Peer Review Activities

Industry Analysis

Industry Description

Audio and Video Equipment Manufacturing – 334310

“This industry comprises establishments primarily engaged in manufacturing electronic audio and video equipment for home entertainment” (Conference Technologies, Inc). Home audio equipment is an industry that has been big in the past few decades and is an industry that is projected to keep growing in the future.

Size Trend Maturity

The home stereo industry is just about 100 years old and has come a long way since then. Record players, pre-amps, and tower speakers were the main parts of stereo systems when they were first introduced to the public, however now stereo systems can consist of the speaker, a WiFi connection, and a smart phone to provide people with better quality and more convenience. One report estimates that the size of the industry will grow to a $22.5 billion market globally by 2020 (Radiant Insights). In the area that Stanek’s Sound will be operating, over $46 million is spent a year on everything audio (ESRI).

Seasonality and Sensitivity

Research has shown that since 2001 the most popular time to buy a stereo system is in the spring whereas the least popular time to buy one is at the beginning of the year. Apart from a few outliers here and there this pattern is incredibly consistent year after year (Berman, Pfleeger, 1997).

Macroenvironment

New tech plays a huge roll in this industry. Tech shapes the way home audio systems are built and what features are built into them. The biggest change is the connection of the system, traditionally speakers are connected to a receiver via speaker wire, however with the Stanek’s Sound system there is no need for a receiver nor speaker wire. With new wireless technology speakers can connect through WiFi without ever physically connecting to the source of the content the speakers are playing. Technology can also influence the longevity of a company in this industry, if a business doesn’t constantly pay attention to new technology that is impacting the industry then that company is going to be left behind and die out.

Sociocultural forces can revolutionize and reanimate products like the Stanek’s Sound speaker line up. Record players are a good example, turntables are an outdated form of media that is outselling the newer and more convenient medium for content because of a huge trend that is influencing a generation. There is no way a trend can end the use of a speaker, however, fads can damage companies

The economy is a factor that has a huge effect on this industry, it can impact sales drastically. This was recently as 2008 when the industry took a hit because of the financial situation that a lot people were in. It took a while for companies to get back to their normal state, below in figure 1 is a visual representation of that fall and climb of audio equipment sales since the stock market dipped.

figure 1

This industry is reliant on manufacturing products in other countries so if our government decides to introduce any new tariffs, that can have an enormous impact on the industry. Government can also strain relationships with other countries making it harder to do business with them.

In terms of environmental forces this industry relies heavily on raw materials. The industry is also concerned with the pollution the environment because of the actions that the government can take to regulate production because of pollution.

The legal system in the states isn’t the biggest concern to this industry, however the legal system in foreign countries is very important. Having less regulations when manufacturing these products helps keep the costs down and profits up (slideshare.net).

Factors of Success

Technology is an ever-changing industry and because of that Stanek’s Sound needs to be able to adapt to any new form of technology, trends, or research. The seasonality of the product is very clear and has been following a certain pattern for over 15 years so being able to predict sales and adjust operations accordingly is something that can be very valuable.

COMPETITION ANALYSIS

Direct and Indirect

As a manufacturer with a storefront location Stanek’s Sound will have an interesting spectrum of competitors. Direct competitors to the company will be stores such as Music Lovers, Elite Audio Systems Inc., House of Music, and Dijital Fix since they are audio stores in San Francisco. The indirect competitors would be companies like Bose, Polk, Samsung, Sonos, LG, Sony and Klipsch because they all sell home theater systems though other retailers.

Direct

San Francisco doesn’t have a lot of audio companies in the city itself which is great for Stanek’s Sound because it gives them an opportunity to come into that area as a big competitor. Forbes claims that 82% of customers do research online before they buy. After looking at and navigating through all the websites of the audio shops in San Francisco some businesses were left out of the direct competitors’ website based on their websites’ ease of use, lack information of the business, and lack of products. The few that are direct competitors are not only speaker retailors, but are also installers and designers so they do what Stanek’s Sound does and more.

Indirect

The indirect competitors of Stanek’s Sound are Bose, Polk, Samsung, Sonos, LG, Sony, and Klipsch. These companies are indirect starting off, but will hopefully be bigger competitors as Stanek’s Sound grows as a business. However, now they are indirect because they all make similar systems to the lineup that Stanek’s Sound offers. They are still a competitor because when Stanek’s Sound is being sold in more than just their storefront location they will have to compete side by side with those manufacturers.

