TermPapers-TermPapers.com - Internet Table of Contents I. Executive Summary 3 II. Introduction 4 III. Internet Description 4 a. Company Background 6 b. Mission Statement 7 IV. External Analysis 10 a. Who Matters Analysis 10 b. What Matters Analysis 14 c. External Factor Evaluation (EFE) Matrix 18 V. Internal Analysis 25 a. The Balanced Scorecard Analysis 25 b. Internal Factor Evaluation (IFE) Matrix 28 c. Competitive Profile Matrix (CMP) 32 VI. Strategic Analysis 34 a. SWOT Analysis 34 b. Grand Strategy Matrix 37 c. SPACE Matrix 39 d. IE Matrix 42 e. Douglas-Craig Model 44 VII. Strategic Recommendations 47 a. The 4 Components 48 VIII. Implementation Plans 49 IX. Conclusion 51 X. References 52 I. Executive Summary: Netscape Corporation is to the leading provider of open software that link people and information over the Internet and Intranets. Netscape offers a full line of clients, servers, development tools, and commercial applications to create a complete platform for next-generation, live online applications. Netscape was founded in April 1994 by Dr. James H. Clark, who founded the Fortune 500 computer systems company Silicon Graphics, and Marc Andreessen, who created the NCSA Mosaic software whose graphical user interface simplified Internet navigation. The Mountain View, California, company held its initial public offering in August 1995, only 16 months after its founding. Described by one equity research report as the fastest growing software company in history, Netscape currently employs more than 2000 people in 17 countries and reported revenues of $346 million in 1996, as compared to $85 million in 1995. Netscape currently has ten offices in Europe and five offices in the Asia-Pacific region. In addition, 92 of the top 100 companies listed on the Fortune 500 are Netscape customers, and Netscape's Navigator Internet client software has become the world's most popular PC application. There are many opportunities in the browser industry, including favorable government legislation and market expansion as well as globalization of business. But some of these opportunities are overshadowed by the threats from the technological advances and strong competition. These factors can be paired with Netscape's internal strengths: increasing revenues, strong market share, and strong global presence. After careful evaluation of these factors, the following strategies appear to be complimentary to Netscape's current industry position: market penetration, market development, backward forward and horizontal integration, and product development and joint venture strategies. Upon further consideration, a market penetration strategy would be most effective for Netscape considering the company current position in the browser market. This strategy is best suited to help Netscape increase its market share in the industry. II. Introduction: After this basic description of the browser industry, a comprehensive external analysis will be provided in this paper. Four frameworks are applied to develop an understanding about what external factors have greatest potential impact upon the browser industry performance. From this analysis, conclusions are drawn as to who and what matters to Netscape Corporation. Moreover, a set of key opportunities and threats are identified through the External Factor Evaluation (EFE) Matrix which Netscape should consider when formulating strategy to follow to success in the market. Following this external analysis, the paper turns to an internal analysis. In this internal analysis, a set of strengths and weaknesses are identified by the Balanced Scorecard Analysis and the Internal Factor Evaluation (IFE) Matrix. After identifying the opportunities, threats, strengths and weaknesses, five frameworks will be used to analyze how best to take advantage of the strengths and opportunities while minimizing the impact of the threats and weaknesses. Having clearly done that, a recommendation of strategy (ies) will be provided with a description of the four components associated with it. The major issues that entail the implementation of the recommended strategy (ies) will also be discussed. Finally, a summary of the recommended strategy (ies) with reference to why this (these) where chosen will be made at the end of the paper. III. Internet Description: The Internet browser industry is one of the major Internet and computer technology industries at the present time. The industry provides access to the graphical content of the Internet for the estimated 53.2 million Internet users worldwide. The industry is highly connected with other segments of the overall computer industry. The value chain for an industry identifies key suppliers and customers for the industry. For the browser industry, the chain begins with suppliers, which include web site programmers and designers, disk and packaging manufacturers, and Internet content providers. The industry itself is in the center of the value chain, comprised of two major competitors and a large number of smaller competitors. Following the industry in the value chain are the industry's customers, which include businesses, institutions, universities, general Internet users and advertisers. The major competitors in the Internet browser industry are Microsoft, which produces the browser Internet Explorer, and Netscape, which produces the browsers Navigator and Communicator. There are also several smaller competitors in the market. Although the exact number is not known, one recent estimate by the Browser Watch web site estimated the number of smaller competitors to be about 49 . Exact estimates for market share differ by a few percentage points, but in all figures, Netscape and Microsoft split almost the entire market, leaving only a tiny piece for their numerous other competitors. One of the more recent