Xero's potential for international expansion through online accounting software

Xero is an online accounting software company based online, which offers accounting software for both personal finance, and companies. Some of the elements of the Xero include invoicing, payable accounts, expense claims, fixed asst depreciation, business management reporting, and automatic bank, and credit feeds (Lam, 2007). In addition, the company conducts its business online and sells its products through subscription based on the number of company units (Lam, 2007) managed by the parties. In addition, the software, Xero's product can automatically import bank and credit card data, for instance, bank statements. Rod Bury is the founder of Xero Ltd., which he formed in 2006.

The advancement in global economy has seen to the change in traditional balance between the consumers and suppliers. This is because of new communications and computing technology, and the creation of open international trading platforms meaning that consumers can make choices to supply transparent alternatives. This means that a business will need to base its activities for the good of the customer because technology has evolved to provide for the lowest cost provision an opportunity (Teece, 2010). In the case of Xero, it provides customers opportunities to lay out their experiences concerning the accounting software from the company.

In addition, the company has an entrepreneur leader, who is likely to take the company to a global market. On the other hand, prior studies suggest that internationalization is a complex phenomenon and although there have been numerous researches on the issue; there is still a need for future studies to comprehend the phenomenon (IBS, 1976). Nevertheless, many small companies achieve internationalization without knowing because all the entrepreneurial activities, especially those that occur in foreign markets, are part of the internationalization process. Most importantly, small companies find it hard to compete in the global market owing to the competition.

However, online-based companies that offer unique products gain the capacity to compete in the global market and achieve internationalization (Forsgren and Hagstrom, 2001). Some of the ways that small companies can use to achieve internationalization include direct investment, mergers, or joint ventures. Xero is a good example of a company, based online, which shows the potential to achieve internationalization. For instance, the company has joint ventures with other companies and accountants to provide the accounting software product (Xero, 2013). Owing to this, it is apparent that within a predictable timeframe, the company might achieve global leadership.

In comparison with the manner in which countries conducted international trade in the past, the current approach shows substantial difference. Historically, countries relied on specialization of the products they were suitable in producing, and subsequently used the products for trade. In the current international trade, countries have studied each other, a factor that makes specialization a bit complex. In the context of companies, online-based companies, Xero included, are using innovative business models because of the constant improvements of their products. This model suits such companies because technological innovation requires a business model innovation, mainly in order to capture a global market (Teece, 2010).

History and International Operations

Founded in 2006 by Rod Bury, Xero Limited is a web-based company, which is showing the potential of becoming a global leader. In addition, the company is listed on the New Zealand Stock exchange and the Australian Securities Exchange. The company is fast growing and has teams in Sydney, Auckland, Wellington, San Francisco, Melbourne, and Milton Keynes. In addition, the company has accounting software that is intuitive and easy to comprehend because the design of the software enables even people with little accounting proficiency to use the software. Notably, its business approach is to register accountants and bookkeepers to enable businesses to keep a regular contact with their professionals.

Xero creates cloud accounting application, which users use to access their financial information on various platforms. Although the main business of Xero is the provision of the accounting software, the company provides cloud solutions, most of the companies' internal ICT operations occur on cloud applications. The company migrated to Microsoft's cloud suite, in addition to broad usage of cloud software, which includes Yammer, Box, Smart sheet, Jira, and GotoAssist. However, in the globe Xero provides online cash accounting and accrual accounting, which performs transactions in real time. This enables the prompt development of financial reports, which enables the firms that use the software to determine their position anytime. The company has collaborated with other companies in an attempt to expand its business activities, which have helped the company, reach a large audience globally.

In addition, the company has published relevant information on its many websites. Nevertheless, the company has uploaded tutorials on how to use the accounting software, which has helped most people in using the software. One way that the company runs its international business activities is by learning from each region it operates. By so doing, the management applies all the activities that work in one region to other regions (Xero, 2013). Most importantly, the company is taking advantage of the ongoing disruption, which makes it unique. Therefore, the company is using the internet to provide cloud services, an aspect that has changed the economics of small businesses globally.

