Module name: Business Environment

Title of the assignment: Business environment of AZ

Electronic Materials

Student name :

Submission date :

ContentsMission, objectives and history of your assigned company.........................................................................3

History of the company...........................................................................................................................3

Market conditions and competitive.............................................................................................................4

Market Conditions...................................................................................................................................4

Yips internationalization strategy........................................................................................................4

Ansoff’s Growth matrix........................................................................................................................5

PESTEL Analysis........................................................................................................................................7

Reference....................................................................................................................................................7

Appendix 1-Yips internationalization strategy.............................................................................................8

Appendix 2. Ansoff’s Growth matrix...........................................................................................................9

Appendix 3. PESTEL Analysis......................................................................................................................10

Mission, objectives and history of your assigned company

History of the company

AZ electronic materials is a UK based company incorporated in 1950 as a section of the Hoechst AG which

is a German chemical company currently known as Senofi- Aventis the company’s main business activities are production and supply of high quality and purity special types of chemical which are used by companies in producing integrated circuits (IC) and flat panel displays (FPD), photolithographic printing and LEDs. Currently the head office of the company is situated in Stockley park UK and the company is listed in London Stock Exchange (LSE) The company is one of the leading companies who engaged in this industry and holds almost thousand patent rights across the world such as UK, USA, china, France etc. Among other companies Samsung, Intel, IBM, Sony, LG, Sharp, Toshiba are leading customers of the company which in turn shows the company’s strength and the image the company has.

Every Sony television watch, every Samsung smart phone or tab used every Toshiba photocopier used AZ electronic materials products are there. Due to the fast change in the electronic industry towards high speed small devices AZ electronics too spend significant amount of money for research and development activities since for them to be a market leader innovation is one of the most important aspect.

Company’s vision is to sees the company’s continuance development in to one of the most advanced and respected chemical material company in the world. Company’s strategy is to research and development driven organic growth. Further company is targeting niche markets where it can obtain leadership in the market by way of acquisitions. Thus it can be noted that the company.

When considering the competitive environment of the AZ electronic materials it can be noted that it competes in a global level in several sectors. Accordingly the products of the company are sold all around the world including UK, USA, china, Japan, France. Further it can be noted that product wise also the company’s competition is wide spread, company offers its products to range of customers who ultimately use the company’s materials to manufacture range of products in all kind of electronic products.

It can be noted that the company have range of business partners who trust the company to provide inputs to their products. Thus, when achieving the company’s goals and objectives their support is very useful to the company.

In the year of 2011 the company’s revenue was US $ 791 which is 16% growth compared to the previous year. Most of the revenue is generated from Asian region as most of the electronic companies are located in Asian countries such as Japan South Korea and Taiwan. The country wise revenue of the company is as follows,

Country Revenue US $2011

Revenue US $2010

Taiwan 209 191Japan 186 136USA 142 78China 89 57German 53 51

France 15 16

Source, Annual report AZ Electronic materials, 2011)

Moreover the product wise revenue is as follows

Product Revenue2011

Revenue 2010

IC materials 545 448Optronics 224 207Printing & other 23 26

Further the company’s profit was amounted to US $ 125.6 Mn in the financial year 2011. When considering the asset base of the company it can be noted that the company’s total assets exceed more than 1.7 billion out of those US $ 663 mn were the value of the patent licenses of the products it offers. Therefore it is evidenced that the company is a large scale company from its operation results and financial position.

Market conditions and competitive

Market Conditions

It is noted that the company carry out its operations in the global perspective across the world such as Asia, Europe, USA. Further it can be noted that the company’s main focus region is Asian region and USA. The main reason to focus in these areas is that countries in those regions are specialized in manufacturing electronic items. Countries such as Japan, Taiwan, USA, China as the examples for these types of countries.

The company’s internationalization strategy can be analyzed using following strategic management models.

Yips internationalization strategy

As shown in appendix 1 Yip suggests that the in order to analyze the internationalization or globalization four types of drivers needs to be evaluated with regard to a particular organization. According to this analysis there are four aspects (drivers) where the attention needs to be given. Those are,

Market globalization drivers Cost globalization drivers Government globalization drivers Competitive globalization drivers

Market globalization drivers

Growing demand for new and smart electronic devices Connection with globally accepted electronic device manufacturers

Cost globalization drivers

Low cost production facilities in countries Huge cost savings

Government globalization drivers

Exchange rate variations Government regulations Interdependence of countries to help in relation to subsidizing their competitors

Competitive globalization drivers

Increase of threats of new entrants Increased competition among the existing companies

Ansoff’s Growth matrix

In appendix 2 we can identify that the company is adopting market penetration strategy and product development strategy. As per the company’s objectives the company aims at existing markets with a organic growth and this can be concluded as that the company offer existing products in to the existing market. Further in with their Research and development company tries to offer new products to the existing markets.

