Download - Mauritius Housing Company Ltd
Mauritius Housing Company Ltd
Presented by Laurent Mario Pierro-Jacques
Date Produced On 23rd August 2007
1. Carry out a SWOT and Environmental Analysis for MHC Ltd
Mauritius Housing Company Ltd
The Mauritius Housing Company Ltd is a state-owned financial company dwelling
in only Housing Finance Sector. The MHC Ltd was established in 1963 and since
then it has been at the forefront in innovative housing solutions for individuals
that has hugely contributed to making 85% of the Mauritian population become
owners of their home. This was done in guideline with:
Mission
To help as many families as possible to become owners of a house and be at the
forefront of housing development in the country
Vision
To be the Leading Provider of Housing Financial Services in the Region
SWOT analysis
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A tool used by organizations to help the firm establish its Strengths, Weaknesses,
Opportunities and Threats (SWOT). It is the first stage of planning and helps
marketers to focus on key issues. Existing business need to evaluate their
strategies and objectives in relation to alternate strategies in order to identify
opportunities and risks. This will also help them to review their progress
according to their original plans.
SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths
and weaknesses are internal factors are internal factors which influences MHC
whereas the Opportunities and threats are external factors which factors which
influences MHC.
1. Strength
Well established company:
Mauritius Housing Company is a settled company with 48 years of
existence. It has been the leading-edge in providing innovative
housing solutions and facilities for individuals that has brought
remarkable contribution for their welfare.
A trustworthy company :
Mauritius Housing Company has a good reputation as being the
company who has provided 85% of the population by making them
become owners of their home. The ownership of a house represents
for most of these individuals the investment of a lifetime and this is
made possible by the availability of financial facilities which the
company is catering for.
Availability of employees :
Mauritius Housing Company has the advantage of having reliable
staffs on which it can count. The staffs working in the company are
mature and experienced and many among those joining MHC do
their whole career there. The reason behind this may be that the
company offers good working conditions and job security.
Introduction of different schemes :
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Mauritius Housing Company has come out with a fund raising
scheme, the Housing Deposit Scheme that offers attractive savings
rate based on the principle of fixed deposits in banks. It also
operates mainly in 2 housing loan products- The Normal loan and
the Government Sponsored Loans. They also developed one PEL
(Plan Epargne Logement) Account to enable eventual customers
constitute a savings for their project. The PEL savings scheme has
remained a popular savings mode for all income groups and offers
attractive interest rates.
2. Weakness
High lending rate
With a high level of competition which made access to finds
complicated, MHC now has to borrow at commercial rate and this
automatically leads to higher lending rates to customers. It will be
difficult for these customers to pay off the interest, let alone their
original debts. An increase in lending rates will make them think
twice before deciding whether to take loans when buying a
property and this is not what the company wants to achieve.
No flexibility in conditions :
The conditions of loans at MHC are fixed, that is, one rate and same
conditions for all. No negotiations, based on specificities of
customers, are allowed like in other financial institutions. This has
driven away many young professionals who came for Housing Loan
that presented high possibility of widening the customer’s reliance
of the company and to decrease their likelihood to switch to a
competitor.
Absence of important departments :
MHC does not have a real Marketing Department to scan and
analyse the market. A marketing department plays an important
role within any type of business and without which the organisation
might not be able to compete with other companies. The marketing
department is a unit of the organisation charged with carrying out
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specific tasks that are expected to be marketing research and
advertising.
Poor customer service
MHC has done very little in the past years to improve its
correspondence with its customers. There has been no opening of
new branches, only three throughout the island. Customer service
is one of the most important ingredients that MHC cannot discard.
High quality customer service helps to create customer loyalty and
attract new customers. Customers today are not only interested
with the products or services offered but also the elements of
service that they receive when they enter a retail outlet.
Lack of technological skills :
It has been said in the case study that MHC does not revise its
information system. Information system will help in analysing
existing historical data about customers. Managers can thus make
use of these data while deciding to provide loans to new customers.
