1st Answer

Introduction: Porter Diamond Theory of National Advantage, which is commonly

known as Porter's Diamond Theory is a renowned theory that enables a nation or a
corporation to analyze its competitive advantage available to them and how they can
use this competitive advantage to generate economic benefits for themselves. So, the
following is the reconstruction of Porter’s model with respect to the Indian IT- sector in
an extremely systematic pattern, on the basis of a longer time horizon, which
encapsulates newer sets of information.

Porter's model: applicability to the Indian IT-sector:

The framework designed by Porter recognizes the competitive forces such as Threat of
New Entrants, Cost Arbitrage, low infrastructure costs, bargaining power of suppliers
and bargaining power of buyers.

New Entrants and Big Players: The threat of new companies entering the IT sector is
affected by the ability of people to enter the market. Suppose, if it costs less money and
time to enter the IT market and compete in an effective way, if there are few economies
of scale in place, or if the already existing tech companies have little protection for their
key technologies, then it is easy for the new competitors to quickly enter the market and
weaken the position of big players. If the already existing tech-giants have strong and
durable barriers to entry, for example patents, trademarks, intellectual property rights
and copyrights, then these corporations are in a better position to maintain their
favorable position and take enough advantage of it.
According to Porter, new companies will bring new resources; this leads to reduction in
the prices for the end-users, which further reduces the profitability of the IT industry.

The threat of new entrants is extremely high for the Indian IT sector because of
the low setup cost and infrastructure requirement. Many new IT startups in the
past few years serving the clients across the globe.

The huge tech-giants, however, make it challenging for small and medium startup
companies to crack huge deals. This is because the big players are in a good position
when it comes to infrastructure and resources. The big five Indian IT corporations
contribute to around 25% of total revenue of the industry which indicates a fairly
competitive market. Of this 25%, TCS accounts for 10% and emerges as a clear winner.

Cost Arbitrage: Since IT sector is characterized by a high reliance on skilled

manpower. So, new start-up companies having good funding can afford to hire excellent
talent in the industry. The availability of low-cost skilled labour gives rise to cost
arbitrage which is an extremely important factor underlying the competitive advantage of
the industry. The software professionals in India have tended to enjoy (absolute) wage
advantages as compared to their counterparts in the US and Europe. Also, India's huge
pool of technically skilled human resource with proficiency in English adds to this cost
advantage.

Bargaining Power of Suppliers: The level of supplier concentration influences the

bargaining power of suppliers. Also, the bargain strength of suppliers depends on
number of suppliers available for every key component, how unique are their products
and services and the cost for these IT companies to switch from one supplier to
another. Since the suppliers in the Indian IT industry consist of IT infrastructure and
hardware providers, transport service companies, Recruitment firm /engineering
colleges and suppliers of office space. The bargaining power of suppliers is extremely
low since they are fragmented and all of them provide almost the same kind and level of
service without much differentiation.

Bargaining Power of Buyers: An easy way to assess this is to ask a simple question ‘’
How easy it is for the buyers to drive the prices down? This question is answered by
factors such as importance of each individual buyer to your business, the cost of buyers
to switch from one IT company to another and how easily the substitutes to your
services are available. Now, this depends on how niche or conventional the IT
services are.

Niche services include implementation projects which involve using of new

technologies like Machine Learning, Big data, Artificial Intelligence, ERP
implementations etc. The above services involve high engagement from clients,
significant differentiation with respect to product and strategic impact on the business of
clients. Hence, the bargaining power of buyers is low when they look for these services.
Conventional IT services mostly include work that is repetitive and having little client
engagement. So, the bargaining power is high here.

Lower infrastructural costs boosting entrepreneurship: The infrastructural costs in

order to set up a software unit are less. Besides computers, office space and
equipment, and internet connectivity, there are virtually no major costs to set up a
software unit. Hence, entry barriers are less. This coupled with enhanced profitability
from production of software, worldwide decline in prices of hardware, and various
government initiatives such as low tax and tariff obligations in the early 1990s brought in
a new wave of entrepreneurship.
Conclusion: The existence of a fully functioning diamond as the industry traversed from
an investment-driven to the innovation-driven phase. This was made possible on
account of constant innovation in the industry which results in the gradual progression
of the industry from being a service provider to a solution provider. Third, the strategies
adopted by the corporations revealed that uniform strategy for all may not be beneficial
since the industry remains highly heterogeneous. Fourth, the domestic market has
evolved to match the export market with more-and-more IT adoption.
3rd Answer

3a.

Introduction: Digital currency refers to crypto-currency or a virtual currency. It is

secured by cryptography, making it nearly impossible to counterfeit or double-spend.
Many cryptocurrencies are decentralized networks on the basis of blockchain
technology—a distributed ledger which is enforced by a disparate computer networks.

