SWO Service - Case Study Example

?7.11 SWO SERVICE Executive Summary SWO Service is a small partnership firm situated in Mississauga, Canada. It is owned by George Albinson and Dave Airey. The company was established in the year 1984. It started its business operation with a penetrative pricing strategy to capture the market and had been successful in doing so. However, in recent years it is facing various problems related to maintaining sustainability of its business. It has acquired a substantial sales order for the upcoming six months but it needs to decide upon whether to expand its business further or not. This study discusses about the detailed company and industry analysis to have conclusive evidence to decide upon the sustainability of the business in future. First of all the key issues related to the company performance have been identified. Then the industry analysis has been performed which discusses about the internal and external business factors which have an impact on the company. Then the consumer analysis has been done which includes segmentation strategies and the product mix associated with each segments. Then the trade analysis, competitive analysis and external analysis of the company has also been done. An alternative analysis has been performed which discusses about the targeting of the particular segment consisting of the mid-sized distributors and the relevant positioning and promotional strategies to be employed by the company. Lastly, a recommendation has been provided regarding the best strategy needed to be applied by the company to regain its competitive advantage in the market and have a sustainable growth and development in future. Table of Contents Problems and Analysis 5 Issues 5 Constraints 5 Objectives 5 Industry Analysis 5 Internal Factors 6 External Factors 6 Key Success Factors 7 Consumer Analysis 7 Trade Analysis 8 Competitive Analysis 9 External Analysis 9 Political Factors 10 Economical Factors 10 Technological Factors 10 Corporate Capabilities 11 Alternative Analysis 11 Recommendation 12 Works Cited 13 Problems and Analysis Issues SWO Service is experiencing different kinds of issues which are having a significant impact on the performance and growth of the company. The company has failed to generate revenues at a steady rate since its inception. The penetration pricing strategy followed by the company initially helped it to increase its market share but now it is facing problems to successfully position its products and is losing sales on various grounds. Constraints The constraint that can be identified as regards to SWO Service is the financial constraint. It does not have adequate fund sources available to them to expand its business on a large scale. Objectives The personal objectives include more profit required by the owners of the company. It is in accordance with the company objective which is to decide upon expansion of its business to increase the profitability of the company. Industry Analysis In order to facilitate the formulation of a successful strategy and help in its decision making process regarding the sustainability of the business processes followed by SWO Service it requires to have a comprehensive analysis of the industry in which it is operating its business activities. Industry analysis actually involves identification of the economic factors that helps a company to boost its performance and profitability in the operating industry (Palepu, and Healy 2-16). Industry analysis of SWO Service includes identification and analysis of its internal and external business environment which is explained below: Internal Factors Strengths George, one of the owners of SWO Service is one of its strength. George is experienced in the field of software industry and has the acumen of all different technical aspects of the software industry. Moreover SWO Service develops quality software which is acknowledged by the customers. Weaknesses The organizational structure of SWO Service is one of its major weaknesses. The various business activities of the company are not efficiently delegated to its employees and staffs. Moreover it failed to generate revenues at a stable rate through its software sales. The company does not have a well planned customer development program and it is facing problems to retain its existing clients and acquiring new customers. External Factors Opportunities The government initiatives to boost the computer industry in the country are a great opportunity for the company to expand its existing business. Moreover, the mid-range market could be targeted by the company to expand its business since it suits the market offerings of the company. Threats High competition in the market is a potential threat for the company. Moreover the recession prevailing in the economic scenario is also an added threat for SWO Service. Key Success Factors The key success factors of SWO Service include the industry experience of its founder members. Moreover, it was successful in creating a competitive advantage in the market during the initial years of its operations. Hence, it needs to rebuild it through effective segmentation, targeting and positioning of its customer base and developing an efficient product mix for its products. Consumer Analysis Segment 1 Segment 2 Segment 3 Who Small distributors Mid-sized distributors Large distributors What Annual sales value less than $2 million Annual sales value of $2m to $20m Annual sales value greater than $20m Where Small shops located all over Toronto Owner operated business firms in Toronto Large organizations with centrally computerized operations in Toronto Why To develop software packages to handle payables and receivables and no need for after sell services To develop software packages to control inventory systems with some after sell services To develop unique customized software packages with 24 hours after sell service How According to the small size of the business firms According to the medium size of the business firms According to the large size of business firms Implications: Segment 1 Segment 2 Segment 3 Product Accounting software packages Accounting package along with inventory control systems Customized software package for all the organization unique to the company needs Price Low priced Medium priced High priced Place Small business shops in Toronto Medium sized organizations in Toronto Large business firms in Toronto Promotion Word-of-mouth Word-of-mouth and advertisements Advertisements and establishment of business relationships Trade Analysis The trade analysis of SWO Service includes the trade mechanisms prevalent in its industrial environment. The majority of software that is sold in the market includes hardware sales along with it. Hence both the software and hardware firms are the initiators in the market for the sale of software packages to the customers and both are mutually beneficiated in the