MARKETING MIX OF CONSTRUCTION BUSINESS

A Thesis Presentedto the Faculty of the Graduate School

Aquinas University of LegazpiProfessional Schools

Legazpi City

in Partial Fulfilmentof the Requirements for the Degree Master in Business Administration

JOUANA R. ARELLANO

April 2014

GRADUATE SCHOOL

AQUINAS UNIVERSITY OF LEGAZPIProfessional Schools

Legazpi City

RECOMMENDATION FOR ORAL EXAMINATION

This is to certify that the thesis titled, MARKETING MIX OF CONSTRUCTION BUSINESS, prepared and submitted by JOUANA R. ARELLANO in partial fulfilment of the requirements for the degree MASTER IN BUSINESS ADMINISTRATION (MBA) is hereby recommended for oral examination.

AVELINO C. BELLEZA, DBAAdviser

GRADUATE SCHOOL

ii

AQUINAS UNIVERSITY OF LEGAZPIProfessional Schools

Legazpi City

RESULTS OF THE ORAL EXAMINATION

Candidate: JOUANA R. ARELLANO

Thesis: MARKETING MIX OF CONSTRUCTION BUSINESS

Place: Aquinas University of LegazpiGraduate School Defense Room

Date: April 14, 2014

Time: 2:00 pm

PANEL OF EXAMINERS ACTION TAKEN

NORMA E. BRON, DBA______________________________

Chairperson

HARLEY G. PERALTA, Ph.D. (PA) ______________________________ Member

EDDIE S. SEE, Ed.D. ______________________________ Reader as Critic

MA. SHANE S. DEL ROSARIO, Ph.D. ______________________________ In-Charge of Research Ethics

AVELINO C. BELLEZA, DBAAdviser

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GRADUATE SCHOOLAQUINAS UNIVERSITY OF LEGAZPI

Professional SchoolsLegazpi City

APPROVAL BY THE PANEL OF EXAMINERS

Approved by the Panel of Oral Examiners with a grade of 95 %

BENEMERITUS

NORMA E. BRON, DBAPanel Chairperson

HARLEY G. PERALTA, Ph.D. (PA) EDDIE S. SEE, Ed. Member Reader as Critic

MA. SHANE S. DEL ROSARIO, Ph.D.In-Charge of Research Ethics

FINAL APPROVAL

Accepted and approved in partial fulfilment of the requirements

for the degree Master in Business Administration.

Passed the Comprehensive Examination on November 16 and 17, 2013.

MA. PAMELA M. SORRA-VIÑAS, Ph.D.Dean

REV. FR. ERNESTO M. ARCEO, O.P., S.T.L., Ph.D.Rector and President

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ACKNOWLEDGMENT

The researcher would like to acknowledge with deep gratitude the following for their contributions and encouragement given in completing this manuscript:

Aquinas University of Legazpi, headed by the Rector and President, REV. FR. ERNESTO M. ARCEO, O.P., S.T.L., Ph.D. for the researcher’s academic growth through the University;

The Aquinas University Graduate School, headed by its Dean DR. MA. PAMELA M. SORRA – VIÑAS, along with her administrative staffs, for the total support and for unparalleled responsiveness, given in her years of stay in the University;

DR. AVELINO C. BELLEZA, the thesis adviser, for his untiring presence, untiring guidance and valuable support during the completion of this manuscript;

The Members of the Thesis Panel, DR. NORMA E. BRON, DR. HARLEY G. PERALTA, (PA), DR. SHANE S. DEL ROSARIO and DR. EDDIE S. SEE for their valuable support and expertise that made this study more meaningful and comprehensive;

The CONTRACTORS OF LEGAZPI CITY for their genuine cooperation towards the completion of this study;

The librarian and staff of Aquinas University Library, for the assistance and help extended in utilizing the facilities;

To her beloved parents, who showed support, unswerving confidence and unconditional love during the process of the study;

To her siblings, Jen, Janette, Jessica and Jireh for their inspirational presence and love when she needed them the most;

Above all, to the ALMIGHTY GOD, for His guidance, wisdom and strength given in her entire life.

