BUSINESS STRATEGY

ASSIGNMENT 4

IT INDUSTRY
Infosys

POTERS FIVE FORCE ANALYSIS

SUBMITTED TO:
DR.ABRAR ALI SAIYED
SUBMITTED BY:
GROUP 14
Porters Five Force Analysis:
1. Rivalry among Competitors:

The score for rivalry among competitor is 2.4 which say attractive is moderate.
IT industry is known for its rapid growth, effectiveness & competition. Competition is
from both domestic players & international players. Domestic players are TCS, Wipro,
Tech Mahindra, Mindtree, HCL technologies & so on. And International players are
IBM, Cognizant & so forth. There are several firms offering similar services and so it is a
bit difficult to differentiate based on service offering.

2. Barriers to entry:

The score for barriers to entry is 2.75 i.e. attractiveness is moderate.

IT industry is attractive to new entrants because of its rapid growth and appealing
customer base. But at the same time is unattractive because of cost advantage which large
incumbents possess. Large companies in this industry are getting benefits from
economies of scale, which is valuable. Significant amount of capital is needed and there
are already major established brands in the industry. The best way a new entrant can
make a place in industry is through product differentiation, as there is lack of
differentiation.

3. Threats from substitutes:

The score for threats from substitutes is 5 i.e. attractiveness is high.

There is as such no threat of substitute because there arent any true substitutes.

4. Bargaining Power of Buyers:

The score of Bargaining power of Buyers is 3.6 i.e. attractiveness is high.

It has a large number of buyers and has many options to choose from and so buyers can
clearly articulate their needs. Bigger companies enjoy the advantage of switching costs. It
means if a client selects a particular company as a partner, then it becomes dependent on
the company for all its upgrade and technology requirements, making it difficult for the
client to switch to other company.
 5. Bargaining Power of Suppliers:

The score of bargaining power of suppliers is 4 i.e attractiveness is high.

For IT sector knowledgeable human resource is the largest requirement. So there is large
number of supply of human resource which is available at low cost from around the
world. There is availability of vast talent pool both experienced & fresher and a lot of
training and education is easy available. And so as there exist competitive market of
suppliers the bargaining power of suppliers is low.

Conclusion:
Thus, we can coclude that IT industry has potential growth and seeing this infosys has a
sustainable market in present or in future.

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 Indians 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
thats 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.
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