process. The software companies in general receive 30 percent as profit margin for its hardware sales. However the credit terms of the hardware firms are quite stringent and leasing companies are mostly involved in the system. Competitive Analysis Significant competition in the market is prevalent which is affecting the business activities of SWO Service. It needs to be well organized, identify its key competitors and plan accordingly to outperform its competitors and develop a competitive advantage in the market (Fleisher, and Bensoussan 9). Software industry is facing a stiff competition from various fronts. Plenty of small shop software houses are posing a threat for the software industries and companies like SWO Service. It was mainly due to the fact they are engaged in business activities of developing and selling software packages at low costs. However the quality of the software sold by them was questionable. Hence the lower end of the market was mostly occupied by these small software firms. Moreover readymade software packages like ACCPAC were leading such market segments. However there was less competition in the mid-range market where the customer needs were varied and the customers looked for both quality products and at reasonable price. Next the higher-end market is highly competitive because of the software giants like Arthur Andersen and IBM. This market segment is mostly captured by them and corresponding customers are loyal to them. Hence it provides a strong entry barrier for smaller software organizations like SWO Service. External Analysis External analysis related to the external business environment of an organization like SWO Service is very critical towards the formulation of a successful strategic plan for the company. External analysis mainly helps in identifying and assessing the strategic threats and opportunities that exists within the operating environment of the organization (Hill, and Jones 17). Three of such external environmental factors could be identified in case of SWO Service. They are discussed below: Political Factors Goods and Services Tax (GST) has been introduced by Federal Government only two years back. GST involves a complex taxation procedure and most of the companies need to have a computerized system to implement GST. This is an opportunity for SWO Service to assist in the expansion in its business and capture new markets for its offerings. In addition to this the government is taking initiatives to help in boosting the computer industry in the country. Economical Factors The current economic scenario proves to be a threat for the company because of the prevalent economic recession and slow pace of economic recovery which has greatly affected software industry. SWO Service needs to strengthen its core competencies and competitive advantage in the market so as to ensure sustainability of its business. Technological Factors Technological factors like the requirement of new improved software packages by the customers prove to be a critical factor towards the success of SWO Service. It needs to concentrate more on the development of customized software packages related to accounts and inventory management system to sustain its business. Corporate Capabilities SWO Service is not financially strong and needs to be selective in choosing its strategic initiatives. Marketing capabilities are good since it has been into the business for many years and have acquired relevant knowledge. The production capability needs to be in alignment with the market demand. SWO Service does not have strong human resource and needs to have people mainly in its marketing department to create customer development programs. Alternative Analysis Alternative analysis requires effective targeting and positioning strategies being developed by SWO Service to be able to successfully expand its business and become sustainable in future. As regards the segmentation, of its key customers, three segments have already been identified. Out of these three, the second segment including the mid-sized distributors provides a greater opportunity for the company to be successful in expanding its business. It is so because the customer requirements are varied in this segment and an optimal blend of hardware and software services is in demand by the customers. Positioning of the products of SWO Service which best suits the customer requirements would be acceptable to the customers. Company needs to have good business relationship with the hardware firms to have the hardware best suited for its software. Its products for this segment would mainly include accounting packages with inventory control systems included in it. The company needs to promote its products in this market segment though word-of-mouth communications, meeting the distributors personally, explaining them about the advantages of the software and how it would be beneficial for their business activities and assuring good quality products and best after sell services. Recommendation After a detailed company analysis conducted in this study, SWO Service needs to formulate an effective and efficient strategy for its expansion. It needs to target the mid-sized distributors to sell its products. In order to boost up its sales revenues it needs to acquire new customers in this target segment with comprehensive positioning strategy designed for the purpose of selling its products. The company needs to develop strong business relationship with the hardware firms to get hold of the hardware that would be complimented with the software prepared by the company. This would better satisfy the needs and requirements of the customers in this business segment. Moreover, the company needs to be innovative and develop unique user-friendly software. It needs to be proactive to the changing customer requirements and act accordingly. However, before doing all these activities, the company needs to have a strong marketing strategy which would help in increasing its customer base. It needs to strengthen its marketing team, impart training to them as to how they can convince the customers. Then after assuring delivery of good quality products to its customers the company needs to provide good after sell services to them to retain the key customers and develop good reputation in the market. All these activities would help in gaining competitive advantage in the market and be sustainable in its business. Works Cited Fleisher, Craig S., and Babette E. Bensoussan. Business And Competitive Analysis: Effective Application Of New And Classic Methods. New Delhi: Pearson Education, 2008. Print. Hill, Charles W. L., and Gareth R. Jones. Strategic Management Theory: An Integrated Approach. 10th ed. Connecticut: Cengage Learning, 2012. Print. Palepu, Krishna G., and Paul M. Healy. Business Analysis & Valuation: Using Financial Statements. 4th ed. Connecticut: Cengage Learning, 2008. Print. Read More