Cadbury Marketing Analysis: SWOT and PEST

Cadbury Marketing Analysis: SWOT and PEST Cadbury is British company which is the second largest Chocolate producing company in the world (only after Wrigley combined). The head quarter of Cadbury is at the Uxbridge Business Park in Uxbridge, London{R}. It is also listed in the London Stock Exchange. In February 2010, Cadbury was acquired by Kraft Foods. The company was an ever present constituent of the FTSE 100 from the indexs 1984 inception until its 2010 take over{R}. The firm was formally known as Cadbury Schweppes from 1969 until May 2008 demerger which was divided by its global business from it U.S beverage unit which had been renamed Dr. Pepper Snapple Group Inc {R}. Cadbury Schweppes is the worlds leading Confectionery Company. But it is chocolate with which the Cadbury name is indelibly associated in the minds of consumers. Around the world, Cadbury chocolate has never been more ubiquitous than it is today. It has the greatest reach, consumer awareness, and sales presence than at any time in its history. As we have seen, Cadbury has not managed to conquer the entire globe as the definitive brand of chocolate- but then neither has anyone else. There are global product brands, such as mars Bar, but no definitive global chocolate house name. However, in the markets where Cadbury has been able to successfully take root, they have managed it mostly with spectacular effect. Consumers in Cadburys main overseas markets believe that Cadbury is not only the definitive chocolate brand that is indigenous to their own country. In both Australia and New Zealand, Cadbury is regularly voted as being the most trusted brand in the country. In 1997, on the fiftieth anniversary of Cadbury setting up their Indian company, Cadbury was voted by consumers as being the countrys top brand in a major poll run by the Indian Economic Times. No other single chocolate house name has managed to achieve such close bonds with so many consumers around the globe. Cadbury, a brand that originated at the dawn of mass consumerism, is a brand of the masses. Arnold vetoed the plan as he not wants Cadbury to realize that their strategy had driven his business almost to the brink. As Cadbury were outselling Rowntree in milk chocolate by over ten to one, Rowntree gamely tried to fight on by developing an even milkier chocolate that would trump Dairy Milk and its Glass and a Half claim. Research showed that a slight taste preference over Dairy Milk, but was not yet at the 65% preference level they felt they needed. Cadbury had taken their advantages of huge scale and efficiency, and simply made it impossible for their main rival even to compete in the milk chocolate market. Cadbury merged with drinks company Schweppes to form Cadbury Schweppes in 1969.Cadbury Schweppes went on to acquire Sunkist, Canada Dry, Typhoo Tea and more. In the US, Schweppes Beverages was created and the manufactures of Cadbury confectionery brands were licensed to Hersheys. VISION: Working together to create Brand that people love Cadbury mission statement- Cadbury means quality. This is our promise. Our reputation is built upon quality; our commitment to continue improvement will insure our promise. HISTORY: Cadbury was started in 1824 by John Cadbury in Bull Street, Birmingham in a shop. At initial stages it was a seller of tea, coffee homemade drinking products with a less emphasis on Chocolate. In those days cocoa Chocolate products were a luxury unaffordable for common people. Johns excellent marketing technique soon made him a leading trader of Chocolate in Birmingham. Johns shop reputation for Chocolate prospered more more day by day. Due to its increasing popularity John moved into manufacturing of drinking Chocolate cocoa. By 1840, John his brother started a factory in Bridge Street with a partnership. During 1850, the government reduced the high import taxes on cocoa due to which Cadburys Chocolate rate came down it was in a reach of common people. In 1854, Cadbury got the Royal Warrant by the Queen of England. In 1861, after the retirement of John Cadbury, his son took over the business had a hard time managing it. A new product named Cocoa essence helped the business tremendously. Because of this over whelming success Cadbury shifted their factory from Bridgestone to Bourneville. The factory at Bourneville was much bigger advance than the previous one. In 1881, the company got its first Export order from Australia. In the same year the company also started to manufacture the Milk Chocolate. Cause of this new product Cadbury can now match the quality, taste variety of products made from their competitors in Switzerland France. Cadburys success was marked due to its new recipes experimentation on its new innovations. After the death of Richard Cadbury his son George Cadbury headed the company very well. By the end of 1900, the company had about 2500 workers. Cadbury was far more ahead advance from its time under the leadership of George Cadbury. He also provided with Training housing for its employees. Pension health facilities were also given. During 1910 Cadbury Dairy Milk become a familiar name in Europe. Afer the World War 1 the production of the factory increased. In 1919, Cadbury merged with J.S Fry sons and started a new brand Frys Chocolate Cream Frys Delight which is on sell now also. In 1938, a new brand called as Rosses of Cadbury had placed the company in the top of the chart in the worlds Chocolate manufactures. In 1969, Schweppes Cadbury group merged with a new name Cadbury Sweppes Plc This new company became a leader in confectionary soft drink in the World. With factories all over the world Cadbury soon become a household brand in many countries like U.K, India, Australia, etc. Description: A glass and a half of milk in every half pound bar of chocolate. Product Range: As well as the classic Cadbury Dairy Milk, we make Fruit Nut, Whole Nut, Caramel, Bubbly, Crunchy Bits, Turkish, and Bar of Plenty range. Brand history: Cadbury Dairy Milk (CDM) was launched in 1905 and became an instant success. Over 100 years later and the recipe is relatively unchanged and is kept under lock and key in a safe. Cadbury introduced its famous Glass and a half of full cream milk in every half pound slogan in 1928, but the world-famous symbol was only used in advertising. By the mid 1920s, CDM had become the best selling chocolate brand in the UK. Today, CDM remains the UKs number one chocolate brand and is worth more than  £360 million. More than 65% of the British population will buy CDM at least once a year. It is also an international favourite, enjoyed by millions of people across 30 countries. Cadbury recently announced a commitment to use 100% Fair-trade cocoa in blocks of CDM. Target audience: 21-29 year old females, but a great deal of interest comes from the 45 years+ consumer as well. ANALYSIS: Macro Micro Analysis: SWOT Analysis (Micro): ACADAMIC REVIEW: Even in the beginning of the 21st century, SWOT is still there and rising as a recommended scaffold in lot of well recognized tactic organization and marketing text. Hitt et al. (2000); Anderson and Vince (2002). In addition, combine of SWOT mechanisms have to stick towards core logic so as to take reliability towards calculated assessment. Lengnick-Hall and Wolf (1999) STRENGTH: Cadbury holds 9.9% of the global market share Largest global confectionery supplier. Strong manufacturing competence and innovation, brand name. Acquisition (different competitors) Strong financial strength position. WEAKNESS: Dependent on the confectionary beverage market. Lack of