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44228677 strategic-management-at-infosys-business-strategy
44228677 strategic-management-at-infosys-business-strategy
44228677 strategic-management-at-infosys-business-strategy
44228677 strategic-management-at-infosys-business-strategy
44228677 strategic-management-at-infosys-business-strategy
44228677 strategic-management-at-infosys-business-strategy
44228677 strategic-management-at-infosys-business-strategy
44228677 strategic-management-at-infosys-business-strategy
44228677 strategic-management-at-infosys-business-strategy
44228677 strategic-management-at-infosys-business-strategy
44228677 strategic-management-at-infosys-business-strategy
44228677 strategic-management-at-infosys-business-strategy
44228677 strategic-management-at-infosys-business-strategy
44228677 strategic-management-at-infosys-business-strategy
44228677 strategic-management-at-infosys-business-strategy
44228677 strategic-management-at-infosys-business-strategy
44228677 strategic-management-at-infosys-business-strategy
44228677 strategic-management-at-infosys-business-strategy
44228677 strategic-management-at-infosys-business-strategy
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44228677 strategic-management-at-infosys-business-strategy

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  • 1. BUSINESS STRATEGYSTRATEGIC ANALYSIS OF INFOSYS SUBMITTED TO: PROF. G.K SRIKANTH SUBMITTED BY: MADHUSUDAN MOHAPATRA ENROLLMENT NO – 09BSHYD0419 3RD SEMESTER, SEC - A 2010 IBS HYDERABAD
  • 2. CONTENTS PAGE NO.INTRODUCTION ………………………………………………………………… 03ENVIRONMENTAL SCANNING ………………………………………………. 04 EXTERNAL ENVIRONMENTAL – PESTEL ANALYSIS……………. 04 OPERATING ENVIRONMENT………………………………………… 08PORTER’S FIVE FORCE MODEL (INDIAN IT INDUSTRY)…………………. 12INFOSYS …………………………………………………………………………. 13 INFOSYS BUSINESS LINE……………………………………………… 13 MCKINSEY’S 7 S MODEL ON INFOSYS………………………………. 15 SWOT ANALYSIS OF INFOSYS………………………………………… 16 ANALYSIS OF STRATEGY OF INFOSYS……………………………. 17REFERENCES…………………………………………………………………… 19 Page 2 of 19
  • 3. INTRODUCTIONIn an increasingly globalised world, significant complexity and uncertainty is getting attached tothe unprecedented economic crisis. The Indian economy was also impacted by the recessionarytrends, with a slowdown in GDP growth to seven per cent in 2008. The focus and exponentialgrowth in the domestic market has partially offset this fall and insulated the country, resulting innet overall momentum. The IT and ITES industry in India has today become a growth engine forthe economy, contributing substantially to increase in the GDP, urban employment and exports,to achieve the vision of a “Young and resilient” India. During these years, the sector maintainedits double digit growth rate and was a net hirer. This growth has been fueled by increasingdiversification in the geographic base and industry verticals, and adaptation in the serviceofferings portfolio. While the effects of the economic crisis are expected to linger in the nearterm future, the Indian IT and ITES industry has displayed resilience and tenacity in counteringthe unpredictable conditions and reiterating the viability of India’s fundamental valueproposition. Consequently, India has retained its leadership position in the global outsourcingmarket even during recession time.The Indian IT and ITES industry achieved revenues of USD 71.7 billion in FY2009, with the ITsoftware and services industry accounting for USD 60 billion of revenues. During this period,direct employment reached nearly 2.23 million, an addition of 226,000 employees, while indirectjob creation touched 8 million. As a proportion of national GDP, the sector revenues have grownfrom 1.2 per cent in FY1998 to an estimated 5.8 per cent in FY2009. Software and servicesexports (including BPO) are expected to account for over 99 per cent of total exports, employingover 1.76 million employees. While the current mood is that of “cautious optimism,” the industryis expected to witness sustainable growth over a two-year horizon, going past its USD 60 billionexport target in FY2011. While the industry has significant headroom for growth, competition isincreasing, with a number of countries such as Brazil, Mexico, Philippines etc. creating enablingbusiness environments aimed at replicating India’s success in the IT and ITES industry. Hence,concentrated efforts are required by all stakeholders to address the current challenges, to ensurethat India realizes its potential, and maintains its leadership position. Page 3 of 19
  • 4. ENVIRONMENTAL SCANNING EXTERNAL ENVIRONMENT - PESTEL ANALYSIS 1. Political Stability: Indian political structure is Positive considered stable enough and Govt. of India has set up a National Task Force on IT and software development to examine the feasibility of strengthening the industry. 2. U.S government declaration that U.S companies that willPolitical outsource I.T works to other locations other than U.S Negative will not get tax benefit. 3. Government owned companies and PSUs have decided to give more IT projects to Indian companies. Positive 4. Terrorist attack or war. Negative 1. Global IT Spending (Demand) from USA will increase Positive in FY 2010. 2. Domestic IT Spending (Demand): The Indian domestic Positive market will grow by 12.9 percent through 2013. NegativeEconomic 3. Currency Fluctuation. 4. Real Estate Prices: Decline in real estate prices has Positive resulted in reduction of rental expenditure. 5. Attrition: After U.S recession in 2008-2009, companies are on a hiring spree and there is a revival of the job Negative market, attrition rate is going to be high in 2010. 6. Economic Attractiveness due to cost advantage and Positive other factors. Page 4 of 19
