Company overview/ Statement of Problem Pro Clean LLC is an old-timer carpet cleaning business. It was owned and managed by Kevin Wilson and located in Knoxville, Tennessee. Wilson had to manage almost all functions of Pro Clean daily activities. In this industry, the problems Pro Clean faced are how to stay competitive and still make above average returns with one of his main competitor the King Rug. King Rug has a resolute business structure and is able to charge its customers with high prices which make King Rug much more profitable than Pro Clean. Another problem that Pro Clean has to face is the rapid expansion process.
At the onset of the expansion, the business had started to churn cash as a result of the increased payroll expenses and the lease payments for the company’s vehicles. Wilson’s return on investment was dismal. Cash flow quickly became a problem and Wilson resorted to using his business and personal credit cards to finance his business. Environmental Scanning/ Stakeholder Analysis Demographics of Pro Clean are composed mostly of customers from Knoxville, TN. Being located in the Suburban district and close to Condominiums near the City Center; most of its customers come from single-income families, above $250,000 annually.
Most of these homes had pets/ young children. 20% of the business made up of the regular customers. Economically, Pro Clean is doing fine with its source of Revenue made up of cleaning carpet (77%), upholstery cleaning (9%), area rug cleaning (5%), tile and grout cleaning (5%), carpet and fabric protection (3%), and drapery cleaning for (1%). The culture of the customers of Pro Clean is those of frequent use. Average Pro Clean customers had their carpets cleaned every 12 months.
Technologically, Pro Clean had improved from stuffing envelopes with direct mail material, answering phone calls and giving estimates to setting up a webpage so customers can easily and instantly know about the company’s profile and service. Pro Clean is just a local business thus it is not thinking about expanding to another country, however, it sought to expand locally with much difficulty Industry Analysis Pro Clean’s NAICS code is 339994. According to the United Census Bureau, a 339994 is a “Broom, Brush and Mop Manufacturing” Pro Clean conducts a pure competition in where there are many other competitors selling similar ervice in the industry. Its main competitors are D-Clean, King Rug, Green Clean, Right Clean and Kleen Clean. The industry is a growing market. The market grew approximately 5 percent per year, which was what Wilson’s business averaged as well. Currently, Pro Clean had built up a respectable 5 percent market share in Knoxville Now for Porter’s five forces model of Pro Clean, they are very weak to withstand the threat of new entrants because a number of national janitorial cleaning and carpet cleaning chains were advertising aggressively to establish new franchises in the city.
The bargaining power of supplier of Pro Clean is rather weak. For a cleaning company, Pro Clean can pretty much buy their source of cleaning products pretty much from different suppliers and switch products without hurting the company’s balance sheet. The bargaining power of buyers of Pro Clean is rather weak also, because the customer can switch to another cleaner company in town where it might have a service which Pro Clean doesn’t have. In addition, there are approximately 60 cleaners in town competing in the same industry as Pro Clean. Substitute products are a huge disadvantage for Pro Clean.
Some new customers who are not used to carpet cleaners preferred to buy the cleaning products and do the cleaning by them. The commercial cleaning market was serviced by janitorial service providers that offered a one-stop service to commercial businesses which Pro Clean does not offer. The intensity among the companies is cut throat. The market is very competitive because the firms have similar service and almost equal status among buyers. The other companies are killing each other to differentiate themselves from their competitors by conducting additional source of revenue.
For example, King Rug derives a substantive portion of its revenue from rug cleaning at its place of business and did well with cross selling and up-selling. Pro Clean however, did not successfully up-sell Company Analysis Pro Clean vision is to be the number one carpet and rug cleaners and “ready to take on even the best in Knoxville” Pro Clean’s mission to accomplish this vision is to “stay in touch with all its customers by sending out quarterly newsletters. ” The current goal of Pro Clean is to organize their organizational structure where it had inaccurately expand too fast and thus hurting company’s current cash flow.
To achieve this goal, Wilson had to lay off one of his cleaning technicians. He temporarily transformed the cleaning technician position to that of sales and office administration. Wilson had to spend his personal time trying to develop the business as well as dealing with administrative and clerical tasks. SWOT ANALYSIS Strength: 1. Pro Clean has 5% overall market share of Knoxville carpet cleaning market 2. Its market shares grows at 5% annually 3. Their business venue is located in the city northeast residential district (most of its customers are residential people) 4.
It has loyal customers which generates 60% of its income Weakness: 1. It has a poor organizational structures 2. Lower price charged to its customers making it to have difficulty covering overhead costs 3. It expanded too quickly, making a small return on investment. Opportunities: 1. Pro Clean might be able to target not only residential areas but also commercial as its main competitors do not target commercial areas 2. Pro Clean continue charging a lower price than its main competitor in the rug cleaning business Threats: . Pro Clean competes in a highly competitive market 2. Other companies might crush Pro Clean by offering a cheaper service fee 3. Any frequent-customers who suddenly become unsatisfied might turn its revenue down. Pro Clean’s philosophy is that “each and every client is the most important facet of our company”. Pro Clean’s core competency is its ability to make on-site estimate visits, while other competitors gave approximate estimates over the phone and followed up with a detailed price once they were on site to clean.
Porter’s value chain of Pro Clean is important to the health of the company. Their network (existing customers, technology and follow ups) are the most crucial in the relation of its income statement. They must keep on doing whatever they do best not to lose any existing customers otherwise the company’s operating income will suffer. STRATEGIC ANALYSIS The corporate strategy of Pro Clean is at a low level because it does not conduct any other form of business other than cleaning services.
It has a cost-leadership business strategy as compared to its main competitors; it charged the least fee for cleaning services. Pro Clean ability to keep its existing customers is certainly a positive effect on the company’s image and it also can give a positive “free advertisement” to these customers’ relatives. The culture of Pro Clean is that the human resource works as a close knit team. While Wilson is out, his employees will routinely visit real estate agents and other referral sources for half of the day while others spent the remainder of the day in the office. ALTERNATIVE/SOLUTION
The two main problems mention above is the significantly low pricing which makes it unable to cover its overhead costs while its main competitor can; and the other problem is the wrong decision of the expansion which was rather too soon for the company to handle. The main opportunity which Pro Clean might be able to consider is that it should aim for not only residential area carpet cleaning but also commercial area as it will hugely increase the number in their sales. Also, I believe that the expansion has already happened but it produces a little, if any, a positive return on investment.
The way I would take advantage of this is to either sell the extra capacity/ plant or to maximize its ability to produce different product/services which might be able to generate more revenue for Pro Clean. For example, not only they do the cleaning business, but they also manufacture their own brand of Pro Clean cleaning products. I believe that Pro Clean can survive if these problems were to be exploited. With additional capital and better company strategies implications, Pro Clean will be able to dominate the cleaning industry locally. End Note Page