Accounting Industry in the USA - Essay Example

Marketing Feasibility Study Accounting Industry in the USA The outsourcing phenomenon has surrounded the accounting industry and provides a wide range of services that ranges from accounts payable, book keeping, invoicing, debt collection and tax return preparation. As companies are becoming more at ease with the type of services being provided by the outsourcing companies the degree of outsourcing in the accounting industry is likely to increase. Such circumstances are likely to all the U.S. firms concentrate on the high margin services and meet the demands of the clients especially in technical areas such as taxation, retirement planning, etc. For both non-accounting as well as accounting firms outsourcing has become very appealing. Studies have revealed that number of hiring in the domain of accounting and finance by reputed U.S. firms are likely to increase. Since the demise of Andersen due to the infamous Enron Scandal KPMG, Touche, Ernst Young and Price water house Coopers are known as the big four. Before this it is used to known as the big five. External Factors affecting the performance of the Industry A business unit does not operate in hollow. It operates in an environment. The business environmental factors can be categorized as micro and macro environmental factors. The micro or internal environmental factors are those that can be controlled, where as the macro or external environmental factors cannot be controlled by the firm and yet those factors affect the modus operand of a firm immensely. Therefore it is important for companies belonging to any industry monitor the external environmental factors and develop or modify business strategies accordingly. The external environmental factors include Political, Economic, Social and Technological factors or in short PEST (Cowan, 2005). Political Factors The political environment in US is quite stable. Although the country has been engaged in conflicts in Iraq and Afghanistan; the local political environment has not been hampered by those issues. The Us government - both present and past have welcomed business investments due to which the country has become one of the economic super powers. However due to increase in competition there have been cases of unethical practices. As a result the government has imposed strict legal measures for companies induced in unethical practices. Accounting professionals have a huge role to play to ensure ethical practices are conducted by the company. Hence from an accounting firm’s perspective it is important that reporting and mandatory disclosures are carried out ethically to avoid legal punitive actions from government or any other regulatory bodies (Henry, 2008). Economic Factors The global economy especially Europe and U.S. are looking to get over the economic recession. The economic downturn has forced most of the companies including the major firms to focus on cost minimization. The accounting professionals play a very important role in providing recommendation to the management to minimize cost without comprising the overall the performance of the firm. Also due to the economic recession, various companies look to outsource the accounting activities to specialist accounting firms. This may cause the companies a few bucks, but all in all the it actually helps the companies to make the business operations a lot more smoother as professionals would be looking after the core accounting issues. Social Factors The people of U.S. have always been entrepreneurial in nature and hence this provides a lot of opportunity to the accounting firms as such companies may look for specialists who can help the companies in overall accounting operations. A part forms these, the customers now days prefer to but from companies that are more ethical in nature. Hence, as mentioned before the accounting professional play major role in putting up an image of the company as a socially responsible ethical firm. (Kolb, 2008). Technological Issues The rise of technology has been a boon as well as curse for the specialist accounting firms. Due to the rise in digitization the traditional methods of book keeping are rarely practiced. Most of the basic as well as complex calculations are done on excel spreadsheets. This requires training and expertise which most of the times the employees of the relatively new smaller firms do not possess. Hence, such firms may outsource accounting ops to accounting firms. On the other hand the rise of technology has lead to the invention of various accounting software like SAP. Such software are not very complex and be grasped through a training of one month or so. Although this is great for the business but this actually decrease the business potential of the accounting firms. Key success factors in the industry Quality, Business Traffic, After Sales Service, Expertise, Marketing and Sales Channel, Loyalty components, Image and Price Target Market for the Services As a full service accounting firm the main objective of the company happens to be to provide business as well as personal needs to the community of Florida and beyond (if possible). As per the product mix of the company