Market Analysis Of The Cleaning Sector Management Essay
The Cleaning Industry National Training Organisation (CINTO) has suggested that the UK cleaning industry is valued in the region of £12bn, 2.7 million households in the UK spend as much as £11 billion annually on domestic help, the rise in two-salary household and more disposable income but limited time for domestic chores necessitates this, the cleaning industry presently employs about 820,000 people.
The industry is mainly dominated by small organisations and has 72% of all UK cleaning staff employed in firms with less than ten employees. A third of these firms are operated by sole proprietors.
CINTO is of the opinion that the cleaning industry is resistant to economic recession as a result of the huge demand and inevitability of service. Competition is stiffer however in commercial cleaning sector than domestic. This can therefore affect profit margin. Regardless of the intense competition, the cleaning industry is a booming industry with an impressive growth in the contract cleaning market from £4 billion in 1996 to £6 billion in 2004.
Below is a tabulated STEP analysis of the cleaning sector.
Population and market consist of 61 million people with 67% in the working class, 16.2% aged and 16.4% under aged.
Labour is predominantly made up of migrant workers.
Subject to environmental protection agency laws
The sector is slightly affected by the economic downturn but not significantly as it is a service sector and inevitable to all households in the UK.
Demand cuts through all class and age structure in the UKespecially the working class which accounts for 67% of the UK population.
This sector is a sub sector of the service sector that accounts for a large portion of the UK GDP.
There’s been a shift in demand preference to price from quality and innovation because of the economic downturn.
General services of cleaning, trash pickup, floor polishing, and the specialty services of cleaning carpet and ducts and washing windows.
Staff cleaning buildings and houses by hand or with the help of basic equipment like floor polishers. Operations is labour-intensive
Sector is labour intensive
Simple machines and technology needed.
Government legislation and regulation with respect to waste disposal.
Organised and influential association body with intense pressure on government.
Low government aid policies.
According to MBD (Market and Business Development) report on the sector, Contract cleaning in the UK has grown by over 12 per cent in the past five years and is expected to increase by a further 13 per cent between now and 2011.
The UK Cleaning Market 2004-2012:-
There were over 4,300 individual contract cleaning firms active in the UK in 2008, though the industry remains particularly consolidated in value terms, with the firms in this study contributing more than 80% of the total market revenue.
It has been suggested that 30% of contract cleaning firms are considered at risk in 2009 with the growing problem of customer retention. Customer loyalty is considered less prevalent, and customers of contract cleaners are continually searching for more competitive prices. This competitive trend in the market is pushing price competition in an environment where demand is reducing as smaller firms are internalising certain cleaning duties instead of outsourcing.
The downturn in capital expenditure of contract cleaning firms will undoubtedly affect cleaning equipment manufacturers and suppliers in the short term, with a reduction in demand also aggravated by increasing pricing pressure as Contract Cleaning firms attempt to achieve greater cost reduction measures. The impact for tool and equipment manufacturers are less positive with regards to supplying to this sector in the short term, the need for effective marketing strategies therefore arises to target those companies who are performing well in the market.
The cleaning sector provides employment for over 450,000 people in nearly 32,000 firms.
Table 2: Workplaces and Employees within the Cleaning Sector in Great Britain.
Source: Annual Business Inquiry, ONS, 2005 & 2006
85% of all cleaning companies have 10 or less employees. 1% of companies has over 200 staff and provides jobs for approximately half of all the cleaning employees.
The current uncertain world economy makes analysis of current and future economic performance very difficult. Staffing and retention remains key themes for the sector as it struggles to maintain a stable workforce. This has been made worse by the pressure on sales and the stiff competition within the environment. The effect of the global economic downturn on the sector has been viewed as been less subjective as with other sectors since cleaning is an inevitable service. As expected however, employee training suffers a decline as profit margin reduces. Profit margins remains reduced in the sector, at about 5% in 2006, having been squeezed by 28% between 2002 and
2006. Labour costs consist of about 73% of all costs, this having been increased by 13.2% over the period 2002-2006. Gross Value Added (GVA) per worker (measured as the average financial contribution to turnover each employee within a sector generates) was £9,600 in 2006 compared to a whole economy average of £33,300.
In 2006, seven companies had 25% of the market share (as a percentage of total value), as seen below.