estimates placed Netscape at 52.2% and Microsoft at 45.6%, with the other competitors sharing 2.2% . Microsoft's share has been steadily growing, increasing 9.6% in the first six months of 1998 alone . The browser industry offers access to the Internet, but they have also begun to offer their customers a number of other related services including e-mail, customized search engines, web page composing tools and GroupWare. The two major players are also working to customize their browsers to work as Intranet software for large businesses. a. Company Background: Accessing, navigating, publishing, and sharing information over the Internet and Intranets has created a new market opportunity, one that Netscape Communications Corporation was founded to address. Netscape was founded in April 1994 by Dr. James H. Clark, who founded the Fortune 500 computer systems company Silicon Graphics, and Marc Andreessen, who created the NCSA Mosaic software whose graphical user interface simplified Internet navigation. The Mountain View, California, company held its initial public offering in August 1995, only 16 months after its founding. Described by one equity research report as the fastest growing software company in history, Netscape currently employs more than 2000 people in 17 countries and reported revenues of $346 million in 1996, as compared to $85 million in 1995. Netscape currently has ten offices in Europe and five offices in the Asia-Pacific region. In addition, 92 of the top 100 companies listed on the Fortune 500 are Netscape customers, and Netscape's Navigator Internet client software has become the world's most popular PC application. b. Mission Statement: The mission statement for an organization discusses and explains the relationships, offerings, location, methods of competence maintenance, commitment to economic success, ethics, and unique qualities of the organization. The mission statement defines what the organization is about and the goals and objectives that the company wishes to obtain. It should state the strengths and opportunities the industry must take advantage of and use to their best ability. The industry's mission statement is the cornerstone for the operations of the organization. It is the most important way to measure any firm's performance. The mission of Netscape is to be the leading provider of open software that links people and information over the Internet and Intranets. In addition, Netscape offers a full line of clients, servers, development tools, and commercial applications to create a complete platform for next-generation, live online applications. To satisfy this mission statement, Netscape must consider the following factors: 1. Relationships: Netscape should maintain relationships with many people and organizations. The Internet users, computer manufacturers, search engine companies, software developers, advertisers, and browser employees are vital to Netscape success. The Internet users are the consumers of the industry. They pay for the use of the browser in order to access the search engines that find the requested information. The search engine companies are essential to Netscape because they define how good a browser will perform. If a browser has good search engines, then the consumer will be more likely to use that browser. Computer manufacturer companies dictate which browsers the consumer will have in the computer. For example, DELL computer buyers will be using Netscape Navigator to have access to the Internet. Advertisers provide the main source of revenue for the browser industry. In order to maintain strong relationships with these advertisers, Netscape must attract large number of users through its advanced services. The relationships Netscape wishes to have and maintain are key to the life of the browser industry. 2. Offerings: Netscape main offering comes from providing access to search engines that access the Internet. The Netscape software line includes four families of products: Netscape Communicator client software suite, Netscape SuiteSpot and FastTrack servers, Netscape Development Tools, and Netscape Commerce Applications. Netscape web site provides both information and services, ranging from technical support to the ability to purchase and download numerous Netscape software products. It also provides a showcase for both Netscape technology and the technologies and services offered by Netscape partners and developers. The speed of the access is of vital importance to the browser industry and the way in which advertising space is utilized is a major issue for the industry. The access and the speed of access are the main offerings that Netscape needs continually to improve. 3. Location: Netscape customers can be found anywhere in the world where there is an Internet access. Such firms could be located domestically or in foreign countries. Netscape World Headquarters office in the United States is located in Mountain View, CA. Netscape also have offices in Europe, Asia, and Latin America. 4. Competence Maintenance: In order to maintain competence, Netscape needs to upgrade its graphics and add on services, increase the speed and memory of the browsers, as well as make them more compatible with different software and hardware. In addition, Netscape should consider the language differences of their customers and provide the browsers in languages other than English. 5. Economics: Netscape can maximize their revenue by generating a profit from advertising. Moreover, Netscape must keep up its constant innovation in its existing products and new products as well to attract more customers. 6. Ethics: Netscape needs to keep the industry competitive to avoid monopolies, which would hurt the consumer in the end. Although companies clearly want to take advantage of their position in other areas of the industry, they must ensure that all licensing and packaging deals are within the parameters of fair competition. 