( Ryka, INC.

: Lightweight Athletic Shoes for Women Business and Industry Analysis) Ryka is doing business of athletic shoes for women, which are made on the shape of a woman’s foot, and are designed and developed considering women’s unique fit needs. It is the only athletic footwear company, which is exclusively for women, by women, and now supporting women. Because a woman’s needs in a comfortable, attractive, high performance athletic shoes that are attractive, comfortable, and well suited for exercise and physical fitness programs are different from a man’s. Therefore, it places Ryka shoes among the highest rated in the industry. The athletic footwear industry was divided into various submarkets by end-use specialization. Ryka competed in only three segments: aerobic, walking, and cross-training shoes. Ryka had focused on performance rather than fashion because Poe believed that fashion-athletic footwear was susceptible to faddish trends and to ups and downs in the economy, whereas the demand for performance shoes was based on the ongoing need of women to protect their physical well-being. Ryka cut back on its product line and began to focus primarily on aerobic shoes and secondarily on walking shoes. Poe did not believe that Ryka had to become an industry giant to succeed. SWOT Analysis Strength: Poe’s image and profile were the most critical components in Ryka’s marketing strategy. Poe had successfully worked the female angle: she appealed to contemporary working women because, while being something of a celebrity, she came across as a down-to-earth woman who just happened to be a successful executive. Ryka had made a commitment to demonstrate social responsibility. It was “the first athletic shoe with a soul.” She believed that the foundation would appeal to Ryka customers who appreciated the idea that their buying power was helping less fortunate women. Supporters claimed that the reputation Ryka had garnered as an ethical company, one as concerned about social issues as about the bottom line, effectively appealed to socially concerned women consumers Ryka’s management believed that outsourcing its footwear products minimized company investment in fixed assets and lowered costs and business risk. Ryka’s outsourcing strategy of placing orders as needed with whichever contract manufacturers had the best price made it vulnerable to any unexpected difficulties in manufacturing or shipment. Ryka did not maintain large stockpiles of inventory to buffer any delays in deliveries from producers. Weakness: As a new entrant into the highly competitive athletic-footwear industry, an industry dominated by well-known giants with sales in the billions, the fledgling Ryka Corporation had had no choice but to rely on low budget, guerrilla-marketing tactics such as the Oprah show appearance. After that time, however, Ryka marketing turned to radio and glossy magazine advertising. Ryka print ads appeared regularly in City Sports, Shape, American Fitness, Elle, and IDEA Today, magazines that particularly targeted women 21 to 35, who cared seriously not just about how they looked, but about physical fitness.

Poe admitted to really knowing nothing about making athletic shoes when she cofounded Ryka. As key personnel, she would make consumer feel no confidence on the effectiveness of Ryka’s athletic shoes. However, it does not matter when the brand reputation forms. Opportunities: Despite the subdued growth characteristics of the overall industry, however, a number of segments were rapidly expanding because of high specialization, technological innovation, and image and fashion appeal. Currently, athletic footwear for women was the fastest growing segment of the athletic-footwear market. As there is lack of well designed athletic shoes for women, Ryka had developed a fitness shoe crafted specifically for women’s feet that incorporated a patented design for better shock absorption and durability. None of the other companies in the athletic-shoe industry could boast of having designed their shoe exclusively for the physical characteristics and needs of women; all other contenders had broader lines or different target markets. However, it was the UltraLite mid-sole, Ryka’s most significant and successful product advancement, that put Ryka on a par with or perhaps ahead of competitors in terms of product attributes. Ryka was considering a special new series for people with foot problems or back problems because an increasing number of podiatrists and chiropractors were recommending Ryka walking shoes to their patients. Ryka determined that the most effective way to reach the female aerobic niche was by promoting Ryka shoes to aerobics instructors. Threats: In the already crowded athletic-footwear industry, the various giant competitors such as Nike, Reebok were continually jockeying for a better market position and a competitive edge. It makes the competition even more vigorous and keen for new entrants and others second-tier athletic shoes. For financial problem, potential investors questioned her ability to compete with industry leaders such as Nike and Reebok, given that she had no money and no retail experience. They turned down her requests for loans. (Financial Problem and Market Competition) The $11-billion athletic-footwear industry was highly competitive. Recommendations: I would suggest Ryka designing professional athletic apparel that can fit for any fitness activity. The concepts of apparel merge versatility, style and function with lightweight technology and thoughtful construction to provide maximum performance and comfort for a better fit and a better workout. It thus generates synergy effect for both products of athletic shoes and athletic apparel. The peripheral business industry can generate more revenue for Ryka’s original business. It can enhance and strengthen its financial conditions. Ryka now supports the women’s fitness community by sponsoring events and programs that encourage all women to go out and move, participate and be active. In addition, Ryka can also establish its own Fit Club to provide insider giveaways, product previews, and wear-testing services to its own long-term customers to create their loyalty to Ryka.

The Body Shop International PLC 2001: An Introduction to Financial Modeling The following graph presents the forecast for the Body Shop’s income statement and balance sheet in 2002 to 2004:

How did you derive your forecast? Why did you choose the “base case” assumptions that you did? The forecast takes into considerations the stated business objectives of the Body Shop as well as trends or patterns in the historical financial statement in exhibit 8. Further information on the calculations and assumptions underlying the forecast is to be explained for each account individually in the following section: Assumptions related to the sales growth, expenses and earnings parameters Sales growth: Given the Body Shop’s growth level of 20% in the early 1990’s and its newly implemented strategy, it is assumed that the Body Shop will be able to sustain a relatively high growth rate in the future years, however the Body it will not be able to generate sales growth at the early 1990’s level due to increased competition in the market. In 2000 the sales increased by 8.7 % and in 2001 it increased by 13.3% The Body Shop’s sales are forecasted to increase by 11 % per year in 2002, 2003 and 2004. Thus, it is assumed that the past years trend of increasing sales growth will continue until 2004, however at a steady rate of 11 % per year, which is the average of the past two years growth rate. Cost of Goods Sold (COGS): It is assumed that the cost of goods sold will stay at a constant level in the forecast for 2002 - 2004. It is estimated as a weighted average of the COGS/Sales-ratios in 1999, 2000 and 2001 equal to 40.5 %. Operating expenses: Exceptional costs and restructuring costs: Since the Body Shop’s business strategy includes achieving operational efficiency in its supply chain it is assumed that the Body Shop will also have exceptional costs and restructuring costs in 2002 to 2004 as a consequence of the desired goal to achieve efficiency improvements in its supply chain. The exceptional costs are forecasted to be £5.2 million per year which is a weighted average of the stated exceptional costs in 1999, 2000 and 2001. The restructuring costs are forecasted to be £6.8 million per year which is the weighted average of the stated restructuring costs in 1999, 2000 and 2001. The operating expenses excluding exceptional costs: Even though the Body Shop’s business strategy is to achieve a higher level of operational efficiencies, it is assumed that the “operating expenses excluding exceptional costs”/sales-ratio will not decrease from 2002 to 2004. There are only so many operating expenses that can be cut before the quality of the business operations is damaged. Consequently, it is assumed that the Body Shop will not be able to cut further back on operating expenses without compromising the desire to enhance its brand value. However, it is assumed that the body shop will be able to keep the ratio of 52.3 % in 2001 throughout the years from 2002 to 2004.