understanding of the new emerging markets. OPPORTUNITIES: Growing markets of China, India, Russia. Rise in demand for confectionery market. High degree of merger acquisitioned. Innovation. Changing demands. Healthier Snack with fewer calories. Low-fat, organic, natural confectioneries. THREATS: Increase in cost demands. Global supply chain in low cost locations/areas. Lack of promotional activities. Calories counting and obesity effects the demand of the product. Strengths Cadbury holds 9.9% of the global market share. It is considered as the largest global confectionery supplier in the world. High financial strength (Sales turnover 1997,  £7971.4 million and 9.4%). Cadbury over the years has established itself as an leader in innovation, Brand name a strong manufacturing competence. Recently, Cadbury has grown through its acquisition strategies. Cadbury has increased its sales profit by financial strength position. Weaknesses The company is dependent on the confectionary beverage market whereas other competitor E.g. Nestle has more variety of product portfolios so that the project generated funds can be utilised or invested in other areas of business and research development. Other competitors have greater international experience as Cadbury has been traditionally strong in Europe new to the U.S, due to this there is a possible lack of understanding of the new emerging markets compares to competitors. Opportunities Cadbury has a large opportunity in the growing markets of China, India, and Russia where there is a huge population with consumer wealth and demand for confectionery market is increasing. The confectionery market is characterised by a high degree of merger and acquisitioned activities in recent years. Opportunities exist to increase share through targeted acquisitions. The key for Cadburys growth is Innovation. It is to meet the change in the consumer demands .Snack which is healthier and less in calories need to be developed. A detailed Research and Development has helped Cadbury led to sugar free and centre filled chewing gum varieties. A strong demand of low-fat, organic and natural confectionaries also appear to be in the market. Threats Worldwide there is an increasingly demanding cost environment, particularly for energy, transport, packaging and sugar. Global supply chain in low cost locations. Competition from other brands (global and national) economy prise and aggressive promotional activities by competitors. Due to social awareness of the consumers by rise calories counting and obesity. Due to healthier lifestyle of consumer is affecting the demand of Cadbury products. PEST Analysis (Macro): ACADEMIC REVIEW: Proof put forward that a mass of association have only badly developed environmental examination systems, something which is shown in a report by (Wilson and Gilligan.1997, pp 245-6). Fifield, P and Gilligan, C (1999, pp. 60) POLITICAL: Increase tax. Law legislation. Increase in the rate of obesity. ECONOMIC: Vat. Debts affect the choice of the buyers. Minimum wages. SOCIAL: Concept of eating on the GO. Enjoyed loved by all the age groups. Increasing awareness among the people/consumers. Health eating habits. TECHNOLOGICAL: Market survey. Improve the Quality of product. Maintain trade mark and standards in the market. Increase in productivity. Installation of high technologies machinery. More investment. Periodic maintenance of the equipments. Political: Cadbury dairy milk can be affected by political issues if tax increases this will affect the number of consumers along with the fall in sales of stocks. The judiciary system can also effect Cadbury dairy milks production as any law passed, for example, restricting the working hours of factory for labours as it will restrict the working time of workers at the factory this effects the product efficiency. The main concern of government today is increasing obesity. As a result of a survey major heart problems are caused per year mainly due to Cadburys products. Economic: The rate of interest can also effect the production of Cadbury dairy milk as if a high rate of interest is being charged to Cadbury dairy milk the company would not prefer to borrow money to expand itself. That applies to consumers as well if they are under the burden of loan they would have less share of their income to buy luxury products. Cadbury dairy milk can make more money only if manages to bring down the minimum wages but this could also result in decrease in the consumer sale Social: The latest trend that has been setup in snacking-as more and more people are now into concept of eating on the go. All the members of the family or no age limit is preferred for Cadburys product. Its a product which is enjoyed and loved by all the age groups. The money that is brought in by the people visiting the Cadbury world would not only benefit Cadbury but will also be beneficial for the local residents who have small business near Cadbury world. People are being more and more conscious about their health and their eating habits. As the consumer today are well aware about their rights benefits they have developed this habit to read the ingredient content to make sure that the product is as per their requirement. Technological: To meet the increasing demand and also to maintain in this competitive market Cadbury dairy milk has to take some important measures to meet the day to day requirement like market survey etc. Such as increase in production (volume), improve the quality of the product Etc for this it is important to install/buy better equipment so that Cadbury dairy milk can maintain its statue, standard as a trade mark in the market. As the competition increases day by day the company should quit old methods and machineries should switch to new and better (advance) technology i.e., machineries such as high productivity capacity which can help in enhancing the quality of the product, etc. To install such high tech advance machinery will require more capital such as to export machinery, install, and training programme for employee, land, etc. Company has invest alot of money in it. The company is also supposed to look after the machineries periodic performance maintenance. ASSESMENTS: FACTORS ASSESMENTS Category size Confectionary market is the largest market in the ion of world with over $150 billion retail sale in 2008.It ranked fourth in packed food segments with a global market worth an estimation of $1800 billion. Category growth The rate of growth of chocolate market is about 5% per year. Growth total in developed market which represents around 60% of total by value has been at around 3% per annum. Whereas, growth in emerging markets this is around 10% per annum. Seasonality According to a detail trade and research show that about 40% of sales of chocolate take place i the first quarter of the year, which can be alienated into ester spring occasions such as mothers day and valentines day. Sales and marketing receives more prominent in holiday seasons in year round. Economic of scales There are lot of entry barrier for chocolate and cocoa industry because there are a lot of large company that already exists and has a large manufacturing product at lower cost. If a new organisation wants to enter into this market then that company should produce more chocolate and cocoa at the same price as their competitors. They should be able to meet the large quantity of product along with the cost as compared to their competitors in order to survive. Due to economy of sales in this industry small organisation have a threat to enter in to this market. MARKETING MIX: Product Cadbury