University college Northern Denmark
Financial Management programme
4th semester 2013
The Final exam project
How competitive strategy of the company should be improved in order to
succeed in cleaning business in Aalborg?
The report prepared by Aivija Stravinskaite 4FIE0213
Signature :
Supervisor : Jill Bach Larsen
Delivery date 29 May 2013
Number of keystrokes of the report : 63.904
Number of pages of the report : 30
Table of contents
1.Introduction..................................................................................................................................................................... 1
2.Problem statement.......................................................................................................................................................... 2
1)Motivation .................................................................................................................................................................. 2
2)Problem formulation .................................................................................................................................................. 2
3)Delimitation ................................................................................................................................................................ 2
3.Methodology ................................................................................................................................................................... 2
4.Description of the company ............................................................................................................................................ 3
1)Value chain of the company ....................................................................................................................................... 4
2)Value chain. Sunshine Rengøring A/S ......................................................................................................................... 5
5.Industry analysis .............................................................................................................................................................. 7
1)Services ....................................................................................................................................................................... 7
2)Geographical area ....................................................................................................................................................... 7
3)Trends in the market................................................................................................................................................... 7
4)Development of the industry in Denmark .................................................................................................................. 8
5)Buying behavior .......................................................................................................................................................... 9
6)Market structure ......................................................................................................................................................... 9
7)Hypothetical market structure ................................................................................................................................. 10
8) Stuctural Analysis of Industry (Porter‘s 5 forces) ..................................................................................................... 11
9) Sub-conclusion for Porter‘s 5 forces ........................................................................................................................ 15
10) Level of profitability of the company in a cleaning industry .................................................................................. 16
11) Industry life cycle ................................................................................................................................................... 18
12) Most profitable players in relation to 5 forces ...................................................................................................... 19
13)Global company ISS A/S .......................................................................................................................................... 20
6.Competitive environment ............................................................................................................................................. 21
1)Competitive environment in a stage of maturity ..................................................................................................... 21
2)Service-mix 7P‘s ........................................................................................................................................................ 22
3)Relation between industry life stage and service-mix .............................................................................................. 24
7. Generic competitive strategies..................................................................................................................................... 25
1)Overall cost leadership ............................................................................................................................................. 25
2)Differentiation .......................................................................................................................................................... 26
3)Focus ......................................................................................................................................................................... 26
8.Pricing strategies ........................................................................................................................................................... 27
9.Proposals for Sunshine-Rengøring A/S .......................................................................................................................... 27
10.Conclusion ................................................................................................................................................................... 29
11. List of Sources ............................................................................................................................................................. 29
1.Introduction
The cleaning industry – growing sector
The cleaning industry is growing in Europe (with some significant differences in different
countries). According to the European Federation of Cleaning Industries (EFCI), industrial
cleaning is one of the most dynamic areas accros Europe.There are around 158 000
cleaning contractors where 3 750 000 employees work generating a turnover of nearly 62
billion EUR. The sector was growing significantly during the last 20 years – the turnover
increased almost 5 times from 1989 – 2008.1
Figure 1. Turnover of the European cleaning industry 1989 – 2008
Source : http://www.walqing.eu/fileadmin/walqing_SectorBrochures_1_Cleaning.pdf
Figure 1 shows that it was significant growth of the industry in 2007 when turnover increased to
62 billion in 2008 compared to 54,4 billion in 2006. Industry mainly contains small and very small
companies, where around 90% of contractors had less than 50 employees and only 10% of
companies employed more than 50 employees. Cleaning industry is also highly labour-intensive
sector where around 75% of employers costs are labour costs.1Wage costs are the most important
for all companies in the industry – that could be one of the main reasons for tough competition in
the market. Companies are offering similar services and price becomes one of the most important
1
http://www.feni.be/index.php?id=18
1
criteria. It can be easily seen that cleaning industry in all Europe is growing and new companies are
entering, although there are many already existing in the market. That is why cleaning industry is
interesting to analyze – by making analysis of particular market in Aalborg which will help to
understand what makes competition so intensive defining main key points for company to fulfil in
order to succeed in cleaning business nowadays.
2.Problem statement
1)Motivation
I have decided to choose my final exam topic about cleaning companies in Aalborg, because I was
doing my internship in cleaning company called Sunshine-Rengøring. I was responsible for
marketing management consolidation as it is becoming more important with each day in this
business. It was a great experience to see how real business “works”, although company lost one
of the biggest and most important clients during my internship period. It most likely happened
because of extremely high competition. That is why I chose to look to the competition in this
market from theoretical point of view, analyzing cleaning industry in Aalborg and providing some
solutions for the company in order to improve their competitive situation and defense huge
competition in the future.
2)Problem formulation
Report of my project should cover main aspects, which are important for company to
consider when making decisions about competitive strategy in cleaning business in
Aalborg.
Problem statement : How competitive strategy of the company should be improved in order to
succeed in cleaning business in Aalborg?
3)Delimitation
Even though there are many theories about conducting industry analysis, professional
market research always contains as much empirical data as it is possible. Unfortunately
www.statbank.dk, http://www.dst.dk/en do not provide any new and precise data about the
growth or turnover of cleaning industry in Denmark (the last data is from 2005, which is
not relevant to situation now). It was possible to find some reliable data which shows how
cleaning industry developed in European countries, so I will assume that the pattern of
growth is also the same in Aalborg, Denmark.
3.Methodology
The structure of analysis in the project :
 Description of the company
 Industry analysis
 Competitive strategies
2
 Practical solutions to Sunshine-Rengøring A/S
I will start analysis by description of the company where the main characteristics of specific
firm are described. The method of Value chain will be made in order to understand what
brings value to this company. I am placing it this part of the report, because Value chain
method is never used for industry analysis. It is important to mention that generic model of
value chain represented in M.Porter’s book “Competitive advantage” (1985; p. 33-61) is
mostly applied to manufacturing companies where M.Porter gives example of value chain
for a copier manufacturer. So I prefer using Value Chain for Services, which is based on
generic Porter’s value chain, but applied particularly for service companies.
Structure of composition of industry analysis(which is second part of the report) is shown
and explained in M.Porter‘s book „Competitive strategy“. I will use framework from this
book, which suggests using such models as hypothetical market structure, Porter‘s 5
forces, Product (industry) life cycle curve. Defining market structure is very important,
because then main characteristics of particular business are defined : level of competition,
entry and exit barriers, price formation, profits in a short/lung run, etc. Model of Porter‘s
five forces gives understanding about how competition is affected by each force and which
of them affect it mostly in this market. Product life cycle curve will help to understand
behavior of firms in the specific stage of lifecycle of industry and will help in making
strategical decisions for improving competitive strategy.
