INTRODUCTION TO BUSINESS

MANAGEMENT
2022-23 ACADEMIC YEAR

PRACTICE 3: ENVIRONMENT
(GROUP ACTIVITY)
 Group practice. ENVIRONMENT.

OBJECTIVES:
This practice aims to

 Become familiar with the definition of the sector as a prior step to carrying out
an analysis of the specific or competitive environment.
 Analyse the business environment for the identification of strategic
environmental factors.
 Assess the impact of strategic environmental factors for a specific activity.
 Apply different concepts related to environmental analysis.

Zoom, a success story in the global economy

The recent global COVID-19 pandemic has forced many organizations to resort to
remote video programs massively. According to a study carried out in 2020 by BCC,
70% of the managers surveyed are more open to flexible remote work models than
before the pandemic and hybrid work models are consolidating as the companies
surveyed anticipate that more than a third of employees work remotely after the
pandemic. In addition, to mitigate the effects of the recent energy crisis resulting
from the conflict in Ukraine, governments are firmly committed to regulations
and policies that explicitly support remote working, to reduce the environmental
impact caused by commuting to the workplace and reduce the cost of travel.
(Political Factor)

This situation has caused companies to demand tools that support staff in their
functions and help them maintain contact with their colleagues. The market for video
chat and collaboration apps has skyrocketed in recent months. Downloads of business
apps, such as Microsoft Teams and Zoom, grew the most across all categories on
major app stores like iOS and Google Play. In fact, the global video conferencing
software industry is forecast to grow from $6.87 billion in 2022 to $14.58 billion in 2029,
with an average annual growth rate of 11.3% over this period. This growth is expected
to occur throughout the world, except in five countries (North Korea, Iran, Cuba, Syria,
and the Crimea region), due to the limitations imposed by their governments on the use
of this type of app.

The technological advances that have taken place in recent years have
contributed to improving the capacity of the servers, which reduces their
maintenance costs and improves the quality of the service offered to the end
customer (technological factor). In addition, the general population is increasingly
familiar with the use of videoconferencing programs and collaborative applications to
maintain their social links. In fact, video chat programs were, for a large part of the
population, the only way to maintain contact with friends and family during the COVID-
19 lockdown. The fast development of artificial intelligence together with the
arrival of the 5G mobile connection provided stable and fast Internet connections
almost anywhere in the territory (technological factor).

The offer in the sector is wide and the competition is getting tougher. Zoom,
Google Meet, and Microsoft Teams lead the industry, with 48.7%, 21.8%, and
14.5% market share, respectively. Each of these companies has been constantly
monitoring their competitors and releasing updates almost weekly, to gain an
edge over the competition (specific environment – competitors). The good news
for users is that this ongoing competition has led to improvements in security,
new features, and offering some services for free. Of course, Zoom, Google and
Microsoft are not the only companies competing in the sector, but they are the
main ones. Other well-established companies have been offering video conferencing
software for years, with plenty of equally varied and useful features. Each of these
services has its own list of pros and cons. Therefore, the needs of each client will
determine which of these services will be most appropriate in each case.

Currently, Zoom has a leading position among the different video conferencing
alternatives, surpassing other apps that previously held the industry's leadership, such
as Skype. As seen in Figure 1, the company grew exponentially from the COVID-19
pandemic. This competitive advantage of Zoom over its competitors can be
explained by several factors. Zoom was the first software to offer customizable
backgrounds, which allow users to virtually appear in a more professional or fun
environment. This feature may not seem particularly noteworthy, but it was
important enough that Microsoft recently added it to its own platform. In
addition, Zoom stands out when it comes to sharing the computer screen
(Reasons why it is successful). It not only allows you to share any open application
on your PC but also offers a digital whiteboard, where you can annotate together. It
also offers a multitude of additional functions, such as the possibility of carrying out
surveys in real-time, jointly managing participation permissions in the room, or easily
creating 'breakout rooms' (work rooms for participants to interact in smaller groups). On
the other hand, the quality of the Zoom video streaming service is superior to
alternatives like Microsoft Teams or Google Meet.