JRA

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GRADUATESCHOOLAQUINAS UNIVERSITY OF LEGAZPI

Professional SchoolsLegazpi City

EDITOR’S CERTIFICATE

This is to certify that the thesis titled, MARKETING MIX OF CONSTRUCTION BUSINESS, prepared and submitted by JOUANA R. ARELLANO, in partial fulfilment of the requirements for the degree MASTER IN BUSINESS ADMINISTRATION (MBA), has been edited by the undersigned.

Issued this 30th day of June 2014 for the Commission on Higher Education (CHED) official purposes at Aquinas University of Legazpi, Legazpi City.

ARLENE A. AGUILAR, Ph.D.Editor

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ABSTRACT

ARELLANO, JOUANA R., “MARKETING MIX OF CONSTRUCTION BUSINESS,” (Unpublished Master’s Thesis, Aquinas University of Legazpi, Professional Schools, Graduate School, Legazpi City, April 2014).

Construction industry in the Philippines is one of the key sectors

that are prominent to the business market. It has a big contribution in

terms of revenue and employment. The Philippine Contractors

Accreditation Board as a “contractor” is responsible for building,

designing and renovation of different infrastructures such as

residential building construction, industrial construction, commercial

building construction, institutional construction and heavy civil

construction. Its growth continues as many investors expand their

business in the country which can be seen in the total Gross Domestic

Product share of the said industry as presented in this study.

This study determined the status of the construction business,

distinctive marketing mix practices and their outcomes. The results of

the study were used as the bases in formulating a marketing model

which is applicable to the construction business. The respondents

were the large contractors of Legazpi City. According to Philippine

Contractors Accreditation Board there are 44 registered construction

businesses in Legazpi which are composed of 4- AAA Contractors, 2-

AA Contractors, 7 A- Contractors, 10 B – Contractors, 3 – C Contractors

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and 17 D- Contractors. Category AAA is the highest category given by

PCAB which means that their stockholder’s equity ranges from Php

90,000,000.00 and above. AA contractors Php 45,000,000.00, A

Contractors Php 9,000,000.00, B Contractors Php 4,500,000.00, C

Contractors Php 3,000,000.00 and lastly D contractors which has Php

900,000.00 worth of capitalization.

This study focused on the marketing mix aspect wherein the

researcher aimed to know the marketing practices in terms of the 4

marketing mix namely: product, place, price and promotion.

Frequency count, percentage and ranking were the statistical

treatment used to interpret the data. Specifically, the study sought

answers to the following questions:

1. What is the status of the construction business in terms of:

a. Product,

b. Place,

c. Price, and

d. Promotion?

2. What distinctive practices were undertaken by the construction

business along the 4 P’s?

3. What were the outcomes of these distinctive practices along the

4P’s?

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4. What marketing model can be formulated for the construction

business?

The study is anchored on the theory of marketing mix (4 P’s).

The term marketing mix was given by Neil Borden. This is one of the

marketing strategies commonly used by business managers to

promote products or services and to capture target market. The

practices of the construction business relating to product, place, price

and promotion and formulation of marketing model are the study’s

main conceptual framework. The analytical framework discusses the

status, distinctive practices and outcomes relating to the 4P’s. The

inputs provided by the respondents guided the researcher in

formulating the acceptable marketing model for construction business.

The study used the qualitative and quantitative methods on data

gathering to evaluate the status, practices and outcomes of the

construction business in Legazpi City.

Based on the results culled from the data gathered by the

researcher, the following findings are enumerated:

1. The status of construction business in Legazpi City provided

construction services such as general engineering, general

building and specialty works. Most of the contractors operated in

Region V and nationwide as well. In terms of price, most of the

construction business in Legazpi City could acquire projects up

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to 100 million pesos and the least was 15 million pesos; Radio,

television, magazines, brochures, newspapers, social media and

Internet were used in promoting their business.

