Concept Computers

A Strategic and Financial Analysis of Concept

Contents Page

1.0 - Introduction

2.0 - SWOT Analysis

2.1-Strengths

2.1.1-Established, Major Global Company

2.1.2-Workforce and Culture

2.1.3-Cash Reserves

2.2-Weaknesses

2.2.1-Post-Standardisation Decisions

2.3-Opportunities

2.3.1-Consultancy for Enterprise Solutions

2.4-Threats

2.4.1-Overseas Entrants

2.4.2-New CEO and Staff

2.5-Summary

3-PESTEL

3.1-PESTEL Framework Diagram

3.2-Political

3.3-Economical

3.4-Sociocultural

3.5-Technological

3.6-Summary

4-Porter's Five Forces Framework

4.1-Threat of New Entrants

4.2-Threat of Substitutes

4.3-Bargaining Power of Buyers

4.4-Bargaining Power of Suppliers

4.5-Competitive Rivalry

4.6-Summary

5-Financial Analysis of Concept, 1999-2002

5.1-Calculations Sheet

5.2-Gross Profit Margin (GPM)

5.3-Expenses Ratio

5.4-Return on Total Assets (ROTA)

6-Bibliography

1.0-Introduction

This report has been produced to give consultancy to Kent Andrews, CEO of the computing company Concept. I will use literature theory models to analyse Concept. Using this analysis Kent should be in a stronger position to reinstate Concept to market leadership in its industry.

To closely study Concept strategically I will use the SWOT and PESTEL frameworks and Porter's Five Forces model.

I will use accounting calculations to assess Concept's financial state and then comment on my findings.

2.0-SWOT Analysis

Johnson et al (2005) state that a SWOT analysis

"summarises the key issues from the business environment and the strategic capability of an organisation that are most likely to impact on strategy development".

2.1-Strengths:

I would describe the three strengths below as being Concept's 'Core Competences' (Hamel, G and Prahalad, C. K.). I felt it unnecessary to elaborate on the competency theory additionally. I feel these strengths support the definition Johnson et al (2005) give Core Competences: "...activities that underpin competitive advantage and are difficult for competitors to imitate or obtain"

2.1.1-Established, Major Global Company

Despite recently losing market leadership, Concept is still a prominent global player. It has reacted well to competition in the past 30 years and this experience and knowledge of the industry should aid its recovery to the industry's forefront. Concept has established itself as a leading brand name, and governmental decisions to assign Concept's operating system as the industry standard shows potential buyers the professionalism and expertise of the company.

2.1.2-Workforce and Culture

Concept has a well structured and experienced workforce, complete with Product and Country managers. Key staff was poached from competitors at the end of the 1970s. This would suggest to me that firstly these employees may still be with Concept, indicating it has competent employees, and secondly, it cements the notion that Concept was, and still is, an attractive company to be involved with. The organisational culture and structure is described as being the base of its success. Concept has adapted to a changing climate on a few occasions throughout its long history, especially when reacting to customer needs, such as by manufacturing palm tops and developing enterprise software. This indicates Concept has the foresight and ability to respond similarly again. I am told that Concept's team of software engineers and its Research and Design department regularly outperformed competitors. This is an extremely beneficial strength for a company based in a technological industry to possess.

2.1.3-Cash Reserves

In 2002, Concept had the benefit of $250 Million in cash reserves. Not only does this underline the size and power of the company, but also shows it has the finance to expand and adapt yet again to serve new computing trends and to reclaim its position as number one.

2.2-Weaknesses:

2.2.1-Post-Standardisation Decisions

In the late 1980s, Concept's operating system was chosen by the Government as the industry standard. Consequently, the operating system and microchips suppliers, AMSoft and ChipTec, began supplying every computer manufacturer. As a result, Concept rapidly lost market share. I feel Concept should, if possible, have taken action to limit this inevitable surge in competitors' sales. This could have been achieved by incorporating the manufacture of AMSoft and ChipTec's computing components into Concept's business activities, through either training or acquisition.

Alternatively, Concept could have acquired some of the smaller competitors. As the market matured, several major acquisitions and mergers occurred, threatening Concept. By doing nothing, Concept has demonstrated a possible weakness in strategic planning. It should have been apparent that the standardisation would increase sales for the other companies.

2.3-Opportunities:

2.3.1-Consultancy