Systematic External Environmental Audit

Question: Conduct a detailed and systematic external environmental audit of the Chinese online video market. This should include as a minimum; PESTLE, 5-forces, industry life cycle and competitor analysis (Johnson et al, 2014). Overall, what do you conclude about the opportunities and threats for PPS.tv? Answer: In China, they had the worlds second largest internet user base in the year of 2007. In the year of 2008 they took over United States and claimed the first position in the market. According to Hu (2014), China acquired $65 million from their online video business in the year of 2006 which reached an amount of $500 million in 2010. Various external environmental impacts played a major role in this success of video market in China. Some theory models and analysis are discussed to describe the impacts of those external environmental effects (Lai and To 2012). To achieve success in a competitive market it is very important to develop strategies that will help a company to provide a higher level of performance than their competitors. It is called as core competencies. To understand the core competencies of video market in china it is important to understand the internal and external factors (Zhao and Keane 2013). PESTEL Analysis A PEST analysis serves to examine the external environment in which the organization performs to recognize the key changes that are occurring (Hasan 2013). Political factors Political factors include tax policies, labor law, environmental law, tariffs and political stability. It is the Government who decides which contents will be shown in the television and internet and which contents will be banned or removed. This is an external force that affects the PPS.tv and chinas online video distribution market. Political factors also have legal factors in it. Legal factors like discrimination law, consumer law, antitrust law, employment law and health and safety law is some of the external factors that affect the business strategies of PPS TV (Ho 2014). Those laws also create impact on how the company will operate. Political limitations will emerge as a weakness for PPS TV as it will prevent them to Economic factors Chinas economy in online video market is growing at a rapid speed. They have the largest internet user base in all over the world which made PPS.tv to expand their online advertisement market as a critical source of revenue. Nowadays, Chinese consumers are habituated to get online videos and music for free. PPS.tv understood this fact and didnt waste any time and decided that they will expand their business online advertising business in China. Social factors Social factors include cultural characteristics, health awareness, population growth rate, age distribution, career attitude and accent of safety. Current trends on social factors affect the demand for a companys product and how that company operates (Sun 2013). In china, demand of online music and video is enormous. It has become a social trend to download latest music and videos for free. This is another external factor that will provide a huge range of opportunity to PPStv. For example a youth population will show more interest in online services that a aging population. China has the largest old population in the world as nearly 119 million people of china are above 65 years old (Towso and Woetzel 2014). According to Yksel and Develo (2012), these numbers will increase in the future as it will acquire one sixth of the entire population by 2018. Technological factors Technology creates a huge impact on the progress of an organization. For PPS.tv, it is important that the citizen of china is familiar to the smart phones or iphones. The more people will use smart phones, the more successful PPS.tv will become (Yang 2013). Now, it is a known fact that China is a big market for smart phones. The local smart phones brand is so famous that they are competing with even Samsung and Apple. So, PPS.tv has a good chance to grow their business in China (Yaprak 2012). Five Forces analysis Michael porters five forces analysis is a model used to explore the environment where a company or organization is operating to create competitive advantage. Five important key areas of porters models are hereby described to show its impact on PPS.tv (Allio and Fahey 2012). Threat of new entrants According to porters model there is a threat exists in the market for the companies who are entering as a fresh brand. Several aspects are there to create obstacles in the path of a new company like, Loyalty to existing brands High fixed costs Absence of resources Government restrictions Brand equity As PPS.tv is entering as a new company in the Chinese market, they will face huge competition from Tudou, Chunlei and Bit torrent as they are the top downloading sites in China (Lee 2012). Power of suppliers PPS.tv must allow the suppliers to have enough power to impact the margins and volumes of the company. There are some reasons that a supplier must have power like, Presence of lesser number of suppliers No substitute Product is very important to the buyer and they cannot do without it Suppler industry has a higher profitability that the buying industry Power of customers This method states how much pressure customers can place on the product (Dobbs 2014). If one customer can create large impact to affect a companys margins and volumes then they will hold substantial power. Some reasons that customers might have power are, Lesser number of buyers Usage of large volumes Switching to another product is simple The product is not important to the buyer and they can survive without it Customers are sensitive to price Volume of buyers Price of total purchase Availability of substitutes This process indicates how much chances are there that a buyer will switch to another competitive product. If the cost of switching is negligible then this possesses a great threat. Here are the few factors that can affect the threat of substitutes (Yang and Delios 2015). Relative price performance of substitutes Low buyer switching cost Change in technology and product innovation Another