In 1999 the tax expenses exceed the EBT which I chose not to consider in calculations for the forecast. however it is assumed that it will stay at the current percent-of-sales level from 2001 equal to 2.5 % which is the weighted average of the previous years. We assume that if the plug is negative (we have excessive cash) then we earn interest at a rate of 6%.8 %. The percent-of-sales ratio is 4. . Accounts receivable: The accounts receivable/Sales ratio is assumed to be 8. The estimated tax-rate in the forecast for 2002 to 2004 is equal to 31. 2000 and 2001.8 % in 2002 to 2004 which is the weighted average of the accounts receivable/sales ratios in 1999. Accounts payable: Accounts payable has been significantly reduced in previous years.5 % which is the average of the tax-to-EBT ratios in 2000 and 2001. 2000 and 2001 Other current liabilities: Assumed to increase due to the Body Shop’s business strategy to increase investment in stores etc.6 % in 2001. Tax: The forecasted tax expenses are based on an estimate of the tax-rate. Inventories: Assumed to increase by 10 % per year due to the Body Shop’s stated business strategy.Interest expense or income: The interest rate is assumed to be 6 % whether it is the rate for interest expense or interest income. Cash decreased by 43. It is assumed to increase to 18 % of sales in 2002 to 2004. Other current assets: Assumed to stay at similar level as the previous year’s percent-of-sales ratio.8 % of sales each year which is the weighted average of the percent-of-sales ratio in 1999.6 % per year. Net fixed assets: Assumed to increase due to the Body Shop’s business strategy that intends to increase the investment in stores. It is assumed that the following years cash stock will continue to decrease by 28.9 %. Assumptions related to Assets and Liabilities Cash: the stock of cash has decreased from 1999 to 2001 and it is assumed that this trend will continue in 2002 to 2004.9 % Taxes payable: Assumed to stay at the current percent-of-sales level from 2001 equal to 1. Other assets: Assumed to keep at the current percent-of-sales level from 2001 equal to 1. It is assumed to increase to a constant level equal to 5 % of sales between 2002 and 2004 Long term liabilities: Assumed to increase due to the Body Shop’s business strategy to increase investment in stores etc. Accruals: Forecasted to be equal to 3. which in this forecast will translate into an annual increase of 5 % increase in the value of net fixed assets. It is assumed that the body shop will continue to expand its numbers of stores each year.5 % in 2000 and 28.

The sensitivity analysis shows that at sales growth from 0% and less the Body Shop requires external funding in the form of debt. What is the effect on financing need of varying each of these assumptions up or down from the base case? Why are these assumptions so important? The effect of varying COGS/sales ratio from the base case (40.1 million in additional financing to support the operations and financial requirements that are underlying the forecast. * COGS/sales ratio equal to 40. To see this go to the sensitivity analysis in the excel sheet. The sensitivity analysis shows that at annual growth rates in long term liabilities above 20 % the Body Shop . Based on your pro forma projections. Given their significant role as drivers of the operational and financial activities of the Body Shop.5 %) is limited. but would get it through excess cash. * Inventory growth of 10 % per year in the base case. The sensitivity analysis shows that at annual inventory growth rates less than 40 % the Body Shop require funding through excess cash while at inventory growth rates above 50 % it would require external financing in the form of debt. The effect of varying the sales growth from the base case (15%) is shown in the second sensitivity analysis in the excel sheet. how much additional financing will the Body Shop need during this period? The Body Shop will need £ 132.5% per year in the base case.Other liabilities: Assumed to stay at its level of 0.1% in 2001 throughout 2002 to 2004. The effect of varying the growth in the long term liabilities from the base case (18 % per year) is shown in the fourth (and last) sensitivity analysis in the excel sheet. * Growth in long term liability equal to 18 % per year in the base case. Above growth rates of 10% the Body shop would need funding. In fact the sensitivity analysis reveals that there is no effect of doing so. The effect of varying the growth in inventory from the base case (10 % per year) is shown in the third sensitivity analysis in the excel sheet. Shareholder’s equity: Assumed to decrease by 2 percentage points of the percent-of-sales ratio from the previous year. What are the three or four most important assumptions (“key drivers”) in this forecast? The most important assumptions are: * Sales growth equal to 15 % per year in the base case.

if the trial assets are less than the trial liabilities. The trail assets are £187 . and therefore they don’t need to contact investors to obtain a loan. they failed to maintain its brand image by becoming something of a mass-market line.1 million across 2002-2004 to balance the balance sheet. Anita Roddick. we assumed the growth rate for sales is 13%. what the best way to raise the financing. CEO are looking for assistance in short and long-term planning for The Body Shop. Why are your findings relevant to general managers like Roddick and Gournay? The forecast is intended to support and give guidance to mrs. The Body Shop will not need external financing in 2002. and future recommendations will all be discussed. What are the implications of these findings for them? My forecast suggests that the Body Shop need additional financing of £ 132. To get started. the cost of goods sold percent change is 38% changes. the shops founder and Patrick Gournay. than the company will be in need of external financing. What action should they take based on your analysis? In general the pro forma forecast will show them whether they need additional financing and where it might come from. and they would not need to obtain any new loans. the sustainable growth rate. At growth levels in long term liabilities below 20 % the Body shop would need external funding in the form of debt. a company will not be in need of external financing. The forecast will provide them with an indicator of future levels of costs and investments in inventories etc. The goal is to yield practical insights while being straightforward. The amount of external financing. the required funding will come from excess cash. External financing helps companies to be profitable and obtain growth. In this case.retailers in the late 1990s. One way to determine if external financing is needed is to look at the pro forma balance sheet. Gournay in their future business decisions for the Body Shop based on the stated business strategy. Roddick and mr. The Body Shop was one of the fastest growing manufacturer. While looking at the trial assets and liabilities. along with important ratios. It would be sufficient to cover the required funding through excess cash. As well as indicate to them the level of growth needed to continue the Body Shop’s current capital structure and the growth rate needed to support the business strategy. the internal growth rate. the variables affecting the estimates. and a 50% change for operating expenses. However. If the trial liabilities are less than the trial assets. throughout the years. The opposite is also true. These assumptions are important because the two are significant drivers of the Body Shops operational expenses while the second two are significant drivers of the financial expenses.would need external financing in the form of excess cash.

while expecting to increase sales by 13% or £48. £15. projected sales. Another way to determine if external financing is needed is to analysis the external financing equation. Cost of Goods Sold. funds for research and development. What about operating expenses? Operating expenses is a category of expenditure that a business incurs as a result of its normal business operations. however. While all three of the variables have an enormous impact the net income and retained earnings and practically every other item on the income statement and balance sheet. retention ratio.27 million in 2003 for 2004. 3. At a current level with CoGS ratio at 38%.million compared to the trial liabilities which are £248 million. net profit margin (NPM). Let us now see if and how the need for external funds will change if we decrease the CoGS ratio to 33% of sales. understanding how each number is calculated and what role it plays in determining the answer is more difficult. is the direct costs attributable to the production of the goods sold by a company. It seems The Body Shop is in greater need of external financing every year. and expected growth of 13% for each of the next three years we will need £28.000 million. But how much in dollar value will this 5% decrease in CoGS represent. bath. Using this method. the need decreases to around £ 15. it is about £30 million greater. This means that a company will be expected to spend less on materials. The EFN in 2002 for 2003 goes down to £0. and direct labor costs in 2002 than they did in 2001. and skin care products.22 million.investopedia. ingredients. In 2003 and 2004. The Body Shop will need £ 27. The EFN for 2002 remains the same. and £16.83 million in 2002 for 2003. 2.63 million.84 million in 2001 for 2002. and operating expenses ratio.com) Examples of Cost of Goods Sold are in this case ingredients that the company is using to make their body. (www. while other don’t. operating expense ratio of 50%. Let us begin by focusing on Cost of Goods Sold (CoGS). In 2003. as you may know. A 5% .61 million and in 2003 the external funds no longer are necessary. a difference of £15.912 million in external financing. These figures depend greatest on variables like sales growth ratio. In 2002. Let us now observe how a change of CoGS ratio affects the external funds needed for the next three years. We notice that some things change. advertising. the EFN for 2003 and 2004 decreases significantly. In 2002 a 5% decrease of CoGS represents £21. In calculation of external funds needed (EFN) for years 2001. Such move will put a lot of pressure on the company and may not be best for employees and customers as the wages and quality or quantity of products may be reduced. and utilities. 2002. direct labor costs associated with production of the products. the trial assets are approximately £12 million greater than trial liabilities and in 2004. cost of goods sold ratio. external financing will be needed. Plugging numbers into a formula is always easy.14 million. maintenance and repair. and 2003 we used several figures like current sales. and material costs. So it is crucial for us to set appropriate ratios as they essentially determine how much external funding we’ll need or don’t need. Some examples of operating expenses are employees’ wages. However in 2003 and 2004. etc. The sales growth ratio has a massive impact on current liabilities and current assets. Perhaps these expenses can be managed better and more efficiently to reduce their cost and in turn the need for external financial aid. the company will need external financing for all three years.

