metropol base fort
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Essay based on the Metropol Base -Fort Case Analysis (Marketing) - Highest mark in the classTRANSCRIPT
1. The Security Industry/Market and its Impact on Metropol
The security market in Canada is characterized by increasing industry demand for
security. Growth in this market will attract new competitors to an already flooded
industry. Because startup costs are low, new competitors enter the market easily.
Increased competition threatens Metropol’s potential client-base as customers often view
the security industry as homogenous. The compatibility of products and services between
security companies increases the ease with which customers can switch to competing
firms. Firms attempting to penetrate the market by undercutting industry prices cause the
industry to be typified by low pre-tax margins. Therefore, cost control is necessary to
maximize profits. Most buyers are influenced by the lowest-price offering, while some
are willing to pay extra for quality and reliability. Low-price and high-quality orientation
effect Metropol’s market opportunity as it is difficult to offer reliability and quality at a
competitive low cost.
ESD sales are projected to triple in the security market in the next three years,
overshadowing security guard demand. If Metropol does not offer ESDs and hardware, it
will lose a significant market share because customers prefer firms that provide
comprehensive security coverage. Metropol’s market reputation will suffer for not
providing current products and services. ESD sales would increase Metropol’s product
portfolio and customers perceive advantages in one firm coordinating total security
coverage. Lease and service contracts from ESD sales would provide Metropol with
additional sources of revenue and increased customer switching costs. Realizing that ESD
products can replace the presence of security guards in some situations, Metropol can
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exploit this trend – rather than fall victim to it – by entering the ESD market. The profit
margin on ESDs is also larger while they incur fewer costs than security guards do.
The Ontario market is significantly larger than that of western Canada. Metropol’s
reputable levels of quality and reliability should attract a portion of the corporate market.
Although the market is difficult to penetrate, establishing a presence will increase
revenue for Metropol. Growing without a presence in this market will be difficult.
The security industry is projected to become more formalized and standardized
with respect to security training. Formalized standards may cause a perceived
differentiation to customers seeking quality-driven firms compared to the lowest-priced
firm. Metropol has the opportunity to differentiate itself and more effectively meet
customer needs by yielding to this trend. Because Metropol is already further established
as a trainer/educator, standardization costs will be lower than comparable firms.
The crime rate in Canada is increasing and government protective services are not
increasing proportionally. Metropol can increase its market share by filling the gap.
Government could at anytime increase their presence in the market, thereby reducing
Metropol’s potential market share and increasing indirect competition.
2. Competitive Advantages held by Market Share Leaders
According to surveys, the most important attribute for security consumers is
consistency and reliability. Any firm that can effectively focus on these attributes gains
an advantage. A recognized and established name in the industry differentiates that firm
in an almost homogenous market. These advantages lead to an increased market share for
the firm.
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Organizations that utilize economies of scale lower direct costs and increase
profit-margin on existing jobs. An infrastructure that is established and efficient provides
an advantage in a market where recovering expenses is difficult. Possessing an
experienced and productive management team allows high productivity for low input and
keeps costs down. Cost control enables firms to bid lower.
The hardest competitive advantages to acquire are arguably the most powerful.
Affiliations with producers and distributors allow a firm to buy needed products at a
discounted price, further reducing costs. Relationships with large corporate customers can
provide a firm with a stable and reliable source of revenue.
3. Metropol’s Strategic Strengths and Weaknesses
Metropol has significantly more strengths than weaknesses (appendix A).
Strategic strengths and weaknesses within Metropol are comparatively equal. However,
Metropol’s shortfalls are all strategic weaknesses while many of their strengths are
tactical strengths. This inequality demonstrates that short term management of the
company is exceptional, but some long term problems need to be dealt with.
A majority of Metropol’s strengths stem from exploiting competitive advantages.
Metropol has an established brand name that is recognized by consumers as standing for
quality and reliability. This advantage differentiates Metropol from much of their
competition. Metropol commands the third largest market share in Canada allowing them
to utilize economies of scale. Experienced and productive employee management, proven
by their leading employee efficiency ratio (appendix B), improves cost control. Pat
Haney himself possesses a very developed understanding of the scope of Metropol’s
abilities. This understanding allows planning that is realistic.
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Metropol’s weaknesses are created by what they fail to do. Metropol does not
provide ESDs or hardware; they cannot provide customers with a full security package.
Metropol has not differentiated their offerings to segments within the market. These
failures homogenize the firm, sacrificing potential market share. A detriment to market
share is the customers excluded by not realizing a presence in Ontario. Metropol has no
clearly defined mission, and hence, no strategic direction. Although many options are
available, until a direction is chosen, only tactical strategies can be carried out.
4) Identify and evaluate the strategic growth options available to Metropol:
A strategic growth option available to Metropol is geographic expansion into the
Ontario security market. A merger with an Ontario company lowers entrance costs as it
acquires existing infrastructure. The merger can increase Metropol’s market share by
assisting in penetrating the market. The merged company provides Metropol’s business
with customer and producer/distributor relationships while Metropol retains its brand
name and customer loyalty. Increases in economies of scale are attained by entrance into
the Ontario market. Alternatively, expansion into the Ontario market could mean loss of
the assimilated company’s brand loyalty and dilution of Metropol’s administrative
expertise. Metropol must integrate the employees of both companies which may lead to
increased distinctive competency or organizational detriment. Acquiring the assimilated
company’s reputation may be positive or negative.
The purchasing of a local company has many of the same characteristics of the
merger method; certain pertinent issues do arise. The purchase of a local company
requires a larger cash investment. Purchasing an Ontario company would allow Metropol
to retain complete control over operations and incur no loss in administrative advantages.
