Importance of customers in an unregulated market – Parcelforce

The purpose of this report is to ascertain the importance of customers in an unregulated market with different competitors in existence

Business is the provision of goods, services or both to customers or an organization that provides goods or services in order to attain profit. (Griffin and Ebert, 1996)

Business objective is profit maximization through customers needs satisfaction, for this customers are kings and placed at the center of business activities

Businesses in an unregulated market, it’s the survival of the fittest. What makes your products or services different and unique from others? What is in your business and products or services that attracts and keep customers? Is your business an aroma or an odor? A good answer to these questions can help achieve a successful business. The knowledge and understanding of customers needs is imperative. What strategy or approach should be adopted to achieve this?

The following would be discussed using parcel force courier service as the case study.

a. Customer Oriented Approach.

b. The various activities parcel force is engaged would be discussed and its strategies employed to circumvent any hurdle it faces or to accelerate its growth would also be analyzed

c. SWOT Analysis would be carried out on parcel force worldwide with a view of determining the internal characteristics that can contribute immensely to the achievement of its goals and objectives, also factors within the control of parcel force worldwide that as power to militate against the accomplishment of its goals and objectives, the opportunities on the open that parcel force can tap into, and the threats outside its control that are capacity of undermining its survival and growth

d. The report ends with the importance of having a strong differentiator given the open and competitive environment within which it operates

PARCEL FORCE HISTORY AND OPERATIONS

Parcel force worldwide is a company involved in courier and logistics service in the United Kingdom. It is trading name of Royal Mail Group Ltd. It was founded on 1990 with its headquarters in Milton Keynes, United Kingdom and employed over 4,500 workers.

Parcel force Worldwide performs which is referred to as a “hub and spoke” collection and delivery system with two hubs located at Coventry, just adjacent to the airport. One hub is exclusive for the UK parcels and the other reserved for international parcels. Parcel force Worldwide is capable of handling up to 58,500 parcels an hour.

As competitive as the service sectors is, Parcel force Worldwide is in direct competition with international brands such as DHL, FedEx, UPS and DX Group. Given the openness of the market, Parcel force recognizes that customers are central to its operations and its survival and success, so it aims to provide improved quality and customer services by talking and listening to customers, which is important in anticipating requirements and solving problems promptly, making sure parcels are delivered on time, providing platforms to enable customers track their parcels, engaging in myriad of corporate social responsibilities such as supporting local communities by its involvement in important sector like education.

With the world’s focus on ways of reducing global warming and climate change, and the promotion of a green environment, Parcel force Worldwide in 2007, became the first express carrier residing in the United Kingdom to offer its customers an option to offset the carbon emissions joined with the delivery of parcels. Under this system, Parcel force Worldwide allows customers to make a voluntary contribution of five pounds for a UK delivery or ten pounds for an international delivery to the Woodland Trust. The residual is then math by Parcel force Worldwide.

In promoting and improving its customer service and promoting the concept of choice which is central to consumers, Parcel force Worldwide operates activities such as Business to Business (B2B) services, which deals mainly with the delivery of parcels and supplies from business entity to other business entities, and also Business to Customer (B2C) service, which is in the business of delivering parcels to customers or individuals in their residence around the United Kingdom.

(1) WHAT IS MEANT BY A CUSTOMER-ORIENTED APPROACH

The importance of a customer to every business cannot be over emphasized. A customer is central to every operations of an enterprise, in that every activity undertaken by such enterprises revolves around its customers. The survival, growth, profitability, status etc. of such enterprise is tied not to the quality of the product or services provided, the enterprise’s delivery service etc, but to its customers. As the short and long-term goals of survival, growth, high turnover cannot be achieved without the presence of customers in the portrait.

The importance of a customer to an organization is buttressed by the infamous speech made by Mahatma Gandhi in South Africa in the year 1890.

“The most relevant and important visitor of business premises is a customer. He does not depend on the business but rather the business depends on him. He is the reason for the business. He is not regarded as interruption of work. He is known as part of the business and not an outsider. The business does not do him a favor by serving him, he is doing the business a favor by giving the opportunity to serve him”. (Mahatma Gandhi, 1890 )

They later aspect of the above quote brings to bear the power a customer possesses in determining the survival, success or failure of any enterprise. The profitability or growth enjoyed by any enterprise is directly related to the number of customers (customer base) the organization or enterprise has to its name, which in turn depends on the organization’s ability to provide the night product (s) as desired by the customers, that is, satisfying the customers’ needs, and the nature of customer-relationship.

