Marketing Assignment

Introduction

The market environment involves the external factors such as political, economic, environmental, social, technological and legal along with internal factors such as employees, shareholders, retailers and others who surround the business and influence the marketing operations. In this assignment, the competitive forces influencing the marketing environment of Royal Mail are to be identified and discussed. Moreover, present situation of the company in the market is to be analysed and recommendations are to be given to resolve their risk being presently encountered in the marketing environment.

Background of the Company

Royal Mail is one of the oldest post and courier service providing company located in the United Kingdom that was originally established in 1516. (www.myroyalmail.com, 2018). The chairman of Royal Mail is Les Owen and CEO is Rico Black. There are 161,136 employees working in the Royal Mail as per the reports in 2017 (www.royalmailgroup.com, 2017). The Royal Mail was initially operating as public corporation but with the introduction of the Postal Services Act 2011 majority of their shares was sold and the 30% share still in hold of the UK government was sold off in 2015 (www.bbc.co.uk, 2015). Thus, it informs that the organisation has presently become totally privatised. The operating income of the company in 2017 is £575 million which is more than the previous year (www.royalmailgroup.com, 2017).

Competitors and the size and position of the company in the sector

The key competitors of Royal Mail in the UK are TNT Post, Hermes, DPD and others (www.simplybusiness.co.uk, 2010). In 2017, the company collected £9,776 million as revenue which is 1% more than the previous year and its net income in the year was £273 million (www.royalmailgroup.com, 2017). The market share of the Royal Mail is seen to have reached 18% lower in 2018 and the company has informed that their cost saving in the year is going to be £100 million only rather than their forecast of £230 million (www.thisismoney.co.uk, 2018). This informs that Royal Mail is presently suffering downfall in their business as lower profit is being incurred and the economic forecast to be reached is not being able to be met.

Porter’s Five Forces Model

The Porter's Five Forces analysis is an essential tool that is used for understanding the competitive forces which shape the competitor of the company in the industry of their operation (Mathooko and Ogutu, 2015). The Porter’s Five Forces affecting the Royal Mail are as follows:

Threat of New Entrants:

Royal Mail is already an established organisation with a leading position in the parcel and courier services where they by producing larger capacity of services and products develop cost advantage. The new entrants to enter the parcel and courier industry requires high amount of capital for their establishment (Zhang et al. 2018). However, often they have lower capital which makes it impossible for them to enter the industry to operate at the scale presently Royal Mail operates it business. Thus, the threat of new entrants is weak for Royal Mail. Moreover, the level of product differentiation achieved by Royal Mail has led it to have a strong emphasis on its customers which has made them loyal to the company leading the company to incur increased revenue and profit. This is evident from their strong revenue collection in 2018 which is 1% more than the previous year with 3.2% operating profit achieved in 2018 (www.royalmailgroup.com, 2018). However, the new entrants would be unable to meet the product differentiation and the cost-effective prices of their services which make the threat of new entrants weak for the organisation.

Bargaining Power of Supplier:

The number of suppliers present in the UK post services industry is huge which leads the company to have the opportunity to replace them at any time (researchbriefings.files.parliament.uk, 2018). It leads the suppliers to have less bargaining power making it a weak force for Royal Mail. The products provided by the suppliers in the postal services industry is less differentiated, fairly standardised and include low switching cost (researchbriefings.files.parliament.uk, 2018). Thus, it is easier for Royal Mail as the buyer to change suppliers as needed if their present suppliers demand more. Thus, it makes the bargaining power of the suppliers for Royal Mail to be low. Royal Mail is a leading company in the postal services industry making it a potential customer for the suppliers from whom they are able to derive high profit by providing demanded services. As mentioned by Reim et al. (2015), to maintain key and potential customers the suppliers require offering products at reasonable prices. Since Royal Mail is one of the potential and leading customers in the postal service industry thus the suppliers have to provide them services under reasonable prices which lead them to have lower bargaining power.

Bargaining Power of Buyers:

Royal Mail provides high-quality products at reasonable prices which leads the customers to have less bargaining power as are already been delivered good services at reasonable prices (www.myroyalmail.com, 2018). However, many other organisations are present in the industry in which Royal Mail operates which makes the buyers have many preferences to choose from while thinking of bargaining prices (www.myroyalmail.com, 2017). Thus, in this respect, the bargaining power of the buyers is high for Royal Mail in the industry.

Threat of Substitute Products:

There are few substitutes available for products in the industry in which Royal Mail operates and most of them are already provided by the company. This makes the threat of substitute products low for the organisation. Moreover, the existing substitutes available require high expenditure and they would be priced at high range to be provided to the customers making it less likely for the customers to switch to the new substitute products (www.myroyalmail.com, 2018). Therefore, the threat of substitute product is low for Royal Mail to hinder their present business operation and profits.

Rivalry among Existing Firms:

The strategies used by organisations in the postal service industry are diverse in nature which means the strategies are unique for each business enterprise. This results the organisation present with the Royal Mail in the mentioned industry to be running head-on into each other which makes the rivalry among existing firms a strong force in the industry. In the postal services industry, the fixed costs of the products are high demand which makes the companies present along with Royal Mail to push to work with full capacity and reduce prices of products when demand is lower (www.myroyalmail.com, 2018). This means that competition between firms exists in the industry in relation to management of prices which leads to make the rivalry among forms a strong force in the industry to be faced by Royal Mail.

