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Final Year Dissertation
The viability of establishing a new
commercial weather services business
in the UK
Prepared by Dominic Donegan - Module: DB364 – Business Project
Student number: 12845331
Date Submitted: 25th May 2015
Word Count: 7660
I declare thatthisreport ismy original workandthat nopart of it hasbeensubmittedtoanyother
institute of learninginsupportof an applicationforanotheraward.The opinionsexpressedinthe
reportare put forwardina personal capacityand donot necessarilyreflectthose of Brighton
BusinessSchool oranyorganisationwithwhichthe authormaybe associated.
Signature: …………………………………………………. Date: …………………………………….
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1.) Executive Summary
This report seeks to explore the viability of establishing a new commercial weather
services business in the UK by undertaking a detailed analysis of the Meteorology sectors in
the UK, Europe and US and comparing and contrasting these as a means of identifying what
if any favourable conditions exist for the establishment of a new business.
The report examines the products and services that are currently available in the UK,
European and US market places and looks to combine the results of this analysis with known
new business, competitive advantage and market entry theories and hypotheses, to
establish the viability of the proposal.
Initial findings were of a very competitive, possibly slightly protectionist sector, in that none
of the companies surveyed where prepared to provide pricing information or other
commercial data which was not already widely available in the public domain, on the
grounds of commercial sensitivity. This led to the research to being very much desk based in
nature.
The reports main findings were that at the top of the Meteorology sector competition is
fierce with an ongoing process of company acquisition, product/service expansion, and
extended global strategic reach being undertaken.
There are a variety of product/service offerings across a fairly broad spectrum of customers
ranging from web/mobile app viewers through to farmers, risk assessors, and derivative
traders, and it is suspected, as in other industry sectors, that the specialist/bespoke or
consulting services command the highest premium.
From a business perspective without actually setting a new business up it was not possible
to fully validate the theories and hypotheses surrounding business start-up, market entry
and firm resources although, taking into account the limited resources of a new business,
the research leans strongly towards a policy of product imitation as opposed to innovation
and where possible obtaining additional funding from family or friends before approaching
the banks.
The business model recommendation is therefore for a period of further market/customer
analysis to establish the most attractive products and services currently being used, and
then seek to imitate one or more of these, but with further customer value add in the form
of additional features/benefits or at a lower cost model to entice the customer to buy.
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2.) Preface
The weather impacts much of our life, from the sometimes not so easy choice of clothes to
wear, the amount of gas, oil or coal used in keeping our houses warm, or the taking part in
or watching of outdoor events and sports activities.
With ever increasing occurrences of chaotic and more unpredictable weather and a general
acceptance that global climate change is now a very real phenomenon (IPCC 2014, Met
Office 2011, FT 2014, Independent 2014), this extreme weather is having global
consequences and impacting many of the activities considered key for our survival, including
the production of crops for food, the provision of clean drinking water and the ability to
build safe and dry shelters to live in (Bradford.gov 2015, WWF 2015, National Geographic
2015).
The economic impact of rising sea levels, flooding, devastating storms and heat waves is
considerable, with global losses through natural catastrophes in 2012 alone totalling USD 37
billion, and when Typhoon Haiyan struck the Philippines in November 2013, it was one of
the one of the strongest typhoons ever recorded and the human cost was measured in the
loss of 7,500 people (Swissre 2014).
The weather is therefore very much at the forefront of many people’s thoughts with a
greater appetite for weather information not only by the public but also food producers
whose crops can be wiped out in one severe storm, energy suppliers who have to try and
satisfy a sudden swing in demand and insurance companies who have to underwrite the
risks and pay out for these disasters.
The weather has also entered the legal domain with companies supplying specialist weather
services for litigation cases, including personal injury claims, road traffic accidents, and for
use in specialist forensics (ewi 2014, Weathernet 2015).
With this growing interest in all things weather, this report seeks to explore if an
opportunity might exist in the creation of a new weather services company to satisfy an
increasing demand in the business world.
In the report the author has sought to match his life-long interest in Meteorology with a
detailed analysis of both the Metrology and Business sectors, where early research has
uncovered a marked difference in how the UK and US sectors operate, and he has also
identified theories or approaches that might be applied in the creation of this new business.
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Figure 2: Worldwide growth of natural disasters since the1970’s
Source: Swissre 2015
Figure 2.1: Total economic and insured losses from natural catastrophe & man-made catastrophe in 2013 &
2014
Source: Swissre 2015
Figure 2.2: The most costly insured catastrophe losses
Source: Swissre 2015
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3.) Table of Contents
List of Sections
Section Content Page
1 Executive Summary 2
2 Preface 3-4
3 Table of Contents 5
4 List of Tables and Figures 6
5 Appendices 7
6 Introduction 8
7 Research Aim and Objectives 9
8 Scope of Work 10
9 Literature Review 11 – 29
10 Research Methodology 30
11 Data Analysis, Discussion, and Evaluation 31-32
12 Conclusions and Recommendations 33
13 Appendices 34-38
14 References 39 -48
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4.) List of Tables & Figures
Table/Figure Title Page
2 Worldwide growth of natural disasters 4
2.1 Total economic and insured losses 4
& man-made catastrophe
2.2 The most costly insured catastrophe losses 4
9. Extent of free weather information offered
to the UK general public by the Met Office. 12
9.1 Commercial services offered by the Met 13
9.2 MeteoGroup Products & Services 15
9.3 Example of forecast types offered 16
9.4 Products & Services offered by the The Weather Company 17
9.5 Data identified as high value by the G8 Charter 20
9.6 Government bodies involved in data collection 21
9.7 Met Office Free DataPoint products 22
9.8 Sources of new business finance 2006 – 2011 26
9.9 The growth of the alternative finance market 27
9.10 Vendors and their position in worldwide smartphone sales 29
9.11 Literature sources available for analysis 30
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5.) List of Appendices
Appendix Title Page
5 Met Office Report & Accounts 34
5a MeteoGroup Annual Report & Accounts 34
5.1 Request for Met Office Information 36-37
5.1a Request for MeteoGroup information 38-39
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6.) Introduction
The UK Met Office, with a long history of weather forecasting, is regarded by many as the
de-facto provider of professional forecasts here in the UK, and can trace its origins back to
its establishment as part of the Board of Trade in 1854, with the first public forecast in 1861
(Met Office 2015).
Given its long history as a government body some of the data held by the Met Office is
confidential in nature and is only available to the armed forces and other government
owned or controlled bodies however public data is also provided by way of forecasts for the
BBC and other organisations (Met Office 2015, BBC 2015).
At the time of writing much of the Met Office’s non-media data is charged for and this
differs markedly to the US market place where there is a huge amount of freely available
weather data provided by their National Weather Service (NWS 2015, CNBC 2011, Randall
2010, weatherwise 2015), and here in the UK it could be said that the competition is still
very monopolistic in nature, with this aspect being referred to later on.
Things are however starting to change with the advent of the governments open data policy
(Gov.uk 2014), and an increased appetite for more tailored or specialist forecasts for
farmers, insurers, the legal profession, and the derivatives market. There is now the
possibility that soon all Met Office forecasts currently provided to Public Service
Broadcasters (PSB’s) will be free of charge, under licence (MetOffice.gov 2015).
European providers of weather data are numerous but for the purposes of this report most
attention will be paid to MeteoGroup, the largest non-government owned body in
continental Europe, and the one that supplies amongst others, services for the European
Civil Aviation Authority (MeteoGroup 2015).
The company has also recently won contracts for Shell and Network Rail and looks to be the
biggest competitor to the Met Office’s past domination of the market place here in the UK
(MeteoGroup.com 2015).
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7.) Research Aim and Objectives
To understand through a process of market and business analysis, potential opportunities in
the UK for the establishment of a new weather services business, understanding which
business models or theories might support this, and what form of product or service will
provide the best return.
The following objectives will need to be met to achieve the aim:
Objective 1) Undertake a comprehensive reading and analysis of documentation and data
available with regard to the UK, US and to a lesser degree the European Meteorology
sectors, to gain a greater understanding of the differing market practices of the UK and US.
Objective 2) Gain a deeper understanding of the UK Governments open data policy and how
this is changing the way the UK Met Office works in the provision of free data and whether it
could be regarded as monopolistic competition.
Objective 3) Research various business models, if possible the returns that they produce,
and identify a weather product that not only produces acceptable returns but that also has
some form of at least partially protected USP.
Objective 4) Determine if theories of business start-up and market entry are applicable in
the creation of a new weather services business in both the UK and US markets and where
possible test and/or validate findings.
Objective 5) Analyse market entry and competition strategies such as Differentiation, Low
Cost strategy and Blue Ocean thinking, with a view to determining the best entry strategy.
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8.) Scope of work
There are many providers of weather services in the UK, Europe, and particularly the USA,
many of which are easily accessible via websites.
For the purpose of this report the author has sought to simplify the otherwise very complex
nature of the marketplace by analysing three key companies operating in the Meteorology
sector, with arguably the UK Met Office as the still the de-facto provider of services to the
UK market place, MeteoGroup as the biggest European challenger (see appendix 5 & 5a,)
and the National Weather Service Bureau of the US providing free data to the 339 plus
companies operating there (NWS 2015. Met Office 2015, MeteoGroup 2015)
With the aid of consent forms (See appendix 5.1 & 5.1a), the author has sought to obtain
primary data from both MeteoGroup and the UK Met Office including pricing information,
however this has been declined on the grounds of commercial sensitivity and therefore
there has been a much greater reliance on desk based research than would have been
wished.
Given the myriad forms the supply of weather data seems to be taking, particularly in the US
market place, and the corresponding level of competition (NWS 2015, Accuweather 2015,
The Weather Channel 2015), the author has again sought to simply and refine the focus of
research to that regarding the establishment of a new consulting business providing
specialist services as opposed to one providing data on mobile phones or websites.
It is felt that with a more specialist product or service it would be easier to protect the
company’s USP, unlike a mass market product such as those currently provided on websites
mobile phones, tablets etc., which could be easily imitated and mean a quick loss of
competitive advantage.
Finally, this report takes a look at crowd funding as a source of income for a new start-up,
and its links with social media, however it is beyond the scope of this report to look into the
advantages or disadvantages of social media advertising.
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9.) Literature Review
From the initial project proposal it was identified that there were a number of theories or
hypothesis surrounding business strategy including the set-up of a new business, market
entry, and competitive advantage, however there were no models or theories specifically
pertaining to the Meteorological sector.
This report has therefore split the literature review into two sections, with firstly an analysis
of the Meteorology market place where no supporting evidence for theories or models of
operation have been uncovered and then takes a separate look at the business sector where
they do exist. It is felt however that the two sectors can be linked together in reaching a
conclusion to the research question of ‘The viability of establishing a new weather services
business in the UK’.
Objective1. - The UK Market
Historically weather forecasting in the United Kingdom has been the domain of the
government owned and tax payer financed UK Met Office, and from as far back as the First
World War the department has had close links to the armed services, playing a particularly
vital role in the successful D-Day landings in World War 2 (Met Office 2015).
The Met business today is under the control of the Department for Business Innovation and
Skills, and provides its free Public Weather Services (PWS) to the general public in the form
of national and regional forecasts via television, internet and radio forecasts for the BBC on
own its website, and via mobile phone apps. A full list of its free services is given on the next
page (Met Office 2015).
