Example of a Strategic Marketing Audit. External analysis: Macro Environmental Analysis, Micro Environmental Analysis. Internal Analysis: Organisational Assets, Capabilities Audit, Generic Strategies, Portfolio Analysis, Value Chain Analysis

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Marketing Audit

2. 1. External Analysis

3. MARKETING AUDIT 02
1.1 Macro
Environmental Analysis
1.1.1 Political
Company X’s businesses, are subject to stringent legislation, and market controls.
Some of the key issues are highlighted here:
Deregulation of World Energy Markets.
Different EU nations are opening their markets to competition at different rates.
Electricity and Gas Markets are opening at different rates.
Non-residential energy markets open to competition.
EU Agreement of principles of competition:
Separation of transmission & distribution from production & supply
Non-discriminatory access with transparent & published tariffs
Regulator in each state
Increasing Government targets on renewable energy sources in response to
fears about Global Warming and pressure from groups such as Greenpeace.
Impact of regulatory pressure and/or enforcement of price restrictions
Public concerns over directors remuneration means increased governmental
and shareholder scrutiny, and increased focus on Corporate Responsibility and
Governance.
GDPR legislation in the UK imposes strict rules concerning the use of
individual’s data by organisations.
1.1.2 Economic
Uncertainty regarding the EU, and the effects of Brexit negotiations and its effect on
European utilities markets.
The UK’s (potential) withdrawal from the EU remains a topic of concern, and the
UK’s decision on how to leave (or not) will impact the company’s exposure to
currency exchange rate fluctuations. In the UK levels of personal debt are also
steadily rising.
Political instability in relevant markets threatening economic volatility with the effect of:
Increasing Fuel Charges
Disrupting Currency Exchange Rates
1.1.3 Social/Cultural
Increasingly pressure groups are concerned with the environmental impact of
burning fossil fuels, and are campaigning for more renewable energy sources.
Consumer attitudes in deregulated markets towards utilities are changing with more
people accustomed to shopping around amongst utility supplier and / or buying
multiple utilities from one provider.
Consumers are typically more mobile, with increased car ownership and are thought
to be considered more “cash-rich, but time-poor” so convenience is a major factor in
decision making.
Demographics are also changing, with many EU countries expecting ageing
populations over coming years.
Environmental factors such as the weather also impact Company X’s business,
with hot summers reducing the demand for heating, and cold winters leading to
an increase in car breakdowns. Unpredictability of the weather can have a serious
impact on business performance.

4. MARKETING AUDIT 03
1.2 Micro
Environmental Analysis
1.1.4 Technological
Rising use of the internet is being fuelled by wider availability of access to
Broadband networks, and the emergence of Customer Relationship Management IT
Systems are issues for Company X to consider.
Another factor affecting Company X’s wholly owned subsidiary Company B is the
increasing technical complexity of Cars, making diagnostics and servicing ever more
specialised.
1.2.1 Industry Analysis (Porters Five Forces)
1.2.1.1 Competitive Rivalry
Rivalry in the deregulated consumer energy and telecommunications markets
has been intense. Competing firms have largely only been able to compete by
offering low prices on commodity services to attract new customers, and the
result has been relatively high churn rates.
The UK motoring services market too is very competitive. In the UK, COMPANY
B and other companies have historically fought over market share. In addition,
there are also smaller brands who are challenging the market space, typically
offering lower membership rates. Other companies have responded by offering
a wider range of services to their members (e.g. Windscreens, Tyres, etc.).
For financial services the market is intensely competitive as well, especially
since the emergence of xxxxx brands. These brands are often competing on
low-prices / interest rates, or introductory offers. It has been characterised
by high customer acquisition costs, and high customer churn rates. This has
often resulted in low profits / heavy losses, and may explain the decision to sell
Company to its Competitor Company.
1.2.1.2 Suppliers
Bargaining power of suppliers in the utilities is moderate. While Gas and
Electricity are commodity markets, companies tend to hedge their exposure to
fluctuating prices by signing up to long-term supply agreements. Company X
has been able to offset any imbalance by vertically integrating, so that it can
supply around a quarter of its downstream demand from its own resources
complement
For telecommunications, the bargaining power of suppliers tends to be
stronger, with dominant brands owning large market shares, and market
followers tending to need to partner with those brands to provide some or all
of its telecommunications services, which may involve a reasonably high level
of commitment and integration, so creating significant switching costs. To
some extent this is checked by regulatory restrictions, designed to open up the
market, and there is evidence that this can help companies with smaller market
share.
For motoring services, the bargaining power of suppliers tends to be low, as the
majority of supplies are commodities, such as car spare parts. Note however
that as cars become more technically complex, this power may increase over
time.
1.2.1.3 Buyers
In deregulated energy markets consumer power has increased dramatically,
with a range of companies offering gas, electric, water, and/or a combination of
these, plus related services at very competitive prices.

