External Analysis

• Macro-Environment

• Industry’s Dominant Economic Features

• Driving Forces (Porter’s Five Forces)

• Industry Driving Forces

• Market Rival Position

• Key Success Factors

• Industry Attractiveness

Macro-Environment

• Technical: – Pressure to continuously develop innovative

products and services (Opportunity and Threat)

• Economic:– Current recession (Threat)– Increased Interest Rates (Threat)

Macro-Environment

• Social/Cultural:– Increased Online Time (Opportunity)– E-Business (Opportunity)– Necessity of the Internet (Opportunity)

• Political/Legal:– Regulatory Environments (Opportunity and Threat)– Protecting Intellectual Property Rights (Threat)

Dominant Economic Features

– Market Size– Market Growth Rate– Degree of Vertical Integration– Technology & Innovation– Product Characteristics– Scale Economies– Learning & Experience Curves

Porter’s 5 Forces• Rivalry Among Competitors

– Strong: intense technological competition

• Barriers to Entry– Moderate to Strong: required capital needed to compete

• Substitute Products– Weak: numerous Internet providers– Strong: alternative forms of entertainment

• Power of buyers – Moderate: low switching costs

• Power of Suppliers – Weak : Size of AOLTW gives them bargaining power

Industry Driving Forces

– Internet & New E-Commerce Opportunities– Increasing Globalization– Technological and Marketing Innovations

Broad

Medium

Slim

Low Medium High

Market Rival Positions

AOLProdigyMSNAT&T

JunoNetzeroEarthLink

Local Service Providers

Price Range

Pro

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ine

Key Success Factors

– Strive for Technological Superiority– Constantly Produce Innovative Ideas– Offer Wide Scope of Services– Strategic Partnerships

Industry Outlook

– Attractive to Firms Currently in the Industry• Continues to generate revenue & show profit

• However, volatility of the industry, as well as rate of technological innovation leave future uncertain

– Not attractive to Potential Entrants