The carpet tile in motion
Strategic options for the Hospitality & Leisure segment of Interface Europe
University of Groningen
Faculty Management & Organisation Business Development
Eduard P. van Lier
Amsterdam, October 2003
Supervisors of the University:
Dr. Ir. M.C. Achterkamp Dr. J. Kratzer
Supervisor Interface Europe:
Drs. M. le Large
Preface
The thesis which is laying in front of you, has been written as a part of my study of Management & Organization, specialization Business Development, at the University of Groningen, the Netherlands.
The world of Business Development has always fascinated me. I am an avid reader of articles about market developments. New products, new markets and a combination of these two get my first attention. I find it a very exciting and dynamic industry. As a developer of markets you will be on top of the action from the start.
And action I have experienced. A very nice period of six months was the beginning of my adventures. It all began with my very pleasant stay at Interface Europe. I would like to thank Micky le Large, my supervisor at Interface, for her never desisting support. Also the people of the office I would like to thank for their support and kindness.
Off course my adventure had to be controlled. During meetings with my first supervisor of the University, Marjolein Achterkamp, I received practical comments about how to continue the adventure on the best possible way. I would kindly thank her for her time and efforts. Also Jan Kratzer, my second supervisor of the University. I would like to thank him for his effort to read my thesis and give comments how to proceed.
Lots of other people I could be grateful to. From the woman of the bakery on the corner, to the railway employees for getting me always on time in Groningen for my meetings.
But off course not worthy to mention.
Who are worthy to mention are the people who have experienced my adventure. Thank you for accompany me. Especially my parents and my sister.
My adventure is over. Yours will start by turning over the next page…
Eduard van Lier
Amsterdam,
October 15
th, 2003
Summary
The question of this research has to be answered.
”In which way should Interface’s strategy for the Hospitality & Leisure carpet tile segment be formulated, considering the organisational characteristics, the European Hospitality & Leisure floor covering segment and Interface’s product portfolio in order to improve the position of Interface on the European floor covering market?”
In order to answer this question, the following issues have been discussed.
Current market Interface Europe
This description and analysis is done in order to explore which possibilities exist on the market for Interface Europe to focus more on the specific Hospitality & Leisure segment.
Beside the opportunities and threats in the product specifications like the structure of a carpet tile, the possibilities do exist in the non corporate segments. The share of soft floor covering is in incline, while the share in the corporate segment is in decline because of the economic situation. A possibility could exist for the Hospitality & Leisure segment.
Because of the many years of experience on the market, Interface has built a strong name.
It is likely that Interface can use this good reputation in new businesses in the near future.
The option to develop the Hospitality & Leisure segment can be lucrative, based on the current situation of the market.
Organisational characteristics
The strategic objectives are not clear. A problem which occurs with this deficit is that the employees do not know what their freedom is to act and react on certain circumstances.
The shortage of not having clear strategic objectives also influence the way how to deal with the structure and the culture of Interface Europe.
Interface has a dual authority; a matrix structure. Analysing Interface Europe’s structure it appears that because it is a functional authorized unit there are no other departments who have to give account to the department of MCE. It is difficult who has to take responsibility at certain moments.
Employees do not always feel committed with issues which do not involve their department.
If the Hospitality & Leisure segment will be entered, an option is to use the segment as a pilot for the entire European organisation.
Hospitality & Leisure segment
The branches within the Hospitality & Leisure segment are very different from each other, because of the different ways of use of the areas. Each of the branches should have an own way of communication from out Interface with their wishes and demands.
It may be plausible to state that products and product designs have to be considered by
market and country.(plausible, because of the low rate of return of the questionnaires.)
A movement takes place from more value to more design. A major opportunity for
Interface in the Hospitality & Leisure segment is to break down the traditional Interface
product and manufacturing led perspective and build a Hospitality & Leisure proposition
back from consumer needs and wants. In order to be successful Interface has to think and
act like a marketing led company.
Product portfolio
Interface differentiates itself by producing high technical products and by developing sustainable products.
The knowledge about the products is in decline with the account people. Product characteristics should be better communicated to them.
It is not clear in what way the brands are positioned. It should be better communicated to the customers where the two brands stand in the carpet tile market in order to position the products within a certain concept.
Recommended strategy Hospitality & Leisure segment
Operational excellence will not be the best discipline to follow. Interface has chosen not to be the most cheapest manufacturer and will not change that.
The other disciplines, product leadership and customer intimacy are both good options for Interface.
Coherence and fit between contingency factors
The coherence between the contingency factors have several misfits. In case Interface chooses either the strategy of product leadership, or customer intimacy they should be focused on the non coherence between the factors in order to carry out the strategy as best as they are able to.
Each coherence between the factors has its own consequences for one of the strategies.
Interface should first choose a strategy and next review the organisational characteristics,
the characteristics of the European Hospitality & Leisure floor covering segment and
Interface’s product portfolio in terms of their coherences. If Interface is successful in
doing this and avoids other coherences that do not stimulate the positive effect of the
chosen strategy, they have found a new business for themselves where they can act on as
a market leader endorses.