5. MARKETING AUDIT 04
1.2.1.4 New Entrants
The barriers to entry are significantly lower due to deregulation, with
incumbents obliged to offer “non-discriminatory access with transparent &
published tariffs”. Internationally, in deregulated states, liberalised laws on
ownership have led to a spate of mergers and acquisitions of utility companies,
in an attempt to acquire customers.
Going forward, the market conditions are right for large retail companies
such as Company in the UK to move into utilities, as they look to offer their
customers products and services beyond their traditional retail environment.
This has already been seen in their entry into the financial service market.
Where dominant market leaders have been in place, regulators have acted
on behalf of the consumer by placing restrictions on their activities including
imposition of price caps. Generally, the regulators have also introduced
limitations to encourage competition (e.g. Number portability in the fixed line
telecommunications markets has meant that customers can switch provider
without having to go through the pain of getting a new telephone number).
The result is often very low switching costs for the consumer, thereby ensuring
plenty of bargaining power.
1.2.1.5 Threat of Substitute Products
The threat of substitute products is generally low in the markets, in which
Company X operates:
Energy (Gas or Electric) is generally thought to be essential items, although
rising concerns for renewable energy sources could lead for increased
demand for alternatives such as solar power for supplying (at least some of)
the household energy requirement
Breakdown Services too are essential, with high levels of car usage,
reducing consumer awareness of basic car maintenance tasks, and
increasing complexity of cars.
In telecommunications the need for both fixed line and mobile telephones is
pervasive in most mature European and N American markets.
Arguably Broadband internet services are more discretionary, with these
funds competing with other information sources (e.g. TV / Radio / Press).
The emergence of new 5G mobile phone services may also by considered
potential substitute products.

6. 2. Internal Audit

7. MARKETING AUDIT 06
2.1 Organisational
Assets
2.1.1 Physical Assets
Company X group companies have a wealth of physical assets, listed below:
Interests in several offshore gas & oil fields
Power Stations
Rough Gas Storage Facility
Company B Fleet, 129 x Service Centres, 3000 Tyre Centres
For Companies competitive positioning to be successful and sustainable, it should
recognise the organisations internal resources and capabilities. This resource based
view (RBV) of the organisation, includes analysing a company’s key assets, which
are described below with regard to Company X.
2.1.2 Financial Assets
See financial analysis section.
2.1.3 Operational Assets
The gas fields and power stations mentioned above are also operational assets,
contributing ~27% of the downstream gas demand, and ~22% of the annual
electricity demand. This vertical integration allows the company a level of protection
against fluctuation in commodity gas and electricity prices and guarantees a
percentage of its supply requirements. Company C also has five call centres to deal
with customer enquiries.
2.1.4 Human Assets
The group employs a large number of customer facing employees. It appears that
the levels of service employees offer customers can vary across the group, but there
are some programmes in place to address this.
The company claims to reward success, and develop staff by providing adequate
training & support, but no details are given.
It also appears that motivation and involvement with customers can be positive (e.g.
High staff participation in Help the Aged, Cystic Fibrosis campaigns), so positively
contributing to brand development.
Company X is in the process of recruiting maintenance engineers. However, there
is currently a skills shortage, which the company is trying to address, in part by
developing its own training centre/programme.
2.1.5 Marketing Assets
2.1.5.1 Customer-based Assets
In the UK the group companies’ brands are strong assets. Company B in
particular has a very positive name and reputation.
The Company C Brand has not been viewed so favourably in the past, but
recent research has suggested changed in customer perception and has
some strong brand associations. It has also been working hard to improve its
corporate image through cause related marketing.