Table 1: Market share, (as a percentage of total value) in 2006
Source: Marketing Research for Industry, Feb 2000
A major challenge of this sector is the credit crunch and the effect it has on the sector’s quality service delivery given the budget.
Recruitment and retention are also key issues, issues regarding labour force attraction and motivation to family friendly labour policies.
Future issues to be considered include the need to improve marketing to attract new clients, management of skills gap and planning is vital.
The take-up of qualifications within the industry has been low and almost half of employers don’t have a Level 2 or equivalent qualification. 16% of the sector is not aware of Vocational Qualifications, though their appropriateness is called into question. A third of all firms believe they take too long in delivering and five in ten believe they are too complicated. The BICSc (British Institute of Cleaning Science) is the most common qualification held.
Cleaning firms suffer from increased rate of staff turnover which has been known to be closed to 75% in some cases, with most cleaning staff staying in employment for up to 12 weeks cleaners.
6% of cleaning firms advertised skills vacancies in 2007 -according to the National Employer Skills Survey 2007, – this was primarily in elementary occupations and machine operatives. 80% of elementary occupations were categorised as difficult to fill positions. Almost 800 companies advertised these positions and were located within the West Midlands, South West and South East.
Reasons for these difficult to fill vacancies are:
â€¢ Inadequate personnel interested in engaging in this type of job (28%).
â€¢ Inadequate number of applicants generally (16%).
â€¢ Low number of applicants with the required attitude and motivation (13%).
The implication of these vacancies is the increased workload of other staff.
Cleaning firms have alleged that they have:
â€¢ increasing cost of operation;
â€¢ Difficulty in matching quality standards requirements
â€¢ Delay in developing new products.
As a result of the above issues, 50% of firms have increased their advertising and recruitment campaign and most of the firms are increasingly trying new ways of recruitment.
Reductions in some skills area have been identified in the Cleaning Industry, these include:
â€¢ Management and leadership;
â€¢ Technical skills; and
â€¢ Literacy, numeracy and ESOL
A key driver in the sector is the changing form of procurement. The process of procurement has become increasingly formalised and has most part been subject to European Union Commission guidelines, more challenges are therefore placed on cleaning firms in this sector.
A recent report implied the importance of migrant workers within the industry.
Firms in the cleaning sector are faced with an ageing workforce and recruitment issues, these firms have therefore been able to tap into the large resource of migrant workers, this has culminated in 37% of England’s cleaning labour being classified as migrant labour. Firms have been able to recruit more efficiently and cost effectively as well, however the only hinderance to this is the issue of language which is being subdued by coping the strategies from employer.
Regional Distribution of cleaning companies within England, 2006
There are increasing demands being placed on the industry due to increased regulation and Visibility which, in time, it is anticipated will reveal greater skill needs.
There are a couple of key issues as regards the cleaning sector, they include,
· Recruitment difficulties for domestic cleaning jobs because of competition from other sectors.
· Increased day-time cleaning and expanding skill mix needed
· Employment of migrant workers without language barrier.
· Employing expertise cleaning operatives into supervisory and managerial positions with inadequate training.
· Forecasted job losses of over 90,000 between 2004 and 2014 but concerns of replacement demand still workable.
· Pressure from customers for more work per capita in order to deliver contracts with less people
· Low rate of retention.
· Lack of long term investment in staff
· Difficulties in recruiting new employees into the workforce
· Misconstrued negative image for the sector discourages prospective minds to commit to a career in the industry.
· Skills gaps in managing teams, project management, problem solving and resource allocation, customer care, and managing change for supervisors and managers
· Mixed quality of training provision with low retention rates and qualification
· Inadequate filling of management training slots in the industry
· A small size of employers in the industry had a budget for training of employees.
· Unaccredited training for staffs.
· Employers want tailor fit training that meets their immediate needs and well as their budget.
· The key issues to training to training include the margins on contracts where training is perceived as a cost, career progression is seen as a mirage, shift work and problems of release, and inflexible modes of delivery.
The cleaning sector is a low tech business characterized by ease of entry and entry. Highly competitive, reduces pricing and subsequently profits.
Convenience is key in the cleaning sector, location to the market and fast turnaround on clothes so also cleanliness of the item are important. Consumer care little about what euipments or technology dat has being used as long as the the cleaning service is fast, convenient and effective.
A model has been designed to address a couple of the sector’s issues and it is outlined