Business Studies Research Paper on Alto Consultancy Business Plan Part II

Alto Consultancy Business Plan Part II

Introduction

According to Chirani et al (2012), competition is one of the factors that determine business strategy. Having drawn the business plan, this stage is about understanding Alto Consultancy’s(AC) competitive positionin relation to a number of factors, both internal and external. This paper looks at sources of competition that AC faces, including the strengths of the competitors and the other factors that may affect the company’s ability to compete effectively; the strategies and marketing tactics that AC may adopt to win over first-time customers; various strategic positions that AC may take; the potential risks that AC faces as a new business and even as a consultancy firm in the technology industry, and what mitigation measures it may adopt;the sources of funding; and operation costs report, among others.

Competitors and other Factors Affecting Alto Consultancy to Compete

Like all other business, AC faces competition from other companies. These may be companies that have been in the industry for longer, then there are always the potential new entrants as well. Moreover, setting its sights on a global market (that is, offering consultancy services to companies allover the world), AC faces competition in every continent, with some companies having garnered a brand presence in many markets already and other companies sprouting. Besides competitors, there are many other actors that could stand in the way of AC’s pursuit for competitiveadvantage.

  1. Competition

The players that pose the biggest competition to AC in the technology marketare Prestige Consulting and International Research Company. These companies havedeveloped their market presence and reputation that they have developed for years. They possess high degrees of comprehension and presentation of business models allowing them to establish an enviable reputation in the market.

But these companies also exhibit certain weakness that AC could take advantage of by addressing them. For example, the companies largely utilize traditional research approaches, which minimize accuracy in determining market patterns. Second, these companies have placed market research mostly in the hands of junior associates, so that all that the high ranking executives do is the selling. This results in low-quality services. The companies also charge highly for their services, thereby discouraging participation.

  • Lack of Funds

Besides the competitors, another key factor affecting AC’s pursuit for competitive advantage is the lack of funds. As a startup company, AC requires a sustainable financial capability to ensure it maintains its large scope of operations. But this is where AC faces a major challenge, facing a shortfall of a sustainable financial capital to run its global operations effectively. Moreover, as a start-up company, AC is typically not profitable just yet and lacks tangible assets. As such, it cannot get access to debt financing.

  • Innovation

Innovation of new products and services is one of the most fundamental strategies for creating sustainable competitive advantage in the dynamic environment today. Innovation in this case refers to “the successful application of new ideas in an organization” (Rhee et al, 2010, p.65). According to Chirani et al (2012), organizations that respond best to changing markets have been found to pay attention to creativity and innovation.

As a new company looking to enter a market that many have taken up, AC must be innovative and offer what others do not offer at all or do not offer well. In this regard, AC must be able to respond fast and properly to the changing consultancy and technology markets. This is not just about adopting new technological tools, but also new ideas and concepts, technological or managerial. For example, today, corporations have new information technology needs, owing to the expanding fields of mobile computing, social networking, cloud computing and data storage, and online employee collaboration, among others (Plunkett Research, 2014). Without the capacity for fast response to new concepts and needs, AC faces a major problem in its effort to enhance its competitive advantage.

Strategiesand Marketing Tactics

  1. Strategies

As a new venture, and not having developed a reputation, AC might not be able to win over customers from the already established competitors. It should, therefore, focus largely on attracting new (first-time) customers. In these regard, AC will adopt these three strategies, among others.

First, AC will make customer service the primary focus, by creating a system that rewards customers for their loyalty and patronage. In this regard, the company will develop a clear and simple process on how to engage first-time customers, with the aim of making them feel special and highly valued in their first experience with the company and its services. This will increase the company’s referrals.

Second, AC will cross-promote the business. This will involve joining forces with other businesses to reach a wider customer base. This will involve offering incentives to the customer who use AC’s and its partner’s services; handing each other’s fliers to each other’s customers; sharing ad spaces that AC cannot afford alone, among others.

Last but not least, Ac will also establish online presence(such as through its website and social network sites) and generate conversation. This AC can do through its website, which should be more than just informational. It should also provide service information and even allow the ability to make orders online. The company will also include blogs to its website, which will provide answers to customer’s questions regarding the company and its services, as well as provide free tips that the customer would find useful. Most importantly, AC will use social network sites (including Facebook, Twitter, Linked In, Pinterest, etc.) to promote the business and generate conversation with its target market.

  • Marketing

AC’s marketing will focus on three key factors: product, price and promotion. Product/service-based strategy will focus on the provision of a range of services to satisfy various needs of customers. This will also involve quality, features, and warranties, among others. This will involve innovation with the aim of providing customers solutions to new ideas and technologies.

Price-strategy will be about offering services that reward value back to customers for their expenditure. In this case, AC will look to offer services at cheaper charges than its competitors mentioned above.

Finally, promotion will be about advertising to the target customers. This will be done using various avenues, including TV and other print media. Most importantly, the company willuse the internet for marketing, particularly through social networking, which will help develop brand presence.

