Week 2 - Understanding Our Environment

Week 2

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Video – Week 1 recap (done)

Video – Week 2 & 3 topics (done)

 

                I work for a conglomerate called United Technologies (UTC).  UTC is comprised of five very large companies, each of which has revenues in the billions of dollars.  At a high level, UTC’s primary markets are Aerospace and Building solutions.  We don’t build planes or buildings, but we do build jet engines, elevators, escalators and HVAC systems.  Learning about the SWOT analysis tool and specifically how companies assess their external environment has given me a new perspective on my company’s strategic moves.  There are seven elements to an analysis of a company’s external environment and I believe the three most important ones for my company are: political-legal, economic, and demographic.

                The government is a very important consideration for UTC, and any budgetary and legislative decisions can have a significant impact on our business.  A lot of my company’s products rely on Defense Department budgets and depending on which party is in power, could mean boom or bust!  Legislation can also have a significant impact.  In my factory alone we were preparing to build a new production line to satisfy a new EPA ruling on furnace efficiency until there ruling was reversed.  Three years ago this efficiency ruling was identified as an opportunity to sell more high-efficiency furnaces, so my company started upgrading their product line and production capacity.

                Economic trends also play a vital role in our company’s strategic decisions.  We closely monitor broad indicators of economic health and then more specific ones like housing starts.  In our factory we make production and staffing decisions for the next year based on the size of the market and our market share.  If we see an uptick in housing starts we might increase production, but if we see a fall in household income we may change our product mix in favor of lower cost units.

Demographic trends are critical to the success of my sister company Otis.  Otis is a manufacturer of elevators and escalators.  Otis makes money be selling new equipment (OEM market) and servicing existing equipment.  To succeed in the OEM market Otis needs to be very active in emerging markets.  The most important emerging market is China.  Years ago Otis noticed the urbanization trend happening across China as populations shifted from the countryside to the cities.  So, to take advantage of this trend, and the eventual construction of many new buildings, Otis moved their entire business development group to China!  These boots on the ground were also given a new elevator that would compete in lower cost low-rise residential buildings specific to the Chinese market.