American University

MBA, Strategic Planning BAM 658

“2BI”

External analysis

Student(s): Professor:

Armin Suljkanović Muamer Bezdrob

Sandra Malokas

Edin Čubro

Mladenko Vuković
2BI belongs to IT sector, IT services industry, market of maintenance, rent and consulting of IT.

2BI offer basic solutions and belongs to strategic group with all three business lines.

Company's mission and vision

Company’s vision: We want to be a company that continually learns, adapts to customer needs and
market demands. Our vision is a company that operates on a global market based in Montenegro,
which will have a strong social responsibility, and will respect moral and business standards of living.
In the end we want the IT infrastructure in Montenegro is among the leaders in the region, to the small
and medium enterprises as well as large companies. Rental Services provides features that our clients
use the experience, technology and resources 2BI companies to successfully implement their projects.
A list of our products is increasing day by day and they are all oriented exclusively to customers and
market needs.

Company’s mission: Our mission is to improve the quality of IT services in Montenegro, and to offer
domestic and foreign companies services that will significantly improve their operations, reduce costs
and increase quality. Through the improvement of the IT systems we want to help in the preservation
of nature CG in a way that will reduce the consumption of electricity, reduce the use of paper, etc.
Also, the quality of IT systems, companies in Montenegro will be able to accelerate their business,
reduce the time it takes to design, develop and market products, all with the aim to become
competitive in the region.

Company’s strategy: We want to accomplish our vision and mission through continuous training of
our staff, and continuous investments in the development of IT products. Our company is driven by
business requirements, and all information technologies are placed at the service of business
improvements. Through renting IT service, we want to make our customers more efficient, with
reduced operational risk, reduced costs, and at the same time increased quality of delivered services.

Smart energy
"2BI" provides its clients with professional support in the field of thermotechnics in Montenegro. We
offer design, installation, maintenance and servicing services for heating, air conditioning and
ventilation systems. Our goal is to provide clients with quality solutions for different types of objects:
apartment, house, business premises, building or factory hall. We are ready to talk to the customer
about its needs, establish a suitable solution and access the design and installation of the selected
heating, air conditioning, ventilation or electricity production system.

Central and floor heating

Heat is transported through the pipeline to heating bodies: radiators, fan coils, floor heating and drier
taps. The energy source of this kind of system can be boilers (electricity, solid fuel, liquid fuel, gas or
pellet), heat pumps and solar panels. The combination of these solutions also enables the heating of
sanitary water.
Air conditioning and ventilation system

Heating and cooling of the space can be achieved in addition to the application of classical air
conditioners or freon systems (mono and multi-split systems, VRF systems) and heat pumps and
chambers whose ultimate indoor units are fan coil systems. Ventilation through natural or mechanical
ventilation improves the air quality in the building.
A heat pump as a source of energy
The heat pump emits heat energy from an external source of energy (air, ground or ground), shifts to
an object that is heated or cooled. The heat pumps use up to 3/4 of the required energy for free from
the environment in which we live. Thus, for the consumed 1 kWh of electricity at output, the total
heat output is 3-4 kWh.
Sun as a source of energy (solar collectors and solar panels)

Solar collectors produce heat for central heating or sanitary water heating, while photovoltaic solar
panels are used for the production of electricity for the purpose of the facility or for the sale of
electrical distribution.
Water as a source of energy (Hydrogen generators)

Small hydroelectric plants are plants where potential water energy turns into electrical. Unlike large,
small hydropower plants do not have a detrimental impact on the environment.
Wind as a Source of Energy (Wind Generators)

Wind power wind generators are transformed into electrical energy that can be used for building
purposes or for selling an electrodistributive grid.

External analysis results - industry analysis, environmental analysis, opportunities & threats

In order to determine whether this company can be profitable, based on other businesses in the
industry, we use Porter's five forces model and look at five specific factors.