7. Uniqueness: There are very few companies in the world that links consumers to the graphical content of the Internet. Netscape is one of these companies that provide access to the information over the Internet. Netscape is a new company that held its initial public offering in August 1995 and is considered to be the fastest growing software company in history . Netscape Corporation obtains more than half of the browsers market share. IV. External Analysis: The purpose of an external analysis is to develop a finite list of opportunities that benefit an organization and threats that could be avoided. The external analysis is not aimed at developing an exhaustive list of every possible factor that could influence the business. It is rather aimed at identifying key variables that offer actionable responses. The key external factors can be divided into six broad categories: economical, social/cultural, environmental, technological, political/governmental, and demographic. The following four frameworks will develop a list of key opportunities and threats that should be under consideration. a. Who Matters Analysis: The Who Matters Analysis examines the major players that affect an organization. This framework lists and analyzes the customers, suppliers, competitors and industry players. The Who Matters framework also lists complementors, those players who make it easier for a company to gain customers or suppliers. This framework is an attempt to discern which companies and stakeholders must be included in an external analysis and considered when formulating and implementing a strategy. In the Who Matters framework, industry players are at the center of the circle. Industry players include the major companies that hold a significant portion of the market share in the given industry. Suppliers and customers surround industry players to depict the value chain flow from suppliers to industry players to customers. Customers in this framework include all those who purchase or utilize a service provided by the industry. Suppliers include firms that provide resources necessary to develop or produce the products or services offered by firms in a given industry. Surrounding the Industry Players on the sides are Complementors and Competitors. Complementors include both products and services that are used in conjunction with a product, as well as existing and potential alliance partners, which would be companies that could potentially engage in a joint venture with an industry firm to facilitate such areas as product development, use, or distribution. Competitors refer to companies or industries which could potentially take business away from the current industry players, and include both potential substitute goods which could render the current product unnecessary, and new firms which might enter the industry and take market share away from current players. 1. Industry Players: In the Browser industry, there are only two major industry players, Netscape and Microsoft. Browser products developed by these two companies comprise approximately 98% of the industry market share , which does not leave much territory to be covered by the large number of small competitors. According to one count presented on the Browser Watch Web Site, there are approximately 51 web browsers available to consumers . Some of the better known small companies that are also players in the industry are IBM, Mosaic, lynx, and Opera. 2. Customers: Netscape is used by a large number of Internet users, approximately 57.7% , who wish to view Internet content in a graphical form. Thus, all Internet users are customers to Netscape. However, the major customers segments can be divided into businesses, institutions such as non-profit organizations, universities and other educational organizations, and home computer users. However, many home computer users may actually download Netscape Communicator software free of charge from Netscape web site. The other important customer for Netscape is advertisers who pay to promote their good or service on the Netscape's home page that users see when they initially log on to the Internet. 3. Suppliers: Netscape has few suppliers to consider. The major resource that is required to produce and maintain browsers is programmers and web site designers to write the code for the browsers and to design the home page. Most Netscape software and documentation is distributed via downloads, eliminating the need for a large amount of packaging or materials used to create software and manuals, such as disks, CD-ROMS and paper. Content providers could also be considered as suppliers to the browser industry, because without content, there would be no Internet, and consequently, no browser industry. However, they could also be thought of as complementors, because content providers make it easier for Netscape to gain customers. 