Competitive Matrix

Five Forces of Competition

Bargaining power of customers is slim to none in this industry. At smaller retailers, there might be a little more power for the customers, but for the most part the manufacturers are going to be the ones setting the prices.

Bargaining power of suppliers refers to how much power the suppliers have to change services and raise prices. Either of these can cut into a retail stores profit margins. Examples of these suppliers are: employees, wholesalers, and companies that transport the products.

This industry has some threats of new entrants, for example, Bose who usually sells through retailers now has a few showrooms across the country. Big companies like that can create a threat because of the name behind them, however because it is a store dedicated to one brand, their selection can be slim. Entrepreneurs also pose a threat as new entrant because they can take away from the market share an existing company has.

Threat of substitutes in my industry would be Bluetooth speakers. Bluetooth speakers unlike home theatre speakers are portable, cheaper, and usually have worse sound quality.

Rivalry among competitors is very interesting because the intensity can be different based on how the rivalry is defined. Size and saturation of the market can also play a role in defining the rivalry, competitors that compete with the price of their products are usually in a bitter relationship (Apple vs Samsung).

Barriers to Entry

There are quite a few barriers to entry to this industry including but not limited to: Startup costs, technology, product differentiation, little market share, and brand recognition. Startup costs are going to be one of the most difficult ones to get past because between rent in a big city, renting the equipment needed to manufacture each part of the product and then paying employees to assemble the product costs will build up. Technology is an ever-changing variable that will needed to be considered when starting any company. Product differentiation, little market share and brand recognition are all barriers that come with breaking into an industry with a lot of competition which is an understatement for this industry.

TARGET MARKET

Target Market

The Stanek’s Sound client is many things. According to online resource BrightLocal consumers will travel 18 minutes to get to a specialist shop. The target market lives are within 18 minutes of my store, has a disposable income of $50,000 and up, and is between the ages of 25 and 55. This target market does not have a specific gender.

TMP and Sales Potential

Total population within parameters: 762,156

Percent of people 25-55: 58%

Percent of people with a disposable income of 50,000+: 15%

Frequency: every 7 years

Competitors: 4

TMP = 762,156 * 1/7 = 108,879

Sales Potential = 108,879 * .15 * .58 = 9,472

STRATEGY POSITION AND RISK ANALYSIS

Stanek’s Sound has quite a few strengths such as Price compared to rivals, product innovation capabilities, quality, knowledgeable employees, and company size. When looking at competitors whether it be direct or indirect Stanek’s Sound provides a quality product while not having the sky-high prices that the direct competitors have with their flagship model speakers and installation services braking the bank. Being able to be competitive with the pricing model of the indirect competitors is important as well and gives the company I nice window to price their speakers how they see fit. The wifi capabilities of these speakers allows them to do more than just project sound from a TV or phone, home automation is a massive thing with more and more companies becoming compatible with Amazon Echo or Google Home. Product knowledge is by far one of the most important things to Stanek’s Sound, having employees that know the product front and back is key. Knowledge will help build sales, sign accounts, and assist customers in operating their own Stanek’s Sound set up. Company size is a strength because as a small company there is not a need for a lot of employees.

Stanek’s Sound does have weaknesses, especially for a startup company in a big industry, some of those weaknesses include: too narrow of a product line, being behind rivals in e-commerce capabilities, no name recognition, company size, cannot service those with a low budget. Many of these weaknesses will fade with time, but as a new company there are always some concerns. One of the biggest concerns being there is no name recognition, marketing will play a big role in eliminating this weakness. Company size is on the list as a weakness as well because as a small company Stanek’s Sound doesn’t have all of the resources that bigger companies have to drive sales, gain more market share, or streamline the process of getting the product manufactured to getting the product in the customers home.

Being in the technology industry there are a lot of opportunities to build the company and create a great experience for the customer. One of the easiest opportunities Stanek’s Sound has is being able to adjust to trends, earlier it was mentioned that turntables are very popular right now. Being able to produce a wireless dongle that can plug into RCA (output for a turntable) that would then send a wireless signal to the speaker system would be a reason as to why Stanek’s Sound could the bestselling sound system throughout that trend. It would not be just about fads either, having adapters of all kinds that could integrate past, present, and future technologies would also be an opportunity for the company to gain market share. The growth of the industry would also be an opportunity for growth of the company. There is a growing demand for home audio systems as previously stated which means that there is a chance for expansion in terms of product line, geographical expansion, and staff expansion.

