Strategic analysis of a data processing company

This paper contains a strategic analysis of a data processing company that provides outsourced payroll services to employers in Canada. For the purpose of confidentiality, the name of this company is disguised as ABC Canada. This company is in a mature industry, which is characterized by slow growth and narrowing of product differentiation as new entrants are able to penetrate the market at lower cost due to the advancement in information technology. The growth of this industry in the last four years has been minimal. In order to defend its market leadership, the company takes on a product differentiation strategy through bundling of human resource, time and labour management solutions, and a full suite of comprehensive solutions along with traditional or fully outsourced payroll services to employers of all market segments. This product differentiation strategy serves to gain new clients by enhancing their competitiveness and to protect the revenue of existing clients by creating a lock-in effect through increasing switching costs. Despite the company's steady growth and outstanding performance compared to rivals in Canada, the dominant cost-based strategy approach in managing the business could potentially undermine the company's product and market differentiation strategy in the long run. Implementation and services teams are working on separate silos as supposed to working as a team. The sales force has too many layers of management that restrict and under-utilize its full potential. In order for the company's continuous effort in differentiating its products and marketing strategy to work in the long-run, it is recommended that restructuring of the implementation and services teams needs to take place to service clients with fully outsourced or bundled solutions. A restructuring of the sales force and an evaluation of the compensation structures also need to take place to ensure the company long-term growth.