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


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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mauritius housing company ltd

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