Contents
Preface ... A
Summary ... C
Contents ... E
1 Plan of research ...2
1.1 Introduction ...2
1.2 Backgrounds of the research ...2
1.3 Problem definition ...4
1.3.1 Research objective ...4
1.3.2 Conceptual model...4
1.3.3 Research question...6
1.3.4 Sub questions ...6
1.3.5 Limitations of the research ...7
1.4 Theoretical concepts ...7
1.5 Data resources...9
1.5.1 Secondary sources...9
1.5.2 Primary sources...9
1.5.3 Choice of respondents ...9
1.6 Measure- and observation methods ...10
1.7 Analysing and report ...10
1.8 Structure of this report ...14
2 Description Organization ...16
2.1 Interface, Inc ...16
2.1.1 Description of the organization...16
2.1.2 Mission Statement...16
2.1.3 Vision ...16
2.1.4 Business Strategy and Principal Initiatives ...17
2.2 Interface Europe ...17
2.2.1 Description of the organization...17
2.2.2 Mission statement and vision...17
2.2.3 Business Strategy and Principal Initiatives ...18
3 Current carpet tile market of Interface Europe ...19
3.1 Market analysis...19
3.1.1 Market size & Market growth...19
3.1.2 Dependency on the economic situation and season dependency...21
3.1.3 Phase in product life cycle...22
3.2 Opportunities and threats solely based on the previous paragraph ...23
3.3 Industry analysis ...24
3.3.1 Threats of new entrants ...24
3.3.2 Intensity of rivalry amongst existing competitors ...25
3.3.3 Threat of substitutes ...26
3.3.4 Bargaining power of buyers...26
3.3.5 Bargaining power of suppliers...27
3.4 Strengths and weaknesses solely based on the previous paragraph...28
3.5 Conclusions ...28
4 Description and analysis of the organisation ...29
4.1 Strategy of Interface Europe ...29
4.2 Structure of Interface Europe ...31
4.3 Culture of Interface Europe ...35
4.4 Conclusions ...36
5 Description and analysis of the Hospitality & Leisure segment ...38
5.1 What is Hospitality & Leisure? ...38
5.2 Hotels...40
5.2.1 General ...40
5.2.2 Products ...40
5.2.3 Decision making process ...42
5.2.4 Purchase aspects...43
5.2.5 Information ...43
5.3 Casino’s ...43
5.3.1 General ...43
5.3.2 Products ...44
5.3.3 Decision making process ...44
5.3.4 Purchase aspects...44
5.3.5 Information ...44
5.3.6 Summary Casino’s ...45
5.4 Convention Centres ...45
5.4.1 General ...45
5.4.2 Products ...45
5.4.3 Decision making process ...46
5.4.4 Purchase aspects...46
5.4.5 Information ...46
5.4.6 Summary Convention centres...46
5.5 Theatres...47
5.5.1 General ...47
5.5.2 Products ...47
5.5.3 Decision making process ...47
5.5.4 Purchase aspects...48
5.5.5 Information ...48
6 Description and analysis of the product portfolio ...50
6.1 Product offer ...50
6.2 The product management strategies of Best ...50
6.2.1 Product positioning and differentiation...50
6.2.2 New product development...52
6.2.3 Product line positioning and extension strategies ...53
6.3 Conclusions ...53
7 Strategy Hospitality & Leisure segment ...55
7.1 Value disciplines according to Treacy & Wiersema ...55
7.2 Interface Europe and the value disciplines ...55
7.2.1 Operational excellence ...56
7.2.2 Product leadership...56
7.2.3 Customer intimacy ...56
7.3 Conclusions ...57
8 Contingency theory: fit between organisation, market and product ...59
8.1 Origin and development of the contingency theory...59
8.2 The contingency factors ...61
8.3 Fit between the factors...62
9 Strategy within an organisational fit ...65
9.1 Strategic option: Product leadership...65
9.2 Strategic option: Customer intimacy ...66
9.3 Conclusions ...67
10 Conclusions and recommendations ...69
Bibliography ...71
1 Plan of research
1.1 Introduction
Floor coverings. Everybody needs them. From people with a small household to big companies in the corporate world. In between there are a lot of organisations and institutions who need some kind of covering for the floor as well.
The organisations and institutions are divided in segments which are very general and who apply for any possible kind of floor covering. Interface is a company that produces floor coverings. In Europe, Interface is specialized in the manufacturing of carpet tiles.
As a result of the present-day economic situation, Interface wanted to gain insight in unexplored segments. Interface Europe chose to do research in the Hospitality & Leisure segment. The commercial objective was to increase brand revenues by opening up the Hospitality & Leisure market as a market with considerable potential.
In this chapter the research plan will be discussed. To begin the backgrounds of the research will be described. After that the research planning will be described.
1.2 Backgrounds of the research
Interface traditionally focuses its carpet tile marketing strategy on major accounts, seeking to build long lasting relationships with national and multinational end-users, The main focus is aimed at architects, engineers, interior designers, contracting firms, and other people who often make, or significantly influence, purchasing decisions. Interface emphasises its sales to the commercial office segments (new construction and renovation).
In the future Interface will intend to focus more on the non-corporate segments in order to achieve a higher balance of scale in sales in those areas relative to the commercial office segments. Aim is to lessen the effects unbalanced turnover during the fluctuating economic cycles. Interface Europe is not familiar with non-corporate segments.
This is the reason why the Marketing Central Europe (MCE) department has decided to determine the possibilities in other segments. A distinction is made between the Offices, In store, Hospitality & Leisure, Education & Healthcare, Government & Public and Transport segments. Based on existing data, both internal as external, people in charge have decided to start with the Hospitality & Leisure segment because of the present low penetration degree and the present possibilities. (Business Plan Contract Carpet Tiles Interface Europe, 2002)
The possibilities in the Hospitality & Leisure segment can be determined by carrying out an external research. The, wants, needs, motivations and barriers of the organisations in the Hospitality & Leisure segment needs to be defined. (Residential brand strategy, Fitch 2002) This enumeration of consumer characteristics is named “consumer profile” (Fitch).
Because of the generality of these terms and the fact that there was not yet an existing explanation for them, the general terms were translated in questions for the consumer.
These questions were determined with the help of Interface account managers. In appendix II a list of these questions is resumed.
MCE could also choose to re-evaluate the organisation, because they are loosing their
market share to competitors. This could imply on internal problems as the cause of
decline. (Interface is loosing its market share, but is still the market leader. (Business Plan Contract Carpet Tiles Interface Europe, 2002)
Having insight in the non- corporate segments, Interface still has more belief in expansion, even in the H&L segment, without having to analyse the internal organisation.