2. The study found the following as the common construction

business practices: In terms of product/services, they ensure

compliance with the requirement specified in the contract,

monitoring of ongoing projects, finishing the contract on time,

usage of high standard quality of materials and usage of modern

heavy equipment. The following practices were least applied in

construction business: innovation in services and information

technology utilization. It was revealed in the study that

promotion of zero accident in all areas of operation and multisite

locations to cater projects in different locations at the same time

was commonly practiced in construction business, however,

formulation and implementation of the procedures for efficient

product/ services handling was only applied at times. As to

place, establishing of branches/ offices in areas where services

are regularly in demand, especially in areas of high

concentration of construction activities, was rarely practiced in

construction business. In terms of price, analysing the

competitor’s price and determining the method or methods used

to set prices ranked first as frequently practiced in construction

business. Formulating pricing policies ranked second. However,

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a company negotiating with the agency/ government officials in

order to acquire projects in exchange for a specific amount as

part of incentives in giving / awarding a contract was rarely

practiced in construction business as only one out of 11

respondents agreed to this practice. Other practices relating to

bid rigging were low in Legazpi City. Based on the result of the

study, the level of promotion in construction business was low.

However, commonly practiced by construction business was

setting of promotional objectives. Rarely did they practice

planning and implementing sales and promotion such as free

sample coupons etc. and providing clients with services such as

hotel accommodation, travel expenses etc.

3. The perceived outcomes of the distinctive practices relating to

product/ services are as follows: Ranked first was high quality

of standards and achievement of the desired results with nine

out of 11 respondents who agreed to the effect of their

distinctive practices. Second was service efficiency and

assurance of quality of work and timeliness. Third was

productivity at the job site. The following are the best outcomes

relating to place as experienced by the respondents according

to their practices: good relationship and fast transaction with

suppliers, building and maintaining the image of the firm,

reduced accidents in areas of operation, cost saving, easy

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transport / distribution of equipment and materials, assurance of

smooth peaceful operation in the area, reduced theft and

assurance of safety to the workers and product efficiency. The

best outcomes perceived by the respondents relating to price

are as follows: achievement of cost savings results in better

prices and performance and customer loyalty. As to promotion,

the best outcome perceived by the respondents was the greater

chance of acquiring contracts/ projects. This confirms, based on

their distinctive practices, that construction business used to set

promotional objectives and provide other services to their

clients such as hotel accommodation, free travel expenses,

entertainment etc.

4. The researcher formulated a marketing model for construction

business in Legazpi City. It aims to help the construction

business in terms of marketing aspect. It is necessary to take

note of market data which include information from competitors,

considering the strengths and weaknesses of the company,

analyzing competitor’s pricing strategy. Gathering all the

market data will help the construction business in coming up

with a competitive bid price. After gathering the market data

the business becomes ready in providing quality service by

usage of information technology, innovation in services, high

quality materials, modern heavy equipment, high experienced

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employees, strict security, and promotion of zero accident in all

areas of operation. After providing quality service it is important

for a construction business in Legazpi City to promote its

company since promotion is low among the respondents. This

will help them in promoting and building the company’s image.

Based on the findings of the study the following conclusions

were derived:

1. The construction business in Legazpi City is characterized by its

competitiveness in rendering services in general engineering,

general building and specialty works. The services are extended

not only in Bicol Region but also in any part of the Philippines.

With the high allowable range for contract cost, opportunities for

large contractors to compete for big projects are presumptive.

Promotional aspect still needs to be strengthened to be able to

open new opportunities not only for public projects but also for

private and international projects.

2. The distinctive practices of the construction business for large

contractors in Legazpi City focus on providing clients with high

quality service, efficient performance, safety of employees and

competitive pricing.

