Creation of a marketing department and it’s development on the example of Kerama Marazzi company
Development of recommendations on the creation and development of a marketing department for Kerama-Sochi LLC. Methodology for conducting SWOT-, PESTEL-analysis and expert assessment. Analysis of the main financial indicators of the branch in Sochi.
| Рубрика | Менеджмент и трудовые отношения |
| Вид | дипломная работа |
| Язык | английский |
| Дата добавления | 14.07.2020 |
| Размер файла | 1,9 M |
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Bachelor's thesis
Creation of a marketing department and it's development on the example of Kerama Marazzi company
Volodina Anna Vladimirovna
Introduction
marketing financial expert
The tendency of creating marketing departments by various organizations to increase their competitiveness is becoming increasingly relevant in Russia. The production of similar products and services is growing, forcing the market to change rapidly, and firms to respond quickly to innovations and changes in order to be successful in the market (Razovsky & Kuliyev, 2019). Inclusion of marketing in a company's structure is an activity when marketing functions are introduced into work tasks that help achieve goals (Kotler, 2009).The relevance of creating marketing activities in organizations whose production is aimed at import substitution has been increasing in recent years. Enterprises direct their activities to meeting the needs of consumers of products, so the creation of such services is becoming increasingly important (Mechikova, 2017).
Many companies have a marketing service in the structure of the organization, but most of them are companies directly related to the provision of marketing services or IT services (Bondarev, 2018). The question arises about how to be those companies that have long existed in the Russian market and understand that they need marketing implementation in order to be more competitive? Despite the fact that more and more scientific literature is appearing confirming the need and importance of including marketing departments in enterprises, and Russia's economic market is undergoing a development stage, but many organizations still believe that marketing functions are not a priority (Saburova, 2017). Moreover, there is no relevant scientific literature that analyzed the need for inclusion of marketing services in the branches of companies that work in the construction industry. In this study, the author will analyze a situation that will bring new results regarding the investigated the problem of including marketing functions in activities of the construction organization, which is a branch.
The objective of this research is to respond to the request from Kerama-Sochi LLC and develop recommendations on the creation and development of a marketing department for this branch. The tasks that will help to achieve the goal of the study are as follows: studying the existing scientific literature on a marketing topic, strategic and financial analysis of the Kerama-Sochi LLC enterprise, conducting a questionnaire among managers of marketing departments to understand the structure of these services, conducting interviews with experts in the construction industry, to understand how the marketing departments of branches interact with head offices, then develop recommendations based on the results obtained after analysis of this organization.
The structure of the research consists of several parts: theoretical basis, analysis of the situation, project section and conclusion. In addition, 77 pages (without appendices) and 89 sources cited in this research.
In the part “analysis of the situation”, the analysis methods that were used to obtain the necessary results will be signed. Firstly, such strategic analysis methods as SWOT and PESTEL will help to study the internal and external environment of the Sochi branch. Moreover, the expert evaluation method will be used in conjunction with the PESTEL analysis. Secondly, the analysis of the main financial indicators will be carried out to find out whether the enterprise is stable or not. Thirdly, the questionnaire will be used for managers of marketing departments in order to understand how the marketing service works, which specialists are included, and what functions this service usually performs. In addition, several interviews with specialists with extensive experience in the construction industry will be conducted because it is necessary to get to know how marketing departments of the head office interact with departments of branches.
The object of the research is Kerama-Sochi LLC which is engaged in the sale of ceramic products, granite, mosaics and sanitary ware of Russian production. The subject is study of the structure of marketing departments and development tools.
The results of the study could be relevant for small enterprises (from 16 to 100 employees) that operate in the construction industry and are a branch of an organization. The construction industry is a significant part in the socio-economic development of any developing country, being an important factor showing its stability. In 2017 the share of the construction industry amounted to 5.3 trillion rubles, this is a contribution to the economy of the state of the Russian Federation, this industry took 6th place (Pakhomov & Ovchinnikova, 2019). This indicator illustrates the importance of ongoing analysis of the industry. The results of this study will have a potential contribution to improving the competitiveness of small business construction companies.
1. Theoretical foundation
As an important piece of economical area and business function, marketing came out in Russia at the cusp of the 19th and 20th centuries. During that time there were being progressively developed couple of things such as a manufacturing potential based on business, printed and wall advertisement, producing of packing resources. Russian merchants were building flexible pricing policy and using different tools of distribution. (Suslova & Shcherbenko & Veremeenko, 2018). Before revealing how important the role of marketing in Russia's economical development was, positive attitude toward marketing was advancing quite slowly due to lots of “life stages” such as wars, revolutions, building and growth of Russian economics. The admission of marketing as the tool for one's organization successful working progress had being changed rather slowly in comparison with the other countries. At that time, when industrial organizations involved in export needed to stimulate sales, factories operating only within the country did not at all need to develop the marketing sphere (Berezin, 2004).
Nowadays marketing situation in Russia is completely different. Today the importance of marketing in Russia is obvious for every person who has something to do with economic action. (Utkin, 2003). Many universities have particular marketing subject of study, partnerships have a need in experts, who have studied the marketing area deeply and are ready to assist companies in competitiveness, being in circumstances of today market. Marketing tools are becoming more perfect and relevant day after day.