The reason for this idea can be linked to the traditional perception of being the best in producing carpet tiles (leaders) and having all the competitors follow (lagers).
It could be a right decision to just explore and research the Hospitality and Leisure segment with the goal of stimulating growth, but there is a short comment that can be made on that. Because Interface appeared to loose their share in the market they are currently operating in, it would be of great value to them to know what their strengths and weaknesses are. By only performing research in the new segment, the possibility can occur that growth in the Hospitality & Leisure segment is not realised. This might be due to characteristics of the organisation that affect growth on the Hospitality & Leisure segment as well.
Problem having persons
The department of MCE wants to gain insight in the European Hospitality & Leisure segment. Alongside with the back fall of the economy, total sales of Interface have also declined. The Hospitality & Leisure market is one of the markets that is aimed to increase sales. At present times, detailed insight on the department concerning the Hospitality &
Leisure segment is very limited; in the past this market was not as explicitly targeted as it is nowadays. MCE needs to get insight on the possibilities of future potential sales, they need to know who should be contacted and what market demand should be complied to in order to increase sales.
Beside the description of the current market, it is of essential value as well to get insight on the organisation and on the products Interface offers. The information will be useful to set up a plan of growth (i.e. strategy) for the Hospitality & Leisure segment.
Another part of the research consists of the analysis of potential growth in the Hospitality
& Leisure segment. It has to be determined what customers in the H&L segment expect from their suppliers and in which way the Hospitality & Leisure segment is structured.
This can differ from other segments where Interface is already known in.
The subjects discussed in this thesis will be combined and structured by the hand of a model which is usable in all types of researches. Methodologically, the research approach can be seen as a related decisions concerning several parts. These parts are related with each other and therefore decisions have to be taken in consideration with each other.
The following subjects will be described in the research approach:
•
Problem definition
•
Theoretical concepts
•
Data resources
•
Measure- and observation methods
•
Analysing and report.
operating in and to provide well founded recommendations on how to operate the Hospitality & Leisure segment. Information will be collected by using a qualitative approach. Insight on the Hospitality and Leisure segment will be acquired by using a quantitative approach.
1.3 Problem definition
The problem definition consists of:
•
research objective
•
research question
•
limiting conditions
1.3.1 Research objective
The objective determines for whom (singular or plural) the research is done for, what the result of the research will be and what the importance it has for Interface
The objective formulated by Interface:
Create a strategy for growth in the European Hospitality & Leisure market for Interface’s carpet tiles.
This objective is quite vague and difficult to determine. Out of the many questions problems had to be put in a blueprint in order to perform a research which would be of significance to Interface.
The objective of this project will therefore be formulated as:
Describe and analyse the current European floor covering market, the organisational characteristics of Interface Europe and the European Hospitality &
Leisure floor covering segment, in order to formulate a strategy for Interface’s Hospitality and Leisure carpet tile segment. Goal is to improve the position of Interface on the Hospitality & Leisure segment on the floor covering market in Europe. Recommendations will be of special use to the Central European Marketing department of Interface.
Because Interface has not got much information concerning the H&L segment, every new insight would imply on an improvement of the position on the Hospitality & Leisure segment.
1.3.2 Conceptual model
A conceptual model in a research presents the general view which is used as the basis of the research. It is a powerful tool that describes research results within a clear pattern. On the next page the conceptual model is taken down (figure 1.1).
This research can be seen as a research that fits between the three elements Market,
Product and Organisation. If a fit can be found between the elements, a strategy for the
Hospitality & Leisure segment can be formulated. The Hospitality & Leisure segment will
be explored for the first time for Interface. Interface has already been operating on the
carpet tile market for several years. This is the reason why the market of Interface at first will have to be described. By learning how Interface deals with factors in its current direct environment, conclusions can be drawn whether the Hospitality & Leisure segment is high potential and therefore one to be developed.
Figure 1.1.: Conceptual model of the research
Sub question 1 will deal with the current market of Interface Europe. After having answered this question, the strengths and weaknesses of Interface will be made clear for the current situation. The decision to become active or not in this Hospitality & Leisure segment depends on the outcome which is put together in the conclusion of this chapter. It will also note limitations and possibilities in order to define a strategy for the Hospitality
& Leisure segment. The current market has to be seen as one where Interface has to deal with.
The Hospitality & Leisure segment will be described by the help of sub question 2. The leading characteristics in the Hospitality & Leisure segment concerning the purchase of floor covering and, especially, that of carpet tiles will be discussed.
Sub question 3 deals with the Product portfolio. The products Interface currently produces and the possibilities to produce Hospitality & Leisure related products will be discussed (the organizational characteristics). The questions will be related with each other in order to formulate a strategy for the Hospitality & Leisure segment at the end.
Strategy Interface Europe
Hospitality & Leisure segment
Product portfolio
Structure and culture Interface
Europe
1.3.3 Research question
”In which way should Interface’s strategy for the Hospitality & Leisure carpet tile segment be formulated, considering the organisational characteristics, the European Hospitality & Leisure floor covering segment and Interface’s product portfolio in order to improve the position of Interface on the European floor covering market?”
1.3.4 Sub questions
1 ”In which way should the current carpet tile market of Interface Europe be described?”
•
What is Interface Europe’s position regarding to the market size and market growth on the European floor covering market?
•
To what extent does Interface Europe depend on economic situations and season dependency?
•
Which phase of the product life cycle is Interface Europe in at the moment?
2 ”In which way can the strategy, structure and culture be defined?”
•
How is the strategy of Interface defined?
•
How is the structure of Interface designed?
•
What are the cultural characteristics of Interface?
3 ”In what way should the European Hospitality & Leisure segment be described?”
•
How can Hospitality & Leisure be described?
•
What are the wants, needs, motivations and barriers of the organisations in the Hospitality & Leisure segment?