Industry analysis „2BI“ - Porter's competitive forces model

Competitive force Elements Rating

Entry barriers Low economies of scale (LB) High/Low

High R&D costs (HB) entry barrier
Low capital requirements (LB)
Narrow range of installed solutions (HB)
Determinants of Supplier (Relatively) Low number of suppliers (LP) Low/high
Power High switching costs (HP) bargaining
(Relatively) Differentiated products (HP) power
No entrance into customers industry (LP)
Determinants of Buyer Power Non-concentrated buyers (LP) High/low
Small number of substitute products (LP) bargaining
Price sensitivity (HP) power
Buying from several suppliers (HP)
Determinants of Substitution Practically there is no substitute for IT (LT) Low
Threat High switching cost (LT) substitution
Customer reluctante to substituting (LT) threat
Rivalry Determinants Relatively high number of competitors (LR) High rivalry/
Stable industry growth (HR) Attractive
High number of differentiated products(LR) industry
Low exit barriers (HR)

Entry Barriers:
The IT industry is relatively attractive to new customers due to the rapid growth and attractive
customer. At the same time, the industry is unattractive to newcomers because of the great benefits of
large companies' benefits, the substantial amount of capital needed for a new company and major
existing brands already in the industry. Every beginner in this industry can expect a strong reprisal
from existing players, which is the main reason why this industry is not too attractive. The best way
for a new participant in this area to be successful would be if he had a new idea for a product or
service; The lack of differentiation in the industry is one thing the newbie could use. All in all, the IT
industry is not overly attractive, but it is enough routine and profitable that many people are trying to
get into it. Many new companies are trying to enter this industry, but rarely provide established names
with the right track for their money.

Determinants of Supplier Power:

Although companies such as Intel and Samsung are part of the IT industry, we can classify these
companies as suppliers to IT companies for the purpose of this project. Investments in this industry
are quite standard, and differences are speed, memory, etc. While inputs are standard, it is difficult for
new companies to enter this industry as a supplier due to existing relationships between current
suppliers and IT companies. IT companies are very important for suppliers because they are their
primary customers, but I believe that suppliers are even more important for customers (IT companies).
Suppliers are not "locked" in dealing with certain companies (except contracts) but most of the
relationship between companies and suppliers in this industry is well established and these suppliers
will most likely not want to end their business relationships in the first place.

Determinants of Substitution Threat:

There is no major risk of replacing the IT industry, mainly because there is no real substitute. We live
in the digital age, so we rely on IT to launch lives and businesses. An example of a substitute would
be a scientific calculator, but comparing these two prostheses. Nothing can replace everything that our
computers do for society.

Determinants of Buyer Power:

In an industry that is massive as information technology, the term "buyers" refers to virtually
everything in the world. Although there are technologically downstream countries, most locations
around the world have access to computers and the Internet, etc. With regard to a large number of
customers, it is safe to say that customers are controlling the IT industry. There are so many choices
for the buyer (many companies in this industry) and there are minimal costs of switching, so buyers
are usually not "locked" in one company. Likewise, since IT sales are coming from companies that
make large purchases, these companies are powerful and important for IT companies (which often
provide incentives to these companies to make sure they use their products over competitors).
Customers are price-sensitive, but IT products and services are essential for business success, so they
are willing to spend a lot of money to get a good product. Usually there is a lot of interaction between
customers and IT companies due to the need for product-use training, constant technology upgrades,
and plenty of advertising.

There are many buyers. Most of the buyers are companies but corporates or governments, ministry,
usually which can bargain for lower prices.

Rivalry Determinants:

The IT industry is known for its fast growth, efficiency and competitiveness. The main reason why
many new players are not successful are intense rivalry between existing players. Large companies in
this industry benefit from economies of scale, which is worthwhile and something that does not really
try to lose. The products in this industry are well-marked and tend to have a strong customer base. The
market share is unevenly distributed among the existing players, who are often in different legal and
advertising battles with each other. Industry is very large but matured.
The IT industry is growing and business is very attractive in this area because the number of
competitors is great. There are many IT companies that can provide similar services and there are in
position to give 2BI company a competitive edge. These companies will compete with 2BI on price,
quality, differentiation and key relationships with our customers.