dairy milk is made from real chocolate. Its ingredients include cocoa butter and there is a glass and half full cream dairy milk in every 200 grams of Cadbury dairy milk chocolate, Cadbury buys 65 million litres of fresh milk each year to make Cadbury dairy milk chocolate. Price Price is an important element of the marketing mix. The price charged for a chocolate bar can determine whether a consumer will buy it and the level of sales achieved can determine whether or not Cadbury Schweppes will make a profit. Price is also affected by factors such as the state of the economy, what competitors are charging, the stage reached in the products life cycle and above all what price the market will bear. From the marketing point of view this is what matters. Place Cadbury dairy milk is produced at the chocolate factory in Bourneville in Birmingham. After the chocolate is produced and has undergone all the quality checks it is transported to the stockrooms. After this Cadbury sells it products to shops that deal with beverages and confectionery e.g. corner shops, super stores such as Iceland, Sainsbury, Kwik save, Tesco, Asda, Safeway and petrol station. These businesses are usually visited by customers on a daily basis. They then sell it to the general public. Cadbury produces chocolate for more than 200 countries so that they have a chance to enjoy it as well and make profit. This gives them a wide range of consumers around the world. Cadbury Schweppes therefore makes sure that the cultures of these different people are kept. They can do this by producing products, which are eaten in that particular country without upsetting religious or cultural practises. Product are distributed through varies retailers in the diverse part of the countries because Cadbury being a global brand and is sold worldwide. Cadbury emphasis lot in packing and display of its product attracting the customer thus making sales Promotion The purpose of promotion is to communicate directly with potential or existing customers, in order to encourage them to purchase dairy milk and recommend it to others. The main promotional tools are sales promotions, public relations and advertising. BCG MATRIX: ACADAMIC REVIEW: Categorization of consumers into centre, leading light and subsidiary goes past tradition segmentation since it method of payment and revenues in support of groups of clients, thus confiding their financial significance in the track of the business. Bradley, F (2003, pp. 57) Star Boost Celebration ? Low fat bar Cash Cow Dairy Milk 5 Star Fruit and nut. Dog None Cash Cow: Since the day the company commenced its production the Cadbury dairy milk have been their major and infant product. The company manufactures this product in a very high quantity, the product being the oldest still is in demand. You can see from the table above that how the company reaps and benefits from this very product. Contributing greatly in the Net Profit and Gross sales. Star: After reaping/ milking all the profits from the Cadbury dairy milk the company invests its money in the new product according to the demand of the market, forecasting the growth of sales and product. The new product launched by the company is the boost, celebration etc this product is introduced and has been added to the product range by the company due to the growing demand of the market, costumers. This product is in its growth stage of product life cycle and earning the company good sales and revenues. It can be seen from the table above that company had high gross sales. Question Mark: The question mark always are uncertain product , a company risks its business by introducing a new product not knowing which course in the BCG will it go. Question arises such as; will it be a dog? Will it be a star? The company is also introducing low fat bar seeing the opportunity of being the best quality in the local market to introduce it. DOG: According to my study for the Cadbury company they dont have a dog product. PRODUCT LIFE CYCLE: As from the above figure we can conclude that Cadbury Dairy Milk is now its maturity stage. The product has been launched in the market from more 100 years but still its one of the major company incomes. The taste and packing of the dairy milk havent changed much since it was launched but still it attracts as much consumer as any other chocolate bar. In the first 5 years of its launch (1910-1911) Cadbury Dairy Milk becomes one of most the selling products of the company. PORTERS FIVE: Threats of new Entrant (Low to Moderate) It is a taste oriented business. Capital requirement is high. High R D investment switching cost of suppliers. Consumer Bargain power (Low to Moderate) Switching to anther Product. Due existing competition. Supplier Bargain Power (Low) Large number of Supplier available. Competitive rivalry (High) There are large no. Of companies available in the market. Availability of substitute makes the market even more intense. Competitors differentiating in price. Threats of substitutes (Moderate) Confectionary product cant be stored for a long time. Cadburys substitute are fruits, alcoholic beverages, etc. ACADAMIC REVIEW: The convenience to the new entrants with strategic substitute in the market shown the porters five forces set-up speed (1990). Norgan, S (1994, pp.69) Threats of new Entrant: The threat of new entrants determines the level risk to the company through different scales such as the capital requirements, switching costs, the taste quality benchmark etc. the large capital requirements actually helps the company to create an entry barrier for the new entrants because it requires the company to have a significant source of capital to get started. Apart from the regular expenses a new company would need to spend a large amount of money on advertising and marketing to beat the old runner. Furthermore, switching cost too creates a hurdle to entry for new companies. The expenses and network that must be present to obtain access to distribution channels is an entry barrier for new companies. A new company must acquire distribution channels create a network of buyers, which is time and money intensive. Further, the new companies have to compete for shelf space in stores with the larger players in the industry. To make the situation more tough there are various government regulations that need to be filed before entering the market. Hence it wont be insignificant if we conclude that there is low threat of new entrants to Cadbury because the existence of its feet grounded in the market of chocolates worldwide. Supplier Bargain Power: The bargaining power of suppliers is a vital force that has the strength to almost diminish a firms profitability. The chances of it to increase may be confronted if the product they supply is differentiated or has switching costs. However with Cadbury the main catch that remains is that they are full of a huge number of suppliers spread out in the market. Further the bargaining power of suppliers is decreased because the brand name associated with the company is an important customer of the supplier group and the supplier does not pose a threat of forward integration. Hence the suppliers are at a low risk to pose a threat. Consumer Bargain power: Now what has been noticed through various data available is that the consumer represents a large percentage of the suppliers sales, hence the buyer has more bargaining power over the supplier. As mentioned earlier the backbone of Cadbury remains its taste quotient hence it is expected that the buyer must be willing to accept taste changes in the product, which restricts their