Strategic Plan for a Hypothetical

Strategic Plan for a Hypothetical New Business

Gekko Consulting and Recruiting will be opening its new recruitment agency in the center of Lauderdale Lakes, Florida , on one of the most important avenues in the town, the State Road 7. Its location will allow it to be in the close proximity of all the local large businesses, thus providing a good presence on the market. The company will aim to penetrate the small, medium and large companies in the area, on a radius of around 10-15 kilometers. At the same time, it will also market its services via the Internet and attempt to establish a non-geographical related clientele in other states within the United States.

The company will be recruiting individuals for placement in one of the client company's, according to the opening position specifications that these companies have provided. In this sense, the actual consumer paying for the service will not be the recruited individual, but the company where the employee will be placed.

Despite being a small start-up company with yet limited human and financial resources, the company is basing its hopes for success on the capacity to penetrate a niche market by attracting an incipient portfolio of clients via a network of relations that the experienced team already has. Among its most important strengths is the team's longtime participation in the HR recruitment industry and their dedication to making this idea work.

On the other hand, the company is prepared to extend in the future to connected business segments. In this sense, it will aim to develop its it infrastructure and set up its own database and search engine.

External Assessment

PEST Analysis - Political, Economical, Social, Technological

Economic Forces

At U.S. level, the economy is currently on the brink of a potential economic recession, generally led by the crash of the mortgage market and the decrease in house prices. This has been seen in the last months in low consumer confidence figures and the constant decrease of the U.S. dollar to all time lows against all the major currencies. With the Federal Reserve decreasing the interest rate at 4.75%, from 5.25%, we may see this trend changing in the next couple of month. This would be a good time to invest, in hope of future positive developments.

Florida, on the other hand, is among the fastest growing states in U.S., with a GDP growth of 4.2% in 2006, compared to a U.S. GDP growth of 3.4% (see Appendix 2 for comparison in GDP growth between Florida and U.S. average). Of this, 28% was provided for by the services segment, with 24% covered by finance, insurance and real estate. This shows a good potential for this recruiting company, since the services sector is not yet fully saturated (see Appendix 3 for Florida's GDP by Industry Group).

In 2007 the annual percentage rate for mortgage was 5-6%. The interest rate for payment to health care providers was 11% with 2% points higher than the previous year and 4% points higher than 2005. Business loans interest rates vary from 3-4% to 6-7%, depending on the type of loan (private/government; long-term/short-term; small business/large business). The country's unemployment rate dropped to 4.5%, getting close to a 5-year low.

The gap between imports and exports decreased with 3.8% since December 2006. The inflation rate as measured in December 2006 was 2.5%.The main concerns, at country level, are the high inflation and the slow economic growth (2.5-3% for 2007). The prospects for the next two years for the economic growth are not very optimistic, as is the tendency in the entire U.S. economy, situating the indicator below 4%. Nevertheless, this is still a reasonable figure for future development.

Social, Cultural, Demographic, and Environmental Forces

The state's official language is English, but 16.46% of the population speaks Spanish. This can diversify the potential workforce in the company in terms of the languages spoken and may open up new potential markets. The population counts for more than 16 million individuals. The state's economic growth, which is due to the increase in job growth and the fact that the cost of living is quite low compared to other states, make the life conditions in this state satisfactory.

In terms of education, Florida constantly scores in the lowest 25% in national surveys concerning test-score ranking. The average spending per student is around $1,000. This may affect the local recruitment intended for the company, or at least the capacity to locally recruit employees with a good educational background. Relocation may be needed for future employees at Gekko Consulting and Recruiting.

19% of the state's population is old. Across country the life expectancy growth is forecasted as follows: older than 65 - increase from 12.4% in 2000 to 19.6% in 2030. In 2025, Florida's population is expected to increase to 26%. Many have referred to the state as the most favorite for older people, because of the mild weather, respect for age and good life conditions. Nevertheless, this type of demographics is not likely to impact the company: there is also a strong business service segment and recruitment does not necessarily have to be local.

