Nature And Intensity Of Industry Competition Business Essay

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The nature and intensity of competition in the fields of industry, education and even social ventures has been growing exponentially over the past few decades. Another factor which has contributed to this phenomenon is that the countries that obtained independence in the 20th century are maturing and their economies are becoming more open to foreign investment. However, with the development of small to medium enterprises, the competition is expected to grow further. Although this should mean that there is a constant war between companies to attract the attention of the customers and satisfy their demands, the number of joint ventures, coproduction agreements and other cooperative agreements between companies and corporations has also been on the rise. This may be attributed to a number of factors. The markets of Asia, Africa and the Middle East which consist of a number of emerging economies are very ambitious and have matched it with their rate of growth. This provides a great opportunity for industries across the world to grow and at the same time benefit the host country. However, as the economies of these countries are still in transition, it necessitates partnerships to enter these markets. The governments of such countries try to maintain economic independence by imposing a certain amount of restrictions on foreign companies. Although the number of joint ventures has increased recently, the phenomenon has existed for a number of years now, with a large multinational company tying up with a small local player to gain access to the local market. There is however a change in the direction new joint ventures is taking. It has been increasingly found out that, companies in the free trade geographies of the world and those of equal size are also cooperating with one another to satisfy market demands. A large number of such corporations are complementary to both the companies in the agreement since the services that they bring to the partnership are specialized in different respects although they operate in the same field. Interestingly, companies that contribute in the same way to partnerships i.e. companies with similar profiles and specializations are also tying up. With so many changes in the strategies of corporations across the world, it is worth examining the challenges and benefits of joint ventures in today's economic setting. Therefore, in the below report we shall examine the nature of joint ventures and place a considerable amount of importance on the advantages that companies obtain from such relationships (Contractor, 2002).

DBD can be classified as a small - medium enterprise. It offers IT solutions to corporate clients by developing IT products that suit the needs of the customer. Therefore, they offer innovative solutions since each of the situations or projects that they encounter would require unique solutions. It finds support in the corporate vision of the company which states that the company aims to "do better and be better". Being a small enterprise, they need to adapt to changes that exist in dynamic market situations, a quality that further adds to their profile. Another advantage of being a small enterprise is that they are able to have better control over their work culture. They can maintain and direct their work culture to be healthy so that the productivity of each individual is greater than that in bigger corporations (Iuliana et al. 2008). Therefore, as DBD is able to offer unique IT solutions to clients across various industries which are increasingly using computer systems for their operations, the company has a number of opportunities to grow. Although there are already a number of players in the field, the increasing adoption of computer systems in new areas of industry and education and the need for reliable and cost effective IT solutions places the company in a very attractive position. This is more so in developing nations where there are plenty of such opportunities. It will be a win - win situation for both the stakeholder concerned.

However, it is extremely important to decide the most optimal location where a venture is to be carried out. A desirable location in which to expand operations would be an emerging economy with plenty of opportunities and a stable political system. It would also need to have a base for the IT industry i.e. there is a need for a framework where local players are already present. This will help DBD enhance the value of the products that they deliver to its clients. All of these criteria are satisfied by India and it provides a number of additional advantages. The Indian economy has been growing at a rate of nearly 8% - 9% year on year for the last couple of years and it is the world's largest democracy (SIA, 2004). It is the fourth largest democracy in terms of purchasing power parity and its services sector has been growing at a rate of nearly 11% in recent years (RBI, 2009). Moreover, it has a stable base of IT companies, many of which are billion dollar enterprises that have operations in a number of other areas and countries. Although the railway passenger reservation system of the country was computerized way back in 1986, the adoption of IT services to other industries has been slower and more cautious (Gupta, 2001). Since a large portion of the industry in India thrives on IT exports and with the rate of growth of the industry, which is nearly 40% to 50%, there are a number of untapped opportunities in the market (Murthy, 2000). In fact, the IT exports from the country reached $47 billion, nearly the size of some entire industries in the country. There are a number of big IT companies in the country, both domestic and multinational and therefore offer a base for the resources required. Some of them are Tata Consultancy Services, Wipro Limited, Infosys Technologies Limited. IBM India and Accenture are some examples of some multinational brands.

