liquid assets. Aqua has a current ratio of 2.09 indicating it is able to meet its short and long-term debts. The quick ratio also indicated Aqua is able to pay its short-term debts with a ratio of 1.18 indicating that Aqua has $1.18 of liquid assets for every $1 of current liabilities.

The debt-to-equity ratio measures leverage, the higher the ratio the more debt the company uses to fund operations. Aqua had a debt-to-equity ratio of 2.13, which is relativity normal for its industry. The inventory turnover measures how fast Aqua is selling its inventory, a higher the ratio indicates stronger sales. Aqua’s inventory turnover of 40 shows strong sales and quick product turnover. Return on Assets indicates how profitable Aqua is relative to their total assets; this ratio is highly subjective among different industries. Aqua currently has a ROA of 9%, which is slightly above average for their industry.

Overall Aqua is doing well financially in its industry and as a business in general.

Current ratios
12/31/16
Current Ratio 2.09
Quick Ratio 1.18
Total Debt-to-Total-Assets Ratio 1.66
Total Debt-to-Equity Ratio 2.13
Times-Interest-Earned Ratio 74
Inventory Turnover 40.00
Fixed Assets Turnover 9.30
Total Assets Turnover 5.97
Accounts Receivable Turnover 33
Average Collection Period 10.95
Gross Profit Margin % 49%
Operating Profit Margin % 37%
ROA % 9%
ROE % 12%

 

4.3. Analysis of key internal factors

The key internal factors of the company are comprised of the company’s strengths and weaknesses. The main situation that we plan to focus on is the fact that Aqua Plumbing and Air is having a difficult time cross-marketing for their different departments. The strengths that we have identified in the company have allowed us to take a look at what Aqua is doing currently that can help increase their cross-marketing. The weaknesses that we have identified are factors that are holding Aqua back from successfully having effective cross-marketing that actually gains customers for the different services that Aqua provides.

5       SWOT Analysis/Assessment of Alternatives

 

5.1. SO Strategies

  1. S9, O1 – Use current contracts with local governments to gain new contracts with commercial construction happening in the surrounding area.
  2. S5, O1 – Gain business from commercial and residential construction using connections from top industry associations.
  3. S7, O8 – Send personalized Cards to snow birds when they come down for the winter season.
  4. S7, O4 – Add new software and iPads to keep customer profiles all in sync.

 

 

5.2. WO Strategies

  1. W3, O4 – Use new technology advances to market product and services from in-house.
  2. W10, O4, O10 – Market through Social Media to target Millennials.
  3. W8, O4 – Communicate to employees about company news and events via Smartphones.
  4. W6, O4 – Use smartphones to send Reminders and checklist to employees.

5.3. ST Strategies

  1. S3, T1 – Reinforce safety policies to avoid accidents.
  2. S6, T5, – Maintain 24 hour service to stand out from competitors.
  3. S4, T1 – Maintain mechanic that is well trained.
  4. S5, T5 – Display connections of top industry associations.

5.4. WT Strategies

  1. W2, T6 – Create and maintain constant training opportunities for employees.
  2. W8, T4 – Use newsletters and fliers to keep employees informed.
  3. W10, T5 – Adapt a strong, clear mission and vision statement.
  4. W7, T8, T9 – Hire a marketing media specialist that has personal knowledge of the company.

5.5. SPACE Matrixhttps://lh4.googleusercontent.com/f2e-PoqU0epDKtVPghiQfFSx7LXXJQSDskFBUMKxkZ145DX8qexTP5UzvGJBV6JZGpjS6PtBhCj4k-_2JZLTahZtaqBCXJ8QBVWn4NThY73cdBCOyFWk-g6hHHMui22gsD9sdnnk

6       Recommendations

The following recommendations are strategy conclusions based on our analysis of Aqua Plumbing and Air. It is worth noting that in our conversations with Aqua, Skip, and his managers have given our team insight about their strategy to transition from an external marketing agency to hiring marketing personnel. Based on our analysis of Aqua, key indicators support this strategy as competitively advantageous. Therefore, in an effort to maintain the integrity of our analysis, that recommendation will not be included in the following section. However, since the analysis supports their proposed strategy, some recommendations will assume that Aqua implements the aforementioned plan.