the target market segment could be medium to large size firms, small to mid size as well as individuals. Among the most important clients are likely to be small to medium scale firms; firms that have just started the business are looking for guidance in the domain of accounting and book keeping. Factors influencing the purchase decision of the clients The company values the clients’ value for the resources and time. The company realizes that the clients most certainly do not like any kind of negative surprises. Taxation and book keeping is just the mere beginning; the company looks to become an integral part of the financial management process of the clients. The experiences book keeping and accounting professionals of the company with proven track record seeks to offer quality business consulting services. The company does a lot more than preparing taxes. The company offers an array of services that can help the clients to increase profitability and minimize cost and tax exposures. Above all the company seeks to become a business partner in true sense for the clients. Targeting the niche market segement A niche refers to a very narrowly defined customer group seeking distinctive benefits. Marketers usually identify niche by dividing the market segments in to sub-segments. Increase in competition & change in consumers demand pattern has forced many companies to adopt niche marketing strategy (Wenderoth, 2009). As the company is looking to provide lower end accounting solutions in the form of accounting and book keeping only it is very important for the company to create a niche market segment. However, the niche Market is to be created the total market segment in mind. Hence if the total target market is considered as 100% then the niche market segments can be shown as: Potential Competitors The competitors belong to four main categories; other companies, individual practitioners, accounting software providers and licensed tax consultants. As the proposed company is would look to operate in the region of Florida hence the local accounting firms and individuals only has been chosen as competitors only. Other Firms: There are various firms that operate businesses in the region and the services are very much comparable to the proposed companies. These firms however concentrate on high end accounting services such as financial planning, auditing, superannuation, etc. These firms however have potent human, financial and technological resources. Although there is subtle difference in the offerings, but the domain of interest is the same. Hereby it is also be added that accounting giants like Ernest Young are also present in the Florida Maine region. Individual practitioners: a probable 20 plus individual practitioners’ operate in the region. This includes people that have been in the business for more than 10 years to those who are in the sixth month. The resources of such companies are limited in terms of finance, technology and human resource. Licensed Tax Consultants: Most of the times individual clients look for licensed tax consultants rather than business units. Such consultants provide book keeping services also. The clients may consider that such consultants may provide solutions on the basis of self preparation to avoid taxation problems rather than looking form proactive solution or advice from the councils. Accounting Software Providers: With the rise in technology increased numbers of firms are looking to use accounting software. Therefore the accounting firms are facing increased competition from individual software providers. This includes “Tax Cut” from H&R Block financials and “Turbo Tax” from Intuit. Also as mentioned before, software such as SAP provides an array of services including book keeping and accounting. Many Medium to large companies are actually using SAP. Direct Competition The four major competitors of the proposed company could be McGladery, Berkowitz Dick Pollack & Brant, Marcum LLP, Kaufman Rossin & Co. These companies mainly provides accounting and business consulting services to mid to large companies and mainly focus in the high end of accounting services such as superannuation, Financial planning, etc. These companies have been able to build up an image and reputation credibility and expertise through proven track record and high quality of services. Therefore these firms will most definitely provide steep competition to the proposed company. However, there is a subtle difference in the target market segment between he proposed firms and the major competitors. The proposed firm would seek to target the small and medium enterprises. However, the numbers of such growing firms are a lot more than the larger firms targeted by the competitors. Also one of the key services to be provided by the company is going to be tax compliance. Irrespective of the size of the firm the companies have to look for experts to conduct tax compliance. This provides an opportunity to the firm to target some of the major firms also. Also the major firms offer the services at a premium price which the growing firms may not be able to afford; whereas the proposed firm would look to provide quality services at an affordable