Tuesday, May 5, 2020

Evaluate the Business Strategy of Xero Company in New Zealand

Question: Discuss about the Evaluate the Business Strategy of Xero Company in New Zealand. Answer: Introduction: The current report aims to evaluate the business strategy of Xero Company in New Zealand. Xero is a software firm based in New Zealand, which is involved in developing cloud-based accounting software for medium-sized and small-sized businesses. It has offices in New Zealand, UK, Australia, Singapore and USA(Hatten, 2015). The products of the organisation are developed as software as a service (SaaS) model and they are sold through subscriptions. Even though the organisation has been relatively young, the joint experience of Drury and Edwards has helped it in accomplishing the targets of the shareholders in the beginning year(Wild, 2014). Therefore, the report sheds light on evaluating the readiness for the global market with the help of EFAS and SFAS framework in the context of Xero. Internal Factor Analysis Summary (IFAS) framework: The IFAS framework is a strategic tool that is used to assess the internal environment of an organisation along with revealing its strengths and weaknesses. The IFAS framework provides clear depiction of the input factors, which both the external and internal parties could be able to understand. In addition, this framework does not need sufficient expertise like involving many personnel or time consumption. Furthermore, this strategic tool helps in identifying only the key factors influencing the activity or strategy of an organisation. Thus, with the help of this tool, the management of Xero Company would be able to develop SWOT analysis, McKinsey matrix or it could use the same for benchmarking to improve its overall organisational performance. The executives of Xero have undertaken two key decisions at the time of developing the SaaS business. In the initial stage, the target market has been chosen strategically to offer various kinds of services. According to the observation of t he Chief Executive of Xero, the large software firms have underserved the small business market; thus, framing a chance for the provider of the right solution. This has resulted in initiation of SaaS for the small-sized businesses and the companies serving them. In addition, with the help of SaaS model, the small organisations could minimise the up-front costs, maintenance needs and estimated monthly expenditure. As a result, it has become popular in the global market. Another decision that the executives of Xero have made was to assure that the firm accumulates necessary funding from the market. In this context, (Hill, 2013)stated that the success of a firm largely depends on the confidence and satisfaction levels of the customers. With the help of adequate funding, Xero has managed to assure the required infrastructure availability for the support of the customers in order to represent stability to the potential clients. Hence, with the help of the above-mentioned strategies, Xero has succeeded in expanding into the global market. The role of the internal factors of Xero could be evaluated with the help of IFAS framework, which is briefly demonstrated as follows: Particulars Weight Rating Weighted Score Comments Strengths: Customer-oriented 0.14 4 0.56 Well-positioned Advanced technologies 0.12 4 0.48 Needs to be improved Adequate funding 0.11 3 0.33 Could opt for raising additional funds through equity funding Positive brand image 0.09 4 0.36 Well-positioned Reduction in operational costs 0.10 3 0.30 Increase in customer rates Effective customer support 0.08 4 0.32 Additional personnel could be recruited Weaknesses: Absence of research and development facility 0.06 1 0.06 Questionable Dominance of the top management 0.07 2 0.14 Questionable Undifferentiated products and services 0.09 2 0.18 Needs to focus on adding new product lines Security issue related to customer data 0.10 3 0.30 Requires implementation of a new security system Absence of time-based contracts 0.04 3 0.12 Extremely ineffective Total 1.00 3.15 Moderately satisfying The overall weighted score varies from 1 to 4, in which 1 is considered as low, 4 is high and the average is considered as 2.5 irrespective of the total number of internal factors used in evaluation. In case, if the overall weighted score is below 2.5, it denotes poor internal position of the organisation. On the contrary, a score exceeding 2.5 depicts effective internal position(Wild, 2014). In the case of Xero, the overall weighted score obtained is 3.15, which denotes that Xero has strong internal position. However, there are certain aspects like time-based contracts, product offerings, technologies and security, which could be improved to strengthen its internal position further. External Factor Analysis Summary (EFAS) framework: The readiness of Xero for the global market could be evaluated with the help of EFAS framework, which is briefly described as follows: External factors Weight Rating Weighted Score Comments External strengths: Growing customer base 0.20 4 0.80 Diversion of financial resources for educating the customers Targeting the small-sized businesses 0.15 4 0.60 Xero has been strong in this channel Service improvement 0.10 3 0.30 Despite constant feedbacks from the customers, there is scope for further improvement Increased efficiency 0.05 4 0.20 Reduced time on manual accounting and ease of access Effective collaboration 0.05 3 0.15 Collaboration in real-life financial data for effective group effort External weaknesses: Providing education to the customers 0.15 3 0.45 Well-positioned Rising competition 0.7 4 0.28 Questionable Development of ecosystem 0.7 3 0.21 Developing stage Unscheduled downtime 0.8 3 0.24 Capable in maintaining 99.99% availability Dependence on internet 0.8 4 0.32 Questionable due to poor connection or user overload Total 1 3.55 Highly effective The overall weighted score varies from 1 to 4, in which 1 is considered as low, 4 is high and the average is considered as 2.5 irrespective of the total number of internal factors used in evaluation. In case, if the overall weighted score is below 2.5, it denotes poor external position of the organisation. On the contrary, a score exceeding 2.5 depicts effective external position. In the case of Xero, the overall weighted score obtained is 3.15, which denotes that Xero has strong external position. Strategic Factor Analysis Framework (SFAS) External factors Weight Rating Weighted Score Comments External opportunities Solid ongoing Customer Relationships (Hatten, 2015) 0.35 4 0.60 Engaging in interacting with the customers to gain knowledge about what they desire and scopes of improvementsy(Ismail, 2014) Solid Communication System (Cassar, 2015). 