According to the Business Dictionary, customer-oriented approach refers to “a groups of activities carried out by a business to help its sales and service staff in considering client needs and satisfying their major priorities”.

In a simple term, customer-oriented approach refers to any activity or activities undertaken by an organization or enterprise to draw in customers into its customer base and retain the already captured ones.

Customers tend to have varying characteristics. Some are quick to anger, while some are slow. The identification of these characteristics is important in developing strategies for dealing with each category of customers. ( Kardes et.al 2004 )

An intemperate behavior displayed by a customer is to be seen, not as fault on the part of the customer, but rather as a sign that something fundamental is wrong with the company’s product and/or service, as a satisfied customer won’t be in the business of complaining or causing a scene.

Some of the customer-oriented strategies adopted by Parcel force include;

• Development and improvement in quality of services: In 2002, it was observed that Parcel force Worldwide was making a loss, and this was due to its poor quality of service delivery categorized by unguaranteed parcel deliveries which took two to four days. The loss, as reduce from passage, was due to lack of patronage on the part of its supposed customers as a result of uncertainty on the delivery date. To remedy this situation, Parcel force switched to time and day guaranteed, express delivery. In order to achieve this, the volumes of parcels were reduced on one hand, and the value of delivery increased.

• Restructuring the composition of its employees to increase efficiency: Efficiency in this case, is defined in terms of an efficient machine. (Agiobenebo, 2003). An efficient machine is one that converts 100% of its inputs into an output of the same proportion. In order to achieve this, Parcel force cut back on absenteeism (particularly staff taking unauthorized or sick leave) and also reducing the time lost to accidents at work.

• Involvement in community issues: Given that, no business operates in isolation, in that the community (which constitutes part of the company’s external environment) exerts great influence on meeting its goals and objectives, in terms of how the community view the organization. A recognition of this is necessary if the company intends to achieve the goals of survival, growth and profitability. Parcelforce does this by undertaking certain corporate social responsibilities which includes; reducing the carbon footprint of the parcel delivered, supporting local communities through involvement in education either by granting scholarship, provision of certain equipment, etc.( Carroll and Buchholtz, 2003 )

• Value-addition: Given the competitive nature of the service sector, which has the capacity of reducing one’s customer base, emphasis should be place on value-addition in order to attract and retain potential customers. Parcel force Worldwide does this, by providing a platform for its customer(s) to follow a parcel through online tracking, ensuring that any problem encountered after-sales delivery are dealt with promptly.

2. HOW SWOT ANALYSIS CAN HELP A BUSINESS TO IMPROVE

It is truism that no business enterprise exist in isolation. That is, certain factors (generally referred to as, the business internal and external environment) hinder or spur the enterprise to growth.

External/internal environment as used above refers to or encompasses factors, issues, occurrences, trends etc that are outside/within the control of business which have the potentials of affecting the success of the business and its operational approaches. ( Duncan, 1972 )

SWOT Analysis is a management technique employed in determining or understanding the strength and weakness of the business, and for the identification of the opportunities open to the business and the threats to be faced by the business. Thus;

S = Strength (what the business have)

W = Weakness (what the business lack)

O = Opportunities

T = Threats

The strengths and weakness of a business are categorized as internal factors, while the opportunities and threats fall under external factors.

SWOT Analysis aim to achieve the following;

– Provision of tools and information necessary for the establishment of the business and objectives

– To allow one ascertain the business progress

– To provide a broader perspective as to where the business stands

How SWOT Analysis helps in improving a business can be explained under the following headings:

(i) EVALUATION OF BUSINESS STRENGTHS: The strength of a business rest on a myriad of factors, which resources, from customer loyalty, goodwill, financial resources, human skills of its employees, large client base, nearness or proximity in terms of geography for customers, to convenience. The above factors places such business on a higher pedestal as compared to those without in wooing potential customers. Take for instance, the strength of financial resources. The presence of this enables such business to venture into research and development capable of improving the value of the products or services provided, or in purchasing modern equipment and technology that could improve the quality of its services.

A business whose employees have high human skills tend to experience high growth rate and profitability due to quality service delivery which is a result of effectiveness and efficiency on the part of its employees.

