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caverk_m2_a2.pptxModule 2 Assignment 2 Designing Value-Based Service Katrina Caver
Product Risk Factors and Risk Drivers
Agenda
Risk factors for a tax and audit firm compared to risk factors for a management consultancy
Distinctions between management consultancy and tax and audit business
Three major risks in management consultancy
Analyzing whether to buy or to grow organically
Recommendation
Product Risk Factors for a Tax and Audit Firm
Demand Factors
Competition from other tax and audit firms
Product uniqueness
Marketing and brand name recognition
The regulatory framework
Product platform
Supply Factors
Knowledge and skill of human resource
Motivation of the employees to deliver
management structure
The finance base
(Ramsey, 2014)
This is a monopolistic market dominated by many large firms that seriously compete. Is the product different? The reputation of the firm is very important, which makes gaining customers simple. Reputation also includes the ethic affects, which can very well impact the business. Businesses should always be regulated according to the law. Highly, skilled employees brings more to the company. It is always recommendable for employers to motivate their workers, which hype them to go the extra mile to provide quality services and products. Management structure is a plus, which is the guidance of the workplace. Financial base is an essential component, which covers inadequate funding, which determines the quality and quantity of workers.
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Additional Risk Factors For A Consultancy Business
Demand factors
Industry maturity
Cost structure
Industry cyclicality
The marketing effort
Supply factors
Financing
Regulatory environment
Ability to attract top talent in the field
(Independent consulting boot-camp, 2014)
An industry environment characterized by well, large established business will provide a good business opportunity for this kind of consultancy. The pricing of products should be affordable. If businesses stay loyal to their customers, customers will remain loyal toward them. Many consultancies experience cyclicality in demand, and the marketing services of a consultancy business depend on extensive networking and advertising. Financial resources can determines the range of services on offer. There are few industry specific requirements, but the businesses must fulfill certain obligations.
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Distinctions Between Tax and Audit Business and Management Consultancy
| Traditional tax and audit | Management consultancy |
| There is a clear legal and regulatory framework to conduct this kind of business | There is no defined legal framework guiding this kind of business |
| Demand for services is driven by need to fulfill legal requirements | Demand for this service is driven by need to improve management performance |
| Clientele base is wide | Clientele base is narrow |
| Success of the delivery depends on teamwork and cooperation amongst a big number of individuals | Success of delivery depends on one individual. |
| There are clear procedures on how to accomplish the task. | No clear procedures on how to accomplish the task (Ramsey, 2014) |
Three Major Risk Facing the Business
Lack of expertise
Marketing
Choosing the right employee
Management consulting is different from providing tax and audit services. The management of the business has limited experience in this field. A new business in this field will require the firm to have a wide network where they can derive a possible market for their service. Customer satisfaction is relates to meeting customers’ needs and ensuring that they experience great customer services.
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Analyzing Whether to Buy or To Grow Organically
Advantage of Organic Growth
| Pros |
| Low incremental costs of doing business |
| Ability to produce a new product |
Advantage of Acquisition
| Pros |
| Previous Customers |
| Builds on an established platform |
| Expertise is retained |
| Cash flow is gained quickly |
With organic growth, consultancy can start small and expand as demand increases. It also can introduce new and unique products to establish the marketing cost. With buying, the business will acquire the customers of the business and reduce marketing cost. Buying also allow the business to operate on an established platform. Employees will remain in the new business retaining experience and expertise within the business, which creates cash inflow in a short period of time.
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Analyzing Whether to Buy or To Grow Organically(Cont’d)
Organic growth
CONS
High marketing cost
Has no reputation and clients are unsure
Has to spend a lot of time recruiting in a trial and error method
Business has to wait for sometime before it can break even
Buying
CONS
High cost of purchasing the business
Any adverse image issues are passed on to the business
(Queensland government, 2014)
Organic growth can possibly cost the business a lot of money. Most clients like conducting businesses with well known brands, which can cause a delay with the recruiting process. Businesses has to wait before it can breakeven, where it doesn’t gain or lose any profits. this may take up to three years or a little longer before it can break-even. With buying, the cost of purchasing the business may be very high. If the business has had ethical issues, they will be passed on to the new business.
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Recommendation
Acquire an already established business
Identify market objectives
Identify product drivers and risks
Establish an effective plan
Ensure that pros outweighs the cons and accept the plan
With any business project, it always necessary to follow the appropriate steps with effective planning. This includes acquiring a business that has already been established, identifying market objectives; product drive and risks. Last, ensure that the pros outweighs the cons, which leads to an acceptable plan.
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References
Independent consulting boot-camp. (2014). Starting a Consulting Business How to Make it Happen. Retrieved from http:// www.netplaces.com/consulting-business/managing-business-risk/degrees-of-risk.htm on 2i July 2014
Queensland Government. (2014). Advantages and disadvantages of buying a business. Retrieved from http:// www.business.qld.gov.au/business/starting/business-startup-options/buying-a-business/buying-business-advantages-disadvantages on 31 July 2014.
Ramsey, D. (2014). Start your own consulting business: degree of risk.
Retrieved from http:// www.netplaces.com/consulting-business/managing-business-risk/degrees-of-risk.htm on 31 July 2014
