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Merrick, Korey MBA 640 Final Project 6-1 Milestone Two Risks
Merrick, Korey MBA 640 Final Project 6-1 Milestone Two Risks
MBA-640-Q1950
Korey L. Merrick
8 December 2019
ALTERYX EXPANSION EXTERNAL CAPITAL FUNDING PROPOSAL 2
South Africa
Risks
To be successful in the marketplace, Alteryx must recognize and respond to the various
forces that exert influence on its operations, activities, and business decisions. Alteryx
understands that examining these internal and external forces that drive change in the business is
Internal
Alteryx’s internal environment are the factors that exist inside the organization, which are
under the control of Alteryx regardless of whether they are indefinable or concrete (Mindtools,
n.d.). These internal factors can be either strengths or weaknesses. Consequently, as Alteryx
analyze its strengths and weaknesses, it must seek to use its strengths to take advantage of
opportunities, while using them to minimize risks. Similarly, Alteryx must also seek to improve
weaknesses to take advantage of opportunities and seek to eliminate weaknesses to avoid risks.
Despite our strengths and weaknesses, the company is exposed to the following main internal
risks associated with the project: increased operating expenses; talent management and sales
the above risks or uncertainties occurs, the company’s financial health, operating results, and
Increased operating expenses. Prior to fiscal year ending December 31, 2018, the
company posted net losses for each accounting period since the establishment of Alteryx
(Alteryx, 2018). As Alteryx invests in this expansion, the company expects operating expenses
to increase substantially as well (Alteryx, 2018). Based on our projections, the company
ALTERYX EXPANSION EXTERNAL CAPITAL FUNDING PROPOSAL 3
estimates that operating expenses, as a percentage of sales, to increase by 6.8% from 79.2% in
2018 to 86% for future years. Much of the increase is linked to sales and marketing expenses,
expenses grows past our current financial estimates, Alteryx may report net losses once again.
Nonetheless, to grow the business, the company must increase overall investments in creating
new customer bases in South Africa, while expanding sales within its current customer base. In
addition, additional costs from testing and developing the new subscription-based eLearning
computer education platform, growing distribution channels, establishing our South African
infrastructure, and hiring and training additional employees, just to name a few, are necessary to
expand the business (Alteryx, 2018). However, if the company cannot manage or counter these
Talent management and productivity. Expanding operations into this new market,
places additional and significant demand on the company’s financial, operational, and
administrative resources. A key part of any company’s administrative resources and internal
environment is its people (employees). As such, we must be able to effectively manage, recruit,
integrate, train, and motivate many new hires, while at the same time, retain existing talent
within the company. In addition to lower-level employees, Alteryx’s direct sales force is key to
the company’s success because most of the company’s revenue is attributed to our sales force.
Thus, our financial growth and sustainability depends largely on management’s ability to recruit,
train, and retain sales personnel. However, there is significant competition both domestically
and internationally for talented, competent sales personnel who have the skills and technical
knowledge to ensure the success of our eLearning platform and current products. Although there
is an opportunity for Alteryx to recruit new people in the South African market, there are
ALTERYX EXPANSION EXTERNAL CAPITAL FUNDING PROPOSAL 4
additional upfront costs to train and recruit them because they are new to the company, our
legacy platforms, and the new eLearning platform. If the new hires fail to reach their full
productivity potential, the company may not recover training costs and will adversely affect sales
and profitability.
Report, nearly all the company’s revenue relies on its subscription-based software platform.
During the expansion, Alteryx’s financial results will still rely on the performance, continued
growth, and demand for this platform. However, although there are inherent risks and
uncertainties, the new eLearning platform creates a good opportunity to further diversify
Alteryx’s current offerings and create an additional revenue stream for the company. Unlike,
Alteryx Connect and Alteryx Promote, which use Alteryx Server and is not sold independently,
certain that this new product will generate the forecasted revenue of $13.5M and $5.6M in net
External
External factors occur outside the organization that are beyond the company’s control and
can cause internal changes that can impact the company negatively or positively, creating great
opportunities or significant threats (Mindtools, n.d.). There are several external forces that
Alteryx may need to address, such as political, infrastructure, and socio-cultural conditions.
