Analyse the current business situations of Courus Strip Products and United Colours of Benetton.
Contents
Details Page no
Executive Summary 1/2
Introduction to Businesses 3
Part 1 - Analysis of current business situation Corus Strip Products UK 4/5/6/7
United Colors of Benetton 8/9/10/11
Part 2 - The current strategies of the organisations
Corus Strip Products UK 12/13
United Colors of Benetton 14
Part 3 - Have the organisations developed a competitive
advantage in the market place
Corus Strip Products UK 15
United Colors of Benetton 16
Part 4 - Recommendations for future direction
Corus Strip Products UK 17
United Colors of Benetton 18
Part 5 - How the strategies of the organisations differ 19
Appendices
Reflective journal
Reference list
Executive Summary
Business 1 - Corus Strip Products UK
Corus was formed in 1999 by the merger of British Steel and Koninklijke Hoogovens.
Corus Strip Products produces Hot Rolled, cold Rolled and Metallic coated strip steel that can be used for anything from making bathtubs to building ships.
Corus Strip Products is based in the UK and as such is at a disadvantage to other EU producers, as the UK has not yet joined the Euro. This has affected the company's competitiveness in Europe.
Corus Strip Products UK is currently a loss making business and as such cost have had to be cut. Huge improvements in the financial position of the business have been made but there is a long way to go.
Due to the failure of the business to make money over the past years investment has not been forthcoming. This has left CSP UK behind its competitors with regards to new technology.
Tough new levels on CO2 emissions are being introduced, CSP UK will have to invest substantial amounts of money into its plants if it wants to reach the governments targets.
The expansion of the EU from15 to 25 countries could offer opportunities and threats to CSP UK. It will open up the markets in those countries entering the EU but it will also introduce more competition to the EU market.
CSP UK marketing is split into 3 sections: -
. Communications - to employees, customers, influencers and the media
2. Product and Application development - capturing ideas and product development
3. Strategy and Market development, Environmental Analysis - strategic analysis of customers, competitors, products and environmental development activities
Each section has a plan of what it is to do to meet the company objectives for the year. The company sets out which markets it wishes to expand and which it wishes to withdraw from and they the sections work on how they can best achieve that.
CSP UK has developed a competitive advantage by offering excellent customer service and support.
It is recommended that CSP UK continue with their excellent customer support and look to extend this support to other customers within its portfolio. It is also recommended that upon the accession of the 10 countries to full EU membership that the company investigate the markets in those countries and look at the possibility of supplying them.
Business 2 - United Colors of Benetton
Benetton was formed in 1965 to create colourful jumpers for people tired of wearing dull colors. Today it is a multinational company with stores all over the world creating not only jumpers but also a whole range of clothing for men, women and children.
Benetton has approx 5000 stores world wide with the intention of opening more. Benetton has recently started to invest in mega stores that it has located in some of the most historic and commercial centres around the globe.
Its communications research centre called Fabrics handles Benettons marketing and promotion.
Benetton is a profit making business and it has recently published a plan to increase its revenue and profitability even further, reducing debt and freeing up cash flow.
Technology is always changing especially in the clothing industry. Customer want fashion from the catwalk to the high street quickly, they are not prepared to wait. This means that producers have to find quicker and quicker ways of getting the clothes to the stores without compromising quality.
The Clothing industry is very competitive and companies need to ensure that they have good quality at reasonably prices. Benettons main competition comes from Zara, GAP and H&M.
Benetton has many different brands and ranges associated to them. This can become confusing to the consumer and could possibly lead to dilution of the brand.
Benetton channels all its promotion and marketing through Fabrica. They produce a magazine that is sold in its stores all over the world. The magazine deals with serious issues such as war and aids buts also looks at fashion, shopping and toys. Benetton is a globally recognised brand and it intends to use this to expand in other countries. The company plans to invest 430 million in to the refurbishment of some of its stores and to open new stores. It is particularly interested in the Chinese and Eastern Europe markets.
Benetton created its competitive advantage through differentiation. The company pioneered the system of dyeing the products at the last stage ensuring that it was able to cater for any sudden change in fashion trend.
