GIS as a Software Development and Information Technology Company - Case Study Example

Global Information Technology Table of Contents Introduction 3 IT Business 3 Porter’s five forces 4 Business level strategy 7 Market entry modes 8 References 10 Introduction Global Information Technology or commonly known as GIS is software development and information technology company. The company is presently headquartered in Singapore. GIS functions as the local system integrator in the markets of Singapore. The company mainly works for the government companies. However it also works for private companies as well. Recently the company has expanded in the other parts of Asia in order to provide integration services along with the core function of software development. The next half of the report will be offering some suggestions to the company regarding its international expansion strategies and other business strategies. IT Business The scenario of information technology (IT) business has boomed since the early 1990s. Companies around the world have incorporated information technology into their system of operations. This has increased the volume of IT business. Nowadays IT business is a leading factor for the economic growth of a country. It plays a major role in export promotion, employment, revenue generation and also the standard of living. According to the reports of NASSCOM IT business (along with ITes) will be generating revenue of $ 87.6 billion by the financial year 2012. Furthermore the business is expected to grow at a rate of 19 % annually. It has been able to generate employment opportunities both directly and indirectly. Presently this sector employs at around 2.8 million employees directly and 8.9 million indirectly. Nevertheless further steady growth is expected by the end of 2015. Some of the biggest players in this industry include Dell, HP, IBM and Microsoft among others. With the opening up of the world economy, IT business got further strengthened. In the context of Singapore, it has a number of IT companies. Among the list some of them are A-It Software Services Pte Ltd, ACA-Pacific Technology (S) Pte Ltd, Accenture Pte Ltd, Acecom Networks Pte Ltd, Intelligroup Singapore Pte Ltd, Inter Consulting Pte Ltd, nteract International, Interdata Technologies Pte Ltd and Cognizant Technology Solutions Asia Pacific among many others. GIS being a large player in the Singapore market can easily take up international expansion. To commence the expansion program the company should initiate it by expanding into the Malaysian market. The reason behind choosing Malaysia is that the company will hardly face any issues while operating in the Malaysian market. There are also similarities in the culture of both the countries. Also in comparison with Singapore Malaysia has less number of players in the IT industry. Therefore the company can effectively carry out its business in the Malaysian market. Porter’s five forces Porters Five Forces Models or commonly known as PFF was originally developed by Michael E. Porter in the year. The primary aim of this model is to help companies to determine the attractiveness of the industry where it belongs. Furthermore it also helps to gauge the profitability of the industry. Michael E. Porter has proposed five forces through which the aforementioned factors can be determined. The five forces are; 1. Threat of new entrants: - The threat of a new entrant in an industry is the threat when a new player enters the market. The new entrant in the industry can further increase the level of competition, thereby reducing the attractiveness of the industry. In other words new entrants are described as the companies that are presently not competing within the given industry but has the potential to compete in the industry if chooses to do so. Since IT is presently facing a booming period, there is always a possibility of a new player joining the industry. Therefore the threat of a new entrant in this industry is high. 2. Threat of substitutes: Threat of a substitute is characterized by the threat from a substitute product or service. Therefore the capability to surrogate a product or service can lower the profitability and industry attractiveness. Substitute products are characterized by the availability of same category products, which performs the same function as the existing product. In this there is hardly any subtitle of IT. The functions carried out by IT are not possible by any others. Hence there is no substitute of IT and the threat of substitutes is low. 3. Bargaining power of suppliers: Bargaining power of the suppliers is the ability of the suppliers to increase the cost of raw materials. If the suppliers have high bargaining power the cost of raw materials gets increased. However the bargaining power of the suppliers is highly dependent upon the number of suppliers. The suppliers in the context of an IT industry are the companies that supplies various software and platforms on which new software or tools are developed. Now in IT industry there are only few companies such as Sun Microsystems (Java), Oracle, Microsoft, Intel etc. acts as suppliers. Therefore the bargaining power of the suppliers in this context is high. 4. Bargaining power of buyers: the buyers are the individuals or the companies that are the sole factors which determines the demand for a product in the market place. Bargaining power depends on how fast the buyer identifies other sources. The bargaining power of the buyer refers to the capability of consumers to bargain and lessen the price of the commodity or to increase the cost of the company by demanding more quality products and services (Jones