Case studies: Success and Failure

In order to understand the various dynamics in the chosen country, it is worth studying some cases of IT companies that have made it big and some of the strategies they have adopted. It would be equally educating to learn a case of failure since it offers as many lessons as a success story.

With a workforce of over 174,000 all across the world, Tata Consultancy Services is India's largest IT firm which provides services such as the implementation of IT solutions, consulting services and outsourcing services to corporate clients in fields covering engineering, energy, consumer products and the services sectors. Its revenue crossed $6.3 billion in the quarter ending March 2010 and it has 20 directly managed and 37 indirectly managed collaborated subsidiaries (TCS, 2010). However, mergers and acquisitions is not their main strategy, maintain their top executives although it has helped them expand into many fields. Traditionally, it has been involved in the finance and banking sector and today around 40% of its revenue comes from the banking, financial and insurance sectors. Therefore, buyouts such as that of Australian company FNS and Chilean company Comicrom which operate in the same field is certain to give a boost to company operations.

Another unique advantage for the company over its foreign competitors comes from the challenges it faces at home. Solutions developed in various fields such as the stock exchange, rural banking, etc require that the company meets objectives that are complex and numerous in nature. The requirements of volume, performance and user interfaces are unique due to the population and diversity of the country. In addition, its operations in the field of IT solutions, infrastructure and BPO and testing services give it advantages over its competitors. Big companies that are looking for integrated services will certainly consider TCS for achieving their business goals (Computer Weekly, 2010).

The operations of the company in the financial sector can be better understood by studying its position in the FinTech list. The FinTech list consists of the top hundred companies worldwide that derive more than one third of their revenue from the financial sector. It has been ranked fourth and it has been in the list for the past 4 years (Investment Weekly News, 2010).

The company has successfully used its strategy of mergers and acquisitions to expand and grow in various fields. Its first acquisition was that of a government owned IT major in 2001 that specialized in implementing mass systems. However, the strategy has been deliberate in expanding in its core competencies rather than entering a number of fields. Its ability to offer consolidated services has helped it claim a number of deals. In 2007, it recorded the biggest deal in the history of the industry in the country by contracting with American firm Nielsen for $1.2 billion. It is to provide a host of services to Nielsen Co. from management of it information technology infrastructure to back office work to outsourcing operations (Globe & Mail, 2007).

Another important strategy to their operations is the training and development centre in the financial capital of the country, Mumbai. Since the IT industry is faced with a number of skill shortage issues, many of the IT companies in the country have had to provide their own training course for new entrants and for those employees who work on new technologies. The company has also had to closely work with the government and universities to fulfil its human resource requirements. However, its training centre in Mumbai satisfies the short term requirements of the company. Rather than being seen as a support function as in other companies the training department of the company works very closely with other functions of the company to be more efficient and hence productive. A number of highly effective learning techniques have been developed that help employees of the company achieve the desired goals in a very short span of time. Study material is made available in servers so that they are available throughout the clock and facilitate a self help approach. Practices such as focus on peer to peer learning have proved to be more result oriented than a university based approach. By assisting universal learning in terms of knowledge on technologies, cultures, etc, the company has been able to meet its skill shortages innovatively and productively (T+D, 2007).

With a combination of such strategies the company has been able to achieve the position that it currently finds itself in. Its future goals can be best put in the words of the CEO whose aims for the company are: to increase IT exports from $17.2 billion to $60 billion and to increase market share from 12% to 17% by 2010. Although the targets may seem ambitious, having seen the successes of the company, it would be fair to say that it has a good chance of getting there.