price. But still it needs to be mentioned that these competitors have established sales and marketing channels, high degree of brand awareness, enhanced reputation of quality and credibility, experienced human resources and adequate finance and technology resources. Here it needs to be mentioned that the individual tax consultants and Individual practitioners can also provide competition. However, the intensity of the competition may not be as high as the other CPA firms (Frank, 1964). Substitute Products As individuals become comfortable with computer technology there seems to be an increase in relying on the taxation software packages like Tax Cut or Turbo Tax or SAP. However, it is still believed that the software packages may not have the fine distinctions and provide the yield best results. Analyzing Competitors’ position through perceptual mapping Competitor analysis based on key Success Factors Competitors/ Factors Respective Accounting Firms Licensed Tax Consultants Individual practitioners Accounting Software Providers Quality 5 4 3 4 Business Traffic 5 3 3 4 After Sales Service 4 3 2 4 Expertise 5 4 3 4 Marketing and Sales Channel 5 3 2 4 Loyalty components 4 2 2 3 Image 5 3 3 3 Price 2 3 3 3 [5= Very Good, 4= Good, 3 = Average, 2= Poor, 1= Very Poor] Threat of new entrants and present the barriers To analyze threat of new comers or entrants and barriers to entry Michael Porter’s Five Force Model can be used. The five forces are threat of new entrants, competition among the existing firms, and suppliers’ bargaining power, buyers’ braining power and threat of substitutes. In the present business environment the companies are looking to focus on the core business activities and outsource the mundane tasks. Therefore in future the outsourcing industry is likely to grow in size and hence more and more players are likely to come into the business. Hence the threat of new entrants is very high. There may be a dent in the intensity of threat due to the recent economic down-turn, but still the threat is likely to be pretty significant. The brand loyalty and the economies scale along with the recent economic downturn may act as a barrier to entry. However, the due to the increasing driving forces the barriers to entry are going to be low. Also the high of rivalry among the existing companies is likely to make the market attractive and invite firms to enter the very prospective market. The threat of new entrants is going to intensify as various new firms may decide to enter the market via providing several accounting software as a substitute product (Burgemeister, 2003) Service Offered The company will be focused on providing very basic yet important accounting services that includes tax compliance and book keeping, day to day reporting. Among these taxes compliance can be the wild card. The growing firms may seek to have both the services, but the individuals and the major firms may not look to have book keeping services. But all the companies and even the individuals are likely to seek tax compliances. Augmentation Augmentation is likely to one of the key marketing strategies that would help the company to differentiate the products/ services from that of the competitors. In order to achieve augmentation it is proposed that the company used the concept of service scape to achieve augmentation. Service Scape Service Scape can be described as the environment in which the services are provided to the customers. In this case the company office is likely to be service scape. Servicescape plays a major role in improving the service quality and making the services tangible in nature by addition of the physical evidences. Some of the elements that can help the company to tangibilize the services are described by the figure. Product Differentiation One of the key product differentiation strategies in the form of augmentation has been discussed above. A part form that the company may adopt price quality approach to differentiate the offerings from that of the competitors. As the global economy is going through a downturn, even the major firms have become cost conscious. Moreover, the main target market segment of the company happens to be the growing and medium enterprises which may not have large amount of capital. Hence the price quality approach can be adapted to great success. Also to supplement this, the company can use customized positioning approach to position different products for different target markets. Target Market Probable Positioning Message Large Firms Taxation and Tax Compliance at an affordable price Growing Firms Book keeping and Tax compliance at an affordable price Individuals Tax compliance at an affordable price Marketing Mix Product As mentioned before the company would be looking to provide basic yet important accounting solutions such as taxation and book keeping. Among these the taxation would of great interest as it may allow the company to target all the market segments. The company would seek to reach personal and business financing objectives. Price The company would be looking to position itself through price quality approach. Such strategy has been chosen based on the prime target market segments. The pricing