S2B is a leading company in Montenegro for implementation of corporate information systems and
consulting in the preparation thereof.

Macroenvironment analysis – PEST analysis

Presidential elections are very important in the IT industry. If the cuts are allowed in budget, then
investment in the technology sector will decline. Government should realize how important the IT
Industry is to the sustainable growth of the country. IT employees ranked mobile computing as their
biggest future opportunity. IT industry is far too powerful and growing too rapidly.

Political Economical Social Technological

 Poor and  Low GDP  Obsolete  Poor

unenforceable  Lack of investments education system infrastructure
legislation  Poverty  Perspective „IT is  Slow technology
 Proper legal  Government cost rather than adoption on
framework oriented IT sector investment” business level
 Tax polices  Economy strongly  Sufficient IT labor
 Stability obtained dependent on but unemployed
by entering Foreign investment
NATO
Montenegro is a country that is increasingly ranked on the world rankings every year as a top
destination and a tax paradise for foreign investment.

Crna Gora Hrvatska %

• VAT 19% 25% + 31,58%
• Profit tax 9% 20% +122,22%
• Income tax 9% 40% +344,44%

More and more businessmen, relocate their business for lower taxes. Montenegro is the only country
that uses the euro and is not in the EU and is not in the EU tax information system.

If 2BI company wants to doing business worldwide, then it needs to follow all the different laws and
regulations. Political stability in those countries, but also in the home country is very important.
Coordinated cooperation of relevant government and educational institutions, local governments, IT
companies and large users of IT technology is imposed as a necessity and the only way for the
survival of the IT sector in Montenegro. In Montenegro there is a strong non-governmental sector,
which needs to be developed in the future, as it is a powerful correctional power. In Montenegro,
corruption is a systemic phenomenon. Organized crime uses corruptive activities to try to create
passage to decision-making centers to gain political and economic influence.

Achieve an increase of 50% of newly registered ICT companies by 2014 and an increase of 100% by
2016. The Strategy states that the plan is to: • Increase the participation of ICT sector in GDP to
50% • Increasing labor force in the ICT sector for 50%.

It is clear that not many companies from the Montenegrin IT sector can provide a quality response to
modern IT trend requirements and offer implementation and support services such as: cloud, mobile
convergence, information safety, internet trade, Big Data, etc. The currently small market potential,
insufficient HR and financial capacities of IT companies, the level of development, the availability
and use of IT services in Montenegro, the availability of telecommunications infrastructure and
modest IT education of the citizens are only some of the factors of stagnation in the IT sector
development. Montenegrin IT companies fight for liquidity on a daily basis and the investments in
development are minimal.

The World Economic Forum, one of the relevant institutions which does situation analysis on global
and specific markets, has placed Montenegro on 52th place out of 144 countries in its new report on
ICT competitiveness. This is for two places lower in comparison to the previous report. Although
being ranked 52th out of 144 countries is a quite satisfactory rating for developing countries, the
decreasing trend is worrying. In its report for 2013, Montenegro took 48th place. In the cited report
Montenegro achieved the worst result in price availability of services – 91rd place out of 144.

Competitive advantage lies in the local power – knowledge, relations, motivation, difference which
may not be easily copied by the competitors, but which may be developed through clusters. With the
EU cluster policy it is desired to strengthen the current regional advantages as well as competitiveness
and innovations. The Chamber of Economy has recognized the clusters as new innovation form, tool
for increasing competitive and growing economy. The cluster membership is directly connected with
the increase of innovation, because definition of the clusters provides a definition for long-term
development strategy.