4. Complementors: Netscape is highly integrated with other segments of the computer industry. Products and services that are considered complementors to Netscape include Internet content, which creates the need to use a web browser, computers, which provide the user with the hardware to access the browser, software packages and operating systems, which often include web browsers and provide the platform on which to run the browsers, and telecommunications products, which allow the user to utilize the web browser to access the content found on the Internet. There are several industries, which are alliance partners for current industry players. These include Internet Service Providers (ISPs), computer manufacturers, software developers, and search engines. Most ISPs provide their users with a web browser at the time that their customer begins service. The choice of browser is at the discretion of the ISP, which allows them a large degree of control over the distribution channels for browsers. For example, Earthlink Network offers Netscape Navigator to its customers . Computer manufacturers and distributors, as well as software developers, also have similar power that makes them important alliance partners to Netscape Corporation. Computers are often sold with software pre-installed in today's computer market, and thus, the choice of browser to include with new computer is decided by the manufacturer. Along the same line, software developers creating an operating system often include a browser with their software. Content providers and search engines are important alliance partners because they are included on home pages of Internet browsers, and contribute to a browser having the most up -to-date features. For example, Excite provides a new utility that provides users with a fast, easy way to add powerful search capabilities to their Netscape browsers. Excite Direct adds a search box to Netscape Navigator's tool bar, next to the directory buttons . 5. Competitors: There are few competitors from outside the industry that affect Netscape. The major competitor that Netscape face is Microsoft. Microsoft is the only real competitors that share the market with Netscape at the present time. The only substitute product available at this time is Lynx, a text based web browser. However, this program does not allow users to view Internet content in graphical format, and is unlikely to appeal to the same needs as Netscape. There are several new browsers that are on the market, including Opera, Surf Monkey and HotJava, but these products tend to appeal to a very small segment of the market, and they are unlikely to take market share from Netscape. The above analysis points out that the most crucial relationships that Netscape must maintain are those with complementors, both product, content and service providers that allow customers to use browsers, and alliance partners that control distribution channels. Relationships with suppliers and competitors do not seems to be as essential to the Netscape, as most competition comes from the group of industry players themselves. b. What Matters Analysis: The What Matters Analysis is a framework that considers the external environment factors, which have an impact on a specific industry. The purpose of such an analysis is to allow an organization to realize what matters and thus effectively position itself against its environment. The external environment factors can be classified into six general categories: economical, social-cultural, public policy, natural environment, demographic, and technological. The specific factors that apply with each of these categories vary by industry or segment. 1. Economic Factors: Overall, economic conditions appear to have little total effect upon Netscape Corporation. The web browser's main objective is to communicate over the Internet with Web servers. Since 1994, Netscape revenues have steadily increased practically every year . According to Netscape Financial Statement for three months ending on April 30, 1998, the company's revenue has reached to 127.2 millions .This constant growth pattern illustrates Netscape's relative resistance to economic factors. Even so, the amount of growth does vary from year to year, often due to other competitors, like Microsoft, sharing the markets. Netscape has more than a comfortable position in the market since 1994. 2. Social/Cultural Factors: The American culture is very much evolving around the Internet. There are 45+ million computers online and growing rapidly. In addition, 43% of time spent accessing the Internet from home is used for research or getting information . The Internet is a brave new approach to merge culture with the digital revolution. It is the best way to provide information and services to people around the world at any time of the day. That is the main reason for the increase of online population. Currently, there are 1,700 Internet cafes that serve food, drinks, and Internet access in 95 countries and the number of people who are going there is increasing . The growth rate and size of age groups often determine how much advertising money Netscape needs to attract the largest number of people worldwide. According to Browser Survey Analysis, out of the 45+ million Internet users, 65% of them use Netscape to access the search engines . 3. Public Policy Factors: The Telecommunications Act of 1996 is the first major overhaul of U.S. telecommunications law in almost 62 years . The goal of this new law is to let anyone enter any communications business and to let any communications business compete in any market against any other. The Federal Communications Commission has a tremendous role to play in creating fair rules for this new era of competition in the Internet browsers industry. The Telecommunication Act promotes competition and reduces regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies. This suggests that there are no government acts that can limit Netscape services in the market, which means that the government regulations have no impact on the browsers industry. 4. Natural Environment Factors: Waste management can be handled very easily on the Internet. The published information can be recycled to meet the needs of business users, researchers, publishers and purchasing agents. There is no need anymore to waste papers when there is a change in the information. As such, as individuals, businesses, and governments become more sensitive to the natural environment, Netscape Corporation will not be affected by environmental factors. Especially that this business is participating in managing the waste in the environment. 