Pest and Five Forces Analysis for Comcast Essay

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large organizations like Comcast to use both PEST and Porter's 5 Forces analysis in helping its leaders to understand their particular external environment?

Globalization has created an interesting dynamic in regards to Comcast's external environment. What once was a handful of competitors has now grown to include both international and online competition. To better grasp the current competition with an eye towards future innovations, a PEST and Porter's 5 forces analysis is necessary. This is particularly true as the business dynamics in Comcast's external markets has fundamentally changed over the years. Competition is now outside of the fundamental cable providers. Innovation and strategic mergers have created new product offerings for consumers. Globalization has created a rising middle class in many of Comcast's international markets. Finally, substitutes via the internet have placed pricing pressure on Comcast's core product offers. All of these factors thus contribute to management's view of the future operations of the business and how to effectively mitigate these forces on its external environment.

To begin, a PEST analysis consists of the strategic review of a company's Political, Economic, Social and Technological factors. A PEST analysis much like a Porter's 5 forces analysis, is used to identify threats and opportunities within the business environment. In this particular case, we want to properly understand the external environment and its implications on the company's future operations. The economic factors bode very well for Comcast in the future. The U.S. economy continues to grow at a 2%- 2.5% rate. Unemployment continues to decline with wages and earnings remaining relatively stagnant. Most importantly, housing continues it's consistent climb out of the 2008 financial crisis abyss. We currently are around 1 million household starts, which is well above what is was in 2009, when home prices were declining. Housing is key metric for Comcast and its product offerings. Homeowners are particularly prone to purchase cable, high-speed internet and phone packages. In many instances, homeowners tend to purchase these packages in bundles. This is particular helpful as Comcast operates on a high fixed cost structure which will discuss later (Geraldine, 1999).

Politically and Socially, Comcast has a very unique external position within the market. As the owner of NBC Universal, Comcast has direct access to the media and its production. It also owns the golf channel, E!, Telemundo, and Universal Pictures. All of these franchises are valuable in the own right, but when bundled create an interesting political dynamic. Particularly in this current election cycle in the United States, many media companies have been accused of creating bias content. These biases have been seen in a negative light as citizens believe media companies are indirectly influencing the overall political climate within America (Romm, 2014). This does not bode well for the company's reputation and brand with the American citizenry. However, from an economic perspective it does provide profit incentives and many political campaigns contribute heavy advertising dollars on the platform. Due in part to its extensive brand and networks, advertisers, in particular, political advertisers, will pay premium prices.

Finally from a technological standpoint, the external environment is changing dramatically. Large mergers are forcing Comcast to rethink their overall strategy. The company became the second largest pay- TV subscribers after the Direct TV and AT & T merger. This merger has created a stronger and much more vehement competitor to Comcast. This is particular true as AT & T can merge many of its product offerings with Direct TV. These bundled packages can create a much more compelling value proposition for consumers in the future, relative to those offered by Comcast. The internet has also created an interesting external environment as it relates to technology. As mentioned above, wages have remaining stubbornly stagnant while inflation has been modest. Products, including the ones offered by Comcast are increasing while wages are staying the same. This pricing pressure is therefore placing strain on the middle class America consumer. In addition, although unemployment has declined, the under employment rate remains very high. Students with college degrees are often working multiple part-time jobs to simply survive. Massive student loans are placing heavy payments burdens on students who have limited job prospects. Finally housing for millennial is becoming very costly. At least 30% of a millennial's income goes towards rent. The middle class consumer is the direct consumer that Comcast competes for. Because this consumer is often experiencing financial strain, many have elected to bypass cable and bundles products altogether. They do not purchase cable and instead use cheaper alternatives such as Netflix, Hulu, and YouTube.

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When purchasing internet, they also elect the cheaper options as oppose to many of the higher margin products offering by Comcast. A technology continues to evolve, this places pricing pressure on Comcast, as young consumers continue to trade down.

It is best for Comcast to use the PEST and 5 forces analysis to help its leader's because they both provide a broad and systematic approach to evaluation. The 5 forces model in particular allows the company to view itself from a litany of perspectives. The power of buyers was discussed in detail above with customers having much more power. To alleviate these concerns, many of Comcast's competition has merged or purchased other assets in an effort to provide unique product offerings. AT & T purchased Direct TV. Verizon purchased AOL. The industry itself is consolidating. These all strengthen the power of substitutes which does not bode well for Comcast. Price wars between the large cell phone carriers have the possibility of spilling over to the high-speed internet industry as well. Therefore the intensity or rivalry has a possibility of increasing as competitors attempt to take market share from each other. Finally, the threat of new entrants is still relatively low due to the high barriers to entry that the cable industry has. The PEST analysis and the 5 forces analysis provide the company with a unique an unbiased approach to evaluating and understanding its position in the external environment. With a strong understanding of its position and those of its competitors, leaders are in a much better position to move the company in the correct direction.

In short, what should an organization like Comcast be doing to analyze the external environment at the macro-level and how does that overlap with the organization's micro-level analysis efforts?

The company should analyze the macro environment in much the same manner it analyzes the micro environment. The macro environment, particular for Comcast and its industry has predictive power. Aspects such as GDP growth, disposable incomes, wage growth, unemployment rates, and interest rates all have a direct correlation to its core business operations. Therefore analysis of these metrics will be vital to ascertain how the company will perform in the future. Regression analysis in particular is very useful in this regard. It allows the company to see how strong the correlation between macro factors is to its business operations. Industry publications and third party research also provide insights into the external environment. These publications overlap directly with the company's micro level analysis. For example, every month the government provides figures on GDP growth and employment figures. 70% of the United States GDP is predicated on consumer spending. Therefore if GDP is rising, consumer spending should also be increasing. Higher consumer spending bodes well for future optimism on the part of the consumer. With higher optimism, consumers are much more likely to purchase products from Comcast.

Describe how the information obtained from the organization's macro-level external analysis might be used by an organization like Comcast in performing their SWOT analysis.

The macro information obtained above can be very useful for Comcast when they perform their SWOT analysis. The macro environment is continually changing. Comcast can therefore utilize their unique assets to create a competitive position within the market that adds value for consumers. In particular, its universal studios, NBC, and Telemundo franchises are very powerful. These strengths could therefore be leveraged within the market to create unique product offerings (Peter, 1999). The company could also use the Macro environment to position itself within the global economy. Rising middle classes in both China and Brazil are very compelling customers for Comcast. Internet has not penetrated these environments as much as it has for the United States. Comcast could therefore use its unique assets in places such as South America where the long-term prospects of the firm look promising. Analysis of external factors is also helpful when the company is looking to expand opportunistically. With a strong analysis of macro factors, the company can strengthen its competitive position by strategic acquisitions or product expansion. In particular, South America is experiencing weakness in its macro economy. Brazil for instance is battling very low GDP growth and high inflation. The stock market in Brazil has subsequently declined reflecting these tough macro circumstances. Comcast, realizing its strengths from its analysis may be able to purchase a competitor for a much lower price due to the prevailing macro environment in Brazil. It could then.....

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