bargaining power .A change in the product directly affects the quality and taste of the buyers end. However, the bargaining power of consumers is low to moderate because of the companys differentiated products, the presence of switching costs, the lack of threat of backward integration and the reliance on the industrys product. Threats of substitutes: Flavour and taste being the main ingredient of the company it must still compete with numerous substitute products that can threaten the companys profitability. It constitutes products in the retail arena as well. We are all aware that chocolates are used as gifts during numerous seasons and celebrations including Christmas, Easter, Halloween, Valentines Day, anniversaries and birthdays. Other types of gifts during these seasons are viewed as substitute products. These products are flowers, fruit, and alcohol. All of these products can be purchased instead of chocolates. Many different cooking flavours, a hugely diverse selection of alternate snacks, and a wide variety of seasonal gifts make the threat of substitute products a little high in the company. Competitive rivalry: The competitive rivalry in the market is high because of the numerous brands already getting flourished in the market at the pace of fire. Also the availability of substitutes poses a danger to the level of consumption of the products. Moreover the volatile nature of the consumers taste preference remains as an unending threat along with the cost differentiation. All of these conditions create price wars, advertising battles, new product lines and higher quality of customer service in the market leading to a neck to neck competition. SHELL MATRIX: ACADAMIC REVIEW: Inspiring in a market in a uncertain or growing method is lacking in total grip of an organisation with in the perseverance of funds along with the positive hold of its employees. Assael, H. (1993, 1990, pp. 727) GROWTHING POPULATION. UNITED STATES OF AMERICA (26.1%) INDONESIA (19.7%) RUSSIA (11.9%) BRANDNAME QUALITY CAPITAL MARKET ATTRACTIVENESSHigh Low Medium High Medium Low COMPANYS STRENGTH The above marketing tool represents a new opportunity and potential market for the company. From the above table () it can be seen that the company can expand themselves and enter a completely new industry because of the growth rate and potentiality of the market. The companys SBU for the market is their wealth and brand name access as the maximum consumption of Cadbury dairy milk per capita is high in United States of America as per shown in the fig() and the company is situated in United Kingdom and is well recognised and has a good word of mouth. The market attractiveness is the growing population and urbanization, and growing trends in Cadbury confectionery. The company can launch new range of product such as soft toys, bakery products etc to expanding their market. ANSOFF MATRIX: MARKET PENITRATION: Advertisement/sponsorship. Loyalty scheme(dealers). Gift hampers to loyal customers. PRODUCT DEVELOPMENT: Feedback Adding new flavour to their product range. Adding to the quality MARKET DEVELOPMENT: Manufacturing soft toys. Amusement parks(Cadbury world) Entering into new field to widen its market. DIVERSIFICATION: Coke Pastries Products for Youth-elders group. MARKET PENETRATION: The Company can penetrate its existing market by paying special attention towards its loyal customers like giving priority to their orders from production till the dispatch. The company could also avail reasonable prices to the loyal customer (dealers) and give them credit taking payments in instalment. They could also strengthen their relation by providing after sales services to the existing customer e.g. taking back the delivery if the order is defected and the dealer is not satisfied, returning of money guarantee, etc. PRODUCT DEVELOPMENT: The company can use these phase of the Ansoff growth matrix for the development of their new product, they could add new products to their range and widen their range of products and thus making it for the customer to buy everything they need under one roof. By adding new products the company can position themselves in the market, they could take feedback from the customers via websites and customer surveys(questionnaire) and try to improve the quality of the product as per the requirement of the customer. The company could use an effective mode of communication to let know the customer about the new product being added and could capitalize by utilising their brand name. The company could have a celebrity suiting to their brand values and qualities (celebrity endorsements have a sky rocket sales), they could market their product on the newest and the biggest market i.e. internet. MARKET DEVELOPMENT: They could develop a new market by using different sales channels. Company could offer discounts on the bulk purchase, use another sales promotion such as could hand out gifts on a certain amount of purchase, gift hampers on special occasion, etc. They could widen their market by entering different manufacturing fields and add up more clientele to their profile. For e.g. they can indulge in the production of cakes, pastries, milk and milk products, ice creams and etc , they can enter new manufacturing fields such as soft toys market as it is a highly attractive market. It is considered to be an good market as Cadbury is known as a brand comparatively to any other confectionery product DIVERSIFICATION: By launching this new production Cadbury is trying to widen its market and enhances its product range. Cadbury is aiming at the youth and older generation by introducing these products in the market. Thus, breaking the barriers and thus trying to create a new brand image i.e. not just for kids but for all. CONCLUSION In order for Cadbury to reach the peak of achievement, the company would have to stress on the global growth of the product. It can be a risk to market it in the region France, but with careful study of the target market segments and its economic position, it can be an attainment. Cadbury should also look into other countries like the Asia Pacific in order to market its products popular globally. But then again, careful considerations to look at its major competitors and to obtain the rules and regulations of a certain country are equally important. RECOMMENDATION: Cadbury should produce diverse products in which chocolate is a desirable product like frozen cakes, toppings, chilled dessert and ice cream. And they can enter this new market with their existing brand name/ value.