net income. This calculation allows financial planners to see how much revenues can growth without having to invest in new equity capital. This shows new equity capital is needed to sustain growth of the firm. Since. They will not need external financing in these years. Sales growth rate is the only thing that can have an effect on the EFN for 2002 as the multiplier. For the EFN numbers for years 2003 and 2004 please refer to the Appendix.92 million to £7. we used the ROA and retention from the previous year to show what growth can be in the coming year. therefore this 5% change represents the same dollar amount change the only difference is what is being changed. With this equation we see a company's growth is a function of the return it makes on its shareholders' equity and the portion of its earnings that it plows back into that equity. 7. In 2002. the SGR for The Body shop is -1.74% and for 2004 it is 5. Could it be that this expectation of sales growth of 13% is too high.26%. The EFN for 2002 decreases form £27. When calculating these values. but decrease the expected sales growth rate to 3% we notice the significant change in the need for external financing. equity has to grow too. Decreasing operating expenses seems like a better choice. and net profit margin are actual and final figures for 2001 that cannot be changed the only option for us to decrease our need for external financing is to decrease our expectation of sales growth. Now. Mike Gulbing will discuss the options we have and ways we can raise the necessary funds to cover the financial need The Body Shop may encounter if we choose to follow a path with the need for external financial aid. Another forecasting tool is the internal growth rate (IGR). Replacing old light bulbs to new ones that are more energy efficient and cutting costs of advertising doesn’t have that immediate effect on employees and customers. It shows that a company has no room for growth without external financing. This number matches are forecasting described above. all other variables like assets. that the expenses and external financial aid is necessary because of demand for high growth of sales? Let’s try decreasing our expectations of sales growth and observe the effects of that move on our need for external financing. It also shows for true growth to happen. What about expected sales growth? Sales is the variable that affects more items on balance sheet and income statement than operating expense and cost of goods sold. is the only factor that we can change in calculating the EFN for that year. This calculation allows investors and financial planners to see how much growth can be financed from retained earnings.decrease in operating expense represents the same change in EFN as a 5% change in CoGS ratio as both ratios are a percentage of sales. In 2002 the internal growth rate is -2. the change in sales. For 2003 the IGR for The Body Shop is 4. In order for this equation to work. A similar equation and forecasting tool is the sustainable growth rate (SGR).58%.67 million in 2002. For 2003 and 2004 we see the company can finance about 5% sales growth with cash flows generated from retained earnings. 6. The formula is (ROA*retention ration)/[(1-ROA)*retention ration] . The formula used is (ROE*retention ration)/[(1ROE)*retention ration] . A negative IGR indicates external financing will be needed.25%. If we keep cost of goods sold ratio and operating expenses ratio constant. the debt to equity ratio . although with expenses like advertising being cut it would be difficult to increase sales. even though we decreased the expected growth rate down to only 3% we still would have a need for external financing.

it is better for The Body Shop to maintain their 2001 level of sales in 2002 and establish stability in a major expansion that they’ve encountered in 2001. 2011." Investopedia. Likewise. "Cost Of Goods Sold (COGS) Definition. Copy Mug . . if all goes by the plan.com . For The Body Shop. This shows no external equity needs to be issued for these years. The SGR for 2003 is 9.42% and for 2004 it is 10. Web. try to develop new products. To conclude. In 2003 and 2004. "Operating Expense Definition.com . 4 Feb. 4 Feb. Digital image. 3. 4 Feb. 2. . Web. Work Cited 1. Sanhita Paradkar.7%. After building additional 100 stores around the world in 2001." Investopedia. but it is important to take these ratios into consideration so you can see if the company can sustain that growth and for how long. the calculations basically verified we would need external financing for 2002 and not 2003 or 2004.Your Source For Investing Education. as we saw in our data analysis. 2 Aug. we want to recommend The Body Shop to slow down their growth. the company should invest leftover money into research and development.Your Source For Investing Education. The above equations are simple estimates and should not be used as the only calculating tool. The Body Shop should obtain bank loans to cover unmet financial needs in 2002 and continue their growth in 2003 and 2004. . 2011. It’s very easy to over-forecast when a company is growing rapidly.must be held constant for the firm. and further expand their customer base by building more shops in more countries and cities. . A lot of factors need to be considered when you think about growth rate of a company: If sales grow too slow. Web. It is very important to investors to know how long earnings growth can last. We need more equity if we want to increase debt. you can’t maintain your assets and if you grow too fast you can’t maintain your assets either. 2010.Toughts & Ideas. 2011. at least in 2002. 8. Rapidly growing companies often look the best to investors.

with its Android mobile operating system and acquisition of AdMob. A case analysis for “Strategic Management(MBA)” Submitted by: Group (E) Current Situation: Current performance i. Google has become the world's most admired Internet search engine and given it an outsize influence over the online world. the mobile advertising company. The company sees its mission as the organization of the world's information. Google's boundless function. as well as many opponents say in a high-handed approach to copyrights. . including display ads and mobile phones. Google has been testing out new tricks. strategic Position Founded in 1998. And the company's eagerness to collect vast amounts of data about its users and their online habits has prompted increasing fears that Google could become a threat to consumer privacy. Google's ambition far exceeds the confines of Internet search and advertising. however. But none of these new businesses are generating significant revenue for the search giant yet. making it universally accessible and useful. has put it at odds with a growing list of companies in industries ranging from each & every corner of different aspects of communications to e-commerce.oogle An internate search company.

Stanford University. while Google's has been shrinking. Intel . Bing still handles a small slice of Web searches in the United States. 12.7 percent. Google also faces new competition from Microsoft's Bing.6 percent. Corporate Governance : Board of Directors • Eric Schmidt. Facebook wants to turn scores of sites across the Internet into satellites where users will be able to interact with their Facebook friends. • L. • Larry Page. USA. ii Vision & Mission: Google’s mission is to organize the world‘s information and make it universally accessible and useful. • Sergey Brin. Bing's share has been growing. the company was promoting Google TV. Google Inc. Kleiner Perkins Caufield & Byers • John L. But Google faces fierce competition from social media sites like "facebook" and "twitter". 1. John Doerr. Otellini. What's troubling for Google about Facebook’s growth is that the information exchanged over the social network is walled off from search engines — and increasingly lucrative territory for ads. In November 2010. compared with Google's 62. which accounts for more than 90 percent of its revenue. as has Yahoo's. Hennessy.The company continues to dominate in its core business-search advertising. The point is to bring Web videos to the homeowner's television set. hoping that other companies will build it into their TV sets. Google Inc. • Ann Mather • Paul S. meanwhile. Blu-ray disc players and set-top boxes. Google Inc.