Nevertheless, the company offers stakeholders a chance to own the company by providing shares and this has helped the company raise its capital. This has increased the growth of its business activities in the growth because people are curious in relation to investing online. In addition, the company is recruiting, increasing, and training its staff in an effort to achieve or cater for the demand of the product in the global market. This has allowed for product development. The firm has also opened new physical offices in Sydney and Melbourne in an effort to cater for the customer demands in the globe, and effectively carry out its business activities.

Most importantly, the company provides comprehensive information about the progress to the customers, and other stakeholders. The company publishes annual reports, and other information about the company through its websites. The annual reports provide information concerning the company on various issues, ranging to its future ventures to its profitability and other relevant information for the stakeholders to determine whether their investments are worth. This is a strategic tool for business to disclose their information, especially voluntarily because it will influence potential customers to invest in the company (Chesbrough and Rosenbloom, 2002). Notably, the company operates globally by using certified accountants, and joint ventures, but the company is quickly achieving a global leadership in online business (Xero, 2013).

Developments in Xero

In the year 2006, Xero Software Company, found in New Zealand assessed its market, products, customer engagement and found out that there was an opportunity to make several developments for the accounting software business on an international basis. The traditional models of business suggest that a business should control every aspect of the market or its service. However, in Xero accounting Software Company (Quin, 2013), instead of developing competing software, it went for an open, online platform, which allowed third party software developers to incorporate their inventory managers, workflow controllers, point-of-sale systems, data evaluation tools and a host of other components into the Xero server (Chesbrough and Rosenbloom, 2002). This was strategic, disruptive, modern thinking, which transformed the initial company into an emerging leader of online business accounting business with global offices in United States, United Kingdom and Australia.

In addition, the company introduced new features such as touch, files and purchase orders, to gain a comparative advantage over its competitors. It would achieve this advantage because the features would make the financial documents in the cloud easier for both personal and corporate use. The Xero files would make it easy to upload business documents including invoices, reports contracts and for storage in the Xero Cloud (Bloomberg, 2014). The purchase order feature will enable consumers to order and pay for goods online. The company introduced this features as a means to remain sustainable in online business, primarily because the company aimed at expanding to the United States, and develop its innovations. Recently, the company introduced QuickBooks (R), which is a conversion service to allow consumers to transition to Xero.

In addition, the firm developed a re-design of its iOS7 application to improve performance and response. The application eliminates screen-hogging visual features, by replacing with current ways that the consumer will use to access and manipulate data. Most importantly, the application speeds up the bank processing with the touch of a button; expensing and invoicing with the click of a camera; tapping with the finger to speed up invoicing, and creates a platform for connecting with accounting professionals. In addition, consumers can drag and drop any files into Xero and link them to invoices, transactions, receipts, contracts, bank accounts and many other accounting related functions. The integrative nature of the Xero files has progressed efficiency allowing for anytime, anywhere access to financial details. The purchase order allows easy payment and purchase of goods, and suppliers can interact with buyers in an error free platform.

The company developed the industry's first ever QuickBooks (R), which is a conversion service. Notably, this service is free, and was strategic because the company was aiming at responding to the vast consumer demands. The free service releases millions of small businesses and accounting experts from the confines of desktop accounting. In addition, it allows the consumers to migrate data from QuickBooks into Xero's cloud. This migration of data allows the consumers to easily transfer, promptly access, and manage large amounts of disparate finance data from a browser. In addition to an earlier argument, the Xero Payroll will make it easy for the customers to automate tax calculations, direct deposit, employee access options, and an electronic tax filing part (Bloomberg, 2014).

