ADT 2013 Annual Report Download - page 70

FORM 10-K
are routed through our customer contact centers. Customer care specialists help customers resolve minor service
and operating issues related to security and home/business automation systems and in many cases are able to
remotely resolve customer concerns. We continue to implement new customer self-service tools via interactive
voice response systems and the Internet, which will provide customers additional choices in managing their
services.
Suppliers
We purchase equipment and components of our products from a limited number of suppliers and
distributors. Inventory is held in our regional distribution center at levels we believe sufficient to meet current
and anticipated customer needs. We also maintain minimal inventories of equipment and components at each
field office. Generally our third-party distributors maintain safety stock of certain key items to cover any minor
supply chain disruptions. We also utilize dual sourcing methods to minimize the risk of a disruption from a single
supplier. We do not anticipate any major interruptions in our supply chain.
Industry and Competition
We believe the primary factors driving industry growth include heightened concerns about crime, especially
for an aging population that is increasingly concerned about security related to break-ins and theft of high-value
items. We believe that a combination of increasing customer interest in lifestyle and business productivity and
technology advancements, which are decreasing the cost of Internet Protocol-enabled security equipment, will
support the increasing penetration of interactive services and home/business automation.
The security systems market in the United States and Canada is highly competitive and fragmented, with a
number of major firms and thousands of smaller regional and local companies. The high fragmentation of the
industry is primarily the result of relatively low barriers to entering the business in local geographies and the
availability of wholesale monitoring (whereby smaller companies outsource their monitoring to operations that
provide monitoring services but do not maintain the customer relationship). We believe that our principal
competitors within the residential and small business security systems market are Protection One, Inc.,
Monitronics International, Inc. and Vivint, Inc.
Success in acquiring new customers in the residential and small business security and home/business
automation markets is dependent on a variety of factors, including company brand and reputation, market
visibility, service and product capabilities, quality, price and the ability to identify and sell to prospective
customers. Competition is often based primarily on price in relation to value of the solutions and service. Rather
than compete purely on price, we emphasize the quality of our electronic security and home/business automation
services, the reputation of our industry leading brands and our knowledge of customer needs, which together
allow us to deliver an outstanding customer experience. In addition, we are increasingly offering added features
and functionality, such as those in our ADT Pulse interactive services offering, which provide new services and
capabilities that serve to further differentiate our offering and support a pricing premium.
We face new competition from competitors such as cable and telecommunications companies in the
interactive services and home automation space. However, we believe our robust field sales force, including our
nationwide team of in-home sales consultants, our solid reputation for and expertise in providing reliable security
and monitoring services through our in-house network of fully redundant monitoring centers, our reliable product
solutions and our highly skilled installation and service organization position us well to compete with these new
competitors.
The market leader in the PERS space is Phillips/Lifeline. We believe we have the opportunity to enhance
our position in this segment, and that as the demographics of the United States and Canada continue to change
towards an increasingly older population, the market is poised to experience significant growth.
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