The amount of theoretical work material connected to marketing area is big enough. This part of project work contains several units, which include information about marketing influence on company's development, structure types of marketing departments, what tasks can be solved in it, what level of marketing thinking is in construction industry; social network help in spreading the material or service, which experts can work there, what are the potential risks of creating the marketing department and how to predict them. Each of these segments helps to understand what the structure of marketing department consists of and how to create department with a good perspective. To make the observation of needed literature more clear, I decided to get it structured by separation of resources in the following way. Articles and books, connected to the same or nearly familiar topic, will be discussed both under the one title.
1.1 Influence of marketing departments on the company's development
Having extensively analyzed research articles which tell about the influence of marketing department inside one's company, it is clear that expansion of companies' assortment, increase in supply in the marketplace are the reasons of hard insisting for demand on goods and of drawing customers' attention for different partnerships. For example, it is known that the operation system of marketing department can increase the amount of customers and the level of trading in company. For successful work of marketing strategy it is required to set the communication in particular department correctly and to have the possibility of determination the best tool out of all known suitable tools for one's structure, which was chosen by one particular company. (Falбt, 2017) As one research article says (Pugnaa & Miclea, 2016), because of permanently growth of market's competitive ability, the importance of including marketing into the company's structure has its certain growth as well. Due to marketing department possibility, organizations can easier know and get the wants of their clients, take on the task of how to propose its' product or service, what to change and where to make better the process of spreading the information about the product, that the client is going to approach particularly to this company. More importantly that a lot of authors in their research projects talk about the connection between marketing and market-line formation. For example, one of scientific resource has information about help of productive marketing department's work in market-oriented firm formation. (Verhoef & Leeflang, 2009). Organizations receive significant returns on enterprise performance when management recognizes the important role of marketing in a firm's business (Morgan, Thorpe, 2015). Moreover, some sources claim that the inclusion of marketing functions becomes especially important when the market is rapidly transformed and constantly updated (Moorman & Rust, 2018; Fox, 2015). Besides, there are some projects contain positive information of marketing work influence on financial department. Specifically, in the article (Keszey & Biemans, 2016) which has done empirical investigation of 296 Hungarian firms to make that conclusion.
However, there are other points of view, where it is argued that marketing and its useful functions have lost their strategic role, marketers who continue to participate in the development of strategies have remained in small numbers (Murphy, 2005). Marketing and management issues receive less attention in the boardroom (McGovern, 2004). On the contrary, many marketers make more tactical decisions regarding most of the advertising, sales support and public relations (Sheth & Sisodia (2016). Moreover, discussions on the impact of the activities of marketing departments on the development of organizations are noted in the marketing journal. (Brown, 2015). Nevertheless, there is more literature on the positive impact of marketing on companies.
Results, which has been got during the investigation, show that the company can make financial index numbers better by paying attention to notices and overview are offered by the marketing department. In addition, one of researches showed that if marketing had a high effect in company, the productiveness's raise in firm would be possible. After analyzing the articles is clear that marketing departments work has positive influence on companies' development.
1.2 The main types of organizational structures for marketing department
It is obvious that companies expect the marketing department to be successful in working and helpful in development. To get expectations of company satisfied it is important to make marketing department mobile, well-adaptive to inside and outside changes. The ability of being mobile is being achieved not only with the help of plenty of resources and correct management system, but also with the help of competent marketing service organization. (Savchuk & Mokerova, 2014). There is no common scheme for all organizations. Every type depends on what the factory does, how many departments it has, which distribution area is used, what client base is firm's target.
Today there is huge amount of marketing strategy types. Different sources contain different amount of strategies, the structure types are various, but still the better part of authors talk about the same structures. Mostly widespread scheme types will be reviewed in this section.
Consider the following types of organization structure which can be created in the factory (Kotler, 2009):
1. Functional structure.
In this particular structure of marketing organization there are elements cooperating with actual problems, which means that the formation happens dynamically. All elements are on the same scale of rank, doing all requests from the head of marketing section.
Marketing functional service is suitable for factories with not so big amount of goods and markets, and business process with distribution are constant and repetitive at the same time.
Figure 1. Functional organization*
*Based on the source: Kotler, F. (2009). Framework for marketing management. Second Edition by Pearson Education, Inc., Upper Sadille River, New Jersey. P. 387
2. Geographic Organization.
Companies that trade their goods all over the country often control employed traders by geographical principle. This structure was based on territorial or local fundamental. When business activity is increasing, different parts of market separate into territories. The world has continents, continents have regions, regions have sectors, sectors have districts. During organization by geographical principle, bargaining agents can be on the territory which they serve and it helps them to know client better and to work with less time and transportation expense.
Figure 2. Geographic Organization*
*Based on the source: Kotler, F. (2009). Framework for marketing management. Second Edition by Pearson Education, Inc., Upper Sadille River, New Jersey. P. 388
3. Organization for commodity production.
Factories with wide goods and stock lists commonly use the commercial manufacturing organization. The whole commercial manufacturing is managed by commodity nomenclature manager, who has various groups of goods' managers under control, which in turn have goods' managers underneath, each responsible for the production of their particular goods. This organization structure type has positive effect in case when products which are being produced, have unlike shape or if there are a lot of different its variations; in this case, functional marketing organization makes nomenclature management hard and complicated.