The company’s competitive market environment can be evaluated using Michael porter’s five forces

(Source, www.hbr.org)

1. Threat of new entrants

Since there is a high demand for electronic items there may be threat of new entrant to the industry. Company can eliminate threats by following ways.

Increasing entry cost by investing in Research and development activities Signing up agreements with existing customers Increasing economies of scales Obtain more patent rights where other companies cannot produce such products.

2. Bargaining powers of suppliers

The company has taken several measures to reduce bargaining powers of suppliers

Accordingly the company has created a strong supply chain which reduces the bargaining power of suppliers. Further the company holds the lots of patent rights of where other companies cannot product such products and the suppliers also has to sell their products to the company as there is no any other customers to buy their products

.

3. Bargaining powers of Customers

Company can manage bargaining powers of customers by entering in to long term supply agreements with customers. Further since the company has lots of patent rights in the industry customers doesn’t have any other supplier for these types of products

4. Threat of substitutes

Threat from substitutes is very high as the industry is moving fast. This threat can be eliminated by investing in research and development activities and inventing new products with improved efficiency as a substitute for existing products.

5. Competitive rivalry within the industryCompetition faces by the company can be eliminated by following ways,

Entering in to long term supply agreements with customers Investing in research and development activities Increasing the efficiency in supply chain Increasing economies of scales

It can be noted that the company is operating in an oligopoly market as there are few companies who engaged in this industry. Further company has lots of market opportunities as they have lots of patent rights which they can use for growth of their operations. However the company has managed to dominate in the electronic material market with the knowledge and the patent rights they have.

PESTEL Analysis

Further the company’s external environment can be analyzed using PESTEL analysis,

Accordingly as discussed in the appendix 3 it can be noted that political stability of the countries in which it carry out operations and countries in which it manage its manufacturing plants. In this aspect political stability of countries such as Japan, South Korea, Taiwan, USA are important to the AZs operations. Economic factors such as inflation and developments in ICT may affect to the operation of the company. For example economic crises prevail in European region may have a impact on the sales value of the company and may affect to the operations of the company ultimately.

Current market trends in the electronic industry may affect to the operations of the company. More specifically trend for smart phones and tabs may affects positively on the operations of the company. Being a main customer of the company, demand for smart phones of Samsung has affected the strategy of the company.

Reference BCG Matrix, Available (online) http://www.bcg.com/about_bcg/history/history_1968.aspx

[Accessed on: 15/3/2012]

Chisnall, Peter: Strategic Business Marketing, 1995

Johnson G, Scholes K, Whittington R. (2005): The Environment: Exploring Corporate

Strategy, Pearson Education

Porter, M.E. (2008) "The Five Competitive Forces That Shape Strategy", Harvard

Business Review, January 2008,

Johnson G. and Scholes K. (2003), Exploring Corporate Strategy, 6th edition, Prentice

Hill: London.

AZ Electronic materials 2012, AZ Electronic materials United kingdom,<

http://www.az-em.com/en.aspx > viewed on 7, April 2012

Appendix 1-Yips internationalization strategy

(Source www.hbr.org)

Appendix 2. Ansoff’s Growth matrix

Products/Services

Existing New

Existing MARKET PENETRATION

Expand the operations

Asia and USA

PRODUCT DEVELOPMENT

Offer products in to

existing markets such

as Asia and USA

Potential for Globalisation

Market Drivers

Government Drivers

Competitive Drivers

Cost Drivers

Markets

New MARKET DEVELOPMENT

Expand operations to

new countries or areas

where company sees

more potential..

DIVERSIFICATION

Expand in to new

countries with new

products

Appendix 3. PESTEL Analysis

1. Political Factors 1. Political situation of the countries such

as Japan, Korea, USA, UK in where

the AZ electronics operates.

2. Economic Factors 1. Economic condition of the countries

where company carry out its business

operations.

2. Governments policies affecting the

operations of the company such as

fiscal and monetary policy.

2. Social/Cultural Factors 1. Current demand for latest electronic

items such as smart phones and tabs

2. Concentration of public on companies

ethical business practice.

3. Technological Factors 1. New dimensions of technology such as

smart phones and tabs

2. Increasing demand for online shopping

4. Environmental Factors 1. New trends in corporate social

responsibilities

2. Increased attention on sustainable

developments

3. Concentration on carbon footprint of

organizations.

5. Legal Factors 1. Laws and regulations relating to

manufacturing of industrial

materials and other inputs

2. Laws and regulations relating to

market conditions such as

monopoly and cartels.