5. IMPLEMENTATION OF PORTER’S MODEL AT XARA INC.
The challenges confronted by the Xara Inc. before employing Porter’s model are summarised below:
• The financial meltdown in US excessively impacted the business growth of the Xara Inc. especially after the global economic crises 2008.
• Title insurance was a major vertical for the Xara Inc. However, title insurance industry was detrimentally impacted in the US. The existing customers had ample challenges and some of them filed for bankruptcy. Therefore, to grow an existing customer business was abstruse.
• Staffing was a major issue due to volume fluctuations and the customers were not ascertaining any minimum order commitment.
• 50% of Xara ...view middle of the document...
Therefore, no heavy investment (i.e. plant, machinery, raw material or technology) is needed.
Additional capacity: Not an issue
An existing player having additional capacity is no guarantee for success. It is also not a deterrent for new entrants. Furthermore, a new entrant coming into the industry with additional capacity is also not a competitive advantage. Capacity build up happens over a period of time based on market needs and is a non-issue.
New or greater resources: High impact
The “raw material” in a BPO (BPM) industry is human resources and a better quality of resource can have a significant impact on customer deliverables. If a new entrant comes in the industry with resources, i.e. greater knowledge, skill sets and experience. Consequently, it can meet customer requirement with greater speed and better quality.
Economies of scale: High
Order volume is one among the important parameters that impact pricing. Since per unit price is usually low, a company needs higher volume to pass on any price benefit to the customers. Therefore, a company working on more orders will have a competitive advantage.
Product differentiation: Low
There is hardly any scope for product differentiation as all companies work on the same back office processes using the same kind of tools. BPO (BPM) is largely a service industry. Therefore, the differentiating factor could be in terms of non-product issues like service quality, price etc.
Capital requirements: Low
One does not require heavy investments in plant, machinery and raw material. As important resources, an office space with proper infrastructure (computers and connectivity) and quality resources are are needed.
Learning curve advantage: High
The customers prefer NOT to invest in training their vendors. A company with a zero or a short learning curve is being preferred.
Access to distribution channels: Medium
There are no distribution channels perse, but there could be agents working for a company. These agents usually work on a commission basis and have prior business contacts. If an agent has been signed up with a company, that will not be available for a competitor. Therefore, the competitor has to look out for another agent, who may or may not be as well connected.
Government policy: Low
There is no government policy or licensing that restricts a competitor from entering into the industry. Since other statutory obligations are met, there is no government intervention.
Switching costs: Low
A customer needs to send an email that the customer will stop sending work with effect from a certain date. It is thus easy for a new entrant to woo the customer and start working on orders that were earlier done by a competitor.
Incumbency advantages, independent of size: High
Incumbents may have a prior relationship with key customer executives. This may have been cultivated over several years and not easy for a new entrant to capture.
5.2. Power of Suppliers
Industry dominance: Low...