[Bradely(2008)(pp.309)Cadbury purple regin] Cadbury should re-launch it dog product Cadbury liquor with better promotion, attractive packaging and proper planning. Cadbury should use all form of communication media to promote this product. Cadbury should launch a virtual game and get in alliance with social networking site facebook and launch a game for example; (a Cadbury factory where people can make/customize their Cadbury according to their will). Cadbury should offer the customer a factory visit once/twice in every two months and have a look at how the work is done(hygiene) and creating a good image thus creating a strong customer relation and trust What is property management? What is property management? This essay aims to define Property Management, Facilities Management and Asset management as well as comparing and contrasting the three management sectors. It begins with a description of the three management sectors, and then goes on to differentiate between them. The essay then goes on to draw conclusions based on the comparisons. WHAT IS PROPERTY MANAGEMENT? In order to fully understand the term property management we need to first define the word ‘property and what it refers to exactly. Property may refer to residential, commercial, industrial or special purpose property. Special purpose property as defined by Robert and Floyd (1998) would include property such as retirement homes, hotels, clubs, schools, resorts and so on. Hence the management of these various assets is essentially property management. Robert and Floyd (1998) define property management as the management of real estate on behalf of the owner for compensation. According to their definition, it implies that the person managing the property is not the owner himself and that the owner will essentially compensate the manager for his services rendered. Evans (2007) states that in the past century property management was never seen as a complex sector and was in fact never a complex sector, and that the term property manager was literally just someone who had the responsibility of collecting rent. Evans (2007) states that during the early 1900s the property manager was known as the ‘rent collector and he was feared and disliked by many and during these times, the property managers main role for decades after this was to collect the rent from tenants. It was not until the great depression of the 1930s that events worked to transform the despised rent collector in to the property manager we know today (Evans, 2007). Evans (2007) believes that the harsh economic conditions of the depression put pressure on the property owners and hence, made it harder for them to make mortgage or tax payments on their property/s. Due to the depression banks as well as the local governments were forced to take over the ownership of these properties. Since the banks were unable to sell these properties, due to the scarcity of buyers and lack of cash flow, they were forced to keep these properties. (Evans, 2007) continues to state that the banks, who were too busy to deal with all the re-possessed properties, hired fee managers, to lease these properties in order to generate income rather than leaving these properties vacant. Fee managers later took on larger roles and grew into what we know as the modern property manager (Evans, 2007). There is currently a misconception around the term ‘property management, mainly due to the origin of property management; most individuals see it as a landlord or someone that collects rent and grants leases, however the job entails far more than this. Property management is mainly operational and ensures the following functions are completed: Every space is leased out, Rent is collected, All utilities are paid, Revenue is focused and, It attempts to maintain relationships with clients. A property manager does not only collect rents or manages leases, he/she now requires specialised skills such as, communication skills, technical expertise, and knowledge is essential in order to be a dynamic decision maker therefore it should be seen as a science. Robert and Floyd (1998) see it as a managerial science and believe that it is the fastest growing area of specialisation within the real estate industry. Property management involves the responsibility of managing only the common areas of the building for example, managing a multi tenanted building- i.e. residential apartments, shopping malls. Here the scope of the team is to manage only the common areas such as lobbies, parking, gardens, open spaces, roads and various engineering related assets commonly used like lifts, escalators, fire systems etc. According to Beirne (2006) he believes that even investors do not have a firm grasp on how property management can actually improve the value of the real estate. He states that in many circumstances property management is treated as a ‘necessary evil and that if the business and art of property management is truly merged with the investment it can have a huge effect on the end result. Implying that there needs to be a change in the mind set of particular individuals with regards to property management, and a greater understanding of the sector needs to be established in order to experience the true benefits the sector can bring to an investment. Robert and Floyd (1998) regard the property manager as the individual who attempts to generate the greatest possible net income for the owners of an investment property over that propertys useful life. They continue with stating that in the same way that there are various types of property, so too are there different classifications of property managers. Although the specific management duties and attributes will vary, the main duties and responsibilities remain the same, some would include, planning, negotiating leases, screening tenants, advertising, maintaining the premises, collecting rent, supervising security, keeping accurate records and making periodic reports to the owner or asset manager (Robert and Floyd, 1998). Hence from the extensive length of duties and responsibilities of the property manager one would automatically tell that the property manager that existed 50 years ago, does know longer exist today and that they are essentially very much needed in the industry. WHAT IS FACILITIES MANAGEMENT As with property management, there is a common misunderstanding as to what facilities management actually is. In the old-fashioned sense it is as cleaning, repairs and maintenance, however it is now more established (not fully yet) and hence includes the management of estates, finances, change management, human resource management etc in addition to building and engineering services maintenance. In understanding what facilities management entails, it is important that one looks into the history of Facilities management and how it came about over time. Krumm (2001) suggests that prior to the industrial revolution many organisations had limited space on which to operate and as a result there was no real need for specialist space. However, after the industrial revolution there was a large increase in the demand for space to house highly specialist processes. This led to a greater need to manage real estate more efficiently, and the need for more management staff. Krumm (2001) also outlines that in the past the small scale of production and enterprises meant that the role of ‘Facilities Manager was taken on by the senior management in the organisation. As processes in enterprises became more complex, the role of the facilities manager required more effort, resulting in the job being handed over to other individuals. Krumm (2001) It has also been suggested that the decentra lization of various processes within an enterprise has also led to the greater need for management. This led to the development of facilities management as a profession. (Krumm, 2001). Over time this alias evolved to what we know as a facilities manager today. After having looked at where facilities management originated we can now go on to define it. Barrett and Baldry (2003) define facilities management as â€Å"an integrated approach to operating, maintaining, improving and adapting the buildings and infrastructure of an organisation in order to create an environment that strongly supports the primary objectives of that organisation†. Alexander (2005) also defines facilities management interestingly, its a process by which an organisation ensures its buildings, systems and services support core operations and processes as well as contribute to achieving its strategic objectives in changing conditions. Atkin and Brooks (2005) state that it is imperative to state the