URS Corporation’s Marketing Strategy & Practice
MARKETE RESEARCH
Market Trends
The total market size for year 2002 is $20.4 billion. The overall growth rate is projected to be 2%
for the next year. There is a decrease in demand for construction engineering services provided
in the state and local government sector. This decrease in demand is believed to be the result of
state and local governments deferring projects because of the current economic conditions and
the related sharp decline in personal income, sales and corporate tax revenues at the state and
local levels which are used to fund these projects.
In the private sector business, particularly with large industrial and petrochemical clients, there is
increased pricing pressure due to the current economic conditions.
In contrast, the federal government business remained strong and grew during the last fiscal year.
Key Competitors
•
Bechtel Group, Inc.
•
Jacobs Engineering Group Inc.
•
AECOM Technology Corporation
•
Fluor Corporation
•
Lockheed Martin Corporation
•
DynCorp
•
Northrop Grumman Corporation
•
TRW, Inc.
•
Earth Tech Inc. (a subsidiary of Tyco International)
•
CH2M HILL Companies, Ltd.
•
Halliburton KBR (a subsidiary of Halliburton Company)
•
Parsons Brinckerhoff Inc.
MARKETING MIX
Product
URS Corporation provides a comprehensive range of engineering services such as planning,
design, program and construction management, as well as operations and maintenance, in the
field of surface transportation, air transportation, railroads and mass transit, industrial process
and petrochemical refinement, general building and facilities, water/wastewater treatment,
hazardous waste management and military platform support. Its clients include state, local and
federal government agencies, as well as to private clients in the chemical, pharmaceutical,
manufacturing, forest product, energy, oil, gas, mining, healthcare, water supply, retail and
commercial development, telecommunication and utility industries.
Price
URS earns revenues from fixed-price, cost-plus and time-and-materials contracts. Its direct
operating costs are labor costs for employees who are directly involved in providing services to
clients, subcontractor costs, and expenses associated with specific projects including materials
and incidental expenditures. Indirect, general and administrative expenses include salaries and
benefits for management, administrative, marketing and sales personnel, bid and proposal costs,
occupancy and related overhead costs.
Cost-Plus Contracts: There are two major types of cost-plus contracts – Cost-Plus Fixed Fee, and
Cost-Plus Award Fee. Under the cost-plus fixed fee contracts, the clients are charged on
negotiated rates based on URS’s direct and indirect costs. In negotiating a cost-plus contract, all
recoverable direct and indirect costs are made and then a profit component, which is either a
percentage of total recoverable costs or a fixed negotiated fee, is added to arrive at a total dollar
estimate for the project. The payment is received based on the actual total number of labor hours
expended and total costs incurred. Under Cost-Plus Award Fee contracts, award or penalty fee is
provided based on performance criteria in lieu of a fixed fee. Some of these contracts include a
provision that the total actual costs plus the fee will not exceed a guaranteed price negotiated
with the client. Federal Acquisition Regulations, which are applicable to all federal government
contracts and which are partially incorporated in many local and state agency contracts, limit the
recovery of certain specified indirect costs on contracts subject to such regulations. Cost-plus
contracts covered by Federal Acquisition Regulations and certain state and local agencies also
require an audit of actual costs and provide for upward or downward adjustments if actual
recoverable costs differ from billed recoverable costs. In accordance with industry practice, most
of the federal government contracts are subject to termination at the discretion of the client.
Fixed-Price Contracts: There are two major types of fixed-price contracts - Fixed-Price Per Unit
("FPPU") and Firm Fixed-Price ("FFP"). Under FPPU contracts, clients pay a set fee for each
service transaction that is completed. Under FFP contracts, clients agree to pay an agreed sum
negotiated in advance for the specified scope of work.
Time-and-Materials Contracts: Under time-and-materials contracts, hourly billing rates are
negotiated and are charged to clients based on the actual time expended on a project. In addition,
clients reimburse the actual out-of-pocket costs of materials and other direct incidental
expenditures that incur in connection with project execution.
Placement/Distribution
•
Location: URS has more than 300 offices worldwide, operating in more than 20 countries.
Such presence provides easy access for its clients and allows it to be aware of upcoming
opportunities all over the world.
•
Selection: URS provides a wide range of engineering services: from planning, to design, to
construction management, to operation and maintenance services. Such characteristic
increases the market share for URS and provides the convenience of “one-stop shopping” for
its clients.
•
Nonstore retailing: URS has a well-designed website that advertises its expertise and
resources, www.urscorp.com
Promotion
•
Advertising: URS advertises its resources on its own website, on engineering journals and
news magazines, and through press releases of its project wins and key personnel changes.
•
Personal Selling: When a need for its service is identified, URS contacts the potential client
and assembles a team to put together a proposal. The proposal may consist of possible
solutions to meet the client’s needs, estimate of the cost, and statement of qualification,
which includes the organizational chart and the resumes of key personnel. If permitted by the
client, a presentation is then followed.
•
Public Relations: URS strives to maintain its status as a responsible contractor by providing
quality work and complying with laws and regulations relating to government contracts.
•
Sales Promotion: Sometimes the company takes in a project with very small profit margin or
even at a loss, in hoping to attract more future business from this potentially big client.
INTERNATIONAL MARKET ENTRY STRATEGY
Host Country Analysis
The host country that was selected for URS to enter is China. As a country with one of the
highest economic growth rate (10.5% in 2006) in the world, China is a good choice for URS
because it has more construction projects than anywhere else in the world, especially in large
metropolitan areas such as Beijing and Shanghai, where the 2008 Olympics and the 2010 World
Expo will be held respectively. China's economy during the last quarter century has changed
from a centrally planned system that was largely closed to international trade to a more marketoriented economy that has a rapidly growing private sector and is a major player in the global
economy. Measured on a purchasing power parity (PPP) basis, China stood in 2006 as the
second-largest economy ($10 trillion) in the world after the US, although in per capita terms
($7,600) the country is still lower middle-income. The political situation in China has been
relatively stable for the last 15 years and there is increasing legal protection for foreign firms
doing business in China. The cost of labor and material are also significantly cheaper than those
in developed nations in North America or Europe. All in all, China presents tremendous
opportunities for URS, including engineering and constructions projects both at the local and
federal government level such as freeways, railroads and airports, as well as private construction
projects such as office buildings and residential apartments.
Mode of Entry
The best mode of entry for URS to enter China is Foreign Direct Investment. According
to current Chinese law, URS may establish a wholly owned subsidiary in China. The wholly
owned subsidiary will appropriately “mirror” the structure URS has in other countries. While
this approach may be more costly it will allow the necessary direct control over the subsidiary to
assure that the URS brand continues to be highly regarded. URS has the cash reserves necessary
for such an undertaking so it can afford these higher costs. In addition, the stronger links and
more direct control provided by a wholly owned subsidiary structure will help assure maximum
control and maximum profitability. During the critical launch period URS management will
remain in charge. However, this control should not prevent local managers from having
autonomy over such things as project choice, staffing, and focused business development and
marketing expenditures, etc. The wholly owned subsidiary structure will also allow the parent to
report all earnings from activities in China. Understanding that there may be initial losses the
investment will be made to help continue to grow earnings. This is important as the US market
becomes more saturated and experiences slower or even negative growth.
Purchase answer to see full
attachment