Corporate Strategy

Assignment - 2

Choose a company or industry and write a report about the external factors
covering PESTEL, porter's five force model, SWOT analysis and industry life
cycle.

Company: Infosys

Name: Niyathii Vannum

USN No: 19MWPR0089
Branch: International Finance
Faculty: Ravindra Babu
Course: MBA(WP)
Semester: 4
Institute: CMS Business School, Bangalore

About:
Infosys Limited (formerly Infosys Technologies Limited) is an Information Technology (IT)
MNC, established in 1981 and headquartered in Bangalore, India. It has been a IT stalwart
for decades and employs more than 240,000 people worldwide as of March 2020. It has
more than 1400 clients in over 50 countries of March 2020.

Infosys Revenue breakdown:

INR 90,791 crore (FY ending 31st March, 2020)
INR 82,675 crore (FY ending 31st March, 2019)
INR 70,522 crore (FY ending 31st March, 2018)

Pestel Analysis:
Political
 Impact of Brexit in UK and European market
 Implementation of stringent visa policies by various governments

Economical
 Impact of Delocalization in cost of employees
 Advantage of Special Economic Zones

Social
 Growing trend of digitalization in the market
 Strong employee culture with emphasis on training and diversity

Technological
 Platforms and products to be the future growth drivers
 Impact of automation

Legal
 Strong ethics and legal culture within the organization

Environmental
 Sustainability initiatives and Green IT infrastructure

Porter’s Five Forces Analysis:

Threats of New Entrants
New entrants in Technical & System Software brings innovation, new ways of doing things
and put pressure on Infosys Limited through lower pricing strategy, reducing  costs, and
providing new value propositions to the customers. Infosys Limited has to manage all these
challenges and build effective barriers to safeguard its competitive edge.
 How Infosys Limited can tackle the Threats of New Entrants
 By innovating new products and services. New products not only brings new
customers to the fold but also give old customer a reason to buy Infosys Limited ‘s products.
 By building economies of scale so that it can lower the fixed cost per unit. 
 Building capacities and spending money on research and development. New
entrants are less likely to enter a dynamic industry where the established players such as
Infosys Limited keep defining the standards regularly. It significantly reduces the window of
extraordinary profits for the new firms thus discourage new players in the industry.

Bargaining Power of Suppliers

All most all the companies in the Technical & System Software industry buy their raw
material from numerous suppliers. Suppliers in dominant position can decrease the margins
Infosys Limited can earn in the market. Powerful suppliers in Technology sector use their
negotiating power to extract higher prices from the firms in Technical & System Software
field. The overall impact of higher supplier bargaining power is that it lowers the overall
profitability of Technical & System Software.

How Infosys Limited can tackle Bargaining Power of the Suppliers

 By building efficient supply chain with multiple suppliers.
 By experimenting with product designs using different materials so that if the prices
go up of one raw material then company can shift to another.
 Developing dedicated suppliers whose business depends upon the firm. One of the
lessons Infosys Limited can learn from Wal-Mart and Nike is how these companies
developed third party manufacturers whose business solely depends on them thus creating
a scenario where these third party manufacturers have significantly less bargaining power
compare to Wal-Mart and Nike.

Bargaining Power of Buyers

Buyers are often a demanding lot. They want to buy the best offerings available by paying
the minimum price as possible. This put pressure on Infosys Limited profitability in the long
run. The smaller and more powerful the customer base is of Infosys Limited the higher the
bargaining power of the customers and higher their ability to seek increasing discounts and
offers.

How Infosys Limited can tackle the Bargaining Power of Buyers

 By building a large base of customers. This will be helpful in two ways. It will reduce
the bargaining power of the buyers plus it will provide an opportunity to the firm to
streamline its sales and production process.
 By rapidly innovating new products. Customers often seek discounts and offerings on
established products so if Infosys Limited keep on coming up with new products then it can
limit the bargaining power of buyers.
 New products will also reduce the defection of existing customers of Infosys Limited
to its competitors.
 Threats of Substitute Products or Services
When a new product or service meets a similar customer needs in different ways, industry
profitability suffers. For example services like Dropbox and Google Drive are substitute to
storage hardware drives. The threat of a substitute product or service is high if it offers a
value proposition that is uniquely different from present offerings of the industry.