The Met Office also conducts much more complex longer term governmental global
forecasting models on Climate Change, in association with the Hadley Centre in Exeter, and
Medium Range Forecasting through its close links with the European Centre for Medium
Range Weather Forecasting (ECMWF) based in reading.
It could be argued that in scientific circles it is better known for its work in these areas,
particularly by members of the IPCC, for its work with them on global climate change (Met
Office 2015, ECWMF 2015).
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Figure 9: Extent of free weather information offered to the UK general public by the Met Office.
Source: Met Office PWS Service Catalogue
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In addition to working for the general public and providing detailed scientific reports for
bodies such as the International Panel on Climate Change (IPCC 2015) the UK Met Office
works on a commercial basis supplying reports and forecasts for the various UK industry
sectors including Renewable Energy, Transport, Aviation and the Insurance & Capital
markets sector.
These reports fall under four distinct revenue generating programmes which are Consulting,
Transport, Media, and Training with the complete portfolio of services shown in the table
below. (Met Office 2015)
Figure 9.1 Commercial services offered by the Met Office (no cost provided on website).
Source: Met Office 2015,Donegan 2015
Sector Product/Service Comments
Utilities
Wind Renewable Energy Win Map 30 years of observation data
Wind Visual Eyes Web based - for managinghealth and safety
Wind Safesee International offshoreforecastingfor
operations,health and safety, maintenance.
Wind Virtual Met Mast Tool to assistin the sitingof Onshore & Offshore
wind farms
Solar UK Solar Energy Maps Assistancein the planningand erection of Solar
farms
Water Waste water management Frequent & accurateshortterm forecasts
Water Water resource planning Drought/Flood forecasts
Energy Energy demand forecast Demand forecasts on the energy grids affected
by unseasonal cold or warmweather.
Insurance & Capital
Markets
Risk WindstormHazard maps & Historical
catalogue
Allows Risk to be priced down to and set at local
level
Risk Risk Modelling Catastropheprediction and mitigation
Transport
All World area forecastcentre One of two in world
Aviation Volcanic Ash advisory centre One of ninein world
Rail Adverse weather forecasts For train operatingand maintenance companies
Road OpenRoad Key weather information to transportand
infrastructuredecision-makers.
Marine See state forecasts Critical projectinformation for Marine
Operations
Construction/Mining
Location based reports On sitereports and forecasts
International consulting Site specific consultingservices
Retail
DemandMet Weather forecastingfor crop yield and product
availability in super markets
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MeteoGroup by contrast began life as a privately owned and Dutch based Meteorological
consulting company (Meteo Consult) that expanded into Germany through joint venture
with MC-Wetter (later wholly acquired) and into Belgiumby the acquisition of Meteo
services.
A subsequent joint venture with the Press Association (PA) in the guise of PA Weather
Centre eventually saw the entire acquisition of Meteo Consult by the PA, and a new
company, MeteoGroup UK formed (MeteoGroup 2015).
In its early days Meteo-Consult had also worked within the shipping market, developing its
proprietary weather routing systemSPOS, and today this product makes up an important
part of MeteoGroup’s portfolio of services, aligned with other offshore products such as
Nowcasting Pro6 and the range of bespoke services offered to the offshore wind sector
(MeteoGroup 2015).
MeteoGroup established what could be viewed as a strategic presence in the US with the
opening of an office there in 2010, with other key growth events including the acquisition of
Nowcasting in Ireland in 2011, providing further specialist offshore capability, a new
presence in South East Asia with the opening of an office in Singapore in 2012, and the
acquisition of the large Swiss-German company mminternational swelling its ranks of
employees to over 400.
Today MeteoGroup competes head-on with amongst others, the UK Met Office, and has
won some important contracts from them, including the Devon local authority contract. In
addition the company has made large inroads into the transport, retail, and energy trading
markets in the UK, including securing the Network Rail contact in the UK, the signing of
contracts with RWE and Vestas, two of the larger European companies operating in the
renewable energy sector, and a recent contract with Shell Offshore (MeteoGroup 2015).
In the media arena MeteoGroup has also recently secured what could be regarded as a
higher visibility contract for Channel 4 weather news from ITN, and the company also writes
regular columns for the Huffington Post (2015).
Whilst announced at the time by PA as a partnership between MeteoGroup and General
Atlantic LLC, In December 2013 the company was wholly acquired by the private equity firm
in a deal worth £160 million to PA. At the time the deal was expected to net up to £125
million pounds in profit for the parent company and help the Press Association invest in and
diversify its business, whilst also addressing what it referred to as its pension fund deficit
(Press Association 2015, General Atlantic 2013, FT 2013, WeatherCast 2015).
Continued on the next page is a comprehensive list of the products and services offered by
MeteoGroup, many of which mirror or closely resemble those offered by the UK Met Office.
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Figure 9.2: MeteoGroup Products & Services
Source: MeteoGroup 2015,Donegan 2015
Sector Product/Service Comments
Utilities
Water Water Management Bespoke rainfall analysisand forecasting
Trading Delivery of accuratedata to energy
traders
Probability and longrangeforecasts
Power distribution Extreme weather events For operations and maintenance
Insurance & Capital
Markets
Claims Severe weather warnings Advance warnings to alertclaims departments
for readiness
Risk Risk Analysis& Modelling Risk assessmentfor insuranceproducts
Claims Wind speed analysis For evaluation of storm damage claims
Claims Hail maps Size and location of storms
Risk Worldwideforecast Risk analysisand modelling
Transport
Road RoadCast Winter maintenance preparation forecasts
Road Summer RoadCast High winds and heavy rainfall alerts
Aviation Aviation forecasts Privateprovider of data to European Aviation
Sector
Rail RailCast Adverse weather warnings for track operators
Marine Nowcastingpro 6 Operational planningtool for high resolution
metocean forecasts
Marine RouteGuard Shipping Route forecasting
Marine Site specific Forecasts and observation data
Solar Energy
Wind Wind & temperature maps Temperature and wind speeds at hub and
ground height
Solar & Wind Satellitefor Solar and wind Visibleand infrared showingcloud movement
and density
Wind O&M Weather forecasts for Operations &
Maintenance planning
Solar & Wind Archive forecasts 48 hour and 7 day archiveforecasts
Wind Wind & temperature maps Temperature and wind speeds at hub and
ground height
Construction
BuildCast Custom based forecasts for construction
industry
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The US Market
NWS, the national weather provider for the US provides at the time of writing, free weather
data to a total of 339 companies in this country, whilst also providing a portfolio of services
on its own website, also free of charge (NWS 2015).
Like the UK, although slightly later on in the US, weather came under the auspices of the
military in 1870 with a weather service established under the army’s signal service division,
although by 1890 the value of the service to the greater public had been recognised and the
service was transferred to the civilian US Weather Bureau within the Department of
Agriculture.
In the mid 1960’s an Environmental Science Services Administration was created within the
Department of Commerce which subsequently becomes the National Oceanic and
Atmospheric Administration (NOAA), with the US Weather Bureau being renamed the
National Weather Service (NWS) in 1970 and it becoming a component of NOAA
(weather.gov 2015).
Since this time the NWS has grown and changed both technologically, and also in its service
offering, with an emphasis towards more severe and catastrophic weather forecasting and,
according to their website a focus on the need to provide forecasts for the protection of life
and property, provided at no cost to the general public and commercial organisations (NWS
2015).
Similarly to the UK Met Office and its association with the Hadley Centre with its work on
Climate Change, NOAA could be regarded as more environmentally and scientifically
weighted than the NWS, and undertakes climate monitoring, oceanic and atmospheric
research, and work on coastal maintenance (NWS 2015, NOAA 2015).
Figure 9.3: Example of forecast types offered to the general public by the NWS
Source: NWS 2015
As previously highlighted the provision of weather in the US differs markedly to that of the
UK and mainland Europe with well over 300 private sector meteorology companies taking
the government free data and tailoring it to fit their individual customer needs (NWS 2015,
CNBC 2011), although like the UK, many households turn to their national weather service
(NWS) for daily forecasts with Lazo (2011) stating that the average US adult obtains
forecasts 115 time per month, giving a country wide average of 300 billion forecasts
annually.
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It is estimated that in 2013 there were 350 companies proving commercial weather services
in the US, and that their combined annual revenues are believed to be in the region of $3
billion per annum, an increase of over 50% in a two year period and with a predicted trend
of increased innovation, and a continued growth in growing revenue (Wharton University
2013, Weatherwise 2012)..
The companies providing these services vary from small consultative type business
providing specialist services to much larger operations such as AccuWeather, The Weather
Company and WeatherBank INC There is a trend in the US for weather apps on mobile
devices to provide what is known as hyper-local weather whereby the track of individual
rain clouds are given on a minute by minute basis, and currently Accuweather and DarkSky
are the two main providers of this technology (Accuweather 2013, The Economist 2013).
Figure 9.4: Some of the products & services offered by the US based The Weather Company
Source: WSI.com 2015, Donegan 2015
Sector Product/Service Comments
Insurance
Claims WeatherFX Alert Severe weather alerts service
Risk WeatherFX response Real-time risk assessment
Claims WeatherFX replay Weather claimvalidation
Marketing Weather FX reach Extreme local weather warnings
Development WeatherFX API Integration of data sets
Energy
Power Generation WSI Trader Weather prediction for power generation companies
Power Generation WSI Windcast For evaluation of suitablewind farmsites and predicted power
generation
Power Generation WSI Hourly trader Prediction of volatileswings in energy consumption
Power Generation WSI MarketFirst Prediction of expected GFS and ECMWF models
Aviation
Pre-Flight WSI Pilotbrief
Optima
Pre-Flightradar and other data
Ground staff WSI Hubcast Lightning strikewarnings
Operations WSI Fusion To streamlineand enhance aviation operations
Turbulence WSI Total
Turbulence
In-Flightturbulence alerts
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Discussion on Objective1.
As part of the Department for Innovation Business & Skills the Met Office is still very much
under government control and as such is at least partly funded by the taxpayer, and this
includes what it refers to as its “Compeatable Business” where it seeks to “maximise the
offset to tax payers through its commercial activities” (Met Office 2015).
This ““Compeatable Business” is only a relatively recent event in its history and prior to this
the Met Office had the opportunity to build a portfolio services with little or no competition
and it could be argued that until recently it operated on a monopolistic basis ((Johnson,
Whittington, Scholes 2011) in that it has been operating in an industry where there has
been just one firm, its own.
Being the main incumbent in its sector presents difficulties for new businesses wishing to
compete in the same market place, in that the Met Office already has supplier relationships
in place that it has built up and strengthened over many years, examples of this being both
BBC Radio and Television (Met Office 2015), and the new business might have to adopt a
low cost policy on its products to try and secure this business.
In addition to the entrenched nature of the competition any new firm entering the market
will have the added disadvantage of competing against a company that is at least in part
subsidised by tax payer’s money, and being government owned is unlikely to be allowed to
fail.
The disadvantage in adopting a “Cost Leadership” policy (Porter, 1985) is that it will impact
on the profit margin the company makes and whist this is likely to be counteracted
somewhat by the lower staffing costs and operational costs of the new smaller firm, it may
have to spend significantly more on its marketing to bring about brand awareness.
