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GENESIS Your Vision for the Future GENESIS Corporation is a company that deals with production of computer software and business applications that are essential for successful conduct of business today. We strive to provide affordable, innovative software solutions to users worldwide by applying creativity, experience and teamwork. The result of our efforts is production of high quality business solutions that make our customers live easier and their businesses more profitable. With the customers as a center of our mission, we succeed to produce successful results on challenging products.
In achieving of this goal, we accept the customers as equal partners that we can rely on. We hope that every customer looks at the software that we produce as they look to their most valuable employees and even more, as representatives of their culture, keepers of their history, and advisors they trust. The ultimate goal is to establish Genesis as a high-end software design and engineering company that reaches the marketplace through product development and market partners. A friend of Boris, who is working in Moscow, mentioned that the labor market for computer software in Russia is full, while the demand is not only lower than the previous year, but also decreasing because of the economic crisis in the country. At the same time, the US economy is prosperous and the software market is booming, which raises the wages for specialists in software development. Since software is an intangible product and can be shipped from country to country via the Internet without customs and duties on the national borders, it can be easily produced in Russia and downloaded within minutes on a server in the US.
The fact that the average software specialist salary in Russia is 10 - 15 times lower than that of his American colleague can explain why it may be so profitable to sell programs developed in Russia to the American market. A new opportunity for software development opened this year and has not been totally explored by the traditional software developers in this country. From January 1999 a new common currency, Euro, will be introduced in the European community and many banks, financial service companies and even individuals will need new software to put Euros into their accounts. Most programmers in the States are busy now solving the 2000 -bug problem and do not have the opportunity to develop Euro-related software within a short time frame.
Because of that the idea to import the Russian software looks like a gold mine. A third reason why such activity would be profitable, is the abundance of anti-virus and anti-hacker programs in the Russian market. This is the consequence of extensive hacker activity within the country, and many businesses are buying it, fearing of losing confidential information through the Internet. In addition to this, there are very few programs that would convert metric system into other measurement systems and many scientific laboratories that cooperate with international R&D departments will need such automatic converters and are ready to pay a premium price to those who would offer them. Taking all the above into consideration, we decide to establish a company which would make the software developed in Russia available to consumers in the United States. We estimate that such a company would be one of the lowest cost producers in this country with the product quality equal to that of an average American software developer.
Software products emerged as soon as computers were invented. Among other kinds of software, many commercial titles serve for banks, R&D departments, and financial companies, who are using them for everyday calculations, account maintenance, PC and on-line banking, etc. (Recently, appeared an urgent need to cope with the year 2000 problem and the newly born currency, the Euro. ) Such companies, if they are logged on some external network (like the Internet, for example) will also need software to protect themselves from hackers. On the other hand, many research and development departments, scientific research laboratories, and engineering departments in the United States and other countries that have measurement systems other than the metric system, need software to convert their numbers when they communicate worldwide. In 1994, those types of programs were a $ 5 billion a year business in the United States (a $ 4 billion market in Japan, $ 15 million worldwide). Nine years earlier, the industry appeared stagnant; retail software sales were less than $ 100 million in 1985, down from $ 3 billion in 1982.
Its rebirth exceeded everyones expectations. Since 1985, Microsoft Corp. has dominated it with over 150 million of their individual programs sold worldwide (over 50 million were in US businesses). Nearly two-thirds of the banks in North America use Microsoft software. We are a relatively young company.
We are facing uphill competition from the leader in the traditional market, but we can say that our company has a strong potential in the niche we have found. Genesis is in a position to continue its further development due to the cost advantages and its small size and market. In order to present you with a clear picture of our company we have to give you an idea what our market looks like. MARKET SIZE: in 1994, commercial software for banks and financial companies was a $ 5 billion a year business in the United States (a $ 4 billion market in Japan, $ 15 billion worldwide. American companies were spending approximately $ 7 billion on banking programs as of 1994. With the $ 5 billion spent on currency exchange and securities, trade hardware and software, the $ 12 billion total were nearly two and one-half times the size of the $ 5 billion traditional banking programs.
Currency conversion software has experienced resurgence in interest in recent years, partly because they have become more banker-friendly. Banks are demonstrating more and more interest in interactive multimedia forms of securities trade. Although the standard business software offered only limited graphics performance, over 150 thousand banks worldwide are a potential market for interactive securities trade and currency exchange commercial software. SCOPE OF COMPETITIVE RIVALRY is international, but the primary producer is Microsoft Corp. who is struggling for the markets in Japan, Western Europe, and the US. The main competitors are Netscape, Compaq and Phillips Electronics.
Growing advertisement budgets for new software titles signal just how competitive the industry is becoming. Microsoft spent $ 5 million to promote its new title designed for New York Stock Exchange in 1997. Good Times Programming undertook a $ 3 million to $ 5 million campaign for its October 1994 launch of Banking Online, one of the industry's most successful software titles. STAGE IN LIFE CYCLE: mature. After years of steady growth the industry revenues were expected to decline slightly in 1994 and 1995. Industry analysis attributes the decline to a maturing market, although new program systems are expected to offset some of the decline.