The existence of customers’ loyalty or brand loyalty to a company’s product is an important ingredient for the growth and success of the business. (Aeker,1991) defined brand loyalty as “the attachment that a customer has to a brand”. Its existence, that is customer loyalty or brand loyalty, is directly tied to the company’s ability to match the expectation of its customers. The enjoyment of this loyalty is a in an addition to the company as, it is most likely possible that, during bad times, consumers of the company’s product or service will tend to stand by it based on past antecedent or patronize its services in the face of stiff competition. There is also the advantage of, customers willing to part with any currency equivalent for the services given by the company.

Below are list of Parcel force Worldwide strengths:

– Good customer base: With over 30,000 business customers in the United Kingdom and 23 partners across 30 European countries.

– Financial strength: Parcel force Worldwide has a turnover of £382 million. The financial strength of Parcel force is corroborated with a 7.3% annual growth in revenue.

– Productivity rate: In simple term, productivity refers to the ratio of output volume to the volume of inputs. That is, it measures the quantity or units of output produced by employing a certain level or units of factors of production (such as labor and capital) (Smith 1776; Ricardo 1807). The productivity level of Parcel force Worldwide is put at 200,000 parcels per day. This productivity level or rate tells a lot about the effectiveness and efficiency in Parcel force Worldwide delivery system.

– Spread: Parcel force Worldwide has branches and delivers parcels in over 30 European countries.

– Involvement in Business to Business (B2B) and Business to Customer (B2C): Parcel force Worldwide engages in delivery parcels and supplies from companies to other companies (B2B), and to individuals at their residence around the United Kingdom (B2C).

– Efficiency in Operation: The reduction in the number of staff employed by Parcel force Worldwide, the closure of some of its depots and the opening of a new, technologically advanced sorting centers in Coventry has increased the operating efficiency of Parcel force Worldwide which is an added advantage.

– Availability of Operational, Promotional and Growth Strategies: The readily availability of operational, promotional and growth strategies to improve efficiency and meet customer needs better, strengthen the brand presence in key markets, and expand the business operations outside the shores of the United Kingdom respectively is a to Parcel force Worldwide.

(ii) EVALUATION OF BUSINESS WEAKNESS: The adoption of a SWOT Analysis tends to expose the weakness of the business, which is necessary in the step to restructuring business practices. Certain business weakness includes; minimal staffing, poor quality product or service, accessibility of product, high price as compared to competitors. The aforementioned weaknesses have the potential of championing the death of such business. By employing SWOT Analysis, the various weakness of the business can be exposed, and changes made in order to improve the business. Take for instance, a business having lack of accessibility to it product. Lack of accessibility of product means, lack of purchase of the company’s product they can readily have access to. This results in a reduction in customer base, which leads to the death of such business. By employing SWOT Analysis, the said weaknesses can be identified and proactive measure engineered to minimize or eliminate such weaknesses.

The various weakness of Parcel force Worldwide includes:

– Commitment of staff to work, that is, attend and rates: The level of commitment of employees of Parcel force Worldwide to work is low, as this resulted in a loss in the trading year of 2002.

– Presence of accidents at work: As noted in editorial, a good number of accidents tend to occur at the offices of Parcel force Worldwide. This result to a loss in valuable time, which could have to channeled into something productive.

(iii) EVALUATION OF BUSINESS OPPORTUNITIES: Business opportunity refers to those unexplored or untapped area which has the potentials of increasing the growth of the business. The identification and exploitation of certain virgin areas tends to improve the quality of product or services rendered and also improve the business’ customer service. Take for example, the venture of Parcel force into online tracking of customer’s parcel, under the assumption that this advancement is alien to its competitors, tends improve its customer service and quality of service by enabling such customers conveniently monitor their parcels. This has the effects of increasing its customer base due to improve serve delivery.

Some of the business opportunities Parcel force Worldwide is opened to include:

– Change in demographic conditions: With a larger proportion of the population aged over 60 years, Parcel force Worldwide can cease the moment by being the first service delivery company to deliver cards that can be read by people experiencing sight problems and for those who are unable to speak and understand English.

– Recognition of the strength of organization structure: Given the fact organization structure is essential or a key strength in ensuring and supporting quality customer service, investment can be made in terms of training and re-training its staffs in order to ensure quality customer service, the effect of which is beneficial to Parcel force Worldwide.

– Shift from product-oriented to customer-oriented system

(iv) EVALUATION OF BUSINESS THREATS: Business threats are those factors that have the potentials of undermining the survival and growth of a business. Business threats may include, the entrant of similar firm, reclining effective demand for the business’ product or service, customer friendly policies employed by one’s competitors, merger of certain businesses or firms, economic downturn

Economic down turn tend to have the effect of reducing the disposable income of customers which result in declining demand for the business product or services. This has the potentials of undermining the success of any business.