Strategic Positions

Being a new player in the industry, and facing stiff competition, AC’s strategic position (that is, the essence of how it plans to compete and serve its customers) will focus on attracting customers fast and retaining them by gaining their loyalty. In this regard, AC’s core strategic position focuses on customer bonding, which involves customer attraction, customer satisfaction andcustomer retention. Based on this premise of customer bonding, the three specific strategic positions that AC will operate upon are: best product/services; total customer solution and system lock-in(Dean & Company, 2014).

Best service will focus on two key elements: service differentiation (that is a range of services for the various applications of technology and low charges for services rendered (unlike the two key competitors). In other words, this is about offering a range of service options depending on customer needs and financial ability.

Total customer solution will focus on increasing customer profits or reducing their costs. By enhancing customer’s economics, this will lead to even stronger bonding.

Finally, system lock-in concerns the identification, attraction and nurturing of ‘complementors’ (Dean & Company, 2014, p.1). This will increase the value of the services AC offers, which will build even stronger customer bonding. Figure 1 below summarizes the interrelationship between these three strategic positions.

Figure 1: Strategic Bonding Triangle

Source: Adapted from Dean & Company (2014)

Risks and Mitigation

AC anticipates market and financial risks, and must find ways to address these. Market risks has to do with the perpetually changing nature of the technology and consultancy industries. Perhaps the hottest technologies today have to do with big data, data mining and predictive analytics, cloud-based information technologyinfrastructure, and mobile apps and data services, among others (Plunkett Research, 2014; ). But new technologies emerge constantly,almostevery day. AC must know and anticipate the newest technologies. To be left behind or caught by surprise for a technology consultancy firm would do AC a lot of disfavor. But without the infrastructure for this, the dynamic nature of the technology market might just overwhelm AC. In this regard, AC must invest heavily in market research, using some of the technologies (such as data mining) to keep track of the market in real-time.

From a financial perspective, new ventures are likely to collapse as it faces financial challenges in its earliest stages. Besides, start-up businesses often self-finance their initial stages of operation. Other sources may include cash injections by the owners, loans and other forms of credit. Because of the nature of start-ups, such as the lack of a clear picture of all that the business entails, these sources of finance may be inadequate. But such problems often stem from the failure of the business to appreciate and anticipate the possibility and scope of these risks. To mitigate this risk, the first step is to identify both the quantifiable and unquantifiable risks when calculating operation costs: fluctuations in market prices of supplies and materials, contract disputes, potential legal obstacles and economic downturn (which can create unanticipated consequences), among others. By taking inventory of all potential financial risks, Ac will be based-placed to utilize available tools (Harner, 2011).

Sources of Funding

For AC, as already noted above, debt financing is not an option as it does not make any profits yet and has no assets. As such, AC has an option of three primary sources of outside equity financing: venture capital funds; angel investors and corporate investors.

AC can access venture capital fundingthrough limited partnerships, where the managing partner invests on behalf of the limited partner.As of January 2000, the size of the venture capital market was estimated to be US$100. Angel investors are individuals of high net worth who invest in a company. The size of the angel investor market is valued at the estimated amount of US$48.3 in 2002. Finally, corporation investors, as the name suggests, are corporate entitiesinvesting in a company not part of it or even a subsidiary. This may be for financial and/or strategic reasons or even on behalf of their shareholders. Ultimately, which source of fund AC goes for depends on how much control over the company and its operations the founders want to retain, as well as the complementary advantages that may come with the funding (Denis, 2004).

Corporate investorsposes a bigger problem over control, thereby causing conflicts of interest between the investing corporation and the entrepreneurial venture. Moreover, maybe because the funds do not belong to an individual but the shareholders, there may lack of commitment on the part of the corporation (Denis, 2004).

Equally, angel investments are said to be generally much more involved in the operations of the companies in which they invest than venture capital investments, often involved in the day-to-day operations (Sudek, 2006).

For AC, venture capital funding would be important. Venture capitalists have been found to play a major role in the operations of the companies in which they invest. Most importantly, they certify (that is, give credibility to) the company in which they invest in the market. They provide mentoring andstrategic advice, and “help in bringing innovative products to the marketplace” (Denis, 2004, p.)and may assist in recruiting top managers. Moreover, venture capitalists may also raise additional funds by certifying the quality of start-up, like AC.

Operating Costs Report

As the five-year pro forma forecast in Business Plan I (see below) shows, AC plans to spend a total of $250,000 in the first year and remains the same in the second year. But from the third year, that amount falls in the third, and even further so in the fourth year. This is because the first two years will involve AC using a lot of money in buying assets, recruiting employees, among others.

Figure 2: Five-Year Pro Forma Forecast

The expenses will be spent on rent, office material (including office stationery). Also, the money will be spent to acquire the necessary competences and characters (employees), and paying for tax and legal obligations in the process of starting the firm. Further, the money will be used for marketing and promotion and mentoring consultants for business growth, among others.

Conclusion

This paper was competitiveanalysis for AC. Indeed, for AC to be successful in the technology consultancy market, it mustunderstand the market in all its elements, including completion and risks. This paper has examined these and more.

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