After structural analysis of the industry, I will refer to generic competitive strategies with
presentation of risks coming together when choosing one of them. As it is very important
for company to decide how to defense competition in the market, I will present main
pricing strategies, which could be applied to specific company in this market. Service-mix
7P‘s model is relevant, because it demonstrates on which parameters companies mostly
compete in this market. Relation between service-mix analysis and indsustry life cycle
stage will be discussed afterwards.
In the last part of the project I will express my personal opinion about which competitive
advantages company should strengthen in order to follow proposed competitive strategy.
4.Description of the company
Sunshine Rengøring A/S provides the daily private and commercial cleaning. Company is
flexible with time of cleaning and the plan of the work depends on preferences of the client.
Types of services offered by company :
Daily cleaning
Periodic cleaning
Cleaning after building/constructions
Cleaning after moving out
Hotel cleaning service
Carpet, windows, nicotine cleaning
3
Staircase cleaning
Cleaning of ovens
Industrial cleaning
IT- cleaning
Mission
Sunshine Rengøring A/S has a mission of offering proffesional cleaning for business and private
customers with a competitive price and best quality in the region of Nordjylland, Denmark.
1) Value chain of the company
The value chain model is defined as a systematic way of analyzing all the activities a firm perfoms
in designing, producing, marketing, delivering and supporting product or service of the company. 2
Figure 2.Source : http://www.mindtools.com/pages/article/newSTR_66.htm
The main goal of every company is to create a value which exceeds the costs involved in
creating/producing product (costs of activities shown in the figure 2).
In this model value activities are divided in two broad types : support and primary
activities.3
Primary activities:
Support activities
1.Inbound logistics
1. Firm infrastucture
2.Operations
2. Human recource management
3.Operations
3.Technology development
4.Outbound logistics
4.Procurement
5.Marketing & sales
6.Service
2
3
http://www.economist.com/node/14301710
Porter, M., “Competitive Advantage: Creating and Sustaining Superior Performance”, Free Press , 1985
4
Value chain for a service company
Figure 3.Source : http://www.olegabriel.com/publication-web-Gab/Value_Chain_for_Services.pdf
2) Value chain. Sunshine Rengøring A/S
Figure 4 : own composition
All activities represented in the figure 3 are discussed and applied to Sunshine Rengøring A/S as
follows (graphical model of the value chain – see figure 4) :
Primary atributes
In the service design activity 2 main aspects should be considered by the cleaning
company. First of all, in order to design service that clients are actually willing to buy,
company has to be aware of needs and wants of their customers. Cleaning services can be
measured only by customer satisfaction/disatisfaction, so before providing the service
company has to be sure what expectations of their clients are. Secondly, the balance of
quality and price should be discussed. Management of the company should take into
consideration product life cycle, researches for this industry and information about
competitors. Price should be set fairly according to the quality of cleaning
provided.Knowledge Management is an aspect, which is mostly concentrated on needs of
5
the buyer. In the service designing part, physical/technical aspects of service are stressed
more while in knowledge management the behavior of customers is more important. It can
be analyzed with the help of marketing theory (STP process, buying behavior analysis, etc).
When company knows what expectations and needs of its clients are, the service can be
provided much better. It is also important that for example Sunshine Rengøring A/S the
same as other cleaning companies in Aalborg deals with business and private customers.
Differences in communication and satisfaction of these two market groups should be
clearly analyzed as decision of buying the service is made in totally different ways while
dealing with private and business clients.Delivery system management part is very
important as well since service of cleaning is delivered by the cleaner on the agreed time
with the customer. It is intangible service, when there is always participation of employee
of cleaning company needed. It can be one-time or frequent activity, but it is always
delivered by the employee of cleaning company and can not be kept for the future
(perishable service). One of the most important atributes in this type of business is called
moment of truth management, which is all about dealing with complaints from customers
– this is the case in moment of truth management. Probably every company in cleaning
business faced these moments when they had to come back to customer, who is not
satisfied with the quality of the service and behavior of the company becomes crucial
aspect here. Cleaning companies are of course mostly advertised by Word-of-mouth
(WOM) marketing as customers always trust other customers much more than brochures
or marketing tricks. Positive responses of existing customers (word-of-mouth) can attract
many clients to the company and complaints most likely will destroy strong brand name.
So it is important for a company to leave every customer as much satisfied as it is possible.
It is not only a providing high quality service, but communication after deal is very
important as well.
Supporting atributes
Most of the value of the service provided by cleaning company is actually created by its
employees, so choosing right and reliable workers is very important for the company. This is what
human resource management covers in this model. Employees, who are hard-working and are
able to represent company in a best way bring much value to the company. It is also important to
have efficient organisation as schedules of work have to be made precisely and most efficiently for
each employee. Physical aspects are also valuable in the cleaning business – appropriate
appearance of employees, ordered equipment and high quality of services create better image of
the company . If employees look tidy, equipment is prepared in a right way and services are done
carefully, client will always notice and appreciate it. There is also an aspect, which makes
companies think about their client being well-informed about process. Company should give clear
information about how, when, by whom services will be provided and delivered. It also depends
on the buyer how much information he/she requires, but employees of the company have to be
ready to provide at least brief explanation about their services. If a cleaner is well informed about
his/her working hours, chemicals, equipment used in the process of delivering service, client will
6
be more satsfied when she/he can be well informed as well. Punctuality & reliability bring value to
cleaning company, because being punctual means first starting and then finishing work on exactly
indicated time. Reliability of employees is also a case, because usually in a process of delivering
cleaning services, clients are not there and they trust their company, which employees should be
responsible and trustworthy.
5.Industry analysis
1) Services
Services provided in the cleaning industry have the same characteristics as all services in
economics. It is intangible economic activity, which is not stored and it can not be physically
owned. Cleaning services can be provided as either one-time service or weekly/monthly activity. In
marketing theory services have 5 main features, explaining difference between goods and
services. First of them is perishability, which means that services can not be stored or kept for a
longer period – for example, if office manager wants to have clean office, he has to become
permanent client of the cleaning company and agree about frequency of services provided.
Second feature of services is intangibility – client is not able to see service before he actually buys
and tries it. Client of the cleaning company can only see how company works in other places, but
he is never sure what quality of services will be provided to his/her home or work place. Variability
is fourth major characteristic of services, which means that the quality or the process of providing
services are never constant – one time client can be satisfied with the quality and other time he
can be disappointed, because it is done by other employee or using different
equipment/chemicals, etc. Services are also inseperable – in order for client get it, the presence of
provider(employee of cleaning company) is neccesary. The last feature of services is nonownership. 4Practically, services offered in this industry are various types of cleaning services –
cleaning of private houses, schools,universities, hospitals, hotels, restaurants, offices; cleaning of
windows, staircases, etc.
2)Geographical area
Market, which is analyzed in the project is situated in Northern Jutland, Denmark. There are also
few international firms that are leaders in this industry as they global companies with strong brand
name and customer loyalty (for example ISS A/S, Allianceplus A/S).
3)Trends in the market
The fundamental customer need is the quality of service, but is not longer a trend in the market.
