Case Study :Xero and Mcdonald's

Topics: Accounting software, Business, Strategic management Pages: 12 (3386 words) Published: August 6, 2013

Xero and McDonald’s are two objects that will be analyzed in this essay. In terms of Xero, an online accounting software company, the essay will focus on Xero’s business strategy by using Porter’s five forces model and Xero’s sources of competitive advantages by using Porter’s value chain model. Also, the roles and competencies of CIO, CTO and CPO will be discussed in the case of Macdonald’s Australia. Finally, based on Macdonald’s, it will analyze the importance of information system and information technology.

1. Competitive Forces Model

With rapid development and increasing acceptance of the internet, Drury established Xero, an accounting software company that listed on the NZ stock exchange within a year. To analyze Xero’s business strategy and the impact that external factors have on internet industry attractiveness, Michael Porter’s five forces model can be used as follows:

1.1Threat of new entrants

Indeed, there are a few barriers that impede entry to the industry. Two significant barriers are switching costs (e.g. Offering multi functional services, such as training services for both customers and partners and facilities for banking contacts , than usual accounting services) and capital requirements (e.g. extensive knowledge of small businesses and advanced information technology).

In reality, however, threat of new entrants is still high in view of the facts following:

1) establishment of relationships between firms and clients is temporary and the high knowledge requirement of the defense industry can be meet basically by learning and imitation, 2) licensing and permit requirements of internet industry are not as restricted as those of the power generation industry and the airline industry, which allows more firms to enter, 3) Locating market niches not being served allows the new entrant to avoid entry barriers. It is an opportunity for small entrepreneurial firms to identify and serve neglected market segments due to the immaturity of the internet market, which encourages small start-up firms to enter.

1.2 Bargaining power of suppliers

In contrast with traditional producing industry, there is no real supplier for a software company that designs systems internally and independently. For instance, the data and professional knowledge that the firm requires for developing an online accounting system is entirely offered by clients and internal employees, including the information collectors, the system designers, the maintenance programmers and the accountants.

Thus, the firm is able to control the cost and price effectively without the threat of supplier’s actions.

1.3 Bargaining power of buyers

Firms seek to maximize the return on invested capital while buyers seek highest quality products at the lowest possible price. As for Xero, small businesses and their advisers are direct buyers. Although many accounting software can be chosen to provide online accounting services, the bargaining power of small & midsize enterprises is not as strong as it seems like.

Xero is one of few accounting softwares which can run on Mac OS X and Linux as well as Windows. For buyers not using Windows or using multi operation systems, the cross-platform software is a smart choice for avoiding from changing platform. Moreover, Xero contains a unique dashboard and facilities which can automatically import bank statements from thousands of banks globally, including the major banks in USA, UK, New Zealand and Australia. Product differentiation enables Xero be powerful when dealing with clients.

1.4 Threat of substitute products

The key features of accounting software include invoicing, accounts payable, expense claims, fixed asset depreciation and management reporting. For small businesses, to achieve these goals without purchasing accounting software, three approaches can be illustrated:

• Manual accounting systems;

• Setting IT department to develop internal accounting...

Bibliography: Australian school of business school of accounting, “Strategic Management Accounting - Course Material and Readings”, 2011
Berray, T and Raj, S
Lane, Michael S. and Koronios, Andy (2007) Critical competencies required for the role of the modern CIO (Accessed April 27 2013)
Michael E
Nina, M. (2013). Growing a software start-up in the UK. (Accessed May 1 2013)
Pagie, B
Roger D, Smith. and Titan, C. (2003). The Chief Technology Officer: Strategic Responsibilities and Relationships, Research Technology Management (Accessed April 28 2013)
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