Information system can also give information through the
verification of data collected from different sources such that the
company can have advantage over their competitors.
Lack of prosperity at work :
Even though employees do their whole career at MHC, there is no
confidence for one to flourish in the organisation and those making
it to the middle management team lack the necessary competence
and knowledge to bring upon any changes in the company. All this
has contributed to reinforce a negative image of MHC to the eyes of
its stakeholders. In order to overcome these problems managers
need to review processes and assess the quality of services offered.
3. Opportunities
New schemes for young professionals :
A housing loan scheme for young professionals is being studies for
the last five years. This home loan will give the opportunity to
individuals through which one can build his own house. This scheme
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also provides the complete money needed to build the house and
allows the individual to pay the amount in installments.
A motivation to achieve on its own :
Mauritius Housing Company will have to operate on its own. This
means that the company will now have the freedom to take
initiatives instead of depending on the Government for subsidies.
4. Threat
Interest rates must be compared :
MHC should be careful about interest rates. Before setting up its
interest rates it must take into account what its competitors are
offering.
Not evolving to a required level :
Mauritius Housing Company is not advancing as fast as its
competitors. If the company does not take initiatives to get back on
track, it will be disadvantageous since the company can work on
obtaining incentives to advertise its services and gain a larger
market share markets than present.
Recruitment and selection of labour force :
Mauritius Housing Company should take into consideration its labor
force and make an assessment of their skills and competencies. The
recruitment of highly qualified professionals is important for the
company to prosper and should avoid bureaucracy.
Interest rates on savings :
With the imposition of 15% tax on interest rate on savings in banks
and financial institutions made by the government, we find that the
value of the Housing Deposit Scheme has now declined. Customers
are not willing to pay high level of interest rate.
No subsidies by government :
It has been mentioned in the case study that the government will
stop subsidizing MHC. This has been decided so as to create an
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equal right in the financial sector. This will help MHC to develop its
own strategies to be able to operate independently in the future.
Environmental Analysis
It is very important that an organization considers its environment before
beginning the marketing process. In fact, environmental analysis should be
continuous and feed all aspects of planning.
The organization's marketing environment is made up of:
1. The internal environment e.g. staff (or internal customers), office technology,
wages and finance, etc.
2. The micro-environment e.g. our external customers, agents and distributors,
suppliers, our competitors, etc.
3. The macro-environment e.g. Political (and legal) forces, Economic forces,
Socio cultural forces, and Technological forces. These are known as PEST factors.
PEST Analysis
1. Political forces
Support from Government :
MHC enjoyed continuous support from the Government as it helps
the company in subsidizing savings rate which is based on the
principle of fixed deposits in banks and also by including a
Government bonus on the HDC savings at term.
Political stability :
Mauritius enjoys very good political stability and reasonable growth.
This success is a result of a strong commitment to democratic
principles together with political stability, good governance, sound
principles and consistency in the management of the economy.
Government subsidies :
The government is providing subsidies to the lower and lower-
middle income groups. This will enable the individuals earning a
salary of less than Rs.15,000 per month to repay back their loans.
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Imposition of tax :
There has been an imposition of 15% tax by the government on
interest rate paid on saving account place in banks and financial
institutions.
2. Economic Forces
MHC will have to depend on its own :
In order to create a level playing in the Financial Sector, it will stop
all subsidies to MHC. And MHC will have to operate on its own in a
competitive environment hence borrowing capital at a commercial
rate and if the customers are low income earners they might not be
able to meet up to the repayment as required.
3. Socio-cultural forces
Home ownership :
It is said that the business of Housing Finance individuals is now
small due to the increase in the percentage of home ownership.
Purchasing power decreases
Lower and lower-middle income groups, drawing less than Rs 15,000/-
per month from their incomes, they might have less capital for
consumption per month, altogether, this might lead to a decrease in
the purchasing power of the customers.