Nowadays environmental issues are in the centre of attention, when „Green“ concept has been
one of the biggest trends in the past years. Ideas of protecting environment affect not only food
and clothing market, but is also spread in the cleaning industry. That is why the main goal of
4
http://www.investorwords.com/6664/service.html
7
companies should not be only focused about leaving the building clean, but nowadays cleaning is
also provided to take good care of people and their environment. It is becoming fundamental part
of the industry as cleaning products, equipment and consumables are expected to be ecological.
Waste and recycling are also an issues – companies have to focus on recycling as their direct work
is to eliminate trash from the clients‘ work place or home. Water usage is an aspect to consider as
well, because much of water is wasted while using cleaning machines and there should be ways to
lower the waste of water as much as possible. 5
Intense competition in the market makes companies keep costs down as at the same time
providing the highest level of service, so cost pressure is one of the most important features in this
market. As labor costs are the main costs in this market hiring and training right employees is
something that cleaning companies are working on very hard in order to have a better image of all
industry.6It is also important that company would pay well for its employees – there are no clients
that would like to hire a company where employees are underpaid or they work illegally.
Improvements of customer client relationship are crucial in order for cleaning company to
succeed. Company has to keep assertive and professional relations with its clients. In this market
customers can be easily gained by „word of mouth“ (unpaid form of promotion recommendations). So keeping strong relations with customers, can help to retain existing
customers, who would also recommend company to others, helping company to grow.
There are more trends appearing in the market such as consolidation in the industry, when large
players become bigger because of growth of demand or aquisition of smaller companies. ( Two
cleaning companies operating in all Denmark Kølving & Thaning and Alliance clean & care merged
in 2009, becoming one strong player called Allianceplus A/S).7
The importance of marketing activities became much bigger than years ago and now marketers
dictate innovations and prices in each company, while some years ago developing marketing
strategies in cleaning companies was ignored. 8
4)Development of the industry in Denmark
No. of
Year companies
2001 5,819
Year
Total
employment
2001 48,299
Female
employment
28,629
Male
employment
19,670
Total sectoral
employment as % of
total employment in
economy
1.7
5
http://www.servicesmag.org/index.php?option=com_k2&view=item&id=1:..
http://www.entrepreneur.com/downloads/guides/1816_cleaning_service_ch1.pdf
7
http://www.polarisequity.dk/default.aspx?pageId=135
8
http://www.europeancleaningjournal.com/magazine/articles/business-reports/ecj-20th-birthday-looking-back-atindustry-trends
6
8
2009 5,718
2009 52,430
28,877
23,553
1.9
Figure 5. Total employers and employment in cleaning, 2000 and 2010 (Denmark)
(approximately)
Source : http://www.eurofound.europa.eu/eiro/studies/tn1108048s/tn1108048s_2.htm
Even though number of companies in cleaning sector was lower in 2009 compared to
2001, total employment in an industry increased during these years. The percentage of
total employment in economy changed from 1,7% to 1,9%. It means that there were
more companies, which left the market than those, which entered it, but existing
companies employed more workers. It is also possible that some smaller companies
merged together that is why number of companies is lower in 2009.
This table shows not only that there was slow growth during the years, but that female
employment is higher in this market. Other trend in the labor force of cleaning industry
is that it attracts more highly educated staff (especially in industrial cleaning,
maintanance of hygiene in food chains, etc). However, poor working conitions is still an
issue in most of countries, with no exception in Denmark. 9
5)Buying behavior
As it mentioned before cleaning companies deal with both private and business
customers. Public sector can be considered as business clients as well. Buying behavior
is different when dealing with these two market groups.
In business to business (B2B) market decision of buying is usually made by more than
one person and it is always more rational decision, with no personal preferences. It
often relies on mutual benefits for a supplier and buyer. In business to consumer(B2C)
markets buying decision can rely on massive advertising or personal relations between
seller and buyer. It is much more emotional buying than in business to business market,
because there is a room for buyer to express his/her personal preferences.10
6)Market structure
Market structure of the cleaning industry in Aalborg can be assumed as monopolistic competition.
Market is described as such when there are many firms competing, but each of them tries to
attract customers to its particular product or service and company has some power in setting the
price of its service.Following assumptions describe this market :

9
Large number of firms competing. Each competitor in the market has a small market share
and decisions of one company does not affect its competitors to any great extent. Firms
can be considered as independent, although drastic changes in the price of service would
cause some reaction from competitors.
http://www.eurofound.europa.eu/eiro/studies/tn1108048s/tn1108048s_2.htm
www.ecampus.ucn.dk; Financial management, 3rd semester; Marketing management, Buying behavior.ppt
10
9


No entry barriers and exit barriers. If new company wants to enter/leave the market – it is
easy to do it.
Product is differentiated, but highly substitutable. In the cleaning industry all companies
provide cleaning services, but it can differ to some extent. If company can offer better
quality,special type of cleaning or create stronger relationships with its customers, it can
set higher price without losing all customers.11
7)Hypothetical market structure
Figure 5 : own composition
Market leader is the company which has biggest market share, while market challengers are those
which try to attack market leader in order to gain bigger market share. Market followers can play a
big role as well, but they are not obsessed with stealing customers of their competitors and they
prefer to use strategies more to follow than to attack market leader. It is mostly common in such
industries where possibility for differentiation of product is low, product or service can be easily
compared and price sensitivity is high. Market nichers are those companies who chose alternative
to be a leader in a small targeted market than follower in a large market.12
Hypothetical market structure (cleaning industry Aalborg)
Figure 6 : own composition; source for analysis „Konkurrenter analyse.Sunshine Rengøring
A/S.pdf“
11
Sloman, J. „Essentials of Economics“ 4th edition, Pearson Education, 2007 p.128
12
Kotler P., Keller.K. „ Marketing Management“,Pearson Education, 13th edition,2009 p.341-350
10
Market leader is global facility service company ISS A/S, market challengers could be Compass
group and Forenede Rengøring A/S, companies which also operate globally and have similiar level
of profits as ISS global facility service. Market followers are smaller companies, which have to
accept the level of a price that three-top firms set in the market. Allianceplus A/S and
Rengøringsselskabet Rent ApS could be named as niche, because both companies offer not only
ordinary cleaning services, but first one is focused on hospital cleaning, while second one offers
maintenance of outdoor areas also.
Market-follower – Sunshine Rengøring A/S
In the industry where services/products are homogeneous and price sensitivity is high as it appears in the
cleaning market, more companies follow market leader rather than challenge it. Most of competitors are
against stealing each other‘s competitors. The follower must to define its growth path by holding existing
customers and enter new markets with the service of high quality.There are 4 major types of market
followers : counterfeiter, cloner, imitator, adapter. Sunshine Rengøring A/S is most likely to take a position
of imitator when services of cleaning are slightly differentiated from market leader and challengers by
pricing, location, means of providing the service. 13
8) Stuctural Analysis of Industry (Porter‘s 5 forces)
Figure 7 : Forces Driving Industry competition
Source: http://www.asecsldi.org/dotAsset/292822.pdf
I.