  • 5. 1. Language Spoken: India has the second largest English- Highly Positive speaking scientific professionals in the world, second only to the U.S. English medium being the most acceptedSocial medium of education. Thus India boasts of large English speaking population.Social 2. Education: It is estimated that India has over 4 million Highly Positive technical workers, over 1,832 educational institutions and polytechnics, which train more than 67,785 computer software professionals every year. Positive 3. Working age population Page 5 of 19
  • 6. 1. Telephony: Highly Positive a. India has the world’s lowest call rates (1-2 US cents). b. Expected to have total subscriber base of about 500 million by 2010. c. ARPU for GSM is USD 6.6 per month.Technological d. India has the second largest telephone network after china. e. Teledensity of India is 49.50% f. Enterprise telephone services, 3G, Wi-max and VPN are poised to grow. Positive 2. Internet Backbone: Due to IT revolution of 90’s, Indian cities and India is well connected with undersea optical cables. 3. New IT Technologies: Technologies like SOA, Web Positive 2.0, High definition content, grid computing etc and innovation in low cost technologies is presenting new challenges and opportunities for Indian IT industry. Page 6 of 19
  • 7. Energy efficient processes and equipments: Positive Companies are focusing on reducing the carbonEnvironmental footprints, energy utilization, water consumption, etc. 1. IT SEZ Requirement: IT Companies can set up SEZ Positive with minimum area of 10 hectares and enjoy a host of tax benefits and fiscal benefits. 2. Contract / Bond requirements: Huge debates NegativeLegal surrounding the bonds under which the employees are required to work, which is not legally required. 3. IT Act: Indian government is strengthening the IT act, 2000 to provide a sound legal environment for companies Positive to operate especially related to security of data in transmission and storage, etc. 4. Companies operating in Software Technology Park Negative (STPI) scheme will continue to get tax-benefit till 2010. Page 7 of 19
  • 8. OPERATING ENVIRONMENT Page 8 of 19
  • 9. 1. Market Size More than 80% of revenues come from exports and only 20% from domestic market. Fig: Revenues from domestic and exports (in USD billion) Indian IT industry contributed around % of Indian GDP 5.8% Indian GDP in 7 FY 2009. 6 5 4 3 % of Indian GDP 2 1 0 2004 2005 2006 2007 2008 2009Fig: Contribution of IT industry to Indian GDP Page 9 of 19
  • 10. Fig: Number of employees in Indian IT Sectors (Direct Employment) till FY 2009. 2. Market Share Page 10 of 19
  • 11. 3. Customer ProfileSector Major Clients – Domestic Major Clients – Global (Export British Market) Telecom isGovt. and Public Railways, LIC, MMRDA, US Govt., British Govt., InfosysSector Companies BMC, BPCL, ONGC Australian Govt., Saudi and Kuwait Govt. largest clientBFSI HDFC, ICICI Bank, Citi AIG, Bank of America, UBS, JP contributing Financial India, NSE, BSE, Morgan, Barclays, Goldman to 6.9% of MAX New York Life, Sachs, Morgan Stanley Infosys India Bulls Finance revenue.Telecom Airtel, Vodafone, Reliance British Telecom, AT&T, Communications SingTel, Telstra, VodafoneManufacturing Tata Motors, Tata Steel, Ford Motors, GM, Exon Mobile L&T, RILOthers Pantaloon India Ltd, Tata Pfizer, Wal-Mart, British Airways Sky, DLF, Apollo HospitalRecent Announcement of large IT Projects4. Suppliers 1. Employees/ Professionals 2. Manpower suppliers like Manpower ITES, Quest, MaFoi, etc. Page 11 of 19
  • 12. PORTER’S FIVE FORCE MODEL (INDIAN IT INDUSTRY) THREAT OF ENTRY: 1. Low capital requirements 2. Large Value Chain, Space for small enterprise 3. MNCs ramping up the offshore capacity and employee strength in India Low BARGAININGBARGAINING POWER Shift OF SUPPLIERS: POWER OF BUYERS: From high Very High 1.Large no. of IT1. Due to slow down companies looking for during recession, job to low IT projects - resulting in cuts, lay offs and bleak COMPETITIVE high competition for IT outlook. RIVALRY: High projects.2. Current surge in the 2.Decline in IT market for new 1.Commoditized Offerings expenditure: Indian It projects after recession 2.Low cost, little sector is dependant on in US, demands for IT differentiation & USA, Europe and BFSI professional and Positioning in particular for major lateral hires have 3.High Industry Growth share of its revenue. With increased 4.Strong competitors & the recent financial crisis3. Availability of a large few no. of large in USA and Europe, the number of talented companies new spending from these has reduced considerably pool - Freshers and 3.For existing products lateral IT professionals and services, the clients continues old companies Medium THREAT OF SUBSTITUTES: 1. Other offshore locations such as Eastern Europe, Philippines, Mexico, Brazil and China are emerging and posing a threat to Indian IT industry because of their cost advantage as salary and other costs will be lower there. However this should have an impact only in medium to long term. 2. Price quoted is also a major differentiator, the quality of products being same. Page 12 of 19
