Discuss about the Market Segmentation for Conceptual and Methodological.
Honeywell International, Inc. is a US based conglomerate company, which is operating in a number of markets and with number of service offerings. This particular report is discussing Honeywell Building Solutions and the market and demand situation of the company in Australia. As per the company website, the company is providing solutions to the business and consumers since 1962 (Honeywell 2016). In Honeywell Building Solutions, the company focuses to design, implement and support cost- effective building solutions to the consumers. It provides “energy efficiency and security” in constructions and communities. As mentioned in the organization website, “Smart grid, micro grid and on-site power generation, integrated security, building controls, automation, and management, system service, maintenance and optimization, and smart building are examples of the technologies produced by the HBS business unit” (Honeywell 2016). With sustainable, flexible, scalable and long-term solutions, Honeywell Building Solutions provides increased productivity, reduced operational cost, and safe working environment to the buildings (Honeywell, 2016). The company is globally respected for its dedication to the innovation. According to the last published report, the net income of the company was US$4.768 billion in 2015 (Honeywell, 2016).
The company serves the building industry worldwide. As mentioned in the company website the organization provides construction solutions to the investors too. Thus, it can easily be speculated that this particular segment of Honeywell is slowly but consistently capturing the market in the construction and “Intelligent Building Management Systems” market.
As opined by Votano and Sunindijo (2014) with the changes in the environmental laws in the construction sector, the demand of the energy efficient grids of the “Building Energy Management Systems” are gradually increasing.
With the changes in the governmental regulation the business of the energy efficient sectors can be fluctuated, but in the modern world of technology and the international growth of the aged population will increase the market share of the company.
Honeywell shares a huge portion in the consumer segment. As mentioned by Hjort et al. (2013) identifying the right potential customers is essential for creating a successful business and increase the profit count. Here, the consumers can be segmented in the following ways:
Geographic:
The organization is operating in the international market. However, the customers of the urban and commercially developed areas can be cited as the potential customers.
Demographic:
As mentioned by Wedel and Kamakura (2012) the demographic segmentation focuses on the market division according to the “age, gender, income, education, ethnicity, marital status, education, household (or business), size, length of residence, type of residence, profession/Occupation” of the customers.
Age: The aged people will need smart home equipments.
Profession/Occupation: The main customers of the selected company are the building construction companies. However, the general customers from any profession or the business organizations can be the customers of this company.
The customers who are environmentally conscious and keeps eye on the safety and security issues can b identified as the potential customers. Moreover, the business owners who are conscious about the legal challenges in the safety, sustainability and the environmental issues will be the target customer of the company.
Behavioural:
The customers are business houses who are not much price sensitive. However, quality is an issue over here. Moreover, the modern and technology oriented people will love to install these products.
Value oriented:
The “Building energy management system (IBEMS) providers”, “Investor community”, “Commercial building automation system (CBAS) vendors” “Lighting controls manufacturers” “electronic companies,” “Commercial real estate (CRE) providers” “Corporate energy and sustainability executives” and the “Government agencies” will and the solution service of the selected company (Biswas 2014).
If the buying pattern of the customers can be examined it can be noted that the organizations mainly creates strategic alliance to the company. As mentioned by Khalfan et al. (2015) in the IBMS market, the construction houses make deals to the IBMS companies for the installation of building solution equipments for their construction projects.
On the other hand, direct deals are also done with the customers for the installation of the security systems and other offerings.
As mentioned by Kibert (2016) the political and legal scenario of the country as well as the international market, the installation of the security equipments and the energy efficient grids are one of the major legal regulations in the construction companies. Hence, as opined by McGeorge and Zou (2012) it can be stated that the decision-making unit for the purchase of the product offerings of the company is the industry itself.
While buying the products of Honeywell Building Solutions, the customers can switch for alternatives. As mentioned by Azzi et al. (2015) the company has number of competitors which can serve as the alternates for the company. Here, the name of the General Electric, Johnson Controls and BAE Systems can be mentioned. Moreover, in the process of buying the product offering the customers can examine the alternates like quality, price, brand name and many more.
The company website can be served as the information source for the customers. Moreover, the advertisements, neighbors, word of mouth can be served as the source of information.