Figure 3. Organization for commodity production*
*Based on the source: Kotler, F. (2009). Framework for marketing management. Second Edition by Pearson Education, Inc., Upper Sadille River, New Jersey. P. 389
4. Market Organization.
Lots of factories sale their products' assortment on different kinds of markets. In market organization model company identify several types of clients, which have different needs and problems. This means, that each section has possibility to examine needs of each customer group more carefully.
Figure 4. Market Organization*
*Based on the source: Kotler, F. (2009). Framework for marketing management. Second Edition by Pearson Education, Inc., Upper Sadille River, New Jersey. P. 390
5. Matrix Type.
This organization is temporary. This structure type is connected to organization of temporary subsections for solving particular tasks. It allows you to:
- concentrate on particular targets;
- create temporary teams of experts;
- use effectively the experts for solving the problem;
- reduce management expenses.
To make a conclusion, it is possible to notice, that each company needs its own structure for marketing organization. The analyzing organization's and peer's needs, its target market, financial possibilities and appreciation ways of company's development are the best solutions before choosing the particular strategy.
1.3 Risks of creating a marketing department
There are always some risks while creating something new or inoculation the new system into some kind of stable structure. Every organization tries to count all possible risks before running the process (Edler & Fagerberg, 2017). So how to calculate all possible risks and to avoid most of them? For keeping to a minimum a quantity of unexpectedness, which can emerge while realizing marketing plans, marketing department has to take care and control all on-going activities. The work of P. Kotler lists 4 stages of marketing control: control of the annual plan, profitability, efficiency and strategic (Kotler, 2009). Annual plan control is connected to sales. Annually practical results are being compared with the standards for better understanding whether annual plans are well done or not. Particular standards of profitability control, which are connected to profitability, are getting set and compared with actual results of profitability, to make clear if the company will have income or not. Profitability control doesn't require efficiency measuring of different products, channels, territories, groups of clients, etc. It provides most wanted information to the headship, to determine is it reasonably to expand, reduce or except products, channels or territories. Efficiency control is aligned with it's outgoings measuring. It shows the ways of the increasing efficiency of different marketing substances, specifically, sales office and advertising. Strategic control provides analyzing of company's chances of determining and reaching set marketing targets as well as reacting to the environment. Most commonly, strategic control checks long-time results of company's activities towards closest business rivals. In addition, by S.M. Ovchinnikov's classification Marketing risks can be divided into inner and outward, but it depends on marketing environment. Outward ones are connected with upcoming factors about external company's marketing environment, both macro and micro. Second group has risks are depending on inner company's marketing environment: low qualified employees, resource shortage and temporary risk. More importantly, according to the words of J. Trout, depending upon the level of marketing planning, risks split into strategic and tactic. Strategic risks could be caused by incorrect determination of strategic targets, choosing of positioning strategy, determination the moment of appearing in the market, incorrect choice of target segment and, finally, wrong determination of the common company's strategy. Tactic risks are aligned with making decisions about marketing combination (4P): risks associated with product policy, pricing risks, risks of marketing products and promotion risks (Trout & Ries, 1989).
1.4 Marketing departments relevance in construction industry
One of the articles uncovers marketing' specificity in industries and spheres of business. Marketing is actively used in industrial service, agribusiness, service industries, merchandise, banking business, insurance business, construction, hotel and travel businesses, web-marketing and petrol-chemical industry (Beloborodova & Sharafutdinova, 2018). It is clear that marketing is relevant almost in all of spheres of businesses.
In case that Kerama Marazzi company runs its' operations in construction industry, this term will be discussed more accurately. The use of marketing tools in the construction sphere in relation to other sectors of the economy is not developing so fast. This is due to the fact that the existing commercial relations between participants in this industry have a complex and relatively long process of interaction. Besides, marketing specifics in construction industry is aligned with the construction process itself.
In article named “The improving of marketing process in the construction organization” it is told the every country needs stable development of building industry. By that reason it provides the part of citizens with job, supporting social stability and being the important part of business activity. But this article also contains reasons why is the level of using marketing processes in construction industry in Russia, not as high as in western countries (Kogotkova & Mehdiyeva, 2017). After analysing articles of this topic, it is possible to say that the level of using marketing in building industry is improving slowly, but today more and more construction firms start understand that organization structure marketing is a very significant helper in firm's development.
