Software Firm SWO Services - Case Study Example

7.11 Table of Contents Problem Analysis 4 Issues 4 Constraints 4 Objectives 4 Industry Analysis 4 Internal Issues 5 Strengths 5 Weaknesses 5 ExternalIssues 5 Opportunities 5 Threats 5 Key Success Factors 5 Consumer Analysis 6 Implications 6 Trade Analysis 7 Competitive Analysis 7 External Analysis 7 Political Environment 7 Economical Environment 8 Technological Environment 8 Corporate Capabilities 8 Alternative Analysis 8 Recommendation 10 Work Cited 11 Appendices 12 Problem Analysis Issues The country was going through recession when the owners floated SWO services, a software firm. Though the policy of penetrative pricing worked for the owners of SWO and they were able to capture the market share, but the revenue and profitability widely fluctuated. The company was also losing customers due to various reasons. Constraints SWO was going through financial constraints as it was not able generate consistent revenue. A very important reason was that customers wanted the same low cost efficient product which the company could not offer. Objectives The first objective should be to earn consistent revenue without much fluctuation. Secondly the company should formulate strategies for increasing the profitability, and thirdly, they should utilize funds for expansion of their business too. Industry Analysis In the industry analysis there are a number of characteristics which has to be studied by the analyst. It includes the analysis of the financial performance of the company, the stability of the industry, labor conditions, competitors, stock prices and the market barriers of the industry (Fischer, Donald and Jordan 147). In this study the industry analysis of SWO is done by analyzing its internal and external issues: Internal Issues Strengths The strengths of the company was the extensive experience of Dave in programming, the first software package of the company called PICK, which was well-known for manipulating huge data. Weaknesses The major weakness was the fluctuating revenue generation and profitability of the company. Secondly, the company was also losing its customers due to lack of proper marketing strategies. Thirdly, the duty or responsibility was not evenly distributed among the workforce in the company. External Issues Opportunities The federal government was taking initiatives to enforce the companies to computerize their business processes. This was an opportunity for SWO to acquire more customers, especially big offices who needed such software. This would also enable SWO to enter the mid-range market. Threats The continuing recession was the biggest threat for the company. Many distributors became insolvent and there was no demand for new systems in the market, so the market was becoming really competitive. Key Success Factors The strong technical knowledge and experience of the owners was a big success factor for the firm. Moreover, the initial strategy of the owners to sell the first few installations at a low price helped them to enter the market quickly and also grabbed market shares for them. However, if the company formulates the right strategies by injecting proper marketing mix ingredients, then it would be a win-win situation for SWO. Consumer Analysis Segment 1 Segment 2 Segment 3 Who Small distributors Mid-sized distributors Large distributors What Generated sales of less than $2 million annually The sales value was between $2m to $20m annually The sales value was greater than $20m annually When The small business immediately wanted such software to handle their accounts They were reluctant to pay for services and cheap software, but are willing to buy efficient ones They would buy when software is specifically designed for their company Where Thousands of small shops were located all over Toronto These are owner operated firms in Toronto These are big organizations with computerized operations in Toronto Why To develop software packages for handling payables and receivables To develop software for introducing an inventory control system for the business They wanted a totally integrated software to cater to the various different requirements of the company How According to the small size of the business According to the medium size of the firms According to the large size of the organization Implications Segment 1 Segment 2 Segment 3 Product Accounting software packages Accounting software package with inventory control systems Customized software package especially designed for organization Price Low priced Medium priced High priced Place Small shops in Toronto Medium sized business in Toronto Large organizations in Toronto Promotion Word-of-mouth and in-store promotions Word-of-mouth and testimonials Advertisements and establishment of business relationships Trade Analysis The software sales also included the sales of hardware. Generally the small or medium sized software firms formed joint venture with the hardware suppliers. The software companies received about 30 percent margin from the hardware sold by them, but the hardware companies did not provide proper credit to them because majority of the companies leased the hardware and did not purchase them. Competitive Analysis The level of competition in the software industry was high. The small business owners manipulated the price in this industry. They sold faulty software at cheap prices and since the distributors did not have the knowhow of software, so they bought them. The cheap software packages cost around $600 to $400 and did not offer any after sales services. In the mid-range market the needs of the clients were sophisticated. The price range of the software was usually from $10,000 to $20,000. The product quality and the services offered depended on the price. For the large companies, divisions of accounting firms or hardware companies customized the software for specific companies. These were distributed to large distributors. External Analysis Political Environment