CASE 5 Global Marketing in Wipro Infotech— A Strategic Perspective INTRODUCTION Global Marketing is a relatively recent phenomenon in India with many companies looking for business opportunities beyond national frontiers to acquire competitive advantage. It is the result of companies synergising their domestic and international operations in such a way that they jointly contribute towards corporate objectives. The New Economic Policy (NEP) ushered in by liberalisation has provided a major impetus to international business, providing a variety of benefits to the corporate sector in the form of export incentives and duty concessions. With increased competition in the domestic sector following liberalisation, companies are now forced to adopt the export route to survive in the market. Given this scenario, the IT industry in India has done exceedingly well and has come to be recognized as a global centre for research and development Considering the vast resource of skilled manpower available here and increased foreign investment in software technology parks, this sector is poised for further growth in the coming years, a phenomenon which could firmly establish the identity of India as a global competitor. Given this scenario, the IT industry in India is highly competitive with major players like TCS, HCL, Wipro and TISL developing strategic alliances with MNCs like HP, ACER, IBM and others to further their business interests. Some of the companies have multiple alliances to support different product needs as well as to acquire expertise in specific aspects of product development. Wipro is one of the companies that have been actively working towards enhancing its reputation as a global software company and improve its market presence abroad. In recent years Wipro has realised that competition for global markets has become more intense and, therefore, selecting and exploiting global market opportunities requires direction and a sense of purpose. Globally oriented companies are 6364 Case Studies in Marketing —The Indian Context increasingly using their overarching corporate strategy as a reference point for integrating and coordinating their domestic and international marketing activities. Thus the selection of market, mode of market entry, type of market presence, allocation of resources and overall marketing strategy need to be consistent with and supportive of the company’s long-term strategic objectives and goals—a philosophy shared by Wipro. GLOBAL MARKETING IN WIPRO AND ITS ANTECEDENTS Foreign and domestic marketing are similar in that the purpose is to create and manage profitable exchange relationships between an organisation and its markets. This is done by satisfying the needs or wants of a particular market more effectively and efficiently than the competitors. However, Wipro believes that this idea is misplaced and cites three important aspects or factors that differentiate international marketing from domestic marketing: e Legal systems Management styles e Nature of competition In Wipro's case, the decision to go global was the outcome of forced circumstances rather than a planned strategy. In other words, Wipro was not a proactive player. In retrospect, their strategies appear to be consonant with three basic marketing philosophies, which we now describe: 1. The Market Extension Philosophy In the initial stages of internationalising their operations, Wipro did not pay much attention to the specific needs of foreign clients. They believed that they could satisfy the needs of their clients by providing similar services as in the domestic market. Foreign markets were primarily viewed as outlets for surplus capacity. The underlying assumption was that they are primarily interested in service availability at low cost. 2. The Multi-domestic Market Philosophy This concept builds on the belief that (a) different foreign markets can make significant contributions to the company in the long run; (b) efficiency can be achieved if the foreign marketing activities of the firm were integrated and coordinated in a way that accentuates the company’s competitive advantages. A company adopting the multi-domestic market orientation assumes CASE 5: Global Marketing in Wipro Infotech—A Strategic Perspective 65 opportunities. Basically, this approach has been the result of better awareness that improved market performance was possible by integrating and coordinating foreign market activities and experience in exploiting advantages. Thus the marketing strategy was differentiated to fit each market’s needs, given their characteristics or peculiarities. 