Despite the good prospects, the future of the sector is not without challenges.
On the one hand, the increase in the price of energy has increased the cost of
software development and maintenance. The lack of qualified personnel (e.g.,
programmers), and rising inflation have also pushed up development costs.
Cloud computing providers, essential to the sector, have also increased their
costs vastly in recent months. On the other hand, many companies have returned to
a face-to-face (or semi-face-to-face) situation, so the potential demand for remote
conferencing programs may be reduced. The reduction in transport prices (e.g., train
vouchers) could favour a return to face-to-face attendance. Finally, the prices of
telephone calls have fallen drastically in recent times, so some organizations are
returning to using the telephone to coordinate their daily activities (economic
factor).
Sources:

https://www.fortunebusinessinsights.com/industry-reports/video-conferencing-market-
100293
https://www.dataart.com/blog/the-web-conferencing-boom-covid-19-s-effect-on-the-
video-call-market
https://www.zonamovilidad.es/impacto-videoconferenciasl-covid-zoom
https://support.zoom.us/hc/es
https://www.multioferta.es/noticias/conexion-5g/conexion-5g-2021-novedades-360.html
https://www.elmundo.es/tecnologia/2020/04/29/5ea91baefc6c8336798b4648.html
https://www.digitalinformationworld.com/2021/04/top-video-call-platform-by-market-
share.html

Figure 1: Zoom profit margin evolution (2019-2022)

 Work to be done
Explain the Zoom sector.

It is in the technology sector of video conferencing

1. Give a minimum of two examples of each of the following groups of

factors of the general environment, preferably present in the text, and
justify their relevance/influence in this case:

a) Political factor.
b) Economic factor.
c) Socio-cultural factor.
d) Technological factor.
e) Ecological factor.
f) Legal Factor.

2. Answer the following questions related to the competitive environment.

a) Threats of substitute products. List several types/categories of

products/services that can be substitutes for video conferencing
software (at least 2).

b) Barriers to entry. List a minimum of three barriers to entry. Assess

and rate them according to their importance.

c) Degree of rivalry among competitors. Assess the degree of

concentration and its competitive consequence.

d) Bargaining power of buyers. List a minimum of three types or

categories of customers in the industry. Rank them according to their
bargaining power.

e) Bargaining power of suppliers. List a minimum of three types or

categories of suppliers in the industry. Rank them according to their
bargaining power.

3. Rate the type of environment on the Stable-Turbulent scale and justify

your answer.
 4. Identify the strategic factors in Zoom's environment and assess their
potential impact (opportunities, threats). To do so, list and describe the
main factors in the environment by focusing on the 10 most important
factors from the general environment and/or from the competitive
environment.

Note: Answer using the template on the following page and submit the document in the
corresponding Moodle task.
Group practice template: Environment.
Group: Team members:

1. Explain the Zoom sector.

2. Give a minimum of two examples of each of the following groups of

factors of the general environment, preferably present in the text,
and justify their relevance/influence in this case:

FACTOR RELEVANCE THREAT/ OPPORTUNITY

a) Political factor.

b) Economic factor.

c) Socio-cultural
factor.

d) Technological
factor.

e) Ecological factor.

f) Legal Factor

3. Answer the following questions related to the competitive

environment.
 a) Threats of substitute products. List several types/categories
of products/services that can be substitutes for video
conferencing software (at least 2).

b) Barriers to entry. List a minimum of three barriers to entry.

Assess and rate them according to their importance.

c) Degree of rivalry among competitors. Assess the degree of

concentration and its competitive consequence.

d) Bargaining power of buyers. List a minimum of three types or

categories of customers in the industry. Rank them according to
their bargaining power.

e) Bargaining power of suppliers. List a minimum of three types

or categories of suppliers in the industry. Rank them according
to their bargaining power.

4. Rate the type of environment on the Stable-Turbulent scale and

justify your answer.
 Type of environment (justify your answer)

5. a) Identify strategic factors in your environment and assess their

potential impact.

b) Which of these factors present a higher uncertainty degree

regarding their future evolution?