13
Threat of entry
Kotler P., Keller.K „Marketing management“,Pearson Education,13th edition,2009 p.351
11
New entrants to an industry bring new capacity and desire to gain market share that puts pressure
on prices, costs, and the rate of investment necessary to compete. When this threat is high,
companies that already exist in the market have to hold down the prices or boost investments in
order to deter new entrants. 14 The threat of entry depends on the height of entry barriers and
reaction of existing competitors that new entrant can expect. If barriers to enter the market are
low and already existing companies are not expected to react intensively – threat of entry could
be determined as high.
Barriers to entry15
1)Economies of scale
2)Product differentation
3)Capital requirements
4)Switching costs
5)Access to distribution channels
6)Government policy
Threat of entry in cleaning business in Aalborg could be seen as high, because barriers to entry are
low : price of service will not decline if company provides more services per period (small
economies of scale). Also it can become easy to overcome existing customer loyalties over their
cleaning company if new entrant could suggest better price or quality of service. There are no
huge capital requirements to enter the market – in the beggining it can only be one man‘s
company with minimum quantity of equipment for work. Switching cost could not become high
entry barrier, because it is easy for customer to change from one cleaning company to another.
Access to distribution channels and government policy are also not so important in the market as
it is not manufacturing, but service providing company and industry is not regulated by special
government policies.
II.
Intensity of rivalry between existing companies
Rivalry among existing competitors makes companies use tactics like price competition,
advertising battles, product introductions and increased quality of customer service.16There are
many factors which influence intense rivalry in the market. Rivalry among competitors in cleaning
business mostly affects profitability of companies, because price cuts transfer profits directly to
customer.
Price competition exist in this market, because :
14
15
16
Porter, M., “Competitive Strategy”,1st edition, Free press, 1980 p.7
Porter, M., “Competitive Strategy”,1st edition, Free press, 1980 p.7-16
http://www.asec-sldi.org/dotAsset/292822.pd
12


Service of cleaning that rivals provide is almost identical and it does not cost
a lot for buyer to switch from one company to another.
High labour costs. As mentioned before labour costs present around 75% of
total costs in the average company. Labour costs are variable costs, which
vary with the quantity of service produced, but companies having such
expenses for labour costs can only compete on 25% of fixed costs and have
to use strategies on how to manage these costs in the best way.
Competition among existing companies can also depend not only on price, but other aspects such
as quality of service, brand name etc. Quality of service could be important factor, but cleaning is
unskilled work, so company can not compete on this dimension a lot. That is why price
competition is most likely to occur in this market.
As such important as price competition in this market is that all companies compete on almost the
same service. For example, most of cleaning companies in Aalborg offer private house and office
cleaning, which means that the result of it is zero-sum competition17 , where the gain of one
company becomes the loss of other when losing/gaining the new customer.Rivalry can also
become positive-sum competition if competitors concentrate on different segments of buyers,
where there are special price offers for chosen customer groups. It is positive not only because it
will make profitability higher, but also expansion of business may occur when special customer‘s
needs are better met. Some companies chosing special segment for example Allianceplus A/S in
Aalborg is offering all ordinary cleaning services, but they win a lot by specialising in hospital
cleaning where competition is not that high and price for services can be set higher.Exit and entry
barriers also make difference in rivalry among competitors as high entry and exit barriers limit
number of companies entering the market making unsuccessful ones to stay and use other
strategies to compete in order to remain in the business. In other words high barriers make
competition more intense,but it is not the case in the cleaning industry where entry and exit
barriers are low. It is important that height of exit and/or barriers in industry affects profitability. It
is explained in part Level of profitability of the industry.
III.
Pressure from substitute products
Substitutes perform the same or similiar function as an industry‘s product by
different means.18 Substitutes reduce profitability of industry and there are also
competitors to the firms in the industry. Normally substitutes can be easy to
overlook, because their of product/service can differ a lot from the one industry is
offering.
17
http://www.asec-sldi.org/dotAsset/292822.pd
18
http://www.asec-sldi.org/dotAsset/292822.pdf
13
In this industry (monopolistic competition) every company has a little space for
setting price and keeping monopoly as it is the only provider of special service. So
from this point of view all cleaning companies are competitors, but at the same
time they are substitutes to each other. Cleaning service can be provided different
ways, techniques or using different equipment – service is slightly differentiated. If
we consider competitors as substitutes, then bargaining power of suppliers brings
high pressure to competition in this market.
IV.
Bairgaining power of buyers
Buyers compete with industry by forcing down prices, bargaining for higher quality
or more services and playing competitors against each other – all at the expense of
industry profitability.19
Goup of buyers is powerful when:
 It purchases large volumes relative to seller‘s sales
 The product it purchases from the industry represents a significant part of
the buyer‘s costs
 The product it purchases is standart/undifferiantiated
 It faces few switching costs – not expensive to switch from one company to
another in the industry20
 There is a threat of buyer integrating backwards – producing service
themselves
 The industry‘s product is unimportant to the quality of the buyers‘
product/service (Business to business market)
 They buyer has information about market prices,demand, competition in
the market
Buyers bring high pressure to competition among cleaning companies in Aalborg because of the
following aspects : cleaning services are standart and most of companies can offer similiar quality
of it. Switching costs are not high if buyer decides change from one company to another.The
quality of cleaning company service does not affect quality of buyer‘s service(for example,
cleaning of lawyers‘ office will not affect the quality of lawyers‘ direct work). Buyers can become
even higher threat in the market if they know information how high supply of service is, how
tough is competition or what average price is. This information can be easily know only by
contacting few companies in the market.
V.
19
20
Bargaining power of suppliers
Porter, M., “Competitive Strategy”,1st edition, Free press, 1980 p.25
Porter, M., “Competitive Strategy”,1st edition, Free press, 1980 p.25-27
14
A supplier group is powerful if the following statements hold true
 It is dominated by few companies
 The industry is not an important customer of supplier group
 The supplier‘s prouct affect the quality of the product/service of an industry
 The supplier group poses a credible threat of forward integration21
The supplier group in the cleaning industry is not so powerful, because products firms buy
(equipment for cleaning, chemicals etc.) can be bought from many companies and industry is
important customer of supplier group.
There is an other aspect, which is important to consider about cleaning companies in Aalborg –
labor supply. As mentioned before cleaning industry is labor intensive, so qualified workers are
very important for every company. According to Michael E. Porter in his book „Competitive
Strategy“ labor must be recognised as supplier as well as it has great power in some industries. As
labor costs represents the biggest part of total costs in all cleaning companies, having right and
skilled employees is important in order to compete in the market. Tightly unionized labor can
bargain away a significant part of profits not only in concrete company, but in all industry as well.