1.5 Which specializations marketing department can contain
Experts quantity which are in marketing department, depends on the company's size, on needs, which it wants to realize and on the budget, which is available to spend on the effective department's work. (Martin Luenendonk,2016). One of the articles says about basic specialties which can be included in typical marketing department in the large business. Chief Marketing Officer, Marketing Director, Vice President Marketing, Marketing Manager, Marketing Analyst, Public Relations, Social Media Expert/Creative services, Marketing Coordinator and Marketing Assistant. Head marketer is the head of marketing department. He makes decisions during the development of main marketing strategies, also he is responsible before the Committee of directors or Administration for the department's work results. The head marketer watches and takes care of all marketing strategies, which are being developed and realized. His tasks and fulfillment help the head of department. Marketing vice-president is responsible before the head marketer. His duties contain direct realization of marketing strategies. He interacts with marketing manager, determining strategies, messages and other marketing media. Therefore, marketing manager works under the vice-president control. Firstly, his tasks contain creating of advertisements, choosing the way of message display, which can be published in print media, TV broadcasting, banners, social media and official web-page. Secondly, he is responsible for the control of other department workers. Marketing analyst investigates potential clients, their changing needs, analyses opponents and market's condition. With the help of marketing tools, like, surveys or researches, to find the very useful information for marketing and further firm's development. Public relations officer always works on one's company's reputation, supporting polite relationship with clients and swiftly interacts with them to make perception of company more positive and to help client to return back over and over again. More importantly, this employee creates understanding of clients and influences on theirs behaviour and way of thinking, using media-management. The secret of such effectiveness is working with Internet profiles, premeditation and realization of the media content on official company's social network pages, to get more people known about the product or service. Creative services work with developing and presentation of organization's products, like, on the web-page, fliers, advertisements, e-mail programs, and also, other advertising materials, which are demanded by marketing department. Marketing coordinator synchronizes its department's divisions and manages on-going advertising and marketing operation, tracks trading data, takes care of ads' inventory, plans and co-ordinates evens, prepares reports. Marketing assistant realizes the administrative job, required for instant department's working.
1.6 Functions of the marketing department
The main task of the marketing service is to determine the company's place in the market and find opportunities to take the most advantageous position in relation to competitors (Couto, 2015). In one of the scientific articles, a survey of top managers of companies, namely 144 top-managers of organizations that are located in Lithuania, is conducted (Urbonaviиius, Dikиius, Kasnauskienл, 2017). The analysis of the answers is carried out in order to learn about the importance of the functions of marketing departments. The described functions contain typical areas of 4 P, marketing research and planning. Marketing planning and price management were rated as the most valuable marketing functions, and product management, marketing research and communications proved to be less valuable. Moreover, it was noted that for the heads of subsidiaries, the communication, research and planning functions of marketing saddles are priority. For managers of small companies, marketing events are less valuable than managers of medium and large enterprises.
Several sources contain information discussing the relationship between marketing and financial functions (Sheth, Sharma 2015; Uzelac, Sudarevic 2016; Rust, Ambler, Carpenter, Kumar, Srivastava, 2014; Weinzimmer, Bond III, Houston, Nystrom 2013). In other sources, the marketing function is related to sales, their regulation and increasing demand for products (Rouziиs, Anderson, Kohli, Weitz, Zoltners, 2015). Marketing services include a function where they communicate with consumers of products, because one of the most important tasks of such departments is to communicate with customers and take into account their tastes and interests (Grunig & Grunig, 2014). The marketing subunit of a company is often responsible for developing a new product (Song & Montoya-Weiss & Schmidt, 2017). There are authors who talk about the relationship of marketing with external or internal factors, such as income and pricing (Garrow, Ferguson, Keskinocak, Swann, 2016). There are scientific articles where marketing is related to strategic and managerial aspects (Webster, 2017).
But there are opinions where it is argued that studies that evaluate the role of marketing by management are rare or just relate to this issue (Spillard & Moriarty, 2017; Homburg, Workman, Krohmer, 2016).
1.7 Marketing plan and its components
The development of a well-made marketing plan helps to determine and quantify costs, establish price parameters and determine price forecasts, study potential risks about production and prices. More importantly, there is a description of writing plan importance, its components and estimation of the plan (Bevers & Waller & Amosson & McCorkle, 2017). F. Kottler determines marketing plan as the main tool of orientation and coordination of the marketing process. Marketing plan usually contains 8 sections:
1. A brief review and content of the plan.
First, the main goals and objectives that need to be implemented are described. After that signs what will be contained in the plan.
2. The situation in the current market.
This section develops information about sales, the situation with the competitive environment, pricing policy, product positions, sales sources and the macro environment.
3. Analysis of possibilities & issues.
Particular SWOT analysis is being produced, because on this stage it is needed to know main opportunities and threats, weak and strong sides of the company and that issues that can emerge.
4. Setting targets.
Marketing and financial targets and being determined.
5. Marketing strategy.
To reach already set aims, the common marketing strategy is being scheduled. Marketing strategy is a long-term plan of realizing commercial and corporate targets of one's or the others company. (Ryabkov, 2015)
6. Action programmes.
The plan should include general programs that are aimed at achieving the company's goals, answering the questions of what will be done, when, who will do it and how much money will be needed to implement it.
7. Planned gains and losses.
The following paragraph will help to form the supportive budget. Income column includes forecasting sales volume by subdivisions, and average products' price. Expenses consist of outgoings, financial breakdown, marketing events. Planning income is the difference between offtake volume and gross expenses. Prepared budget is given to government consideration, which can edit it, if it is needed. Therefore, approved budget becomes the basement for developing further plans and delivering schedule, production release, recruiting employees and making marketing events.
8. Control.
Usually, the budget is being planned for each month/quarter, that is why headship monthly investigates and summarizes of plan's realization.
