Introduction
When a company is considering exiting a particular industry, it has to strive to achieve some specific metrics that may, among other things, boost its valuation. For a company to ensure it makes the best decisions when exiting, it has to come up with strategic alternatives based on its current strategy, expected performances, missions, visions, and values. By assessing AcademyOne’s current strategy and operating environment, one can decide which strategy and business plan best fits the organization if it is to quit in the next five years. This paper will critically analyze AcademyOne’s business and competitive environment. A SWOT analysis of it will all be conducted, and recommendations on the best product to have for it to generate revenues of over $7 million. This analysis will reveal that the company should only focus on one product and seek to expand in the area of operation if it is to increase its revenue. The business and the competitive environment of AcademyOne show that the organization should remove five of its products from its portfolio and expand its customer base if it is to achieve its revenue target.
AcademyOne Business and Competitive Environment
Business Environment
Properly understanding AcademyOne’s business and competitive environment is important when formulating strategy. Its managers must choose the right course of action if they want to achieve $7 million in annual sales in the short term (Lamber, 2022). An organization’s business environment comprises all internal and external factors that affect it, whether positively or negatively. Common internal factors affecting an organization include its employees, management, strategic objectives, organizational culture, goals, and values (Grant, 2019). The business environment of AcademyOne is positively influenced by Mike McIntyre, the organization’s Chief Operations Officer (COO). The operations leader has experience in sales, having served for seven years in software and educational learning solutions. Besides experience in sales, McIntyre has leadership experience, having started two businesses and successfully made them fit for mergers and acquisitions. The leadership of AcademyOne is well organized, comprising the CEO Mr. Moldoff who started the company, and a group of twelve executives who lead various departments.
The business under study focuses on enhancing students’ and institutional performance. The organization explains that it knows the devil is in the details and therefore promises to push and ensure students and institutional performance improves. Through its mission, vision, and objectives, the organizations project an image of dedication to ensure that the best services are offered to its clients. The organization is privately owned, and therefore it enjoys fewer legislative controls compared to some of its close competitors, who are publicly held companies. The business environment in which the company under review operates has caused it to rely mainly on two types of revenue streams. First is the implementation fee and recurring licensing for the organizations; this source of revenue is the biggest for the organization. AcademyOne offers its clients a wide range of offers, and this vertical integration acts as a form of diversification, making the company less volatile.
Competitive Environment
The competitive environment refers to the ecosystem where the business operates and comprises all external factors that positively or negatively influence the business. AcademyOne operates in the higher education and technology industry, also called Edtech. This industry has proved to be rather attractive, posting positive results in the last ten years. The organization’s competitive advantage could be better analyzed using Porter’s five forces of competition framework (Grant, 2019). The company has to consider the competition from substitutes, especially the free services offered by CollogeSource, Inc., its most prominent and direct competitor. The company does not have to worry very much about the threats from substitutes because of the sticky nature of this business, where once they get a client, they are less likely to leave.
The company has three types of customers: the 50-state Department of Higher Education, various institutions, and community colleges. The states form the largest market share segment and have less bargaining power because of the loyal nature of their operations and the not-for-profit way of conducting their operations. Another main market segment for AcademyOne is four-year public and private institutions. These institutions have low bargaining power because they are not price-sensitive and could hardly notice a new business that used cost leadership as its market penetration strategy (Grant, 2019). Finally, there are the community colleges, and although these are very sensitive to price changes losing the clients would not largely impact the business since they generate the least revenue for the organization.
AcademyOne also faces a threat posed by new entrants into the industry. The products and services offered by the organization under review need a high level of expertise in higher education technology. This barrier is good for the business since it raises the bar for entry. According to the case study, the company has little concentration of rivals, with only a few known direct and indirect competitors. They also enjoy product homogeneity, as very few organizations can offer close substitutes. The competitive advantage is also influenced by the high switching costs from one service provider to another. This is both an advantage and a disadvantage in that the companies’ clients cannot easily be lured away, and it is hard for the business to gain new clients.
Strength and Weakness Environment
The SWOT analysis is one of the most popular methods used to conduct external and internal analysis for an organization. The strengths and weaknesses that the company has to deal with are internal, while the threats and opportunities are external to the organization. The company has the strength of having a president and COO who is very knowledgeable and experienced in Mike McIntyre. With over seven years of sales experience and strong knowledge of how to best determine the growth strategy, he keeps the organization’s future very promising. The company can also enjoy quick and consistent decision-making due to less capital dilution, as the CEO and founder of the company, Mr. Moldoff, remains the main shareholder (Lamber, 2022). The leadership committee is also small and lean, comprising twelve qualified executives to lead various departments.
