Tata Consultancy Services: Selling Certainty Case Solution & Answer

Tata Consultancy Services: Selling Certainty Case Solution

Threats

Increasing competition is the main threat, which can affect the company, as with increasing number of new firms entering the market there is more competition expected. TCS has also been poor at marketing, thus this threat can affectthe revenue and growth of the company.

There is an increase in the labor cost, which leads to an increase in the operational cost. However, the increment in cost is not substantial to be worried about. Although its impact is minor nonetheless,this can become a major issueif no proactive action is taken.

Some foreign governments might take initiative because of the increasing public concerns about the outsourcing.

Porter’s Five Forces

Threat of new entrants

Since the capital requirement for this industry is very low, therefore there is no barrier to enter the market as far as capital requirement is concerned. Since there is less capital requirement, therefore this will cause new firms to enter the market and if they fail then the cost that will incur will also be low.

Moreover, there is requirement of highly skilled and technical labor force to survive and compete in this I.T industry. Most small firms lack such experience and skilled workforce therefore, this is one of the barriers to entry.

Competitive Rivalry

There is high competition among the I.T firms. Moreover, different firms have competitive advantage on different aspects of I.T services. There is strong competition on price and each company changes its price strategy often to secure their growth.

In addition to this, the cost of capital is low which makes the competitive environment more intense with rapidly increasing number of newly established I.T firms. The industry has high positive growth, which also attracts new entrants.

Threat of substitute products

Substitute products are also available widely because of many I.T firms in the industry. As far asTCS is concerned, it should maintain its quality of services as well as diversification of products will reduce this threat.

Bargaining power of buyers

The supplier has significant bargaining power since there is intense competition in the industry. Each company, in order to secure customers, can agree on buyers’ terms otherwise the buyer swill switch to another company. However, one can secure buyers based on its quality services and work commitment, such as TCS which secures the contract from SEGA to computerize its entire process at prices quoted higher than other competitors.

Bargaining power of suppliers

The supplier that is the labor has less power in controlling  the prices. In addition, the labor market is overflown with I.T professionals and engineers. Furthermore, companies have high discretion to hire or change the labor as and when required. However, some experienced or special technical labor have some bargaining power and they are also in less supply, therefore for technical work the technical labor or suppliers are required.

Financial analysis

As per the comparable given in the case, it can be seen that TCS has made revenues from off-shore services, which is 41% of total revenue. This is more than the competitor, Cognizant,however itis less than Infosys. The gross profit margin of TCS is also less than Infosys technologies with 44.1% and 46.8% respectively. However, as far as revenues are concerned, it has the highest revenue, which is $4.3 billion as compared to $3.1 billion of Infosys and $1.4 billion of Cognizant.

Competitive advantage

TCS has maintained its competitive advantage with the quality of services it provides as well as by its commitment. It delivers its services in time as per scheduled. About 87% of its customers are satisfied with its timely completion of services. On the other hand, 89% customers are satisfied with the quality of services. All these factors help the company to maintain its competitive advantage…………………

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