What is The main competition that could be faced by the startup companies?
Information Technology (IT) in Oman is a flourishing business that comprises of different types of services. In addition, due to the recent fall in oil prices, Oman has been encouraging its citizens to expand their business prospects and take up new ventures. Moreover, currently Oman has a booming market for IT industry as 95% of the population uses computers and advanced technology to conduct their daily business. In addition, evaluating the current situation opening ‘Customer Support Services’ in Oman could be beneficial and profitable endeavor for any startup company. Furthermore, the customer support endeavor could uses limited capital input and provide a vast growth opportunity. Barringer (2012) suggested that business plan having low number of competition could help start-up business to increase their overall income in first year of inauguration. On the other hand, Mullins (2012) mentioned that without conducting effective research startup business could face difficulties and incur losses, which might result in their closure.
During 2016, Omani citizens have used around 55 million Riyal worth of computer service and are future projected to increase in near future (Oman.org. 2016). Moreover, the Omani citizens have purchased around 175 million Riyal worth of computer software and hardware products in 2016 (Oman.org. 2016). These numbers mainly provide the booming market for IT industry, which is being developed in Oman. Furthermore, Mr. Abdul Al Hakim has an experience of 8 years in IT filed, which has helped him knowing in-depth knowledge about the overall changing environment for IT industry in Oman. Thus, Abdul Al Hakim after effective market analysis wants to open a customer support service in Oman. Blank (2013) stated that with the help of adequate market research companies are able to make effective decisions, which might help in increasing its overall return on investment. In addition, the company name suggested by Abdul Al Hakim was ‘Al-Computer Support’.
Goals and potential of the business and milestones:
he purpose of startup business is to provide effective services to Omani citizens and increase its customer base by increasing the number of subscribed users. Furthermore, the other business goal is to expand its operations in UAE.
In addition, due to the limited number of customer service companies in Oman, the potential for the business success is relatively high. Moreover, the limited number of investment needed for starting the company is also reducing the overall risk. Furthermore, limited risk and huge business opportunity mainly increases validity of the business plan (Wentzensen and Wacholder 2013).
‘Al-Computer Support’ mainly aims in providing services to 1000 customer at the end of first year. In addition, the company also aims in increasing its subscriber to 500 by the end of 1st year and 1500 by the end of 2nd year of its operations.
Uniqueness of product or service
The ‘Customer Support Services’ will mainly help its customer that are facing problems with their computer. In addition, this service will be provided to both home and industry level customers, which currently has low service providers in Oman. Furthermore, ‘Al-Computer Support’ will have packages ranging from one year to five years and executive offers to encourage customers for using their services (Blank 2013).
These companies mainly have clients from different industries and neglect the overall rising demand from personal users in Oman. Thus, the overall competition level in home computer users in Oman is relatively low. Kwonget al. (2012) mentioned that increased competitive level could reduce the profit generation capacity of the company and hamper its growth prospects.
Estimated market share:
The main Customer service support industry in Oman mainly comprises of companies operating from overseas. In addition, with the help of high quality services and marketing exposure the new start-up company could effectively raise its overall market share. Wentzensen and Wacholder (2013) stated that with the help of effective pricing policy companies are able to increase their overall market share and in turn improve its revenue generation capacity. Marketing plan:
Market strategy—sales and distribution:
Implementation of effective marketing policy could mainly help the start-up company to maximize its customer reach and in turn increase its customer base. In this context, Jones and Penaluna (2013) mentioned that companies having exclusive marketing strategy with high quality services are mainly able to capture potential customers in their vicinity. On the other hand, Barrow et al. (2012) criticized that increased marketing exposure could raise administrative expenses of the company and might affect negatively its profit retention capacity. In addition, the marketing strategies that could be used by the start-up company are as follows.
Increased quality of services:
The marketing strategy for the start-up company is to provide high quality services to its customers. In addition, with the help of increased service quality and customer satisfaction level the company could enjoy the exposure of word of mouth advertisement. Furthermore, theses word of mount advertisement could help the company accumulate loyal customers and strength its financial stability. In this context, Weinstein et al. (2014) stated that companies now days have only one target to achieve high level of customer satisfaction, which enables them to raise their revenue generation capacity. On the other hand, Bothaand Robertson(2014)criticized that customer now days are more prone to low priced service, which reduce the need of having high customer satisfaction policy.