Some of the threats Parcel force Worldwide is faced with include:

– Unregulated market: The market in which Parcel force Worldwide operates in, is one in which there are no rules guiding the conduct of individual firms operating in the market. The implication of this is that, individual firm can engage in any act that is of potential danger to Parcelforce Worldwide.

– Consumer Power: The existence of consumer power means that Parcel force Worldwide is at the mercy of the target market, and thus, have little influence in determining the price of its service (Reynolds, 2011).

– Existence of similar Services: The existence of similar services offered by other business entities has the potentials of reducing the market share of Parcel force Worldwide.

– Few players, with large market share: This has the effect of making it difficult for Parcel force Worldwide to increase its share of the market.

– Open market.

Below is the SWOT Analysis Table of Parcel force Worldwide

POSITIVE TO THE ACHIEVEMENT OF GOAL NEGATIVE TO THE ACHIEVEMENT OF GOAL

INTERNAL FACTORS Strengths

– Good customer base

– Financial strength

– Spread

– Involvement in B2B and B2C

– Efficiency in operation Weakness

– Lack of commitment to work

– Presence of accidents at work

EXTERNAL FACTORS Opportunities

– Change in demographic conditions

– Recognition of the strength of organization structure

– Shift from product-oriented to consumer-oriented approach Threats

– Unregulated market

– Consumer power

– Existence of similar services

– Few players, with large market share

– Open market

3. THE DIFFERENCE BETWEEN B2B AND B2C BUSINESS

Before delving into the differences between B2B and B2C businesses, it is important to define such businesses. B2B, which is an acronym for Business-to-Business, is one that involves the sale of goods or services to other business/businesses. In other words, it involves the sale of goods and/or services from one business entity to another.

B2C or Business-to-Customer, as the name implies, involves the sale of goods or services to single individual or customers within a given geographical location. Parcel force worldwide also engages in Business to Business (sale of services to business entities) and Business to Customers (sale of services to customers) activities. Parcel force Worldwide does this through its 53 depots where businesses and/or customers can visit in order to send parcels to not just UK destinations, but to international destinations. Also, its post office branches allow customers to send parcels from any post offices across and outside the United Kingdom. Customers and businesses can directly conduct business transaction or purchases with Parcel force Worldwide through its official website or through its call center.

The differences between these two businesses can be analyzed under the following headings.

(i) Purchasing Process: With regards to Business to Customer (B2C), customers who purchase the business product or services, do so for personal use. Thus, little or no lag exists between placing an order and receiving the package as prompt and quick decisions are made on the part of the customer. Hence, the purchasing process is simple. One the other hand, the purchasing process is complex with regards to B2B business, as decision making tends to go through several processes which involves several departments. Certain large purchase, may need some approval, in terms of authorization from the board.

(ii) Price and Payment System: With regards to B2C, customers who purchase product or services pay the product price as other consumers at point of sales and employ payment mechanisms such as check or cash payment, use of credit or debit cards. In Business to Business, price paid for vary from one customer (business) to another and depends on terms-of-negotiation, quality of products orders. The payment process is complex, as products are selected, order placed, and logistics agreed upon. It is worthy to note that, payments are not made at the time of the order, rather invoices are received and settlement made based on agreed payment terms.

4. IMPORTANCE OF HAVING A STRONG DIFFERENTIATOR IN AN OPEN MARKET

An open market is one in which there are no hindrance or restrictions to the entry and exist of business offering similar or same product (s) or rendering similar services. The existence of no barriers to entry, means the emergence of competitors who brings with them certain threat that are detrimental to the success and survival of one’s business. Thus, the need for strong differentiator in a market as competitive as an open market.

Product or service differentiation is a marketing technique employed by businesses to distinguish its product or service from similar ones offered in the market.

The reason(s) why a strong differentiator is importance is or are as follows:

(i) Elimination of perceived substitute: The presence of differentiators inherent in the product or service tends to make the services or products standout. In other words, it eliminates any perceived substitute. The existence of a substitute spells doom as consumers feel indifferent as to whether to consume the business’ product or other offered in the market. This results in decline in sales, which affects the survival and success of the business.

(ii) Protection or maintenance of goodwill: The development of strong differentiator is necessary if a business wants to protect and maintain the goodwill it currently enjoys.