A differentiation policy (Porter, 1985) may offer more opportunity for a new firm to enter
the market however it will need some form of unique product or service to do so and this
ties in well with the work of Barney (1991) where he talks about the importance of the firms
resources to enable sustained competitive advantage.
Barney (1991) talks about 4 key indicators being required to achieve this sustained
competitive advantage and these are Value, Rarity, Imitability, and Substitutability (VRIN)
and are covered in more depth on the next page.
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The following questions will need to be addressed prior to market entry:
 Value – Does the new product or service provide potential value to customers and
does it provide value to the company by taking advantage of opportunities in the
marketplace and neutralising threats? Are the expected returns enough to satisfy
shareholders/stakeholders or cover the company’s operating costs?
 Rarity – Does the new firm have unique or rare intellectual capital in the form of its
employees or a unique product or service?
 Imitability – Can the proposed product or service be copied easily by the
competition?
 If the product or service can’t be copied can it be substituted by something similar?
It is possible that the best strategy for a new firm entering the market place, and with
reference to Porter’s competitive strategies (1985), will be to have a hybrid strategy with a
focus on product specialismand uniqueness targeted at a very specific market and also seek
to compete on a cost basis in a specific segment that research suggests stands the best
chance of success.
Being a trading arm of the Department for Innovation, Business, and Skills the Met office is
not open to the same share speculation and potential acquisition on the open market as
other private firms that are listed on the stock exchange. This affords the Met Office yet
further protection from competition.
MeteoGroup on the other hand has not hand the security of government backing but has
been able to grow through the acquisition or merger of other European firms and in doing
so gain valuable assets such as the use of a proprietary network of 830 weather stations
across Germany and Switzerland. This has enabled the company to produce a more localised
and accurate forecast without having to pay the national weather centres for their data, and
therefore becoming more self-sufficient and potentially more profitable in the process (pr
newswire 2013).
Supporting this growth and acquisition strategy an article in the Financial Times states that
the company is seeking to rival the Met Office in providing “accurate weather forecasts for
consumers and business” with it claiming to supply its services to 60% of local authorities in
the UK (FT.com 2013).
The company however is subject to potentially the same threats/opportunities as other
non-public sector companies, and this is this is well demonstrated by its recent acquisition
by General Atlantic LLC (MeteoGroup 2015) which, whilst being reported in the press as an
amicable acquisition by General Atlantic LLC, the departure of their CEO suggests this might
not necessarily have been the case.
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MeteoGroup also now has a presence in the US market place and is presumably seeking to
grow its business there. It and the UK Met Office, should it decided to operate there, will
seek the same challenges in that more local, established firms receive their data free of
charge and like the Met Office have possibly built up long standing relationships with
business and consumers alike.
Objective2. The UK GovernmentsOpen Data policy
In June 2013 a charter was signed by the worlds G8 members that would allow future access
by the public to data that had previously been the preserve of the world’s governments, and
was seen as being of high value in the improvement of democracies around the world
(Gov.uk 2013).
Figure 9.5: Data identified as high value by the G8 Charter
Source:Gov.uk2013
The table on the next page shows some of the data that Companies House, The Land
Registry, The Met Office and Ordnance Survey had been previously collecting significant
amounts of for many years, and with the creation of The Public Data Group, an advisory
body to the Department for Business Innovation and Skills in 2011, some of this data has
been made available either commercially and at a charge, or free of charge to the general
public (Gov.uk 2014).
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Figure 9.6: Table showing four of the many government bodies involved in data collection
Source: Gov.uk 2014
The data that is now available has been banded into 4 pricing categories by The Public Data
Group (Gov.uk 2014) and is as follows:
 Open Data – As far as possible and where it is feasibly to do so financially, this data is
free of charge.
 Cost Recovery – Where cost of collection, management, or distribution costs are
involved, there is a charge although this may be reduced in time if production costs
lower in line with increased efficiencies.
 Trial Access – Sometimes used for research purposes this data is available only for a
limited period of time.
 Commercial Rates – This data is typically analysed and refined and a rate is levied
that covers the cost of collection, distribution or where a service element is involved.
European Directive 2007/2/EC requires that data spatial data, i.e. data that contains a
positional or locational element, is comparable across European regions thus providing the
people that use it consistent evidence about the environment they live and work in (Local
Government Association 2013).
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This directive has impacted the UK Met Office in that not only has it had to provide some of
its data free of charge, but also it has now also to be in a format that complies with the
INSPIRE directive.
The Met Office has fulfilled its obligations in the creation of a website called DataPoint that
provides INSPIRE compliant data in a format that is suitable for application developers and
details of the products are shown below, although it is worth noting that much of this
information is also available to the general public on the Met Office’s own website (Met
Office 2015).
Figure: 9.7: Met Office Free DataPoint products
Name Description
UK hourlysite-specificobservations Hourlyobservationsforthe last24 hours
Last 24 hours Marine Observations A linktodownloadthe last24 hourMarine
Observations
National andregional textforecast TextusedforUK and regional weatherforecasts
UK Climate Averages Districtand Regional,Site specificandUK monthly
climate averages.
Precipitationforecastmaplayer Imagescoveringthe UK
Visiblesatellite maplayer Image showingrecentcloudcover
Total cloudcoverforecastmaplayer Total cloudcoverfor UK
Pressure forecastmaplayer Mean sealevel pressure forthe UK
Surface pressure charts Pressure levelsandweatherfronts
UK 3-hourlysite-specificforecast A qualitycontrolledforecast datafeed outto5 days
Lightningstrikesmaplayer Image showinglightningstrike frequencyprovidedas
a map overlay
Infraredsatellite maplayer Infraredsatellite image showingcloudcover
providedasa map overlay
Rainfall radarmap layer A setof layerimagesinthe formof map overlaysto
show recentrainrates inmm/houroverthe UK.
Temperature forecastmaplayer Forecastmap layerforthe UK showingscreen
temperature
Mountainweatherforecasts Data and contentusedto provide Mountainweather
forecasts
Regional extremesobservations Observationextremesare providedbyregionforthe
previousday
UK dailysite specificforecast A five dayforecastforapproximately5,000 locations
Weatherextremesdata A linktoweatherextremesdata
Regional Climate Anomalies A linktoview monthlyregionalclimate anomalies
Historicregional climate data A linktohistoricregional climate data
Historical StationObservations A linktohistoricstationobservationsintextformat
Source: Met Office 2015,Donegan 2015
P a g e | 23
Discussion on Objective2
The creation of the Met Office DataPoint website offers software developers and potential
new business owners the opportunity to obtain data free of charge, re-package it in the
form of graphics and visual displays, and then sell the product or service on to businesses
and consumers at a cost, subject to the Met office terms and conditions (Met office 20155).
As previously mentioned however much of this data can already be found free of charge on
the Met Office’s own website and therefore it could be argues that this is only of limited use
to the new business owner and is certainly not comparable to the more extensive and
complex data available in the US market place (see figure 6.3).
In addition any new business starting up will also be competing against the Met Office
commercial division and as already discussed they enjoy the protection and assurance of
being a government department and at least partly funded by the tax payer.
P a g e | 24
Objective3. – Business Models& Returns
From the material accessed thus far it has become clear that the selling of weather products
and services is evolving along multiple channels with differing business models however
there is little or no information available as to the actual profit levels or returns available on
differing models and with this in mind the report takes a look at the differing models being
utilised but without showing actual figures or rates of return.
Large firms in the US such as The Weather Company have partnered with IBM to provide
weather services for business, and the global giant Monsanto has recently paid $390 million
for the Climate Corporation and its associated expertise in weather data analytics for
farmers (Monsanto 2015, 03.ibm 2015). This model centres on the yearly activities of
farmers and looks to provide accurate forecasts pre sowing/harvesting etc.
Another developing channel in the US is what is termed the nowcasting apps, and these are
phone, tablet, or web apps that provide hyper-local forecasts that update at regular minute
by minute intervals using data from local stations (iTunes. Apple 2015, SkyMotion 2015) and
this very much ties in with the increased public appetite for short interval hyper-local
forecasts.
MeteoGroup’s business model revolves around securing its own weather stations through
company acquisition, thus keeping data costs low whilst restricting competition, however an
article by the University of Pennsylvania entitled “Today’s Forecast for the Weather
Business: Increased Revenues and a Focus on Innovation” points to the limitations in the
private sector caused by the expense of investing in Supercomputers and global modelling
programmes (K@W 2013, MeteoGroup 2015) and few smaller weather firms will have the
money to go on the acquisition trail like MeteoGroup.
The importance of not only product differentiation but business model differentiation is
highlighted by David Teece (2009) in his paper on business strategy and innovation as is the
need to be customer centric, a view echoed Christensen & Cook (2005) in the HBR journal
“Marketing Malpractice: The Cause and the Cure, where they highlight the need to produce
goods or services that the customer actually needs as opposed to what the company think
they need.
Similarly Teece (2009) talks about building a sustained competitive advantage and like
Porter’s views on competitive advantage (1985) he talks about the importance of not only
having a differentiated product that is hard to imitate, but also a hard to imitate
differentiated business model.
P a g e | 25
Discussion on Objective3.
From the wealth of material accessed thus far it could be argued that in weather forecasting
the following business models currently exist:
 Detailed analytical reports for sectors including insurance, farming, and legal, using
large amounts of data and computed with very powerful and expensive super-
computers.
 Everyday forecasts for the general public including those provided by the UK Met
Office, MeteoGroup, Accuweather & The Weather Channel.
 Specialist reports such as those provided by MeteoGroup for the Wind Turbine and
Solar industry.
 Hyper-local reports provided on app and tablet by companies such as Dark Sky and
Sky Motion.
It is suggested that Accuweather may have recognised the value in having multiple business
models and therefore a hybrid business strategy, as it has recently acquired the hyper-local
company SkyMotion and their app MinuteCast, which presumably will provide it with
additional revenue to its general daily forecasts on the web.
As in most businesses the cost of consultative or bespoke work is generally more than the
run of the mill regular activities a company might undertake and it is likely this also applies
to the weather industry with larger returns being made on specialist and
consultative/analytical products and services.
Being specialist or bespoke in nature these cost are usually not publicised, thus providing a
weather company with some protection from other competing companies that might wish
to imitate its product or service, but not know how much it can charge prospective
customers for it.
P a g e | 26
Objectives4. & 5 – Business start-up and Market entry theories& blueocean
strategy and competitiveadvantage
To achieve continued success and competitive advantage in a new business start-up a
number of academic sources point to the necessity for not only a differentiated product that
no one else has but also one that delivers value to customers and can be viewed as being
customer centric, that is the product or service revolves around satisfying a demand from
the customer or finding a solution to their problem. Adding to the above comments other
authors state that future successful companies will be the ones that can create, capture, or
deliver value in unique ways (Porter 2008, Teece, 2009, HBR Staff 2006, Kim, Mauborgne
2004, Anthony 2013).
However a differentiated offering alone is not a guarantee of success with Storey & Greene
(2010) highlighting the problems faced by small firms in raising finance and having less
influencing power in the market place with this comment being reinforced by Mazzarol
(2004) who talks about the need for not only the correct financial backing but also the
correct marketing and production competencies.