importance of integrative, interdependent disciplines whose overall purpose is to support an organisation in the pursuit of its business objectives. They also believe that the proper application of facilities management techniques enables organisations to provide the right environment for conducting their core business on a cost effective and best value basis. (Atkin and Brooks, 2009). [â€Å"TOTAL FACILITIES MANAGEMENT†] In practise, facilities management can cover a wide range of services including the following: Real estate management Financial management Change management Human resource management Health and safety Contract management Building maintenance Domestic services Utilities supplies Atkin and Brooks (2005) Alexander (1996) believes that we need to look at facilities management at four levels: corporate, strategic, tactical and operational. Corporate level: Managers must contribute to service planning, devise policies and undertake scenario planning. In this level a full understanding of corporate culture is highly necessary. Strategic level: Managers carry responsibility for effective business planning of the facilities, services, leadership of the team and development of proposals for developing facilities management. Strategic facilities management is the management of a companys activities in order for the company to achieve its future objectives. It mainly concerns the decisions planning for the future and the development of existing practices. Tactical level: The facilities manager ensures service quality, manages value and implements risk management strategies. He also ensures operational control through auditing and monitoring performance. Operational level: The facilities manager is responsible for the operation and maintenance of buildings and for the delivery of the services. Operational facilities management involves the management of daily activities such as the activities that need to be fulfilled in order for the enterprise to operate on a daily basis. It also involves taking account of and assessing current practices for their application in future projects. Facilities management deals mainly with the management of a whole sum area rather than a part. It deals with the management of the core services of an enterprise, as well as all the services required for the running of the enterprise. Facilities Management is aimed at providing value for money for the enterprise as well as delivering a package which is well balanced and suites the needs of the end user. For example management of an office floor where the whole area and its relevant assets come into the scope. In order to get a better understanding of Facilities Management, let us look at an example of what a facilities manager does. Let us use a shopping centre for example. In this scenario, there are a variety of activities that need to be taken care of to ensure the day to day running of the shopping centre. Such activities will include the running of the security, cleaning, management of tenants, maintenance, lighting, air conditioning, and basically everything that goes on ‘behind the scenes to provide the user with a pleasurable experience. These activities fall under the scope of the Facilities Manager. The scope of the facilities manager extends to the planning of what services to acquire, when to acquire them as well as creating a balance between cost and quality. The facilities manager will also try to create a balance between the services required while trying to stay within his budget. It is also the job of the facilities manager to take note of current practices and use these observations for future planning and implementation. It must be noted that Facilities Management is not limited to the processes described in this example. What is involved in Facilities Management depends upon each enterprise. Facilities management, just as Property management is operational, looking at attributes such as, the systematic expenditure of budgeted resources on capital improvements and planned maintenance. WHAT IS ASSET MANAGEMENT? In defining asset management it is important to first look at the definition of an asset. There are two main types of assets. These are real assets, and incorporeal assets. Real assets refer to tangible property such as a house, car, desk or television while incorporeal assets refer to intangible assets such as shares or an interdict. Asset management is a term that can be interpreted broadly and encompasses both real and incorporeal assets. There is no set definition for asset management. It differs according to the differing aims and scopes of various companies. There are different views as to what asset management entails. According to Woodhouse (2009) the term ‘Asset Management currently has three different principal uses. These are: The financial services sector has long used the phrase to describe the management of a stock or investment portfolio trying to find the best mix of capital security or growth and interest or yields. â€Å"Equipment Maintenance = Asset Management†. Some industrial and infrastructure maintainers (and software vendors) have adopted the term to try to boost the professional standing of the maintenance function. This, however, is a narrow and self limiting view that misses many of the biggest opportunities. Asset care (maintenance) is just one part of asset management. The core business for organisations that is heavily dependent on physical equipment, systems and infrastructure. This encompasses all aspects of investing in the right assets in the first place, exploiting them appropriately, caring for them (maintenance) and ultimately replacing them or disposing of them. This is the meaning defined in the BSI PAS 55:2008 Publically Available Specification for the optimal management of physical assets. (Woohouse, 2009) The three points outlined above are all attempts to define asset management. The first two uses outlined are limited in their scope and are explained briefly below. The third use is a much broader and more modern definition for asset management, and will be discussed more in depth. In terms of the first use outlined above, this refers to the work of financial institutions such as Old Mutual and Investec and involves the management of stocks and bonds. Asset management in this sense incorporates the management, investment and trading of incorporeal assets or ‘financial assets. It can also be referred to as investment management and involves the management of capital investments in order to achieve growth in an investors capital. This is done through investing ones capital in shares or bonds and receiving returns in the form of dividends or interest or through an increase in the value of the shareholders shares. Under this definition of ‘Asset Management can also be described as portfolio management. Portfolio management is the management of a portfolio, with a portfolio being a group of mutual funds, shares, stocks or investments. For example, if you have 25 shares in the construction sector, 15 in the property sector and 10 in the commercial sector, your portfolio would consist of 50 shares. Portfolio management would then be the decisions involved in deciding which shares should be bought, how many of each shares to be bought and ensuring that the portfolio is efficiently managed, taking into account risk as well as other factors which might influence the portfolio. This would fall under the scope of a portfolio manager. It is often perceived that asset management is solely to do with the management of investments or portfolios. However, this is not the case as outlined