Expanding Business To The UK: A Case Study Of Infosys Pvt Ltd Essay.

What are the main lessons international business managers can learn about the interplay between home and host country differences in achieving success?

Introduction to International Business and Expansion Strategies

The international business arena has been rife with various enterprises that have immensely contributed to the trade and business transactions all over the world. The idea behind any international business to expand its business or to seek entry to any new market is done with a primary motive to increase the company revenue and profit margins (Brannen, Piekkari & Tietze, 2014).

There are several secondary motives also that are associated with the expansion and market entry strategy and execution; such as increasing the brand visibility in the markets in the nearby region, better allocation of talent and resources to make the overall business operation more efficient (Buckley, Burton & Mirza, 2016). In the given context of analyzing the various factors and aspects of the business move regard establishing itself in a newer host country, the example of the Indian IT enterprise Infosys Pvt Ltd is being considered. In a business proposal that is being considered by the decision makers at the highest level of the company management, it has been proposed that the company strengthens its presence in the UK, where it does have some of its operations, by setting up another development and BPO center.

Globalization and the opening of the major world economies at the turn of the last century has lead the world ushering into a new age of enhanced and more complex business and trade association s between the various entities of the world.

As per Cantwell, Globalization and the subsequent liberalization of the different existing economies and markets all over the world has been one of the biggest milestones that have been achieved so far (Cantwell, 2014). The advantages of having a globalized and a liberalized economy are many. Some of it includes the ability and scope for the various international business and trade enterprises to establish themselves in the foreign markets. Upon successful execution of the various business strategies that are aimed that gaining a string foothold in the targeted host country, it directly leads to the earning of higher revenue for the business. In the post second world war era, globalization has been dubbed as one of the huge advantages that the international business enterprises have on a broad scale (Cavusgil, et al., 2014).

But in the most recent trends that has been all across the entire Europe, globalizations has suffered a few setbacks as well. This can be attributed to a high level of intertwining between the economic and trade front of a country in Europe with the sociopolitical aspect. The heightened skepticism over the effects on the labor force of the respective countries, immigration etc. has led to a lot of changes in the market perception of the existing norms for the international business enterprises (Collinson, Narula & Rugman, 2016).

Case Study: Infosys Pvt Ltd and Its Proposed Expansion in the UK

Brexit, i.e. the decision of the UK to exit from the EU has presented itself as an opportunity for the Indian IT major to make itself more indispensible for the IT sector that exists in the UK in the present time. Traditionally speaking, UK has been deriving a huge chunk of its revenue from the tertiary or service sector. It has been the finance capital for the entire Eurozone. With Brexit coming into effect, this would mean that the UK would be making itself more that available for

Infosys is one of the largest businesses in India that provides IT enabled products and solutions to its clients and has a turnover in excess of $4 billion in 2008. The company was founded by N.R. Narayana Murthy and six others in the year 1981, and it is now the largest IT Company in India with its headquarters in Bangalore. It has more than 90000 employees in its pay role and has its current operations across India and other foreign markets spread over North America, Europe, Middle East, Africa and Pacific. Infosys has planned on establishing an integrated development and BPO unit in the UK. The MNC already has a production and development unit operating in the UK and intends to strengthen its position in the offshore market of the UK (Infosys, 2017).

In case of a corporate entity from an emerging or developing economy seeking entry into a developed market, the expansion can be termed as an upward trend from the enterprise’s stance.

For the international business and marketing strategies to take hold in the host market in a scenario such as this case as hand, the corporate leadership and the overall management of the company hierarchy plays a vital role. The strategic decision that would be taken in this regard would be pivotal to the future of the company and would contribute to the generic frame of international business and marketing strategies framework that is currently in place (Infosys, 2017).

In case of the proposed  expansion, the company plans on finding a niche for the turn key projects and products such as Infosys Finacle in the UK market. The low cost IT solution brand image that the company has created around itself can help the MNC to a huge extent as and when compared with the huge competition that it faces from the competitors from other emerging markets (Infosys, 2017).

Benefits and Drawbacks of Globalization and Brexit on International Business

To the advantage of Infosys, even though the company has been majorly operating out of India that has a large number of development and product delivery centers; it has succeeded in grooming an international image to itself due to standard of its services and products (Cravino & Levchenko, 2016).

The various factor that are to be considered before making the final decision on the proposed expansive move by the company , it is essential to understand the exact present nature of the business and operation scenario of the MNC. In addition, the company must also comprehend the kind the perception and brand image with respect to a particular product or service it is going to offer.

The diverse products and services that the company generates revenue from. As it can be seen, application development and application maintenance accounts for the highest per service revenues. But as per the projected future trends in the UK markets where it intends to strengthen its presence, the business process management would also see a huge demand and hence will be a bug contributor towards the company’s turnover (Folsom, et al., 2016).

According to Forsgren & Johanson, the total initial invested that would be needed to set up and establish a functional development and BPO center in the UK would be at the tune of $100-120 million. Additionally the entire decision taken by the management and the decision makers of the company would be riding on the timing factor (Forsgren & Johanson, 2014). At this point, when the host country would tentatively get into a phase of economic uncertainty chances of getting an upper hand on the business operation s and within the foreign markets would be the key concern of the enterprise.

