Case scenario:
ITeam, Inc. is a high-tech company based in Walnut Creek, California that produces, markets, and sells computer systems, peripherals, and other consumer electronic products to corporate clients and electronics retailers. iTeam has grown significantly in its first five years focusing on selling its products locally. Recently they have expanded nationally putting them in direct competition with larger, global firms. These larger companies can offer equal or lower prices with greater product diversity and more value added services.
In addition, iTeam's cost structure has increased which has lowered their profit margins. Predicting future success is difficult since sales in this industry are difficult to predict as the high tech market has been erratic. The recent decision to source product from China has resulted in reduced product quality and political pressure domestically. In addition proposed EPA legislation if passed will be costly to producers of electronic goods. Lastly, iTeam has not established a formal sales program and relationship selling has been non-existent.
Variables in the external environment that effect sales consist of economic, legal and political, technological, social and cultural, and natural. There are many external environmental factors that are likely to affect iTeams future. The most likely to negatively affect this companies future is Global competition. Their recent national expansion from a local niche company to a national sales organization has put them in direct competition with larger companies who have the ability to price their products at the same level or lower than iTeams. In addition, these companies can offer greater product diversity and more value added services.
The recent move to source product from China has resulted in reduced product quality and caused political and social pressure for eliminating U.S. jobs. Also of serious concern is the potential level of lead in products manufactured in China. This could open the company up to legal risk from potential lawsuits and reputation risk if they were to have unfavorable media coverage.
The rapidly changing Technological environment is creating the need for extensive Research and Development to create constant innovations to keep up with the competition. The need to continually spend significantly on R & D to remain competitive in the market place is a significant factor.
If CEO Andrew Taylor chooses to move forward with an expansion into Europe and China, it will require a significant investment in an expanded supply chain and new distribution channels. It would also create the need for an improved manufacturing system to increase production capacity. Relationships would need to be developed with new customers and suppliers and iTeam's current sales force is not experienced in this area. These challenges will clearly affect iTeam economically.
Variables in the internal environment include goals and objectives as well as internal culture, personnel, financial resources, production and supply chain capabilities, service capabilities and technological capabilities including but not limited to Research and Development. iTeam does not appear to have a well defined mission and even CEO Andrew Taylor is not convinced that the industry growth projections are accurate. Since this company was formed as an entrepreneurial start up by Mr. Taylor and several of his classmates from business school, the creative spirit has been allowed to flourish, resulting in a group of individual contributors unskilled in relationship building and most likely focused on how large they can get their commission compensation. There is currently no incentive for the sales team to spend time building new relationships with potential new suppliers or long term prospects.