The power of labor force is high in this particular industry. 22
9) Sub-conclusion for Porter‘s 5 forces
Bargaining power
of suppliers
Intensity of rivalry
among existing
competitors
Threat of
substitute services
Bargaining power
of buyers
Competition
Threat of new
entrants
Figure 8. Porter‘s 5 forces. Industry of cleaning services, own composition.
21
Porter, M., “Competitive Strategy”,1st edition, Free press, 1980 p.27
15
Figure 8 shows structural image of the competition in this market. Intensity of rivalry among
existing competitors exists because of price competition in the market and this brings medium
pressure to competition in all industry. Bargaining power of suppliers, which is also considered as
medium-strenght force, affects competition not because of direct suppliers, which sell equipment
to cleaning companies, but because of the labor supply, which is very powerful in this industry.
Threat of substitute products affects competition with high pressure, because all competitors in
the market could be seen as substitutes for each other as it is easy for every client to switch from
one company to another and service is slightly differentiated. Buyers are also very powerful in this
industry because it does not cost a lot to change from one cleaning company to another, the
competition in the market is intense and supply of services is high. When dealing with private
customers, bargaining does not occure so often, but business clients, whose purchases are the
biggest part of total sales of cleaning companies, has huge power in bargaining and it only makes
competition higher. The highest pressure for competition in this market comes from threat of new
entrants as there no entry and exit barriers in this industry, there are no huge captal requirements
to start business and there are so many companies in the market, that new entrant will not be
noticed by other competitors unless it starts attacking biggest existing leaders and challengers of
the industry.
10) Level of profitability of the company in a cleaning industry
Profits earned by companies in the industry depend on the market structure, demand/supply
balance and entry and exit barriers. As mentioned before, the cleaning industry in Aalborg can be
considered as monopolistic competition. In this type of industry, short-run fluctuations in supply
and demand can affect higher short-term profitability.
Equilibrium of the company in monopolistic competition (short run) :
Figure 9.Monopolistic competition
Source : www.ecampus.ucn.dk; Financial Management, Global Economics 1st semester
16
Profits are maximised where MC=MR (Marginal costs = Marginal revenue).
Possibility of earning supernormal profits (seen as purple area) in a short-run depends on 2
aspects - how big demand for the service is (higher demand – higher profits) and differentiation of
the service : if company can offer special service, it will most likely earn supernormal profits in a
short-run.Even though in the short run companies are able to earn supernormal profits, in the
longer run new entrants will enter this market since there are no high entry/exit barriers in
monopolistic competition. In the industry of cleaning companies new firms are constantly entering
the market, so demand becomes lower and curve shifts to left and continue doing it until normal
profits remain and new entrants stop entering the market.
Long run equilibrium will be reached when normal profits will be earned and price reach normal
level (PL) leaving less space for new entrants in the market.
Equilibrium of the company in monopolistic competition (long run) :
Figure 10 : Monopolistic competition
Source : www.ecampus.ucn.dk; Financial Management, Global Economics 1st semester
Level of profitability of the industry also can be discussed when analyzing interaction between exit
and entry barriers.
17
Exit barriers
Entry barriers
Low
Low
High
High
Low, stable returns
Low, risky returns
High, stable returns
High risky returns
Table 11 : Entry and exit barriers (industry)
Source : Porter, M., “Competitive Strategy”,1st edition, Free press, 1980 p.22
The best case for business is when entry barriers are high, but exit barriers are low – here
will not so many of new entrants, but unsuccessful sellers would leave the industry. The
situation should guarantee high and stable returns for companies. If both entry and exit
barriers are high there will be not so many competitors, but because of difficulties to leave
the industry they would stay in the market keeping competition intense. Returns in this
kind of industry are most likely to bring high, but risky profits for companies. The worst
case is when entry barriers are low, but exit barriers are high, which means that companies
easily enter market (for example when economical situation is in the booming period and
returns can be high), but there are difficulties when leaving the market if all industry
becomes not so profitable. 22
The industry of cleaning companies in Aalborg represents situation when both entry and
exit barriers are low. It ensures low and stable returns in the longer, but the competition in
this type of industry is usually strongest, because it is not so difficult to enter and leave the
market if company is unsuccessful.
11) Industry life cycle
Figure 12 : Product life cycle curve. Source :
http://www.tomspencer.com.au/2009/01/25/product-life-cycle-model/
22
Porter, M., “Competitive Strategy”,1st edition, Free press, 1980 p.22-23
18
Product life cycle (PLC) curve which was first developed in 1965 by Theodore Levitt in an
article entitled “Exploit the Product Life Cycle”, can be applied to analyze industry as well.
Even though there are a lot of discussions about whether all industries (and products)
follow these 4 stages, in this project it is summarized that cleaning industry is in a stage of
maturity as cleaning services are accepted by potential buyers, profits become lower and
more stable as competition is increased and intense in this stage of PLC. Industries passing
through stages of life cycle are affected by some forces, which pressure situation in all
industry to change. In Figure 1 Turnover of the European cleaning industry 1989 – 2008,
which was presented in the introduction part of report, we can see that profits of the
cleaning industry are following this kind of pattern. Assuming that cleaning industry in
Denmark is developing in a similar way as it is in Europe during past years, it is possible to
see clearly that industry is in a stage of maturity.
12) Most profitable players in relation to 5 forces
70.00%
60.00%
50.00%
40.00%
30.00%
Company
20.00%
Solvency ratio
10.00%
0.00%
-10.00%
1
2
3
4
5
6
7
8
9
10
-20.00%
-30.00%
Figure 13 : own composition;
Source for analysis „Konkurrenter analyse.Sunshine Rengøring A/S“
1-Rengøringsselskabet Rent ApS
6-ISS Facility Services
2-Thrane Erhvervs Rengøring ApS
7-Compass Group
3-BK Rengøring ApS
8-Forenede Rengøring A/S
4-Jydske Erhvervs Service
9-Sunshine Rengøring A/S
5-Allianceplus A/S
19
Solvency ratio measures company‘s ability to meet long term obligations. It varies from industry to
industry, but generally company with solvency ratio higher than 20% is considered as healthy
business. Greater solvency ratio shows greater probability that company will not fail on paying its
debts in the future.23
We can see that in the cleaning business in Aalborg most profitable players can be considered as
financially healthy (Allianceplus A/S, ISS facility services, Forenede Rengøring A/S, Sunshine
Rengøring A/S). BK Rengøring has negative solvency ratio, which means that company will have
problems in paying long-term debts. Sunshine Rengøring has highest solvency ratio – 58%.
13)Global company ISS A/S
ISS is a large and long-established facilities services group, operating in 53 countries in Europe,
Asia, Latin America, Asia Pacific, and North America. In 2010, the group had sales of DKK74 billion.