3. As to the outcomes, the practices result to a positive one, which

resulted to attainment of high quality service, productiveness,

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timeliness, good relationship with their stakeholders, good

company image, efficiency, safety to employees, cost saving and

customer loyalty.

4. A proposed marketing model for construction business is

designed in order to improve productivity and to make the said

industry more competitive not only for local projects but

international markets as well.

Recommendations for the marketing aspect of construction

business are summarized as follows:

1. Since large contractors in Legazpi City focus more on

government projects, it is recommended that they must be

open to other opportunities such as developing Legazpi City by

building medium - rise condos, hotels and other forms of

development. This will make the construction business more

attractive to stakeholders.

2. To keep pace with the world of modern technology, construction

business in Legazpi City must also adopt utilization of

information technology and innovation in services. Adaptation

of the idea will open new market opportunities for the

construction business.

3. It is also recommended that contractors must establish offices

in areas where services are regularly in demand especially in

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areas of high concentration of construction activities as this is a

good strategy and may increase the number of acquisitions of

projects as they build their company’s image in different

locations.

4. Competitive building in construction business must also be

practiced by the contractors in Legazpi to give way to the right

and fair process of acquiring projects.

5. Promotion must also be adopted in construction business in

Legazpi City as its level of practice is very low.

6. The construction business in Legazpi City should observe the

benefits of adopting effective marketing models. The

formulated marketing model by the researcher could be

adopted to improve the productivity and quality of their

services. This will also aid the construction business’

sustainability so they can compete not only locally but also in

international construction market.

As areas for further study, a study on Bid Rigging in Construction

Industry, and also a study on Information Technology Usage Impacts

on Construction Business. A SWOT Analysis of the Construction

Business in Legazpi City is a new and worthy ground for research.

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TABLE OF CONTENTS

Page

TITLE PAGE i

RECOMMENDATION FOR ORAL EXAMINATION ii

RESULT OF THE ORAL EXAMINATION iii

APPROVAL BY THE PANEL OF EXAMINERS iv

ACKNOWLEDGMENT v

EDITOR’S CERTIFICATTION vi

ABSTRACT vii

TABLE OF CONTENTS xvi

LIST OF FIGURES

LIST OF TABLES

xviii

xix

CHAPTER

I THE PROBLEM AND ITS SETTING

xvi

Introduction 1

Statement of the Problem 4

Scope and Limitation 5

Significance of the Study 6

II THEORETICAL BACKGROUND

Review of Related Literature and Studies 8

Synthesis of the State-of-the-Art Gap Bridged by the Study

32 34

Theoretical Framework 34

Conceptual Framework 37

Analytical Framework Definition of Terms

38 40

III RESEARCH DESIGN AND METHODOLOGY

Research Design Sources of Data

43 43

Respondents of the Study Research Instrument Validation of the Research Instrument Data Gathering Procedures Statistical Tools

44 45 45 46 47

IV MARKETING PRACTICES OF CONSTRUCTION BUSINESS IN LEGAZPI CITY Status of Construction Business 48

Product/Services 50Place 51Price

Promotion 54 56

Distinctive Practices undertaken by Construction Business

58

xvii

Outcome of the Distinctive Practices 65

Marketing Model Formulated for Construction Business in Legazpi City

70

V SUMMARY, FINDINGS, CONCLUSIONS AND RECOMMENDATIONS Summary 73

Findings 73

Conclusions 77

Recommendations 78

Areas for Further Study 80

REFERENCE LIST 81

APPENDICES 85

CURRICULUM VITAE 106

LIST OF FIGURES

Figure Page

1

2

Theoretical Framework Model

Conceptual Framework Model

35

37

3 Analytical Framework Model 39

xviii

xix

LIST OF TABLES

TablePage

1 Respondents of the Study 44

2 Products/Services 49

3 Area of Operation 52

4 Allowable Range for Contract Cost 54

5 Promotion 57

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