How Infosys Limited can tackle the Treat of Substitute Products /

Services
 By being service oriented rather than just product oriented.
 By understanding the core need of the customer rather than what the customer is
buying.
 By increasing the switching cost for the customers.

Rivalry among the Existing Competitors

If the rivalry among the existing players in an industry is intense then it will drive down
prices and decrease the overall profitability of the industry. Infosys Limited operates in a
very competitive Technical & System Software industry. This competition does take toll on
the overall long term profitability of the organization.

How Infosys Limited can tackle Intense Rivalry among the Existing
Competitors in Technical & System Software industry
 By building a sustainable differentiation
 By building scale so that it can compete better
 Collaborating with competitors to increase the market size rather than just
competing for small market.

Implications of Porter Five Forces on Infosys Limited

By analysing all the five competitive forces Infosys Limited strategists can gain a complete
picture of what impacts the profitability of the organization in Technical & System Software
industry? They can identify game changing trends early on and can swiftly respond to exploit
the emerging opportunity. By understanding the Porter Five Forces in great detail Infosys
Limited’s managers can shape those forces in their favour.

SWOT Analysis of Infosys:

Strengths
 Strong Brand and Goodwill
 String Financials and Heavyweight Investors
 World-Class Infrastructure
 Global Delivery Model
 Strong Focus on Innovation
Weakness
 Largely dependent on services
 Huge dependency on North America and Europe
 3. Premium pricing a drawback in current market environment
 4. Issues within the leadership and management

Opportunities
 Expansion in Asian and Middle East Markets
 IT integration across Industries

Threats
 Global and Regional Competitors
 Visa Fees and Legislations

Life Cycle:
For an organisation that provides its customers software and consultancy solutions in
product lifecycle management, Infosys clearly needs to re-invent itself with respect to its
organisational life cycle management if it is to catch up with its competitors such as TCS and
Cognizant.

Infosys followed an r-strategy and it was an early entrant into the nascent software sector in
India in 1981. As its co-counder, Narayanamurthy reflects, Infosys required Government
approval even to import computers for office use and had to wait for weeks or months in
certain cases for this. It rode the worldwide IT boom of the 1990s to become a respected
internationally recognised IT services company and followed a generalist strategy, operating
in several niches such as IT Consultancy and package implementation services in areas as
diverse as engineering, healthcare, life sciences and aviation sector and KPO services.

However, as the last recession from 2006 - 2012 showed, Infosys grew slowly while other
generalist competitors such as Cognizant and TCS grew much faster. It has also been slower
in geographic diversification than its competitors.

Infosys grew through creativity but it never had a full blown crisis of leadership. Its top
management and the path to reaching senior management levels have remained fairly
constant and predictable till 2006. Perhaps this was because its founding members were
entrepreneurs who were also somewhat seasoned managers. This enabled them to scale up
quickly through the growth through direction, crisis of autonomy, delegation, crisis of
control and growth through coordination.

Using Geitner's model, we feel that Infosys moved through stages One through Five where it
experienced a problem generally associated with stage 1: a crisis of leadership. Infosys'
much vaunted 3.0 strategy failed to deliver adequate results in the recent past. It grew in
absolute terms but much slower when compared to competitors. From stage 5, Infosys is
transforming itself using the stage 1 route where the problem area was identified as that of
leadership. This crisis of leadership was rectified with the return of Narayanamurthy and
finally, with the exit of most of the old guard and induction of Vishal Sikka, who was
formerly with SAP, and as a non-Infosysian, this marked a shift in Infosys' recruitment
norms.

In terms of Weitzel's and Jonsson's model of Organisational decline, Infosys is in Stage 4

where there is a crisis and steps have been taken to restore the organisation's growth
trajectory.

Infosys is weak when it comes to management consultancy services, since it tends to work
at the level of operational value creation. Competitors such as IBM and Accenture dominate
this area. Infosys' current transformation could help it break into this sector. Infosys has to
morph towards being a management consultancy with a significant IT component.

Thank You!