Quick responses to problems:
In addition, the startup company also aims in having a quick response team, which could deliver results in short time. This marketing policy could help attract customers working in MNC’s and having tight schedule.
The startup company could mainly uses low pricing strategy to capture the required market share for achieving sustainable growth. In addition, the company could provide lucrative offers in its yearly subscriptions, which might increase the number of subscribers and maximize its overall profitability. Pfitzer et al. (2013) argued that adoption of low pricing strategy by Start-up Company might affect its cash reserve and reduce its capacity to achieve sustainable growth.
Advertising and promotions plans:
The advertising and promotional plans that could be used by the start-up company are as follows
Increased social media exposure:
With the help of social media, Start-up Company could effectively increase its reach to target customer and in turn raise its ability to make higher profits. Moreover, the social media advertisement could also help in attracting potential customers, which in turn might help in raising customer base of the company (Barrow et al. 2012).
Using online advertisements:
In addition, with the help of online advertisement the start-up company could effectively increase its customer research. Furthermore, as the company is related in computer business online advertisement could effectively help in reducing the overall expenditure of physical advertisements.
Arranging works and seminars for industrial clients:
In addition, the company could also arrange seminars and workshop for small business shower in Muscat that are facing problem with their compute. Moreover, with the help of seminar the companies could capture small business and in turn increase their customer base and revenue generation capacity (Wagemans et al. 2016).
The main advantage of operating in Muscat is the population that it holds, which could be beneficial for the start-up company. In addition, the services that are being provided by the company could be effectively delivered to small business operating in Muscat. In this context, Feenstra (2014) stated that with the help of effective start-up location companies are able to maximize its overall profitability in its first year of operations. On the other hand, Wagemans et al. (2016) argued that during an economic crisis Start-up Company could faces problems even though the location is most appropriate for its operations. Moreover, Muscat being capital of Oman could effectively help the new computer support business to flourish its operations and capture adequate market share.
In addition, the new start-up company has effectively singled out the zone in which it could operate smoothly, which Muscat. Moreover, the company mainly focuses on small business and home pc users in Muscat. However, the software services of the company are provided over all over Oman, which in turn could help in increasing its overall sales. Field (2014) stated that start-up companies effectively conduct market research and start their operations in zones that could increase their revenue. Nevertheless, Tounes et al. (2014) criticized that due to intense competition, zones with adequate customer exposure could lose interest of startup companies.
After recent fall in prices of crude oil, Oman has implemented different types of strategies to promote business, which does not deal with Crude oil. In addition, Oman has implemented 0% corporate tax rate for companies having a total profit of less than 30,000 Omani riyal (Pwc.com, 2016). In addition, the companies that have profits more than 30,000 Omani riyal has to pay only 12% as corporate tax (Pwc.com, 2016). However, companies dealing oil production are taxed 55% on their total profits (Pwc.com, 2016). In this context, Hiduke and Ryan (2013) stated that tax benefits and advantage mainly help startup companies to maintain the competitive level in the market, which in turn increases its growth prospects. On the other hand, Allison et al. (2014) criticizes that due to the increased tax advantage provide by some government competiveness of small business increases and reduce the overall profitability that could be generated by start-up companies.
Being situated in Muscat the capital of Oman the start-up company could effectively enjoy adequate suppliers for its services. In addition, the company mainly sells services, which does not require high number of suppliers to support its activities. Furthermore, the start-up company mainly requires internet and computer related supplier, which could be easily arranged in Muscat (Hiduke and Ryan 2013).
In addition, the start-up company will accommodate a service van that could help in supporting customer visits. In addition, the access to transportation could effectively help the company in increasing its hardware service to small business and home pc users. In addition, the location of Start-up Company also helps in effectively reducing the transportation time for its workers. York and Danes (2014) stated that locations having easy of transportation could effectively improve its service timing and
In an IT company management team must divided the operation into various structures which includes from administration to client end. For a start-up IT company the management must focus on the mission, vision and objectives. The mission must states what are the aims and goals of the company whereas the vision must state where the company wants to see itself in future (Bosun, Tenescu and Dima 2014). Based on the mission and vision a company must make strategic planning and work towards fulfillment of it.