8. MARKETING AUDIT 07
2.1.5.2 Distribution Based Assets
Regulatory restrictions limit Company X’s ability to own and control the
distribution and transmission of its electricity and gas products, but the group
has been able to negotiate ownership of the Rough storage facility (subject to
controls) which will allow it to influence the costs associated with Gas storage.
Generally, the company has adopted a direct sales model to its UK consumer
base, although it has closer its UK retail operations, and reduced the number
of Company C salespeople, as the company focuses on retention rather than
acquisition of new customers. This may also be in response to concern about
the role of commission-only sales agents.
Both brands are extremely durable in the UK market, and have strong market
shares making them key customer assets.
Company J is less-well established as a brand, and research indicated
significantly lower awareness levels than its key competitors. It tends to appeal
to a different segment of the market (younger, sophisticated). At this stage it
cannot be considered a strong asset.
One issue for Company X is the extendibility of these brands. Certainly, it is not
likely that the Company C brand could be exploited beyond the UK, and indeed
even within the UK stretching of this brand to cover other services, outside the
utilities market may prove difficult.
It is not clear what, if any value can be placed on the group’s international
brands as assets.
The Company X brand itself is also not that well known, and indeed it is
not clear what brand strategy has existed to date. Therefore, a key issue for
Company X’s future will be to decide upon an appropriate branding strategy.
2.1.5.3 Internal Marketing Assets
The groups existing customer base in the UK represents a significant asset for
the company going forward.
Company X claims xx% share of the aggregated UK residential energy market.
It also claims xx% share of the personal and business roadside services
market. This has been identified as an opportunity for cross-selling of other
Company X services.
2.1.5.4 Alliance Based Assets
Company X has formed a number of alliances and joint ventures during recent
years. The most notable ones include:
Strategic alliance with Partner Co 1 and agreement with Partner Co 2 and
Partner Co 3 to allow Company X to supply residential mobile and fixed line
telecommunications, respectively.
The company also has several long-term supply agreements in place that
provide stability and guarantee a proportion of supply/demand.
Joint Venture with Company to develop offshore wind farm, in response to
the pressure to increase the percentage of energy derived from renewable
sources.
Company Partnership with Help the Aged to look at problems facing older
members of society, such as isolation, safety and security and death in
winter. The alliance helps Company X to strengthen the brand image,
encourage staff participation & morale, and helps form relationships with
regulators, governments and opinion formers.

9. MARKETING AUDIT 08
2.2 Capabilities Audit
2.1.6 Systems
Company X has been investing heavily in CRM projects across the group which
will allow a single view of the customer across the group, permitting (providing
the consumer “buys-in) cross-selling opportunities. However, it is not clear at this
stage what exactly to group intends to do with its new systems. The group has also
invested in systems that allow consumers to manage their accounts on-line, which
xx% of Company’s customers use.
2.2.1 Shared Values
Company X has a clear view of what its values should be. However, it is not clear to
what extent these values are understood and shared by each of the SBUs. Pockets
of excellence clearly exist (for example COMPANY B with regard to customer
service), but it is not clear how Company X intends to develop these values amongst
all its employees.
The following analysis uses McKinseys 7’S framework for assessing Company X’s
Corporate Capabilities:
2.2.2 Strategy
This is an area of concern, as there appears to be no clear direction being set for
the company. No mission or corporate objectives seem to be in place at the Group
level to provide a framework for the group companies to operate in. The result
seems to have been that the individual subsidiaries seem to be developing their
own independent plans for future growth in the absence of strategic direction. This
can be seen in a steady stream of often un-related acquisitions, and ad-hoc entry
into foreign markets. Also, the investment in the groups CRM systems needs to
be integrated within an overall program of identifying and targeting key customer
groups, and a clear vision of what the systems will allow stakeholder to do, and what
Company X want to do with it must be in place to capitalise fully on the investment.
2.2.3 Structure
The structure of Company X appears to have grown organically, rather than being
designed. The result is a mixture of a centralised HQ, with some divisions SBUs
(e.g. Company C), and some aligned to territories (e.g. Europe, N.America. As the
organisation grows it will need to consider alternative arrangements. Marketing
appears to be a centralised function, but with each brand/ SBU doing its own thing.
2.2.4 Staff
Company X has undergone a large acquisition programme over recent years, both
domestically in the UK, and internationally, and it continues to recruit people. A key
challenge will be to ensure good communication with new staff members about what
Company X is trying to achieve, and the values it wishes to employ. HR and Internal
Marketing have a key role to play, in order to ensure success.
2.2.5 Skills
The organisation has clearly identified the need to recruit to fill its Company C
maintenance engineer skills shortage, developing its own engineering academy to
help generate the skills required.
Marketing Skills - There is evidence that research is done within Company X to try
to understand market needs, customer perceptions of individual brands - and the
strategic importance in brand image, and these skills are applied at an SBU level.
However, it is not apparent that these skills are applied at a group strategic level.