Societal Environment : Societal Environment analysis known as “PEST” analysis is an important tool in which to measure this vision and alignment with the various forces of change affecting the world and the industry. Co-Founder and President. Products. Engineering and Research. Using this mindset. Senior Vice President. Sherpalo Ventures. Tilghman. • Alan Eustace. Political Factors: Google had become a hot political debate when it had made announcements of its agreement to acquire YouTube® on October 24thof 2006. The mindset behind evaluating these forces is to avoid actions that may be doomed to fail due to political.• K. Business Operations. Senior Vice President. Princeton University. • Shona L. • Patrick Pichette. Brown. Drummond. social or even technological reasons. Senior Vice President. Chairman of the Board and Chief Executive Officer. we will explore Google’s current position and influences that could have lasting impact on Google’s future position in the search as well as marketing industries as they relate to the global economy. Senior Vice President and Chief Financial Officer. Senior Vice President. • Sergey Brin. • Jonathan Rosenberg. USA. • David C. • Nikesh Arora. Technology. • Larry Page. Ram Shriram. President. Corporate Development and Chief Legal Officer. which offers online advertisement serving and . • Shirley M. 2. the company completed the acquisition of DoubleClick. Product Management. Top management • Eric Schmidt. In March 2008. economic. Co-Founder and President. Global Sales Operations and Business Development.

who has become a major player in the information-technology outsourcing. etc) as well as regulators debate the acquisition and it’s far reaching impacts on the industry. they have been instrumental in creating a . In the US online protection of personal data is actually ahead of some other regions of the world. * In this year British Agency Said on November 3rd Google Violated Privacy Law in this year. a topic that concerns many in the private as well as corporate sector. radio or newspaper/magazine advertisements. the issue of privacy is still a major concern. In the US. the EU has a wide range of privacy protection laws which limit what information corporate businesses may collect as well as how they use this information. legal issues regarding privacy and aggregation of data will also continue to evolve. has different laws regarding the use of personal identifiable information. Conversely. Microsoft. All this issues are serious political threat to a company that has grown to a market capitalization of $162 billion by worrying more about serving customers than catering to the whims of bureaucrats and politicians. Due to the opportunities to leverage targeted advertising combined with lower cost solutions. Another potential issue which surrounds Google is that of privacy. Google will need to be careful of its data aggregation practices and how the implications of law and acceptable methods of advertising may impact their business model. It is important to realize that as social issues regarding the use of personal information evolve. As laws develop regarding information that is available on its servers housed in the US as well as other nations. What is acceptable in one country is not necessarily acceptable in another and Google as the ‘Gateway to information’ must continually be aware of this slippery slope. India. privacy laws (4th Amendment of US Constitution as well as various Statutory Laws) are targeted towards Government actions rather than corporate entities. Economic Issues: G oogle is in a win-win situation with economic factors as it continues to provide focused advertising campaigns to businesses at drastically lower costs than traditional TV. However. AT&T. Although in the corporate environment the concern is that it is becoming more and more an issue of contracts rather than politics on how information is to be handled. the closing of this deal remains to be decided as many companies -Yahoo. Web publishers and advertisement agencies.management technology to advertisers. thus corporations are largely unregulated.

Google’s core competency.??? Socio-Cultural Issues: As highlighted earlier. Many advocacy groups continually stress the importance of privacy and confidentiality of personal information. in this year US regulators scold Google on 29th October. one day a week is devoted to development in areas that are either outside of. This fact is further stressed by the many news stories of compromised corporate systems and the loss of personal identifiable information. facebook© is launching a next-generation messaging service that will allow its 500 million users to communicate with people who are outside this social network. the general public’s actions do not follow suit with their overall statement of privacy concerns. pictures and various other private matters to the Internet in the form of blogs. However. mostly in part to Google’s popularity. Consequently. Because after all. However. Technological Environment: Google has been diversifying its offerings to explore other markets outside of search and advertising. a provider of information security and compliance solutions. isn't that what we're all looking for? Thus. as much as it is stated as a growing concern.. privacy concerns of the general public continue to evolve and depend greatly on public consensus. Thus public awareness of this issue has increased. it will raise the stakes in Facebook's battle with Google and its Gmail service. However. Both Yahoo! and MSN are having a difficult time competing directly with Google’s Adsense and Adwords marketing tools. who doesn't want to increase their sales………. even with the vast majority stating that privacy is a concern there is continual posting of personal information. etc. many ebusinesses bank on consumer inertia to continue being profitable. Although Yahoo’s system actually costs the advertiser less. as we have seen in the case of the eBay and Skype merger. Therefore. or an extension to. Inc. This ideal of diversification is even built into the Google business model which supports employee exploration. Google should be the winning choice for anyone that is looking to convert clickers into buyers. websites. “Google does get more traffic and it converts better than Yahoo. and in the end. So. Google completed the acquisition of Postini. this niche market does have many direct competitors like Yahoo! and MSN who are also looking to gain market share in this particular advertising sector. For that reason. the question Google needs to ask is what kinds of expansions are aligned synergistically with the core business and which are more tangential to its core competencies? .niche market in Internet advertising that’s why to solve that problem.

it is this balance that Google must continually monitor as it expands into areas like mobile markets[3]. | |Power |Competition Elimination and Substitution: Microsoft embedding their search tool into their Explorer browser. An example of this leverage that yielded a competitive advantage was seen in a desktop search feature where “Microsoft included a new desktop search feature in Vista. | | |Threat of forward integration – Google search might not perform as well with new software releases from Microsoft and| | |Apple." [2] In addition to Ballmer’s observations are Google’s online offerings. Task Environment : Porters Six Forces Model: |Force | | Impact on Google |Supplier bargaining |Google is globally dominant. Ballmer said Google's search prowess isn't the company's biggest accomplishment. but Google beat it to the punch with its freely-downloadable Google Desktop Search.”*1+ Ballmer of Microsoft stated that the two biggest competitive threats to his organization: open source software and advertising supported applications in which he directly stated the symbol of the second problem was Google.Google has addressed this concern in extending its current offerings into various markets. but have leveraged the technological competencies in its new offerings.com. 3. "Getting search right was actually not the hardest part of the issue. And now the rest of us are going to have to learn that game. These markets are outside of its core search and advertising. Subscription based software has and continues to be a driving force in the success of many companies like salesforce. Thus. They got ad funding -they really figured that out. | |Barriers to New Entry |Yahoo & Microsoft have radically improved their search engines and can on pass/deploy their search | .

| |Switching costs are mostly related to hardware (storage of indices and speed of information return) and accuracy | | |related. Yahoo) so the degree of rivalry is more oriented to an oligarchy – | | |this could bring attention of UN or individual countries as a restriction of trade in the future. | | |Online marketing and the rules governing what is good and bad practices (e.| | |tool through their products. | | |Threat of Substitutes |High. | | | |Switching costs for most of the search tools are nothing. | | |Currently there are only a few rivals (Microsoft. cloaking) are still | | | |evolving – this could affect Google’s current technology and philosophy. | |Competitive rivalry |Rules/ethic has not been defined so the environment is easily exploited or manipulated. | | |Switching costs are negligible | |Buyer inclination to substitute is primarily driven by speed and accuracy of the result and also by the overt pushing| . | |There is no such thing as the perfect search engine – thus a better search engine invented by another will critically| | |affect Google – may have even severely as 40% of the company revenue comes from advertising which is driven through | | |the search engine.g. | |Brand identity is important (if not paramount – Google has made the language as a noun and a verb) | | |Improving on the search engine and its features is a significant task for a large number of highly skilled IT | | |technologists.

| |Users of the search tool are demanding more services and complexity or sophistication with the search tool to remain | | |‘loyal’ to its use. |Shareholder power | | | | | | | | | | | | | | | | | | | | . |Threat of backward integration. | | |Users of the search tool are becoming more sophisticated and demanding other services also for free. | |Two client groups – web community wanting to search/locate items and the organizations selling products – have to | | | | | |satisfy both client groups equally. | | |Ad Revenue is directly related to use . | | | |Substitutes are available – and for the same price: free | |No real reviews are undertaken on what features the web community would like to see so each search company employs | | | |researches to straw poll/guess directions.| | |of ads that are included with the search results and pages.even the loss of a small percentage of use can mean significant revenue | | | |loss to Google or the other search generating companies.. |Buyer bargaining Power|Use of the search rankings is a significant leverage point by the owners of search tools in bargaining.