It is recommended that Benetton look to extend the concept of their mega stores to other countries. The are already looking at increasing their share of the Chinese and Eastern European market and I think by opening mega stores in those areas they will be more likely to succeed. Large stores such as the mega store will offer reassurance to the customer and can only improve the Brand image in the country.
Introduction to Businesses
Business 1 - Corus Strip Products UK
Corus was formed in 1999 by the merger of British Steel and Koninklijke Hoogovens.
"Corus manufacturers, processes and distributes metal products as well as providing design, technology and consultancy services"(www.corusgroup.com)
Due to the large size of the company for this report we will look at Corus Strip Products UK, which along with Corus Strip Products Ijmuiden, Corus Colors, Corus Tubes, Packaging Plus, Spaces and Corus Automotive make up the Strip Products division.
Corus Strip Products main manufacturing plants are based in South Wales, Llanwern and Port Talbot. These plants produce hot rolled, cold rolled and metallic coated strip. Corus Strip Products UK aims to "work closely with customers to help them obtain the best results from our products"(www.corusstripproducts.co.uk). Corus Strip Products UK aims to lead the market providing the best products and services to their customers whilst ensuring that they improve these services continually.
I chose to look at Corus Strip products UK as I work for the company in an analysts
role and before that in the Automotive sales department. I thought it would be interesting to learn how we market our products to the customer.
Business 2 - United Colors of Benetton
The Benetton family in Italy formed Benetton in 1965 as a partnership. The company was formed to produce colourful jumpers for people who were tired of wearing dull colours. In 1978 the company was reorganised as a limited liability company. Again in 1985 the company ...
This is a preview of the whole essay
I chose to look at Corus Strip products UK as I work for the company in an analysts
role and before that in the Automotive sales department. I thought it would be interesting to learn how we market our products to the customer.
Business 2 - United Colors of Benetton
The Benetton family in Italy formed Benetton in 1965 as a partnership. The company was formed to produce colourful jumpers for people who were tired of wearing dull colours. In 1978 the company was reorganised as a limited liability company. Again in 1985 the company reorganised this time adopting the name Benetton Group SPA. In June 1986 11% of the total ordinary shares in the company were sold to the public in Europe and in October 1988 the company was listed on the Frankfurt stock exchange. In 1989 Benetton expanded into the American market. The company offered 7,000,000 American depositary shares to the public each worth 2 ordinary shares, it they listed these shares on the New York stock exchange. Finally in 1994 11,000,000 new shares were offered to the global public. Even today all the family members are still involved in the production and design of Benetton products.
The Benetton Groups main Products are casual/sports wear designed for men, women and children that it markets and sells under the United Colors of Benetton and Sisley brands. The company is divided into two sectors. One selling casual wear, including footwear and accessories through it's network of Benetton shops the second being sportswear which is sold through it's network of Playlife shops.
I chose Benetton and my business to consumer business as I wanted to learn more about the company behind the controversial advertisements such as the nun and priest kissing and the death row interviews.
Part 1 - Analysis of current business situations (external and internal using PEST and SWOT)
To analyse the current business situations you need to take into account the following internal and external factors that may affect the business.
Internal factors that affect businesses are: -
Marketing mix - 4 P's
Finance
Technology
External factors that affect businesses are: -
PEST - Political, Economic, Social, Technological
Markets
Customers
Competitors
Business 1 - Corus Strip Products UK
Internal factors
Marketing involves having the right product at the right price in the right place with the right promotion. This is called the marketing mix and is often referred to as the 4 P's (Product, Price, Place, Promotion).
Product
CSP UK produces Cold rolled strip steel which is used for anything from bathtubs to car components, Hot rolled strip steel which is used for ship building to garden furniture and metallic coated strip steel which is used for roofing to fuel tanks.
CSP UK has a wide range of products that have varied uses.
Price
CSP UK price their products competitively taking into consideration others in the market. The UK has not joined the Euro yet so it has been difficult in recent years for CSP UK to be competitive in Europe.
Place (Distribution)
CSP UK has two distribution methods. In the first example goods are sold to a steel service centre that process the material thus adding value to the product (cut into sheets, press panels etc.) and then the material is sold on to the end customer.
In example two the goods are sold direct to the end customer.
