Environmental Analysis
EXERCISE: EXTERNAL ENVIRONMENT ANALYSIS
Objective
To provide the experience of performing an analysis of a company’s external environment.
Sample Responses to Questions
1. Laws and Regulations. What are some key laws and regulations under which this company and the music industry must operate?
Key laws and regulations in the music industry might include copyright regulations, contracts, royalty practices in both retail sales and radio broadcasting, anti-trust, advertising regulations, foreign-trade practices.
2. Economy. How does the state of the economy influence the sales of this company’s products?
The state of the economy has traditionally had less of an immediate impact on the music industry than on some others. CDs and on-line music sales tend to be low-ticket items, and are less likely to be affected too adversely even by a recession. A key driver of sales is the presence or absence of popular new talent.
3. Technology. What new technologies strongly affect the company you have selected?
New technologies permitting on-line music sales, like iTunes, and recording and playing devices like iPod and upcoming cellphone technologies, increase the easy availability and sale of music products. They also allow music companies to avoid the expense of manufacturing and distributing CDs, and sharing sales revenues with retailers. A major downside is that new technologies permit easy copying of music without payment. Technology that can provide copyright protection (e.g., preventing unauthorized copying) may be one solution to this problem.
4. Demographics. What changes in the population might affect the company’s customer base?
Demographics affecting the company might include changes in the population of young people who are the primary purchasers of pop music (conversely, the gradual decrease in classical music sales as the demographic for that segment ages), and the growing importance of the Hispanic market.
Objective
To provide the experience of performing an analysis of a company’s external environment.
Sample Responses to Questions
1. Laws and Regulations. What are some key laws and regulations under which this company and the music industry must operate?
Key laws and regulations in the music industry might include copyright regulations, contracts, royalty practices in both retail sales and radio broadcasting, anti-trust, advertising regulations, foreign-trade practices.
2. Economy. How does the state of the economy influence the sales of this company’s products?
The state of the economy has traditionally had less of an immediate impact on the music industry than on some others. CDs and on-line music sales tend to be low-ticket items, and are less likely to be affected too adversely even by a recession. A key driver of sales is the presence or absence of popular new talent.
3. Technology. What new technologies strongly affect the company you have selected?
New technologies permitting on-line music sales, like iTunes, and recording and playing devices like iPod and upcoming cellphone technologies, increase the easy availability and sale of music products. They also allow music companies to avoid the expense of manufacturing and distributing CDs, and sharing sales revenues with retailers. A major downside is that new technologies permit easy copying of music without payment. Technology that can provide copyright protection (e.g., preventing unauthorized copying) may be one solution to this problem.
4. Demographics. What changes in the population might affect the company’s customer base?
Demographics affecting the company might include changes in the population of young people who are the primary purchasers of pop music (conversely, the gradual decrease in classical music sales as the demographic for that segment ages), and the growing importance of the Hispanic market.