Google excels at directing a large quantity of visitors to websites using its Ad Sense program. For the advertisers this increased traffic translates into increased sales and directly helps the bottom line. Google faithfully adheres to the provision in the mission statement. simply do not provide links that are as useful as Google’s. . Value Google’s search products bring value to their customers because they provide relevant websites promptly. Many business are dependent upon the traffic Ad Sense brings to their website to generate income. Most websites feature some sort of banner advertising and are littered with hundreds of words. Microsoft and Yahoo. which is uncommon. Google has achieved the top market share in the search industry precisely because their product is rare. which is one way to organize the internal factors into the generally accepted categories of strengths and weaknesses and as well as to analyze how well a particular company’s management is responding to these specific factors in light of the perceived importance of these factors to the company. This rare service is testimony to their charge to never “compromise…user focus for short-term economic gain”. Immutability and Organization) is used to assess the importance of each of the factors that might be considered strengths. Rareness. Internal Environment : This is an analysis. which is a stark contrast to Yahoo and Microsoft’s search home pages. Infrequency Google’s search offerings are rare because of the relevancy of the results. In IFAS the VRIO framework (Value. Google’s website features a minimalist design. According to these findings the company can understand their position and take necessary steps.| | | 4. The Google home page can only contain 28 words as a policy of the company’s founders. which recognizes that “advertisements should not be an annoying interruption”. Google’s main competitors. This keeps the clutter to a minimum. Here company’s strengths and weakness are found and identify which strength or weakness carries more weight.

S. fast computer memory. and marketing (Google. It also takes into account the changes in the general economy and other socio-cultural factors. their search engine can effectively learn more quickly than competitors’ products.Immutability Google’s results are not easily imitated because of the large infrastructure requirements to serve the relevant pages quickly. a competitor could not replicate Google’s search results. Without going through a process of refinement over a significant period of time. 5. Books. Google has servers all over the world all synced up and all running on a very large quantity of RAM. the company now has offices in the U. 2008). Google should be able to sustain its competitive advantages through the foreseeable future. Since Google has the largest market share. . Google does not confine itself to the search product it is most well known for and has special applications for browsing different kinds of information such as its Shopping. but it will need to continue to innovate new ways to diversify its advertising business so the company is not dependent on solely the Ad Words service. Google has used its analytics tools to help understand the social complexity of the meaning of keywords to specific groups of users. and Music applications. Organization There are different ways of organizing and accessing information. These three competitive advantages set its core search functionality apart from the competitors whose web portals simply can’t keep up. Changes in the general economy and other socio-cultural factors Global: Internet search is applicable to most cultures all over the world freeing Google from geographic dependence. Google consistently delivers relevant results at blazing speeds with minimal hassle. and international locations in over 30 countries working on research. External environment : The external environment of an organization comprises of the moves and the strategies adopted by its competitors. Google’s operations exhibit path dependency because it takes time to collect the data to provide results and even more time to analyze both the content and users reactions to the results. and right now searching the Internet is arguably the best for retrieving information efficiently. In fact. sales. With each search Google refines its results so that the search engine gets “smarter” and caters to people’s individual preferences.

Google offers a personalized search engine for more than 115 countries. This means that it will be less affected as the Baby Boomers age in comparison to other companies that depends on the 50 to 60 year-old demographic groups. and would not be hurt by changes in the ratio of female to males. the company is likely to gain market share. measurable advertising makes it more recession-proof than many other businesses in tech. Technology: Technology is obviously always improving and Google has taken specific measures to make sure it does not fall behind. Demographics: Google is well positioned in demographics because it has a relatively young user base. and as language support improves. Google has faced concern on copyright issues because the company stores copies of third party web pages and images on their servers. Political and Legal: Formal institutions have not significantly affected Goggle’s operations. The company will however benefit when some traditional and paternalistic societies begin using the Internet more frequently. Goggle’s focus on highly targeted.S. However. The page provides the relevant information regarding digital information and provides links to notify both Google and the U. technology companies like Google are relatively isolated because search and consequently internet-based advertisements has become a staple to the world society and economy. Internet search is also not a gender-specific issue. Economic: The United States is currently in a period of recession and stocks are trading at 52-week lows. They have responded to this criticism by releasing a copyright information page. .

) *Increase in online advertising * Online video increasing * Google engineers are encouraged to spend 20% of their work time (one day per week) on projects that interest them. Facebook 2.Twitter 2.Copyright disputes stemming from Google Book Search. Threats. News. Industry Competition. it must be recognized that when Google was founded. Yahoo.Opportunities. Click fraud 3. Double-Click) *Other partnerships (AOL Time Warner. is more mature with a necessary path dependency to gather data on both the content of WebPages and the search history of users. and Competitor Analysis Opportunities *Advertising partnership with Yahoo *Experimental partnerships with radio and print media *Acquisitions of businesses (You Tube. The current competitors have thousands of servers deployed in locations all over the world and have accumulated many years worth of data about user habits. Excite. Threats 1. Current Competitors: . however. A new entrant would need to provide better search results at very fast speeds to compete in this highly competitive market. Corp. and AltaVista dominated the search market and Google has since eclipsed them all . With that in mind.The market now. the threat of new entrants in the Internet search market is relatively low. NASA. Potential New Entrants: The barriers to entry in the Internet search market are high. Therefore.

There is a dizzying amount of money made in this industry. posted revenues of $7. Innovative search technology 4. 2. and Microsoft (operating under their respective brands – MSN and Live Search). SFAS ( strategic factors Analysis summary) : Strategic factor analysis (SFAS) summarizes an organization’s strategic factors by combining the External and Internal factors. 6. This creates a sort of self-perpetuating draw for customers as the search results constantly improve. The competitive rivalry is strong and ongoing in this industry because large amounts of advertising dollars flow to the website that has captured the largest volume of searches.e. Internal Environment The following internal traits portray a resource-based view of Google's core strengths: 1. Broad web site appeal 3. Yahoo.Dependence on advertising .1 billion respectively (Google. Google’s large market share enables to improve the quality of search results and targeted ads more quickly than their competitors.Growing pains (i. Strong brand name.0 billion and $51. finding new key employees and infrastructure) 2. When it is completed then the company revised the weights that reflect the priority of each factor as a determinant of the company’s success.Google’s main competitors. "The advertisers' return on investment (ad cost per sale or cost per conversion) from advertising campaigns on web sites or Google Network members' web sites compared to other forms of advertising" Google's weaknesses are: 1. 2007).

New laws and regulations domestic and international. Size of current customer base and market share leverage. Competition from Microsoft and Yahoo. Increasing intellectual property. 3. Unmapped countries expanding services 2. In order to compete with other media titans such as Microsoft and Yahoo. Greater resources. Increasing international competition 6. and ability to attract and retain users through portals 2.Nearly all revenue from one product line (search) 6. bundled services.Lack of experience External Environment Google's opportunities are: 1. Strategic Analysis Google is a single-product-line business search engine technology. Google has sought to employ the power of .Weak position in China 5. advertising agreements Google's threats are: 1. Increasing competition reducing operating margins 4. Shrinking advertising budgets by companies 5. New advertisement format and tracking mechanisms 3.3.Google Member Network's lack of popularity 4.

databases and servers continue along with evaluation of purchasing or partnering with companies that offer what is needed. • Create and promote an image of an ethically and socially responsible company that believes in respecting people's privacy.how far does Google want to go on the privacy front especially now that the merger with DoubleClick is raising serious questions about competition and regulations? • Emphasize the usage of data containing information with permission and have open discussion on how to protect people as well as their own business. Implementation • Have R&D of browsers. In the case of Google. • Re-evaluate goals on. 7. greater scalability and lower costs. • Hire more high tech people to fulfill many R&D ideas & design demographic search sites. Google’s future will be more relevant and useful to end-users and maintain its competitive edge over other search providers by retaining and growing its user base. • Continued focus on enhanced advertising targeting . by applying concentric diversification focus on the core product of search services the company has also been able to benefit from a competitive advantage in faster response times. Recommendation : Recommendation a. • Implement enhanced operational and management systems that will provide the real time results clients.differentiation to create a competitive advantage.