More than that, some companies include divisions, dedicated to control, activities plan for unexpected circumstances.
1.8 Social networks and their relevance
Social media activity currently takes up a significant part of the time among people. Employees of various companies use this opportunity as a channel for communicating with customers and disseminating information (Goel, Hofman, Sirer, 2017). Continuous interest and increased user engagement in social media leads to the expansion of advertising ideas, the creation of new tools to attract potential buyers (Hill, Provost, Volinsky, 2016). The number of organizations that accept social networks as a tool for advertising will increase every day. Many corporations today have official pages on Instagram, Facebook, Twitter. This allows to conclude that social platforms are an integral part of the lives of consumers and companies (Mathews & Ohajionu, 2015). The creation and further use of a website is often used by companies to promote their product (Lin & Rauschnabel, 2015). Moreover, this article states that the ability to purchase goods and pay for them in an online format is positively perceived and popularly used by consumers. Implementing Instagram tools in a marketing strategy can be an excellent solution for promoting a business (Heinonen, 2011).
This paper highlights the moments of using various tools in this social network to successfully promote the product. Laying out posts and stories, holding contests in the company profile, periodically conducting headings, live broadcasts, accepting orders, consulting clients on emerging issues. According to Brand Analytics, the most demanded social platform among users in the world is Facebook, but specifically in Russia the audience reach is 7%. This article says that the sought-after social networks in the Russian Federation are YouTube and VKontakte. Moreover, such a network as Tik Tok has been growing rapidly around the world since 2018, the audience of Tik Tok has already reached 800 million people (Global Digital overview, 2020). This article talks about the popularity of using targeted advertising, about its good ability to attract the target audience.
The population around the world is becoming more mobile, according to PwC forecasts, by 2023 the level of mobile Internet use among consumers in Russia will be 85%, the share of mobile traffic will reach 92%. The indicator in the mobile advertising segment shows a 22.7% growth for 2018. Therefore, the inclusion of mobile advertising in a digital strategy is becoming the right decision.
Using such a tool to promote products such as advertising with the help of bloggers is becoming more popular every day (Puschmann, 2016).
1.9 Types of events to attract consumers
This article describes the various activities that can help in attracting customers and promoting products or services (Vuong Quoc Duy, 2016). It discusses possible marketing solutions to attract customers, among which are events such as presentations, contests and quizzes directly on the territory of an organization, flash mobs, sampling, participation in exhibitions, entertainment events. In this article, the primary data of 110 observations and statistical analysis were used, as a result of which the listed marketing decisions were identified.
Moreover, there are articles where authors discuss the importance of conducting events for department employees in order to improve their professional skills (Napalkova, 2017; Frolova & Abrymsky, 2018).
Consequently, the holding of such events allows organizations to sell and advertise products.
2. Analysis of the situation
2.1 Characterization of the Kerama Marazzi LLC
For making the thesis object description as clear as it can be, Kerama Marazzi LLC firstly will be investigated in general, then there will be particular investigation of the department of this organization, particularly situated in Sochi. Kerama Marazzi is the largest manufacturer of ceramic tiles and granite on Russian market (Official Kerama Marazzi web-site). This company works in construction industry. The main activity according to Russian National Classifier of Types of Economic Activity (OKVED) is 23.31(code) manufacturing of ceramic tiles and bars, in addition there are clay and kaolin extraction (08.12.2), manufacturing of ceramic sanitary-engineering (23.42), wholesale trade of other construction supplies and products (46.73.6), other aiding activity, connected with transportation (52.29), rent and managing of own and rented non-residential and immobile space (68.20.2), investigation of market's conjunction (73.20.1). Kerama Marazzi LLC's establishers are one russian legal person and one foreign legal person: PRIVATE LIMITED COMPANY “MOHAWK MARAZZI RUSSIA B.V.” (the share is 99,85%) and Kerama Center LLC, where the share is 0,15% (according to the United State Register of Legal Persons (ERGUL)). This company has two manufacturing plants, which are situated in Orel city and Moscow region, more specifically, in Murino village. Products manufacture is carried out by using the brand new technologies and equipment of italian companies such like Sacmi, ICF, Technoferrari. In Orel city manufacture volume in 2018 is 29 000 000 m2 of ceramic tiles and ceramic granite. In Murino village this measures is 8 900 000 m2 of ceramic granite (this information was taken from the official website).
The financial performance of this company is growing every year, for example, the company's revenue has risen from 9 billion rubles to 14 billion rubles for 5 years of the organization. The information about the organization's revenue is calculated based on the value of column 2110 of the accounting statements of Kerama Marazzi LLC for the period from 2014 to 2018.
Figure 1. Revenue of the Kerama Marazzi LLC for the past 5 years, billion rubles*
*Based on the source: Rosstat. Accounting reports of the Kerama Marazzi LLC for the period from 2014-2018
Financial and strategic analyses and marketing department recommendations will be connected with Sochi's department of Kerama Marazzi company. The Kerama-Sochi LLC was opened in 2004, it works on market for 16 years, The main business activity according to Russian National Classifier of Types of Economic Activity (OKVED) is wholesale of ceramic tiles and glassware (46.44 code), also wholesale of ceramic sanitary-engineering equipment (43.73.3), wholesale of other constructive materials and goods (46.73.6), distributive trades of sanitary-engineering equipment in particularized stores (47.52.5), distributive trades of constructive materials, which are not included in other groups of products, in particularized stores (47.52.7), and also operations with immobile space (68). Founders of this department are one russian legal person and one foreign legal person: Kerama Center LLC, which share is 60%, and Nina Aleksandrovna Buckhareva, which share is 40%. The size of further capital is 3 000 000 ?. (All the information according to United State Register of Legal Persons (ERGUL) data).
