Research Proposal on "Compass Group Marketing Strategy"
Research Proposal 9 pages (3509 words) Sources: 15 Style: Harvard
[EXCERPT] . . . .
Compass Group Marketing Strategy Case StudyThe time period of 2001 through 2005 was a turbulent one for Compass Group. Besides battling a global recession, the company was also implicated in ethically questionable activity including accusations of bribery at the United Nations to promote its Eurest Support Services (ESS) and win contracts illegally. In addition, there had been relatively flat demand in its largest markets including the U.S. with the business and industry catering segments struggling. The full implications of these challenges are seen in a financial analysis of Compass Group, which are shown in the Appendix. Table 1, Compass Group PLC Ratio Analysis, Table 2 Compass Group PLC Income Statement Analysis, and Table 3, Compass Group PLC Balance Sheet Analysis quantify the challenging strategic obstacles Compass Group faces today. The financial analyses are also insightful to ascertain the opportunities and threats facing Compass in both the UK and in their North American served markets. Based on insights gained from this analysis and from the review of the company's history between 2001 to 2005 a series of strategies are made for each of the four regions the company competes in.
Compass Group's Turbulent Flight: 2001-2005
Amongst the many costly and potentially damaging distractions Compass Group faces is the lack of a strategic plan that synchronized their many businesses (Paton, 2005, 31), resulting in gradual deterioration in their net capital expenditures that seriously eroded their ability to stay competitive in their core businesses. This is seen in the analysis of their balance sheet in Figure 2 in the appendix. As a result of this t
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As of this period, Compass Group has seven divisions and despite the glowing reviews of performance in each one with positive turnover (Garner, 2004, 22) and growth by Compass senior management, this in fact not the case. The eight divisions are in fact forcing the supply chain into a fragmented, inordinately expensive response to catering relative to travel concessions, Business & Industry, Defence, offshore and remote, Education, Healthcare, Sports & Leisure, and Vending. Critical to many of the business models in each of these sectors are earning and retaining contracts. When one of the managers' responsible Eurest Support Services (ESS) is caught bribing the UN to win more contracts the stability of several sectors' business models is threatened by fines and penalties, in addition to a loss of credibility (Gander, 2005, et.al). In fact the bribery activity by one subsidiary of Compass Group just provide evidence of how fundamentally chaotic the operations of the divisions had become, and how each began to become disconnected from the broader strategic direction of Compass Group (Mason, 2003, 14). The bribery incident with the UN is a symptom of another more fundamental flaw of the company and that is the lack of synchronization of strategies across the divisions. The UN contract value (Bill, 2005, 14) of £35M and the resulting ban from the UN (Bill, 2005a, 7) are significant for the company's reputation globally and further distracts them from the more systemic challenges they face in their core business. With the U.S. Congress launching a probe (Elan, 2006, et.al.) in all operations of Compass in the U.S. (Elan, 2005, et.al.) it is no surprise when shareholders ask for prompt action and voice agreement with the division being disbanded who sponsored the bribe in the first place (Compass Group PLC, 2004). As this period in the company's history ends, the urgency of getting the company more sychronised and into a more consistent direction becomes obvious (Afiya, 2005, 5) and (Frewin, 2005, 16). What is insidious during this time is the fact that heir supply chain and logistics costs are escalating while depreciation and net capital expenditures are flat-lining while cash flow drops. Compass Group must get beyond the many distractions to get a strategy together for first addressing their most potentially fatal flaw and that is the lack of supply chain and logistics efficiency compounded by conflicting demands from their divisions on this critical set of processes in their organization. The bribery case is evidence of a how inefficient the organization has become; lower prices and the ability to outbid competitors needs to be organically created through exceptional process performance, and this is clearly not happening during this period of time during the company's history.
Assessment of Opportunities and Threats
In analyzing the opportunities and threats that face Compass Group during the 2001-2005 timeframe the role of their existing customer base needs to be the highest priority in both of these areas. As the customer base is the primary source of recurring revenue, the greatest opportunity in both the UK and North American markets is customer retention and organic growth in this specific area of their business. As has been noted in the company's financial statements and in analysis of their situation as of 2005 the client retention rate of Compass Group typically hovers in the 95% range (Rammel, 2005, 25-26). With retention being such a critical issue, Compass Group needs to nurture and grow this area of their business in the top sectors of the UK and North America, and this is the greatest opportunity the company has for increasing growth. Vending, Defence, Offshore & Remote and Business & Industry in the UK are showing the most consistently highest levels of turnover and growth, and need to have a higher proportion of capital invested in them as a result. This needs to be tempered however with the concern over asset and ROI efficiency as is shown in the financial performance illustrates in Tables 1 through 3 in the Appendix. In North America, the greatest opportunities are for growing the Defence, Offshore and Remote sector, followed by Travel Concessions and Sports & Leisure. As the case study mentions, Healthcare is experiencing growth due to the demographic trend of more aging baby boomers in the North American markets needing enhanced healthcare services. All of these sectors in North America have delivered over 15% turnover, with education have slightly below that figure yet still above 10% as of the financial statements analysed to complete this report. All of these opportunities in both the UK and North America however need to be tempered with the fact that the company's internal efficiencies need to be made more efficient and significantly more cost-effective as has been shown through financial analysis mentioned in the introduction.
Threats to Compass Group in the UK and North American markets include sanctions and potential penalties for their bribery scandal involving the UN, in addition to a significant reduction in Defence, Offshore & Remote business in North America, the company's leading sector in that geography. There is also the threat of increased competition in all sectors in North America in addition to continued consolidation of the catering and food retail industries. There is also the threat that is internally based, and that is the severe lack of supply chain coordination the company is experiencing, as is illustrated by the high inventory turns and correspondingly low profitability, starting in 2001 and extending into 2002. This threat is also exacerbated by the complication of logistics as it relates to serving the North American Travel Concessions sector, which is geographically broadly distributed across North America, with a supply chain… READ MORE
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“Compass Group Marketing Strategy.” A1-TermPaper.com, 2008, https://www.a1-termpaper.com/topics/essay/compass-group-marketing-strategy-case/21807. Accessed 5 Oct 2024.
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