3. The Global Marketing Philosophy Wipro has recently set-up a global R&D centre in Bangalore. The objective is to have a dedicated team of professionals catering to international marketing needs because of the vast potential of business opportunities available. Their current strategy is in broad conformity with the global marketing philosophy. It is a systems approach to international and domestic marketing. The strategy focuses on synergising market opportunities, domestic and foreign so as to maximize joint profits or any other performance variable that is consistent with the overall corporate objective. Essentially the whole world is viewed as a single market and opportunities are selected by means of portfolio assessment and exploited in a way that is consistent with strategic objectives. ASSESSMENT OF INTERNATIONAL MARKET OPPORTUNITIES The assessment process in Wipro consists of identifying, analyzing and selecting additional marketing opportunities that meet the firm’s strategic objectives and create competitive advantage. Assessment enables development of new marketing strategies and objectives and helps in the implementation and control of marketing effort. Types of Assessment (i) Market entry assessment Issues: (a) What is the nature and potential size of the market? (b) What is the political and economic climate prevalent in the market? (PEST analysis)? (c) What are the legal issues? (d) What are the resource requirements? (e) What are the logistic requirements? Wipro follows a fourstep entry assessment procedure, which iEliminated due to Domestic Regulations and Management Preferences | \\e_[ Briminated for intial entry assessment 3 g \<—_| Eliminated by advanced entry assessment & 3S 3 ate ee 3 5 Exploitable market 2 2 ‘opportunities & CHART 1 Wipro: entry assessment procedure. (ii) Market place assessment Issues: (a) Whether to change market presence in a particular country, and how. (b) Whether to add a new product or drop an existing product from the product line. Chart 2 depicts the structural framework of Wipro’s market assessment procedure. INTERNATIONAL MONITORING SYSTEM The information categories developed at Wipro for an international monitoring system are as follows: Poli ical Environment e Parties e Policies e Public opinion Economic Environment e Infrastructure e Economic policies (GNP, inflation, exchange rate) e Technology « Markets (customers, suppliers, competitors) Contributes to production objectives? Can they be acquired at a reasonable cost? Does Wipro have the required production capacity? Legal Environment oe Laws e Rules and regulations e Practices STRATEGY DEVELOPMENT CHART 2 Wipro’s market assessment procedure. La Can they be _|No have the required logistios capacity? acquired at a Does Wipro have the required log -ightothate ety Thtegrate marketing opportunity into company’s operations a opportunity CUSTOMER AUDIT AT WIPRO FOR INTERNATIONAL The International Business Division carries out the process of customeaudit, The exercise, though complex, gives them a clear profile about the potential or prospective customers, The evaluation is done on five basic interrogatives. 1. What = benefits do the customers seek m= factors influence demand = functions are provided by the product/service to the customer = are the important buying criteria a kind of product support services do the customers expect (post-sales) 2. How = do the customers buy = long does the buying process last = much are they willing to pay = do the customers use the product = does the product/service fit into their operations 3. Where a is the decision made = do customers seek information about the product = do customers buy the product 4. When a is the first decision to buy made = is the product repurchased 5. Why = do customers buy = do customers buy Wipro WIPRO’S GENERIC INTERNATIONAL STRATEGIES Business strategies are generally classified into four generic types—Low/ Stable technology strategy, Advanced management skill strategy, Dynamic high-technology strategy, and Product-market rationalisation strategy. Wipro currently follows the product market rationalisation strategy, but is making an effort to adopt the more difficult but profitable dynamic high-technology strategy, in pursuit of which they have set-up a global R&D division and India Development Centres for TANDEM and SUN, heir primary customers and business partners in the international market. Analysis of Competition At Wipro, the essence of strategy formulation for international markets is coping with intense competition. Yet it is easy to view the competition narrowly considering that Wipro is the country’s second largest Infotech company. Moreover, the global software market is highly segmented, and competitive forces go well beyond existing players in the industry. The state of competition in an industry depends on five basic forces as enunciated by Michael Porter in his highly acclaimed work, ‘Competitive _ Advantage’. We