Canadian Security Market and Metropol
Metropol is one of the leading Security Companies in Canada. Mainly its business depends upon un-armed security guards. The company is well known for its quality service and customer service and it targeting commercial sector primarily. However the management at Metropol has decided to expand its market share and to form a new mission statement, so that they can effectively identify the future opportunities they want to work with.
Canadian Security Market and Metropol
The security market in Canada is huge and has many key players in it. Metropol is one of the major player along with its competitors such as Pinkertons. The industry offers products like, un-armed uniformed guards, mobile patrol, investigations, alarms, fences, locks, safes and consulting. The industry is very competitive as it is very easy to enter the market and start a new business. As the clients are more interested in cost of the security, companies are forced to keep their margins as low as possible. The analysis of the Canadian security market is done by using Porter’s 5 points.
- Threat of substitute products:
This is the major competitive factor for all the companies as there are many companies who are offering the security products. Metropols major business is of providing security guards where as there are many other companies who are also providing the security guards. Clients’ perception about the products is very much same, most of the customers do not differentiate between the two companies quality of service they provide, this makes the customer to switch easily from one company to other.
The cost of the switching on the other hand is also less, as the customers’ perception about two different services is same. Where as, there is a growing sense among the customer of quality security and thus they are considering Metropol. This is an opportunity for Metropol to attract such customer and make more customers like them.
- Threat of New Entrants:
Due to the growth in security needs of the businesses the security service providing industry in Canada is also growing. It is due to many reasons, such as locations of plants and offices at remote locations, growing number of crimes and increasing number of un-employed people in the country. Also there is a big gap between the security provided by the government (fire and police) and the security needed by the company.
Many new companies are entering to fill this gap of different segments and in current segments, as the investment is very low and experience is all you need. Metropol has the opportunity to capture the market where they are not present, before there is a new entrance by other company.
- Competitive Rivalry:
Metropol has two major competitors the Pinkertons and Burns. Pinkertons has 12.5% market share where as Burns has 7.5% and Metropol has 7% of the market share. It means that Metropol is not far away from becoming the markets most customer company. Metropol considers all other companies as its competitors as well, as it is operating heavily in the west region of Canada and not that much in Ontario, thus they can capture market in that region as well. Its competitors are already lowering the prices and are capturing the new customers on the basis of price competency.
Where as Metropol has the reputation and has the better profit margin than its competitors. The competitors of Metropol is also providing ESDs in a complete package, where as Metropol is more focusing on guards as its major business lies there. ESDs segment is the fastest growing business in the industry. The major competition in the industry is the price, and this is due to the small poorly managed companies and the big multi nationals who actually started this strategy in order to capture the market share. Metropol can work on ESDs segment in order to compete with their competitors.
- Bargaining power of Customers:
Due to the high elasticity of demand, customer has the power to bargain. The switching cost is low, customers perception about the substitute product is same and substitute products are available. This has reduced the profit margins for the companies and has increased the competition with the greater bargaining power in the hand of customers.
- Bargaining power of suppliers:
As the industry is operating on low margins and low switching cost of customers, the bargaining power of the suppliers has been almost gone. Now its all about providing service needed by the customer on his (customer’s) desired rates. Where as Metropol has a advantage as they have a reputation and are known for their quality, their customer also value their services, hence giving some bargaining power to Metropol.
Metropol and Competitive advantage
Three types of strategies can give a company competitive advantage, Cost leadership, Differentiated and focused. Currently Metropol is following a focused strategy, which has actually worked for them and has made them the most successful company in terms of quality service, customer dealing, reputation and profit margins. Currently company is only targeting those companies who actually understands the need of better security and differentiates between security services given by different firms. On the other hand almost all the competitors of the company are following the cost-leadership strategy and are increasing the price competition in the market.
That is the reason Metropol has failed to capture the most market share, as the customer at the time don’t see a difference in services provided by the company or they don’t understands the need of better security in future. Metropol has effectively made their customer loyal by educating seminars for their customers and telling them that how much are they safe in their security, while others are loosing if they are not using Metropol.
