Learning from Mistakes
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 their
product. For example, the Pew Internet & American Life Project estimated that the number of text
messages that were sent each day would soar from 500,000 in 2001 to 4 billion in 2009. In addition
to this technology shift, the target locations (restaurants) 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.
Discussion Questions
1. What is the biggest stumbling block for Cell Zone?
2. Are there other market segments where Cell Zone might work?
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