Promotion
CSP UK doesn't advertise products individually (except for a few specific products). Instead it relies on brand image to sell its products. It does however work in conjunction with a numbers of steel service centres to produce articles for trade magazines on projects that have been completed using CSP UK products. It also produces a magazine title "Foreword" that is mailed to customer that includes articles on developments that have taken place and introduces new products to potential customers.
Finance
CSP UK has been achieving record losses over recent years. In the last 2 years however significant improvement has been made and although the company remains loss making it is expected that the company would return to profit within the next 2 years.
Technology
Due to the losses incurred by the business CSP UK has suffered from lack of investment for several years. All this has changed this year with the announcement of investment at its Port Talbot and Llanwern site aimed at bringing CSP UK back to being the most efficient steel company in Europe.
External factors
When choosing how to market the products of a business you need to take into account external factors over which the company have no control.
PEST Analysis
A pest analysis is a useful toll to help decide which direction the business should go in. Below are explanations on the main points from the PEST analysis for other points please see appendix 1
Political
The Kyoto agreement being introduced by the government to reduce the levels of C02 by 16.3% by 2010 compared to 1990 will have a negative affect on Corus. To reduce the levels of C02 by this amount the level the levels that industries are permitted to emit by the government will have to be reduced. Although the company continually to invest in ways to reduce pollution a reduction of the amount proposed by the government will require substantial investment that will have an effect on the company's competitiveness in the market place.
Economic
The expansion of the EU from 15 to 25 countries in May 2004 could have a positive or negative effect on the company. In May Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia will all join the EU. In joining the EU these countries will become open to free trade. This means that the material currently supplied from Corus Strip Products UK into these countries will no longer have additional taxes added to the cost. This will therefore make UK material more competitive in the countries joining. This can also work the other way. The countries joining the EU will also be free to sell to other countries in the EU without the additional taxes also making them more competitive in the market.
Social
A large company such as Corus Strip Products UK may find it difficult to find enough skilled people to fill vacancies. However due to the excellent apprentices schemes, graduate recruitment and the company's strong links with higher educational institutions mean that the company not only recruits skilled, knowledgeable people but it also trains them.
Technological
Customers demand continuously improved products to enable them to continually improve the products that they make. Customers demand better surface quality, increased strength and reductions in weight. Customers also look for other products that may help cut costs.
Other external factors are: -
Markets
Below is a list of the companies current markets and an example of how the products are used within each market.
Market Usage
Agriculture Milking parlours
Automotive Body panels
Construction
Consumer Products Furniture
Energy and power generation Oil and gas recovery
Engineering
Hevac Air conditioning
Packaging
Rail Tracks and production of wagons
Shipbuilding
Yellow goods Forklift trucks
Customers
CSP UK not only sells to external customers it also sells to other businesses within the Corus Group. These other businesses process the material adding value and then sell to end customers. An example of such a business is Corus Colors. Cold rolled steel is sold to Corus Colors, they then coat the material making more resistant to rust and then sell to the end customer. Below are a few examples of the customers CSP UK deals with.
Ford
Honda
Swindon Pressings
Nissan
Toyota
Renault
H.E Perry
Sebden
Van Leer
Tyco
EES Orb
Myson
These customers are all well known in their sectors.
Competitors
With the exception of Alpha Steel who have only recently recommenced steel production in the UK, CSP UK are the only strip steel producer in the UK. All of CSP UK competitions comes from Europe with companies such as Arcelor, Thyssen Krupp and Riva.
SWOT analysis look at the internal strengths and weaknesses of the company and the external opportunities and threats for the company. Below are the main points from the SWOT analysis for further points please see appendix 2
Strengths
Corus Strip Products UK is skilled in project management for example the re-building of blast furnace number 5 at its Port Talbot plant in record time.
Weaknesses
The over hierarchical management structure can cause motivational issues throughout it's employees.
Opportunities
The rapid expansion of the Chinese market is opening up new sales opportunities for CSP UK. China is in a period of rapid growth with huge numbers of capital expenditure projects being looked at which with CSP UK expertise in project management they could take advantage of.
Threats
The expansion of the EU to 25 in May 2004 will introduce new competition to the EU market.
