BUS 225 Southern New Hampshire University Diversification Decision Presentation

BUS 225 Milestone One Template
Executive Summary
January 24, 2021
Description of Problem
This report was prepared in response to the growing need to diversify our product portfolio to take
advantage of commercial opportunities in other industries. In recent years, the financial outcomes for ABC
Engines
Ltd
have come
under
increasing
pressure
because
of
the
shifting
business
environment. The weakening financial performance in the automotive industry requires a re-examination
of the automotive industry, determinants of success, and business opportunities that might exist in
alternative industries. This executive summary highlights the automotive industry, market trends, and
compares these market conditions with the U.S telecommunication industry.
Description of the Current U.S. Automotive Industry
The U.S Automotive industry boasts one of the largest automobile markets globally. Overall, the U.S
automotive industry ranks second in the global market for production and sale of vehicles. The industry is
dominated by major manufacturers with the FCA, General motors, and Ford accounting for over 50% of
the market share (Abolhassani et al., 2019). The three companies produce significantly more vehicles,
procure more parts, and invest in research and development at a greater pace than the remaining industry
players.
The light vehicle sales topped 17 million in 2019 accounting for over 97% of the total vehicle sales in the
market. This was the fifth year in a row when sales surpassed or reached 17 million units. In the same year,
the automobile industry contributed 2.7% of the national GDP translating to approximately $545 billion.
However, the seemingly strong performance in 2019 was in fact a drop of 1.3% on a year-to-year
basis (Abolhassani et al., 2019). 2018 recorded the highest sales in recent years extending robust growth in
the industry over the past decade.
The industry is projected to experience a significant drop in demand for motor vehicles over the next few
years as a result of the coronavirus pandemic. However, a steady increase in the demand for electric cars is
expected to drive demand and spur industry growth in post-Covid-19 economic conditions.
Current Automotive Market Trends
The U.S automobile market trend is shifting towards electric and hybrid vehicles. While gas-powered
vehicles remain the overwhelming majority on the roads, environmental concerns have contributed to the
growing shift in the demand for electric vehicles. In 2015, the electric vehicle market share stood at 0.5%
of the overall automobile industry (Krasniqi & Hajrizi, 2016). By 2019, this market share had grown to 3%
indicating the growing interest in renewable energy. Tesla Motors and General Motors are some of the
leading players in the electric vehicle sector driving it through research and development.
Besides the trend towards renewable energy, the U.S automobile industry has witnessed a trend in
technological adoption. A significant percentage of the market that is showing interest is semi-autonomous
cars. Self-driving vehicles exploit artificial intelligence to move from one region to another with minimal
driver intervention (Krasniqi & Hajrizi, 2016). The market is also shifting towards larger cars with more
legroom for comfort. Ultimately, consumers are more interested in safety over and above any other feature
of an automobile.
Description of the U.S Telecommunication Industry
The U.S telecommunication industry is highly competitive. The industry has recorded substantial growth
over the past decade powered by discoveries in cellular connectivity and a boom in smartphone
technology. Major industry players include Verizon, AT&T, T-Mobile, and U.S Cellular. The industry
revenues for 2020 were estimated at $581 billion with the transition to 5G networking expected to provide
a strong impetus for economic growth (Kalem et al., 2020). Full implementation of 5G networking is
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anticipated to create new opportunities in the industry and to provide a bedrock upon which other industries
will thrive post-coronavirus pandemic. The merger between T-Mobile and Sprint in April 2020 caused
seismic disruptions in the industry. The resulting T-Mobile U.S Company enjoys a greater customer base
propelling it to the second largest telecommunication company after Verizon. The 2020 third-quarter results
showed that T-Mobile U.S had generated revenues of $19 billion representing a 45.1% increase on a yearto-year basis (T-Mobile Q3 Results, 2020).
Current Market Trends in the Telecommunication Industry
The telecommunication industry experiences tremendous changes spurred by information technology. The
U.S telecommunication industry is in the middle of the 5G phenomenon as the major trend shaping
industry practices and consumer expectations. Consumers are most interested in ultra-low latency,
enhanced data sharing speed, and improved efficiency (Kalem et al., 2020). However, consumers are also
persuaded by data-protection abilities in the middle of increased broadband services and the proliferation
of the internet of things (IoT) devices. Video streaming services and online-based gaming experiences are
some of the services that will drive consumption as well as competitiveness in the foreseeable future.
Appendix A
Explanation from Porter’s Five Forces Analysis of the Telecommunication Industry
Porter’s five-force analysis indicates that the rivalry among existing competitors is high. Several industry
players are offering similar products and services. The profitability margins are small making it essential
to compete based on customer volume and technological efficiency (Kalem et al., 2020). The exit barriers
are also significantly high because of the fixed costs involved in establishing a company in the
industry. However, the threat of new entrants is low because of the costs involved in establishing and
running a telecommunication company. The bargaining power of buyers is also moderate because of the
limited number of companies from which customers can choose to subscribe. However, the cost of shifting
from one firm to another is low granting buyer’s moderate leeway. However, the ability to influence
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outcomes is also limited. The threat of substitute products is moderate in the telecommunication
industry (Kalem et al., 2020). The uniqueness of communication services such as voice and data
sharing provided
by
the telecommunication firms makes
the
threat
of
substitute
products
minimal. Similarly, the power of suppliers is moderate. Firms can purchase raw materials from several
suppliers. If materials from one of the suppliers are not suitable, it is easy to shift to another supplier because
of the low switching costs.