and Hill, 2009, p.64). Since there are number of players in this industry that offers similar product and service at a competitive price, the options are large for the buyers. Therefore the bargaining power of buyers pertaining to this industry is high. 5. Intensity of competition within the industry: This depends on the structure of the competition and industry costs, strategic objectives, degree of differentiation, switching objectives, and exit barriers. This force reflects the competition within the industry. Rivalry among industry is about the intensity of competition among the organizations. The global IT industry has some of the biggest players. For example to name a few IBM, Intel, HCL, Microsoft etc. all belongs to the same industry. Hence the intensity of competition within the industry is high. Table I – PFM in GIS Threat of new entrants High Threat of substitutes Low Bargaining power of suppliers High Bargaining power of buyers High Intensity of competition within the industry High (Source: Author’s Creation) Business level strategy Business level strategies are defined as the methods or plans that a company uses to accomplish various activities within their business operations. It is mainly concerned with the position of firm in the industry in respect with the competitors (Albany, n.d.). A business level strategy is also essential for the purpose of remaining competitive in the market place. In general there are four business level strategies as identified by Michael Porter. The business level strategies are underlined below:- 1. Cost Leadership strategy: - It is one of the simplest of all the strategies. The primary intention of a cost leadership strategy is to remain the lowest cost provider in the marketplace (Clark and eHow, n.d.). 2. Differentiation strategy: - While the basis of cost leadership strategy is low pricing, differentiation strategy hugely relies on the non-price factors to gain more market share. Some of the non price factors include quality of the product, customer service, and expediency. Therefore organizations that rely on the differentiations strategy do not offer low price to the customers, but tap customers on the basis of quality and service. 3. Low-Cost Focus strategy: - The low cost focus strategy is almost similar to the cost-leadership strategies, but this strategy does not intend to be the cheapest provider of goods and services in the market. It rather focuses upon the strategy that proposes to be the cheapest cost provider to a niche market segment. In order to cite an instance if a company that manufactures and sells specialized shoes for the persons with wider feet, offers lowest price in that segment. However it does not provide low cost in the overall shoe market. Therefore low cost focus strategy helps a company to compete with others on the basis of cost in the niche market segment. 4. Differentiation Focus strategy: - The differentiation focus strategy is almost similar to the differentiation strategy. However the only difference between the two forms of business level strategy is that unlike differentiation strategy it does not cater to the whole segment of the market. It only caters to a niche market segment. In order to cite an instance a company that sells financial products to a small venture, may offer the best service to that niche segment, and it may not offer the same to the other segments. In the context of GIS, it should opt for cost leadership strategy. The primary reason behind opting for a cost leadership strategy is that it’s a new company in the Malaysian market. So in order to tap the initial customers, cost leadership strategy is the best strategy. Once it gains few customers it can further satisfy them with high quality product and services. Market entry modes In general there are 4 ways by which a company can expand its business into other countries. They are exporting, licensing, joint ventures and FDI. Exporting- Exporting is a process by which a company directly sells its product to the end customer of another country. Exporting depends profoundly upon the coordination between the Exporter, Importer, Transporter and Government. Licensing – It is a process by which different rights are given to a company who does business in the target country on behalf of the actual organization. Rights include Logo, Trademark etc. Example could be General Motors and Ford Motor Company. Joint Venture – Joint venture is a mode of market entry by which a company joins hand with another company of the target country to start its operation. Foreign Direct Investment – It is the mode of entry where the organization starts its operation on its own. There is no involvement of a third party. GIS should start an office in Malaysia as there is hardly any cultural difference between the two countries. Also the Malaysian IT market is unsaturated and the company can take advantage. However rather than buying any existing Malaysian IT company, it should expand directly in the Malaysian market. Moreover the external business environment of target country is favorable. Hence it should take up FDI for the expansion. Also the Porters Five forces model describes that the intensity of completion within the IT industry of Singapore is intense. Therefore necessarily it should take up international expansion. References Albany, No Date. Business-Level Strategy. [Online] Available at: [Accessed 05 September 2012]. Clark, W., and eHow., No Date. Types of Business Level Strategy. [Online] Available at: [Accessed 05 September 2012]. Jones, G. R., and Hill, C. W. L., 2009. Strategic Management Theory: An Integrated Approach. Connecticut: Cengage Learning. Read More