Part 1 - Analysis of current business situations (external and internal using PEST and SWOT)
Business 2 - United Colors of Benetton
Internal Factors
Product
Benetton produce "womenswear, menswear, childrenswear and underwear collections offering a total look for everyday, for work and for leisure, in the city and outdoors". (http://www.benetton.com/flash/home.html)
Benetton aim to offer its customers the latest trends from around the world.
Price
The clothing industry is very competitive. Benetton price their products so that they can remain competitive in the market.
Place
The Benetton range is sold in United Colors of Benetton shops. According to the company web site there are approx 5,000 stores worldwide. Some of these stores are franchises but in a recent policy turnaround Benetton have started a major investment in mega stores that are distinguished by their size, location (mainly in historical or commercial centres) and the level of customer service offered. These mega stores carry the full range of Benetton products including the accessories range. Mega stores have already been opened in London, Milan, Prague, Tokyo, Berlin, Paris and Lisbon
Promotion
Fabrica, a communications research centre that was set up in 1994, handles Benettons promotion. Fabrica produce a magazine called Colors that is sold in over 60 countries and published in 4 languages. Colors tackles such issues as war and the fight against aids to shopping, fashion and toys. Benetton views its advertising campaigns as "not only a means of communication but an expression of our time". (http://www.benetton.com/flash/home.html) Benetton are well known for using serious issues to advertising the brand. By using controversial issues they have automatically become a topic of conversation again increasing the awareness of the brand. They not only use the company magazine to advertise their products but they also place full page adverts in some of the most popular magazines on sale.
Finance
Benetton has recently publicised a 3year plan with the aim to increase revenue and profitability. Benetton aims to meet its plan by developing the products and their distribution network. The plan looks at opening approx 450 additional stores paying particular attention to India, China and Eastern Europe. Another part of the plan is to reduce debt and free up cash flow.
External Factors
When choosing how to market the products of a business you need to take into account external factors over which the company have no control.
PEST Analysis
A pest analysis is a useful tool to help decide which direction the business should go in. Below are explanations on the main points from the PEST analysis for other points please see appendix 3.
Political
Benetton currently has 5,000 shops and plans to open another 450 worldwide. It must take into account the legislation of the countries it operates in with regard to Consumer protection and rules governing the workplace and employee protection. Failure to comply with rules laid down by the countries it operates in could result in heavy penalties.
Economic
Benetton operates all over the world and as such will be affected by exchange rates. If exchange rates vary drastically Benetton could face a reduction in profits or on the other hand they could benefit.
Social
Again as Benetton operates on a global scale they have to take into account the fashion trends of the countries they sell in. For example it may be unacceptable to wear an item of clothing in one country and in another country it may be the height of fashion.
Technological
Technology is always changing. To stay ahead of the competition it is important to invest in new technology. In an industry such as the clothing industry trends change quickly so it is important to get the current trend to the market place as quickly as possible to reap the greatest reward.
Other external factors are: -
Markets
Benetton has retail outlets worldwide but concentrate their mega stores in historic or commercial centres around the world. Below is a list of locations where some of the mega stores are located.
Lisbon - Portugal
Paris - France
London - UK
Shanghai - China
Milan - Italy
Berlin - Germany
Prague - Czech Republic
Tokyo - Japan
Customers
The United Colors of Benetton range produce clothes for men, women and children. The collections "offer a total look for everyday, for work and for leisure, in the city and outdoors"(http://www.benetton.com/flash/home.html).
Competitors
Benettons competitors vary from country to country depending on which stores operate in the market. Benettons main global competitors are GAP, Zara and H&M.
All three companies sell a wide range of clothes at competitive prices.
Below are the mains points from a SWOT analysis looking at the internal strengths and weaknesses of the company and the external opportunities and threats for the company. For further points please see appendix 4.
Strengths
Benetton are well represented in the global market. The have store in over 120 countries and have recently started to launch mega stores in some of the worlds most historic and commercial centres. There are also plans to develop the market in China and Eastern Europe.
Weaknesses
Benneton have many different ranges and brands names associated to them. This can become confusing to the consumer and may lead to dilution of the brand. They currently trade under the following labels.
United Colors of Benneton
UnderColors
The Hip Site
Sisley
Playlife
Killerloop
They also had sports equipment business that has recently been sold to re-concentrate focus on clothing lines.