Sochi city's department has 3 Kerama Marazzi stores in the center of city. In addition, there two more official stores: one is in Adler city and one in Dagomys city. Average staffing number on 2019 year in that department contains 30 employees. The following organization has to struggle with the huge amount of work each day. According to increasing revenue for the last five years, it can be said that the department moves in the correct way (Spreadsheet №2), but still has circumstances which can be optimized after strategic and financial analyses are completely done. Plus, there are some territorial differences in clients' preferences can be mentioned, which means, that this particular region with Kerama-Sochi is on operation, tastes and preferences are different in comparison with Moscow region citizens (Grishin, 2016). In the context of these two factors there is a need to create own marketing department inside the company, which will make and investigate Sochi's market and analyse clients in the region, to reach the best competitive ability in the current market and current region.
Figure 2. Revenue of the Kerama-Sochi LLC for the past 5 years, million rubles*
*Based on the source: Rosstat. Accounting reports of the Kerama-Sochi LLC for the period from 2014-2018
For solving the problem of marketing department creation, Sochi's department has to determine current condition of Kerama Marazzi LLC in Sochi, analyse market for the moment, then find out mostly significant factors, which influence on the department development. Proceeded SWOT-analysis, analysis of financial indicators from 2013 to 2018, PESTEL analyses with expert review, a questionnaire among marketing managers and interviews with construction industry experts.
2.2 Research program
The research program includes several stages of analysis, tools that are necessary for a number of studies. For convenience, information about the research program is presented in the table below (table 1).
Table 1. Research program
|
Element of analysis |
Methods for analysis |
Details of the analysis |
|
|
Internal and external analysis of the Kerama-Sochi LLC |
SWOT- analysis internal and external analysis |
Strengths Weaknesses Opportunities Risks |
|
|
External environment of the Kerama-Sochi LLC |
PESTEL analysis (using the expert assessment method) |
Political environment Economic environment Social environment Technological environment Legal environment Ecological environment |
|
|
Internal environment of the Kerama-Sochi LLC |
Financial analysis |
Profitability ratio Liquidity ratio Total Debt to Equity Leverage Ratio Net Fixed Assets Index Investment Turnover Ratio |
|
|
Questionnaire for marketing managers of different organizations |
Quantitative research - survey |
Conducting the questionnaire of 40 managers of marketing departments. |
|
|
Evaluation of the activities of marketing departments in the branches of Kerama Marazzi LLC |
Qualitative research - in-depth interviews |
Conducting interviews with 10 directors of marketing departments of various branches of Kerama-Marazzi LLC |
In this part few steps are to be described and made: strategic analysis of Sochi's Kerama Marazzi department, financial analysis of the enterprise, a survey of managers of marketing departments of construction organizations, interviews with leading specialists of Kerama Marazzi LLC.
2.3 SWOT-analysis
To analyze the strategic prospects of the economic entity, a SWOT analysis will be used, which will help determine the strengths and weaknesses of the company, threats and opportunities. Thanks to this tool, it is possible to evaluate the internal and external environment of an enterprise. Internal analysis is needed to determine the resources, opportunities, and competitive advantages that a company possesses. External analysis helps identify market opportunities and threats by analyzing competitor resources, industry, and the general environment (Cooper, 2017). The purpose of this analysis is to study the internal and external environment of the organization to formulate further strategies and strategic decisions of the branch.
Table 2. SWOT-analysis of Kerama-Sochi LLC
|
Strengths (S) |
Weaknesses (W) |
|
|
1. For the last 3 years there is raise of ernings and income in Sochi's department can be seen (according to Rosstat data and Federal Tax service); 2. 16 years on the market; 3. The experts experience on the head posts is more than 15 years; 4. There is a system of professional prepare and upgrade qualifications for the employees; 5. European quality standards; 6. Affordable price; 7. Brand new equipment and technologies from Italian companies (Sacmi, ICF, Technoferrari); 8. Using of DRY PRESS technology; 9. Identifiable brand; 10. Wide assortment of goods. |
1. Weak marketing policy and, as it used to be, infrequency and unpredictability of orders getting; 2. Infrequency of monetary movement for the reason of high measure of debts receivable. |
|
|
Opportunities (O) |
Threats (T) |
|
|
1. Active objects construction on Sochi's territories (after winter Olympic Games 2014, Sochi city develops very active in the construction industries) 2. Increasing of customers amount in the case of having new realty; 3. Following the results of the Sochi-2016 international investment forum, agreements were signed for the realization of 5 large projects which total worth was 14,8 billion rubles (information is taken from SCAPP). |
1. Increase in the number of competitors; 2. Raising prices for constructing supplies; 3. Lack of experts; 4. Delays at construction objects; 5. Development of alternative technology and equipment analogues. |
After elaboration of received SWOT-analysis, it is getting clear that department has already been developing for several years in a correct way, if its revenue and profit are getting bigger each year. Nevertheless, by the reason of growing competitors, appears of products analogues and construction industry development, department needs marketing experts to be more able to meet competition. Thanks to active sales growth, department has enough finances to open marketing section. In 2018 the revenue of department was 272 202 000 rubles, profit was 12 578 000 rubles (the data was taken from the accounting statements of Kerama-Sochi LLC).