The federal government of the country introduced goods and service tax (GST). It was a very complex tax system on the business and it compelled the companies to computerize for managing the business process of the company. The motive of the government behind this step was to expand the computer industry. This would be an opportunity for SWO to get more customers for their company. Economical Environment The country is going through recession for the past 2 years, so it can be said that the current economic scenario is not very good. The economy is recovering at a slow pace and SWO need to utilize its strengths to take the advantage of this situation rather than following the other software companies. Technological Environment The market was filled with different types of software companies and many confused customers, such as small business owners and other mid-sized and large companies. They needed an efficient accounting software package, inventory control system and other customized software to serve their requirements (Henry 51). Corporate Capabilities The profits of the company fluctuated and SWO was not passing through good financial phase. The production process of the company is not streamlined, and the duties of the top level management are not evenly distributed, though SWO has good technical and experienced mind working for the business processes of the company. Alternative Analysis The alternative strategies would include the targeting and positioning strategies of SWO to a particular group or groups of customers. It would also include the in-depth analysis of the marketing mix ingredients and other qualitative analysis of the market so that SWO can acquire more market share and retail them. According to the income statement and the balance sheet presented in Appendix 1 and 2, the given alternatives would surely help SWO to get a positive financial statement in the coming year.They are as follows: 1. SWO have a quality product, but the customer base is not good. The small business owners usually prefer to buy cheap software because they do not understand the quality, so for them price becomes the major decision making factor. The mid-sized companies are willing to buy quality software at every higher price. So SWO can offer their software to mid-sized companies. Pros: SWO would be able to generate high profit and get loyal customers. Cons: The mid-sized firms may not trust the company initially because the company has no good and loyal customer base. 2. SWO can develop good business relations with the hardware companies. So when the company cannot generate income by selling software, it can at least earn money by selling the hardware of those companies. It would be an alternative source of revenue generation and an alternative product for the company. Pros: The Company would be able to get another source of income. Cons: The credit payment system with the hardware companies can be a problem. Moreover, selling hardware might overshadow the actual product of the company. 3. SWO pricing strategy should not fluctuate. This means that the company should maintain a standard pricing system. Unnecessarily decreasing the price for gaining more customers would decrease the brand value of the company and its products. Pros: The Company would be able to establish itself as a well known brand in the long-run. Cons: SWO might lose its small business customers. 4. SWO can open up their own retail store in the business hug of the city, so that the mid-sized and large organizations may be able to recognize the company and its product. It would boost up the sales of the company. The store would also provide services related to the software and also sell software of SWO. Pros: It will give the company recognition among major customers. Cons: This step would increase the cost of the company. 5. Finally the promotional strategies are important to attract the mid-sized and large customers. These customers are sophisticated and have knowledge about the software. So advertisement and other promotional tools are necessary to attract them. Pros: SWO might receive orders from large companies too. Cons: The cost of the company would increase. Recommendation The study was regarding SWO services, a software firm floated by two partners. Both of them were experienced and have good technical knowledge. After analyzing the case study it was found that SWO had expertise, knowledge and a good product too, only the company lacked in formulating the right strategies utilizing the right marketing tools. It would be recommended that SWO focuses on its organizational structure, assign right task to the right person, employ good marketing professionals for approaching companies and pitch their products to the clients in an effective manner. Work Cited Fischer, Donald E., and Ronald J. Jordan. Security Analysis and Portfolio Management. New Delhi: Pearson Education India, 1995. Print. Henry, Anthony. Understanding Strategic Management. London: Oxford University Press, 2008. Print. Appendices Appendix 1 Projected Income Statement ($000s)   1992 Income 560 Cost of goods sold 114 Gross profit 446     Expenses   Advertising and promotion 16 Bad debt 17 Consulting 8     Depreciation 9     Loan interest 4 Maintenance and repair 7 Miscellaneous 12 Office and Computer supplies 15 Rent 3 Research cost 6 Telephone charges 4 Travelling Charges 7 Wages 259 Vehicle lease 3   370     Net Income (Profit) $76 Appendix 2 Projected Balance sheet as at April 30 ($000s)   1992 Assets   Current Assets   Bank 45 Account Receivables 85 Inventory 54 Total Current Assets 184 Fixed Asset   Computers 46 Office Equipments 56 Software 43 Total Fixed Asset 145 Less: Accumulated Depreciation -80 Net Fixed Asset 30 Other Asset 40     Total Assets 254         Liabilities and Shareholders’ equity   Current Liabilities   Accounts Payable 60     Long term Liabilities   Loans 140 Shareholders equity 54     Total Liabilities and Shareholders equity 254 Read More