Natural physical environment
As a construction and engineering company, DT faces various external and internal factors that affect the day to day running of the company. The external environment consists of various opportunities and threats which the company is subjected to in that particular business environment. For instance, just like every other firm around the world, DT is affected majorly by the natural physical environment which is accompanied by various sustainability issues.
The societal environment for DT comprises of economic, political, technological and socio-cultural. The economic environment for DT acts as an opportunity for the company, thanks to the current economic growth experienced in UAE. While other organizations are affected by the downturn in the economy, the like of DT and other companies within the UAE boast of the vast natural resources and profits in the region to maximize their profit through operations. Then there is the technology, one of the most crucial components of Driver Trett as a company. Being a construction and engineering firm, the company relies heavily on technology for most of its construction processes and other business operations and networks. The political or legal factors affect the operation of DT profoundly as the company relies on legal procedures in undertaking almost all its activities. However, the friendly political atmosphere enjoyed in the UAE would offer the most favorable political environment for the continuous operations of the company. The socio-cultural facets of the environment play a significant ongoing role in DTs tactic both in services and marketing. With the massive leap in technology, DT has been able to satisfy both younger and older generations as it can serve and accommodate all generations wants and needs.
The task environment factors that affect the operations of DT are such factors as the threat of new entrants, bargaining power of buyers, threat of substitute products and services, bargaining power of suppliers, rivalry among competing firms and relative power of unions, governments and special interest groups. The entry of new competitors and bargaining power of buyers in construction and engineering companies are medium, thus giving DT an excellent opportunity employ its customer lifetime value to reinvent their marketing strategy. For instance, with the bargaining power of the buyers being medium, the company can find its most valuable customers and retain them from the competitors. Such benefits also give the company capability to segment its clients by lifetime value, a crucial strategy for marketing.
However, the threat of substitute products and services, bargaining power of suppliers and rivalry among competing companies are all high in consultancy market. For instance, the company considers launching customer-focused campaigns with precision and focusing on new clients worth retaining, all of which are done using the customer lifetime value to reinvent the firms marketing strategy.
The internal environment of DT as a company comprises of its strengths and weakness in offering the construction and engineering services to its customers. Such factors depend on the firms corporate structure, corporate culture, and organizational resources. The companys central capabilities are from its large-scale operation, strong brand image and high-performance culture. Its characteristic skills are of its technological infrastructure and ability to lead in cutting-edge ways through adaptation and application of technology in new and inventive ways.
Customer lifetime value (CLV) for Driver TrettAs a consultancy firm, DT has been able to apply the CLV model mainly for the calculation of the customer value over the life cycle. For this, the firm uses the repeat behavior as an indicator of high lifetime value and as a prediction of future repeat behavior. The firms systems and methods for predicting the CLV based on segment level churn involves segmentation of the customers into multiple other segments according to the weighted RFM scores allied to the data within the dataset. The data represents the purchasing behavior of the customers over a predefined period of time. In performing the segmentation, customers with similar and close weighted RFM scores are grouped in one segment. The firm also through the method computes a churn value for each of the customer segments based on each segments buying behavior. The churn value linked to transaction features which are the linked to customer correspondence to each segments data. The expected customer lifetime period in years is the projected from the calculated segment level churn values. Subsequently, the customer lifetime value, which is an indication to the profitability associated with customers, is projected for each client based on their expected lifetime value in years.
Therefore, in calculating their customer lifetime value, the firm applies the equation:
CLV = (Frequency of Purchase) X (Duration of Loyalty) X (Gross Profit)Now suppose the firms retention rate for a set of clients say for past four years is 63%, 64%, 65% and 64%, the average retention rate for the firm would equate to 64%. Now according to the analysis, the expected relationship duration for the average customers would:
11-average retention rate11-0.6410.362.778Therefore, using the customer lifetime value, the firm is able to respond to both the internal and external factors that affects it in the consultancy industry. The most important aspect for every business is how retain and maintain a significantly high number of customers in the highly competitive market environment so as to maximize the profit from the same. Taking advantage of the opportunities and strengths, and taking precautions from the various risks and weaknesses, the firm is able to apply the CLTV model effectively to realize its main objective, realization of maximum profit.