2.4 PESTEL analysis
This analysis includes an expert questionnaire to get a reliable assessment of the effect of external and internal factors on Kerama-Sochi LLC. Questions include prepared basic external factors that may affect the development of the branch, and significance assessments from 1 to 5, where 1 is the smallest value, 5 is the most significant. Estimates given for each parameter of one factor by experts, for example, political, will be added up, in order to then calculate the average score. After a survey of all experts, the obtained average scores will be added up again, then to calculate the average score for each factor from the PESTEL analysis in a general way. The final points, after analyzing the answers from the requested, will be presented in the table 3. Moreover, each expert, after a quantitative assessment, evaluated the presented parameters on the impact on the Sochi branch, speaking either of the positive or negative impact of each item. Information that the author received from respondents is confidential. Therefore, the analysis of the impact of external factors on the Sochi branch will be described based on new information received from respondents, statistics that experts noted as an example for the author and statistics, which will mainly be taken from reports prepared by the Central Bank of Russia. The questionnaire with the received expert evaluations is presented in Appendix 2.
The sample includes experts working in the industry related to the production and sale of ceramic products and building materials for more than 15 years in leadership positions. They know the history of the Sochi branch, because they work directly with it. Moreover, the selected group of experts is interested in a thorough analysis and its results, because it can help them to improve the organization's further strategy. The research is narrowly focused, so the sample is not random. The sampling method is the “snowball”, such the method assumes that there is a “bond” or “link” between the original sample and others in the same target population, which allows a series of calls to be made in a circle of acquaintances (Berg, 1988). The choice of this technique is because of it is difficult to directly contact experts. The strategy is that in order for the assessment of external factors that may affect a particular organization to be accurate, then the respondents should be people who know about the activities of this enterprise and interact with it (Kosheva, Golosova, Seyidov, 2017). The sample is not so large, because the number of experts is quite limited (about 10 people). The problem with sampling may be the inability to receive information from respondents for various reasons. Moreover, for the reason that all sample units are specialists in a narrow field, the results will be relevant for this study. Therefore, it cannot be argued that this sample will be representative. However, the snowball method allows the author to assert that the results will be accurate, because this sampling method allows to accurately select the sampling units. Moreover, there are examples in the scientific literature when a small number of respondents were used to conduct the analysis. New forms of qualitative data are constantly appearing in literature, among which there is an interview format (Creswell, 2012). Moreover, John W. Creswell claims that he met studies where, during the quantitative analysis, a large circle of participants was not used (Huber & Whelan, 1999). The author notes that he met in phenomenology the number of participants from 1 to 325. Moreover, Dukes (1984) recommends investigating from 3 to 10 objects, and Riemen (1986) in his research studied 10 individuals.
Experts:
1. Bukhareva Nina Alexandrovna. General Director of Kerama-Sochi LLC. She has been managing this company for 16 years.
2. Novikova Larisa Vitalevna. General Director of Kerama Center LLC. She has been working in the construction industry for 25 years.
3. Myagkova Victoria Yuryevna. Commercial Director of Kerama-Sochi LLC. She has been working in the construction industry for 17 years.
Characteristics (table 3) that were used for the PESTEL analysis were taken from scientific articles. Political factors for further assessment by experts were taken from an article written by Senior Lecturer, Department of Economics and Industrial Production Management (Oborina, 2018). Economic factors were taken from a scientific article where a detailed analysis of the state of the economy in relation to the construction industry is carried out. (Karyakina, 2019). Social factors that may influence the development of the market relative to the construction industry were best considered and listed in the article of the candidate of economic sciences (Anpilov, 2017). Technological factors were taken from several scientific resources that discuss the impact of processes on the activities of Russian enterprises with respect to innovation management (Fiyaksel & Ermakova, 2018). Moreover, in one of the sources there is a strategy for the innovative development of the construction industry of the Russian Federation until 2030, which describes several technological factors affecting the development of the production of ceramic products and building materials (Ministry of Construction and Housing and Communal Services of Russia, 2018). Environmental factors were taken from a scientific article that illustrates the influence of environmental factors on construction organizations (Korol, 2017). Legal factors are taken from a scientific article, which analyzes the construction industry and factors that may affect organizations and their activities, risks when doing business in this direction (Koshelev, 2018). For structuring, all the factors that the experts evaluated were listed in the table 3.