Political. Despite being the second-largest economy on the continent with several
corruption, poor education standards, crime, and unemployment that continue to impede growth
in the country (Matsangou, 2019). Although Alteryx’s eLearning platform benefits from SA’s
ALTERYX EXPANSION EXTERNAL CAPITAL FUNDING PROPOSAL 5
poor education standards by helping SA improve and modernize its education system related to
technology, government corruption and crime presents significant risks (GAN, n.d.). For
example, SA’s current government has been accused of a list of scandals involving racketeering,
fraud, money laundering, corruption, and taking bribes from arms dealers (Matsangou, 2019).
Although South Africa’s Prevention and Combating of Corruption Act (PCCA) criminalizes
corruption in public and private sectors, making it a crime to offer any form of gratification to a
government official if it is not lawfully due, the laws are inadequately enforced (GAN, n.d.). To
reduce risk Alteryx must communicate a strong message to international business managers and
governments by setting strict standards of behavior and principles globally, adapt industry anti-
corruption standards, exclude outsourced providers that have corruption offences, and report
corruption to the proper authorities (Travieso, 2017). If the company does not find measures to
curb the impact of these political risks, it can result in costly fines (assuming internal corruption)
for Alteryx resulting non-deductible expenses and a reduction in net income and potential
Technology Infrastructure. Over the past decade, SA recognized there was a clear and
urgent need to develop a comprehensive and integrated e-strategy that advanced the countries
information and communication technology (ICT) to a level that supports its growing economy
and population (The National Planning Commission [NPC], n.d.). Similarly, SA realized that a
robust ICT infrastructure is a critical enabler that attracts economic activity in this new digital
world (NPC, n.d.). SA’s investments in ICT provide important opportunities for Alteryx that
may provide seamless delivery of its eLearning platform not only to SA’s education system, but
to homes across the country as well. However, SA has fallen short in developing an information
infrastructure that is universally accessible to meet the needs of citizens, businesses, and the
ALTERYX EXPANSION EXTERNAL CAPITAL FUNDING PROPOSAL 6
public sector -as compared to the country’s main peers and competitors (NPC, n.d.). Poor ICT
infrastructure presents moderate risks for Alteryx resulting in more infrastructure investment
costs to support its eLearning platform internet demands that allow smooth delivery of the
platform without degradation of quality (i.e. lagging, and extended video buffering times).
Despite the risks, enormous opportunity still exists for businesses willing to invest capital
resources and who have the ingenuity to help solve SA’s ICT infrastructure challenges.
Socio-Cultural. One major external factor that may have a large influence on the
company is South Africa’s socio-cultural conditions. For instance, the biggest political and
social change that has occurred in South Africa was the abolishment of its apartheid system, a
system that legally call for the disenfranchisement, discrimination, and segregation of its
majority black population (NPC, n.d.). However, severe racial tensions still exist, and it has a
significant impact on business relations within the country (NPC, n.d.). In response to South
Africa’s post-apartheid transition, Alteryx must strictly enforce or adapt an equal opportunity
policy that quickly respond to incidents that contravenes it, while implementing measures to
designated groups. By ensuring equitable representation in all occupational categories and levels
in the workforce, Alteryx can avoid damaging its image and brand. Ignoring political and social
external forces like the one above, can be a damaging mistake for the company.