5. Demographic Factors: The demographic of the Internet browsers' users is probably the highest mass-market demographic available. Online population is grew 46% from 1996 to 1997. The business segment of the Internet will explode in 1998 . Statistics show that 82 million PCs will be Net-ready by the end of 1997, up 71% from 1996. This number of PCs is predicted to hit 268 million by the year 2001 according to Dataquest forecasts. According to the browsers statistics, 65% of online users are using Netscape Communicator . The demographics show that online users are more comfortable with using Netscape Communicator as it provides valuable services and speed preferred by the users. The current demographic trend suggests that Netscape may want to evaluate their target audience to success in the competitive market. 6. Technological Factors: To keep up with the latest technology innovations, Netscape is continually coming up with new products that support these technologies. The integration of various programs into the browser may effect the number of the targeted audience. For example, Netscape latest release of Netscape Communicator 4.5, which is a major enhancement to Netscape Communicator provides next-generation browsing, email, calendar, and management features . Another issue that might have an impact on Netscape is the access speed. Netscape has to keep up with the customers' request for accessing the large number of information available on the Internet as fast as possible. Currently, it takes .88 seconds to load the main page with Netscape Navigator compared to Microsoft Explorer which takes 2.25 seconds over T1 connections .In addition, the user interface has to be developed to meet the needs of all kinds of individuals, technical and non-technical people. The graphical user interface (GUI) is considered to be an important part of the product. The design and implementation of the GUI has a great effect on the selling of the product. c. External Factors Evaluation (EFE) Matrix: The External Factor Evaluation (EFE) Matrix allows strategists to summarize and evaluate the economic, social/cultural, demographic, environmental, political, technological, and competitive information. This type of analysis can be very helpful in determining the severity of threats and opportunities to Netscape Corporation. By assigning weights to each threat and opportunity, one can calculate an overall rating that signifies where the firm stands in the industry relative to the factors analyzed. An EFE Matrix for Netscape follows: Key External Factors Weight Rating Score Opportunities 1. Market Expansion .20 3 .60 2. Increase in Intranets .10 3 .30 3. Favorable Government Legislation .05 2 .10 4. Globalization of Businesses .20 4 .80 5. Name Recognition .10 4 .40 Threats 1. Increase in Number of Competitors/Rivals .06 3 .18 2. Economic Conditions .04 4 .16 3. Technology Advances Require Innovations .10 4 .40 4. Lack of Growth .10 3 .30 5. Worldwide Internet regulations .10 3 .30 Total 1.00 3.54 The weights given to each factor signify the importance of this factor to Netscape success within the environment, higher values having the greatest impact on the business. Note in this case that the threats are weighted lower than the opportunities. Similarly, the ratings signify how well Netscape is handling each factor now, 1=poor and 4=superior. Description of Opportunities: 1. Market Expansion The market for Internet browsers is growing rapidly. According to a 1997 report by International Data Corporation (IDC), there were 53.2 million Internet users world-wide as of September 1997 . These users must get on the Internet by way of a browser, and Netscape must be aware of the enormous opportunities that arise from both the US market and foreign markets. IDC predicts that demand for Netscape will increase from 10.1 million units sold in 1996 to 124.3 million in 2002 . Market expansion has been assigned a weight of .2 because it is one of the most important factors that Netscape need to take advantage of in order to maintain and enlarge their market share. Overall, Netscape received a rating of 3 because they are moving to aggressively target new markets with foreign language versions of their products, but they could expand the range of languages offered and the scope of their marketing to target developing markets. 2. Increase in Intranets Recent industry surveys have shown that more than 80% of large corporations have built or plan to build intranets within the next 12 months� and that �the market from intranet software alone is expected to reach nearly $10 billion by the year 2000 . This is a huge opportunity for Netscape because they realize that there is little money to be made in the browser industry , and have instead turned to developing Intranet software to increase revenues. For example, Netscape revenues rose almost $200 million dollars between 1996 and 1997 even as browser decreased from half of revenues to less than 20% . This opportunity was given a weight of .10 because it is an opportunity that Netscape can and must take advantage of to increase its revenues in the future. Netscape was given a rating of 3 because they are working presently to develop client-server software line that enables corporate users to link to the Internet as well as create internal Intranet, which help them to improve communications and distribute and share information. 3. Favorable Government Legislation Favorable government legislation means different things to different players in the industry. For example, it is an opportunity to Netscape if the Department of Justice wins it's current case against Microsoft. If Microsoft is forced to allow users a choice of browsers with its operating system software, the competitive situation in the market will be more open to Netscape. 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