10. MARKETING AUDIT 09
2.2.6 Style
Company X appears to have quite an open and relaxed management style. For
example, consulting employees, customers and stakeholders on choice of charity
to support, and performing global employee satisfaction surveys. Provided this
feedback is acted on, it should lead to a workforce that is more responsive to the
direction the company wishes to go in.
Perhaps in response to pressure groups, but Company X also seems to have quite
a caring attitude, talking about its policies for dealing with disabled people, family
leave, personal development, work-life balance and opportunities for disadvantaged
elements of society.
2.2.7 Systems
As highlighted earlier, there is concern over the apparent lack of a clear vision of
what Company X wishes to do with its CRM systems at a group level.
What is also unclear is what control systems are in place to monitor the activities of
the subsidiaries (particularly the foreign subsidiaries), to ensure that the corporate
strategy is carried out, and core values are adhered too.
2.3 Generic Strategies
Figure 2.3.1 on the right uses Porters generic strategies framework for Company
X’s key business activities. Viewing their businesses in an international context, it
can be seen that a number of Company X’s SBU are occupying the middle ground.
For example, their residential Gas and electricity businesses are very focussed on
the UK, with some recent expansion into the US and Europe. However there seems
to be neither a cost-focus, nor a significantly differentiated service that it can offer
its customers, although in the UK the Company C Brand has a distinctly different
identity from its major competitors. It is not however clear to what extent these
differentiating features are exploited.
For their energy wholesaling business, the picture is similar, but with a focus on
supplying a fairly limited customer base (i.e. largely to other Company X group
companies) with a commodity product, which necessitates a cost focus.
For the COMPANY B brand the strategy appears to have been more clearly one of
providing best of breed roadside and related services to the UK motorist.
However, for Company the position is different again. The company has had
low brand awareness and has been offering low cost me-too products to the UK
consumer, undercutting BT to achieve market share growth, with reasonable
success.
All of this highlights the fact that there is no single generic strategy that Company X
is following.
Strategic Advantage
StrategicTarget
Uniqueness Perceived Low Cost Position
Broad
Industry-Wide
NarrowSpecific
Segment
Differentiation
Focused
Differentiation
Overall Cost
Leadership
Focused Cost
Leadership
Residential
Energy
CEM
COM
Company
Figure 2.3.1 - Porter’s Generic Strategies

11. MARKETING AUDIT 10
2.4.1 Boston Consulting Group (BCG) Matrix
The BCG Matrix highlights some of the difficulties facing Company X going forward,
namely a lack of Stars in which to significantly invest for future growth.
2.4 Portfolio Analysis 2.5 Value Chain
Analysis
Application of Porter’s Value Chain Model is notoriously difficult to consider when
applying to services, but with regard to Company X the following observations can
be made…
Company X is investing in Gas/Energy production businesses in an attempt to
minimise the risks associated with supply (in-bound logistics).
Regulatory restrictions on ownership of transmission & distribution (i.e. out-bound
logistics) as well as production and supply (EU Barcelona summit) means that
Company X may only be able to add value by means of strategic alliances /
partnering.
Company X has been adopting a direct sales channel strategy (e.g. Withdrawal
from LPG markets) in an attempt to improve its customer relationships and so
add value by better understanding its customers (marketing and sales).
Figure 2.4.1.1 - BCG Matrix
???
Dogs
Stars
Cash Cows
Company
CEM
Company
CompanyCompany
Company
Company
Company
Company
Company
Company
Company
Company
Technology Development
Company Infrastructure
Procurement
Human Resource Management
In-bound
Logistics
Operations
Out-bound
Logistics
Marketing
and Sales
Customer
Service
Margin
of Value
Figure 2.5.1 - Porter’s Value Chain

12. MARKETING AUDIT 11
Company X has recently integrated its Company C energy and home services
divisions, and indeed is actively recruiting service engineers in an attempt to
create value by increasing the breadth of customer services quality of services
offered.
Procurement – Company X adopts a mix of long and short term bi-lateral
contract for supply, as well as producing ~xx% of its own downstream energy
demand and a structure use of financial derivatives to minimise risk and ensure
good value.
Technology Development – While there is no evidence to suggest a structured,
managed approach to NPD and innovation, there is evidence (e.g. COMPANY
B & BG Financial services, BG & Company J Telecommunications) of sharing
new product developments across SBUs to increase the value of the offering to
different customer groups.
Company Infrastructure – Company X is investing heavily in CRM projects for
Company C & COMPANY B. The vision is to allow a single-group wide view of
the customer. If this can be achieved this offers the company opportunities for
employees to provide significantly better customer service throughout the value
chain, and for the company to cross-sell products & realise cost savings (e.g.
By merging call-centre functions). All of these can be seen to be increasing
value to the consumer. It is less obvious whether there is a company-wide
market information system that can be used to help identify trends, and monitor
opportunities.
It is also noted that Company X can start to look at creating wider value systems
through its alliances with partners. Also the Company C web-site features other
resources related to household services that Company C provides in partnership
with third parties.