Opportunities
Fashion trends differ from country to country by making slightly changes to the design of products depending on the country they are being sold in, Benetton may be able to appeal to more customers.
Threats
Most consumers want catwalk fashion at high street prices. There is strong competition in the fashion industry and producers are always looking for faster ways to get products from the catwalk to the high street whilst remaining cost effective.
Part 2 - The Current Strategies of the Organisations
The marketing strategy of an organisation should contain information on customers, products and markets enabling the company to decide which customers are growing and should be supported and encouraged to increase future sales, which products are doing well and should be promoted or which products should be discontinued and also which markets should be developed or which should be moved away from.
Business 1 - Corus Strip Products UK
CSP UK splits it's marketing into 3 sections: -
4. Communications - to employees, customers, influencers and the media
5. Product and Application development - capturing ideas and product development
6. Strategy and Market development, Environmental Analysis - strategic analysis of customers, competitors, products and environmental development activities
The main objective of communications is not to market its individual products to the market place, it uses its relationships with the steel service centres and customers to produce articles on projects completed using Corus products which are then published in trade magazines to do this, but to "enhance the reputation of Corus to stakeholder audiences by implementing agreed CSP UK communications policies"(Corus Strip Products UK Communications Annual Plan 2004).
The main objective of product and applications development is to provide information on customers, products and markets enabling the company to decide which customers are growing and should be supported and encourage to increase future sales, which products are doing well and should be promoted or which products should be discontinued and also which markets should be developed or which should be moved away from. They will also be focusing on developing new products to meet business and customer requirements.
The main objective of strategy and market development is to develop strategies for market and product combinations and manage the marketing plans for new products/ services. Focus will also be given to the continued measurement of customer satisfaction.
Please see appendix 5 for key activities of each section.
Below is a table showing which markets shows CSP UK product and sector strategy for the coming year.
As you can see from the table Corus Strip Products UK see Hot Rolled Pickle material into the End User market as a development opportunity along with Cold Rolled products into CPP. Hot rolled products into the Auto Tier 1(press workers) is seen as a general decrease as Auto manufacturers are moving away from Hot rolled products.
Part 2 - The Current Strategies of the Organisations
Business 2 - United Colors of Benetton
Fabrica handles the marketing for United Colors of Benetton, which is Benettons communications research centre. Fabrica was created in 1994 and has handled marketing since then. Fabrica supports the "creative development of young artists/researchers from all over the World" (http://www.benetton.com/html/whatwesay/fabrica/index.shtml"
The young artists develop communication projects looking at a range of sectors including Cinema, music, publishing and photography.
United Colors of Benetton produce a magazine that is sold in its shops in over 60 countries around the world. Colors is published 3 times a year in 4 different languages ensuring that the message inside will reach as many people as possible. Colors tackles important issues such as war and the fight against aids but it also covers things such as shopping, toys and the latest fashions.
Benetton has very strong global recognition for its brands and it plans to use this to emphases "the quality of its products whilst not taking part in a sterile price war" (http://www.benetton.com/press). Benetton is now starting to concentrate on its own stores. Over the next 4 years it plans to invest 430 million euros with over half of this to be used for the refurbishment of old stores and the opening of new stores with particular attention on mega stores that will carry the full range of Benetton products. Benetton are keen to develop the Chinese and Eastern European market.
Part 3 - How have the Organisations Developed a Competitive Advantage
There are several ways in which to develop a competitive advantage: -
. Through price
2. Through differentiation
Business 1 - Corus Strip Products UK
Price
Corus Strip Products UK has two pricing strategies. Within the UK as Corus is the largest strip steel producer in the UK market they have control over the price and set the standard for the rest of the producers. However outside of the UK Corus Strip Products UK choose to follow the standard set by other producers within Europe. Due to the increasing cost of producing steel it is extremely difficult for a producer to lower it's price to a level below the industry average and continue to make a profit.
Differentiation
There are many ways in which a company can differentiate itself from its competition.