4. Technological forces
No updating of informatics system
Due to lack of funds MHC cannot update it informatics system and
install new technology which might be used to record all the entries
appropriately and be efficient.
2. Considering that the context of the PEL, explain the concept of
Product Life Cycle (PLC) and how you would adapt your Marketing
Strategy at each Stage (of the PLC) to ensure success.
The PRODUCT LIFE CYCLE describes the stages a product will pass through from
its introduction, through its growth until it is mature and then finally its decline.
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During the Product life cycle, the marketing situation of a product change. This is
influenced by the marketing mix and marketing strategy of the company for
these product.
The life cycle concept may apply to a brand or to a category of product. Its
duration may be as short as a few months for a fad item or a century or more for
product categories.
Product development is the incubation stage of the product life cycle. There are
no sales and the firm prepares to introduce the product. As the product
progresses through its life cycle, changes in the marketing mix usually are
required in order to adjust to the evolving challenges and opportunities.
1. DEVELOPMENT STAGE
Firstly a product will be developed. The prototype will be tested and market
research carried out before it is launched on to the market. There will be no sales
at this time.
2. INTRODUCTION STAGE
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At this stage, the company introduced or launched the product on to the market.
Usually, sales are low until customers become aware of the product and its
benefits. Some firms may announce their product before it is introduced, but
such announcements alert competitors and remove the element of surprise.
Advertising costs typically are high during this stage in order to rapidly increase
customer awareness of the product and to target the early adopters. During the
introductory stage the firm is likely to incur additional costs associated with the
initial distribution of the product. These higher costs coupled with a low sales
volume usually make the introduction stage a period of negative profits.
During the introduction stage, the primary goal is to establish a market and build
primary demand for the product class. The following are some of the marketing
mix implications of the introduction stage:
Product - one or few products, relatively undifferentiated
Price - Generally high, assuming a skim pricing strategy for a high profit
margin as the early adopters buy the product and the firm seeks to recoup
development costs quickly. In some cases a penetration pricing strategy is
used and introductory prices are set low to gain market share rapidly.
Distribution - Distribution is selective and scattered as the firm
commences implementation of the distribution plan.
Promotion - Promotion is aimed at building brand awareness. Samples or
trial incentives may be directed toward early adopters. The introductory
promotion also is intended to convince potential resellers to carry the
product.
3. GROWTH STAGE
The growth stage is a period of rapid revenue growth. Sales increase as more
customers become aware of the product and its benefits and additional market
segments are targeted. Once the product has been proven a success and
customers begin asking for it, sales will increase further as more retailers
become interested in carrying it. The marketing team may expand the
distribution at this point. When competitors enter the market, often during the
later part of the growth stage, there may be price competition and/or increased
promotional costs in order to convince consumers that the firm's product is
better than that of the competition.
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During the growth stage, the goal is to gain consumer preference and increase
sales. The marketing mix may be modified as follows:
Product - New product features and packaging options; improvement of
product quality.
Price - Maintained at a high level if demand is high, or reduced to capture
additional customers.
Distribution - Distribution becomes more intensive. Trade discounts are
minimal if resellers show a strong interest in the product.
Promotion - Increased advertising to build brand preference.
4. MATURITY STAGE
The maturity stage is the most profitable. While sales continue to increase into
this stage, they do so at a slower pace. Because brand awareness is strong,
advertising expenditures will be reduced. Competition may result in decreased
market share and/or prices. The competing products may be very similar at this
point, increasing the difficulty of differentiating the product. The firm places
effort into encouraging competitors' customers to switch, increasing usage per
customer, and converting non-users into customers. Sales promotions may be
offered to encourage retailers to give the product more shelf space over
competing products.
During the maturity stage, the primary goal is to maintain market share and
extend the product life cycle. Marketing mix decisions may include:
Product - Modifications are made and features are added in order to
differentiate the product from competing products that may have been
introduced.