Synergy effect of the cluster and its potential for transformation of knowledge and ideas into
commercial products has lead to the cooperation of the CEM and the First IT cluster in Montenegro in
organizing the performance in INFOFEST and promotion of ITC sector opportunities in Montenegro.
For small IT enterprises in Montenegro the cluster is a tool for increasing the business efficiency and
flexibility of development – form of activity, not just the description of economic activity. The
establishment and operation of the first IT cluster point at the effects of such cooperation, visible
through sharing knowledge and opportunities of contracting greater volume activities for which the
individual would not be able to compete and negotiate, lower development costs of new products and
services, favorable loans and easier access to funds EU.

Montenegrin IT sector, of course, shares the destiny of the overall Montenegrin economy. The years
of expansions, caused mainly by the exquisite growth of direct foreign investments, were followed by
the years of crisis. Basically, the causes of global crisis are ambivalent. However, in Montenegro they
are based on the drastic fall of direct foreign investments as one of the basic generators of
development. Due to a high level of dependency on direct foreign investments, following the period
of exquisite economic growth, Montenegrin economy proved to be highly vulnerable.

The research on the use of IT in companies was carried out on a representative sample of 600
companies in the territory of Montenegro. The target group are companies with 10 or more employees
who were interviewed by telephone in the period from 1 to 15 April 2015. The aim of the research is
to obtain information on the representation and use of information-communication technologies in
companies from certain sectors according to the classification of NACE Rev2: administrative and
auxiliary service activities; construction equipment; Information and communication; Real estate
business; Manufacturing; Supply of electricity, gas, steam and air conditioning, water, wastewater
management, waste disposal process control and similar activities; Professional, scientific and
technical activities; Transport and storage; Wholesale and retail trade, repair of motor vehicles and
motorcycles; Accommodation and nutrition services.

In Montenegro, 94.3% of respondents said they were using computers in their business. All other
information in this release applies only to companies that use their computers in their business in
2015. Of the companies that use the computer in their business, 38.5% responded that it employs IT
professionals who have the ability to develop, maintain, manage IT systems and applications, which
represents a growth of 0.8% over 2014.
When it comes to the Internet, research has shown that 99.0% of companies using computers have
Internet access. Of the companies that have access to the Internet, 74.3% responded to having an
internet presentation, which is 1.0% more than year before. According to the results of research 69.0%
of enterprises (who use computers in their business) allow their employees to access remote electronic
mail, documents or applications of companies.
The IT scene in Montenegro is unused. The Montenegrin IT market is partly covered by regional
firms because the state does not have companies that are able to parry them well. There are no major
and serious companies in Montenegro that are export-oriented, and are therefore competitive on the
regional and global markets.
Montenegro is bypassed because it has the smallest number of IT engineers in terms of the number of
people employed in the labor market, as well as the smallest number of IT development companies in
comparison to the region, especially in relation to Eastern Europe. There is no guide, analysis,
research or material that promotes the IT industry of Montenegro, while in the region and Eastern
Europe we can find a lot of this plus a number of serious fairs, conferences, IT associations, start-ups
and communities, investment funds, Business incubator, co-working space, IT professional practices
and competitions, IT institutes, web sites and various other organizations that promote and develop
the IT industry in their countries.

Montenegro is not sufficiently present economically, institutionally and promotionally, in reality it

means that it is very unlikely that any serious investor or firm will decide to invest or outsource its IT
development to this country because it would be a risky investment.

The Montenegrin market is very small, and most companies work solely for the purpose of realizing
their own interests, not seeing the benefits of pooling and working for common, bigger goals. One of
the major problems is that there are a small number of companies developing software. A large
number of them are implementing the deployment of other software that is usually regional or
international, which means that we also export money in that part.

Opportunities and Threats

Opportunities

IT sector is expanding, with many future opportunities for success

Local government wants to encourage local businesses
Competitors may be slow to adopt new technologies
The growth of IT service turnover, primarily because this factor speaks of the growing need for expert
knowledge and increasing their availability on the local market. The growth in IT service turnover, if
continued, in convergence with raising the level of IT education can be a powerful development
generator. Some of the transition countries have recognized and exploited this developmental
opportunity.