Finally, the price, quality and the existing knowledge i.e. the brand name will influence the buying pattern of the customers in this market.
The macro environmental factors are one of the major variables that have a hug influence on the demand pattern. For identifying, the environmental impacts on the demand a PESTL analysis can b done. As mentioned by Kolios, and Read (2013) a PSTLE analysis provides a clear picture about the political, social, technological and economic trend in a certain market that is being influential in the operation of the organization.
Political:
With the integration to the Kiyoto protocol, Australia and many other countries are now creating laws regarding the installation of “Building Energy Management Systems” within the construction projects. The government is providing legal incentives to the organizations which compiling to the norms.
Economic:
The economic slowdown in the international as well as the domestic market has affected the construction industry in Australia. However, as mentioned by Votano and Sunindijo (2014) the economy of the country is strong and the strong FDI flow is enriching the construction market.
Social:
As mentioned by Biswas (2014) the growth of population in the last decade, has expanded the market potential for the construction company. It is being helpful in creating demand for the solution offering of the selected company. Moreover, as opined by Azzi et al. (2015) the consistent growth of urbanization and the aging population is crating demand for the smart buildings.
With the recent innovation and improvement in the technologies used in the construction industries, the companies are now able to provide energy efficient buildings to the customers. As mentioned by Khalfan t al. (2015) the new trend of BEMS or the “Building Energy Management Systems” in the contraction industry of developed countries like Australia and Japan, the company is now on the verge of experiencing a huge level of success in those markets.
Legal:
As opined by Hojjati and Khodakarami (2016) with the increased concern for the environmental issues the countries like Australia is creating laws which are making it obligatory for the construction companies to install energy efficient solutions to their buildings. Moreover, as described by Kibert (2016) the Australian government has strict laws regarding the employee safety. Hence, it is crating demand for the safety solutions of the selected company.
As described by E. Dobbs (2014) Porter’s five forces model examines the competitive rivalry and the company’s position in the market. With the variables like “Consumer’s bargaining power,” “bargaining power of suppliers,” “threat of Substitutes”, “threat to new entrants” and the “competitive rivalry” in the existing market, the competitive situation can be analyzed.
Here, in this report the consumers’’ bargaining power has been discussed with the aim of exploring the buyers’ power in the market.
As the company is operating in providing green and energy efficient solutions to the construction houses and the investors, the bargaining power of the consumers can be detected as low. With the increased regulation in the construction markets for the installation and management of energy efficient power grids and other equipments, the customers the gradually being dependent on the service offering of the company (Asadullah and Celik 2016).
Moreover, the Australian government has strict rules for the companies to provide safe and secure working environment to the employees. It has pushed the business organizations to install security management equipments. Thus, it can be claimed that the products of the company is important for the customers and they cannot ignore the offerings of the company.
The blue ocean strategy talks about creating new market and demand for obtaining competitive advantage.
As opined by Kim and Mauborgne (2014) for formulating a blue ocean strategy it is needed to reconstruct the market boundaries by the company. To achieve this goal, the companies can use six different paths like, looking across the alternative industry, looking across the strategic groups within industries, looking across the chain of buyers, looking across the complimentary products and the service offerings, looking across the functional and emotional appeal and looking across the time.
Here, to discuss the demand conditions, the writer has discussed the third, fourth and fifth paths for reconstruction of the market boundaries.
Buyer Group:
In the context of the market, in which the selected company is operating, the chain of buyers are two to three stags. As mentioned by Yamagata and Seya (2013) in the building solutions market, the chain of buyers starts from influencers to purchasers to users. As per the company report, the organization is now focusing mainly on the purchasers. As the company deals with the construction companies to provide building solutions, it mainly focuses on the purchasers (Honeywell, 2016). However, in few cases, the company interacts with the influencers like the investor group or the users like the individual customers. As mentioned by Hojjati and Khodakarami (2016) shifting from purchaser to buyer will create brand value but it will not be much profitable for the company, as it will not collect a significant number of businesses. However, if the organization focuses on the influencers like the investor groups of the official bodies and corporate sustainable officers, it will be profitable to the company.
The product offerings of the company are being used in the buildings for energy efficient, security and sustainability solutions. The pain of the customers can be identified as reducing the operation cost, increasing the employee outcome and improving building efficiency. By reducing the price and products that will be IoT (Internet of Things) based, the efficiency will be increased and cost will be reduced.