•
Which information is needed by both Interface and the purchaser?
4 ”What is the range of products Interface offers and what are the possibilities for Interface to produce Hospitality & Leisure related products?”
•
What kind of products currently exist and how are they differentiated?
•
What trends can be noticed in the product portfolio?
•
How is the New Product Development process organized?
5 ”In what way the organizational characteristics, the H&L segment and the product characteristics should be in fit with each other?”
•
What kind of products are suitable for the Hospitality & Leisure market?
•
What influence do organisational characteristics have on the products and the market?
•
What strategic choices can be made after having analysed the H&L segment and what are the product possibilities?
6 ”In what way should the organizational characteristics, the H&L segment and the product characteristics be in fit if an organizational strategy will be followed?”
•
In which way do the organisational characteristics, the H&L segment and the product relate to each other in the current organisation?
•
How can this relation be formed into an optimal fit?
1.3.5 Limitations of the research
1. The research will be limited to the following European regions/countries: Benelux, France, Germany, United Kingdom. These countries cover approximately 80% of Europe’s total volume share.
2. Only chain related pan- European institutions will be taken in account within this research. These are organisations with at least 20 establishments in Europe, Chain related institutions with at least 13 establishments in one European country and Chain related European institutions with at least a total floor surface area of 30.000m2 In paragraph 1.7 the choices of the second limitation will be explained.
1.4 Theoretical concepts
Beside the problem definition, the theoretical concepts are also a main part of the research approach. Other decisions within the research approach will be taken in accordance with these two parts. A decision has to be made concerning the concepts that will be used in the research. There are two aspects that have to be taken into consideration. First, the concept has to contribute in making the problem understandable. Secondly, the concepts have to contribute to the measure of research.
The market factors consist of the market size, the market growth, the dependency of the economic situation, season dependency and the phase in which the product life cycle is in.
When looking at the existing literature on analysing companies and their markets, a variety of theoretical approaches can be used.
Several approaches choose for the analysis of the industry structure by Porter. According to Minztberg, (Minztberg, 1992) this analysis is meant to give an insight in the profitability of a sector. Five forces determine industry profitability because these influence price, costs, required investments and return on investments. By describing the industry with Porter’s five force model, enough insight can be given of the industry Interface is operating in. The emphasis of this research will lie in the possibilities the Hospitality & Leisure market can offer for Interface.
The industry factors are combined in the five force model of Porter. In 1992 Porter described the influential characteristics of each of the five forces in a book he wrote along with Quinn (Porter and Quinn, 1992).
By discussing the Market factors and the Industry factors an answer will be given for sub question 1: ”In which way should the current carpet tile market of Interface Europe be described?”
The theoretical concepts I have applied are further discussed in the following. A distinction is made by separating the H&L segment, Product portfolio and Organisation of Interface Europe. These subjects correspondent with the sub questions.
Strategy, structure and culture Interface Europe
Sub question 2: ”In which way can the strategy, structure and culture be defined?”
The structure of Interface Europe can best be discussed by the structure parameters which are also described by Minztberg. (Mintzberg, 1983) The organisational structure will be described by a number of issues. These issues are normally used to design a structure for an organisation. Interface Europe will be described with help of these parameters to give insight into the structure of Interface.
The culture of Interface Europe will be described according to the ideas of Schein (Schein, 1992). Culture can be analysed at several different levels, where the term level refers to the degree to which the cultural phenomenon is visible to the observer.
Distinguish is made between Artefacts, Espoused values and Basic underlying assumptions.
H&L segment
Sub question 3: ”In what way should the European Hospitality & Leisure segment be described?”
The description of the Hospitality & Leisure segment will be based on data gathered by answers from questionnaires. The point of departure of these questionnaires was to get insight in the wants, motivations, needs and barriers from chain related European based Hospitality & Leisure companies.
Product portfolio
Sub question 4: ”What is the range of products Interface offers and what are the possibilities for Interface to produce Hospitality & Leisure related products?”
The ideas of Best (1997) will be used in order to answer this question. Best developed product management strategies. He divided these strategies in three, namely: Product positioning and differentiation, Product line positioning and extension strategies and new product development.
Strategy Hospitality & Leisure segment
Sub question 5: ”In what way the organizational characteristics, the H&L segment and the product characteristics should be in fit with each other?”
Core competences are organisational specific competences which are the source of distinctive value creation. These core competences will generate customer value. What these core competences are and in what way they can best be translated into customer value is discussed by Treeacy and Wiersema (1996).Customer value leads to customer value orientation. A translation of this orientation is the vision of an organisation. In this case a translation for the Hospitality & Leisure segment. A strategy could be formulated from here.
Fit between the organisational characteristics, the H&L segment and the product characteristics
Sub question 6: ”In what way should the organizational characteristics, the H&L segment and the product characteristics be in fit if an organizational strategy will be followed?”
The essence of the contingency approach is that a desired outcome is the consequence of an appropriate 'fit' between two or more factors, such as between the organisation's strategy and structure.
According to this approach the managerial tasks involves analysing the organisations in
its context, taking advantage of opportunities and minimising constraints through endless
combinations of strategies, structures and policies. In order to say something about the coherence between the factors, it is necessary to know in what way the factors are related to each other. Miles & Snow (1994) advocate that company success depends on putting together a complete and complementary package of ingredients: strategy, structure, process, and a managerial ideology. These ingredients have to be in coherence with each other and with the environment.
1.5 Data resources
1.5.1 Secondary sources
The most important secondary sources that will be used is a report of research agency BMW associates (BMW associates, 2002). BMW associates made a report which gives an overview of the European contract carpet and carpet tile market. Next to this information other data will be collected from associates concerning the carpet tile market and organisations within the Hospitality and Leisure market.
1.5.2 Primary sources
Primary information will be collected from several market parties. The most important parties are the organisations within the Hospitality & Leisure segment. Other primary information will be gathered by the people working at Interface Europe.