Managing Operations

Initially, the company had a handful of employees, which translated to negligent growth of the company because it had only 3,000 consumers. Therefore, the company had to re-look the way it carried out its operations. In addition, this called for shaping of the company's strategies, and it developed a platform where the consumers would communicate with accounting experts. This was an important strategy in managing the online operations because some customers will need support (Smith, 2013). Nevertheless, in an event a new customer was not proficient in using the accounting software or the customer had experienced some difficulties while using the software, they would inquire from the experts, through the online platform.

Most importantly, most of the company's experts were majorly accountants, who do not have essential managing skills. Therefore, the management opted to educate, recruit the accountants to gain proficiency on management issues. In addition, the company has hired experts who interact with customers to increase their book keeping efficiency, as an effort to manage their business operations. In addition, the corporation is in the course of developing a Small Business Advisory Group, which will help the company transform, and achieve sustainability through managing substantial operations. In addition, the company has a support team, management and a R&D team (Plenert, 2002), which are safe for investors that can execute many operations, which will help in the growth of the company.

Similar to other companies, the company has a hierarchical system of governance composed of a board of governors, directors, board members, and employees. The board is the final body, which is accountable for all choices made in the business. On the other hand, directors are responsible for keeping all the financial documents, which outline the financial position of the company. They also defend the assets of the company. Most importantly, the company has a set of rules, ethics and regulations, which the employees must follow, and work in accordance to the ethics. The chief executive is accountable for the high standards of conduct, although the firm does not have an official set of codes. Owing to this, all the stakeholders take part in managing the operations of the company (Xero, 2012).

Internationalization

The terms internationalization and globalization describe the change that occurs in the global political, social and economical context. In addition, the advancement in technology has led to a case where the globe is merging at a gradual pace. The internet has led to fast communications across the globe (IBS, 1976). This has led to development of the economy, which has separated the globe along economical lines (Reid, 1983). At some point in time, every company must face internalization. This may occur through many ways such as global mergers (Johnason & Vahlne, 1977), acquisitions and extending markets in an attempt to expand the global operations from local to a global level. Internationalization process has substantial advantages. However, in order to achieve internationalization, web-based firms face substantial challenges, which might serve as barriers to achieve global success.

Xero is a web-based company, and consumers expect it to launch an online international shop from its inception. This is so because the objective of Xero is to realize a substantial amount of audience through its only service channel, the online platform (internet). In addition, as global operations grow, and as interaction with clients intensifies, the company recognizes that it can expand its market via intermediaries. The intermediaries may serve as trust facilitators, content filters, translators and mechanisms for disseminating information. In order to achieve the aim of reaching a large audience, Xero has a peer-reviewed informative website, which has an enabled web-based communications, which further serves as a promotional tool rather as a means to generate revenue.

Issues in internationalization

Product Policy

Internationalization aims at reaching a large global audience, and the success of the product in such a target market requires the company to form a unique product policy. In this case, the firm should examine the essential features of the products and ensure that the features can meet the demands of the customers at a global scale (Grafers and Schlich, 2006). The Xero accounting software, initially had 3,000 users, but after some years, the mark had hit the 157,000 user's mark. This is a positive aspect and it shows that the software can reach a global scale.

In addition, the software has unique and customized features, which users find efficient in delivering the accounting objective. A typical example is the QuickBooks (R), which is the first ever feature developed in the software market, and its work is conversion. This feature allows users to migrate data, and manage large amounts of disparate finance data. However, there is a potential threat from new entrants, who might come up with advanced software with advanced features, which might have a good competitive advantage over Xero.

Company size and organization

There is a common perception that large companies have substantial resources (Barney, 1991). However, in practice, this does not mean that they would perform in international operations, when compared to small and developing companies (Bonaccorsi, 1993). Currently, companies are embarking into foreign global markets, especially for companies, for instance, Xero that deal with technological products. However, issues such as free trade agreements and creation of new information technologies have the capacity to decrease the significance of company size in the global market. Nevertheless, the quest to seek opportunities in the global market can become a significant challenge for Xero, mainly because it has not developed a global network.