Price - Possible price reductions in response to competition while avoiding
a price war.
Distribution - New distribution channels and incentives to resellers in order
to avoid losing shelf space that is the one can either remove middlemen or
add middlemen in the channel of distribution.
Promotion - Emphasis on differentiation and building of brand loyalty.
Incentives to get competitors' customers to switch.
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5. DECLINE STAGE
Eventually sales begin to decline as the market becomes saturated, the product
becomes technologically obsolete, or customer tastes change. If the product has
developed brand loyalty, the profitability may be maintained longer. Unit costs
may increase with the declining production volumes and eventually no more
profit can be made.
During the decline phase, the firm generally has three options:
Maintain the product in hopes that competitors will exit. Reduce costs and
find new uses for the product.
Harvest it, reducing marketing support and coasting along until no more
profit can be made.
Discontinue the product when no more profit can be made or there is a
successor product.
According to the Case Study, the Mauritius Housing Company (MHC) has to
develop their product. However, the MHC is losing their position because of the
reference market makers. The competitors are the banks and financial
institutions. The product is the PEL (plan Epargne Lorgement) Account and it
enables customer to constitute a saving for their project. In the following
described how the marketing mix has to be adapted on each stage to be
successful with the product.
At the introduction stage, the MHC has to define their product and find a
market. As a result, the company should emphasize more on the promotion of
the product in order to struggle forward the awareness of the costumer.
Moreover, the company has to create the brand name and communicate with the
costumers. They have to provide them features and benefits, which are more
efficient than that of the bank and financial institutional products. The classiness
of the product has to be in foreground and helps to differentiate the product.
They also have to define their pricing strategy. In this case the price penetration
is more efficient. The company will maximise their profit over time and stay
under the price level of the competitors. These factors will increase the
awareness of the costumer and find early adopters of the product. This will be
the basement for the next steps.
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The growth stage will increase the sales of the company. At this stage the MHC
has to take care that they have a development in their product. This means they
have to adapt new features or complete the additional service of the product. If
the demand is increasing the company can increase the price. But they should
not forget to maintain the promotion. It is still a crucial factor to differentiate the
product. Therefore they have to build up the brand loyalty and create a more
intensive distributions channel.
The maturity stage will slow down the sales and maximise the profit of the
company. At this stage the company has to differentiate their product
completely from the competitors. The company must avoid the price-war as this
can arouse the reference market maker again. Promotion tools make non-buyers
or competitor-buyers to own-buyers by providing a better service and greater
features and benefits than the others. Due to the classiness of the product the
company will be able to distend this stage as long as possible. However, the
bank and financial institutes will try to adopt their services and products to the
MHC product.
Finally, the decline stage will arouse. Depending on the competitors’ products
and the market situation the company has different option. But in this case the
most logical option is to reposition the product at the market by residing and
development of services and features
3. MHC has finally completed the parameters for the launch of its
new product, Housing Loan Scheme for Young Professionals.
a. PRODUCT AND PRICING STRATEGY
The new scheme which MHC might be launching is Housing Loan Scheme for
young professionals. Which is a new scheme added to the Corporation’s services
which might be targeting the professional youngsters. MHC already provides two
types of loans which is normal loan and the government sponsored loans. This
might be done to get more customer and to increase the revenue and market
share of MHC.
MHC might have to consider the marketing mix before launching the service in
the Housing Finance sector.MHC might have to decide which type of pricing
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strategy it might adopt so as the service works. Since the service is a new one
MHC might have to bear in mind that the service is what the customers wants.
The scheme provided by MHC might be according to the young professionals’
preference. That is the service might be quickly delivered, it must have
securities and insurance. MHC might have to consider which type of additional
services it might have to provide along with the main scheme so as to attract the
targeted customers.