Let us now examine the case of a company that has failed to a measure similar to which Tata Consultancy Services has succeeded. The failure of Satyam Computers is being viewed as a failure only on the part of the audit activities of the company; it has been a failure of the entire top management of the company including the board of directors which is a key factor in the success of any company and therefore it is a management failure rather than corruption on the part of an individual alone. In January of 2009, Satyam shares fell by nearly 78% after its chairman and founder revealed that accounting records of the company had been falsified and accounting profits had been inflated for a number of years. The hypotheses that: would the company have survived had the top management and the chairman not indulged in malpractices? is not relevant. The question must rather be: Would the company have survived with the kind of top management and chairman the company had for any longer even if the accounting malpractice had not been committed? must be asked.

Although the company has not gone bankrupt and has been able to retain a large portion of its employees, this has been mainly due to the buyout of the company by another IT giant, Mahindra InfoTech. Prior to its failure, Satyam was the fourth largest IT consultancy, system integration and outsourcing firm in the country and was listed on the New York stock exchange. It had operations in 66 countries across the world with 50,000 employees and had operations in the infrastructure field as well.

The fact that nearly $1.6 billion dollars of the company's revenues was falsified by a single person in the company is being questioned. It had to involve a number of stakeholders across a number of platforms staring from the board of directors and the top management to the auditing firm that carried out the accounting tasks for the company. At a time when its competitors where showing profits in double digits, Satyam continually showed that its profits were under 5%. Despite a number of procedures and practices across the units of the organization to prevent such a situation, it had been happening for nearly a decade. Therefore, it was a complete system failure (Livemint, 2009).

The importance of the top management has been studied and analyzed in great detail. Academic work relating it to a number of factors in the performance of the company has also been established (Melvin & Copeland, 2008). With a corrupt management, the basic requirements of a company in order to achieve longevity and its goals are not satisfied. Therefore, the case of Satyam was that of a management failure and a failure of corporate governance rather than any other factors.

Options for DBD

Having looked at the challenges and opportunities in the Indian IT market let us also look at all of the options available with DBD to expand its operations in the country. The most promising of these are joint ventures, capital investment and technological partnerships.

Joint ventures and alliances take place between various kinds of organizations, however, let us look at a scenario wherein a joint venture takes place between DBD and Tata Consultancy Services. In such a scenario, DBD would stand to gain from a number of advantages that result from the tie up. The venture would be similar to a venture capital model in which Tata Consultancy Services would invest considerably when compared to DBD whereas DBD would bring in technical expertise that it specializes in. It would be able to use the resources of the IT giant, monetary, technical and man power to achieve the aims of the venture. It would also provide clients an advantages resulting from the small company culture and technical expertise of DBD. Some of the obvious advantages for DBD are cost savings, huge risk reduction, access to technology, rapid expansion of customer base, entry into new markets and an edge over its competition. At the same time, it will need to deal with an equal number of challenges starting from partner evaluation in the face of events such as those involving Satyam, the development of an effective exit and change management strategy (Hewitt, 2005).

Let us now consider the option of capital investment on the part of DBD to expand operations in India. DBD had a turnover of one million pounds in the last financial year. With a majority of projects exceeding this figure, DBD will have to in turn rely on fund raising to use the option of capital investment. Not only will it be doing operations that it is not familiar with, it will require a considerable knowledge of local conditions that it does not have. Moreover, even if it were to invest in a small project, one failed project could put an end to all of the objectives that DBD set off with. Therefore, capital investment is not a viable option for DBD to achieve its aims.

Technological partnerships are an interesting option to DBD. It could come with technological solutions that could be shared with a local partner who implements them. This will be similar to a joint venture in terms of meeting some of the pre - requisites such as choosing the right partner, etc. However, the risks involved would be considerably higher. Moreover, the requirement for DBD to be a technical partner is knowledge of the local conditions so that it can come up with an optimal technical solution to the problem at hand. Otherwise, it would result in its competitors gaining advantage over the partnership and result in decreased popularity of their IT product. Therefore, local knowledge being one of the main criteria, technical partnerships is also not a viable option for DBD to achieve its aims (Glover & Wasserman, 2003).