Raising finance can be a big issue with small firms who can struggle to obtain capital from
banks or venture capitalists who may not feel the credit history is sufficient or that the risk is
too high (Martinelli, 1995). Another author highlights the importance of relationships in
obtaining credit (Cole, 1998) and this might well explain why the largest source of finance
for small new start-ups is actually family and friends, as shown in the table below:
Figure 9.8: Sources of new business finance 2006 - 2011
Source: GEM 2011
P a g e | 27
Crowd-Funding is a newer but popular and growing means of raising finance through social
media channels and has some suggest come about as a result of the difficulty in obtaining
credit from more mainstream sources such as banks during the recession (Statista 2015).
Crowd-Funding comes under the banner of the alternative finance market and this is a
growing phenomenon across the world but particularly in the USA and Europe, with Europe
experiencing a growth rate of 144% last year and the UK experiencing the fastest growth
rates in (FT.com, jbs.cam2015).
Figure 9.9: The growth of the alternative finance market
Source: University of Cambridge & Ernst & Young 2015
Assuming sufficient finance is in place and In addition to having the correct and ideally
unique product, a business has to have the correct strategy in place to be successful with
many businesses failing through lack of a coherent strategy (Zimmer & Scarborough (2005),
and because they suffer what Mazzarol (2004) refers to as a strategic Myopia where they
find the task dull or unnecessary.
For the firm to be successful a winning strategy may be to find a market place where no one
else is operating in, such as undertaking a blue ocean strategy in an uncontested market
place (Kim, Mauborgne 2004) or it has to face the existing incumbents and the possible
entry barriers that might be in place, that make it difficult for the newcomer to gain a
foothold (OECD 2007, Porter 2008, Yip 1982).
P a g e | 28
These entry barriers come in all shapes and sizes and can include economies of scale, where
the incumbent firm/firms can produce the same or similar goods at a fraction of the cost to
a newcomer, a small number of existing firms (oligopolies) in collusion and acting
defensively towards the newcomer, or the preferential agreements or strong relationships
established with the incumbents customers.
It should be noted however that some authors do not see entry barriers as a guarantee of
failure and suggest that there may still be opportunities in turbulent markets, particularly if
the company has a multitude of differentiation strategies (Carter & Jones-Evans 2004,
Zimmer & Scarborough 2005).
Should the new firm be in the enviable position of operating a blue ocean strategy it is likely
that this will not remain the case for long with competitors seeking to imitate the company’s
product and grab a share of the virgin market. According to Barney (1991) and building on
the work of Porter (1985) to enable a sustained competitive advantage it is important that
the firm has the correct resources in place, referred to as core competencies by Prahalad &
Hamel (1990) and with reference to Barney these are detailed below:
 Physical capital resources – The firms plant and equipment, geographic location and
access to raw materials where applicable.
 Human capital resources – The Company’s people, their experience, training,
judgement, intelligence, and the insight of individual managers working within the
firm.
 Organisation capital – The formal reporting structure of a company the planning,
coordinating and controlling systems it has in place.
P a g e | 29
Discussion on Objectives4 & 5
In an ideal world all new small firms entering the market place would be doing so in an
uncontested space with a product or service that was unique and could not be easily
imitated.
However even with a small business start-up and a product or service that is initially unique
and successful, is unlikely that it will be long before competitors seek to imitate and unless
the now incumbent maintains a process of business and product innovation, competitive
advantage is unlikely to be maintained.
An example of this rush to compete in the same market place might be the story of Apple
and the first touch screen phones in 2007 whish back than was a virgin uncontested market.
Today Samsung is the market leader with a host of other companies having entered the
sector, a clear indication of competitors pilling in when they sense there is business
available (Gartner 2015, The Guardian 2015).
Figure 9.10: Diagram showing vendors and their position in worldwide smartphone sales
Source: Gartner 2015
It could also be argued that firm resources are another area that in the real world are
generally not actually perfect and whilst an individual or group of individuals may have a
brilliant idea if this idea is not conveyed to all staff members’ part of the message may be
lost and the staff may feel alienated and not take on board the ‘journey’ the CEO and senior
staff are embarking on.
More than this the CEO may be so wrapped up in the company and making it a success,
there may be no clear strategy or business model in place or indeed time to do anything else
however for a sustained competitive advantage to last not only does the product have to
remain un-imitated and there be aa programme of innovation, the staff have to have a
certain level of core competency training coupled with general skills development,
otherwise motivation can suffer there can be a loss of drive and ultimately the company can
suffer.
P a g e | 30
10.) Research Methodology
The analysis conducted from the initial project proposal identified fairly quickly that the
Meteorology sector does not have any underlying theories or hypothesis that can be applied
to the area of Meteorology and therefore an interpretivist approach to this aspect of the
report has been undertaken to reflect the author’s view that there will be no single answer
or unifying theory to the question of The Viability of establishing a new commercial
weather services business in the UK.
The author feels however that the Business sector is different to the above, with a number
of theories and hypothesis that surround the start-up of a new business and market entry.
These include the theory of Competitive Advantage, Blue Ocean Strategy, Business process
Innovation and Firm Resources, and the author has undertaken a positivist approach to this
research as he feels he will be able to validate or test at least some of these theories.
A mixed research methodology has therefore been employed with an overall constructivist
approach to ontology, reflecting the author’s views that reality differs somewhat from
country to country and even possibly within different organisations.
With regards to availability of data for the study, the author has been unable to conduct
primary research with the three main company’s studied due to commercial sensitivity (See
appendix 5.1 & 5.1a) constraints surrounding their products and the pricing thereof. He has
therefore had to rely on desk based research using data from both primary and secondary
literature resources such as journals, white papers, company reports, books, online
academic publications and web based news articles.
Figure 9.11: Diagram showing possible literature sources available for analysis
Source: Saunders, Lewis, Thornhill 2009
P a g e | 31
11.) Data Analysis, Discussion, & Evaluation
The Meteorology Market Place
The weather forecasting market is in a state of change with large multi-national companies
such as The Weather Company, The Climate Corporation, and Accuweather extending their
global reach and diversifying their portfolio of products and services, in some cases through
competitor acquisition, or indeed being the subject of a take-over, as opposed to growth
through entirely organic means (Monsanto 2015, 03.ibm 2015, MeteoGroup 2015).
More Insurance firms are now paying attention to the weather, as are derivatives
companies, legal firms and energy companies, and the literature analysed so far suggests
this is the result of the increasing frequency of chaotic weather events around the globe,
their associated impact on people and business alike and an overall increased demand.
Short of these world-wide chaotic events suddenly abating it unlikely this interest will wain
and therefore competition in this sector looks set to remain, most likely grow and certainly
the upper end of the market looks very competitive with the likes of The Met Office,
MeteoGroup, Accuweather and The Weather Channel all vying for a piece of the same
marketplace, with them providing services online, via phone apps and tablets whilst also
catering for the more specialist business market place (MeteoGroup 2015, Accuweather
2015, The Weather Channel 2015, Met Office.gov 2015).
Given the difference between the US and UK market place in terms of free data access and
therefore reduced operating costs and potentially higher profit margins, it is possible that
we see will more US companies attempting to make in-rods into the European marketplace,
particularly the UK where long range, statistical and modelling data still carries a premium.
P a g e | 32
The Business Environment
From the data analysed on new business start-up, market entry, competitive advantage and
entry barriers, it is clear that many writers on the subject see product or service distinction
as the key to being successful, along with having the correct human, capital and
organisational resources in place and an ongoing business and innovation process (Porter
2008, Teece 2009, HBR Staff 2006, Mauborgne 2004, Anthony 2013).
The importance of either having a business plan formulated or having conducted some in-
depth market analysis is cited as being equally necessary (Zimmer & Scarborough (2005,
Mazzarol 2004, Porter 1985), and yet Steve Blank (2013) of the Harvard Business Review
suggests this thinking is actually old school and what is more important is actually getting a
product or service to market, gathering customer feedback and then adjusting the product
or service accordingly.
It could be argued that with this approach the new business will ultimately have a product
or service that provides real value to the customer however the time taken to get to this
stage, not to mention the cost involved may well have handed an advantage to the
competition and a better course of action might be one of imitation of other companies
products or services (Theodore Levitt 1996), with Oded Shenkar (2010) of Harvard Business
Review suggesting that up to 97.8% of the value of new innovations goes to imitators.
With research suggesting that being first is not necessarily best with its associated
development costs and an offer that is not complete (Carr-Michael 2010), a less costly
approach might be to enter as a “Fast Follower” (Shenkar 2010), and let someone else make
the mistakes. By studying the competitor’s product it might be possible to design a product
or service that mirrors an existing one but which provides more value add to the end
customer, costs less or even a combination of the two.
To help achieve success as a “Fast Follower” (Shenkar 2010), a pre-business customer survey
could be undertaken to ensure that the proposed product or service is one that adds value,
and just as importantly is something the customer actually needs (Christensen 2005).
Financing is another early stage requirement for the set-up of a new business with a lot of
SME heads turning to friends or family for finance (GEM 2015. This presents a problem in
that friends or family may insist on some form of stake in the company in return for their
investment or may wish to get actively involved in the management of the company
possibly affecting its overall strategic direction.
Crowdfunding too has been identified as an additional and much newer source of start-up
finance however it is suggested that interest is waning a little, a fact bourne out by one such
new SME owner (Guardian 2014) suggesting that people now have to work much harder
with their pitch and business plan to convince people to invest in them and there is also the
fact that with so many investors in the business, there may be a lessening of overall control.
P a g e | 33
12.) Conclusion and Recommendations
For a small business to succeed in the Meteorology market place the same theories and
hypotheses applying to other new start-ups would appear to apply although with a lack of
data on business model returns and weather products and service costs, it is hard to verify
this.
The market is clearly very competitive at the top end with a focus on global coverage and a
mixture of business to client and business to business services. The competition at the top
end of the market represents an opportunity for a smaller firm to enter ‘under the radar’
and to avoid some of the initial barriers to entry.
Whilst applications on smart phones and tablets reach a large audience and can presumably
generate good profit levels for the company this is beyond the strategic reach of most small
new firms and they would most likely feel the full competitive force of the much larger
incumbents should they try and compete in this space.
Whilst competitive advantage and innovation are important factors in establishing a
business perhaps the most important element is one of Human Capital or USP and, as at the
time of writing the author does not feel he has a unique product or service to offer and
therefore a process of imitation as opposed to innovation would seem the best initial route.
Research suggests a specialist consultative or bespoke product or service would be the most
profitable route as it would be perceived as higher value to the customer than a standard
forecast and is likely to attract higher profit margins.
The recommendations would be:
 Identify through further research a specific market segment that is of interest and
conduct surveys of potential customers, ascertaining if there are shortfalls in the
products or services they use or they have needs that are not being addressed. At
the same time attempt to gather costings information from the potential customer
identifying if they see their current products and services as providing value for
money.
 Prepare business plan showing proposed business model, projected revenues, and
other key information, and use this when approaching family as first point of call for
any early funding requirements, with alternative sources being fiends, crowd-
funding or the banks.
 Operate on a ‘below the radar basis’ with minimal advertising so that competition is
not alerted to new business presence and it has a chance to become established.
P a g e | 34
13.) Appendices
Appendix 5: Excerpt from Met Office Report & Accounts
Source: Met Office.gov 2015
Appendix 5a: Excerpt from MeteoGroup Annual Report & Accounts
Source: fame2.bvdep 2015
P a g e | 35
Appendices……….cont.
Appendix 5.1: request for information email to Met Office & subsequent response. (Continued on next page).