TV. Research and development in these areas of technology is needed to be the market leaders with continued online advertising technology usage and implementation. With the entire technology experts at Google and changes in the physical market of the internet changing from phones to Wi-Fi and data storage systems and access methods changing. weather. • Advocacy systems and procedures for real time statistics and feedback on internet ads to their customers will give their customers confidence and allow them to augment their marketing campaign constantly. • Expand multimedia product offerings • Create hardware for imbedded search systems. throughput and security. scientific research. and music is continuing to merge into one Product. conferencing and video. Determine which areas to pursue(Genealogy software. Evaluation: • Customer satisfaction of Google's search methods slow down in terms of blocking the speed of browsers. • Develop software for large data gathering systems or purchase companies that do this. computers. • The market for phones. • Decision to make free Wi-Fi and broadband internet usage available will stimulate increased desire for products that can use this in multi-media such as music. space. a coordinated modernization effort may yield tremendous advancements in speed.• Continue expansion of free Wi-Fi in key cities. databases and efficient hardware for servers. handheld gaming. . b.

Take a moral high ground as to how they will define and handle these issues and apply that to all customers and users world-wide no matter what the laws are. • Determine costs verses revenues earned for software systems outside of core business Follow the multimedia market and look at product offerings. • Analyze market strategy for all the evolving technology areas. • Stay abreast with the rules and regulations regarding privacy and all legal technology issues. • Follow costs and needs for imbedded hardware systems. costs. . Google should stay on top of these developments as well as usage of this type of hardware in system rockers and satellite c. databases and server technologies along with evaluation of what it financially will bring to the bottom line. Control • Examine the long term costs of the browser. roadblocks and benefits in cities determined important for free Wi-Fi. Sound and voice could become easily integrated into this type of site. • Determine. If they can help define these usage issues at the national and international level it will enable them to base their business on a known rather than an unknown. Also for older users. determine the increased development costs verses income for things such as visually enhanced sites. • Google should do follow up compliance checks of all privacy standards and policies on customers' sites and offer public disclosure to those sites that don't adhere. Keep in mind many databases and browsers are offered free.• As hardware systems continue to advance and develop many software algorithms will continue to become hardware components. • Determine costs to implement demographic search sites and study the long term maturity issues involved when the children users are older and use to the Google way of doing things.

// .cfm?articleid=1651 [2] http://knowledge. Google CEO as well as CFO argued on last Sunday (21st November. Google will delete the personal data collected by the company's Street View cars in Britain after regulators there wrapped up their inquiry into the intrusion. 2010) that Social Networking is `Absolutely' a Part of Strategy. bumping up its workforce as it expands into new markets and battles for talent with faster-growing rivals.co.upenn. without punishing the Internet search leader for collecting e-mails.aspx 2) http://news.com/topics/google 3) http://pogue. The Federal Trade Commission is scolding Google Inc.3news.edu/article.yahoo.zdnet.Reference: 1) http://www. passwords and other personal information transmitted over unsecured wireless network.edu/article.uk/communications/0.co.1000000085.upenn.wharton.com/2010/11/16/finally-google-voice-foriphones/?ref=google_inc ----------------------[1] http://knowledge.wharton. looking to hire more than 2.000 people around the globe.nytimes.00.nz/Google-to-purge-UK-personal-data-gotten-from-WiFi/tabid/412/articleID/187249/Default.htm ----------------------Google to purge UK personal data gotten from Wi-Fi.blogs.cfm?articleid=1651 [3] http://news. Google Inc.39284914.

including me. Plenty of accusations were hurled. But when Google submitted an iPhone version of the app. . Apple rejected it (or. tried to figure out what Apple’s problem was.Google. just let it sit in app-store limbo). All kinds of people. rather. the app works great. is looking for new opportunities to grow by branching out into a variety of markets. On Android phones. many linked to greed and a desire to protect the revenues of AT&T (Google Voice makes cheap international calls and lets you send and receive text messages for free). Finally. which controls about two-thirds of the global Internet search market. It replaces the built-in dialing program—with a smarter one that sends the proper Caller ID information and has a million cool features. including Android Smartphone software. online display advertising and Web-based productivity software. Google Voice for i Phones // The solution would have been the Google Voice app.

Maytag. because of the acceptance of the microwave by the U. convenient and easy to clean. It was not until 1945 that firms begin to offer full lines of various appliances. The manufactures have responded to the consumer demands.S. Many consumers are demanding appliances that are attractive. For example. kitchen remodeling and the market for replacement appliances. but as long as consumers need take care of clothes and prepare foods. most appliance manufactures produced a limited line of appliances derived from one successful product. new housing construction. although it is mature and saturated in the United States. and Maytag focus on washing machine. dryers. U.S. All are well established in the industry and have been major players for many years. by manufacture smart appliances with sophisticated electronic controls and self diagnostic features. General Electric made refrigerators. there will always be a market for major household appliances.S Major Home Appliance Industry in 2002 (Case 15) The household appliance industry is huge! The number of household appliance grows every year. refrigerators. . appliance manufactures were introducing energy efficient versions of refrigerators and washing machines. but there is one sector of the industry. Many consumers are willing to pay top prices for top of the fine appliances that enhances their décor's and save precious time. The major appliance industry is both saturated and mature. By 1990s.U. manufactures offered a full range of products even if they did not make the items themselves. Due to governmental pressure. By 2002. During this era a company was reluctant to enter the market of another company. and dishwasher. During the 1980s the industry was beginning to expand. Whirlpool. new technologies and designed were being introduced into major home appliances. The major appliance industry is a stable and profitable industry. The sales continue to increase in the 1970s despite the high interest rates and inflation. Today's kitchens are often the entertainment center of the home. Electrolux. The five major players are General Electric. The industry will always be affected by interest rates. The industry almost double in size during the 1960s. the major appliance sector that remains constant. The appliances that comprise this sector are ranges. Prior to World War II. washers. as sales of several products grew rapidly. there are many growth opportunities available abroad. consumers. and Raytheon.

to mention a few. the number one major home appliance producer in the United States and number two in the world. While most industry participants achieved compliance with all regulations on schedule. as well as the small amount of energy consumed by appliances— only 4 percent.Finding of Fact#1: A concern for manufactures of home appliance was the environmental and government regulations standards that they must adhere to. citing the capital investments required to meet the stipulations of such legislation. and Maytag.S. you can have a positive effect on the environment. The biggest environment problems are directly associated with energy production and use: urban smog. particularly for smaller firms. By purchasing energy-efficient appliances. Kitchen Aid. oil spills. and other brand names. The biggest players in the appliance market are Whirlpool. Whirlpool. Prior to the IEC being created. some countries were put at a disadvantage when competing on a global scale. As of 2003. Why it is important for customers to buy energy efficient appliances? Every time a customer buys a home appliance. but at great cost to the industry in both dollars and employment. and some manufacturers had boost sales with environmentally friendly products. they are making the decision that affects the environment. More recent regulations were aimed at reducing harmful gas emissions. The appliance industry remains highly consolidated. appliances. How was the standard for energy efficiency appliance implemented worldwide? They created an International Electro-technical Commission which serves as the worldwide standard for manufacture regardless of what country a firm is operating or selling their product in. It allow for a few deviation to meet the country specific needs. Government environmental regulations continued to be one of the greatest hurdles facing appliance makers. Products include . General Electric (GE) Appliances. choosing energy-efficient appliances is one way a customer can immediately reduce their contribution to global climate change. five major firms supply more than 98 percent of all U. according to the Association of Home Appliance Manufacturers. markets its products under the Kenmore. Whirlpool. and global warming. The act required manufacturers to cut product energy consumption by 25 percent every five years. some appliance makers resented the new regulations. In fact. Theirs a big difference each customer can make by taking energy use into account in their household purchasing decision. acid rain. manufacturers had more than doubled the energy efficiency of their appliances over those of 30 years prior. The Department of Energy's (DOE) National Appliance Energy Conservation Act of 1987 had set new standards that limited energy consumption by new appliances. Finding of Fact#2: Industry consolidation was raising the competitive stakes.

