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The Impact of International Strategy: Identifying Growth

Opportunities for Infosys
Strategic Management

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Arpit Jain PGP/24/319
Aswin Menon PGP/24/320
Bharanidharan Sp PGP/24/321
Janhabi Mukherjee PGP/24/331
Jatin PGP/24/332
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Contents
Executive Summary………………………………………………….……3
Introduction, Problem Statement and Objective…………………….…….4
Methodology and Sources…………………………………………………5
Analysis of Internal Factors………………………………………………..6
Analysis of Advantages from the nature of the Product
Analysis of Advantages from the Origin
Analysis of External Factors………………………………………………10
Competitive Analysis
Analysis of Other Advantages and the Diamond Cluster
Conclusion………………………………………………………………..15
Appendix……………………………..…………………………………..17
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Executive Summary
The following report is an analysis of Infosys Limited, the Indian software service company,
and the impact of international growth strategy upon their operations. The report draws from
a number of academic papers, news reports and to examine the processes and mechanisms
that Infosys should ideally strategically adopt in order to maximise their growth opportunities
in the international market. The report is written from the point of view of a consultant who
views Infosys as a new company which has just been set up. Several factors of the analysis
are therefore based in 1981, and not the present day. After a thorough examination of the
competitive climate, advantages and disadvantages of Infosys, a model of international
growth that focusses upon North American clients and expansion, works closely in alliance
with the Indian government, and follows a standardized product strategy has been suggested.
Following this analysis, the report examines the approach that Infosys Limited took in real-
world terms, and has contrasted this to the suggestions made in the report. While the majority
of the suggestions have matched with Infosys’ actual activities, there are a few marked
differences which have been pointed out, and their outcomes have also been reported upon.
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Introduction
This report is completed with the intention of gaining experience at analysing the
strategic positions and activities of large-scale business organisations in India. Specifically,
this is liable to help us learn about those organisations pursuing or looking to pursue
international expansion. Identifying growth opportunities among Infosys’ external and
internal factors, as well as strategizing on how to best pursue those growth opportunities will
be an invaluable skill for our future careers.
Along with the above, the multiple frameworks and guidelines that we will use to
understand Infosys and its trajectory are useful elements to build future strategies and ideas
around in real-world applications.
Overall, the project is beneficial for our future employment and current education in a
number of ways.

Statement of Problem
In 1981, Infosys has been founded in Pune as Infosys Consultants Private Limited.
While initially a consultancy company, it has been reregistered as Infosys technologies
Private Limited in 1993, and it has made its initial public offering in the same year. By this
time, the company has relocated to the city of Bangalore, and the US investment bank
Morgan Stanley has purchased 13% of equity in Infosys.
Although the initial capital investment in Infosys was only USD 250, the very first
client Infosys signed was New York based software developers, Data Basics. This is
significant, as Infosys’ first move is therefore one of international growth. How should
Infosys continue its international growth and expansion to maximise their presence and
profits?

Objective
The objective of this report is to:

 Analyse Infosys’ position in the worldwide economy to locate its opportunities for
international growth
 Strategise upon how it can capitalize upon the above opportunities
 Recommend potentially successful routes of action to the company
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Methodology
The methodology for the process has been twofold. It is as follows:

 Analysis of the internal factors – country/economy of origin of Infosys, the nature of

the product and service that Infosys is selling, other advantages that the company has.
Frameworks such as the “Export, Standardisation, Multidomestic, Transnational”
framework of international growth have been used to bolster the analysis.

 Analysis of the external factors – competitive climate for Infosys, the market that
Infosys is functioning in. Frameworks such as Porter’s “Diamond Cluster” have been
utilized to lend depth to the aforementioned.

Sources
The following are the nature of the sources utilized for the report:

 Business magazines
 Academic articles from journals
 News reports
 Official company websites
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Analysis of Internal Factors

Analysis of Advantages that Infosys Gains from its Origins
1) Availability of IT Talent - With a population of over 1 billion of which around 20%
are said to be digitally employable, India offers huge advantages in this regard.
According to a report by NASSCOM, India’s IT and ITeS workforce is estimated to
grow at a compounded rate of over 20% for the next 4 years as well. With India
having one of the youngest populations in the world with 35% of its people ageing
between 0-14 years and 41% below the age of 18, there are no signs of this talent pool
decreasing.

With the average age of IT workforce coinciding with the demographic structure of
India, this bodes well for software and IT companies such as Infosys.
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The above attached graph explains the surplus of IT talent available in an emerging
country such as India. This provides cost advantages and advantages of economies of
scale..

With minimal wages in India being far lesser as compared to their foreign competitors’ such
as Oracle and Cisco, they provide the company with great future growth opportunities.