will now analyze Wipro’s international business environment based on this approach. Threat of new entrants. This is a major threat faced by any _ organisation, especially so in the software industry, which is growing at the rate of 50%, thus making it very attractive for potential entrants. Threat from existing competitors. Big names are already present in the industry like TCS, TISL, HCL-HP with more international players like Oracle, Texas Instruments,.Motorola and SISL, set to make major inroads into the market. But Wipro, being well-entrenched in the industry, has generally been able to meet the challenges posed by the competitors. Bargaining power of suppliers. Wipro does very little ‘outsourcing’ for its projects, and hence this is not perceived as a major threat. Bargaining power of buyers. This is the biggest threat Wipro faces today. Presently, 50% of its revenue from software exports is from customers like TANDEM, SUN, IBM, STRATACOM and NBC. Dependence on a few major customers gives Wipro little scope for maneuvre. The company has made substantial investments in exclusive software development centres (SDCs) for SUN and TANDEM, as mentioned earlier, in the hope of creating and maintaining a long-term business relationship. But with more and more exacting standards emerging in the software industry because of the intense competition from the MNCs, Wipro has to continually upgrade the quality of its work in order to justify their huge investments in SDCs. Threat from substitute products/services. Currently, there is nc major threat since the market is highly segmented with different companie: focussing on specialized areas of product development, a ready source o! competitive advantage. Wipro’s greatest strengths are technology and people and they have managed to use them successfully to execute major product: for foreign clients like AT&T and STRATACOM. Figure 1 presents the ‘major and minor threats facing Wipro.Potential Entrants “Major Threat” Industry Competitors ‘Suppliers Buyers (Bargaining power (Bargaining power of suppliers) Rivalry among of buyers) “Minor Threat” firms “Major Threat” ‘Substitutes (Threat of alternative products or services) “Minor Threat” FIG. 1. Various threats (minor/major) facing Wipro. Table 1 gives the performance of the International Business Division from 1992-93 to 1994-95 export destinations for each year, productivity. TABLE 1(a) International Business Division Performance U9 INO) 2k BOGS Sie eee aa UgesiaKY Year Exports turnover Growth (Rs, crores) (%) 1992-93 31 1993-94 50 61 1994-95 76 52 DEE? a ctetindinglhant aategen sheeheste ie TABLE 1(b) Export Destinations 1992-93 Region Exports Per cent of total exports (Rs. crores) North America 20 64.5 Middle East 6 19.5 Europe 4 13.0 Others 1 3.0 Total 31 ee el ener Per cent of total Exports (Rs, crores) 32 64.0 il 22.0 6 12.0 ¥ 2.0 50 1994-95 Exports Per cent of total Exports (Rs. crores) North America 40 52.5 Middle East 10 13.1 17 22.0 9 12.3 76 Year 1992-93 1993-94 1994-95 TABLE 1(c) Export by Location On-site Off-site (by value, %) (by value, %) 66 34 61 39 59 41 Mee een eee centre te rote ee a TABLE 1(d) Productivity (Exports per Employee) 1992-93 1993-94 1994-95 (Rs.) (Rs.) (Rs.) 160,000 240,000 350,000 150,000 260,000 375,000 : 200,000 300,000 400,000 HCL-HP 190,000 340,000 540,000 collection, analysis and ming a key factor in a ARCH ACTIVITIES AT WIPRO dissemination of information is increasingly firm’s business agenda. Towards this end, 2 great deal of market research activities is undertaken to aid managers anc72 Case Studies in Marketing — The Indian Context specialized work groups to make quick and effective decisions. Broadly, the activities undertaken by Wipro are as follows: Corporate Responsibility Research e Consumer's right to know studies e Cross-national managerial studies Corporate Strategy Research e Corporate business unit portfolio studies e Analysis of strength of channel relationships e Analysis of shared costs of activities of business units e Resource studies e Economic and political trend analysis e Competitor studies Market Research e Market potential studies e Market share analysis e Market characteristics studies e Distribution channel studies Sales analysis e Competitor product studies Marketing Research e Product/Service testing e Price elasticity studies e Branding studies ISSUES FOR DISCUSSION 1. Do a SWOT analysis for Wipro in the Indian market context and discuss the appropriateness (or otherwise) of its domestic strategy. 2. Are Wipro’s forays into the international markets with respect to entry, mode, etc. right? If not, what are the alternatives you would suggest? 3. How can Wipro’s corporate strategy be kept flexible enough to adapt to increasing competition and changing realities?