reason is similarity of the substitutes. For example, if price of coffee rises, then a buyer will switch in to tea (Olande 2012). However, as PPS.tv will provide free downloading of music and videos, cost is not a concern for them. Their main concern would be speed. If the downloading speed from their site is satisfying or high then the consumers will download music and videos from their site. Otherwise they will look for substitutes (Saunders 2012). Competitive rivalry This describes the intensity of competition between existing companies (Balland 2013). For PPS.tv, the competition will be huge as there are lots of online downloading sites are present in china that is providing great services (Dhillon 2013). Basically highly competitive market results from these factors, Many companies who are providing same products with no dominant Negligible differences among competitors product and services Only chance of growth depends of stealing each others customers Competitor analysis Competitor analysis is a common technique to construct a competitor array. The different steps are, Understanding the scope and nature of the industry Finding out the competitors in the market Determining who are the potential customers are what their expectations are Determining the key success factors Compare with the competitors on each key success factors Industry life cycle Like every person has to go through different stages of life, every organization has to go thorgh different industrial life cycles. Industrial life cycle has four stages which are start-up, consolidation, maturity and relative decline stage. Start up stage In this stage it is difficult to understand whether the company will become successful or not. In this stage the risk is very high. If the product of the company has many more similar competitors in the market then the risk is high that the company will not achieve success. But if the product is new then there is a good chance that there will be a rapid growth (Schawel and Billing 2012). As for PPS.tv, many more music and videos downloading sites are present in the China market. So there is a chance that PPS.tv will not become successful. But the other part is, china has the largest online users base in the world (Hussain 2013). So PPS.tv is thinking that entering Chinese market with some competitors in it will not affect marketing goals as the demand is too high. Consolidation stage Once a company has survived the initial stage it will enter into consolidation stage. In this stage the company will become stable and market share can gained more easily (Yang 2013). Once PPS.tv will survive the initial stage they will acquire a better market place. Therefore, their growth will be faster than the rest of the economy. Maturity stage At this stage, companies are called as cash cows as their cash flows are consistent but offer very little opportunity for growth or profit (Darroch 2014). At this stage the product more and more standardized and it forces its producers to compete heavily on price basis. Reinvesting the cash flows is not an option, it is best to be milked from. Relative decline In this stage, the important features are, Cost becomes counter optimal Sales volume either will decrease or will stabilize Decrease in prices and profitability The company has been planning to expand their business in China and in this regard, is highly important to discuss about the internal as well as core capabilities of the company. Therefore, the first most important objective of the company is to focus on the small and relatively immature online advertising market in China, which is largely dominated by much larger as well as more established portal issues (Yang 2013). Apart from that, the company has shed focus on attempting to internationalize the service of the company in the United States where money is more available than any other parts of the world. The company is rich with its strong technical suit and thus they can patent the highly innovative protocol technology (Wang et al. 2012). Along with that, the company is required to focus on licensing the technology to the leading content distributors abroad (Yang 2013). It has been found that the online video space of China has been gradually becoming more competitive with the pass age of time and in this regard, PPS.TV must not waste time. Speed is one of the facilities of this company and this is one of the internal resources if the company. This online video site must focus on this pare carefully to reach the target market easily. The company is an enough large provider to generate volumes of the trusted users that are sufficient to attract a wide number of the new customers. Low operation costs are other major internal resources of the company that might help them to take entry into the market. PPS require only 1/100 of the conventional bandwidth in order to provide its VOD service (Tobescu and Seuring 2015). In compare to this company, other companies cost more than PPS.TV. Superb user experience is another important internal resource that this company has been enjoying over its competitors. On the PPS.TV, customers could easily start watching a video as soon as they click on the relevant link (Rojas and Kathuria 2014). The users of PPS.TV need not to wait for buffering and downloading. Moreover, it has been found that PPS.TV has gradually improved with the course of time. One of the most important things about PPS.TV is that mire the people have watched the PPS.TV services, the faster it has become (Brown 2014). The PPS.TV service support all types of popular formats that takes into account wmv, rm, rmvb, mp3, avi, wma, asf, mpg, flv and mid (Wang 2013). This allows the users to consume a wide range of the different kinds of videos, cartoons as well as music content. PPS.TV was seeking to successfully promote its server software as well as the transmission protocol as the standard of the video serving and transportation by working successfully with the companies in the overall video industry that takes into account hardware provides, content providers and the browser providers (Baliamoune and Garello 2014). The company