It provides single services, multiple services, or integrated facilities services for private and
business customers.
Services provided by ISS A/S (2010) with percentage of total sales in 2010:
• Cleaning services, (including washroom services) - 52%
• Property services (including landscaping, pest control, damage control services, and
maintenance and technical services) - 20%
• Catering services - 9%
• Office support services (call centres, reception services, and office logistics), accounting for 8%
• Security services (manned guarding and access control) - 7%
• Facilities management (on-site management of facilities services, change management, space
management, and consulting), accounting for 4% of total sales in 2010.24
Sales of ISS A/S
in 2010
Cleaning services
Property services
Catering services
Office support services
Security services
Facilities management
Figure 14 : own composition
23
http://www.investopedia.com/terms
http://files.shareholder.com/downloads/ABEA-5ASMJV/0x0x509621/71ebb250-82b0-4dc8-b2e8b126acfa5bbf/Full_Story_ISS_2011_Oct.pdf
24
20
6.Competitive environment
1)Competitive environment in a stage of maturity
As it is discussed in a part 1.5 Industry life cycle – cleaning industry in Aalborg is considered to be
in a stage of maturity when management of the company has to decide about it‘s competitive
position and analyze competitive environment carefully. How does industry look like when it is in
the stage of maturity?
First of all, more competition for the market share appears – problems caused by this tendency in
the market could be solved by competitor analysis and choosing right and efficient position in the
market. If company is able to predict reaction and behavior of its competitors, strategic decisions
about gaining/defending market share can be made. When the industry is in a stage of maturity
buying behavior changes as well, because buyers have experience in chosing product – cleaning
service is not longer a new service for most of the customers, who already purchased the service
from competitors or repeatedly chose on and the same company as they are satisfied with the
quality and price. As growth of the industry is slower, companies will be pressured to compete on
dimensions such as marketing, distributing, selling and research methods. There is one more
feature which describes company – temporary or permanent decrease of industry profits – slower
growth, struggling with decisions about strategic changes can lower profits and reducing cashflows of the companies, especially the firms with smaller market share.25
Stage of maturity often brings changes in a structure of all market (for example intensity of rivalry
is most likely increases, mobility barriers become higher/lower, etc.), so firms in the industry have
to respond to it strategically. Rapid growth usually does not appear in the market anymore in a
stage of maturity of the industry and companies are forced to compete more intensive as high
profits are earned just because of high demand. Management of each company has to decide
about one of three generic strategies and find a ways how to follow it efficiently.It is crucial for a
company to make changes in a product mix and pricing when the industry is in an early maturity.
Even though clenaing industry in Aalborg does not appear to be in an early maturity, decisions
about product mix and correct pricing should be done efficiently and constantly. 26
25
26
Porter, M., “Competitive Strategy”,1st edition, Free press, 1980 p.237-240
Porter, M., “Competitive Strategy”,1st edition, Free press, 1980 p.241
21
2)Service-mix 7P‘s
Figure 15. Service-mix
Source : www.ecampus.ucn.dk, Financial Management, 3rd semester – Marketing management
The theory of marketing invented special service-mix for products in the service industries. It is
important to analyze which of the aspects are most important in particular industry and what is
the essence of each parameter.
1. Product. As sales of product brings company profits, design and features of it are very
important. Main characteristics of concept of cleaning services are already discussed in a
part of the project 1.1 Service.
Company should pay attention to the product mix theory, which proposes constant
developments in all products and their lines.
Figure 16 : Product-mix
Source: www.ecampus.ucn.dk, Financial Management, 3rd semester – Marketing management
Product width part should answer the question how many numbers of different product
lines are provided by the company. In the cleaning industry in Aalborg the best example is
ISS A/S, which has 6 different product lines (cleaning, property, facility, office support,
catering, security services). Each product line has its own lenght – number of
22
products(services) in each line, for example in a cleaning service line they can offer daily
office cleaning, food hygiene, industrial, dust control, etc. Product or service depth can be
descrbved by number versions of each product, in the cleaning industry it is very
specialised as each service can be provided and adopted in a special way for every client.
When manager has all product lines and their lenth and depth defined, it is possible to see
who are clients of each product line, how profitable it is and who are their buyers.27
Product mix concept can also be applied to a smaller company such as Sunshine-Rengøring
A/S, but of course it would be much more narrow as there are only one product line –
cleaning services, with it‘s lenght which is represented by private houses, offices,
schools,hotels, restaurants,windows cleaning and depth which depends on the needs of
each customer. Even though variety of products(services) in a small company is not that
big, decisions about focusing on more profitable clients or rejection of not profitable
product variations have to be made. Only that can help company to remain successful in a
maturity stage of its industry.
2. Pricing. The stage of maturity in the industry brings changes not only in products company
offers, but in pricing it as well. When industry growth is slower and profits of companies
stabilize, there is a need to make rational decisions about price structure. Looking and
comparing company to it‘s competitors, the difference can be seen and there are always
risks in setting correct price. One of them is having too high price, which would make
clients choose competitors and demand for the services(products) of particular company
will reduce. Other threat is having too low prices which means that costs associated with
providing service exceed the sales volume, which leads to taking loans or a bankruptcy in a
longer run.28;29
3. Promotion. When considering this aspect, company has to find solutions to different
problems. First of all, there are different ways how services should be promoted to
business and private customers. There are some different pricing strategies, which could
be chosen by particular cleaning company.30
Type of promotion
Promotion via mass media : news papers,
Advertising
radio, tv promotion, etc.
Involves special offers, coupons, etc.
Sales promotion
When promoting services directly to person,
Personal selling
mostly occurs in business to consumer
market
Mostly occurs in business to business
Direct mailing
marketing, when company offer is sent by
mail to named person using formal style and
offering services
27
www.ecampus.ucn.dk, Financial Management, 3rd semester – Marketing management
http://www.m4bmarketing.com/business-marketing-pricing/
29
Porter, M., “Competitive Strategy”,1st edition, Free press, 1980 p.242
30
http://www.learnmarketing.net/promotion.htm
28
23
Inernet marketing
Promoting services online - for example
creating constantly renewable webpage or
using social media to attract new customers
Table 17 . Types of promotion
Source : http://www.learnmarketing.net/promotion.htm
When choosing one or few strategies for promoting services, the company should target markets
(market groups) in order to adapt their promotion to chosen clients and it has to consider capital
for promoting, Advertising via mass media is much more expensive than personal selling, but it
would probably be more effective as well. Choice should be done after consideration how much
company is able to spend on promoting its services.