Nevertheless, some of the markets, like the year 2000, or EURO- New Currency, are not yet fully satisfied. Since 1998, the number of available programs has increased substantially, primarily because of the large number of Microsoft licensees. At the end of 1994, for example, the leader had a library of 466 titles. NUMBER OF COMPANIES: the industry is characterized by oligopoly, when most of the market is occupied by two firms: Microsoft and Compaq with the rest possessing only an insignificant market share. Nevertheless, the share of Sony and Philips may grow in the "Next Generation" systems.
Competitive forces in the marketplace increased the need for higher quality and distinctive business software concepts. Competition for new programs that would help managers of the future and will build a strong base for doing business and other media hits is increasing the development costs for software producers. MAIN MARKET SEGMENTS: the potential customers for interactive multimedia systems formed a business pyramid roughly divided into four tiers, consisting of innovators, early adopters, other interactive system users, and mass market consumers. [ Innovators have a history of buying new systems that offer significant technological improvement over existing alternatives and are generally insensitive to price, software availability, brand identification, breadth of distribution, and factory support. It is believed that the class of innovators for banking interactive systems consists of approximately 500, 000 consumers. [ Early adopters are similar to innovators except that they consider price / performance and software availability more carefully. Like innovators, they are motivated customers who learn about a product through word-of-mouth even if it is not advertised heavily. It is believed the class of early adopters consists of several hundreds banks and finance corporations. [ Current users are companies who currently own at least one commercial system.
These consumers base their purchase decisions on value, software availability, and price. It is believed that there are approximately 50 thousand banks worldwide are consumers of those products. [ Mass-market customers are those who have PCs in the office but currently do no use commercial software. DEGREE OF VERTICAL INTEGRATION: the process of title development is generally separated from hardware and software production, although some title developers have made attempts to produce their own software. Software is priced to generate most of the profit; the hardware market is, typically, separate from it. The software for most PCs runs between $ 300 and $ 500. Software developer costs to create a new program ranged from $ 75, 000 to $ 300, 000, with some CD titles costing $ 1 million to develop.
EASE OF ENTRY/EXIT: moderate entry barriers exist in the form of strong customer loyalty and brand preference. Distributors are unwilling to accept merchandise from an unfamiliar manufacturer, who does not have a high publicity level and strong public image. Small program publishers without the resources of the big players in the industry face an uphill battle. Retailers only take their product if they had a strong brand name, backed with advertising dollars. But without shelf space, it is hard for small publishers to build a brand image and start generating revenue necessary to fund large-scale marketing campaigns. DISTRIBUTION CHANNELS: electronic and computer software stores were the traditional retailers of PC programs.
However, as the software business grew, other retailers began carrying them because of their high margins. In 1994, over 20, 000 stores in the United States carried such programs. Circuit City was the leading retailer with an estimated 20 percent of the US market; mass merchandising (e. g. Best Buy) captured about 35 % of all sales (see the table). Circuit City IBM software Despite overcrowding of traditional distribution channels, analysts predicted new channels of distribution to emerge.
Technology is making new forms of distribution possible. Several companies were experimenting with direct marketing, the use of cable downloads, and on-line distribution via the Internet. There was also the potential that the increased bandwidth of phone and cable systems could make network distribution possible. SEASONALITY: Retail sales of commercial software are quite stable during the year and do not jump like most of consumer electronics sales during the Christmas season, because the main customers do not depend upon the calendar holidays. TECHNOLOGICAL CHANGE: not so rapid as in microprocessors or PC industry, but relatively significant. It is one of the main driving forces and one of the factors creating risk: because it takes 10 to 15 months to complete the original program and then another 3 to 6 months to market it, development risks are quite high.
A lot can change between the time a design was started and the time it is launched into the marketplace. Software that was popular last year can be out of fashion 12 months later. PRODUCT DIFFERENTIATION: very high. Each program is different and many incompatible operating systems are existing: Windows, Compaq system, etc. Currently, there are more than 20 consumer computing and calculating formats available in the US, many of which are incompatible. COMPETITIVE FORCES - After the overall industry analysis it is necessary to view the competitive forces and the rivalry intensity.
Since the market is already highly saturated, competition is high. In the past years, the marketing of commercial software has been unsophisticated. Demand was stimulated by the advertising campaigns of the platform providers such as Microsoft or Compaq. Demand was so strong for the hits that publishers merely had to get them into the stores. Advertising led to word-of-mouth publicity and sometimes only consisted of ads in leading software advertising magazines and a booth at the Consumer Electronic Show.
As of 1994, marketing was becoming a more significant competitive factor. As retail shelf space became more crowded with platforms and commercial software, companies initiated a marked shift in marketing strategy. The major releases started to be promoted much like a release from a major movie studio. Direct marketing, merchandising, mail promotions, and special offers became commonplace. The number of competitors has increased as new generations of software systems appeared on the market, and the demand cannot grow as fast as it did previously. One of the reasons why the demand is so slow is the economic crisis in most of the world, especially, the Asian Tigers and Russian Federation.
The matter is also complicated by the fact that the new rivals are more diverse in terms of their visions, strategic intent, objectives, resources, and countries of origin. Nevertheless, these factors are offset by the fact that in order to switch brands, customers have to incur the cost of acquiring a new network platform that may be priced as high as $ 200. POTENTIAL ENTRY - The following factors are complicating the potential entry: brand preference and customer loyalty and limited access to distribution channels. In 1994, retailers found many of the Wind...
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Research essay sample on Billion A Year Competitive Forces