Analysis of current issues in the sector

The liberalisation of the UK courier and postal industry is seen to have ended the monopoly of Royal Mail allowing other postal businesses to grow in the industry for collecting and delivering mail and parcel (researchbriefings.files.parliament.uk, 2018). This has led to increased competition in the market as more private companies along with Royal Mail are operating in the same domain to achieve better future prospect for their business. As mentioned by Lebedev et al. (2015), increased competition in the market decreases the market share of the companies and often shrinks the customer base. Thus, in UK postal and courier industry, the rise of increased competition has become an issue for the companies as each of their market share are diminishing and their customer base are becoming volatile and shrinking which is offering them lower returns on investment. It is evident as the City Link Postal services informed that as a result of increased competition they have to slash their cost base and was unable to get determined profit and targeted customer base for their business (www.independent.co.uk, 2015). The Brexit has led to raise issues for the companies in the UK postal and courier industries in respect to international deliveries. This is evident as the courier companies for cross-border deliveries are required to pay 30% increased finances for making imports with near investment of £11m in new tariffs for operating their business worldwide and face more strict rules from the customs services (www.linkscourier.com, 2018). Thus, companies like Royal Mail require making more financial investment in their business to operate within EU and worldwide.

The customers in the UK courier and postal industry are seen to avail cheap services without caring for quality or other factors (www.theguardian.com, 2017). It has led the companies feel pressure to decrease the price of their services to much lower level to retain the customer, in turn, making them pay lower salary to their staffs for maintaining profit. This is evident as in the reports published in the media it is seen that courier and postal staffs are seen to earn as little as £5.75 an hour which is much lower than the national minimum wage of £7.50 an hour (www.theguardian.com, 2017). This has resulted employees to get poor salary making them leave their jobs which has lead the industry to face high staff turnover and lack of proper availability of skilled staffs. As mentioned by Lubotsky and Olson (2015), employees who are not provided minimum salary as per the national standards are economically unstable and often leave their job. This is because the employees feel they are being exploited and not valued for their work effort making them leave the industry to search for better options. Thus, few of the current issues being faced in the UK postal and courier industry is increased pressure of providing cheap services along with high turnover and lack of availability of skilled staffs.

In the current UK postal and courier industry, the increased demand of the customer has become an issue to create job security and safety of the individuals working in the industry. This is because to meet the increased demand by the customers it has led UK courier companies to avoid offering sick leaves to the employees and employees even taking sick leaves are terminated or threatened for losing their jobs if not available at any time for any reason (www.independent.co.uk, 2015; www.theguardian.com, 2013). As mentioned by Leung et al. (2015), lack of job security and safety leads employees feel lack of zeal to work with more effort and efficiency. This is because the negative working condition makes them depressed and fear of losing jobs making them unable to show better commitment at work. Thus, the negative working environment is creating issues for the UK courier industry to face challenges to deliver It is evident as more than 1 in 10 people in the UK has reported to get damaged packages with 1 in 5 people reporting their parcel goes missing (www.mirror.co.uk, 2017). Thus, due to work pressure employees in the UK courier and postal services are seen to be delivering damaged packages to customers that are making them unsatisfactory with the service quality.

Recommendations for the company based on the risk and opportunities identified

Royal Mail to avoid the issues of accessing less profit as a result of increased competition in the market is recommended to improve their service quality and develop more innovative services which would make them stand out from their competitors. Thus, in this context, Royal Mail requires to test new modes for delivery of letter within time and arrange automated technology to provide parcels to the individuals to improve their efficiency and cut costs for deriving better profits. Moreover, to tackle the increased demands of the customers in the industry Royal Mail is recommended recruiting more employees so that workload on the existing employees can be minimised. This is going to lead the employees work with better efficiency to deliver letters and parcel creating better satisfaction for the customers to receive their services.

Royal Mail is also recommended to provide sick leaves to the employees and help them to have work-life balance so that the employees feel valued and develop the zeal to work with better efficiency. The company also to avoid turnover of staffs is recommended to provide better appraisals and salary as per the minimum standards of wage mentioned by the UK government. Moreover, Royal Mail is recommended to review their management and structure of the business to identify the faults that are causing them to face issues with financial management for the company. Later, based on the reports they are to make changes so that better financial management can be achieved to ensure proper follow of money and profit for the business. Royal Mail is also recommended to closely survey the marketing strategies of their competitors and based on the report develop unique strategies for them to be implemented in the market so that they can stand out from their competitors.

Conclusion

The above discussion informs that Royal Mail is a UK company operating the in the postal and courier industry. They have increased the threat of rivalry in the market and the industry in which they operate is seen to face issues such as employee turnover, high demand from customers, maintain cheap prices and others. However, various recommendations are provided such as implementing technology in services, providing appraisal and proper salary to the employees and others to help Royal Mail resolve the issues.

References

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