Macro- and Micro Analysis for New Services Production - Essay Example

Macro- and Micro-Level Analyses for New Service Production BY YOU YOUR SCHOOL INFO HERE HERE The service There is growing demand for management consulting services in the domestic and international marketplace as business struggle with issues of cultural development and brand establishment in consumer markets. The company will be launching a consulting service that works with executive leadership to build more marketing prowess and increase management competency. Increasing revenues and profit maximization The Internet represents tremendous opportunities to highlight a company’s brand, with growth in mobile usage and broadband subscribership.

To increase revenues, the new management consulting service will develop a dedicated website in which customers can schedule appointments with the consulting expertise. In-house sales representatives will also be recruited for the effort who will work directly with contract negotiation and provide sales presentations based on success factors, skills development capacity, and pricing. Profit-maximizing quantity will be based on the breakeven analysis conducted which measures actual operating expenses, including administrative, payroll and procurement.

The breakeven point of all expenses versus revenues will determine the necessary client load required to earn profit and increase revenues. If more sales staff is required to expand profit, it will be based on breakeven total and simple revenue analyses. Marginal cost and marginal revenue Since services does not require tangible production, marginal cost will be determined by recognizing the fixed costs of operating the business (such as office and payroll) and compared to variable costs such as market-driven inflation on supplies or travel expenses (as two examples) as the business develops more market presence.

The following calculation will be utilized to determine total costs: Once the total costs are determined as based on fixed costs plus variable costs, divided by units of production, marginal cost estimates can be achieved. As additional units of service are produced, the total costs of operating the business will be measured against marginal costs. The information needed to determine marginal costs is the volume of customers requiring service, labor related to sales and actual consulting hours, and the costs associated with supplies, payroll, administration, travel and other corporate expenses.

Decisions related to hiring additional support staff could not be accomplished without knowledge of the breakeven point and the actual total costs of service production and the increases incurred with one additional unit of service added to the business model. Fortunately, consulting services are tightly related to labor costs and man-hours required, thus it is easier to calculate marginal costs than in a production goods environment. Pricing and nonpricing strategies Consumers today are more price sensitive than ever.

“In the wake of today’s economic recession…investors are showing a clear preference for companies that offer guarantees” (Alexander, 2009, p.17). The consulting service will develop contractual agreements that provide such guarantees for productivity and outcome successes related to their unique objectives for management or marketing development. Pricing will occur using two analysis tools: First, competitor analysis will be conducted to determine an average pricing model to remain competitive.

Secondly, pricing will be structured to ensure that labor and total operating costs do not exceed 40 percent of total operating expenses. For example, a negotiated contract for improved brand recognition for a corporate client will require 12-16 weeks of direct consulting and development. The contract will be priced at approximately $30,000, with a guarantee of a 20 percent increase in consumer brand recognition, which can be measured by surveys or other quantitative data performed by the consulting marketing experts at the firm.

Pricing will be established on a per-client basis based on needs and the level of labor and tools required to perform the service. To assist, a value proposition will be developed to accompany all print and online literature related to the consulting brand. “With today’s tight economy, you need to have a strong value proposition to break through the clutter and get (customer) attention” (Konrath, 2007, p.1). The value proposition will describe successes in consulting, value related to price, and quality-based guarantees.

This will also differentiate the business from existing competition in this market by positioning on price and quality and be reflected in the value proposition. Increasing barriers to entry Proprietary knowledge protections restrict entry into a market (Porter, 2011). All literature utilized for consulting services will be protected by intellectual property protections under copyright or trademark, especially related to innovative consulting service development. Cost minimization Minimizing costs includes streamlining labor-related consulting function to lower payroll costs, developing a lean procurement model for supplies, and establishing a culture of waste management related to utilities, travel itineraries and travel costs, and establishing a commission-based system rather than salaries prior to meeting performance targets.

This will act as incentive to gain more client revenues and limit the fixed costs to the business. References Alexander, Jeremy. (2009). It’s Still all about Guarantees, National Underwriter, 113(19), p.17. Konrath, Jill. (2007). How to Write a Strong Value Proposition. Retrieved October 25, 2011 at http://www.sideroad.com/sales/value_proposition.html Porter, Michael. (2011). Porter’s Five Forces – A Model for industry analysis. Retrieved October 24, 2011 at http://www.quickmba.com/strategy/porter.shtml