0.10 4 0.30 Good bonding between the internal and the external stakeholders of Xero Well-designed and successful marketing strategies 0.22 3 0.80 The strategies have been constructed by analyzing the feedback of the consumers and gaining knowledge about the changing market needs Proper leveraging of Strengths (Drexler, 2014). 0.06 4 0.25 Increasing the efficiency of the operational activites Effective employees for handling the sales 0.04 3 0.40 Porper training and knowledge to the employees External threats: Missed deadlines (Bove, 2015). 0.6 3 0.35 Very less Unable to maintain pending work 0.5 4 0.38 Questionable Infrequent cash flow 0.7 3 0.23 Very infrequent High fixed cost 0.5 3 0.40 On the process of improvement Total 1 3.71 Highly effective The overall weighted score moves from 1 to 4, in which 1 is considered as low, 4 is high and the average is taken as 2.5 without even looking at the total number of the external factors used in the analysis. In this case, if the overall weighted score is under 2.5, it reveals an improper external position of the organisation. On the other hand, a score more than 2.5 reveals efficient external position. In the case of Xero, the overall weighted score obtained is 3.71, which denotes that XERO is positioned strongly in the external market (Seethamraju, 2015). Therefore, it can be said that Xero can be implemented successfully in the market. The operational plan for the allocation of the resources to the constructed strategies involves updating the budget and the cash flows for undertaking future forecasting that will be useful for proper resource allocation. It is essential that Xero is ready for the next tax year so that they can construct their financial budget and safeguard the firm from giving out additional tax. The review of the business plan is ideal so that they can introduce changes according to the transformations in the market. Xero even needs to identify the gaps that are available in their operations so that business operations can be secured. Therefore, strategies to allocate the resources are essential. Conclusion The paper that has been prepared concentrates on the accounting software service provided by Xero, who is a partner of Microsoft. The company has been established by looking at the market opportunity that is present in the global market with respect to the small organizations. The company tries to discover the accurate path that will help them enter the global market and outlines the intrinsic factors of the firm with the help summarizing the Internal Factor Analysis. The paper even evaluates the prospect of Xero to enter the international market and operate successfully. This is done by analysis of the external factors that enhance the service of the company. It is vital to understand the external factors as the company has to make necessary actions with respect to them so that they function properly. It is vital for every organization to gain success in the market where they operate and therefore the firm tries undertakes Strategic Factor Analysis Summary so that effective strategi es that can uplift the business of Xero can be identified. The analysis of these strategies will recognize the success of the company and the evaluation of their operational plan helps to deliver the best services to their customers and to remain the market leader. The company maintains the ethical business standard codes while operating in the market thereby gaining the trust of the stakeholders. Recommendation The analysis of the paper reveals that there are room for improvement within the firm, as the demand in the market is continuously changing. It is vital for Xero to maintain a good relationship with its customers and to receive their feedback so that they have an idea of what changes can be made to make their service better and satisfy the customers with ease. Xero requires distributing their financial resources effectively so that every aspect of their operations receive the desired amount and no department is neglected. Proper training and educating the customers are even necessary so that the customers know the importance of SaaS and they can invest accordingly in the software. The implementation of these factors can develop the business of Xero. References: Bove, C. L. ( 2015). Business in action. Pearson. Cassar, G. I. ( 2015). Alternative information sources and information asymmetry reduction: Evidence from small business debt. Journal of Accounting and Economics, , 59(2), 242-263. Drexler, A. F. (2014). Keeping it simple: Financial literacy and rules of thumb. American Economic Journal: Applied Economics, , 6(2), 1-31. Hatten, T. S. (2015). Small business management: Entrepreneurship and beyond. Nelson Education. Hill, C. W. (2013). Global business today. McGraw-Hill Education (Australia). Ismail, N. A. ( 2014). Factors influencing the alignment of accounting information systems in small and medium sized Malaysian manufacturing firms. . Journal of Information Systems and Small Business, , 1(1-2), 1-20. Seethamraju, R. ( 2015). Adoption of software as a service (SaaS) enterprise resource planning (ERP) systems in small and medium sized enterprises (SMEs). Information systems frontiers , 17(3), 475-492. Wild, J. W. ( 2014). International business. Pearson Education Limited. International business. Pearson Education Limited.

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