Cont. on next page………………………………..
P a g e | 36
Appendices……….cont.
Appendix 5.1……cont. request for information email to Met Office & subsequent response.
Cont. on nextpage…………………………….
P a g e | 37
Appendices……….cont.
Appendix 5.1a: Request for information email to MeteoGroup and subsequent response (Continued on next
page).
Cont. on nextpage…………………………….
P a g e | 38
Appendices…..cont.
Appendix 5.1a: Request for information email to MeteoGroup and subsequent response.
P a g e | 39
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Dissertation Final

  • 1. P a g e | 1 Final Year Dissertation The viability of establishing a new commercial weather services business in the UK Prepared by Dominic Donegan - Module: DB364 – Business Project Student number: 12845331 Date Submitted: 25th May 2015 Word Count: 7660 I declare thatthisreport ismy original workandthat nopart of it hasbeensubmittedtoanyother institute of learninginsupportof an applicationforanotheraward.The opinionsexpressedinthe reportare put forwardina personal capacityand donot necessarilyreflectthose of Brighton BusinessSchool oranyorganisationwithwhichthe authormaybe associated. Signature: …………………………………………………. Date: …………………………………….
  • 2. P a g e | 2 1.) Executive Summary This report seeks to explore the viability of establishing a new commercial weather services business in the UK by undertaking a detailed analysis of the Meteorology sectors in the UK, Europe and US and comparing and contrasting these as a means of identifying what if any favourable conditions exist for the establishment of a new business. The report examines the products and services that are currently available in the UK, European and US market places and looks to combine the results of this analysis with known new business, competitive advantage and market entry theories and hypotheses, to establish the viability of the proposal. Initial findings were of a very competitive, possibly slightly protectionist sector, in that none of the companies surveyed where prepared to provide pricing information or other commercial data which was not already widely available in the public domain, on the grounds of commercial sensitivity. This led to the research to being very much desk based in nature. The reports main findings were that at the top of the Meteorology sector competition is fierce with an ongoing process of company acquisition, product/service expansion, and extended global strategic reach being undertaken. There are a variety of product/service offerings across a fairly broad spectrum of customers ranging from web/mobile app viewers through to farmers, risk assessors, and derivative traders, and it is suspected, as in other industry sectors, that the specialist/bespoke or consulting services command the highest premium. From a business perspective without actually setting a new business up it was not possible to fully validate the theories and hypotheses surrounding business start-up, market entry and firm resources although, taking into account the limited resources of a new business, the research leans strongly towards a policy of product imitation as opposed to innovation and where possible obtaining additional funding from family or friends before approaching the banks. The business model recommendation is therefore for a period of further market/customer analysis to establish the most attractive products and services currently being used, and then seek to imitate one or more of these, but with further customer value add in the form of additional features/benefits or at a lower cost model to entice the customer to buy.
  • 3. P a g e | 3 2.) Preface The weather impacts much of our life, from the sometimes not so easy choice of clothes to wear, the amount of gas, oil or coal used in keeping our houses warm, or the taking part in or watching of outdoor events and sports activities. With ever increasing occurrences of chaotic and more unpredictable weather and a general acceptance that global climate change is now a very real phenomenon (IPCC 2014, Met Office 2011, FT 2014, Independent 2014), this extreme weather is having global consequences and impacting many of the activities considered key for our survival, including the production of crops for food, the provision of clean drinking water and the ability to build safe and dry shelters to live in (Bradford.gov 2015, WWF 2015, National Geographic 2015). The economic impact of rising sea levels, flooding, devastating storms and heat waves is considerable, with global losses through natural catastrophes in 2012 alone totalling USD 37 billion, and when Typhoon Haiyan struck the Philippines in November 2013, it was one of the one of the strongest typhoons ever recorded and the human cost was measured in the loss of 7,500 people (Swissre 2014). The weather is therefore very much at the forefront of many people’s thoughts with a greater appetite for weather information not only by the public but also food producers whose crops can be wiped out in one severe storm, energy suppliers who have to try and satisfy a sudden swing in demand and insurance companies who have to underwrite the risks and pay out for these disasters. The weather has also entered the legal domain with companies supplying specialist weather services for litigation cases, including personal injury claims, road traffic accidents, and for use in specialist forensics (ewi 2014, Weathernet 2015). With this growing interest in all things weather, this report seeks to explore if an opportunity might exist in the creation of a new weather services company to satisfy an increasing demand in the business world. In the report the author has sought to match his life-long interest in Meteorology with a detailed analysis of both the Metrology and Business sectors, where early research has uncovered a marked difference in how the UK and US sectors operate, and he has also identified theories or approaches that might be applied in the creation of this new business.
  • 4. P a g e | 4 Figure 2: Worldwide growth of natural disasters since the1970’s Source: Swissre 2015 Figure 2.1: Total economic and insured losses from natural catastrophe & man-made catastrophe in 2013 & 2014 Source: Swissre 2015 Figure 2.2: The most costly insured catastrophe losses Source: Swissre 2015
  • 5. P a g e | 5 3.) Table of Contents List of Sections Section Content Page 1 Executive Summary 2 2 Preface 3-4 3 Table of Contents 5 4 List of Tables and Figures 6 5 Appendices 7 6 Introduction 8 7 Research Aim and Objectives 9 8 Scope of Work 10 9 Literature Review 11 – 29 10 Research Methodology 30 11 Data Analysis, Discussion, and Evaluation 31-32 12 Conclusions and Recommendations 33 13 Appendices 34-38 14 References 39 -48
  • 6. P a g e | 6 4.) List of Tables & Figures Table/Figure Title Page 2 Worldwide growth of natural disasters 4 2.1 Total economic and insured losses 4 & man-made catastrophe 2.2 The most costly insured catastrophe losses 4 9. Extent of free weather information offered to the UK general public by the Met Office. 12 9.1 Commercial services offered by the Met 13 9.2 MeteoGroup Products & Services 15 9.3 Example of forecast types offered 16 9.4 Products & Services offered by the The Weather Company 17 9.5 Data identified as high value by the G8 Charter 20 9.6 Government bodies involved in data collection 21 9.7 Met Office Free DataPoint products 22 9.8 Sources of new business finance 2006 – 2011 26 9.9 The growth of the alternative finance market 27 9.10 Vendors and their position in worldwide smartphone sales 29 9.11 Literature sources available for analysis 30
  • 7. P a g e | 7 5.) List of Appendices Appendix Title Page 5 Met Office Report & Accounts 34 5a MeteoGroup Annual Report & Accounts 34 5.1 Request for Met Office Information 36-37 5.1a Request for MeteoGroup information 38-39
  • 8. P a g e | 8 6.) Introduction The UK Met Office, with a long history of weather forecasting, is regarded by many as the de-facto provider of professional forecasts here in the UK, and can trace its origins back to its establishment as part of the Board of Trade in 1854, with the first public forecast in 1861 (Met Office 2015). Given its long history as a government body some of the data held by the Met Office is confidential in nature and is only available to the armed forces and other government owned or controlled bodies however public data is also provided by way of forecasts for the BBC and other organisations (Met Office 2015, BBC 2015). At the time of writing much of the Met Office’s non-media data is charged for and this differs markedly to the US market place where there is a huge amount of freely available weather data provided by their National Weather Service (NWS 2015, CNBC 2011, Randall 2010, weatherwise 2015), and here in the UK it could be said that the competition is still very monopolistic in nature, with this aspect being referred to later on. Things are however starting to change with the advent of the governments open data policy (Gov.uk 2014), and an increased appetite for more tailored or specialist forecasts for farmers, insurers, the legal profession, and the derivatives market. There is now the possibility that soon all Met Office forecasts currently provided to Public Service Broadcasters (PSB’s) will be free of charge, under licence (MetOffice.gov 2015). European providers of weather data are numerous but for the purposes of this report most attention will be paid to MeteoGroup, the largest non-government owned body in continental Europe, and the one that supplies amongst others, services for the European Civil Aviation Authority (MeteoGroup 2015). The company has also recently won contracts for Shell and Network Rail and looks to be the biggest competitor to the Met Office’s past domination of the market place here in the UK (MeteoGroup.com 2015).
  • 9. P a g e | 9 7.) Research Aim and Objectives To understand through a process of market and business analysis, potential opportunities in the UK for the establishment of a new weather services business, understanding which business models or theories might support this, and what form of product or service will provide the best return. The following objectives will need to be met to achieve the aim: Objective 1) Undertake a comprehensive reading and analysis of documentation and data available with regard to the UK, US and to a lesser degree the European Meteorology sectors, to gain a greater understanding of the differing market practices of the UK and US. Objective 2) Gain a deeper understanding of the UK Governments open data policy and how this is changing the way the UK Met Office works in the provision of free data and whether it could be regarded as monopolistic competition. Objective 3) Research various business models, if possible the returns that they produce, and identify a weather product that not only produces acceptable returns but that also has some form of at least partially protected USP. Objective 4) Determine if theories of business start-up and market entry are applicable in the creation of a new weather services business in both the UK and US markets and where possible test and/or validate findings. Objective 5) Analyse market entry and competition strategies such as Differentiation, Low Cost strategy and Blue Ocean thinking, with a view to determining the best entry strategy.
  • 10. P a g e | 10 8.) Scope of work There are many providers of weather services in the UK, Europe, and particularly the USA, many of which are easily accessible via websites. For the purpose of this report the author has sought to simplify the otherwise very complex nature of the marketplace by analysing three key companies operating in the Meteorology sector, with arguably the UK Met Office as the still the de-facto provider of services to the UK market place, MeteoGroup as the biggest European challenger (see appendix 5 & 5a,) and the National Weather Service Bureau of the US providing free data to the 339 plus companies operating there (NWS 2015. Met Office 2015, MeteoGroup 2015) With the aid of consent forms (See appendix 5.1 & 5.1a), the author has sought to obtain primary data from both MeteoGroup and the UK Met Office including pricing information, however this has been declined on the grounds of commercial sensitivity and therefore there has been a much greater reliance on desk based research than would have been wished. Given the myriad forms the supply of weather data seems to be taking, particularly in the US market place, and the corresponding level of competition (NWS 2015, Accuweather 2015, The Weather Channel 2015), the author has again sought to simply and refine the focus of research to that regarding the establishment of a new consulting business providing specialist services as opposed to one providing data on mobile phones or websites. It is felt that with a more specialist product or service it would be easier to protect the company’s USP, unlike a mass market product such as those currently provided on websites mobile phones, tablets etc., which could be easily imitated and mean a quick loss of competitive advantage. Finally, this report takes a look at crowd funding as a source of income for a new start-up, and its links with social media, however it is beyond the scope of this report to look into the advantages or disadvantages of social media advertising.