4. Place. This parameter considers such questions as where product is made, stored and how
transported to the customer. But it is not a case in cleaning industry as place where services are
provided is always building, which has to be cleaned.31
5. People. Employees of the service company is essential in providing it, that is why it is important for
a company to train and employ right employees. Staff presents each company when providing
service, reacting to complaints. It sometimes represents image not only of one particular company,
but of all indutry. Choosing right employees, who are responsible and motivated is the key in
creating competitive advantage.32
6. Process is the aspect considering ways of providing service and how efficient it should be done. It is
mostly about employees who have to know how the best quality of services have to be provided
and client who knows what processes are included in the service which he is buying. In a case of
cleaning company, the plan of work, time consumption, equipment and chemicals used in a process
are crucial to be known both for employee and a client. Responsibility for having efficient processes
in a company is under responsibility of management.
7. Physical evidence/environment. This parameter of service marketing mix considers the
physical appearance of provider and services that customer is buying. Especially in a
cleaning business for example, uniformed and tidy looking employees, always ordered
equipment, highest quality of services provided will distinguish company from it‘s
competitors. Physical environment can affect the brand and image of company as small
mistake can make client switch to competitor if its physical environment can be evaluated
as better.33
3)Relation between industry life stage and service-mix
Relating service marketing mix to an indsutry stage of maturity (part of the report 5.11) helps to
understand that all aspects are important to competition, and improving them company is able to
get stronger position in a competing with its competitors. But some of the factors are not so
important as industry is matured and such aspect as process is no longer a case for the industry
competitors, because companies are not new in the market and most efficient ways of work are
31
http://www.learnmarketing.net/place.htm
http://www.learnmarketing.net/servicemarketingmix.htm
33
http://www.learnmarketing.net/servicemarketingmix.htm
32
24
already found out even though there is always room for improvements. Place is not such
important parameter in the industry as there is no re-selling, transportation, storage of services.
Highest competition in the cleaning appears on a price(price competition), promotion,
product/service (innovations, differentiation) and people (motivating and training staff)
parameters.
Figure 18 : Parameters cleaning services industry, own composition
7. Generic competitive strategies
M. Porter in his book „Competitive strategy“ p.34-41 identifies 3 generic strategies which help to
create strong defendable position against 5 competitive forces and to overcome competitors in
the longer run.



Overall cost leadership
Differentation
Focus
1)Overall cost leadership
Strategy used by businesses to create a low cost of operation within their niche. The use of this
strategy is primarily to gain an advantage over competitors by reducing operation costs below that
of others in the same industry.34This strategy requires construction of efficient-scale facilities, cost
and overhead control and cost minimazation in service, advertising. Low cost relative to
competitors gives the firm a defense against rivalry from competitors.
Risks:

34
Increasing business size – The growth of the company is success for business, but at the
same time it requires to spend much more time for administrating and organizing actual
http://www.businessdictionary.com/definition/cost-leadership.html
25


work. The growth of the company should be managed carefully, so company will not
outgrow its business model and will not have huge increase in costs.
Losing experienced work force to competitors
Low-cost strategy taken by followers or new-comers.35
2)Differentiation
Using this strategy company provides unique product or service. There are many approaches to
differentiate company : strong brand name, unique technology, features or customer service. The
best way to use this strategy is when company can differ from competitors on few dimensions.
Differentiations provides opportunity to defense rivalry in other way than keeping low-cost
position. The results should be customer loyalty and lower competition as it would be hard for
competitor to overcome uniqueness of the company.
Risks:


The cost difference becoming more important factor than uniqueness of product
Consumer dissapointment – failing to deliver different and high quality service/product36
3)Focus
Third generic strategy is focus. It can be applied when company is focusing on producing product
or service to a particular buyer group or geographic market. While the cost-leaderhip and
differentiation strategies are more focused on all industry – focus strategy has to be chosen in
order to serve particular market very well. The advantage of company using focus strategy is that
they can serve their target more efficiently than competitors who are competing broadly. For
example, if new cleaning company enters market in Aalborg, providing high-quality service only for
hotels – many hotels in Aalborg can switch to company knowing that they can have better services
from company which is focused and will do best to satisfy their chosen clients‘ needs.
Risks:



Needs of chosen customer group becomes not so hard to satisfy – niche becomes part of
the overall market
Segment becomes attractive and fulfilled with new entrants
The cost difference between competitors in all industry is much higher than the need of
choosing focused supplier as broad-range competitors can offer product much cheaper
producing almost the same quality of product/service.37
35
Porter, M., “Competitive Strategy”,1st edition, Free press, 1980 p.45
Porter, M., “Competitive Strategy”,1st edition, Free press, 1980 p.46
37
Porter, M., “Competitive Strategy”,1st edition, Free press, 1980 p.46
36
26
8.Pricing strategies
Service business can use all pricing strategies with the consideration that the labor cost is the
primary service cost. Services can be priced at a premium or discount and have special offers for
different customers. Aspects such as labor costs, cost of materials, overhead costs (accounting,
depreciation, interest, taxes, telephone bills, etc.), desired level of profit are important aspects to
consider when choosing pricing strategy. Usually charges for services are based upon an hourly
labor because it is the biggest cost component.38 it is also possible to set a price for customer
depending on a square meters of the place where company will have to deliver service. Price can
vary accordingly to length of contract with business clients, lowering price of the company in
exchange to longer contract.
If Sunshine-Rengøring A/S is offering low price and high quality, it is possible to choose from few
optimal pricing strategies. First of them is value pricing and it means that company offers „more for
less“ by underscoring both quality and price. It is not price cutting, it is more like finding a balance
between quality and price and this will bring clients the value of services they seek. The only threat
is underevaluation of all costs (marketing,labor,overhead) and earning too low profits. There is
possibility to choose cost-plus strategy, which is used most commonly. It is simply calculated costs
and desired profit added. This strategy assures having low cost, but it fails to take marketing
expenses into consideration. The other pricing strategy called Meet-or-Beat the competition,
which entails constantly changes of prices due to competition and actions of competitors in the
market. It is mostly used in service businesses as price competition occurs when service is difficult
to differentiate. Similar strategy is called follow-the-leader, which is also applied in industries
where price competition is intense, but it is competing with particular competitor. Leader in this
case is a dominant firm in the industry, such as ISS A/S in cleaning market. The last option for the
company would be variable pricing strategy, which means that company offers discounts, credit
terms in different ways depending on customer. For exmple, setting different price for private and
business customer would mean using this strategy. 39
9.Proposals for Sunshine-Rengøring A/S
The aim of this project is to improve the competitive strategy of this particular company. Competitive
strategy is long-term action plan which helps company develop competitive advantages and overcome its
competitors. 40
Here are my solutions for the company in order to strenghten its competitive position in the cleaning
industry. Proposals, which can become competitive advantages of this company in the longer run, are
based on analysis made in a part of the report 5. Industry analysis and 6.1 Competitive environment.