The strength, weaknesses, opportunities and threats of DT are as in the SWOT analysis table below:
Plant and equipment management
Quality of products and services
Strategic alliances with local firms
Growing non-oil sector
Tax free environment
Political stability, and
Oil-rich UAE Weaknesses
Research and Development activities
Training and retraining of staff
Innovation in services
Strategic planning, and
Joint ventures with overseas firms
Growth of inflation
Instability of currency value
Disparities between the emirates
Shortage of skilled manpower
Increasing in oil production spending, government saving decrease.
The rise of oil income
Increase in oil consumption and rise of oil prices globally
Transfer of technical expertise Threats
Iran restarting their nuclear weapon program
Conflicts in the GCC region which worsens security
Downside dangers associated from the global economy
Worsening of global financial market settings
Competition from emerging markets in Middle East and around the world
Since the firm has realized the importance of retention rate in marketing in the consultancy industry, it has shifted its focus from acquiring new customers to retaining the existing ones which has indeed proven cheaper since in the industry the lifetime value is more a significant metric than the profit made from an individual sale. According to Marketing Metrics, the probability of selling an existing customer is between 60% and 70% while the probability of selling a new prospect would be between5% and 20%.
With the customer retention rate standing at 64%, the firm is determined to improve the rate by at least 20% so to achieve an 84% or more in average in all its offices in the Middle East where it faces the stiffest competition. To do this, the management has to consider showing numerical improvement CLTV model variables especially the frequency of the customer buying, how long the customer stays with the company and their gross profit.
The mission of Driver Trett (UAE) is to combine its commercial procurement services with its widespread planning, technical knowledge, and project management experience to empower the company to offer an inclusive, integrated service to its clients. To ensure this, the firm coordinates the legal, technical, and financial and any other additional specialist services that are applicable throughout the progression to the various project phases. To realize its objectives, the DT management utilizes the customer lifestyle value (CLV) which provides it with unprecedented insights and vital tools for predicting most of its marketing strategies from saying individual spend of a specific client to their quarterly sales growth. Through CLV, the company can attract high-margin customers while targeting clusters of their clients with untapped value and retaining their high-value customers on the verge of churning.
Since DT firm is unswervingly related to the state of the economy, it would be recommendable that it stays committed to informing and supporting its marketing budget allocation strategies. By use of CLV modeling, the firm can decide to observe its projected revenue stream from any channel based on other customers from other sources. As a result, the company will be able to gain instant insight into any marketing strategy thus helping it in the clarification of the return of every cent spent. The other recommendation would be to use the CLV model to learn and understand the lifecycle of the clients. Through CLV, the firm would be able to identify and target customers at earlier stages in their lifecycle which would then enhance its marketing effectiveness.
d) Strategic options
The TOWS Matrix as a tool is used to identify strategic options based on Threats, Opportunities, Weaknesses, and Strengths. The matrix is used to determine strategic options for DT as a firm. The first imperative option for the company is to consider keeping the existing strategies in place already while concentrating on fine-tuning them. As a firm, Driver Trett would continue to focus on satisfying its customers through the high-performance culture by meeting diverse customer needs. The company utilizes the manage collaboratively, operate independently, and compete collectively to segment its operating companies in such a way that each of them can stay while focusing on its particular products and services. Such an option is advantageous to the company in that it allows the company to make extensive efforts in organizing the firm while its procedures and policies are put in place in support of the existing strategy. Conversely, the strategic option is disadvantageous to the company in that keeping with the current plan would be challenging since the economy is at a halt hence suffering the firms financial situation. By analyzing both the internal and external environment, the company uses the techniques to figure out the strategy of the whole organization, department or a team within the organization. The model also helps the company figure out a process like marketing campaign and their experiences and skills.In modern marketing segmentation, targeting and positioning (STP) has been a familiar approach and is the most commonly applied marketing models in practice after the TOWS matrix. The firm has been using the STP model in creating marketing communications plans helping the marketers to prioritize propositions while developing and delivering personalized and relevant messages to engage with divers...
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