There are numerous opportunities and areas in which entrepreneurs can use IT to improve the
economy. One of these areas is the agricultural sector. IT companies have the opportunity to work on
introducing IT solutions in agriculture to make business easier for farmers. Export and own
development of serious software solutions. In the forthcoming period, it is predicted that there will
continue to be a trend in outsourcing of IT development. Montenegro's greatest advantage over all of
the above mentioned countries, especially the countries of the region and Eastern Europe, is that this
country is significantly more price-sensitive and there is currently an overwhelming number of
academics who have completed technical faculties and who, with adequate education, can compete on
Regional and global market. This is also confirmed by several smaller foreign companies that have
their representative office in Montenegro. Estimates are that by 2017 there are over 900,000 IT
experts in the European Union, while the number in the Americas, Canada, Australia and the
developed Middle East countries is significantly higher. This is a great opportunity for Montenegro's
economy. It would be enough if only in Europe Montenegro used a part of a promise of current IT
demands and could easily have access to hundreds of IT professionals from foreign money.

Threats

A lack of institutionalized state assistance to the development of IT sector as a potential exporter of

services,
Still inadequately developed eGovernment services oriented towards citizens and business and lack of
benefits or stimulations for the development and export of products, as opposed to some other
economic sectors, are the biggest but not the only limiting factors of the IT sector development.
The Montenegrin IT sector is largely (84%) in local ownership, while only 14% of foreign companies
and 2% represent foreign companies.
The Ministry for Information Society and Telecommunications faces budget cuts and the lack of
funds for the implementation.
The state, as the biggest IT client, has been reducing the level of public procurement in the IT area for
years, thus further aggravating the situation in the IT sector.
There is no guide, analysis, research or material that promotes the IT industry of Montenegro, while in
the region and Eastern Europe you can find a bunch of plus a number of serious trade fairs,
conferences, IT associations, start-ups and communities, investment funds, Business incubator, co-
working space, IT professional practices and competitions, IT institutes, web sites and various other
organizations that promote and develop the IT industry in their countries.
The domestic market is very small, and most companies work solely for the purpose of realizing their
own interests, not seeing the benefits of pooling and working for common, bigger goals. One of the
big problems is that this firm does not develop software. When implementing other software that is
typically regional or international, the company is exporting money.

In general, the ICT sector in Montenegro is well-developed and competitive on the regional level,
primarily thanks to the existence of strong telecommunications operators with foreign capital. The so-
called “C” part of the ICT sector is one of the drivers of Montenegrin economy with an annual income
of cca 300 million EUR. There is a notable disproportion between the level of development and the
income amount in comparison to IT sector, for which we may say that it is not on a satisfactory level
based on the general financial indicators and research results. The main characteristics of the IT sector
are: a very small number of employees (654 employees at 232 IT companies with recorded turnover at
transfer account in 2014), low financial and, consequently, development potentials of IT enterprises
and operations at a small and insufficiently developed IT market.
The factors such as:
• Stagnating IT market following the downfall (almost 30%) at the start of the economic crisis
2007/2008, inadequate level of IT literacy (according to the latest census almost half of Montenegrin
population is computer illiterate),
• a lack of institutionalized state assistance to the development of IT sector as a potential exporter of
services,
• still inadequately developed eGovernment services oriented towards citizens and business and
• lack of benefits or stimulations for the development and export of products, as opposed to some
other economic sectors, are the biggest but not the only limiting factors of the IT sector development.