Microeconomic
According to Kokemuller (2019), microeconomic factors are those that involves the
availability and usage of resources that impact individuals and businesses. Microeconomic
factors that affect Alteryx expansion opportunity decisions the most include customers, and
Customers. There is no doubt that customers have a direct impact on the success of any
business. If Alteryx cannot attract new customers and expand revenue from existing customers,
the expansion will not be successful, or the company may experience slower revenue growth
than expected. The success of Alteryx’s eLearning platform relies on the assumption that SA’s
educational system will be a major and supporting customer, predicated on the fact that the
country needs to innovation and modernize its education system (NPC, n.d.). If this assumption
proves to be false, Alteryx could be left alone to bear the costs without the support of SA’s
government. Additionally, it loses its competitive advantage and must compete with other
institutions. The undeniable fact is that Alteryx will not be successful or profitable if it can’t
attract new customers. In addition to increased public sector demand for eLearning services,
demand and usage for eLearning courseware in the private sector, practically corporate
enterprises and schools, is expected to rise 55% by 2023 with industry revenue estimated to
increase at a CAGR of 14.9% during the same time (Ken Research, 2019). As such, the
company must fully understand its target market, develop and implement an effective marketing
strategy to build a strong customer base that generates revenue streams to support the expansion
and operations.
impact on a business (Kokemuller, 2019). The level of competition in the eLearning industry in
SA is moderate (Scrivastava, n.d.). With over a dozen major eLearning providers operating in
the country and along with Alteryx resources, the company should be able to capture a good
percentage of the market share. In the public sector, Alteryx’s biggest competitors are
Webanywhere eLearning Services, LRMG, and Learning Advantage, all of which provides
ALTERYX EXPANSION EXTERNAL CAPITAL FUNDING PROPOSAL 8
However, Alteryx’s targets computer and technology education specifically. Alteryx eLearning
platform targets one of SA’s major challenges, a workforce absence of ICT skills. It directly
addresses SA government’s top priorities, which is to build a skilled and technology competent
workforce that can help build a sustainable technological advance future for the country (NPC,
n.d.). Despite the moderate level of competition, rising SA’s education system fees allow
reasonable the price flexibility for Alteryx eLearning services, if, the company provides quality
education and set reasonable prices it should be able to compete in this increasingly crowd
market.
Alteryx’s financial projections are quite sensitive as they rely on attracting new
customers. As the number of customers goes up or down, sales equally follow in the same
direction. Current estimates are based on training 30,000 students (customers) at $2,715 per
student each year for six years resulting in annual sales of $13.6M per year.
Reduction in sales of 20%. If the expected number of customers goes down 20%
(24,000), for example, future cash flows from sales decrease to $10.9M per year or $65.2 in six
years. Alteryx return on investment (ROI) is 4.81%, based on initial investment of $10.4M. In
addition, if Alteryx invested the $10.4M, let’s say in a government bond because of its minimal
risks, at today’s effective annual rate of 1.683%, the NPV of the project would yield a positive
result. The PV of $10.9M for one year is $10.7M resulting in an NPV of $0.3M (NPV equals -
cost plus PV of future cash inflows). In other words, investing in the project with an expected
20% reduction in sales yields a positive NPV indicating that Alteryx should invest in the project
higher risk investments that yields returns higher 4.4%, such as those funds that invests in master
limited partnerships, junk bonds, and real estate index funds, the project would not be worth the
investment (assuming does not realize a loss on the 4.4% investment). Moreover, after applying
the time value of money concepts, we can see that in six years the FV of the initial investment
costs plus the FV of the estimated annual costs equals $52.54M. This amount represents the
opportunity costs that Alteryx would have received if it invested the above funds, which happens
to be less than sales of $65.2M. This further supports the investment decision.
A 20% increase in estimated sales. Similarly, a 20% increase in sales would be great
news for Alteryx resulting in annual sales of $16.3M an increase of $5.4M each year. The
company’s ROI would increase by 0.86% from 4.81% to 5.67%. In addition, the NPV would
also be positive suggesting that Alteryx invest in the SA expansion. Assuming no changes in
operating expenses, Alteryx six-year sales of $97.74M would surpass the FV of the initial
References
Alteryx. (2018). Alteryx, Inc. Annual Report on Form 10-K For the Fiscal Year Ended December
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ALTERYX EXPANSION EXTERNAL CAPITAL FUNDING PROPOSAL 12
Appendix A