As the service is new MHC might be able to use one of the two pricing strategies
for launching his new service. The two pricing strategies are Penetration pricing
strategy and Skimming pricing strategy. The penetration pricing strategy is
where a lower price is set when launching a particular product or service
compare to the competitors.MHC might set its interest rate lower than its
competitors so as to attract the young professional. MHC might benefit from it
because the trend nowadays between the young professionals is to be
independent, which is to build their own house and live. If they are getting the
housing loan at a lowest interest rate in the market they might benefit from the
service of MHC and this might increase the return of MHC in the long-run.
However use of penetration strategy might be risky as while providing low
interest MHC might not be able to repay its borrowing in the short-run and that
might lead MHC to bankruptcy. In the short-run MHC might be making loss and
for that it might have to reduce its costs and there might be inefficiency at work
as the workers might not be getting job satisfaction.
Skimming pricing strategy is where high price is set when launching a product or
service. This type of pricing strategy is used when there is no similar service
provides or limited similar service provided in the Housing Finance sector. That is
MHC might set a high level of interest rate, as it might be a new scheme with
many additional services. The main target here will be the high income earners.
By using this pricing strategy MHC might be cover it’s borrowing in the short-run
and might be profitable. This might help MHC to establish an image that could
serve as a competitive tool and in the long-run increase customers. However by
giving high interest rates the young professionals expect to have more services
and a better condition compared to the low interest ones but it might be the
case as MHC has one rate and same condition for all its customers. With the
market liberalisation and globalisation organisation with new service one may
not have a long time to enjoy the fruit of skimming. Which are the competitors of
MHC might quickly adopt the new scheme to their companies and benefit from it.
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(b) DISTRIBUTION /PLACE STRATEGY
Marketers face several strategic decisions in choosing channels and marketing
intermediaries for their products. Selecting a specific channel is the most basic of
these decisions. Marketers must also resolve questions about the level of
distribution intensity, the desirability of vertical marketing systems, and the
performance of current intermediaries. The decision about distribution intensity
that is the number of intermediaries through which a manufacturer distributes its
goods should ensure adequate market coverage for a product. In general,
distribution intensity varies along a continuum with three general categories:
intensive distribution, selective distribution, and exclusive distribution.
Intensive Distribution
An intensive distribution strategy seeks to distribute a product through all
available channels in an area. Usually, an intensive distribution strategy suits
items with wide appeal across broad groups of consumers, such as convenience
goods.
Selective distribution
Selective Distribution is distribution of a product through only a limited number
of channels. This arrangement helps to control price cutting. By limiting the
number of retailers, marketers can reduce total marketing costs while
establishing strong working relationships within the channel. Moreover, selected
retailers often agree to comply with the company’s rules for advertising, pricing,
and displaying its products. Where service is important, the manufacturer usually
provides training and assistance to dealers it chooses. Cooperative advertising
can also be utilized for mutual benefit. Selective distribution strategies are
suitable for shopping products such as clothing, furniture, household appliances,
computers, and electronic equipment for which consumers are willing to spend
time visiting different retail outlets to compare product alternatives. Producers
can choose only those wholesalers and retailers that have a good credit rating,
provide good market coverage, serve customers well, and cooperate effectively.
Wholesalers and retailers like selective distribution because it results in higher
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sales and profits than are possible with intensive distribution where sellers have
to compete on price.
Exclusive distribution
Exclusive distribution is distribution of a product through one wholesaler or
retailer in a specific geographical area. The automobile industry provides a good
example of exclusive distribution. Though marketers may sacrifice some market
coverage with exclusive distribution, they often develop and maintain an image
of quality and prestige for the product. In addition, exclusive distribution limits
marketing costs since the firm deals with a smaller number of accounts. In
exclusive distribution, producers and retailers cooperate closely in decisions
concerning advertising and promotion, inventory carried by the retailers, and
prices. Exclusive distribution is typically used with products that are high priced,
that have considerable service requirements, and when there are a limited
number of buyers in any single geographic area. Exclusive distribution allows
wholesalers and retailers to recoup the costs associated with long selling
processes for each customer and, in some cases, extensive after-sale service.