1.5.3 Choice of respondents
Because the thesis can be split up in a qualitative research and a quantitative research, the choice of respondents is also different.
The respondents by whom information was gathered for the qualitative research were several employees working at Interface Europe in Scherpenzeel, the Netherlands. These employees were working at all kind of departments of Interface. Beside the contacts in the Netherlands, several informal talks were held with people from the United Kingdom who were in the Netherlands for meetings with their Dutch colleagues. These informal talks were not planned. Lots of information could be gathered on this manner. These informal talks were about a range of subjects. The information needed for this thesis has been filtered out. Beside the informal talks, several meetings with the management team were also data input for the thesis.
With help of my supervisor at Interface much information could be gathered and selected for the thesis.
In the end, only three interviews were held to verify the already existing knowledge of the
organisation. These interviews were held with people who are active on the production
site, the European marketing department and an employee of the marketing department
Benelux. To my opinion the choice of these people were right because the information I
needed could be gathered during these interviews. This limited number of interviews
which were held will not have any influence on the validity of this qualitative research.
provided by people in ‘charge’. The people which were asked to be interviewed are people all active in Scherpenzeel, the Netherlands, with a long time of experience in the business. Their knowledge about Interface and the European carpet market can be considered to be substantial.
The questions of the interviews, which were held in the Dutch language, can be found in appendix I. I have divided the three interviews amongst three important parts of the organisation. Several questions are the same. Other questions are specific for a certain area. These are the complete question lists. The questions which were already made clear during my stay in Scherpenzeel are not filtered out.
To get insight in the market of floor covering questionnaires were send to hundred organisations within the Hospitality & Leisure segment; the quantitative research. In what way the respondents were chosen to gather information from out the Hospitality &
Leisure segment is described in paragraph 1.7.
The questionnaires which were send to the organisations, both in the Dutch and the English language, operating in the Hospitality & Leisure segment can also be found in appendix I. (Because of the slight little differences between the questionnaires of the branches, I have chosen only to add the questionnaire of the Hotels in the English language in the appendix.)
1.6 Measure- and observation methods
A distinction can be made between register and measure by stimulus.
With register, a reality occurs to people. This is also known as measure without addition of extra stimulus. The most important register forms are observation, studying of documents, analysis of numerical data, analysis of other researches and simulation.
This kind of observation has been used frequently. Documents and researches have been observed and used for this thesis. Observation took place especially at the department where this research took place.
Measure with stimulus is when a stimulus is added and the result is observed. Most important kind of measure with stimulus are inquiries, interviews and test- and scaletechnics. The measure of inquiries and interviews were used.
1.7 Analysing and report
The description and analysis of the current market, the products, strategy, structure and culture of Interface have been done after a qualitative approach.
Analysing and report has to take place on a manner that is in line with such a qualitative approach. Both the planned interviews, as the informal talks had to be structured. The purpose of such a qualitative approach is to bring structure in the amounts of data and to put them in order. Baarda, de Goede & Teunissen (1998) describe steps for analysis which can be used to analyse the collected data. Afterwards I can conclude I have not taken these steps in the way the authors put it down in their book. In the following I will describe in what way I have interpret the author’s steps.
step 1: select information on relevance
The selection of relevant information has been done while processing the data. Non-
relevant information has been filtered in this way already.
step 2: split up relevant texts in fragments
Same as step 1. In some cases it was indeed necessary to split up relevant texts in fragments to combine these parts with other interviews.
step 3: labelling
Labelling is the process of giving names to the fragments.
At the moment of preparing the interviews the names were already given to the fragments.
The fragments were translated into questions. The questionnaires were set up by following the issues which are discussed in this thesis.
step 4: order and reduce the labels
This step was automatically taken at step 3.
step 5: determine validity of the labelling
The determination of the validity was not necessary in that way that it can be assumed the labelling afterwards and during the process is a valid way of setting up the questionnaire, leaded by the issues of this thesis.
step 6 and 7: define core labels and determine inter subjectivity
These are steps which I have not taken in this research for the interviews.
step 8: answering the definition of the problem
Because this thesis covers two kind of researches, namely a qualitative and a quantitative research, a direct answer on the problem definition could not be given. Off course, the interviews for the qualitative research were taken with regard to the issues which had to be discussed. The outcomes of the qualitative research will be part of the overall problem definition.
The exploration of the Hospitality and Leisure segment has been done by a quantitative approach. (Baarda & de Goede, 1998) Analysing and report has also to take place on a manner that is in line with a quantitative approach. As stated before, this part of the research will be of an explorative nature. Before I started the research I had already several expectations of the relations between the variables. I assumed, the different branches within the Hospitality & Leisure segment would have different wants, needs, motivations and barriers. The operationalisations of these consumer characteristics are taken down in appendix II. The differences of the countries and the way an institution is organised also influences in what way they purchase floor covering. Because this research is based on chain related organisations, it is not surprising an establishment will have the same results in comparison with another hotel establishment within the same chain. This will have effect on the size of the sample.
My research plan will therefore be a questionnaire in this part of the research. A one- moment survey.
The institutions will be selected by a proportional stratificated aselected sample, because
there is not an even amount of institutions in the separated branches. The strata’s can be
distinguished. This is done by separating the Hospitality & Leisure segment into
The selection of institutions in the Hospitality & Leisure segment is very broad. It soon became clear it is impossible to research all institutions of the segment. A selection had to be made which institutions should be included in the research.
Because Interface traditionally focused their carpet tile marketing strategy on major accounts, this ‘new’ Hospitality & Leisure segment will be approached on the same way.
This means a distinction has to be made between the institutions that can be labelled as major accounts and others. Major European accounts will therefore be pan-European chain related organisations.