2) Growth rate – Contributing over 10% to India’s ever growing GDP, The IT industry’s
revenue is expected to be an estimated 190 million, and growing at 7.7% a year, it is
expected to reach 350 million by 2025.
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3) Tax and other governmental advantages - The company also obtains various tax
advantages by way of SEZ tax shields, corporate tax rebates and tax holidays in India.
In 2019, the government of India released a national policy on software products to
develop India as a software production destination. It also identified IT as one of the
12 champion service sectors for which they have developed an action plan for which
they have set up a 5000 crore fund.

4) Reputation for Indian software engineers

Analysis of Advantages that Infosys Gains from the Nature of its Product
Being a service oriented company in the international market, Infosys obtains various product
related advantages. We analysed various global strategies in order to assess where to place
Infosys. The strategies are as follows –

a) Export strategy – This is when a company is primarily focused on its domestic

operations. It does not intend to expand globally but does export some products to
take advantage of international opportunities. We realised that Infosys, with only 3%
of its revenue derived from India, does not fall into this group.
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b) Standardisation strategy – This is when a company treats the whole world as one
market with little meaningful variation. The assumption is that one product can meet
the needs of people everywhere. With Infosys tailoring its products to meet
requirements of the people, it does not fall into this group as well.
c) Multidomestic Strategy – When a company customizes products or processes to the
specific conditions in each country. Such companies benefit because their local
country managers would understand local laws, customs and tastes better.
d) Transnational Strategy – This is a mix of standardization strategy and a
multidomestic strategy. It is used when a company faces significant cost pressure
from international competitors but must also offer products that meet local customer
needs. This is very difficult to achieve because the company would have to achieve
economies of scale through standardisation but also be flexible to respond to local
needs.

Due the nature of Infosys’ product and the economies of scale it enjoys, it is able to
follow a transnational strategy. High global integration combined with high local
responsiveness allows it to attend the needs of its customers in each country and
respond to it accordingly.
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Analysis of External Factors

Competitive Analysis
Key Competitive Advantages that Infosys has:
● Extensive Domain Knowledge And Expertise
● Comprehensive Offerings
● Long-term Relationship with Clients
● Proven Global Delivery Model
● Execution Excellence
● Competent Leadership And Management Team
● Invest in Well understood, Proven Product and Not Just R&D

COMPETITORS:
TATA CONSULTANCY SERVICES:
 TCS is the first company on Infosys' list of top competitors (Tata Consultancy
Services). TCS is an Indian international information technology (IT) provider and
outsourcing firm based in Mumbai, Maharashtra, India. It is an affiliate of the Tata
group.
 Tata Consulting Services is the second largest Indian firm by market capitalization
and is one of the most valuable IT services brands in the country.
 

ACCENTURE:
 Accenture comes in second on the list of top Infosys rivals.
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 Accenture is a global technical services firm headquartered in Ireland. Accenture has

been headquartered in Dublin, Ireland, since September 1, 2009, and now represents
91 Fortune Global 100 companies and more than 3/4 of the Fortune Global 500.
 The below are the distribution lines through which the corporation has segmented its
operations:
 Accenture Planning provides services in corporate strategy, technology strategy, and
operations strategy; Accenture Consulting provides engineering, business, and board
advisory services; and Accenture Digital provides digital marketing, analytics, and
mobility services.
 Accenture Technology focuses on product planning, implementation, dissemination,
and discovery and development, as well as its Technology Labs for emerging
technologies.
 Accenture Operations were based on a model of administration delivery known as
"as-a-administration." This includes things like rethinking market metrics, IT
administrations, cloud administrations, managed activities, and security.

CAPGEMINI:
After the Irish rivals, we'll take a look at a French rival. Capgemini is a French multinational
company that provides consultancy, infrastructure, professional, and outsourcing services to
its customers, much like its competitors.
Capgemini is considered as one of Infosys' most formidable rivals due to its low-cost
activities.

HCL:

HCL Technologies Limited (HCL) is an Indian global knowledge advancement (IT) company
with headquarters in Noida, Uttar Pradesh, India. And a footprint in over 44 countries,
including the United Kingdom, the United States, France, and Germany.
Infosys has 250 Fortune 500 companies and 650 Global 2,000 businesses among its clients.
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The company and its auxiliaries had a net annual revenue of 71,265 crores (US$10 billion) as
of July 2020.

COGNIZANT:
Cognizant is the next in line for Infosys challengers. Cognizant is an American global
organisation based in New Jersey that provides IT administrations such as advanced,
innovation, counselling, and project management.
In 1994, Dun and Bradstreet founded Aware as an in-house innovation unit, and in 1996, it
began servicing external customers.
 
WIPRO:
Wipro Limited is an Indian multinational corporation focused on data engineering,
consulting, and market analysis. Bangalore, Karnataka, India, is the company's headquarters.
Wipro founded Wipro Enterprises in 2013 to distinguish its non-IT organisations. Wipro
Limited is a pioneer in data innovation, consultancy, and demand assessment administrations
around the world. To help our customers respond to the advanced world and make it fruitful,
we use computational modelling, hyper-computing, mechanical technology, cloud
computing, science, and new technologies.
 