Table 3. PESTEL analysis
|
The significance of the factor |
The name of the factor from PESTEL analysis |
Characteristics |
|
|
4 |
Politics |
1. State regulation through the formation of a regulatory framework; 2. International relations of Russia with other countries. 3. Centralized administrative influence; 4. Market mechanisms; |
|
|
4 |
Economics |
1. State policy in relation to the economy; 2. The level of taxes; 3. Competition; 4. Interest rate; 5. Inflation; 6. The unemployment rate; 7. Investment situation. |
|
|
3 |
Society |
1. The standard of living of the population; 2. Social guarantees; 3. The demographic situation; 4. The level of education and qualifications of employees. |
|
|
5 |
Technology |
1. New products on the market; 2. Automation; 3. Increasing the role of innovation in the activities of enterprises; 4. R&D (research and technological development (RTD); 5. Lower production costs. |
|
|
2 |
Ecology |
1. Certification; 2. Minimization of harmful effects on human life and the environment. |
|
|
4 |
Law |
1. Legislative acts adopted by the government regulating the activities of business entities; 2. Conditions for grants, subsidies and support of the state budget. |
Based on the analysis of experts' answers, the average scores for each factor (table 3) describe the following situation in the current market. The most significant factor that can affect the development of Kerama-Sochi LLC is the technological factor (for all experts, the technological factor was rated at 5 points). The emergence of new products, methods of production and design of ceramic outputs was rated as the most important of all parameters among technological factors (experts on this item were given 4/5). Moreover, all experts noted the positive impact of this parameter on the development of the branch. The increasing role of innovation in the activities of enterprises also affects the development of the Sochi branch. On the one hand, it was noted that this parameter has a negative effect on the work of the company, because experts who are directly associated with this branch spoke of a lack of specialists to automate the organization's workflow. On the other hand, the products of Kerama Marazzi are famous for Italian production technologies, from which the quality of ceramic tiles and granite has been evaluated by customers as excellent for decades (taken from the respondents' answers). Political, economic and legal factors were also assessed as important external factors that could affect the company's activities (these factors were estimated by experts as 4 points). Political decisions received by the government of Russia in international relations, for example, Russia's accession to the WTO (World Trade Organisation), political relations between Russia and the countries of the European Union, affect the conduct of the firm's business (expert rating was 5 points). These actions can affect the pricing policy of the industry, its range. Due to anti-Russian sanctions, the prices of the necessary materials for the production of tiles actually rose, which contributed to an increase in prices in the Sochi branch for the goods sold. The influence of the legislative framework in the field of economic relations of the construction industry has a powerful effect on the decisions made by the branch. Today, this parameter generally supports and helps enterprises develop in the sale of ceramic products and building materials. Moreover, the respondents noted the stability of the ruble equivalent, the availability of human resources, which certainly contributes to the progress of the organization. According to the forecasts of the Central Bank, the inflation rate for 2020 will be 3,8, and by the end of the year 4%. The level of inflation declined to 2,7% in 2019. These indicators confirm the experts' answers to the ruble stability, therefore, a positive impact on the pricing policy of Kerama-Sochi LLC. High competition in the current market was also noted as a positively influencing parameter, because it creates a healthy competitive environment where the branch seeks to develop faster and become better. The interest rate on the Central Bank of the Russian Federation is reduced, which may affect the increase in attractiveness for the use of borrowed funds (this information was obtained during the interview, but verified on the official website of the Central Bank). The unemployment rate, cleared of the seasonal factor, in March 2020 amounted to 4,5% (according to a review of the monetary policy department of the Bank of Russia). The average unemployment rate in the Krasnodar Territory for November 2019 - January 2020 is 4,8% (Federal State Statistics Service). Experts note that compared with the previous year, the level has decreased, which favorably affects the activities of the branch. The dynamics of investment activity at the end of 2019 compared with the beginning improved, which positively affects the activities of the analyzed organization (Central Bank Report for 2019). Changes in the indicators of social factors and their strength of influence on the branch's work were rated by experts as medium significant (respondents rated 3 points). Such a social factor as the standard of living of the population was assessed during the interviews as the most important for the activities of Kerama-Sochi LLC (was rated at 4 points). The permanent population of Russia as of January 1, 2020 decreased by 0,02% compared with the beginning of 2018 (follows from the estimate of the Federal State Statistics Service). In accordance with experts, such a situation may lead to staff turnover and a decrease in the number of customers in the Sochi branch. In addition, the level of qualified employees was noted as an important factor (4 points), which can affect the development of the organization. Experts spoke out on the impact of this parameter, they argue, based on their experience and the situation of the current market, that there is a negative impact, because the market lacks qualified specialists in this industry. The environmental factor and its importance for the activities of the branch was rated at 2 points. However, the importance of the certificate, proving that the products fully comply with the requirements of environmental certification was noted by each expert. Kerama Marazzi LLC has a CERTIQUALITY Certificate, which confirms that the company's activities fully comply with all LEED (Leadership in Energy and Environmental Design) requirements. Summing up the expert assessment and the analysis done by PESTEL, we can conclude that the current market creates moderate conditions for the company to develop steadily. Due to the increasing number of alternative products, it becomes difficult to be competitive. In such situation, when the company is developing stably, the market contributes to the development of the industry, one should take advantage of the good conditions of the market environment in order to improve the performance of its enterprise (Zhemchugov, 2016). In this case, the creation of a marketing department would be the right decision to improve the performance of Kerama-Sochi LLC.
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