by the second and third uses identified by Woodhouse. The second use outlined above refers to the maintenance of various assets. This involves managing the asset, from ensuring that the asset is up and running to keeping the asset in good condition. It does not involve the life cycle nor does it plan for changes in technology. It merely refers to the general upkeep of the asset. For example, the maintenance of a vehicle would include servicing of the vehicle, changing the tyres etc. With regards to property, asset management in this sense would include the cleaning, paying of levies and council rates and the upkeep of an apartment. This type of asset management looks at the maintenance of a specific asset or assets. A landlord could be an asset manager in this sense. In the past, the first two types of asset management were more widely accepted definitions. However more recently asset management has grown to encompass a broader range of activities. Woodhouse (2009) outlines that the third use of asset management emerged during the late 1980s when the North Sea oil and gas sectors were shaken up as a result of the decline in oil prices, the Piper Alpha disaster and other factors such as market globalization. It became evident that smaller companies were capable of being more efficient than larger companies due to stricter control over costs and the management of assets. This resulted in bigger companies rethinking their business models. Woodhouse (2009) states that at the same time â€Å"The public utilities and municipalities in Australia and New Zealand, facing a sustained period of degrading services and escalating costs, realised that a different approach was needed to sustainability and value for money† (Woohouse, 2009). In both cases above, various companies and businesses took on a form of asset management which resulted in the reduction of costs and the improvement of services. For example, â€Å"BP and Shell experimented with the creation of a small business culture within the leverage of a large organisation. Asset-centred production units emerged, employing multi disciplined teams with to find the best combination of investments, exploitation and care for each production platform. The results were spectacular, reducing total costs of ownership and raising production nearly tenfold, while simultaneously raising safety and environmental performance† (Woohouse, 2009) As a result, asset management has evolved, and now includes many of the attributes of Property and Facilities Management. This broader range of Asset Management can be defined as: â€Å"A systematic and coordinated activities and practices through which an organisation optimally and sustainably manages its assets and asset systems, their associated performance, risks and expenditures over their lifecycles for the purpose of achieving its organisational strategic plan as defined by the PAS 55 Publicly Available Specification published by the BSI (British Standards Institution)† (Hastings, 2009). This refers to the third use outlined by Woodhouse. It is a more wholesome definition of asset management, putting it under a broader spectrum and incorporating all the uses outlined above. It encompasses portfolio management, maintenance management as well as a variety of other activities. The PAS55 definition of asset management involves the management of â€Å"Financial Assets, Physical assets, Human Assets, Information Assets and Intangible Assets† (Hastings, 2009) and looks at the management of assets from before they acquired, during their lifetime as well as managing the future need for assets. This means that it takes into account technology and labour, as well as the incorporeal assets identified in the first use. It involves the management rather than the maintenance of the asset and aims to protect an interest in a company rather than a particular asset. Hastings (2009) describes asset management in a similar way to Woodhouse. He identifies 5 activities which he claims will lead to successful asset management. These are â€Å"identifying what assets are needed, identifying funding requirements, acquiring assets, providing logistic and maintenance support systems for assets, and disposing or renewing assets† (Hastings, 2009). These factors can be explained by looking at the management of buildings. It can be further simplified by looking at a specific aspect of a building such as air conditioning. Firstly, the appropriate cooling system will be chosen from a range of different products. The decision will be based on various factors such as the quality and cost of the system. The system will then be installed and will be maintained during its life cycle. Near the end of the assets life span, the asset manager will make decisions as to how to replace or upgrade the air conditioning. The whole thought and management system outline d in the example falls under asset management. It must be noted that while maintenance is the key aspect of the second â€Å"Equipment Maintenance = Asset Management† use, it only forms a small part of the third use outlined by Woodhouse (2009). There are a number of generic attributes which when practised well, with the asset manager giving equal attention to each, will result in the efficiency and success of asset management. Woodhouse (2009) outlines 7 key attributes of good practice in asset management. He outlines that the asset management policy must be â€Å"holistic, systematic, systemic, risk based, optimal, sustainable, and integrated† (Woohouse, 2009). This can be explained by looking at a business. In order for asset management to be holistic it must be applied throughout the whole business. It must look at all aspects of the business and not just specific areas. It must also look at ways in which value can be optimized from assets. In terms of being systematic and systemic, the business must well organised and structured while at the same time, looking at the bigger picture rather than individual departmental goals. The asset management strategy of the business should also take risk into consideration when drawing up its plans and plan accordingly. In order for the asset management to be optimal and sustainable it must reach a compromise between the various aspects of the business. For example, it must reach a balance, say between quality and cost. In assessing sustainability it must also take into account the life span of the asset. Finally, with regards to integration, the business must link up all forms of asset management. Fo r example, different departments must work together in managing their assets. COMPARISON BETWEEN ASSET, FACILITIES AND PROPERTY MANAGEMENT Now that Facilities Management. Property Management, and Asset Management have been defined this paper will go on to compare and contrast the three, looking at the similarities, the differences and where they overlap. To help illustrate the differences three very brief summaries will be outlined regarding the three management methods. These are as follows: Asset management: The management of an asset or assets Facilities management: The management of a wide range of facilities or services Property management: The management of different types of properties Comparison between Property Management and Facilities Management Facilities management is similar to property management in the case that both managers manage the day to day operations of a property/estate. The property manager looks at the day to day operations of the tenants, the building, whether every unit is leased etc. and the facilities manager looks at the day to day operations of the various