  • 11. P a g e | 11 9.) Literature Review From the initial project proposal it was identified that there were a number of theories or hypothesis surrounding business strategy including the set-up of a new business, market entry, and competitive advantage, however there were no models or theories specifically pertaining to the Meteorological sector. This report has therefore split the literature review into two sections, with firstly an analysis of the Meteorology market place where no supporting evidence for theories or models of operation have been uncovered and then takes a separate look at the business sector where they do exist. It is felt however that the two sectors can be linked together in reaching a conclusion to the research question of ‘The viability of establishing a new weather services business in the UK’. Objective1. - The UK Market Historically weather forecasting in the United Kingdom has been the domain of the government owned and tax payer financed UK Met Office, and from as far back as the First World War the department has had close links to the armed services, playing a particularly vital role in the successful D-Day landings in World War 2 (Met Office 2015). The Met business today is under the control of the Department for Business Innovation and Skills, and provides its free Public Weather Services (PWS) to the general public in the form of national and regional forecasts via television, internet and radio forecasts for the BBC on own its website, and via mobile phone apps. A full list of its free services is given on the next page (Met Office 2015). The Met Office also conducts much more complex longer term governmental global forecasting models on Climate Change, in association with the Hadley Centre in Exeter, and Medium Range Forecasting through its close links with the European Centre for Medium Range Weather Forecasting (ECMWF) based in reading. It could be argued that in scientific circles it is better known for its work in these areas, particularly by members of the IPCC, for its work with them on global climate change (Met Office 2015, ECWMF 2015).
  • 12. P a g e | 12 Figure 9: Extent of free weather information offered to the UK general public by the Met Office. Source: Met Office PWS Service Catalogue
  • 13. P a g e | 13 In addition to working for the general public and providing detailed scientific reports for bodies such as the International Panel on Climate Change (IPCC 2015) the UK Met Office works on a commercial basis supplying reports and forecasts for the various UK industry sectors including Renewable Energy, Transport, Aviation and the Insurance & Capital markets sector. These reports fall under four distinct revenue generating programmes which are Consulting, Transport, Media, and Training with the complete portfolio of services shown in the table below. (Met Office 2015) Figure 9.1 Commercial services offered by the Met Office (no cost provided on website). Source: Met Office 2015,Donegan 2015 Sector Product/Service Comments Utilities Wind Renewable Energy Win Map 30 years of observation data Wind Visual Eyes Web based - for managinghealth and safety Wind Safesee International offshoreforecastingfor operations,health and safety, maintenance. Wind Virtual Met Mast Tool to assistin the sitingof Onshore & Offshore wind farms Solar UK Solar Energy Maps Assistancein the planningand erection of Solar farms Water Waste water management Frequent & accurateshortterm forecasts Water Water resource planning Drought/Flood forecasts Energy Energy demand forecast Demand forecasts on the energy grids affected by unseasonal cold or warmweather. Insurance & Capital Markets Risk WindstormHazard maps & Historical catalogue Allows Risk to be priced down to and set at local level Risk Risk Modelling Catastropheprediction and mitigation Transport All World area forecastcentre One of two in world Aviation Volcanic Ash advisory centre One of ninein world Rail Adverse weather forecasts For train operatingand maintenance companies Road OpenRoad Key weather information to transportand infrastructuredecision-makers. Marine See state forecasts Critical projectinformation for Marine Operations Construction/Mining Location based reports On sitereports and forecasts International consulting Site specific consultingservices Retail DemandMet Weather forecastingfor crop yield and product availability in super markets
  • 14. P a g e | 14 MeteoGroup by contrast began life as a privately owned and Dutch based Meteorological consulting company (Meteo Consult) that expanded into Germany through joint venture with MC-Wetter (later wholly acquired) and into Belgiumby the acquisition of Meteo services. A subsequent joint venture with the Press Association (PA) in the guise of PA Weather Centre eventually saw the entire acquisition of Meteo Consult by the PA, and a new company, MeteoGroup UK formed (MeteoGroup 2015). In its early days Meteo-Consult had also worked within the shipping market, developing its proprietary weather routing systemSPOS, and today this product makes up an important part of MeteoGroup’s portfolio of services, aligned with other offshore products such as Nowcasting Pro6 and the range of bespoke services offered to the offshore wind sector (MeteoGroup 2015). MeteoGroup established what could be viewed as a strategic presence in the US with the opening of an office there in 2010, with other key growth events including the acquisition of Nowcasting in Ireland in 2011, providing further specialist offshore capability, a new presence in South East Asia with the opening of an office in Singapore in 2012, and the acquisition of the large Swiss-German company mminternational swelling its ranks of employees to over 400. Today MeteoGroup competes head-on with amongst others, the UK Met Office, and has won some important contracts from them, including the Devon local authority contract. In addition the company has made large inroads into the transport, retail, and energy trading markets in the UK, including securing the Network Rail contact in the UK, the signing of contracts with RWE and Vestas, two of the larger European companies operating in the renewable energy sector, and a recent contract with Shell Offshore (MeteoGroup 2015). In the media arena MeteoGroup has also recently secured what could be regarded as a higher visibility contract for Channel 4 weather news from ITN, and the company also writes regular columns for the Huffington Post (2015). Whilst announced at the time by PA as a partnership between MeteoGroup and General Atlantic LLC, In December 2013 the company was wholly acquired by the private equity firm in a deal worth £160 million to PA. At the time the deal was expected to net up to £125 million pounds in profit for the parent company and help the Press Association invest in and diversify its business, whilst also addressing what it referred to as its pension fund deficit (Press Association 2015, General Atlantic 2013, FT 2013, WeatherCast 2015). Continued on the next page is a comprehensive list of the products and services offered by MeteoGroup, many of which mirror or closely resemble those offered by the UK Met Office.
  • 15. P a g e | 15 Figure 9.2: MeteoGroup Products & Services Source: MeteoGroup 2015,Donegan 2015 Sector Product/Service Comments Utilities Water Water Management Bespoke rainfall analysisand forecasting Trading Delivery of accuratedata to energy traders Probability and longrangeforecasts Power distribution Extreme weather events For operations and maintenance Insurance & Capital Markets Claims Severe weather warnings Advance warnings to alertclaims departments for readiness Risk Risk Analysis& Modelling Risk assessmentfor insuranceproducts Claims Wind speed analysis For evaluation of storm damage claims Claims Hail maps Size and location of storms Risk Worldwideforecast Risk analysisand modelling Transport Road RoadCast Winter maintenance preparation forecasts Road Summer RoadCast High winds and heavy rainfall alerts Aviation Aviation forecasts Privateprovider of data to European Aviation Sector Rail RailCast Adverse weather warnings for track operators Marine Nowcastingpro 6 Operational planningtool for high resolution metocean forecasts Marine RouteGuard Shipping Route forecasting Marine Site specific Forecasts and observation data Solar Energy Wind Wind & temperature maps Temperature and wind speeds at hub and ground height Solar & Wind Satellitefor Solar and wind Visibleand infrared showingcloud movement and density Wind O&M Weather forecasts for Operations & Maintenance planning Solar & Wind Archive forecasts 48 hour and 7 day archiveforecasts Wind Wind & temperature maps Temperature and wind speeds at hub and ground height Construction BuildCast Custom based forecasts for construction industry
  • 16. P a g e | 16 The US Market NWS, the national weather provider for the US provides at the time of writing, free weather data to a total of 339 companies in this country, whilst also providing a portfolio of services on its own website, also free of charge (NWS 2015). Like the UK, although slightly later on in the US, weather came under the auspices of the military in 1870 with a weather service established under the army’s signal service division, although by 1890 the value of the service to the greater public had been recognised and the service was transferred to the civilian US Weather Bureau within the Department of Agriculture. In the mid 1960’s an Environmental Science Services Administration was created within the Department of Commerce which subsequently becomes the National Oceanic and Atmospheric Administration (NOAA), with the US Weather Bureau being renamed the National Weather Service (NWS) in 1970 and it becoming a component of NOAA (weather.gov 2015). Since this time the NWS has grown and changed both technologically, and also in its service offering, with an emphasis towards more severe and catastrophic weather forecasting and, according to their website a focus on the need to provide forecasts for the protection of life and property, provided at no cost to the general public and commercial organisations (NWS 2015). Similarly to the UK Met Office and its association with the Hadley Centre with its work on Climate Change, NOAA could be regarded as more environmentally and scientifically weighted than the NWS, and undertakes climate monitoring, oceanic and atmospheric research, and work on coastal maintenance (NWS 2015, NOAA 2015). Figure 9.3: Example of forecast types offered to the general public by the NWS Source: NWS 2015 As previously highlighted the provision of weather in the US differs markedly to that of the UK and mainland Europe with well over 300 private sector meteorology companies taking the government free data and tailoring it to fit their individual customer needs (NWS 2015, CNBC 2011), although like the UK, many households turn to their national weather service (NWS) for daily forecasts with Lazo (2011) stating that the average US adult obtains forecasts 115 time per month, giving a country wide average of 300 billion forecasts annually.
  • 17. P a g e | 17 It is estimated that in 2013 there were 350 companies proving commercial weather services in the US, and that their combined annual revenues are believed to be in the region of $3 billion per annum, an increase of over 50% in a two year period and with a predicted trend of increased innovation, and a continued growth in growing revenue (Wharton University 2013, Weatherwise 2012).. The companies providing these services vary from small consultative type business providing specialist services to much larger operations such as AccuWeather, The Weather Company and WeatherBank INC There is a trend in the US for weather apps on mobile devices to provide what is known as hyper-local weather whereby the track of individual rain clouds are given on a minute by minute basis, and currently Accuweather and DarkSky are the two main providers of this technology (Accuweather 2013, The Economist 2013). Figure 9.4: Some of the products & services offered by the US based The Weather Company Source: WSI.com 2015, Donegan 2015 Sector Product/Service Comments Insurance Claims WeatherFX Alert Severe weather alerts service Risk WeatherFX response Real-time risk assessment Claims WeatherFX replay Weather claimvalidation Marketing Weather FX reach Extreme local weather warnings Development WeatherFX API Integration of data sets Energy Power Generation WSI Trader Weather prediction for power generation companies Power Generation WSI Windcast For evaluation of suitablewind farmsites and predicted power generation Power Generation WSI Hourly trader Prediction of volatileswings in energy consumption Power Generation WSI MarketFirst Prediction of expected GFS and ECMWF models Aviation Pre-Flight WSI Pilotbrief Optima Pre-Flightradar and other data Ground staff WSI Hubcast Lightning strikewarnings Operations WSI Fusion To streamlineand enhance aviation operations Turbulence WSI Total Turbulence In-Flightturbulence alerts
  • 18. P a g e | 18 Discussion on Objective1. As part of the Department for Innovation Business & Skills the Met Office is still very much under government control and as such is at least partly funded by the taxpayer, and this includes what it refers to as its “Compeatable Business” where it seeks to “maximise the offset to tax payers through its commercial activities” (Met Office 2015). This ““Compeatable Business” is only a relatively recent event in its history and prior to this the Met Office had the opportunity to build a portfolio services with little or no competition and it could be argued that until recently it operated on a monopolistic basis ((Johnson, Whittington, Scholes 2011) in that it has been operating in an industry where there has been just one firm, its own. Being the main incumbent in its sector presents difficulties for new businesses wishing to compete in the same market place, in that the Met Office already has supplier relationships in place that it has built up and strengthened over many years, examples of this being both BBC Radio and Television (Met Office 2015), and the new business might have to adopt a low cost policy on its products to try and secure this business. In addition to the entrenched nature of the competition any new firm entering the market will have the added disadvantage of competing against a company that is at least in part subsidised by tax payer’s money, and being government owned is unlikely to be allowed to fail. The disadvantage in adopting a “Cost Leadership” policy (Porter, 1985) is that it will impact on the profit margin the company makes and whist this is likely to be counteracted somewhat by the lower staffing costs and operational costs of the new smaller firm, it may have to spend significantly more on its marketing to bring about brand awareness. A differentiation policy (Porter, 1985) may offer more opportunity for a new firm to enter the market however it will need some form of unique product or service to do so and this ties in well with the work of Barney (1991) where he talks about the importance of the firms resources to enable sustained competitive advantage. Barney (1991) talks about 4 key indicators being required to achieve this sustained competitive advantage and these are Value, Rarity, Imitability, and Substitutability (VRIN) and are covered in more depth on the next page.