By getting lists of chain related organisations, I have searched on the internet for sites which could give me information. HVS is an international consulting agency which is specialised in researches for their customers in the H&L segment. The HVS site (www.hvsinternational.com/europe.htm) offered me lots of information about the segment. HVS makes a distinction in the different kinds of H&L branches, namely, Food
& Beverages, Convention, Sport & Entertainment gaming service and Hotels. The organisations which are active in these branches I have selected for the research; Hotels, Restaurants, Convention centre, Casinos, Cinemas and Theatres. Per branch it turned out to be necessary to use different restrictions. In what way HVS sampled is unknown.
Considering that HVS is a professional organisation, I can conclude that their information is based on facts researched by them earlier.
The institutions have to meet at least one of the following requirements to be part of the research. These requirements have been set up by order of the people in charge at Interface Europe. These restrictions make sure that each kind of organisation with potential for Interface within the Hospitality & Leisure segment will be part of the research.
Chain related pan-European institutions with at least 20 establishments in Europe;
Chain related institutions with at last 13 establishments in one European country;
Chain related European institutions with at least a total floor surface area of 30.000m2.
In what way this selection has been is made is discussed in the following.
Hotels 63 Theatres 10 Cinema’s 3 Casinos 5 Convention centres 15
Restaurants 4
Table 1.1.: Total amount of questionnaires sent
The amounts of questionnaires sent were different per branch. The reason for this can be read in the following explanation.
Hotels comply in this research with the restriction; chain related pan European institutions with at least 20 establishments in Europe.
The list with hotels who comply with this request would be inexhaustible. I have made a selection of Hotel chains which are scattered around Europe most. I have used a list of hotels, obtained by HVS for this selection.
The following Hotel chains were the result of the selection: Sofitel, Novotel, Mercure,
Golden Tulip/ Tulip Inn, Intercontinental, Ibis, Formule 1, Etap, van der Valk. In total 63
hotels across Europe were part of the research.
Theatres comply in this research with the restriction; chain related pan European institutions with at least 20 establishments in Europe.
Theatres are independent institutions in most cases. Chain related is the company Stage Holding. Stage Holding has several theatres who function as a working company in Europe. These working companies will be part of the research. In total 10 theatres across Europe were part of the research.
Cinemas comply in this research with the restriction; chain related pan European institutions with at least 20 establishments in Europe.
Cinemas went through lots of changes recent years because lots of independent cinemas became part of chain organised companies which are active across Europe. (article screendigest). On the basis of the chain related cinemas named in the leading cinema magazine, I have made a selection of the cinemas which are scattered in Europe most. The Pathe, Kinepolis and CinemaxX cinema’s will be part of the research. In total 3 cinema’s across Europe were part of the research.
Casinos comply with the restriction; Chain related institutions with at least thirteen establishments in one European country.
The greater part of the variety of casinos across Europe do not comply with the request of being chain related across Europe. The Dutch Holland Casino is the only chain related casino. They have got plans to start up establishments outside the Netherlands. As yet a Belgian company, Belcasino’s, tries to be active in Belgium. In France, Partouche is still trying to operate as a chain related institution. That’s why only the Holland Casino with thirteen establishments in the Netherlands will be part of the research. In total 5 casino’s across the Netherlands were part of the research.
Convention centres comply with the restriction; Chain related European institutions with at least a total floor surface area of 30.000m2.
Like theatres, convention centres are in most cases independent institutions. A search on the internet resulted in a list with a few companies who are related with each other in Europe. The following companies will therefore be part of the research Mecc Maastricht, RAI Amsterdam, RAI Germany, RAI France, Jaarbeurs Utrecht, Jaarbeurs Belgian office.
In total 15 convention centre across Europe were part of the research.
Restaurants comply in this research with the restriction; chain related pan- European institutions with at least 20 establishments in Europe. Just like the distinction between economy , mid-rate and first-class in the hotel sector, I have tried to make a distinction between these rates in restaurants. AC Restaurants, Gauchos and van der Valk will be part of the research. In total 4 restaurants across Europe were part of the research.
The amount of institutions per branch which will be included for the research are different. Purpose of the questionnaires was to get insight in the H&L segment.
Information was gathered first by distinguishing the branches and second to link up
restrictions for the research. The gathered information of the branches will be combined
later.
1.8 Structure of this report
The thesis is structured by the conceptual model and the theoretical concepts. The following chapters will be discussed.
The following figure on the next page will make clear in what way the report is structured.
Figure 1.2: Model of research
Chapter two will give a description of Interface on corporate level. In this chapter a general description of the company will be given where this research took place. Beside this description, the mission, vision and strategy will be discussed of Interface.
A market analysis is the starting point of chapter three. The industry analysis for Interface will be described after that. In this chapter the market and the industry will be described and analysed. Special attention will be given to the market of Interface Europe. An answer will be given on the sub question: ”In which way should the current carpet tile market of Interface Europe be described?” Interviews, internal and external documents are input for analysing this current market.
This description and analysis will be done in order to explore if there exist possibilities for Interface to extend their market with a specific Hospitality & Leisure segment.
In chapter four the organisation will be discussed. The issues of strategy, structure and culture are the organisational aspects which will have attention. Interface Europe is the object of analysis for these issues. This chapter will deal with the organisational characteristics of Interface. That means that the part of the organisation which is important for this thesis, the MCE department, will be discussed.
An insight in the Hospitality & Leisure segment will be given in chapter five. The wants, needs, motivations and barriers of the different institutions in the segment will be discussed.
In this chapter the segment will be explored by answering the sub question: ”In what way should the European Hospitality & Leisure segment be described?”
The description will not be about all aspects of the segment. Only the aspects which are important for Interface with this subject on this moment will be discussed.