The legal structure of an IT company must first of all divided and further subdivide the entire operation of the company and delegate responsible person who will be accountable for all the functioning of the entire department. The main profile of an IT company is knowledge process outsourcing (KPO) in which various companies outsource their IT related activities to a IT firm (Hart, Taraba and Tomaštík 2014). The organizational structure of IT Company must include human resource, administration, accounts and finance, operation and customer service. All the departments must be under the joint control of the board of directors who have been delegated authority by the owners of the company to look after the entire organization.
Board of directors consists of a chairman who is the CEO of the company and three executive directors and 2 independent directors. One of the independent director is the consultant and legal advisor of the company who is responsible for the legal compliance of the company. The members of board of directors must focus on the customers as they are the most important base of an IT company. Therefore, they must be given full satisfaction otherwise if they lose their client base then it will be difficult to survive. They must gain trust of their clients to retain them. Management must ensure that persons responsible for dealing clients must perform their job excellently to fulfill their needs.
For a start-up IT Company it has to incur some of the initial start up cost like registration fees, legal expenses like preparation of MOA and AOA, preparation of feasibility studies etc. These costs are essential to bring the company into existence.
Facility and Rent First of all start-up IT company must take a office at rent from where they will perform all the operation
Utilities Expenditure on electricity, water and power are the cost of running a business. This are to be incurred from the very beginning from the time office is taken on rentSalaries Initially few employees will be appointed to run the business and they have to be paid salary for that so initial start up cost includes salary expenditure also (Shahi,Alipour and Feizi 2013).
Equipment Initial Equipments and machinery has to be setup in the company to perform its activities. Like desktop, laptop, printers, fax machines and many more (Al Kindi,Al Lawati and Al Rawahi 2015).
Supplies There are various things which is required to run a business and is only available from outside sources. So they have to enter into agreement with various vendors.
Legal Compliance Initially registration of company, permission of government, pollution control and many more legal bindings are there for a start up. For that reason company have to incur some cost to abide various laws and regulation
Marketing For an initial start up marketing is very essential as they have to promote their company in order to absorb clients from market since clients are the base of any IT company.
'Al-Computer Support' must apply value chain analysis, value engineering and just in time to control its estimated cost if it is exceeding the budgeted. This way they will be able to cut down the prices of their service provides and absorb the market of Oman (Tan, Zhang and Liu 2013). First of all they must set a target price which will be the rate as per the industry rate in Oman then they must prepare a cost structure and estimate all the cost involved in this process. Target price minus profit margin is the target cost of the service provided and 'Al-Computer Support' must try to keep the estimated cost within the target cost.
The must before the start of the operation prepare a budget for the entire year where expected revenue as well as cost are to be identified, which help in evaluating the overall profits that might be generated at the end of the fiscal year (Ratkowskiet al. 2016). As is a start up management must start with Zero Based Budgeting (ZBB), which the initial stage of budgeting in which the cost centre and principal budget factor is identified and functions of budget is defined. From the next year budget will be prepared based on this ZBB (Louis, Lys and Sun 2014). Then after 5 to 6 years again the budgeting process will start from zero based budgeting when the earlier assumptions will become useless.
Various risk associated with a startup IT firm will be discussed under this section.
• Strategic Risk: It is the risk, which the company might fail to implement its strategy effectively and efficiently to achieve its objectives and goals. There can be many reasons behind it like powerful competitor enters into the market and customers shift to that company because they are providing better facilities and services. Hurdles can also come from monopoly suppliers who can hike the prices of their supplies. Strategic risk can lead to bankrupt of the company (Choi and Sias 2012). Therefore, failure in this case is referred to as strategic risk.
• Compliance Risk: It is the risk involved that the company is following all the relevant laws and regulation properly or not. Otherwise, government will ban their company (Guérin and Kilian 2014). In serious cases, compliance risk can affect the future of a company and become strategic risk.
• Operational risk: It is the risk associated with the operation of an IT company. When a company faces a failure in maintaining its day-to-day operation like server failure, system failure, machinery shut down and many more. These types of failure disrupt the entire operation of the company, which is very harmful (Scarbrough, Panourgias and Nandhakumar 2015).
• Financial Risk: It is the risk involved with the financial standings of a company. If the company has takes a huge short-term loan and it is repayable within few days then it may be difficult for the company to run its daily operation since they have to use their funds in paying off its debts.