In the Steel industry however differentiating yourself is not an easy task. All products have industry standards so that one grade of steel bought from one producer should be the same as from another. So it is not possible to differentiate products. Corus Strip Products has however found a way of differentiating itself from the competition through offering support to its customers. Corus Strip Products offers a range of support including technical advise on which products would best suit an application to support in on going projects to research and development with customers. One such example of this is Corus Automotive. Situated at the International Automotive Research Centre at Warwick University Corus Automotive is a team of 30 vehicle engineers that look to provide solutions to the automotive industry and it's suppliers. This specialist knowledge and advice can be vital to customers.
Part 3 - How have the Organisations Developed a Competitive Advantage
Business 2 - United Colors of Benetton
Price
United Colors of Benetton produce menswear, womanswear, chidrens wear, under wear and accessories for everyday use, for work, leisure, outdoors and in the city. Benetton wants its products to be available to everyone and they are priced accordingly. Its main competitors are Zara and H&M and its products are in the same price bracket.
Differentiation
As with most businesses Benetton gains its competitive advantage through differentiation. Benettons main tool is its approach to manufacturing its products. Benetton chooses to manufacture its products in plain colours and then dye them at the last process. This ensures that Benetton can deliver the latest fashions to its stores quicker than anybody else.
Benetton is also establishing mega stores in some of the most historical and commercial centres across the world. This will help with brand image and brand recognition as seeing the stores in such areas will make the customers think of quality and prestige.
Part 4 - Recommendations for Future Direction
Every business has to plan for the future especial if they wish to meet targets they have been set.
Business 1 - Corus Strip Products UK
With the expansion of the EU I recommend that Corus Strip Products UK look to the new countries entering the EU for future expansion. As a business they currently offer excellent support to their customers and they could look at countries entering the EU to try and develop their customer base in those countries.
The Steel industry is very capital intensive and as such many projects are set up as joint ventures between 2 companies. With the new countries entering the EU Corus Strip Products could investigate the possibility of entering into projects as a joint venture with a steel company from the new countries entering the EU.
The Chinese market is expanding rapidly at the moment and does not have the resources to be able to meet demand. In the short term there is the opportunity for Corus Strip Products to export its products to China. However this may not be a long-term option as the Chinese steel producers are also expanding rapidly and it is expected that they will be able to meet and exceed Chinese demand over the next few years.
Corus Strip products have been successful in retaining customers due to its excellent customer assistance with research and development. The company should build on this and try to include as many customers as possible in their development programme to make themselves indispensable to the customers.
Part 4 - Recommendations for Future Direction
Business 2 - United Colors of Benetton
Clothing fashions change from one country to another and this can be for many reasons i.e. weather conditions, religion or maybe tradition. Benetton could use this to their advantage. Instead of producing one range that is sold in all its stores around the world if they slightly customise the range for each country they may be able to improve their market share in each country. It does not mean that they have to specifically design a whole range for each country but by customising a small proportion approx 5% -10% of the range they may make the range appeal to more people.
Benetton has successfully introduced mega stores to some cities around the world. These stores carry the whole range of Benetton products and are have been placed in some of the major capital cities around the world. These stores have been popular and help the brand image of the company. Seeing such big stores in prestigious locations can only serve to improve the image of the company. Due to the success of these larger stores Benetton could look at expanding these stores to some other countries. They already plan to open stores in China and Eastern Europe but if they choose to open mega stores then that will only help promote Benetton as a large international company that offers quality at the right price.
Part 5 - How the Strategies of the Organisations Differ
Corus Strip products don't directly market the products to the market. Instead it works almost in partnership with its customers or groups of similar customers to develop products that best suit the customers needs. It then produces information on the products that is sent to the customers that the company feel would benefit from the product. When choosing which market to develop and which customers to offer the support to it analyses how the markets in each sector are operating and what other products are currently available on the market it also looks at what competitors it has in the market and what projects they are involved in. From this information the company formulates its plan for the year identify what activities they will under take, in which markets and with which customers. It also identifies which markets and customers are in decline and moves its support to other areas that would bring more advantages.
United Colors of Benetton on the other hand market their products direct to the end user through adverts and company magazines. Although Benetton is more well known for advertising the brand and not the actual products they do produce advertising which is placed on billboards and in most magazines. It also relies on the location of some of its mega stores (well known, historical, commercial locations) to convey to the public that they are a high-class company with quality and reasonable price.