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Bidding on contracts in the Ontario market is a passive strategy that may result in a
substantial cash investment because Metropol must purchase offices to service its first
customers. The merger option is the most attractive from a cost-benefit standpoint.
However, these three growth options into Ontario only expand the company and are not
strategies for future growth.
A focused strategy defines the mission that Metropol is lacking, allowing them to
create effective marketing strategies. Such focus incorporates a value-added approach to
attract a large number of security-conscious clients and persuade less security-conscious
organizations to spend more money on security. This method provides Metropol with a
focused mission, lower costs, higher profit margins, and lower employee turnover due to
above average salaries. This narrow strategy ignores some future trends in the security
market such as the ESD boom. Some contracts will continue to go to the lowest price no
matter what the level of service may be. However, this focus provides a better retention
of current clientele.
The expansion of Metropol’s product line, especially into that of the provision of
ESDs, addresses future trends in the security industry. The sale of ESDs by Metropol
provides customers with the complete security package, leading to differentiation. The
electronic surveillance market will provide higher profits due to the larger profit margin
on ESDs. Metropol’s adoption of ESDs into their product mix gives the company a plan
for future expansion and allows them to make exclusive relationships with manufacturers.
Growth into the security market, especially ESD sales, requires significant financial
investment. ESD sales may reduce the demand for security guards.
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To facilitate growth, Metropol can diversify its service offerings into other areas.
This strategy is an easy way to differentiate with little risk and low cash investment. Such
differentiation of service will increase market share. Metropol’s administrative
competencies will be attentive to an area not consistent with growth and may cause
current clientele to misinterpret Metropol’s focus. This growth option causes Metropol to
lose sight of its mission statement and in no way develops the organization within its
relevant market.
Metropol also has the option for growth in the consumer market where it could
provide related security products. Greater exposure of name, increased product line and
other sources of revenue serve as factors that may influence growth for Metropol.
Metropol does not currently deal with hardware, and as such, this may be too much of a
leap for them. Hardware and ESD services must be developed before Metropol can enter
the consumer market. This option requires heavy cash investment and also blurs
Metropol’s mission statement.
5. Recommendations
Metropol needs to build two tactical and two long term strategies. The tactical
strategies include refining their mission statement and introducing hardware and ESDs to
their list of offerings. The strategic directions involve focusing on the customer to
segment the market and eventually expanding operations to Ontario. These strategies will
eliminate several market threats and takes advantage of many market opportunities.
Metropol needs to define their mission: to focus on providing specific services to
each customer. The effects of defining a mission include the increase of brand equity and
a clearer understanding of consumer needs. Metropol also needs to introduce ESDs and
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hardware as an immediate attempt to serve individual customer needs. By expanding
their product portfolio, Metropol offers complete security coverage and is prepared to
take advantage of future trends. Hardware and ESDs create customer dependence by
increasing switching costs due to contractual relationships.
Strategically, Metropol must focus on providing “levels” of service congruous to
different demands of the market. Because Metropol’s customers range from quality
oriented (willing to sacrifice cost) to price oriented (willing to sacrifice quality), various
options are needed to provide for each customer’s wants. Customers that are quality
oriented, for example, will pay the higher price demanded by better trained guards and
increased service (e.g. 24hour dispatch). Alternately, price oriented customers will gladly
accept basically trained guards and basic service (e.g. 9-5 dispatch) if the cost is low. The
point is to manipulate the product offerings to match the customer, not to manipulate the
customer to match a single offering.
When these strategies have been implemented, Metropol will be better able to
satisfy its current clients, inducing customer loyalty. These strategies will also increase
Metropol’s ability to attract new customers because of their want-matching system. Only
at this point should Metropol devote its resources to increasing market share in an
expansion to southern Ontario. When this expansion is deemed necessary, merger is the
desirable option. By merging, Metropol avoids infrastructure setup costs, utilizing a
competitive advantage the moment they enter the market. To grow in the security
industry, an Ontario presence must be achieved.
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APPENDIX A
SWOT Analysis
Strengths- Third largest share of the market- Established brand name- Recognized quality & reliability- Economies of scale- Very efficient administration- Very good cost control- Efficient employee management (low employee efficiency ratio)- Differentiated level of service- Increased switching costs (from education) than competition Assume greater customer loyalty- Able to collect accounts receivable quickly- Swift and responsive customer service- Many strategic options- Developed understanding of scope of abilities
Weaknesses- Does not offer security hardware (therefore no full-package offered to customers)- Not completely national- No strategic direction- Mission not clearly defined- No segmentation of market
Opportunities- Market expected to grow, double security guards and triple ESDs demand- ESDs have a greater margin, possibility of obsolescence- ESDs create company loyalty- Room to grow in current market by stealing customers from weaker organizations- Insurance costs increasing (less indirect competition)- Crime growing faster than Government crime fighting- Residential market requires similar services (not security guards) and market is similar- Industry becoming more formal and standardized
Threats- Industry has bad reputation for quality and reliability- Low startup costs- Perceived switching costs are low- Low pretax margins- Differentiation difficult- Increased ESDs means lower security guards required- High turnover (approaches 100%/yr)- Most of market is lowest-price oriented
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APPENDIX B
Employee Efficiency Ratios
The employee efficiency ratio, given by formula 1a, was designed to analyze the number
of employees a firm requires to generate $1 of revenue. The lower the ratio, the more
productive employees are in general. This ratio is only effective when comparing similar
industries.
1a Efficiency Ratio = # of EmployeesAnnual Revenue
Efficiency Ratios of the top 5 market-share holders in Canada (followed by rank)
Pinkertons 0.000092 2nd
Burns 0.00015 4th
Metropol Base-Fort 0.000067 1st
Wackenhut 0.00017 5th
Canadian Protection 0.00014 3rd
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