Appendix B
Summary of Findings from Porter’s Five Forces Analysis Comparing Both Industries
A comparative analysis of the U.S automobile industry and the telecommunication industry show
disparate commercial opportunities. Growth in the telecommunication industry is on an upward trend
while the automobile industry has recorded negative growth over the past two years. The transition from
4G to 5G networks promises to create numerous business opportunities that ABC Engines Ltd can exploit
with a successful strategic marketing plan. Although competitive rivalry is high, the low threat of new
entrants negates this threat substantially. ABC Engines Ltd. should proceed to take advantage of the
business opportunities in the telecommunications industry.
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References
Abolhassani, A., Harner, E. J., & Jaridi, M. (2019). Empirical analysis of productivity enhancement
strategies in the North American automotive industry. International Journal of Production
Economics, 208, 140-159.
Reimers, J., Dorn-Gomba, L., Mak, C., & Emadi, A. (2019). Automotive traction inverters: Current status
and future trends. IEEE Transactions on Vehicular Technology, 68(4), 3337-3350.
Krasniqi, X., & Hajrizi, E. (2016). Use of IoT technology to drive the automotive industry from
connected to full autonomous vehicles. IFAC-PapersOnLine, 49(29), 269-274.
Kalem, G., Vayvay, O., Sennaroglu, B., & Tozan, H. (2020). Technology Forecasting in the Mobile
Telecommunication Industry: A Case Study Towards the 5G Era. Engineering Management
Journal, 1-15.
T-Mobile Q3 Results. (2020). T-Mobile Crosses 100 Million Total Customer Milestone and Raises
Second Half 2020 Financial Guidance across the Board with Strong Third Quarter 2020 Results.
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Appendix A
Appendix B
6
Graphical Representation of Industry Data
Findings and Decision Modelling
A Presentation By :
Student’s Name:
Instructor’s Name:
Course :
Date:
Sales in NAFTA Region
Current U.S Automotive Industry: Sales by Fuel
Type
U.S Automotive Industry: Trends by Fuel Type
Trends in customer demands such as vehicle
safety, extra features, and technology
Source: https://www.ericsson.com/en/blog/2020/12/consumer-trends-automotiveindustry-2020
Trends in the body types of vehicles sold
(SUVs, trucks, sedans)
Trends in the U.S Telecommunication Industry
Expected Growth areas
Sales by Products/Services and Customer
Demands
Industry Data Summary
• It is time to divest from the automotive industry because of declining returns
• The automotive industry performance is on a decline compared with the
telecommunication industry
• The future of automotive industry is in the production of electric and hybrid
vehicles
• The telecommunication industry is currently on a decline. However, industry
projections indicate strong performance over the coming years.
• The future of the telecommunication industry is in data services.
Rational Decision Making
• Decision based on objective facts void of sentimentalism
• It is a multiple-steps analysis involving problem identification, evaluation of
alternative solutions, and selection of best course
• Suitable in high-stakes decision-making process.
The Intuitive Decision-Making Model
• Decisions made on the basis of perception, sentiments, instincts,
and feelings
• No conscious thoughts, rationale or evidence is used to determine
the course of action
• Associated with flawed information and insufficient consideration
of alternatives (Intuitive Decision-Making, n.d).
The Recognition-Primed Model
• Decision process involves three-step problem-solving techniques:
• Experiencing problems
• Evaluating the situation
• Implementing decisions.
• Preferred where there is insufficient amount of information to cause indepth analysis of the problem at hand.
Choice of Decision-Making Model: Rational
Decision Making
• Rational decision-making is appropriate for this report
because:
• It fosters application of reliable facts
• The amount of costs involved in investing in the telecommunication
are huge requiring rationalizing all facts.
• The method allows for selection of the best course of action from a
range of potential courses of action (Chi, 2018).
References
•
Intuitive Decision-Making. (n.d). When is intuitive decision making beneficial? Decision Innovation. https://www.decision-makingsolutions.com/intuitive_decision_making.html
•
Chi, C. (2018). Rational Decision Making: The 7-Step Process for Making Logical Decisions.
https://blog.hubspot.com/marketing/rational-decision-making
•
The Recognition-Primed Decision Model. (n.d). Free Management Books. http://www.free-managementebooks.com/news/recognition-primed-decision-model/
•
Libby, T. (2015). SUVs pass sedans as most popular body type in US auto market. HIS Markit. https://ihsmarkit.com/researchanalysis/q22-suvs-pass-sedans-as-most-popular-body-type-in-us-auto-market.html
•
Reimers, J., Dorn-Gomba, L., Mak, C., & Emadi, A. (2019). Automotive traction inverters: Current status and future trends. IEEE
Transactions on Vehicular Technology, 68(4), 3337-3350.
•
Kalem, G., Vayvay, O., Sennaroglu, B., & Tozan, H. (2020). Technology Forecasting in the Mobile Telecommunication Industry: A
Case Study Towards the 5G Era. Engineering Management Journal, 1-15.
•
IBISWorld. https://my-ibisworld-com.ezproxy.snhu.edu/
•
Abolhassani, A., Harner, E. J., & Jaridi, M. (2019). Empirical analysis of productivity enhancement strategies in the North American
automotive industry. International Journal of Production Economics, 208, 140-159.

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