 
TECH MAHINDRA:
Tech Mahindra is an Indian multinational corporation that specialises in data innovation (IT)
and business process outsourcing (BPO). The company is based in Pune and has an enlisted
office in Mumbai. It is a subsidiary of the Mahindra Group. In 1986, Mahindra and Mahindra
formed a joint venture with British Telecom as an invention revaluing company. English
Telecom had a 30 percent stake in Tech Mahindra at the start.
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Analysis of Other Advantages and the Diamond Cluster

In terms of international expansion, there was one major advantage that Infosys had
which originated neither from their location nor the location of their product. Despite their
limited initial investment, this comes from the fact that their very first client in 1981 was
New York based Data Basics. This indicated that right from the very beginning, Infosys was
not in a position where they needed to “grow into an international strategy”, and instead they
began as an international company in itself. This is significant, since it implied that an
expansion strategy would be easier for Infosys considering they began as an “international
company”. Their growth strategies only needed to focus on the expansion strategy, and not on
the “entering the international market” strategy.
A second significant framework in this subject is Porter’s analysis of the Diamond
Cluster.

Porter’s Diamond Cluster is an important part of the theory of competitive advantage

of nations. This states that by default, due to certain natural factors or outcomes, companies
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which set up in particular nations have advantageous conditions over some others. One such
area which is rich in advantages is the Silicone Valley, in which technological companies
have several natural factors that positively impact them.
Most of the time, the diamond clusters are located in first world countries, which are
rich in natural resources and are geographically locate nearby the large customers for most
brands.
While Infosys did not originate in a first world country, one may argue that setting up
in India was a factor that gave Infosys some of Porter’s Diamond Cluster advantages, such as:

 Lower rivalry than in the US:

While the software field was competitive in India, it was nowhere near as competitive
as high tech US based areas such as silicone valley would be. This worked to Infosys’
advantage, as since India’s good reputation for software talent along with this factor
allowed them to establish themselves to the international consumers as a reliable
company.

 Government Support:
The Indian government was lenient and approving towards software companies at that
time. This is an important part of the External Factor Analysis, as it impacts both the
economic and political conditions that the company must face. The benefits of a
lenient attitude on the part of the government cannot be overstated.

These benefits should strongly impact Infosys and its growth in both the Indian and
international markets.
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Conclusion
With our analysis of the above, we have come to three major suggestions for Infosys’
International growth strategies, so as to maintain the growth they have had in their initial
start. In this section, we have noted these suggestions and analysed Infosys’ actual actions
in parallel with the solutions.

 Geographic focus:
- Having started out as an international company, Infosys should focus on the
business they have already achieved and emphasise on the same geographic area.
The North American area should therefore be their prime area of industrial
growth, since they have already proven that the market their has a demand for
their services.
- This is a strategy that Infosys carried through with – 66% of their business
comes from North America, and their very first international headquarters was
established in close proximity to their first client in Boston, New York.

 Governmental alliances:
- Since Infosys was founded in India at a time when the Indian government was
positively impacting software organisations, it made sense for them to work in
close alliance with the government. This might end to future benefits and revenues
in official state projects and the like.
- This is a strategy that did not match with Infosys’ actions. Infosys has publicly
gone on record to state that they would not work with the Indian government. The
reasons they have cited for this are red tape, corruption and delayed payment
issues.
- It is possible that if Infosys had taken on government projects, their growth
would have been more focussed in India, and not in the US as it is now. This may
have been a positive, but it may also have crippled the company due the systemic
inefficiencies that the Indian government might suffer from.

 Product Strategy:
- International growth requires breaking into different cultures and political
systems. However, software services are relatively independent of culture, and
this makes breaking into a new market easier. We recommend that Infosys follow
the transnational strategy for the product, where they use a mix of standardisation
and multidomestic strategies.
- This is a strategy that Infosys followed through on, as one can see that their
primary services are those which are minorly tweaked to fit different regulations,
but where the nature of the product remains the same. Their highest percentage of
revenue comes from financial services, which are a prime example of
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transnational product strategy.

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Appendix
 https://www.rediff.com/money/2006/jul/11sld6.htm
 https://www.infosys.com/about/history.html
 https://ajmjournal.com/HTMLPaper.aspx?Journal=Asian%20Journal%20of
%20Management;PID=2019-10-2-8
 https://saylordotorg.github.io/text_fundamentals-of-global-strategy/s04-03-clustering-
porter-s-national-d.html
 https://economictimes.indiatimes.com/tech/ites/no-single-government-project-where-
infosys-has-not-lost-money-n-r-narayana-murthy/articleshow/48147515.cms?
from=mdr
 https://www.infosys.com/investors/news-events/annual-general-meeting/2018/
documents/ceo-updates.pdf