• Global deliver Model (GDM) approach: the company has adopted this practice that has proved to be an invaluable business and operational strategy that aims at bringing the work to the location where the best resources and talent is present. As per Kelley & Shenkar, this enables the business to find strategic locations for getting a firm footing, make a presence in a foreign location by taking a reasonable amount of risk as the business front thrives in the parent market (Kelley & Shenkar, 2013).
• As compared to other emerging markets in the Asia and South east Apian Markets, Indian Businesses are more capable of taking risk with the foreign endeavors.
• Availability of adequate talent and low cost labor in the parent country: this leads to the seamless flow of work and distribution of resources within the company located at different geographic location based on the factors and resources available.
• Demand for offshore outsourcing has increased over the years. The trend is quite obvious and quantitatively huge in case of IT and BPO sectors. Infosys has been in this domain for a long time and has a huge amount of firsthand experience and expertise to make important business decisions (Kolk, 2016).
• Less cultural distance and a larger amount of sensitivity to the western work and social culture as compared to the contending enterprises and service providers.

• The impending changes being done to the management of the company can pose a problem when it comes to adapting to the new market conditions.
• Being a company from the emerging economies that is planning on making an entry into a developed and well established, the chances of being undervalued is very high. For the last few years, Infosys has been trying to project itself as an IT service provider (Meyer & Peng, 2016).

• The recently taken decision of the UK to separate itself from the European Union would open up a whole new gamut of possibilities for the billion dollars’ worth IT major. Brexit would lead the host country to look for being more lucrative for the foreign entities who could contribute to the country’s economy.
• The projected restrictive approach that the post-Brexit UK would be adopting keeps the jobs within the country itself and hence contributing to the economy. By establishing another development center in the UK Infosys would hire from the local talent pool and thus align itself with the cause of the administration. As it follows a Global delivery model (GDM), it could still provide cost effective, low cost IT solution to the clients in the host country (Neelankavil, 2015).

• Infosys has established itself as a low cost IT solution and service provider. The change in the perception that is needed in order to place itself as an MNC that has a value oriented approach to its deliverables.
• At this juncture the availability of other source for low cost, cheap IT solutions as compared to that offered by Infosys. The competiveness that is observed in case of the labor product and service options has definitely increased over the years that ultimately bring down the profit margins.
• Lack of product or service acceptance among the on shore client base: the idea of setting up of the development facility in the UK is to promote the acceptance of the brand and making its presence clearer to the domestic business entities. But there is a fair chance that this agenda might fail on this front due to uncertainty over the customer sentiments.
• The global IT service providers have more or less figured out the overall working and the approach that is adopted by the Indian IT giant. They have stepped up their efforts to bridge the gap between the customer or client expectations and what they have to offer.

This would be a major concern with the impending decision on the part of Infosys Pvt Ltd to establish a development center in the UK in addition to the existing operation, would be up for a major shake up owing to the changed politics and policy approach of the country owing to the Brexit.

In-fact as per Picciotto & Mayn, the UK would now be able to frame its own policies with regard to the corporate and business entities operating in the country without having to depend on a lot of Brussels bureaucracy. In the long run this would prove to be more welcoming and attractive for international business enterprises (Picciotto & Mayne, 2016).

Factors Influencing the Decision of Infosys Pvt Ltd

Due to exit of the UK from the EU, the entire economy of the country might go into a shock for a small period of time. As predicted by most think tanks and experts in this field that in the long run the country would see a positive economic condition persisting in the country. Infosys would be benefiting from the same (Santacreu-Vasut, Shenkar & Shoham, 2014).

As opposed to the communist governments in some counties such as countries of Latin America and China, UK has a capitalistic economy. This leads to a greater degree of flexibility and autonomy on the part of the foreign enterprises operating offshore. The lack of a huge amount of governmental regulation on the working and operations of the international business enterprises usually turns out to be a boon. In a similar case, this expansive maneuver by Infosys would be positively impacted by this (Sinkovics, et al., 2014).

Due to the nature and scale of operation of the company, the influence of the social factor is little on the operations of the company. The changes in the demographics of the country may mean some changes to the company but those are a long term concerns and have very little impact on the present and near future operations of the enterprise (Stahl & Tung, 2015).

Being an IT service and products proprietor, it particular aspect can have massive implication on the operations of the company. The increased amount of automation in the field of IT may lead to an excess of labor at the disposal of the company. This can create an imbalance in the overall health of the company.

There are several things that the international business managers in case of all medium and large scale business enterprises can learn with this particular case. The understanding of the present day economic system of the home and the host country is absolutely essential. Most business decisions with regard to the movement of the resources and the factors of production happen after considering the prevailing conditions of the market at large (Verbeke, 2013).

The quick adaptability on the part of the new entrant to the market is a key aspect of any business enterprise to gain success in the foreign markets. With the increased degree of globalization in the trade and business sector, it is obvious that the level of competition has definitely increased. To keep oneself relevant in the drastically changing market scenario, it is important that the decision makers in the international business entities understand and pay close attention to how they can infuse more value to their products and services. (Wild, Wild & Han, 2014)

Lessons for International Business Managers

As in the case of the IT Company Infosys Pvt Ltd, the value oriented and client centric approach to dealing with various demand s has resulted in its success in the markets in other parts of the world. With the UK undergoing Brexit, the timing of the setting up of the development center and enhancing its brand presence in the UK couldn’t be any better. Even though the decision might entail a certain degree of uncertainty in the beginning, but in the long run the endeavors and the managerial decisions that have lead up to this point would bear fruit (Zander, McDougall-Covin & Rose, 2015).

Conclusion

The above analysis and discussion of the proposed expansion of Indian IT major into UK brings forth some of the genuine concerns over the management decisions. Even though a lot is to be desiccated from the ground results of how the business operations go in the real time, the initial decision must be based on a veritably elaborate consideration of the various opportunities and threats presented to the company by the proposition. 

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