As manufactures joined forces to increase investment capital and reduce research and production expenditures. Europe posed the greatest prospect for profit. Number three Maytag sells Maytag. the U. . What strategy did U.S. the major appliance company are losing customer. They understood the needs to seek out opportunities abroad. Every time a smaller firm enters the market. because they are normally owned by a specific family. disposals. By penetrating the foreign market. The U.dishwashers and compactors. because foreign countries were trying penetrating the U. By doing this. Also. The United States companies focus their expansion on foreign markets that offered the greater potential for growth. What could the small businesses do to challenge the major appliance company? I believe the small businesses must expand their product line if they are really to be competitive with major appliance industry. because it tends to be 100s of smaller firms that are persuading customer to buy their product. major appliance industry will be targeting the customers that can't afford the cost of the new appliances.S. The customers are drawn to the smaller firms. The small business will always be at a disadvantage when competing against a major appliance company. and Magic Chef and Hoover floor polishers. Also. The company will also enhance their reputation as a leader that cares about people and the environment. they should consider offering repair serve to the customer on all major household appliances. since the average life span of certain home appliance is 10-15 years. There are number of smaller major home appliance companies that operate in North American. This would increase their annual profit so they would have the financial stability to market product and services to different segment of the population. The smaller firms tend to specialize in one specific product. GE is the number two producer of major household appliances.S appliances industry use to remain competitive with foreign countries? To remain the world's leaders in the appliance industry they seek out joint ventures with other countries. and compactors. I recommend that the company allow the customer to trade-in the older appliance for the newer version. You get to know them. Performa. The older appliance could be refurnish and then sold for a reduce price. Finding of Fact#3: Stronger niche producers were emerging in traditional products categories. They are a real challenge to the powerhouses that traditionally sale home appliance products. Jenn-Air. Its products include dishwashers. companies were very active in the acquisition of foreign companies. How could the major appliances company remain competitive with 100s of smaller companies? I believe that the major appliance company must offer special to consumer so they would want to buy their product. the number of competitors in the appliance industry lessened. because they feel a real connection to the people that work for these companies.S. companies would continue to expand. market.

beyond this point I believe the well being of citizens in general is the responsibility of our governments and not the private companies. Should Big Pharma focus on the creation of shareholder value. or should this focus be mitigated by the “needs” of patients primarily. provide benefits to their employees (medical insurance. On the other hand. the classic objective of business entities. we the people have entrusted our government to decide what is best for us. It’s nice to think that there are companies who as a priority care for the well being of their customers and they’re communities. to include medicines. Our government is the people’s ‘company’ and we are its ‘employees. but also citizens in general? a) Consumer Activist perspective: I believe governments have a strong social and moral responsibility to all its citizens to allow the opportunity of accessing health care. salaries. retirement plans. they create jobs.’ Just like in the private industry in where it’s in the company’s best interest the well being of their employees to work and make profits for them. Less employees. it should be in the government’s best interest the people’s well being so we can continue to produce and contribute to the prosperity of our nation (pay taxes). b) Business perspective: . but this is not what these companies are in business for. appropriate working conditions. This is as far as private industry contribution goes. and help communities prosper thru their tax contributions. lesser contributions. The private industry has a social responsibility with its employees and their communities.Burroughs Wellcome and “Ethics and Big Pharma” a) Consumer Activist perspective b) Business perspective 1. Pharmaceutical companies are in business for financial gains. etc).

b) Business Perspective: . Do US patients who suffer from life-threatening illnesses have the right to drug(s) which treat their condition? How about foreign patients? I such rights are asserted who (or what entity) should have financial responsibility? a) Consumer Activist perspective: As a consumer activist. On the long run. which is to make profits. If a business has the competitive advantage of being the sole provider of a product or service. 2. any US or foreign patient who suffers from life-threatening illness has the right to a drug or drugs which treat their condition.4 billion in 1992. Medicaid spending for AIDS was estimated to reach $2. then it is expected for these companies to try and maximize their profits. While the business is entitled to make a profit from the drug. The issue for a consumer activist is that only 40% of persons with AIDS were able to take advantage of this subsiding. Every consumer should have the rights to needed medicine regardless of their financial situation. “An estimated 40% of persons with AIDS have received care under the Medicaid Program. have stepped in to help pay for the medicine. regardless of what the product is. They also have a quality responsibility with their customers. Estimated annual costs for AIDS care and treatment funded by Medicaid ranged between $700 million and $750 million in 1988. to make quality products at competitive and reasonable prices. which is administered by the Health Care Financing Administration and funded jointly by the federal government (55%) and individual states (45%). the most important aspect is to protect the consumer.” Here both the federal and state’s governments along with insurance companies. but this is something for companies to consider as business decisions and not as social benefits to communities. and to make the product easy to access and perform as expected. pharmaceutical companies wouldn’t be in business in the first place. Taking this stance. They have a financial responsibility with its shareholders. If there is no illegality in taking advantage of its marketing position then why wouldn’t a company take advantage of this? If there are no moneys to be made. unfair pricing and poor quality will create competition thus reducing prices and improving quality. In addition. A way to make this possible is for the government to subsidize the cost of the drug to make it more affordable for consumers.Pharmaceutical companies are in business for financial gains. private insurers paid $250 million annually in AIDSrelated medical payments. it is more important that the public can afford the medicine. A main reason for this is that the consumer activist has the consumer’s best interests in mind.

is it fair to not allow them to recover their . the price should be set only by Wellcome PLC. 3. should a life-saving drug be made available to all via the limitation of patent protection given to such drugs. If it wasn’t profitable to create and sell these drugs.” This is an initial investment made mainly by the company. Any US or foreign patient who suffers from life-threatening illness does not have the guaranteed right to a drug or drugs which treat their condition. However. no business would begin the process of making these drugs in the first place. and government subsidization of clinical trials.” This means that “the orphan drug designation for Retrovir provided a sevenyear marketing exclusivity after its commercial introduction. The majority of drugs can be considered life-saving drugs.” Without this prior investment. The way to make a profit is to sell the medicine for a price that people are willing to pay. Once a drug is developed and efficacy is provided to FDA standards. tax credits. the business made most of the initial investment so the majority of the responsibility to set the price is theirs. and eliminating “temporary monopoly. Also. In those countries. the most important aspect is to make a profit from the medicine.S. competition is then created resulting in better quality and affordable prices. “The direct research and development costs associated with Retrovir were estimated to be about $50 million” but “when the costs of new plant and equipment to produce Retrovir were also considered. House of Representatives had launched an investigation into possible “inappropriate” pricing of Retrovir. they might not have been able to create the current drug. However. no one would be able to buy the drug to help them. The limitation of patent protection is a tool available to help make drugs accessible to the masses by allowing competition. they need to set the price fairly high to make a profit.From a business perspective. This is especially true in foreign countries that the government hasn’t given any money to help create the medicine.” If a life-saving drug is developed but lengthy exclusivity is not issued to a specific company. total research and development cost estimates ranged from $80 million to $100 million. even a simple cut can lead to catastrophic consequences. It would be wise of them to set the price fairly but no one has a given right to the drug. What about the company who has invested great amounts of moneys to reach a final product. In that scenario. the government did help by titling the drug an “orphan drug. if you don’t have them when you need them. “Wellcome PLC had spent $726 million for research and development on dozens of drugs in the five years preceding approval of Retrovir without producing a major commercial success. “The Subcommittee on Health and the Environment of the U. whatever the impact on the market? a) Consumer Activist perspective: We believe the government should attempt all efforts to make life-saving drugs available to all.” This pressure forced Wellcome PLC to lower prices.” Knowing this. When it is put into prospective of an $826 million was invested to make this drug. the government won’t directly set the price but will have an effect on the pricing.