Political, Governmental, and Legal Forces

At the level of the United States as a whole, the political climate is stable and does not affect the business segment in which the company is operating. While there are no expectancies of laws that will radically change the business climate, the company will still be subject to general governmental and legal forces that will regulate the business area through different acts.

Florida's constitution specifies the responsibilities, functions and operations of the state government. Historically, Florida was viewed as a Democratic fief. Lately, however, many democrats have switched to the republican side. This led to an overwhelming proportion of Republican outnumbering the Democrats by 251,929 to 132,432, with 123,985 not affiliated with either party.

The current political distribution in the State of Florida changed to a small extent the government's attitude towards the economic activity, in the sense that taxes are kept to a level so as to encourage the development of local business.

On the other hand, the Cuban minority, very strong on the political scene in Florida, is bound to play an important role in future evolutions. While originally traditionally Republican, the Cuban community, with the appearance of a new voting generation, began to favor the Democratic Party. This may lead to a new reversal of voting preferences in Florida.

The state's position on minimum wage changed in 2004 when the state voted a minimum level and that this minimum would be adjusted every six months with the inflation rate. Until then, Florida was one of the few states that didn't have a minimum wage established by law.

Currently, Florida is one the few states in U.S. that doesn't charge a personal income tax. Until 2007, there was a tax charges on "intangible personal property" for goods such as: bonds, stocks, etc., but this was abolished.

Technological Forces

Florida, as part of United States, is a major contributor in terms of technological innovation. The majority of Research and Development funds are private, rather than coming from government taxes. The technological level allows for the products in general to have a better quality and to become cheaper after a given period of time, in which the production technology reaches maturity.

There are 11 state universities, 4 medical schools and a large number of private colleges in Florida. The amount spent by those in R&D in 2005 counted for $1.5 billion and the royalties paid to the state, by those entities since 2000 were over $14 million.

Florida set a Technology Development Fund to help creating new centers of excellence in the state. The centers are created with the purpose of reducing the gap between the academic environment and companies. Also, this state hosts a considerable number of technology and research parks in which universities and companies join together in research projects.

The intellectual property is encouraged at national level. Copyright is protected by federal law. The law may have different interpretations in different states, but the regulation is the same across country.

Competitive Forces (esp. Porter's Model)

Entrants

The threat of new entrants comes from companies that, similar to this company, will enter the market with a portfolio that is already formed. Generally these are small companies in terms of resources (both human and financial), but with experienced HR manager, who are generally also founders and who bring along a portfolio of existent clients. The usual large HR companies remain a potential source of new entry threat as well.

Suppliers

Since the company is specialized in a particular type of offer (HR recruitment services), the suppliers it will be dealing with are also represented by service providers, such as marketing designers, web hosting firms or, in a certain way, even the employees, as work suppliers.

The marketing designers will play an important role in defining the company's brand identity on the market. They are not only responsible with elaborating the designs that will best match the targeted segment of consumers, the market niche the company will be penetrating and the medium and long-term strategy, but they will also develop promotional materials such as brochures, promotional products etc. The fact that the Florida market (and, in fact, the overall market, since market designers can be hired over the Internet and this is, in fact, the type of activity that can pertain to online collaboration) has a reasonable number of marketing designers makes their power sensibly negligible in the equation.

The web hosting companies will be in charge with hosting the company's online website and, similar to the market designers, have a negligible power, since there is a sufficient number of web hosting companies to guarantee a certain level of competition between them that can eliminate pressure in the form of high prices or low quality services.

On the other hand, the staff that the company is going to have, in the form of individual providers (workforce can be identified as such), can exercise a certain amount of pressure. The first reason for this is that training and integrating an employee is an activity that requires a significant amount of time and money. On the other hand, this is an operation that will need to be repeated every time that an employee leaves and a new one has to be hired.

Rivalry

The company is likely to have significant rivalry on the market. First of all, there are the 319 identified companies in Florida that one will need to consider, but there are also additional areas where rivals can come from, such as Internet HR databases and job search engines. Companies with large HR departments and significant resources are also able to attract some of the candidates that Gekko Consulting and Recruiting would have otherwise placed elsewhere, thus decreasing the company's turnover.