Another strength the company enjoys is its business strategy, which targets students transferring from one institution to another. Therefore, it offered a range of products to state higher education bodies, higher learning groups, and community institutions that deal with the issue. This business offers strength to the business because once a client has landed, it is extremely hard for them to leave the organization. The favorable laws and regulations requiring that a portal be created in all transfers made the higher learning institutions turn to AcademyOne, thus enhancing their operations. Another key strength enjoyed by the company under review is that it has different products making it very easy for learners to move from one institution to another.
Weaknesses are the unfavorable conditions that a business faces relative to its competitors. One of the greatest disadvantages the company has to deal with is the low sales turnover of its products since they have to be tailored to the client’s specifications. This sales pitch of making the software as the client demands also increases direct labor costs, reducing the company’s top line (Lamber, 2022). It has also been observed that this effort of designing the products to specifications results in an insignificant increase in sales volume. Another weakness the organization faces is that one of its products, ArticulatedED was outdated and required manual attention from the employees to keep it working. This ties up costs in labor money that could have been used in pursuit of other alternative strategic investments.
Opportunities and Threats
Opportunities are elements in an external organizational environment that allow it to formulate and implement strategies to increase profitability. In the case of AcademyOne, numerous opportunities exist to increase revenue to the targeted number, enhancing the exit strategy. One of the opportunities enjoyed by AcademyOne is the large number of students who need interfaculty transfers. This, backed by a large number of either four or two-year community colleges, makes the market in the targeted industry high. Ultimately, this results in a greater need for software development so that the government’s need for proper documentation is met.
There is also an opportunity for AcademyOne to diversify and make a product that focuses on students’ academic success. If released into the market, this product would be easy to sell while ensuring that the sticking effect associated with the products is still there. There is also an opportunity for the organization to enjoy increased retained earnings in the coming years since the revenues earned by the organization have been projected to grow in the coming years. Additional earnings could be reinvested into the business and bring a compounding effect. The reinvestment would make it enjoy a large economy of scale and give it a chance to put off its competitors with these large economies of scale.
Threats are the external factors of an organization that could threaten its integrity and profitability. One of the fears that the management of AcademyOne has to deal with would be a decision by its clients to expand their operations and start making the transfers using their software. Although capital intensive, this method would be useful to the organizations as it would minimize overall costs. The threat is that huge investments would have to be made to cover the fixed costs. Another threat the company faces is the reduction of direct and operating costs, meaning the increase enjoyed in Earnings before Interest Tax Depreciation and Accruals (EBITDA) and net income could have come from neglecting key expenses, which may result in negative outcomes in the future.
Analysis and Development of a Strategic Business Plan
To achieve annual sales above $7 million, AcademyOne must cut some product lines to focus only on the most profitable ones. The company offers six products AccountED, ArticulatED, AssessED, AdvisED, AdvancED, and AwardED (Lamber, 2022). However, four of the products produce very little revenue, yet they contribute significantly to the overall cost of production. Initially, the management of the organization under review thought that the tailored specifications would increase customer satisfaction, but financial statements show otherwise. Therefore, management should consider maximizing the revenues contributed by the two most popular products, ArticulatED and AssessED, which produced 92% of the total revenue (Lamber, 2022). This strategy fits well with the argument that an organization must be willing to change if they are to adapt. In addition to cutting the cost, reducing the number of services offered by AcademyOne would give the employees time to focus only on the most useful products.
However, the in-depth critical analysis revealed that one of the two selected products, ArticulatED was outdated and constantly needed manual work rounds from the organization’s employees to keep it working. Such an iterative process could end up making employees busy while doing useless work time, which would be better for doing creative and innovative work. The management should therefore focus solely on the product AssessED and invest heavily in it. Although there is a risk in investing in one product, it presents a huge opportunity since all the marketing, research and development, and selling/distribution expenses should be increased to boost product sales. The organization should also channel the funds saved from the discontinued operations to expand in different American states and Canada. Having AssessED well marketed in the 50 states would lead to increased revenue generation from two million to seven million.
Conclusion
To achieve its target revenue and thus achieve the desired exit sell-out price AcademyOne will have to remove the products that are not performing from its portfolio and invest more in the one product that shows promise. First, the organization should stop all its products except AticulatED and AssesED, which combined generated over 92% of the total revenue in 2020. After further analysis, however, product AticulatED should also be removed since previous analyses have found it unreliable. The COO analysis has shown that the product is outdated due to a lot of labor, making it prudent for the management to remove it too. Since revenues are only generated from nine states, management should channel the efforts toward marketing the product to ensure it is available in all 50 states. The company has to multiply its revenue over 15 times to achieve the desired revenue that McIntyre wants to achieve.
References
Amankwah-Amoah, J. (2021). COVID‐19 pandemic and innovation activities in the global airline industry: A review. Environment International, 156, 106719. Web.
Grant, R. M. (2019). Contemporary strategy analysis (10th ed.). John Wiley & Sons.
Lamber, S (2022). Strategic management at AcademyOne: Growth towards an exit strategy. Version 2022-04-26 IVEY Publishing.