6.1. Recommendation 1: 25 mile, Regional Social Media Advertising Campaign (S1, W1, W10, O10, T8, T9)

Our first recommendation is that Aqua develop and launch a 25 mile, regional social media advertising campaign. As defined above, the problem for Aqua that our analysis is trying to solve is a lack of crossover in services for individual customers. One glaring weakness in our analysis of Aqua’s internal environment contributing to this was the lack of unified marketing material that emphasized their ability to meet all home service needs of individual customers. A strategic social media marketing campaign helps solve this problem by communicating a clear and concise message to all social media users within Aqua’s service area.

 

 

 

6.1.1. Financial Impact

We believe creating a social media campaign, will benefit Aqua by bringing their customers awareness of all the services they offer. The benefits to Aqua with this strategy include the ability to control the financial impact of this strategy, and the ability to control distribution of the ad. According to FitSmallBusiness.com, “Facebook advertising cost can be anywhere from $0.16 to $1.00+ per click.” The range depends on a number of factors including industry, business size, and ad quality. For example, if Aqua launched a one-time Facebook ad for $10. The cost of this ad depends on the number of interactions with it. If 10 customers interact with the ad the cost per click (CPC) is $1.00. Therefore, this provides Aqua with the ability to control the financial impact of this strategy because they have control over when their ads run, what target they want to pursue (specific zip codes, or communities,) and the content of their ads. This is particularly advantageous when customers looking for service in this industry generally tend toward hiring the company that is first on their mind. Additionally, when compared to television advertising, social media advertising is approximately 10 times more affordable. One metric used in this measure is the cost per thousand impressions (CPM.) This measures the average cost for an advertising medium to reach 1000 people. According to LyfeMarketing.com, “Social media… is one of the only form of media that can expose you to more than 1000 for less than $3” (Traditional Media, n.d.).

https://lh6.googleusercontent.com/XdmGkHfm_zelkugb54Pmex1vf7pijuTOTTIlpoyXC-f1DMJ_bpi0zaOE5BE9i-vF2pqmzlmONnFRSQ9zI_NfGAVSMJxQeAgpUX0ZFRMsGnmTjCJbcmvNTFJZjgR5qu0N1K-03VC6

6.1.2. Cost/Benefit Analysis

COSTS. This will combine the cost of developing web content and graphic elements, estimated cost of advertising, and the time cost of ad management.

  • Developing Web Content and Graphic Elements. Estimated one-time cost between $50 and $2,500.
  • Advertising Budget. $200 to $1,500 per month. $10/ day reaches approximately 950-1,500 customers.
  • Employee Wages. Between $50,000 and $55,000 annually.

BENEFITS. This solution would offer lower advertising cost, increase customer awareness, flexible advertising schedule, and increased revenue.

  • Lower Cost Advertising. Social media advertising is, on average, 10 times more affordable than television advertising. Also avoids “peak time” advertising costs.
  • Increased Customer Awareness. Ability to define target customers with criteria such as, region, gender, age, education, and other data Facebook provides to advertisers.
  • Flexible Advertising Schedule. Choose to run your ad continuously or for a set time period. Facebook will not exceed your set budget.
  • Increased Revenue. Lowering advertising cost and increasing customer awareness will increase revenue.

6.2. Recommendation 2: Develop Cross-Training Program (W2, S10, T4, T5)

As written above, one of the challenges specific to organizations in the service industry is earning and maintaining customer trust. Often times, honest companies can be hindered by the dishonest actions of other service companies, such as when an auto mechanic advises a repair that isn’t needed. Since Aqua’s desire is to increase service-crossover for individual customers, honest employees who are untrained, may not feel comfortable making recommendations for other services. Therefore, it is vital that Aqua develop a cross training program to support their personnel and encourage service recommendations. Based on our IFE, implementing this recommendation would strengthen Aqua Plumbing and Air by addressing employee weaknesses in product knowledge. Our recommendation is that Aqua utilize an off-site training program like the Ultimate Technical Academy (UTA,) to train select employees who could consequently train Aqua’s remaining personnel.

6.2.1. Financial Impact

The financial impact of developing a cross-training program will include high initial cost but we believe it will pay long-term dividends through increased crossover in sales. First, there will be the cost of classes through UTA. UTA is privately owned and operated training school for service industry technicians. Their goal is to “create an elite group of top performing technicians through education and hands-on training” (Ultimatetechnician.com, n.d.). The following table shows all five-day classes offered and pricing.