  • 13. INFOSYS:INFOSYS BUSINESS LINE Infosys is highly dependant on North America and Europe which constitute 90% of its revenue.Fig: Revenue Break up by Geography (2009-2010) Page 13 of 19
  • 14. BFSI and Manufacturing contribute more than 50% of Infosys. So the focus must shift from BFSI sector to other sectors revenue.Fig: Infosys revenue break up by industry segment (2009-2010)Fig: Revenue break up by services offered in FY 2009. Page 14 of 19
  • 15. MCKINSEY’S 7 S MODEL ON INFOSYSLeadership Style: Infosys believes that leadership is one of the most essential ingredients oforganizational success which is provided by its chief mentor Mr. N R Narayanmurthy.Leadership is based on high business vision and supportive style. Hence emphasis is given ondeveloping leadership qualities among employees in Infosys. For this purpose it has established“Infosys Leadership Institute” for grooming the budding mangers from the beginning. That’swhy Infosys is ranked tenth in global survey for best leaders because it invests time, effort andmoney in leadership development, and has "a talent pipeline that can feed this growth."Topmanagement’s open door policy, continuous sharing of information, inputs from employees indecision making and making personal rapport with employees are some of the key factors in theorganization. We have also seen there is a smooth transition from Mr. N R Narayanmurthy toMr. Nadan Nilekani and then to Mr. Krish Gopalkrishnan. With out any adverse effect on thecompany outlook and each one proved worth during their tenure. This shows leadership beingcarried forward to others in the hierarchy instead of being holding one person the key positionfor long time unlike other organizations.Staff: Since it is a knowledge based industry, it focuses on quality of human resources. Out oftotal workforce, about 90 percentages are engineer. At the entry level, it emphasizes on selectingcandidates who find the company’s culture satisfying, superior academic records, technical skillsand high learnability. The company emphasizes on training and development of it s employeeson continuous basis and spends around 3% of revenue on up gradation of employee’s skills and50% as employee cost. It maintained highly matured process oriented training methodology andinfrastructure.Strategy: Infosys has adopted client focus approach for achieving growth. Its objective is tofocus on limited number of large and medium organizations throughout the world. In order tocater to the client, it emphasizes on custom built soft wares. Another differentiating factor is itquotes for premium margin. The company doesn’t negotiate on margin beyond a certain limitand sometimes walk out rather than compromise on quality for low cost contract. Hence it hasdifferentiated it self as quality driven model not cost driven model. It has strong engagementwith existing clients. It also focuses on value added services to new clients. It also focuses onincreasing geographical base by planning to expand through Infosys China in China, EasternEurope and Czech Republic through Infosys BPO, Infosys Australia in Australia and in LatinAmerica through Infosys Mexico. Infosys also focuses on enhanced solutions through Page 15 of 19
  • 16. consulting, Business Process Management, System Integration and Infrastructure Management.It has also deep industry knowledge in BFSI, Telecommunications and Manufacturing Sectors. Italso invests on brand building through media and Industry analyst events etc. It also believes inorganic growth through risk aversion and enhancement through new technology innovation withvarious partners.Shared Value: The shared values include C- Customer Delight, L – Leadership by Example, I –Integrity and Transparency, F – Fairness, E – Excellence (CLIFE).Structure: The organizational structure at Infosys includes free form, Flexible Team structure,equality among employees etc.Skills: Infosys has employed domain specific and technical certification, competency buildingmeasures. It has been CMMi level 5 for process capabilities. It has devised strategy for achievingbreak through performance results using the balance scorecard.SWOT ANALYSIS OF INFOSYS:Strengths: Leadership in sophisticated solutions that enable clients to optimize the efficiency of their business. It has proven “Global Delivery Model”. (GDM). Commitment to superior quality and process execution. Strong Brand and long term client relationship. Status as an employer of choice in 2004. Ability to scale up. Innovation and leadership.Weakness: Excessive dependence on US for revenues – 67% revenue from USA Excessive dependence on BFSI sectors for revenues. Weak player in Indian market. Only 1% revenue from India. Low as compared to TCS. Low R&D spending as compared to other global IT companies. Only 1.3% of total revenue. Rising wage bill. 42.9% to 44.8% of revenue. Low expertise in high end consultancy and KPO.Opportunities: Domestic market to grow by 20%. Expanding into new geographies like Europe, Middle East, Latin America, China etc. Cash Rich (around USD 1 Billion) Acquiring companies to increase expertise in consultancy, KPO and package implementation capabilities. Page 16 of 19
