Case analysis of Infosys: Strategic management perspective

By | April 15, 2014

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1.        Introduction

 

From the case of Infosys it is easy to see that Narayana Murthy, the founder of the company has transform the 1981 year founded little software company into the first Indian company to be listed on the NASDAQ and become a world leader in IT consulting and software service provider, these achievement to a certain extent have close relationship with Murthy’s management practices in which his management philosophy and approaches, in the management’s perspective it would interesting and worthy to go into the case to study Murthy’s managerial skills and his philosophy. And below the essay will examine this great former CEO’s management practices in four aspects: business ethics, leadership, human resource management and strategic management in order to solve the following key issues and problems:

 

1.1    Strategic management

 

1.1.1            Generic competitive strategy

 

Mere judging from the description one may easily concludes that Infosys is adopting the differentiation focus in the generic competitive strategy (Porter 1985), but look at the fact that the high end consulting service accounts 24.9% of the total service products and the systems integration accounts for only 3.6%, and the rest are the application development and maintenance, testing service, etc according to the annual report (2009) of Info sys and such service is the equivalents of “commodities” in the IT industry and they are highly price sensitive in the competitive IT industry (Ranjan 2005). This low cost competitive advantage is enjoyed commonly by the Indian software industry because of the high English proficiency and low salary of the Indian labors. So even the company is changing towards the differentiation focus in the high end service it is now still majorly adopting the cost focus generic strategy in the low end product and service.

 

1.1.2            Industrial analysis- Porter’s five forces analysis

According to Michael E. Porter’s five forces model, in the business environment of an industry there are five forces that together decide the intensity and attractiveness of the industry: the bargaining power of customers, threat of new entrants, bargaining power of suppliers, competitive rivalry within the industry and threat of substitute products (Porter 1980). Below the two competitive forces will be elaborated: competitive rivalry within the industry and bargaining power of customers.

 

In term of competitive rivalry within the industry, as early as in 1981 long before software development industry became mature and attractive enough for any Indian firms to enter into the industry, Murthy had recognize the trend that the US based IT service industry will transferred to India because of the Indian’s large pool of English analytically strong technical talents. Then early this century, when the US Technology market came with a period of slump, Murthy had more than ever determined about the within industry competitive rivalry that the competition form sinking IT service industry will be reduced because of its high cost and on the other hand the competitive intensity from the developing countries will show up in the coming years, and that’s why in one of his letter to shareholders, he predicted that Indian is all set to consolidate its position as a major force on the global IT service map to persuade the shareholders in supporting his strategy to expand the business in term of difficulties.

And in term of bargaining power of customers, because of the increasing low cost IT service in the developing countries such as Indonesia, it is at a trend of growing which can be seen from the growing of the high end customized IT service such as the consulting service and package implementation as stated in the chart below. And in recognition of the growing bargaining power from the customers, Infosys have put more and more effort on the customized and integrated service.

 

Source: the 2009 annual report of Infosys (unknown 2009)

 

 

1.1.3        Knowledge management

 

The knowledge management (KM) program is based on an interactive knowledge database that is available to employees to create, update and learn the knowledge among employees according to their needs through channels like Wiki, blogs and forums. With constant effort in building the knowledge system, Infosys earned its recognition in the knowledge management area by winning the honor of “Most Admired Knowledge Enterprises”, the sixth time that Infosys earned this title (Unknown 2009).

 

1.1.4            Value chain

 

In order for an advantage of a company to be the core competency, this advantage need to meet three major requirements, it provides extra value for customers and is hard for competitors to imitate and it could be leverage to a variety of products (Prahalad & Hamel 1990). In the view of point of Murthy, “strategy is all about becoming unique in a market place” as he said and such unique takes the form of cost beneficial and customized software for Infosys which again is sourced from the techniques and customer oriented service provided by the professional employees. In this case Murthy’s business practices in the Infosys are focusing on the production and service maintenance out of the five major generic value-added activities in the value chain (Porter 1985).