Class Cost
Plumbing Service & Maintenance $1,397.00
Electricians Service & Maintenance $1,397.00
HVAC Service Courses $1,397.00

As a result of this investment in training, it would be advantageous for Aqua to capitalize on the employee’s training, by offering him/her an educator position at Aqua. This will be the second source of financial impact as the employee salary would fairly fall between $59,441 and $76,688 annually, according to data on Salary.com.

6.2.2. Cost/Benefit Analysis

COSTS. This will combine the total cost of training, the cost of employee salary, and potential threats.

  • Training at UTA. Individual classes cost $1,397.
  • Hotel Reservation for Training. Between $62 and $67 per night.
  • Airfare to Training. Price subject to current rates. Range between $200 and $600.
  • Employee Wages. Between $59,000 and $77,000 annually.
  • Employee Turnover. Risk of employee’s starting a competing business.

BENEFITS. This solution would offer lower long-term training cost, increased product knowledge, and increased revenue.

  • Lower Training Cost. Trained employee(s) can write training programs, conduct training and customize training to fit needs of Aqua.
  • Increased Product Knowledge. Aqua’s technicians gain education on products and services they do not specialize in.
  • Increased Revenue. Enhancing employee’s knowledge helps them to better identify and recommend necessary services, which increase revenue from crossover.

6.3. Recommendation 3: Bundle Products and Services (S10, T2, T3, W1)

Our final recommendation is based on our analysis of Aqua’s internal and external environment. Over almost 50 years, Aqua has built a reputation for being community focused because of its strong organizational values. This has earned Aqua brand loyalty among its customers, despite the lack of service crossover. Based on these facts, we think Aqua could increase crossover by capitalizing on customer loyalty and bundling their products and services. Another benefit of this strategy is that it is a proactive approach to the threat of competitors because it secures the customer before they need an emergency repair.

6.3.1. Financial Impact

An additional incentive with this recommendation, is its high return; bundling products and services has very little immediate cost associated with the change. Costs will include advertising the service bundle pricing, and lower selling cost of the bundle. However, it captures market share and revenue by acquiring customer contracts for a yearlong period.

 

 

6.3.2. Cost/Benefit Analysis

COSTS. This will combine the cost of advertising, and the cost of lower selling price.

  • Cost of Advertising. Advertising varies depending on medium. Television ads cost between $200 and $1,500, social media between $200 and $1500 per month.
  • Lower Sales Price. Aqua’s plumbing maintenance plan plus water treatment maintenance plan and HVAC maintenance plans total cost between $688 and $1,000 annually.

BENEFITS. This solution offers increased market share, greater customer loyalty, and increased service crossover.

  • Increased Market Share. Market share will increase from customers who shop services a la carte based on immediate needs.
  • Greater Customer Loyalty Aqua acquires customers for annual contracts, limiting the number of customers who switch to competitor services as needs arise.
  • Increased Service Crossover. Aqua strategically serves its annual contracts by providing all of their services to customers who purchase bundle maintenance.

 

 

 

 

 

 

 

 

6.4. Quantitative Strategic Positioning Matrix

https://lh6.googleusercontent.com/JCYZV8TLyFlcY0s955e-didQXE_SV3GXFgxeIne1Bhx3uzXWPEMurFUR-Y9wI-Z2g1txPIsmhePdblmAZRKOEz0FWqrwHesmJ_d3_boOaxWYX7NJ1aNYucXvcqlROO3FiwRuoAPi

https://lh4.googleusercontent.com/CTETJg05vnWryADKip9YlY8bxYsAKbLa6qRPjmuRRTs85pxqYGO56lkAntlsagMhqA-Pn1dzWdYd8IQHdec6AYQ3c9xvlaw36duuXjyqlZ-fruVD0YixRJPHCc_6wQrAjYprxBN3

https://lh5.googleusercontent.com/-syFMXhhM9esIgZu5AcZU5QmoiHl8rWy9tbBRWY2SF0zeFrhlb1LaTu9_I1HVu7yilYKcYqPe7o0NATbKFM9-Tz0n_TyZng-aY2vM8zlcTRJcuHSQ3bfMq-d5C0ZQ2lMK4pCFw4M

https://lh3.googleusercontent.com/rnBjeBnpwG7Ck7Kd00S3DMOd3tKYihFFiFThqVMDzRT2ZE8ACsVw6sTUd7-KlR7G-LUAEugWKjJztMUQ7iOOaU6Y20T_iMTB-gJ44vRaxnzR95u4fVUnHyC3J9j7XpEQfR9X-5BE

7       Implementation

 

7.1. Implementation Steps (7.1.1.-7.1.6.)

Each one of the recommendations will require different task and responsibilities from each department for them to be effectively carried out. However, not all departments will have a role to play in the implementation of all recommendations.