  • 17. Opening new offices and development centers in cost advantage countries such as Latin America and Eastern Europe. Aggressive strategy of expansion of ADMs, BPO, and software products into emerging markets. Diversification into new areas such as aviation, telecom and health care.Threats: The economic pressure, rising wage, pricing pressure in India and abroad. Intense completion in market for technology services could affect cost advantage. High dependency on a small number of clients and loss of major clients could impact adversely. Failure to complete fixed priced, fixed time frame projects on time. So the company needs to shift to Time and Money kind of projects. Indian currency fluctuation Termination of client contracts can be terminated without cause or little notice or penalty.ANALYSIS OF STRATEGY OF INFOSYS:Corporate level Strategies: Global Delivery Model: Producing where it is most cost effective and selling where it is most profitable. Moving UP the value chain: Getting involved in a software development project at the earliest stage of the life cycle. PSPD Model: Predictability of Revenues, sustainability of revenues, Profitability, De- Risking for Risk Management.Actions Taken Expansion into low cost countries like Mauritius, Philippines, Thailand, Mexico etc. Improved Quality capabilities - CMMi Level 5 Emphasis on delivering high value services Currency hedging for predictability of revenues. Investing heavily in training centers.Generic Strategies: Low cost Global delivery Model (24/7) Little differentiation in low-end services of value chain. High differentiation in high end services in value chain like software products and package solutions. Focus on Quality, Customer relationship management, timely delivery.Market Penetration and Development Strategies: Current Markets: USA and Europe Current Products: ADM, BPO, KPO, consultancy services (in BFSI, manufacturing and retail) and software products (financial products Finacle). Page 17 of 19
  • 18. Recommendation: As most large clients in US and Europe are cutting costs post recession, Infosys needs to be more aggressive on cost and quality front. Since these are fast developing IT market, Infosys needs a paradigm shift in focus from US and EU markets to markets such as India, Middle East, Eastern Europe and Latin America, China, Philippines. Result of strategy: Unlikely to yield good results.Product Development and Diversification Strategies: Current Market: USA and Europe New Product: Consultancy and package implementation services in relatively growing sectors esp. healthcare, life sciences and aviation sector, and KPO services. Recommendation: Concentrate on building expertise in these domains by strategic acquisitions. Changing Brand image from low value service provider to high value service provider. Result of Strategy: Likely to have good result. (better the company acquired, the better the result for Infosys) and long term strategy to change brand image interms of diversification.Other Strategies by Infosys: Concentration: 90% of Infosys revenues from American and European nations. Vertical Integration: Infosys made a bid to acquire a European major Axon consultancy to improve its business in European markets, but finally called off the deal due to high valuation. Otherwise, Infosys has always believed in organic growth. Innovation: The Software Engineering and Technology Labs (SETLabs) at Infosys is the center for applied technology research in software engineering and enterprise technology.Future Strategies to be followed by Infosys: Global sourcing strategy is aligned with business strategy. Enhancing operational efficiency and delivering value added services. Structuring processes and services into modules thus leading to enhanced flexibility and productivity. Aggressive focus on ERP solutions like Oracle and SAP. Expand into high end consulting. Consolidation and Strategic acquisitions are essential for future growth of revenues. Shift in focus from low cost advantage to high quality services. Quick adoption to high growth markets is necessary. Provide high end services in value chain. Consolidation among key IT players. Compromise on High margin for sustainable growth. In order to increase revenue growth, only organic growth will not help the company. Page 18 of 19
  • 19. REFERENCES: IT/ITES – Market and opportunities – IBEF (Indian Brand Equity Foundation). NASSCOM Strategy review – 2009, 2008. Annual and Quarterly report of Infosys – 2009 – 2010, 2008 – 2009 Emerging Destination for IT/ITES industry – NASSCOM & KPMG. www.infosys.com www.moneycontrol.com www.nasscom.org www.nasscom.in www.indianembassy.org/indiainfo/india_it.htm Page 19 of 19

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