Reference no: EM132183820

Analyzing the external environment is a critical step in recognizing and understanding the opportunities and threats that organizations face. And here is where some companies fail to do a good job. Consider the example of Salemi Industries and the launch of its product, Cell Zone, in 2005. Although it tried to carefully analyze its potential market, it misread the market’s demand for the product and paid a steep price for its mistake.1 Mobile phone usage was sharply increasing, and its founder observed that patrons in places such as restaurants would be annoyed by the chatter of a nearby guest having a private (but loud!) conversation. Salemi Industries interpreted this observation as an opportunity to create the Cell Zone: a “commercial sound resistant cell phone booth that provides a convenient and disturbance-free environment to place and receive phone calls . . . with a design feature to promote product or service on its curvilinear outer shell,” according to the firm’s website. Salemi Industries’ key error was that it failed to take into consideration an emerging technology— the increasing popularity of text messaging and other nonvoice communication technology applications and how that would affect the sales of its product. In addition to this technology shift, the target locations (restaurants) thought the price ($3,500) was too steep, and they were not interested in or willing to give up productive square footage for patrons to hold private conversations. Not surprisingly, the firm has sold only 300 units (100 of them in college libraries), and Salemi Industries has lost over $650,000 to date.

1. What is the biggest stumbling block for Cell Zone?

2. Are there other market segments where Cell Zone might work?