 

Recommendation 1: 25 mile, Regional Social Media Advertising Campaign

Recommendation one focuses on regional social media advertising efforts to convey a clear message of all services provided by Aqua Plumbing and Air. This strategic media marketing campaign will help the company broadcast their services to the utmost target market.

Management

The management team will focus on setting clear guidelines and objectives on which criteria will be advertised through the social media marketing campaign. These set guidelines will be passed down to the marketing department which will have the biggest role in carrying out this recommendation.

Marketing

The marketing department will have the main role in implementing the first recommendation. It plays a vital role in promoting the business and its mission to serve customers. Marketing serves as the face of a company in producing materials that represent the organization. So, the marketing department will be the ones that will have primary control in designing, researching, planning and executing the social media advertising campaign. They will research their target markets’ social media activity based on certain criteria such as age, gender, demographics etc. They will then plan and design an ad that will catch their desired market’s attention and their last role will be successfully putting the social media marketing campaign into place.

Financial/Accounting

The financial department will have a minimal role in the execution of the first recommendation, however its role is very important. They will be responsible of including this recommendation in the budget in order to determine if the company has enough money to advertise via social media.

Informations

The information systems department will be working hand in hand with the marketing and management department to manage the company’s data in regards to the social media advertising. They will also assist in making decisions based on the information and analysis they gather from weather or not the social media ad is effectively working.

Operations

The operations department will be impacted based on the increase of sales that the social media advertising will create.

Recommendation 2: Develop Cross-Training Program  

Recommendation two focuses on Aqua developing a cross training program that supports their personnel and encourage service recommendations. This recommendation will address employee weaknesses in product knowledge. Our recommendation is that Aqua utilize an off-site training program like the Ultimate Technical Academy (UTA,) to train select employees who could consequently train Aqua’s remaining personnel.

Management

In order to implement this recommendation Aqua’s top management will be responsible for interviewing and hiring the best possible candidate that will be willing to go through the training. This step is critical because the candidate that management chooses must also be willing to go to continuous training and train other employees on the materials on which they were trained on. Meaning they will be both the trainee and trainer.

Finance/Accounting

The finance department will be in charge of forming a payroll position for the educator position. They will also be responsible for generating a new budget that includes the training sessions and the payroll for the new position.

Human Resources

The human resources department will have the responsibility of conducting initial meetings, interviews and testing for the prospective employee. The results of this will then be handed down to management in efforts of choosing the best possible candidate for this position. They will also be responsible for employee relations, payroll information, benefits and training.

Operations

The operations department will oversee the development of the new Educator’s position. They will also be conducting quality assurance checks making sure the new position is functioning effectively and successfully.

Recommendation 3: Bundle Products and Services

The third recommendation would be put in place to potentially increase crossover by capitalizing on customer loyalty and bundling their products and services.

Management

Management’s would be tasked with deciding what services to bundle in order based on which combined services will generate the most increased revenue.

Marketing

The marketing department will be in charge of designing and executing promotional products and materials that will reach the most potential clientele. Dependent on how successfully they conduct their marketing efforts will determine how much increased sales the company can get from this promotional offer.

Finance/Accounting

The finance department will be impacted by the increase of sales that the bundling of products and services will generate.

Operations

Operations will be in charge of overseeing quality assurance making sure that all products and services are up to company standards.

 

7.2. Necessary Changes

Other changes may be required if all three recommendations are taken and all reliant on the fact if they are successfully implemented.

 

7.2.1. Structural

A very major structural change will be necessary if and when the new educator’s position is put into place. The current structure is that each department has maintenance technicians, residential consultants, four levels of sales representatives, and call dispatchers. So, when the position for an educator is created then the educator/trainer will be on top of all departments but if it is successfully implemented all departments will be combined into one all and a set of maintenance techs will be able to provide services for each department but the residential consultants, sales representatives and call dispatchers will remain intact for each department.

 

7.2.2. Cultural

Aqua currently maintains a strong community and cultural values which allows them to build a strong brand loyalty. They are successful in creating and establishing an environment in which allows them to hold high quality employees that provide high quality services. Their current culture is set around the fact that they are honest to their customers and not offering them with services that they do not need. These recommendations will not impact their current company culture it will only allow Aqua to build on their current culture.