Buyers

There are two potential categories of buyers that need to be discussed here, each with a different power in this equation. First of all, there are the small and medium sized companies, normally those that don't have an HR department or have one that is not really sufficiently developed to be able to handle the entire recruitment process (it can also include companies that have judged that, in terms of their opportunity costs, it is simpler and cheaper for them to use a third company in the recruitment process). These are in larger number and have a lower negotiation power.

On the other hand, one can also consider the large companies that, because of the increasing demand of personnel, appeal to companies such as Gekko Consulting and Recruiting so as to complete their own HR recruitment capacities and bring in an extra provider. These companies have a greater power.

Substitutes

The Internet job search engines are important substitute products that can pose a significant threat to the company. Internet job searching is simple and at a low cost both for the job seekers and the company that seeks employees. It is often an alternative to go for this type of service, especially since you have additional facilities, such as the capacity of using a candidates database to facilitate the search.

The External Factor Evaluation (EFE) Matrix

Key External

Factors

Weight

Rating

Score

Opportunities:

1. Complementary activities

2. Local business environment

3. Job search engine

Threats:

1. Competitors

2. Substitutes

Opportunities

Complementary activities. Gekko Consulting and Recruiting could expand its services portfolio to complementary activities in the human resource area, such as: training, coaching and HR efficiency assessment. This could expand both the consumer basis and the potential to increase company revenues.

Job search engine opportunities. The company could set up an internet job search engine, which would allow companies that are looking for candidates to have access to a large virtual database in exchange for a given fee. This option involves low maintenance costs. Client companies would have the option of listing job offers in exchange for another fee.

The local business environment. Florida is going through a major economic growth period, which indirectly implies increased employment, increased job migration and fluctuation.

Threats

Competitors constitute a threat worth taken under consideration for any company. In Florida the number of companies with the same profile as Gekko Consulting and Recruiting is considerably high, and this makes competition quite tough.

Substitutes, such as internet job search engines, can be treated threats, not only as opportunities. They offer the possibility of incurring lower recruiting costs to companies that are looking for candidates to fill in their openings. If these engines grow up to gain a large part of the recruiting market share, they can take away from the company's potential customers.

Internal Assessment

Management Assessment

The organizational structure proposed is sufficiently flat so as to promote a flexible approach to the decision making process during the first period of activity. The recruiting manager is the most important position, with the person hired for this job being in charge with both the external and internal recruiting process. This means that she will be coordinating the employee recruiting activity and their placement with the companies that have asked for them.

The sales and marketing manager will be in direct contact with client companies, but this person will also be in charge with determining the company's promotion campaigns, analyzing the market segmentation and deciding on clients to pursue.

Finally, the financial manager will be in charge of the company's monthly financials, but he will also approve budgets for various marketing and business development activities.

Market and Marketing Assessment

In order to be able to perform a proper marketing assessment, the targeted group of consumers needs to be first of all identified and characterized. As such, it is not the employees directly that are targeted customers, but the companies that will hire them.

The potential customers can be divided into 3 categories (see appendices 5 and 6 for market analysis figures and charts):

Small business - including businesses with 1 to 99 employees;

Medium business - including business with 100 to 499 employees;

Large business - including business with 500 and more employees.

The figures are conclusive in pointing towards the small business segment as the fastest growing and the largest in the market (97.5% of the entire Florida market). The company will thus focus its efforts on the small business segment, with the highest future potential and capacity of growth. There are also additional motivations for this choice, as small companies do not have a complex human resource department already available for recruitment and it is more likely for them to outsource this kind recruiting activity.

A search on Yellow Pages revealed the following results:

1. There were 9 business listings under the "Personnel Consultants" category. These companies are specialized in recruiting personnel for other corporations (e.g. Ambiance Personnel, Interim Personnel and Leading Edge Consulting Group).

2. There were 304 business listings under the "Human Resource Consultants" category. These companies cover a wide range of services, from recruiting to training and HR payroll benefits (e.g. Assessment Technologies Group, Dynamic Corp Solutions Inc. And Gevity HR Inc.).