has successfully protected its intellectual property and this is one of the core offerings of the company, which has differentiated this company from the existing competitors. However, the company in the earlier time faced some problems to grow their user base, but with the course of time, the company has grown a vast range of the customer base and this has encouraged the comp any to expand their business in China (Tsai and Lin 2015). In this part, it is highly important to discuss about the strengths and the weakness of PPS.TV services (Pps.tv 2016). The company has successfully experienced the business units in a comparatively small time. The domestic market of this company is strong enough and this is considered as one of the strengths of the company (Ng 2014). The company within a short time period has gained high profitability and revenue and this is undoubtedly one of the strengths of the company. Apart from these, the high growth rate of the company in the strong competitive business scenario is one of the strong places of the company. It has been found that the income level of this company is at a constant increase and thus the company enjoys a preferable position among the existing competitors. The gradual expanding market of online video streaming in different parts of the world has indulged the business in several parts and this is no doubt one of the strengths of the company. The marketing and the mana gement team of the company has been successfully expanding internationally to the markets with more developed inline advertising industries, where the users are willing to pay for the desired content. This has successfully motivated the company to take entry into the China market. The patent system of the company as well has played a significant role to motivate PPS.TV services to expand the entire business. After discussing the strengths of the company, it is no doubt to say that discussing the weakness of the company is another major part and in this part, it has been done. The company has largely invested in the research and development operations and this has caused huge, which is one of the weaknesses of PPS.TV services. The tax structure of the company is considered another weakness of the company, as the tax structure has affected the growth if the company to some extent. Possibility of high loan rates in the operating areas is also considered as the weakness of the company (Miyoshi 2012). However, the company has stated that the operating cost of the company is less, though it can be said that the cost of the company is comparatively high. This affects the growth of the company in several areas. The small business units of the company have also been considered as another weakness of the company. The government regulations in the operating countries are considered as one of the st rong weaknesses of PPS.TV services and the company is required to deal with this part legally as well as carefully. The growing rate of competition and the lower rate of profitability demotivate the company sometimes and the management of the company is required to shed focus on this pare carefully. Ansoff gave a definition for product marketing strategy as a joint statement of a product line and related set of missions which the products are designed to fulfill. According to Gong (2015), there four growth alternatives, Market penetration In this strategy, the organization tries to develop them using its existing products and services in the existing market. This can be achieved by selling ore products to the customers or by finding new customs. For PPS.tv, it not possible to provide new products to the customers as their goal is to provide free music and videos to the customers. However, to gain new customers they can do few things. They will have to find out the flaws in other companies who are offering same service. Like, if the downloading speed of Bit torrent is 500kb/hour on average, they can upgrade their system which will provide more than that to the customers (Lai and To 2012). Besides, better connectivity will allow them to post new music and videos before Bit torrent or other competitions. This will attract new customers. Market development In market development, a company tries to expand into new markets using its existing offering. For example, PPH.tv figured out that China has biggest market of online users in the world. This why they did not waste any time and decided to enter in China market with their existing service of online advertisements and all (Huang 2012). Product development In product development strategy a company tries to invent new products and service in order to and more growth and new customers. Extending the product range is a good idea to develop the product. For PPS.tv, it is quite tough to extend their product. They provide free downloading options to the customers. This business does not have much score of extending. What they can do is extend their market reach or extend the availability of their downloading site. Like, if the customers of iPhones cannot access their sites, PPS.tv can extend their reach by joining hands with Apple. Diversification In diversification a company tries to grow its market share by introducing new offerings to the market. It is known as the most risky market strategy as both product and market development is required. For PPS.tv, they can apply different offers to attract the customers towards it. This sit will have a common member and VIP members options. VIP members will have the option to download latest music and videos before the common members can do. VIP membership will be a paid membership. So PPS.tv can offer discounts on VIP membership so that more customers get attracted to the site. This will make their product popular and this will help to improve their market growth. References Allio, R.J. and Fahey, L., 2012. Joan Magretta: what executives can learn from revisiting Michael Porter.Strategy Leadership,40(2), pp.5-10. Baliamoune-Lutz, M. and Garello, P., 2014. Tax structure and entrepreneurship.Small Business Economics,42(1), pp.165-190. 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