8       Evaluation

 

8.1. Recommendation 1: Recommendation 1: 25 mile, Regional Social Media Advertising Campaign

8.1.1. Evaluation Measure 1

One way to measure the effectiveness of the regional social media advertising within 25 miles is to measure the profits of the company.  By looking to see if the profits of the company you can see the increase with the extra social media advertisements. This will be an indicator that the advertisements are effective.

 

8.1.2. Evaluation Measure 2

Another way to evaluate the effectiveness of the social media advertisements is to set up a poll system with the sales staff. When customers call to schedule an appointment with a mechanic, the salesperson can ask how the customer heard of Aqua Plumbing. This way the company can measure exactly how many people are using their services due to the social media advertisements.

 

8.2. Recommendation 2: Recommendation 2: Develop Cross-Training Program

8.2.1. Evaluation Measure 1

To measure the effectiveness of the cross training program, the company can look to see if the use of different services by the repeat clientele have increased. By measuring the loyal customers to one service and seeing that they began purchasing new services as well, then the company would be able to see the cross training program is working.

8.2.2. Evaluation Measure 2

A different way to measure the effectiveness of the cross training program is to routinely test the employee’s knowledge of basic information that they would need to know for cross selling to customers. If they employee passes the routine tests, then the cross training program will prove to be effective.

8.3. Recommendation 3: Bundle Products and Services

8.3.1. Evaluation Measure 1

When measuring the effectiveness of the bundling of products and services, the company can categorize the bundled deals separately than the single services. Then, the company can look at the sales records to see how many customers are buying the bundled products and services as opposed to the single products or just one service at a time.

8.3.2. Evaluation Measure 2

Another way to measure the effectiveness of the bundled products and services it to use a strategy evaluation matrix. By using this matrix the company can easily see if the bundling of the products and services is an effective strategy or not. If the matrix finds that the strategy is not as effective as Aqua plumbing thought, then the can take corrective actions to fix the problems.

References

(2017). In Aqua Plumbing and Air. Retrieved September 19, 2017, from  https://www.aquaplumbingsarasota.com/

Bonnell, A. (2015, April 2). Consumer Attitudes Toward Green Brands Reach All Time High.               In Market Research. Retrieved October 20, 2017, from               http://blog.marketresearch.com/sustainability-in-america-consumer-attitudes-toward-green-              brands-reach-all-time-high

Coz, E. L. (2016, March 24). Sarasota-Manatee is No. 11 in the U.S. for Growth, census says.               In Extra. Retrieved October 8, 2017, from               http://extra.heraldtribune.com/2016/03/24/sarasota-manatee-no-11-in-u-s-for-growth-

David, F. R., & David, F. R. (2015). Strategic Management Concepts and Cases (16th ed.).               Florence, SC: Pearson.

Madigan. (2017). Water Supply and Irrigation Systems in the US (Publication No. 22131).               Retrieved from IBISWorld website:               http://clients1.ibisworld.com.ezproxy.lib.usf.edu/reports/us/industry/default.aspx?entid=1

(n.d.). In Cool Today. Retrieved September 19, 2017, from  https://www.cooltoday.com/

(n.d.). In Ultimate Technical Academy. Retrieved November 27, 2017, from  https://www.ultimatetechnician.com/

O’Hollaren. (2017). Electricians in the US (Publication No. 23821). Retrieved from IBISWorld               website:               http://clients1.ibisworld.com.ezproxy.lib.usf.edu/reports/us/industry/default.aspx?entid=1

Stivaros. (2017). Heating and Air-Conditioning Contractors in the US (Publication No. 23822a).               Retrieved from IBISWorld website:               http://clients1.ibisworld.com.ezproxy.lib.usf.edu/reports/us/industry/default.aspx?entid=1

Stivaros. (2017). HVAC Service Franchises in the US (Publication No. OD5583). Retrieved from               IBISWorld website:               http://clients1.ibisworld.com.ezproxy.lib.usf.edu/reports/us/industry/default.aspx?entid=5

Stivaros. (2017). Plumbers in the US (Publication no. 23822b). Retrieved from IBISWorld               website:               http://clients1.ibisworld.com.ezproxy.lib.usf.edu/reports/us/industry/default.aspx?entid=1

Traditional Media vs. Social Media Advertising (n.d.). In Lyfe Marketing. Retrieved November               26, 2017, from https://www.lyfemarketing.com/traditional-media-versus-social-media/

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