Specialty goods are usually good candidates for this kind of distribution intensity.
The most appropriate strategy for the Mauritius Housing Company would be the
selective distribution. This is due to the fact that the MHC operates only through
3 branches across the island in Curepipe, Flacq and Goodlands and the main
branch being in Port Louis. And since it is the case, it would be a wise strategy to
open new branches in some specific areas such as main towns and villages.
Targeted places could be Quatre-Bornes, Rose-Hill, Ebene, Grand-baie and Port-
Louis, being the core region of the island. In order to achieve this, MHC would
have to recruit more employees. The objective of the company is to establish 10
branches in less than 5 years in order to make the product available throughout
the island. Having several branches will enable the business to have a
competitive edge since it will be more effective in terms of faster processing
time and availability of products. Also, the company can provide online services
where users can do their application via the net, on MHC’s website. The web is
considered as a platform to market a product and hence the firm could seize this
opportunity to expand its market place.
(c) PROMOTIONAL MIX
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For the promotion of the new scheme MHC might have to consider the elements
of the promotional mix like personal selling, advertising, sales promotion,
publicity and public relations, direct marketing. MHC might not do the same as it
did with its old schemes as the promotion might help to promote the young
professionals housing loan scheme well.
Personal selling
Personal selling is the presentation of a product to a prospective customer by a
representative of the selling organization. The customer is more motivated to
buy as information is given directly from one person to another. This is known as
personal communication. More money is spent on personal selling than on any
other form of promotion.
Advertising
Advertising is paid, non-personal mass communication, in which the sponsor (the
company paying for the advertising) is clearly identified. The most common
forms of advertising are broadcasting (TV and radio), print (newspapers and
magazines), outdoor (such as billboards and bus sides), cinema and direct
(including direct mail and online).
Sales promotion
Sales promotion (increasingly known in the industry as promotion marketing)
includes many diverse forms of promotion designed to supplement advertising
and coordinate personal selling. Included in sales promotion are contests for
salespeople and consumers, trade shows, in-store displays, samples, premiums
(e.g. branded caps, pens or drinking glasses) and coupons.
Publicity and public relations
Publicity is similar to advertising in that it uses mass communication to stimulate
demand. Publicity usually consists of favorable news, presentation for a product
or organization. - ‘A plug’- presented through a medium. The unique features of
publicity are that it is not openly paid for and it has the credibility of editorial
material. Organizations frequently provide the material for publicity in the form
of new releases, press conferences and photographs.
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The related area of public relations uses company newsletters and annual
reports, the sponsorship of charity, sporting or cultural events and lobbying. It is
a planned effort to influence the attitudes and opinions of a specific targeted
group, such as customers, shareholders, a government agency or a special-
interest group.
Direct marketing
The best definition for direct marketing is that it reaches its audience without
using traditional formal channels of advertising, such as TV, newspapers or radio.
Businesses communicate straight to the consumer with advertising techniques
such as fliers, catalogue distribution, promotional letters, and street advertising.
Without visiting the store, consumers can order products by phone, fax, mail,
online and SMS. Of these contact methods, direct mail is the most commonly
used. Direct marketing enjoys some competitive advantages such as operating
costs and prices lower than for in store retailing, consumers can often shop at
their leisure from a catalogue or online, and then place an order without the
inconvenience of going to a store.
Considering the fact that the budget allocated is restricted, I would consider the
sales promotion. It can sell to employees’ at a reduced price. It can issue loans
(loans to lower and lower-middle income groups drawing less than Rs 15, 000/-
per month). It can also lower its interest rate and for the first year, it will interest-
free for those applying in the next 3 months. It will provide an incentive for
people to apply within that timeline
I would also opt for the publicity and public relations. This could be done by
employing experienced people to deal with customers. Also, agents working
outdoor could be employed. A launching ceremony event could be organized
where the PM will be invited and some important personality as well as the press
conference.
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