In chapter six an analysis will be given of the product portfolio. The current products, the trends of the portfolio and the possibilities will be part of this chapter. In order to find out whether Interface can serve the Hospitality & Leisure segment with their products an
Current carpettile market
Description and analysis of the
organisation
Description and analysis of the H&L segment
segment
Description and analysis of the productportfolio
Coherences between factors
Strategic options
Strategy Hospitality &
Leisure
answer will be given on the sub question ”What is the range of products Interface offers and what are the possibilities for Interface to manufacture Hospitality & Leisure related products?”
Chapter seven is the chapter which will combine the aspects which were found in the earlier chapters. The market, products and organisational factors will be combined.
During the earlier chapters the foundation will be laid for the rest of the thesis. A strategy for the Hospitality & Leisure segment will be proposed by answering the sub question:
”In what way the organisational characteristics, the H&L segment and the product characteristics should be in fit with each other?”
Core competences are organisational specific competences which are the source of distinctive value creation. These core competences will generate customer value.
Customer value leads to customer value orientation. A translation of this orientation is the vision of an organisation. In this case a translation for the Hospitality & Leisure segment.
A strategy will be formulated from here.
Chapter eight and nine covers the cohesion of the aspects discussed in the earlier chapters.
Chapter 7 offered two possibilities of strategies for the Hospitality & Leisure segment. It became also clear the coherences between the factors would in some cases not have a positive effect on the strategies.
In chapter 8 and in chapter 9 several steps to answer the question: ”In what way should the organisational characteristics, the H&L segment and the product characteristics be in fit if an organisational strategy will be followed?” will be taken.
This will be done in order to discuss the coherences between the factors (chapter 8) and to relate them to each other in a way that the coherences which will not have a positive effect on the strategies will be changed in positive effects for the strategies (chapter 9).
The answering of this question will thus be dealt in two chapters. Chapter 8 has been written to create enough information and understanding to answer the question properly in chapter 9.
Chapter 7 offered two options of strategy for the Hospitality & Leisure segment. In chapter 8 it became clear in what way Interface Europe deals with misfits between their contingency factors.
Chapter 9 will give an answer on the question by taking both strategic options in consideration like if that option will be chosen by Interface. The misfits discussed in chapter 8 will therefore be turned into fits for that specific strategic option.
Chapter ten is the final chapter where conclusions and recommendations for Interface
Europe will be discussed.
2 Description Organization
In this chapter a general description of the company will be given where this research took place. Beside this description, the mission, vision and strategy will be discussed of Interface.
2.1 Interface, Inc
2.1.1 Description of the organization
The original Interface has been augmented by over 50 acquisitions.
Nowadays Interface is a world-wide company which is active in more than 100 countries.
Interface employs a total of approximately 6500 employees world wide with net sales of
$ 1.104 billion and a net loss of $ 36,3 million in 2001. Interface is a global manufacturer, marketer, installer and servicer of products for the commercial and institutional interiors market. They have a strong presence in the segments of modular carpet, broadloom carpet, floor covering services, interior panel fabrics, upholstery fabric and raised/ access flooring. Interface’s principal geographic markets are the Americas (69% of net sales) and Europe (27%). Asia-Pacific has 4% of net sales.
In 2001, 75,5% of the net sales consisted of sales of floor covering products and related services.
2.1.2 Mission Statement
1The mission of an organization defines in general terms the identity of the organization. It implies the place of the organization in the world (Paul, 1994).
“Interface will become the first name in commercial and institutional interiors world-wide through its commitment to people, process, product, place and profits (the five P’s). We will strive to create an organization wherein all people are accorded unconditional respect and dignity; one that allows each person to continuously learn and develop. We will focus on product (which includes service) through constant emphasis on process quality and engineering, which we will combine with careful attention to our customers' needs so as always to deliver superior value to our customers, thereby maximising all stakeholders' satisfaction. We will honour the places where we do business by endeavouring to become the first name in industrial ecology, a corporation that cherishes nature and restores the environment. Interface will lead by example and validate by results, including profits, leaving the world a better place than when we began, and we will be restorative through the power of our influence in the world.”
2.1.3 Vision
As well as a mission, an organization formulates a vision, which is derived from the mission and which implies where the organization wants to go.
1
Interface, Inc. Annual report 2001
The vision of Interface: “To be the first company that, by its deeds, shows the entire industrial world what sustainability is in all its dimensions: People, process, product, place and profits - by 2020 - and in doing so we will become restorative through the power of influence.”
2.1.4 Business Strategy and Principal Initiatives
The corporate strategy of Interface is to continue the diversification and integration of their business, on a sustainable basis, world wide. Interface has achieved diversification by both developing products internally and acquiring complementary product lines and businesses in the commercial and institutional interiors fields. In implementing this strategy, Interface is pursuing the following principal strategic initiatives: Expand markets for carpet tiles. Increase sales in less cyclical market segments, maximise global marketing and manufacturing capabilities, Advance ecological sustainability programs.
The corporate head office has stated the seven S’s, how they name it, for strategy:
•
Become number one brand with specifiers;
•
Develop a flexible multi- channel strategy;
•
Manage our product mix to maximise service and margin and improve cash flow;
•
Recruit, develop and retain the best people;
•
Reclaim Interface’s reputation for excellence in customer service;
•
Innovate by moving closer to the customer, via e-links;
•
Take the sustainability message to the customer.
2.2 Interface Europe
2.2.1 Description of the organization
In 1924 van Heugten started a company which produced saddle-covers for bicycles. In the years that followed, the company Heuga specialised itself in manufacturing carpet tiles. In 1988 Interface took over Heuga. Both companies could complement their businesses especially outside the United Kingdom. Heuga now is one of the brands of Interface, which is the biggest producer of carpet tiles in the world.
Interface focuses itself on the residential (consumer) and contract (project) markets. At first Heuga specialised itself on the consumer market and Interface especially on the market for projects. During the integration process, the two companies developed not only new carpet products, but also new solutions for floors. They developed a cable management flooring system which can be used in projects, cleaning attributes and a system which makes the installation of the carpets much easier, because furniture does not have to be replaced anymore.