Impact on DBD's operations

DBD has a workforce of 20. Without regard to which direction it will adopt in order to pursue its aims of expanding its business abroad, it will need to increase its workforce and raise a certain amount of capital except in the rare case that it manages to find a sufficiently big business partner that is ready to bear a majority of the risks in exchange for a large portion of the profits and the inputs of DBD's technical knowledge. The need to raise capital is a significant one, even with the consideration that a large portion of the 1 million pounds of its revenue is in fact its profits. This factor alone considerably increases the amount of risk for the company. Therefore, it will need to come up with effective risk management procedures and develop efficient exit strategies in case it is not able to meet objectives. Change management is another major concern. There have been a number of corporations, small and large, that have perished due to a failure to manage changes both inside and outside the organization.

It will also need to look at the current projects that being managed in the company. It will need to devise effective plans that ensure their continual success as well. An advantage that can be drawn from this situation is that in the case that DBD has investors, which is highly likely, it is possible to increase their share of investment in the company by developing efficient and detailed strategies for its overseas operations such that they are able to gain the trust of the investors for its expansion operations. However, this might also result in a lack of confidence which can have the opposite effect as desired. The investors might decide that the move is too risky and withdraw some of the invested capital. There are a number of effects, both independent and inter - dependant that will affect the operations of DBD. Let us look at two of the most important strategies whose development DBD will need to ensure regardless of the choice they make.


As discussed earlier, change management is an important consideration for DBD in view of its aim to expand its operations overseas. Although change is constant due to dynamic market forces, its effect is partially negated by the fact that company culture and the workplace are somewhat static in nature. In a situation where the company is looking to expand, especially abroad the challenges involving change are numerous and multifaceted. It has been increasingly established that change management is essentially people management. With a small staff size, DBD has an advantage, however, cultural issues and a lack of knowledge of local conditions in the target country increase the risks involved with change of this magnitude (Paton & MacCalman, 2008). An effective approach is to consider the entire change management exercise staring from a pre - change scenario in UK to a post change scenario in India where DBD would be working with its partner as a project in itself. It has been found out that developing a requirements analysis, design and implementation phase is a very effective means of achieving the desired aims of the company, in this case reduced risk and a smooth transition to an expansion of operations overseas.

The development of an exit strategy is an equally pressing concern for DBD before initiation of its expansion plans, especially when its size is considered. Although popular exit strategies consider the disposal of business in a manner that causes least amount of damages, in this case, the exit strategy for DBD would be the withdrawal of operations from its overseas office alone, if planned efficiently. The exit strategy is significantly dependant on its other strategic plans such as change management and choice of strategy for overseas expansion, etc. Although the impact on stakeholders is one of the main concerns in the development of an efficient exit strategy, in this case, it must focus on the retention of its home operations in case its overseas operations are not successful. This might necessitate the development of some kind of liquidity, however, such a move will affect its pace and measure of overseas expansion. Therefore, it is a balancing act between the amount of risk that DBD is willing to bear and its willingness to expand its operations abroad. The top management will also need to look into their personal aims and those of the company with which it was founded before they develop an efficient exit strategy (Hawkey, 2002).

Therefore, having looked at the options for DBD in earlier sections, their impact and some of the strategies that it will need to develop, it can make a decision based on the risk and availability of partners in the target country.


With an increase in the number of partnerships, it would be failure on the part of organizations looking to expand to ignore the option. With innovative and unique solutions, DBD will be able to satisfy the needs of a number of corporate clients, especially in developing countries where there are a number of opportunities. JVs must be seen as a viable option as opposed to an option that is available due to a lack of resources. it is bound to have a number of advantages for both partners involved. History has taught the corporate community that JVs must be carefully ventured into; however, the rewards are equally great. Two of the main considerations for companies looking to expand are development of efficient change management and exit strategies so that they not only have alternate plans but they are also able to gain the trust of investors. Joint ventures are sure to have a defining influence on present and future companies as it will become one of the key considerations to achieving the aims of corporations and in the process alter them.


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