• Reputational Risk: There may be various types of company all over the world and even their level of functioning is very different. However, all the company is very much concerned about their reputation and goodwill. If their reputation is damaged then company will face loss of revenue and profit. In addition, if it so happens then employees will be willing to leave the organization and it will become difficult for the management to acquire new talent.
Various barriers like geographically barriers, environmental barrier, like pollution control and water wastage, taxation and other duties. Government of a country can, if they want imposes such laws and regulation that it will become difficult for a company to continue its business. Companies might sometimes in order to comply with all the rules and regulation at the same time fail miserably and are then affected by compliance risk (Al-Mascati and Al-Badi 2016). They will also lose their customer base in the world. Sometimes operational risk have more impact on the strategic risk if proper backup has not been taken and entire data is lost due to disaster.
Alternative course of Action
Management of the IT Company always made some strategic planning to achieve their goals and objectives. However, it is not always possible to implement all the strategic planning successfully. There are various government rules and regulation, which an organization must abide in order to run their business (Al-Mascati and Al-Badi 2016). They will not be able to utilize their funds for the working capital purpose of the company. Therefore, an IT company must very cautiously deal with media and try to avoid the lime light since media is something, which can ruin the goodwill of a company (Oman.org. 2016). Sometimes operation risks are caused due to natural disasters like power cut, earthquake and accidental fire, which is not in the hands of human being.
Transfer of Asset
In today’s world at the very beginning, venture capitalist tries to learn about the investment opportunities of a new start up by reading the business plan. Harvest strategy is widely known as the liquidity or exit strategy, which could help the startup business in its operations (Porwalet al. 2012). In addition, with the help of this strategy investors are provided with the chance, which help them make adequate investment decisions.
Harvest strategy allows investors understand their repayment scheme. Before investing in a company, it is the right of all the equity investors to understand how much return they will receive their investment (Porwalet al. 2012). Normally the waiting period is 3 to 5 years, which depends upon the complexities of the company and the industry in which it belong. Generally, for an IT company the waiting time is 4 years as per the industry rules and regulation.
Continuity of Business Strategy
There are two methods of harvest strategy. First is Initial Public Offerings (IPO) and the second one is sale to another company. The business plan must clearly state the type of harvest strategy adopted by the new venture (Oman.org. 2016). In IPO the value of shares shows a drastic rise whereas in sale to another company the price is negotiable. In IPO the company goes public and is called a publicly traded company whereas in sale to another company it will be a private holding company (Gani 2015). In this business plan of Al-Computer Support, the Oman based IT firm it will adopt the first method of harvest strategy because in that case its value of shares will increase as well as it will be able to go public so that its shares can be listed on the stock exchange of Oman.
Identity of successor
Harvest strategy mainly ensures the lenders and shareholders of startup company that it has future plans to sell the shares in public through IPO or sale in to another company after the business have been developed by the management to some extent (Oman.org. 2016). The challenges faced by the management of the company is to run it rightly and show case a huge future prospects so that it becomes attractive in the eyes of other companies who are willing to acquire and prospective company.
The non-accommodation of harvest strategy in business operations mainly indicate that owners of this company have a mentality to run it for an indefinite period (Al-Mascati and Al-Badi 2016). In such circumstances, the owners may provide them with extra benefits in terms of salary and other benefits that will be unfair for the outside investors, as they will not be providing equal benefit to all their stakeholders.
In business plan milestones are used to mark important events. These points indicates the main event in a project like starting point, completion of important tasks and finishing point of the project (Al-Mascati and Al-Badi 2016). It also estimate whether there is any need of external input or data for preparation of budget checks. Milestone does not tend to impact the project duration instead of that they focus on the main progress point of the project. However, it is able to add momentous value to the project scheduling.
Deadlines and Milestones
Furthermore, with the help of CPM, PERT and Program Evaluation effective Milestone stone for the startup company could be scheduled that gives an estimated time within which the project will be completed (Al-Mascati and Al-Badi 2016). It also indentifies the area which will require more time for completion and accordingly allocated the most effective and efficient resources to those areas. It identifies the critical path and evaluates the project cost based on that. After that, crashing is applied to reduce the estimated project cost (Kim 2012).
It is used observe the progress of the project on a timely basis but there are many limitations of it also like it focuses on the critical activities only and ignore the non critical activities (Blank 2013). They tends to inform that project is just on schedule but is actual some of the activities are being ignored. It provides an opportunity to verify the health of the project.
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