services within the building/property. With regards to facilities management, it is concerned with effectively and efficiently managing services such as air-conditioning units, drainage, waste, energy and so on. Whereas property management focuses on the management of various types of properties e.g. residential, commercial, industrial and special purpose properties (special purpose property was defined in property management section). For example, in relation to a retail shopping centre, the facilities manager would manage all the services such as the ones stated above i.e. air-conditioning plants, waste management etc. in contrast the property manager will manage the tenants and clients, ensuring all the units are leased out, all tenants are happy, the centre is operating efficiently etc. Looking at the main purpose of either sector of management we can determine that facilities management requires a manager who has a background extensively in hydraulics, electrical, waste management, structures, recycling, being able to read technical drawings etc. An extensive background in the above mentioned subjects is highly necessary in order to manage these systems effectively, for example employing an engineer as a facilities manager would be a viable option. Now if we consider the definition of property management, it is clear to see that an extensive background in the above mentioned subjects is not highly necessary. Instead a background in property or finance is highly necessary in order to manage the property and tenants effectively as possible. The main difference lies in the range of services that are included in the two sectors. Property Management is the management of a property or group of properties on behalf of an owner of that asset and the role is primarily of an operational nature. Whereas facilities Management is the management of all tenant operational services within buildings for an organisation, example ensuring the air-conditioning plant is utilising sufficient energy and is working as effectively and efficiently as possible. The facilities manager and property manager however, usually work closely together in order to make sure a building/estate runs smoothly. Simply put, facilities management deals with the management of the whole area of the property while property management deals with looking after common areas. Another difference between the facilities manager and the property manager is that the scope of work. In relation to facilities management it covers all owned, leased, government and charitable organisational/business structures. And here the contrast comes in because property management is more related to those properties subject to investor or trust ownership, and hence the scope of business is much narrower. Comparison between Asset Management and Facilities Management There is a large overlap between Asset management and facilities management. In many cases it is hard to differentiate between an asset manager and a facilities manager. In many texts they are referred to in the same context. The main point of overlap is that both forms of management have a maintenance aspect. They are also both similar in that they deal with the management throughout the whole period of existence of an enterprise. For example, asset management looks at the management of assets from the planning stages, e.g., planning what assets to purchase, right through to the end the life span, and decisions to replace the asset. Facilities management also looks at the management of services throughout the life span of the enterprise and are continuous processes. Both forms of management occur constantly, throughout the life of the enterprise. They are also similar in that they are constantly undergoing change as a result of changes in technology and user preferences and must be adapted accordingly. Facilities management and asset management go hand in hand, in that they both strive to provide value for money for the enterprise as well as the client. The two management methods are also similar in that they originated and started to grow at around the same time, being the nineteenth and early twentieth centurys. They also originated for similar reasons, the main reason in both cases being the need for greater efficiency and better management. Facilities management also seeks to cost effectively and efficiently maintain various systems and technologies for the benefit of the owner; this brings the financial planning part into the sector, hence making it similar to asset management (maintaining viability). The facilities managers scope of work covers many different types/sectors of properties. It covers all owned, leased, government and charitable organisational/business structures, as with the asset manager as well. The facilities manager maintains viability of the organisation (operational nature- running the day to day services) and the asset manager tests to check whether the organisation is in fact viable. Although there are various similarities between Asset and Facilities Management, there are various clear cut differences between the two. While facilities management is operational and refers to the management of services, asset management looks at management from a more financial point of view, with decisions relating to costs and optimal use of assets. The key difference between the two management methods is that facilities management deals with the management of services while asset management deals with managing an asset. This means that asset management is more specialised and ensures that optimal use is achieved through the life cycle of assets, while facilities management covers a wider variety of aspects from managing not just one asset, but a variety of assets and processes so that they work well together to provide an overall service. For example, with regards to security, asset management will look at selecting the right form of surveillance, and installing and managing t he system and replacing it. On the other hand Facilities management will look at the security system as a whole, form surveillance, to proper selection of uniforms for guards, ensuring the proper conduct of guards, and the general running of the whole security service. In differentiating between the two, there is one aspect that is exclusive to asset management. While asset and facilities management are similar in the second two uses outlined by Woodhouse above, asset management has a financial connotation which does not apply to facilities management. As identified previously in Woodhouses first use, the term asset management can be used to describe the management of portfolios and investments. While facilities management may involve some management of finances, finance is not one of the core features of facilities management. The main difference here lies in the range of services that are either sector comprises. Facilities Management is the management of all tenant operational services within buildings for an organisation. Whereas an Asset manager manages the owners property from a financial point of view and usually sets budgets for the property manager, hence the interest he has in property yields. Comparison between Asset Management and Property Management Asset management and facilities management are similar in that they both focus on planning and implementation, as well as the day to day running of property and assets. They are also similar in that they both operate continuously throughout the life span of a property. They are similar in that their scopes overlap with property and asset managers working hand in hand.