  • 19. P a g e | 19 The following questions will need to be addressed prior to market entry:  Value – Does the new product or service provide potential value to customers and does it provide value to the company by taking advantage of opportunities in the marketplace and neutralising threats? Are the expected returns enough to satisfy shareholders/stakeholders or cover the company’s operating costs?  Rarity – Does the new firm have unique or rare intellectual capital in the form of its employees or a unique product or service?  Imitability – Can the proposed product or service be copied easily by the competition?  If the product or service can’t be copied can it be substituted by something similar? It is possible that the best strategy for a new firm entering the market place, and with reference to Porter’s competitive strategies (1985), will be to have a hybrid strategy with a focus on product specialismand uniqueness targeted at a very specific market and also seek to compete on a cost basis in a specific segment that research suggests stands the best chance of success. Being a trading arm of the Department for Innovation, Business, and Skills the Met office is not open to the same share speculation and potential acquisition on the open market as other private firms that are listed on the stock exchange. This affords the Met Office yet further protection from competition. MeteoGroup on the other hand has not hand the security of government backing but has been able to grow through the acquisition or merger of other European firms and in doing so gain valuable assets such as the use of a proprietary network of 830 weather stations across Germany and Switzerland. This has enabled the company to produce a more localised and accurate forecast without having to pay the national weather centres for their data, and therefore becoming more self-sufficient and potentially more profitable in the process (pr newswire 2013). Supporting this growth and acquisition strategy an article in the Financial Times states that the company is seeking to rival the Met Office in providing “accurate weather forecasts for consumers and business” with it claiming to supply its services to 60% of local authorities in the UK (FT.com 2013). The company however is subject to potentially the same threats/opportunities as other non-public sector companies, and this is this is well demonstrated by its recent acquisition by General Atlantic LLC (MeteoGroup 2015) which, whilst being reported in the press as an amicable acquisition by General Atlantic LLC, the departure of their CEO suggests this might not necessarily have been the case.
  • 20. P a g e | 20 MeteoGroup also now has a presence in the US market place and is presumably seeking to grow its business there. It and the UK Met Office, should it decided to operate there, will seek the same challenges in that more local, established firms receive their data free of charge and like the Met Office have possibly built up long standing relationships with business and consumers alike. Objective2. The UK GovernmentsOpen Data policy In June 2013 a charter was signed by the worlds G8 members that would allow future access by the public to data that had previously been the preserve of the world’s governments, and was seen as being of high value in the improvement of democracies around the world (Gov.uk 2013). Figure 9.5: Data identified as high value by the G8 Charter Source:Gov.uk2013 The table on the next page shows some of the data that Companies House, The Land Registry, The Met Office and Ordnance Survey had been previously collecting significant amounts of for many years, and with the creation of The Public Data Group, an advisory body to the Department for Business Innovation and Skills in 2011, some of this data has been made available either commercially and at a charge, or free of charge to the general public (Gov.uk 2014).
  • 21. P a g e | 21 Figure 9.6: Table showing four of the many government bodies involved in data collection Source: Gov.uk 2014 The data that is now available has been banded into 4 pricing categories by The Public Data Group (Gov.uk 2014) and is as follows:  Open Data – As far as possible and where it is feasibly to do so financially, this data is free of charge.  Cost Recovery – Where cost of collection, management, or distribution costs are involved, there is a charge although this may be reduced in time if production costs lower in line with increased efficiencies.  Trial Access – Sometimes used for research purposes this data is available only for a limited period of time.  Commercial Rates – This data is typically analysed and refined and a rate is levied that covers the cost of collection, distribution or where a service element is involved. European Directive 2007/2/EC requires that data spatial data, i.e. data that contains a positional or locational element, is comparable across European regions thus providing the people that use it consistent evidence about the environment they live and work in (Local Government Association 2013).
  • 22. P a g e | 22 This directive has impacted the UK Met Office in that not only has it had to provide some of its data free of charge, but also it has now also to be in a format that complies with the INSPIRE directive. The Met Office has fulfilled its obligations in the creation of a website called DataPoint that provides INSPIRE compliant data in a format that is suitable for application developers and details of the products are shown below, although it is worth noting that much of this information is also available to the general public on the Met Office’s own website (Met Office 2015). Figure: 9.7: Met Office Free DataPoint products Name Description UK hourlysite-specificobservations Hourlyobservationsforthe last24 hours Last 24 hours Marine Observations A linktodownloadthe last24 hourMarine Observations National andregional textforecast TextusedforUK and regional weatherforecasts UK Climate Averages Districtand Regional,Site specificandUK monthly climate averages. Precipitationforecastmaplayer Imagescoveringthe UK Visiblesatellite maplayer Image showingrecentcloudcover Total cloudcoverforecastmaplayer Total cloudcoverfor UK Pressure forecastmaplayer Mean sealevel pressure forthe UK Surface pressure charts Pressure levelsandweatherfronts UK 3-hourlysite-specificforecast A qualitycontrolledforecast datafeed outto5 days Lightningstrikesmaplayer Image showinglightningstrike frequencyprovidedas a map overlay Infraredsatellite maplayer Infraredsatellite image showingcloudcover providedasa map overlay Rainfall radarmap layer A setof layerimagesinthe formof map overlaysto show recentrainrates inmm/houroverthe UK. Temperature forecastmaplayer Forecastmap layerforthe UK showingscreen temperature Mountainweatherforecasts Data and contentusedto provide Mountainweather forecasts Regional extremesobservations Observationextremesare providedbyregionforthe previousday UK dailysite specificforecast A five dayforecastforapproximately5,000 locations Weatherextremesdata A linktoweatherextremesdata Regional Climate Anomalies A linktoview monthlyregionalclimate anomalies Historicregional climate data A linktohistoricregional climate data Historical StationObservations A linktohistoricstationobservationsintextformat Source: Met Office 2015,Donegan 2015
  • 23. P a g e | 23 Discussion on Objective2 The creation of the Met Office DataPoint website offers software developers and potential new business owners the opportunity to obtain data free of charge, re-package it in the form of graphics and visual displays, and then sell the product or service on to businesses and consumers at a cost, subject to the Met office terms and conditions (Met office 20155). As previously mentioned however much of this data can already be found free of charge on the Met Office’s own website and therefore it could be argues that this is only of limited use to the new business owner and is certainly not comparable to the more extensive and complex data available in the US market place (see figure 6.3). In addition any new business starting up will also be competing against the Met Office commercial division and as already discussed they enjoy the protection and assurance of being a government department and at least partly funded by the tax payer.
  • 24. P a g e | 24 Objective3. – Business Models& Returns From the material accessed thus far it has become clear that the selling of weather products and services is evolving along multiple channels with differing business models however there is little or no information available as to the actual profit levels or returns available on differing models and with this in mind the report takes a look at the differing models being utilised but without showing actual figures or rates of return. Large firms in the US such as The Weather Company have partnered with IBM to provide weather services for business, and the global giant Monsanto has recently paid $390 million for the Climate Corporation and its associated expertise in weather data analytics for farmers (Monsanto 2015, 03.ibm 2015). This model centres on the yearly activities of farmers and looks to provide accurate forecasts pre sowing/harvesting etc. Another developing channel in the US is what is termed the nowcasting apps, and these are phone, tablet, or web apps that provide hyper-local forecasts that update at regular minute by minute intervals using data from local stations (iTunes. Apple 2015, SkyMotion 2015) and this very much ties in with the increased public appetite for short interval hyper-local forecasts. MeteoGroup’s business model revolves around securing its own weather stations through company acquisition, thus keeping data costs low whilst restricting competition, however an article by the University of Pennsylvania entitled “Today’s Forecast for the Weather Business: Increased Revenues and a Focus on Innovation” points to the limitations in the private sector caused by the expense of investing in Supercomputers and global modelling programmes (K@W 2013, MeteoGroup 2015) and few smaller weather firms will have the money to go on the acquisition trail like MeteoGroup. The importance of not only product differentiation but business model differentiation is highlighted by David Teece (2009) in his paper on business strategy and innovation as is the need to be customer centric, a view echoed Christensen & Cook (2005) in the HBR journal “Marketing Malpractice: The Cause and the Cure, where they highlight the need to produce goods or services that the customer actually needs as opposed to what the company think they need. Similarly Teece (2009) talks about building a sustained competitive advantage and like Porter’s views on competitive advantage (1985) he talks about the importance of not only having a differentiated product that is hard to imitate, but also a hard to imitate differentiated business model.
  • 25. P a g e | 25 Discussion on Objective3. From the wealth of material accessed thus far it could be argued that in weather forecasting the following business models currently exist:  Detailed analytical reports for sectors including insurance, farming, and legal, using large amounts of data and computed with very powerful and expensive super- computers.  Everyday forecasts for the general public including those provided by the UK Met Office, MeteoGroup, Accuweather & The Weather Channel.  Specialist reports such as those provided by MeteoGroup for the Wind Turbine and Solar industry.  Hyper-local reports provided on app and tablet by companies such as Dark Sky and Sky Motion. It is suggested that Accuweather may have recognised the value in having multiple business models and therefore a hybrid business strategy, as it has recently acquired the hyper-local company SkyMotion and their app MinuteCast, which presumably will provide it with additional revenue to its general daily forecasts on the web. As in most businesses the cost of consultative or bespoke work is generally more than the run of the mill regular activities a company might undertake and it is likely this also applies to the weather industry with larger returns being made on specialist and consultative/analytical products and services. Being specialist or bespoke in nature these cost are usually not publicised, thus providing a weather company with some protection from other competing companies that might wish to imitate its product or service, but not know how much it can charge prospective customers for it.
  • 26. P a g e | 26 Objectives4. & 5 – Business start-up and Market entry theories& blueocean strategy and competitiveadvantage To achieve continued success and competitive advantage in a new business start-up a number of academic sources point to the necessity for not only a differentiated product that no one else has but also one that delivers value to customers and can be viewed as being customer centric, that is the product or service revolves around satisfying a demand from the customer or finding a solution to their problem. Adding to the above comments other authors state that future successful companies will be the ones that can create, capture, or deliver value in unique ways (Porter 2008, Teece, 2009, HBR Staff 2006, Kim, Mauborgne 2004, Anthony 2013). However a differentiated offering alone is not a guarantee of success with Storey & Greene (2010) highlighting the problems faced by small firms in raising finance and having less influencing power in the market place with this comment being reinforced by Mazzarol (2004) who talks about the need for not only the correct financial backing but also the correct marketing and production competencies. Raising finance can be a big issue with small firms who can struggle to obtain capital from banks or venture capitalists who may not feel the credit history is sufficient or that the risk is too high (Martinelli, 1995). Another author highlights the importance of relationships in obtaining credit (Cole, 1998) and this might well explain why the largest source of finance for small new start-ups is actually family and friends, as shown in the table below: Figure 9.8: Sources of new business finance 2006 - 2011 Source: GEM 2011
  • 27. P a g e | 27 Crowd-Funding is a newer but popular and growing means of raising finance through social media channels and has some suggest come about as a result of the difficulty in obtaining credit from more mainstream sources such as banks during the recession (Statista 2015). Crowd-Funding comes under the banner of the alternative finance market and this is a growing phenomenon across the world but particularly in the USA and Europe, with Europe experiencing a growth rate of 144% last year and the UK experiencing the fastest growth rates in (FT.com, jbs.cam2015). Figure 9.9: The growth of the alternative finance market Source: University of Cambridge & Ernst & Young 2015 Assuming sufficient finance is in place and In addition to having the correct and ideally unique product, a business has to have the correct strategy in place to be successful with many businesses failing through lack of a coherent strategy (Zimmer & Scarborough (2005), and because they suffer what Mazzarol (2004) refers to as a strategic Myopia where they find the task dull or unnecessary. For the firm to be successful a winning strategy may be to find a market place where no one else is operating in, such as undertaking a blue ocean strategy in an uncontested market place (Kim, Mauborgne 2004) or it has to face the existing incumbents and the possible entry barriers that might be in place, that make it difficult for the newcomer to gain a foothold (OECD 2007, Porter 2008, Yip 1982).