Choice of generic strategy
38
Mariotti S., Glackin C. „Entrepreneurship&small business management“,1st ed. Pearson Education 2012 p.193
Mariotti S., Glackin C. „Entrepreneurship&small business management“,1st ed. Pearson Education 2012 p.193
40
http://www.businessdictionary.com/definition/competitive-strategy.html
39
27
After analyzing Poter‘s 5 forces (in a part 5.8 of the report) of the industry, company is able to base
competitive strategy together with some defensive moves against intensive competition in the market. It is
clear that the highest pressure for companies in the market is threat of new entrants while buyers in the
industry are also very powerful. Substitute products offered by competitors is also a huge threat for all
market. Suppliers‘ power and rivalry among existing competitors affect strength of competition in this
industry as well.
In order to deal with strong competition in the market, one of three generic strategies (discussed in parts
6.1,6.2,6.3) has to be chosen. On the basis of industry life cycle analysis and identifying cleaning industry as
maturing, overall cost leadership looks like the most efficient strategy for Sunshine-Rengøring A/S.
Differentiation strategy would be too difficult to implement when talking about cleaning services. Focus
strategy should be chosen if company is new entrant in the market, while Sunshine-Rengøring already has
customers of different market groups and segments. When choosing the overall cost leadership strategy,
company has to minimize and constantly control costs. This strategy means costs minimization in all parts
of its value chain: HR, marketing, service design management.
Choice of pricing strategy
As cleaning industry is in a stage of maturity, profits are most likely to be low and stable. Companies do not
expect to earn high profits, so it has to choose appropriate pricing strategy. After analyzing few options for
company (part 8.Pricing strategies of the report), it would be the most efficient for Sunshine-Rengøring to
combine two pricing strategies. The basic one would be cost-plus strategy, where all costs are sumed up
and desired profit added, only using this strategy company would be able to achieve overall cost leadership
in the market. It would be also possible to use variable pricing strategy when company would price private
and business buyers with differently, because private and business customers .
Developing customer client relationship
As it is discussed in a part of a report 5.5 Buyers, company is dealing both with private and business
customers. There are some differences in buying behavior and in ways of keeping long-lasting relationships
with these 2 market groups. But developing customer related marketing (CRM) in the company, is an
efficient way in order to promote the service and to increase customer loyalty to the company. Customer
satisfaction of provided services should be evaluated for example 4 times a year (every season of the year)
by simply meeting or having a phone conversation with the client. It is possible that client has some
preferences how she/he wants provided services to be evaluated (more about it part 4.2 Value chain of the
company).
Human resource management
As it appeared from Value chain and service-mix 7 parameters models, human resource management is
very important to every company performing in this market. It is because in service industry like cleaning,
the main provider of service is employee of the company, who creates biggest value to clients. Human
resource management includes management of an organisation, together with selection, attraction,
training, assesment of employees.41 Implementing efficient human resource management system would
motivate employees to be loyal for the company and to present it in a right way in every situation.
41
http://www.humanresourceexcellence.com/importance-of-human-resource-management/
28
Especially in a field like cleaning industry, where many illegal cases of work appear, such as „black market“,
underpaid work and etc, having a good team in the company would be important not only because
employees would provide high quality in their work, but it is also an advantage for all company image if
clients know about „healthy“ situation in the firm.
Dealing with market trends
In the part of the report 5.3 Trends in the market main characteristics of cleaning industry nowadays are
discussed. As it mentioned, „green“ concept is so popular in everyday life with no exception in cleaning
industry, which is now more focused on saving water, recycling, using chemicals, which would be harmless
to environment. Other trend is about high cost pressure in the market, which would be solved by choosing
most efficient price strategy – keeping costs low as much as possible in order to compete in the market.
The last trend, which will be discussed – marketing practises in this industry.Many companies ignore
market changes and lose against their competitors in a stage of maturity. It is crucial for a manager of the
company to understand that now when the growth in industry slowdown, price competition appears,
importance of marketing activities increases – giving up market share too easy, no reaction to competitors‘
moves in changing prices – are not a choice for a company eager to compete in this market.42
10.Conclusion
The report of this project should help cleaning company Sunshine-Rengøring A/S to make decisions about
its competitive strategy. The proposed formulation of competitive strategy, choices of generic and pricing
strategies are not the only ways for the company to grow in the future. Based on industry analysis, I have
seen this competitive strategy as most efficient solution for a firm in order to increase its market share and
remain successful in a longer run.
Overall cost leadership, customer loyalty, strong team of employees, trends of ecology and
accepting importance of marketing could be seen as competitive advantages of this company.
So long-term action plan for Sunshine-Rengøring A/S is formulated as :
Being cost leader in the market, Sunshine-Rengøring will attract new and retain existing clients.
Customer loyalty will be obtained by creating closer relationships with private and business
customers, analysing satisfaction, buying behaviour of these two market groups. Company is
aiming to be innovative by finding new ecological solutions for a process of delivering service.
With help of marketing management Sunshine-Rengøring is focusing on its long- term growth
and development of ways of supplying the best quality cleaning services for low prices.
11. List of Sources
 Books
Mariotti S., Glackin C. „Entrepreneurship&small business management“,1st ed. Pearson Education
2012
Kotler P.,Keller K. „Marketing management“, 13th edition, Pearson Education, 2007
Porter M., „Competitive Strategy”,1st edition, Free press, 1980
Sloman, J. „Essentials of Economics“ 4th edition, Pearson Education, 2007
42
Porter M., “Competitive Strategy”,1st edition, Free press, 1980 p.247-249
29
 PDF-files
„Konkurrenter analyse.pdf“ – Sunshine Rengøring A/S
http://www.asec-sldi.org/dotAsset/292822.pdf
http://www.walqing.eu/fileadmin/walqing_SectorBrochures_1_Cleaning.pdf
http://www.olegabriel.com/publication-web-Gab/Value_Chain_for_Services.pdf
http://files.shareholder.com/downloads/ABEA-5ASMJV/0x0x509621/71ebb250-82b0-4dc8-b2e8b126acfa5bbf/Full_Story_ISS_2011_Oct.pdf
 Websites
http://www.businessdictionary.com/definition/cost-leadership.html
http://www.businessdictionary.com/definition/competitive-strategy.html
http://www.economist.com/node/14301710
http://www.europeancleaningjournal.com/magazine/articles/business-reports/ecj-20th-birthday-looking-back-atindustry-trends
http://www.eurofound.europa.eu/eiro/studies/tn1108048s/tn1108048s_2.htm
www.ecampus.ucn.dk
http://www.feni.be/index.php?id=18
http://www.humanresourceexcellence.com/importance-of-human-resource-management/
http://www.investopedia.com/terms
http://www.investorwords.com/6664/service.html
http://www.mindtools.com/pages/article/newSTR_66.htm
http://www.m4bmarketing.com/business-marketing-pricing/
http://www.polarisequity.dk/default.aspx?pageId=135
http://www.servicesmag.org/index.php?option=com_k2&view=item&id=1:..
http://www.tomspencer.com.au/2009/01/25/product-life-cycle-model/
http://www.learnmarketing.net/servicemarketingmix.htm
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