In the case of life-saving medication. we seek the benefits of all who need life-saving drugs. Limiting patent protection to life-saving drugs should be accompanied by alternate benefit options to those companies incurring in costs for R&D. If there are to be limitations of patent protection. No company wants to do the ‘grunt work’ and incur in millions of dollars in expenses to then easily (and freely) have to share its findings with the competition who will end up profiting without the risk or investment. but what it does state is that we have a right to access the things needed to pursuit our wellbeing. we the people. that all men are created equal.” This in no way states that we the people are entitled to anything free. If the probability of loss of moneys is greater than that of profitability. and at the same time allowing the end user the ease of access and benefits of the drug. that among these are Life. “We hold these truths to be self-evident.investment and generate profits? Our answer even looking at this as consumer activists is “no. Liberty and the pursuit of Happiness. that they are endowed by their Creator with certain unalienable rights. As a pharmaceutical company. have been given the gift of life and the right to live. and to reach that end product many risks and uncertainties are taken. then there need to be other options that allow businesses to recover their investments and make profits. From the perspective of a consumer activist. the citizens needing them should all have the possibility of acquiring . This is where we believe involvement from our government is needed to subsidize and make it attractable for companies to invest in Research and Development (R&D) of life-saving drugs without fear of not recovering their investment. but it would create a lack of interest for any company to invest in creating these types of drugs.” not only is it unfair. if this tool is restricted then other avenues needs to be created to allow the recovery of moneys. b) Business Perspective: Pharmaceutical companies are created to generate profits for their shareholders. the risk will not be assumed by any company. but it is clear to us that companies need to see profits for us to continue benefiting from their efforts and products. Summary: As stated by our Declaration of Independence. Patent Protection is a tool and incentive that allows pharmaceutical companies to recover investments and generate profits. millions of dollars are invested in hopes of reaching an end product.

It is comforting to think that our government has created bureaucratic tools such as patent protection to create incentives for companies to invest in the R&D of life-saving medications. Our government is created by the people and for the people and therefore is responsible for assuring our basic needs. these same tools have generated unintended consequences such as out of control pricing and the creation of monopolies.such medication without having to diminish their quality of life due to high prices. unfortunately. amongst them the opportunity to access life-saving medications. . The wellbeing of our citizens is the responsibility of our government and not of the private industries. Businesses are created to generate profits by providing the best services and products possible in a competitive market.

S. Finding of Fact#1: A concern for manufactures of home appliance was the environmental and government regulations standards that they must adhere to. refrigerators. the major appliance sector that remains constant. there will always be a market for major household appliances. there are many growth opportunities available abroad. . by manufacture smart appliances with sophisticated electronic controls and self diagnostic features. most appliance manufactures produced a limited line of appliances derived from one successful product. as sales of several products grew rapidly. washers. Many consumers are demanding appliances that are attractive. although it is mature and saturated in the United States. kitchen remodeling and the market for replacement appliances. The major appliance industry is both saturated and mature. Electrolux. All are well established in the industry and have been major players for many years. new technologies and designed were being introduced into major home appliances. The five major players are General Electric.S Major Home Appliance Industry in 2002 (Case 15) The household appliance industry is huge! The number of household appliance grows every year. because of the acceptance of the microwave by the U. The industry almost double in size during the 1960s.S. dryers. During the 1980s the industry was beginning to expand. Today's kitchens are often the entertainment center of the home. Maytag. and Maytag focus on washing machine. convenient and easy to clean. but there is one sector of the industry. Whirlpool. General Electric made refrigerators. The major appliance industry is a stable and profitable industry.U. manufactures offered a full range of products even if they did not make the items themselves. For example. During this era a company was reluctant to enter the market of another company. By 1990s. and Raytheon. By 2002. The appliances that comprise this sector are ranges. appliance manufactures were introducing energy efficient versions of refrigerators and washing machines. The manufactures have responded to the consumer demands. Many consumers are willing to pay top prices for top of the fine appliances that enhances their décor's and save precious time. new housing construction. and dishwasher. consumers. Due to governmental pressure. It was not until 1945 that firms begin to offer full lines of various appliances. U. The industry will always be affected by interest rates. but as long as consumers need take care of clothes and prepare foods. Prior to World War II. The sales continue to increase in the 1970s despite the high interest rates and inflation.

Why it is important for customers to buy energy efficient appliances? Every time a customer buys a home appliance. The appliance industry remains highly consolidated. While most industry participants achieved compliance with all regulations on schedule. Whirlpool. How was the standard for energy efficiency appliance implemented worldwide? They created an International Electro-technical Commission which serves as the worldwide standard for manufacture regardless of what country a firm is operating or selling their product in. appliances. and compactors. Jenn-Air. Theirs a big difference each customer can make by taking energy use into account in their household purchasing decision. As of 2003. you can have a positive effect on the environment.S. particularly for smaller firms. More recent regulations were aimed at reducing harmful gas emissions. Number three Maytag sells Maytag. some appliance makers resented the new regulations. choosing energy-efficient appliances is one way a customer can immediately reduce their contribution to global climate change. Products include dishwashers and compactors. By purchasing energy-efficient appliances.Government environmental regulations continued to be one of the greatest hurdles facing appliance makers. according to the Association of Home Appliance Manufacturers. and global warming. citing the capital investments required to meet the stipulations of such legislation. oil spills. markets its products under the Kenmore. and other brand names. . but at great cost to the industry in both dollars and employment. It allow for a few deviation to meet the country specific needs. GE is the number two producer of major household appliances. Finding of Fact#2: Industry consolidation was raising the competitive stakes. Performa. the number one major home appliance producer in the United States and number two in the world. and Magic Chef and Hoover floor polishers. disposals. acid rain. The act required manufacturers to cut product energy consumption by 25 percent every five years. manufacturers had more than doubled the energy efficiency of their appliances over those of 30 years prior. and some manufacturers had boost sales with environmentally friendly products. some countries were put at a disadvantage when competing on a global scale. Its products include dishwashers. The Department of Energy's (DOE) National Appliance Energy Conservation Act of 1987 had set new standards that limited energy consumption by new appliances. In fact. General Electric (GE) Appliances. and Maytag. The biggest environment problems are directly associated with energy production and use: urban smog. to mention a few. The biggest players in the appliance market are Whirlpool. Prior to the IEC being created. they are making the decision that affects the environment. as well as the small amount of energy consumed by appliances— only 4 percent. Kitchen Aid. Whirlpool. five major firms supply more than 98 percent of all U.

market. By doing this. Every time a smaller firm enters the market. because they feel a real connection to the people that work for these companies. The smaller firms tend to specialize in one specific product. As manufactures joined forces to increase investment capital and reduce research and production expenditures. Finding of Fact#3: Stronger niche producers were emerging in traditional products categories. since the average life span of certain home appliance is 10-15 years. because it tends to be 100s of smaller firms that are persuading customer to buy their product. Also. What could the small businesses do to challenge the major appliance company? I believe the small businesses must expand their product line if they are really to be competitive with major appliance industry.S. because they are normally owned by a specific family. By penetrating the foreign market. companies would continue to expand. The U. They are a real challenge to the powerhouses that traditionally sale home appliance products. I recommend that the company allow the customer to trade-in the older appliance for the newer version. the U. . Europe posed the greatest prospect for profit. the major appliance company are losing customer.What strategy did U. the number of competitors in the appliance industry lessened. The United States companies focus their expansion on foreign markets that offered the greater potential for growth. How could the major appliances company remain competitive with 100s of smaller companies? I believe that the major appliance company must offer special to consumer so they would want to buy their product.S. major appliance industry will be targeting the customers that can't afford the cost of the new appliances. Also. they should consider offering repair serve to the customer on all major household appliances. There are number of smaller major home appliance companies that operate in North American. You get to know them. companies were very active in the acquisition of foreign companies. because foreign countries were trying penetrating the U. The older appliance could be refurnish and then sold for a reduce price.S. The small business will always be at a disadvantage when competing against a major appliance company. The company will also enhance their reputation as a leader that cares about people and the environment.S appliances industry use to remain competitive with foreign countries? To remain the world's leaders in the appliance industry they seek out joint ventures with other countries. The customers are drawn to the smaller firms. They understood the needs to seek out opportunities abroad. This would increase their annual profit so they would have the financial stability to market product and services to different segment of the population.

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