Now to increase the market share of the company, Metropol should adopt differentiating strategy. As their product is different and is better than any one else they should increase their marketing campaigns and educating seminars and should invite the businesses who are not using their services. This will create awareness about the need of good security service and people would think about having the better security and would be ready to spend more money. This will allow the company to capture more customer and charge little higher with a greater profit margin. This differentiated strategy would change the perceptions of the customers and people would differentiate between the security provided by different companies.
Strategic Strengths and Weaknesses of Metropol
- Provides greater value to its customers.
- Metropol has 24 hours dispatch serves, which other don’t have.
- Company provide extra and special training to their guards for dealing with , fire, hostage taking, and bomb threats. This differentiates it from its competitors.
- Conduct educational seminars for their clients. This added the value in their product and reputation and increased the switching cost
- Cost control was a major key of success for Metropole in general. Infect Metroploes’ average was higher than of the industry.
- Metropol’s supervisors and customer services representatives has maintained a very good reputation of quality service, where as over all industry has a very bad image and reputation.
- Despite of having other services than unarmed guards, 90% of the revenues depend up on unarmed guards.
- Metropol spends $100,000 more in annual cost as compared to its competitors.
- Company has high employee turn over ratio just as the industry has.
- Spends more on insurance than on actual product.
- Company does not provide their own hardware and arranges it from outside, this makes a cost little higher. Where as customers prefer to have single security company providing them services in order to avoid over lap or any gap in the security system.
Metropol Mission Statement
To expend the business to new geographic locations and capture new markets such as Home security consumers by differentiating our product and service in the eyes of customers and to make them (customers) realize about the importance of quality security service and the future need of it.
Strategic options of Metropol
Following are the strategic options identified by Pat for the future of Metropol.
- Geographic expansion
Expending business to new cities or even countries. This will increase the market chare of the company as will as the revenues of the company. Currently company is operating majority of their business in the western Canada.
- Focused strategy
it means that company should only target to the customers who are willing to work with the company, and that company must put more focus on its customer rather than attracting new customers. In other words keeping you current customers loyal and satisfied. This strategy has worked well for the company in the past years.
- Expanding the range of products and services offered by the company
Customers prefer using single security company for their complete security solution in order to avoid any gap. Where as Metropol has only limited range of products in its product line. Currently they arrange hardware for their customer from outside.
- Diversification into other areas other than the security
Pat considers it as an option, meaning diversifying into other businesses such as Nursing care and secretarial work provider. These would be contractual jobs. The previous attempt of the company to diversify has failed completely as it required professional skills in field other than security.
- Serving the consumer home security market
Metrolpol is also thinking or entering into home security business, where products are small, like alarm, lights, mobile home checks, locks and safes. These products are small and have good profit margins. Currently in Canada people don’t feel that they have a need for home security and their perception about home security is, that we don’t need it.
- As also mentioned in the mission statement, Metropol should expand its geographical locations of business. Currently they are operating well in western region and has 25% of the market share, but they can increase their 7% over all market share by capturing market in the Ontario and Toronto where business is available and is on growing trend. As mentioned in the case it would be wise to merge with some companies in that region and work with them with the name of Metropol. Also capturing the business of Northern Telecom can provide a very good start to the company. Merging with small company and then making them better will require little investment where as the greater infrastructure in comparison.
- As the company will expand its business, it is necessary to change the strategy as well. As is new markets company has to attract the new customers and that can be very well done by making people aware of their security need and then differentiating your product and then make them buy.
- As the company will expand its business it is a great opportunity for the company to capture the new market that is home security business. As Pat mentioned in the case study, that talks have taken place between Metropol and some suppliers to provide them hardware and ESDs on the low rates with the branded label of Metropol, it will enhance then marketing campaign of the company.
- As mentioned in the mission statement, on of the aim of the company is to change people attitude and perception about the security services provided by different companies, Metropol educational programs must be continued with a larger audience.
- Metropol should run a marketing campaign focusing on their different product and realizing people about the need of better security service in affordable price. This will help the company in changing the attitude and the perception of the customer and will provide a chance for a company to capture new customers, as people would like to have better security and Metropol is already well know for their service and quality.
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