  • 28. P a g e | 28 These entry barriers come in all shapes and sizes and can include economies of scale, where the incumbent firm/firms can produce the same or similar goods at a fraction of the cost to a newcomer, a small number of existing firms (oligopolies) in collusion and acting defensively towards the newcomer, or the preferential agreements or strong relationships established with the incumbents customers. It should be noted however that some authors do not see entry barriers as a guarantee of failure and suggest that there may still be opportunities in turbulent markets, particularly if the company has a multitude of differentiation strategies (Carter & Jones-Evans 2004, Zimmer & Scarborough 2005). Should the new firm be in the enviable position of operating a blue ocean strategy it is likely that this will not remain the case for long with competitors seeking to imitate the company’s product and grab a share of the virgin market. According to Barney (1991) and building on the work of Porter (1985) to enable a sustained competitive advantage it is important that the firm has the correct resources in place, referred to as core competencies by Prahalad & Hamel (1990) and with reference to Barney these are detailed below:  Physical capital resources – The firms plant and equipment, geographic location and access to raw materials where applicable.  Human capital resources – The Company’s people, their experience, training, judgement, intelligence, and the insight of individual managers working within the firm.  Organisation capital – The formal reporting structure of a company the planning, coordinating and controlling systems it has in place.
  • 29. P a g e | 29 Discussion on Objectives4 & 5 In an ideal world all new small firms entering the market place would be doing so in an uncontested space with a product or service that was unique and could not be easily imitated. However even with a small business start-up and a product or service that is initially unique and successful, is unlikely that it will be long before competitors seek to imitate and unless the now incumbent maintains a process of business and product innovation, competitive advantage is unlikely to be maintained. An example of this rush to compete in the same market place might be the story of Apple and the first touch screen phones in 2007 whish back than was a virgin uncontested market. Today Samsung is the market leader with a host of other companies having entered the sector, a clear indication of competitors pilling in when they sense there is business available (Gartner 2015, The Guardian 2015). Figure 9.10: Diagram showing vendors and their position in worldwide smartphone sales Source: Gartner 2015 It could also be argued that firm resources are another area that in the real world are generally not actually perfect and whilst an individual or group of individuals may have a brilliant idea if this idea is not conveyed to all staff members’ part of the message may be lost and the staff may feel alienated and not take on board the ‘journey’ the CEO and senior staff are embarking on. More than this the CEO may be so wrapped up in the company and making it a success, there may be no clear strategy or business model in place or indeed time to do anything else however for a sustained competitive advantage to last not only does the product have to remain un-imitated and there be aa programme of innovation, the staff have to have a certain level of core competency training coupled with general skills development, otherwise motivation can suffer there can be a loss of drive and ultimately the company can suffer.
  • 30. P a g e | 30 10.) Research Methodology The analysis conducted from the initial project proposal identified fairly quickly that the Meteorology sector does not have any underlying theories or hypothesis that can be applied to the area of Meteorology and therefore an interpretivist approach to this aspect of the report has been undertaken to reflect the author’s view that there will be no single answer or unifying theory to the question of The Viability of establishing a new commercial weather services business in the UK. The author feels however that the Business sector is different to the above, with a number of theories and hypothesis that surround the start-up of a new business and market entry. These include the theory of Competitive Advantage, Blue Ocean Strategy, Business process Innovation and Firm Resources, and the author has undertaken a positivist approach to this research as he feels he will be able to validate or test at least some of these theories. A mixed research methodology has therefore been employed with an overall constructivist approach to ontology, reflecting the author’s views that reality differs somewhat from country to country and even possibly within different organisations. With regards to availability of data for the study, the author has been unable to conduct primary research with the three main company’s studied due to commercial sensitivity (See appendix 5.1 & 5.1a) constraints surrounding their products and the pricing thereof. He has therefore had to rely on desk based research using data from both primary and secondary literature resources such as journals, white papers, company reports, books, online academic publications and web based news articles. Figure 9.11: Diagram showing possible literature sources available for analysis Source: Saunders, Lewis, Thornhill 2009
  • 31. P a g e | 31 11.) Data Analysis, Discussion, & Evaluation The Meteorology Market Place The weather forecasting market is in a state of change with large multi-national companies such as The Weather Company, The Climate Corporation, and Accuweather extending their global reach and diversifying their portfolio of products and services, in some cases through competitor acquisition, or indeed being the subject of a take-over, as opposed to growth through entirely organic means (Monsanto 2015, 03.ibm 2015, MeteoGroup 2015). More Insurance firms are now paying attention to the weather, as are derivatives companies, legal firms and energy companies, and the literature analysed so far suggests this is the result of the increasing frequency of chaotic weather events around the globe, their associated impact on people and business alike and an overall increased demand. Short of these world-wide chaotic events suddenly abating it unlikely this interest will wain and therefore competition in this sector looks set to remain, most likely grow and certainly the upper end of the market looks very competitive with the likes of The Met Office, MeteoGroup, Accuweather and The Weather Channel all vying for a piece of the same marketplace, with them providing services online, via phone apps and tablets whilst also catering for the more specialist business market place (MeteoGroup 2015, Accuweather 2015, The Weather Channel 2015, Met Office.gov 2015). Given the difference between the US and UK market place in terms of free data access and therefore reduced operating costs and potentially higher profit margins, it is possible that we see will more US companies attempting to make in-rods into the European marketplace, particularly the UK where long range, statistical and modelling data still carries a premium.
  • 32. P a g e | 32 The Business Environment From the data analysed on new business start-up, market entry, competitive advantage and entry barriers, it is clear that many writers on the subject see product or service distinction as the key to being successful, along with having the correct human, capital and organisational resources in place and an ongoing business and innovation process (Porter 2008, Teece 2009, HBR Staff 2006, Mauborgne 2004, Anthony 2013). The importance of either having a business plan formulated or having conducted some in- depth market analysis is cited as being equally necessary (Zimmer & Scarborough (2005, Mazzarol 2004, Porter 1985), and yet Steve Blank (2013) of the Harvard Business Review suggests this thinking is actually old school and what is more important is actually getting a product or service to market, gathering customer feedback and then adjusting the product or service accordingly. It could be argued that with this approach the new business will ultimately have a product or service that provides real value to the customer however the time taken to get to this stage, not to mention the cost involved may well have handed an advantage to the competition and a better course of action might be one of imitation of other companies products or services (Theodore Levitt 1996), with Oded Shenkar (2010) of Harvard Business Review suggesting that up to 97.8% of the value of new innovations goes to imitators. With research suggesting that being first is not necessarily best with its associated development costs and an offer that is not complete (Carr-Michael 2010), a less costly approach might be to enter as a “Fast Follower” (Shenkar 2010), and let someone else make the mistakes. By studying the competitor’s product it might be possible to design a product or service that mirrors an existing one but which provides more value add to the end customer, costs less or even a combination of the two. To help achieve success as a “Fast Follower” (Shenkar 2010), a pre-business customer survey could be undertaken to ensure that the proposed product or service is one that adds value, and just as importantly is something the customer actually needs (Christensen 2005). Financing is another early stage requirement for the set-up of a new business with a lot of SME heads turning to friends or family for finance (GEM 2015. This presents a problem in that friends or family may insist on some form of stake in the company in return for their investment or may wish to get actively involved in the management of the company possibly affecting its overall strategic direction. Crowdfunding too has been identified as an additional and much newer source of start-up finance however it is suggested that interest is waning a little, a fact bourne out by one such new SME owner (Guardian 2014) suggesting that people now have to work much harder with their pitch and business plan to convince people to invest in them and there is also the fact that with so many investors in the business, there may be a lessening of overall control.
  • 33. P a g e | 33 12.) Conclusion and Recommendations For a small business to succeed in the Meteorology market place the same theories and hypotheses applying to other new start-ups would appear to apply although with a lack of data on business model returns and weather products and service costs, it is hard to verify this. The market is clearly very competitive at the top end with a focus on global coverage and a mixture of business to client and business to business services. The competition at the top end of the market represents an opportunity for a smaller firm to enter ‘under the radar’ and to avoid some of the initial barriers to entry. Whilst applications on smart phones and tablets reach a large audience and can presumably generate good profit levels for the company this is beyond the strategic reach of most small new firms and they would most likely feel the full competitive force of the much larger incumbents should they try and compete in this space. Whilst competitive advantage and innovation are important factors in establishing a business perhaps the most important element is one of Human Capital or USP and, as at the time of writing the author does not feel he has a unique product or service to offer and therefore a process of imitation as opposed to innovation would seem the best initial route. Research suggests a specialist consultative or bespoke product or service would be the most profitable route as it would be perceived as higher value to the customer than a standard forecast and is likely to attract higher profit margins. The recommendations would be:  Identify through further research a specific market segment that is of interest and conduct surveys of potential customers, ascertaining if there are shortfalls in the products or services they use or they have needs that are not being addressed. At the same time attempt to gather costings information from the potential customer identifying if they see their current products and services as providing value for money.  Prepare business plan showing proposed business model, projected revenues, and other key information, and use this when approaching family as first point of call for any early funding requirements, with alternative sources being fiends, crowd- funding or the banks.  Operate on a ‘below the radar basis’ with minimal advertising so that competition is not alerted to new business presence and it has a chance to become established.
  • 34. P a g e | 34 13.) Appendices Appendix 5: Excerpt from Met Office Report & Accounts Source: Met Office.gov 2015 Appendix 5a: Excerpt from MeteoGroup Annual Report & Accounts Source: fame2.bvdep 2015
  • 35. P a g e | 35 Appendices……….cont. Appendix 5.1: request for information email to Met Office & subsequent response. (Continued on next page). Cont. on next page………………………………..
  • 36. P a g e | 36 Appendices……….cont. Appendix 5.1……cont. request for information email to Met Office & subsequent response. Cont. on nextpage…………………………….
  • 37. P a g e | 37 Appendices……….cont. Appendix 5.1a: Request for information email to MeteoGroup and subsequent response (Continued on next page). Cont. on nextpage…………………………….
  • 38. P a g e | 38 Appendices…..cont. Appendix 5.1a: Request for information email to MeteoGroup and subsequent response.
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