The company is now operating in the functional sector. The organization’ offering does not have an emotional appeal too the customers. Hence, it is needed for the company to compete on the emotional field. With the functionality, the organization needs to make the customers feel that the products will keep their employees and families safe. They need to feel that with the products they will be able to avoid the legal constrains (Hojjati and Khodakarami 2016).
Here, the soon-to-be non-customers are the influencers. They will try to eliminate the purchaser and deal with the company for cost benefit. The refusing customers are the ones who try to avoid the smart technologies in their buildings (Hjort et al. 2013). With advertisements, they can be attracted to the brand and finally the non-customers are the potential buyers in the rural sector. By lowering down the price and advertisements this group can be attracted.
Buyer Utility:
To create buyer utility, the organization will make the offerings simple and user friendly. The products will provide convenience that was not experienced by the customer before, like the IoT management (Yamagata and Seya 2013). With innovative power usage, technique the risk can be reduced. The company can also opt for colourful devices. Last but most essentially, the energy saving characteristics of the devices will create a hug buyer utility.
Conclusion:
In conclusion, it can be said that the recent macro environmental trend is helping the company to retain this place in the Australian market. Moreover, it can be speculated that by obtaining a blue ocean strategy the company will be successful in the new market as the offerings of the company is a requirement for both the users and the influencers. In the coming future the company can experience a good growth as the construction industry seeking to obtain strategies for energy conservation and cost reduction.
References:
Asadullah, M. and Celik, A.R., 2016. An Effective Approach to Build Smart Building Based on Internet of Things (IoT).
Azzi, M., Duc, H. and Ha, Q.P., 2015. Toward sustainable energy usage in the power generation and construction sectors—a case study of Australia.Automation in Construction, 59, pp.122-127.
Biswas, W.K., 2014. Carbon footprint and embodied energy assessment of a civil works program in a residential estate of Western Australia. The International Journal of Life Cycle Assessment, 19(4), pp.732-744.
Dobbs, M., 2014. Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), pp.32-45.
Hjort, K., Lantz, B., Ericsson, D. and Gattorna, J., 2013. Customer segmentation based on buying and returning behaviour. International Journal of Physical Distribution & Logistics Management, 43(10), pp.852-865.
Hojjati, S.N. and Khodakarami, M., 2016. Evaluation of Factors Affecting the Adoption of Smart Buildings Using the Technology Acceptance Model.International Journal of Advanced Networking and Applications, 7(6), p.2936.
Honeywell. 2016. Honeywell. [online] Available at: https://www.honeywell.com/ [Accessed 27 Sep. 2016]. Khalfan, M., Noor, M.A., Maqsood, T., Alshanbri, N. and Sagoo, A., 2015. Perceptions towards Sustainable Construction amongst Construction Contractors in State of Victoria, Australia’. Journal of Economics, Business and Management, 3(10), pp.940-947.
Kibert, C.J., 2016. Sustainable construction: green building design and delivery. John Wiley & Sons.
Kim, W.C. and Mauborgne, R., 2014. Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant. Harvard Business Review Press.
Kolios, A. and Read, G., 2013. A political, economic, social, technology, legal and environmental (PESTLE) approach for risk identification of the tidal industry in the United Kingdom. Energies, 6(10), pp.5023-5045.
Leeland, S., Shen, P., Holaso, A., Helzer, E., Clinger, K., Lalli, M., Frost, R.C., Kong, S., Gustafsson, N. and Baranauskas, J.M., Honeywell International Inc., 2015. Building control device. U.S. Patent D743,349.
McGeorge, D. and Zou, P.X., 2012. Construction management: New directions. John Wiley & Sons.
Votano, S. and Sunindijo, R.Y., 2014. Client safety roles in small and medium construction projects in Australia. Journal of Construction Engineering and Management, 140(9), p.04014045.
Wedel, M. and Kamakura, W.A., 2012. Market segmentation: Conceptual and methodological foundations (Vol. 8). Springer Science & Business Media.
Yamagata, Y. and Seya, H., 2013. Simulating a future smart city: An integrated land use-energy model. Applied Energy, 112, pp.1466-1474.
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