Take for instance, product of business A is not different from that of business B. certain negative issues observed through the usage of the product of business B, can be viewed also, as inherent in the product of business A. Thus, destroying the reputation of business A.

(iii) Enables the business to venture into competition that does not involve price: The existence of competition among firms in an economy makes it possible for individual firm to engage in activities capable of increasing the demand for their products (Friedman, 1979). By pursuing individual goals of profit maximization, firms channel their resources into viable ventures or productive activities that contribute immensely to their self-interest of profit maximization. Led by this ‘invisible hand’, firms, in the process of actualization of the goal of profit maximization, produce an outcome that is beneficial to the general populace (Smith, 1776).

Operating in a competitive environment and led by an ‘invisible hand’ geared towards increasing the financial position of the business, strong differentiator could be in the area of increasing the quality of the service or goods, the taste of the good, by making it more appealing to the tongue of the consumer. Another could be eliminating or bringing to the barest minimum any health issues associated with the product or the introduction of substances or ingredients that are capable of improving the health of any consumer that would purchase such goods or services.

As opined by Virgil (19 BC), “The greatest wealth is health”. Put in another way, health is wealth. By recognizing the high premium the general public place on health and efforts made to promote sound health, Parcel force Worldwide in carrying out its corporate social responsibility (CSR), engineer programme which has its search light on health and safety, the environment etc. An example of this, the programme initiated with the sole aim of reducing the carbon footprint of parcel delivered to customers and business entities.

(iv) To build a formidable brand loyalty: The presence of brand loyalty is essential for the survival, growth and success of any business. Strong product differentiation plays a significant part in building and re-building product loyalty As posited by The American Marketing Association, brand loyalty is defined as ” where a consumer continuously buys the same product or service repeatedly over time instead of buying from multiple suppliers within the same category”. It also defines brand loyalty as, “the degree to which a consumer consistently purchases the same brand within a product class”.

Travis (2000) sees brand loyalty as “the fundamental objective and meaning of brand equity”, arguing “brand loyalty is brand equity”. The situation in which a consumer repeatedly buys the same product from a business entity, rather than from other business entities can only be achieved when such consumer derives satisfaction from consuming such good or product or service. The consumers’ level of satisfaction can be maximized when the brand fulfill the expectations of the consumer (Bloemer and Kasper, 1995; Ballester and Aleman, 2001).

The fulfillment of consumer’s expectations is made possible through the existence of differentiators as business entity re-direct attention from the worth of the product, that is price, to improving the quality, taste, and in the case of automobile, reducing the quantity of gasoline needed to cover a particular mile.

The provision of a platform through which customer of Parcel force Worldwide can track their parcels from the comfort of their home, adds to the company’s loyalty, in that, such platform contributes to increases in the quality of the service provided.

This has a lot of bearing on the revenue of Parcel force Worldwide as converted loyal customers will be willing to part with any money (price) for the service or product offered (Jacoby and Chestnut 1998; Pessemier 1959; Richeld, 1996). This is mainly due, in part, or to a large extent, to the communication medium of the brand, the trust the customer has on Parcel force Worldwide, and the improved quality service offered. This has the potential of increasing company’s share of the target market (Assael, 1998).

(v) Improvement in Margins: As state earlier under the argument for building formidable brand loyalty, the employment of strong differentiator shifts attention from concentrating on price to the non-price competitive area, like focus on quality and taste. By building consumer loyalty through the development and adoption of stronger differentiation, consumers of the services provided by Parcel force Worldwide will be willing to pay any price for the services rendered. This goes a long way in improving the profit margin of Parcel force Worldwide, as certain fixed costs and operating and/or overhead costs can be met.

CONCLUSION

The role played by Parcel force Worldwide in the United Kingdom and around the globe cannot be over-emphasized. The service sector, to which Parcel force Worldwide is a part of, is highly competitive and this requires the development, adoption and maintenance of strategies that are capable of promoting and maintaining the survival and success of Parcel force Worldwide.

The adoption of differentiation strategies, SWOT analysis, and restructuring the composition of employees have contributed immensely to the success of Parcel force Worldwide through or made possible by effective and efficient delivery system and customer service which are the direct results of the techniques and strategies mentioned above.

In order to continue on this giant stride and improve upon it, Parcel force Worldwide must be on the lookout for opportunities that are capable of contributing immensely to its growth and success.

Source: ChinaStones - https://china-stones.info/essays/business/importance-of-customers-in-an-unregulated-market-parcelforce/





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