Internal analysis results - organizational resources, distinctive competences, building blocks of

competitive advantage, strengths & weaknesses

Strengths

2BI company is able to respond very quickly

Their lead consultant has a strong reputation in the market
2BI has low overheads, so it can offer good value to customers
2BI engineers will do a free state-of-the-art project for the companies concerned.
2BI has a good reputation from renowned companies (UNDP, government of Montenegro, Ministry
of defense Montenegro, radio Free Europe, Carlsberg Montenegro doo, British Council, Luštica
Development ad, UNICEF, Prva banka Montenegro)
Today, the 2BI company in Montenegro maintains over 1,250 computers, over 100 network devices,
70 servers and all over 60 locations. They designed the network and server infrastructure of the largest
banks in Montenegro in a very successful and professional way. They maintain equipment such as
Cisco PIX firewalls, 2/3 layer switches and so on. They have linked IT systems to various companies
and all this in a secure way, so the company's operations are completely safe and at the same time
highly automated and simplified.
The company expanded the number of employees from 5 in 2006 to 50 in 2016, as well as the number
of clients from 5 in 2006 to 146 in 2016. 70% employess (35 from 50) are at least university
undergraduates (4-year university education).
have high quality computers and equipment available

Weaknesses

2BI has little market presence

Company has a small staff
2BI is very dependent on the Montenegro market.

Internal analysis:

 Resources, meaning the available resources which are enabling the company to develop and
deliver the software which it sets out to provide to its customers.
 Capabilities, that is the critical success factors which the company possesses and that give it a
competitive advantage.
 Quality, which is quite clear as a term, referring to the quality of the products / services
provided by the company and to the quality of the internal organization of the company, such
as the quality of the business processes.
 Efficiency, meaning how efficient the company is having a solid structure where all different
departments, units and processes are properly organized and communicate well, in order to
have a smooth operation of the company.
 Customer responsiveness, which is not only referring to the obvious, that is how many
customers does a company have, but also to how extensive is the diversification of a
company’s products, what different price levels exist and how satisfied are those customers.
 Innovation, which is about the level of a company’s desire to invest in new technologies,
follow technological breakthroughs, keep up with the emerging business trends and in which
extend is part of the profits re-invest in research & development.

External analysis:

 Marketing / distribution in foreign countries

 Culture, which refers to certain restrictions or difficulties in communication that might arise
due to different languages and other cultural aspects.
 Trade / commerce law issues, which are sometimes different from country to country and
might cause problems when trying to enter new markets.
 EU regulations that might be rather complicated and restrictive in the standards of quality that
must be followed in order to market a software product in the EU
 Market size
 Currency conversion (to €)
 STRENGTH
- Abundant financial resources
- Well-known brand name
- Economies of scale
- Lower costs of raw materials or
processes
- Superior management talent
- Better marketing skills
- Good distribution skills
- Committed employees
OPPORTUNITIES
- Rapid market growth
- Rival companies are complacent
- Changing customer needs/tastes
- New uses for product discovered
- Economic boom
- Government deregulation
- Sales decline for a substitute product
- EU integration
- Participation in EU funds
- Introducing norms and standards of the
EU which ensure environment quality
- Using private-public partnershio
- Introducing new technologies and
application of innovation
- Improvement of energy efficiency
Industry life cycle analysis
It has several phases: Embryonic, growth, shakeout, mature and decline. We could say that IT
industry is in the mature phase for a very long time, and it's not imaginable that it reaches decline
phase. From time to time, it turns back to shakeout phase, where rivality is very strong, such we have
in recent time.
WEAKNESSES
- Limited financial resources
- Weak spending on R&D
- Very narrow product line
- Limited distribution
- Higher costs
- Out-of-date products/technology
- Weak market image
- Poor marketing skills
- Limited management skills
- Under-trained employees
THREATS
- Commodity price increase
- Competitive market
- Private label growth
- Entry of foreign competitors
- Introduction of new substitute products
- Product life cycle in decline
- Changing customer needs
- Rival companies adopt new strategies
- Increased government regulation
- Increased unemployment, increased
indebtedness and slowed down
economic development
- Unfavorable demographic trends
- Continued decreasing trend of the share
of investment in own assets
- Lack of investment in IT sector