Just like every other company starting out, Stanek’s Sound would have threats. The two biggest ones being changes in technology and bigger companies. It was mentioned earlier that changes in technology can be a good characteristic for this company, however it can also be detrimental. In the fast pace world that we live in customers are up to date on a lot of the newest product on the market, how they work, and why they want it. If Stanek’s Sound as a company does not adapt quickly enough then customers can take their business elsewhere without giving it a second thought. Bigger companies are also a threat because there are a lot of them in this industry and because a lot of them are some of the most recognizable companies in the world.

Best-cost provider

Stanek's Sound is focused on quality and is an upscale product. They have always stated that Stanek's Sound is a great price at a lower cost than similar products and that is exactly what the best-cost provider is all about.

References

[Author Removed at Request of Original Publisher]. "Mastering Strategic Management." 3.4 Evaluating the Industry | Mastering Strategic Management. University of Minnesota Libraries Publishing Edition, 2015. This Edition Adapted from a Work Originally Produced in 2010 by a Publisher Who Has Requested That It Not Receive Attribution., 22 Mar. 2016. Web. 13 Feb. 2017. <http://open.lib.umn.edu/strategicmanagement/chapter/3-4-evaluating-the-industry/>.

Consumer electronics manufacturing, including audio and video equipment, stereos, TVs and radios industry (U.S.) analytics, extensive financial benchmarks, metrics and revenue forecasts to 2023, NAIC 334310 published november 29, 2016. (2016). (). Houston: Plunkett Research, Ltd. Retrieved from https://login.glacier.sou.edu/login?url=https://search-proquest-com.glacier.sou.edu/docview/1855897578?accountid=26242

Gordon, Jack. "Problems With Sociocultural Forces in Businesses." Problems With Sociocultural Forces in Businesses | Chron.com. N.p., n.d. Web. 13 Feb. 2017. <http://smallbusiness.chron.com/problems-sociocultural-forces-businesses-78141.html>.

Hale, Danielle. "Seasonal Patterns in Home Sales Data." Economists Outlook. N.p., 29 Feb. 2012. Web. 13 Feb. 2017. <http://economistsoutlook.blogs.realtor.org/2012/02/29/seasonal-patterns-in-home-sales-data/>.

Insights, Global Market. "Home Audio Equipment Market Size worth $23.97bn by 2022: Global Market Insights Inc." GlobeNewswire News Room. N.p., 29 Sept. 2016. Web. 13 Feb. 2017. <https://globenewswire.com/news-release/2016/09/29/875616/0/en/Home-Audio-Equipment-Market-size-worth-23-97bn-by-2022-Global-Market-Insights-Inc.html>.

Insights, Radiant. "Home Audio Equipment Market Worth $22.50 Billion By 2020 : Radiant Insights,Inc." GlobeNewswire News Room. N.p., 17 Feb. 2016. Web. 13 Feb. 2017. <https://globenewswire.com/news-release/2016/02/17/811227/0/en/Home-Audio-Equipment-Market-Worth-22-50-Billion-By-2020-Radiant-Insights-Inc.html>.

Manan, Maher. "SONY MICRO AND MACRO ENVIRONMENT." Share and Discover Knowledge on LinkedIn SlideShare. N.p., 02 Jan. 2016. Web. 13 Feb. 2017. <http://www.slideshare.net/mahermanan27/sony-micro-and-macro-environment>.

Marketsandmarkets.com. "Wireless Audio Market by Product (Soundbar, Speaker, Headphones, Headset), Technology (Bluetooth, Wi-Fi, Sonos, AirPlay), Application (Home Audio, Consumer, Automotive, Commercial) and Geography - Global Forecast to 2022." Wireless Audio Device Market by Technology - 2020 | MarketsandMarkets. N.p., Apr. 2016. Web. 10 Feb. 2017.

"North American Industry Classification System (NAICS) | Conference Technologies, Inc."Home. N.p., n.d. Web. 10 July 2017.