With a market share of approximately 35%, Interface is the world wide leader in the
carpet tile segment. The modular carpet segment is represented by the brands Interface
and Heuga. Interface Europe has its seats at Scherpenzeel, the Netherlands and Shelf,
England.
European department tries to operate conform the mission and vision of the corporate head office. There does not exist an European policy.
2.2.3 Business Strategy and Principal Initiatives
The list of the seven S’s for strategy was meant to be translated and be adjusted for each department within Interface. Each department is responsible for the translation of the corporate ideas. These seven S’s had to be dynamic when stated five years ago.
A business plan should in first instance fit with the seven S’s of strategy. This has become diluted. A business plan now is not more than some financial indicators and a little bit of segmentation. Financial indicators serve as ad hoc basis for decisions. There are no monitoring systems for marketing and sales
2. In production the mission is tried to be translated in programs. This is the only place within the company where the corporate head office’s ideas can be seen directly.
The mission, vision and principal initiatives are drawed up as a plan on corporate level at the headquarters in Atlanta. At the department of MCE not much is left of this corporate idea of sustainability. The translation of the mission and vision in targets on the short term are untraceable.
2 Interview with Mr. Bruinenberg of Interface Operations
3 Current carpet tile market of Interface Europe
In this chapter the market and the industry will be described and analysed. Special attention will be given to the market of Interface Europe. An answer will be given on the sub question: ”In which way should the current carpet tile market of Interface Europe be described?” Interviews, internal and external documents are input for analysing this current market.
This description and analysis will be done in order to explore if there exist possibilities for Interface to extend their market with a specific Hospitality & Leisure segment.
The market analysis will be done in paragraph 3.1. The opportunities and treats for Interface Europe will be summed up in the conclusion of this paragraph. After that, in paragraph 3.2, the industry analysis will be done. The strengths and weaknesses of Interface Europe will end this paragraph.
Before all this, I will give a short explanation in what way the market of Interface Europe has to be seen.
A distinction can be made for floor covering between hard en soft floors. Interface Europe is a manufacturer of soft floors. Carpets to be exactly. Another distinction can be made for carpets, namely broadloom carpet and carpet tiles. Interface Europe fabricates and marketers carpet tiles. Hard floors are vinyl, laminate, parquet, etc. These hard floors will not be discussed in detail, because it has been shown that buyers first of all choose whether they buy hard floor covering or soft floor covering. The emphasize will therefore be at the distinction between broadloom carpet and carpet tiles
3.
Within the floor covering business the market is divided in projects (or: contracts) and residential. Within projects several different markets are distinguished. The Corporate segment and the non- corporate segments, namely In store, Hospitality & Leisure, Education & Healthcare, Government/ public, and Transport.
3.1 Market analysis
The market factors can be described in terms of market size, market growth, phase in product life cycle, dependency on the economic situation and season dependency.
By analysing the market, the attractiveness of the Hospitality & Leisure segment for Interface Europe can be discussed. Next to that, the analyses enables to discuss in what way the position of Interface Europe on the market can be strengthened in terms of opportunities and threats.
3.1.1 Market size & Market growth
Broadloom is forecast to have a volume share of 78,8% in 2003 with carpet tile at 21,2%
(1998: 83,7 % and 16,3%; 2002: 79,6 % and 20,4%).
4This trend is forecast to continue.
(figure 3.1) To give an idea of these numbers; 160 million square metres of contract
carpet and carpet tile is forecast to be consumed in 2003. This means that the total
contract carpet tile consumption for 2003 is forecast at 34 million square metres. This is 8,5 % less than in 2000.
0 10 20 30 40 50 60 70 80 90
1998 2002 2003
Broadloom carpet Carpet tiles
figure 3.1: volume share per year of broadloom carpet and carpet tiles
Conclusion of this sum up in terms of percentages is that the carpet tile share increases, while the total volume of broadloom carpets decreases.
The following table will give insight in the proportions of the different carpets consumed in the countries where this report is about.
Table 3.1.: Proportions of the different carpets (BMW Ass. P. 27, 28) Total carpet % is the carpet consumption per country of the total floor covering business.
Total % broadloom is the % of broadloom of the total carpet consumption per country.
Total % carpet tiles is the % of carpet tiles of the total carpet consumption per country.
Although suffering from a near zero growth economy and switch from carpet to hard floor finishes, Germany will remain in 2002 the largest contract carpet consumer at 33% (down from 36,3% in 1998). However, Germany remains the lowest percentage consumption of contract carpet tiles in any European region at 8%. This compared with the highest percentage consumption of UK/ Ireland at 38%.
Taking into account the overall decline rate of 6.2%, regions that experience larger declines are UK / Ireland (11%) and Germany (10%). Especially the results of the UK and Ireland region have a large impact on the overall figure since this region accounts for 1/3 of the total contract tile business.
All other regions are expected to equal or grow their volumes compared to last year.
France Germany UK/ Ireland Benelux Rest Europe Total Carpet
%
14,3 % 33,0% 23,1% 11,2% 18,4%
of which
% Broadloom 70% 92% 62% 84% X
%Carpet Tiles
30% 8% 38% 16% X
In the following table on the next page, insight will be given of the percentages carpet consumption per sector per country.
Offices Instore H&L E&H Government/
Public
Transport
France 46,1 % 10,8 % 20,4 % 7,7 % 11,5 % 3,5 %
Germany 44,6 % 6,8 % 22,8 % 10,1% 13,1 % 2,6 %
UK/ Ireland 45,5 % 9,0 % 20,7 % 13,3 % 8,6 % 2,9%
Benelux 45,1 % 9,3 % 21,1 % 8,8 % 12,8 % 2,9%
table 3.2.: Percentages carpet consumption per sector per country (BMW ass.)