3. There were 6 business listings under the "Hiring" category. These companies fall in the same category as the first ones (e.g. The Hiring Company and Adverb Hiring Agency).

Considering the increasing growth rate of business activity, in terms of employees and small businesses number, this is a good moment for a new recruiting company to enter the market.

There are two types of recruiting companies in the market: large ones and small ones. The large companies are recruiting for large corporations and their relationship with customers is established mainly through their notoriety in the market and size.

Small companies will resort either to their relation network or to direct marketing - phone, fax, letter or email to create service awareness. After the customer is contracted (i.e. The company looking to recruit), the recruiting company is listing the available jobs in newspapers, magazines or job search engines. Candidates are interviewed by the recruiting company and later are sent to the employer.

The marketing strategy will comprise the pricing, the promotion, the product and the placement strategies. The four strategies will outline the company's activities to achieve product awareness.

Pricing Strategy

Given that Gekko Consulting and Recruiting will be a start-up business, the company will enter the market charging below the average adopted by most recruiting companies. Thus, most the commissions will be between 15% and 20% of the future employee annual base salary, whereas currently the market average is between 20% and 30% of the same salary. As a guarantee of high standard services, if the employee leaves in less than 90 days from the hiring date, the company will replace that same employee at no extra cost for the employer.

Promotion Strategy

In terms of promotional activity, the following strategies will be used by Gekko Consulting and Recruiting to attract its customers:

1. Network's recommendations - using own network to recommend the company's services and enlarge the network itself. This will be done through the professionals that are part of Melphis' team and who acquired knowledge about the market throughout their entire work activity.

2. Direct marketing - contact potential customers by phone, fax, email or letter to present the company's services.

3. Participate to job fairs, expositions and conferences to create visibility on the company's services.

Among the most important job fairs, the following can be cited: FCC Statewide Job Fair, New Beginnings Job Fair - organized by the Agency for Workforce Innovation, Central Florida's Job Fair, Annual Career Expo, CCFCC Regional Career Expo 2007, Rollins College Career Expo 2007 and so on. There is also a series of events where Gekko Consulting and Recruiting will participate, most of them being on the agenda of the State's HR Council, such as: SHRM Annual Conference & Exposition.

4. Gekko Consulting and Recruiting will also publish a number of articles in business magazines and newspapers that are more frequently read by companies. This will provide potential customers with more information about the company and create product awareness.

5. Develop a company website to provide more visibility to companies that represent potential customers and to future employees that may want to register their CV and enter the company's database. The entire web promotion implies a separate marketing campaign that will promote the company's website. This will include search engine optimization (SEO), in an attempt to better position the company website on Google searches, so that companies searching for such services are more likely to come across the company's services;

placing the website link on different HR forums and sites that potential customers are likely to visit online promotion via direct marketing, such as specific chat rooms.

Product Strategy

In the initial phase, the product sold by Gekko Consulting and Recruiting will be the recruiting service alone. The company will work closely with its customers in order to find candidates that meet exactly the job requirements. Customers will pay for candidates that are hired and will have a 90-day guarantee on the service.

Place-Location Strategy

The headquarters will be located on State Road 7, which is a major avenue in Florida that will help create a positive company image. The services will be provided mainly to companies from Broward, Miami Dade and Palm Beach, as there is a large agglomeration of offices in that area.

The recruiting will be made from the entire state of Florida to get a larger pool of candidates and thus increase the chances of finding the most suitable candidates for the jobs. Potential employees will have a first phone interview. After this phase, Gekko Consulting and Recruiting will decide whether the candidate should have a more personal interview. Candidates will have to pay for the transportation costs to the interviewing place.

Opportunity Analysis

In evaluating the business opportunity, one needs to evaluate the potential of the targeted segment of consumers and will take into consideration variables such as number of companies, number of employees, total population and total employment. The table in appendix 4 gives a good idea of the evolution of all these indicators.

All indicators have had a positive evolution, with growth rates above 2% per year. The most important indicator in our case is the number of employees, as it gives information about the company's potential workload.