would be done based on the value offered the client, not the time to complete the tasks. Price List Item Description Per Unit Price Partner Per Hour $130 Accounting Staff Per Hour $35 Book-keeping Staff Per Hour $25 Promotion Promotion is probably going to be the most important business functions for the company; mainly because the company is a start up one and hence one of the main business objectives is going to be to generate brand awareness about the firm and the products. Hence, the company is most likely to use the elements of the promotional mix to promote the products (Kotler, 2001). Among the above elements the advertisement, Public Relations and direct marketing are going to be the key. Although at this point of time ads and direct marketing are likely to be the key. Add to this the company should also focus on referral marketing to help the products go viral. Advertisement Before mentioning the Ad strategy or the Ad budget it is important to understand a few things. The company is a start up one and hence it would not have a huge marketing budget. Therefore it may not be able to invest heavily in print or TV or Radio ads as they are quite costly. Therefore it is suggested that the company mainly goes for online advertising. Apart from the budgetary issues it is also need to be kept in mind that is a B2B company and most of the times the clients are going to use the internet to look for information and hence the company has to be present over the online medium. At first and foremost the company needs to have a website and get it live and working. The website objectives could be to create awareness about the presence, convey professional expertise along with personal brand, and communicate to prospective clients and of course conversion. Promotional Budgets Online Advertising Budget PPC Advertisement Budget Network Monthly Cost Clicks Probable Leads Cost Per Click Cost Per Lead Google $250 30 2 $5 $200 Yahoo $125 15 1 $7 $200 Others - - - - - Web Budget Start Date End Date Budget Department Web Development 1/06/13 15/09/13 $7,000 Web Client Log in 1/06/13 20/09/13 $7,000 Web Content 1/06/13 1/09/13 $2,000 Web Later PPC ads on Facebook could also be posted. Direct Marketing Direct Marketing mails would be sent to prospective clients. Also Newsletters as well as tax related info will be sent twice per year Direct Marketing Budget Start Date End Date Budget Department Newsletters 1/06/13 15/05/13 $4,000 Marketing Tax Brochure 1/06/13 11/05/13 $2,000 Marketing Referral Marketing Referrals are also going to help the company to build relationships with other companies and professionals. Hence the company should focus on getting referrals from banks, credit unions, law firms and brokerage firms. Place In the initial stage the company would have one office in Florida. As far as distribution channel is concerned as mentioned above the company would look to reach the customers directly through the online medium. Later as the business expands the company may look to expand through other channels such as agents or opening other branch offices (Brown, 2009). Probable Margins At the end of this fiscal year the company should look to achieve revenue of 0.8 million. This is a very rough estimation keeping several factors in mind. Market feasibility From the above analysis it can be concluded that there proposed firm have great potential to succeed keeping mind the growing number of small and medium companies entering the market. Such companies look for guidance in the domain of taxation and book keeping at an affordable price. Therefore such growing number of companies can be easily targeted ad converted by the firm. However, the company will face steep competition from established companies and substitute products in the form of accounting software. The company also has to focus on creating brand awareness to let the target audience know about the presence. Also the threat of new entrants in the market is quite high and hence the loyalty of the customers is also likely to be quite low. Therefore the company may have to diversify in future by adding products to the product line to retain the customers. References Brown, L. (2009). Marketing and Distribution Research. US: Ronald Press Company. Burgemeister, S. (2003). Market analysis.DE: GRIN Verlag. Cowan, A. (2005). Risk Analysis and Evaluation. UK: Global Professional Publishing: Frank, N. (1964). Market analysis: a handbook of current data sources. US: Scarecrow Press. Henry, A. (2008). Understanding Strategic Management. UK: Oxford University Press: Kolb, B. (2008). Marketing Research: A Practical Approach. UK: Sage. Kotler, P. (2001). Marketing Management. US: Prentice Hall. Wenderoth, M. (2009). Particularities in the Marketing Mix for Service Operations, DE: GRIN Vela. Bibliography Belch, G and Michael, G. (2005). Advertising &Promotion-An Integrated marketing Communications Perspective. IND: Tata McGraw-Hill Publishing Company Ltd. Churchill, G. (2009). Marketing Research. IND: Cengage Learning India Pvt. Ltd. Nargundkar, R. 2010. Marketing Research. IND: Tata McGraw Hills Private Limited. Zarrela, D. (2010). The Social Media Marketing Book. CAN: O'Reilly Media, Inc. Read More