Digital currencies (Cryptocurrencies) contain the potential which enables social and
economic growth all over the world, which includes developing nations, through offering
easier access to capital and financial services. It plays the following role:

1.  A Beneficial Rise in Economic Activities: An entire industry has already been built
around cryptocurrencies and it’s held by institutions who are dedicated to supervise all
the digital coin exchanges which take place globally. The rate at which the
cryptocurrency industry has been growing is earth-shattering and this is evident through
the early adopters who became rich overnight and saw opportunities to grow financially.
Cryptocurrencies has already ensured that many people and organizations develop and
flourish, while many also rely on trading as their income source.

2.  Provides a good opportunity for Poorly Banked Countries: More than a third of
the global population doesn’t have an access to services of basic banking  that may
help them out in situations of personal financial crisis - loans, checking accounts and
the list can go on. Since these people, in most cases, are already financially
disadvantaged usually resort to lending practices which are doubtful and dangerous.
The interest rate of these practices is anything but fair, leading to more instability among
the individuals requesting the loan. This is where cryptocurrencies come in place with
their high volatility and ease-of-use.

There are now many apps and programs facilitating the use of cryptocurrencies and
bringing them closer to the wider audience. An added advantage of cryptocurrency use
is that it’s completely decentralized, so trading is possible freely across borders. Usage
of technology will bring a financial revolution that makes each and every one more
financially connected, empowered and enabled.

3.  Low Transaction Costs: Since digital currencies (cryptocurrencies and blockchain)
don’t require an actual brick-and-mortar building to exist, the transactions costs
associated are minimal. There is no requirement for employee wages, utility bills or
payment of rent, so these savings naturally morph into transaction fees which are low.
This, in turn, encourages more and more individuals to trust these new financial tools
and start transactioning, which allows for the global economy to be more closely
intertwined.

4.  Increased Transparency of Transactions: Since all transactions of blockchain and

cryptocurrencies are automated and digitized, they are all tracked in a distributed
ledger. The best thing about it is that it can’t be manipulated by either people or
organizations, which greatly lower the risk of fraud and corruption. This implies that
underdeveloped nations also have a greater chance to enter the financial transactions
game and improve their own economy and social prospects. Also, citizens can keep
track of where state funds would be oriented and will thus have their opinions voiced
within their own political climate.

3b.

By launching its own digital currency, it seems like the PBOC is all-set to compete
against Tencent Holding’s WeChat Pay and Alibaba-backed Ant Group Co. Ltd. Since
Alipay and Tencent’s WeChat Pay, dominate most of the share of mobile payment
transactions, these two corporations are under a serious threat from digital cash issued
by the People’s Bank of China.

.Digital-Yuan poses a serious threat to the online payment’s duopoly Ant Group-
Tencent. Six years in the making, the digital Yuan, also termed as Digital Currency
Electronic Payment, or DCEP, is set to be issued by China's central bank to replace
cash in circulation.

Although DCEP has many characteristics in common with third-party platforms, it

is different in two major ways. It is possible to use Alipay and WeChat Pay only
with an active internet connection; it is possible to transfer cash using DCEP
even when offline.
Another major difference is the transaction fees. Alipay and WeChat charge
merchants and users a fee for transactions which are external and outside of
their platforms.
On WeChat Pay, users have to pay a transaction fee if they withdraw more than
RMB 1000 (USD 153) from their balance on WeChat wallet at a rate of 0.1%.
Similarly, users on Alipay are supposed to pay a transaction fee of 0.1%, once
they cross a limit of withdrawing more than RMB 20,000 (USD 2,897). These
wallets also charge merchants a fee of 0.55% on the flip side to each purchase .
DCEP, on the other hand is expected to not charge any kind of transaction or
commission fees. So, it is likely that consumers conducting their everyday
transactions will switch to DCEP as they wouldn’t have to incur any costs of
performing transactions.
So, Leaders of digital payment like Ant and Tencent stand to lose their
transactions and merchant fees if consumers transact with DCEP.
Ant Group, which has been gearing up for one of the biggest IPOs in the recent
years, looks at this move as a threat to its business. In its prospectus, the
corporation states that initiatives by the Chinese government like DCEP and the
interoperability of the QR code can have an adverse risk to its corporation.
Hence, Ant Group has diversified into consumer credit and products of wealth
management in recent years. However, a big chunk of its revenue which still
comes from payments is at stake with this move from PBOC.
However, more than the loss of the revenue, Alibaba (which owns 33% of Ant)
and Tencent Holding’s WeChatPay are more concerned regarding the potential
loss of valuable consumer data to DCEP.

Conclusion: From a long-term perspective, it is possible that the digital Yuan will take
some market share away from the already-established fintech giants. However, in the
short term, DCEP doesn’t pose any threat to Alipay’s and WeChat Pay’s business
operations as the scale of DCEP issuance will initially be limited. Also, the everyday
users of digital wallets will take some time to gradually adapt to a new digital currency
application.