Strategic assessment of Tata Consultancy Services

7/23/2019 Strategic assessment of Tata Consultancy Services

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Strategic Management TTA-62036

Exercise 3 in Strategic Management


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AbstractA short introduction of Tata Consultancy Services (TCS) is provided. The introduction

comprises the industry sector of operation and the services which the company offers.

The second section talks about the key components which provide TCS the cost/price

advantage. These key components are human resource and the various company systems

processes and business model. The role of each of these component is discussed and how

these factors together provide TCS with the cost advantage.

!n the ne"t section the ma#or threats to TCS which can undermine its cost advantage are

discussed. These threats include the increasing labour costs development of similar product

and knowledge systems by the competitors.

The final section provides some possible solutions to counter these threats and maintain long

term cost advantage. These solutions include looking and switching to new low cost

locations creating more proprietary solutions and filling more patents. $inally engaging with

the concerned governments to avoid ultra%restrictive laws


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ContentsAbstract................................................................................................................. 1

Question 1............................................................................................................. 3

Question 3............................................................................................................. 5

Question 4............................................................................................................. 7

Question 5............................................................................................................. 8

References............................................................................................................. 9


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Question 11. Choose a company which, in your opinion, follows a cost/price leadership strategy (either

in general or with regard to some business unit or product line) and introduce the company

(and business unit/product line, if applicable) briefly.

Tata Consultancy Services (TCS) is a multinational company head&uartered at 'umbai !ndia

with operations in countries around the globe .TCS is a subsidiary of TATA group (an

!ndian Conglomerate which owns over * independent companies operating across si"

continents and having a market capitalisation of over * billion +S,). -*

TCS is a multinational information technology company providing !T services business and

consulting solutions -.!t is the only company from the !T Consulting sector to feature on

The 0orld1s 'ost !nnovative Companies *2 by the $orbes 'aga3ine -4.TCS is the *th

largest !T services company in terms of revenue -2.!t is placed on 5thposition #ust below

$acebook in Computer Services Sector and on ** position overall in terms of market value

in the $orbes list of the 0orld1s 6iggest 7ublic Company *2 -.

TCS provides !T services and solution for a large range of industries which include -58

6anking 9 $inancial Services

:nergy ;esources 9 +tilities

ealthcare

>igh Tech

!nsurance

'anufacturing

'edia 9 !nformation Services

;etail 9 Consumer 7roducts

Telecom

Travel Transportation 9 >ospitality

!ts services include8

Assurance Services

6! 9 7erformance 'anagement

6usiness 7rocess Services

Consulting

,igital :nterprise

:co%sustainability Services

:ngineering 9 !ndustrial Services

:nterprise Security 9 ;isk 'anagement

:nterprise Solutions

i?@ % Small 9 'edium 6usiness

!T !nfrastructure Services


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!T Services

7latform Solutions

Supply Chain 'anagement

Along with services TCS also has a range of software which can be broadly categorised as

follows8

,igital Software and Solutions

TCS 6a@CS

TCS 'asterCraft

TCS Technology 7roducts

TCS reported revenue of *4 billion +S, for financial year *4%*2.!t also reported a net

profit of 4 billion +S, which was almost double of the profit reported by its nearest

competitor !nfosys. TCS also recorded a net profit growth of 4.B ? (year on year) -

which are far higher than the current industry standards.


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Question 33. Evaluate and discuss what are the ey resources of the company that enable this cost/price

advantage.

According to - for a company to adopt a cost leadership strategy the following conditions

should be present8

D!f high transaction costs or differentials in the cost of producing inputs e"ist and

these can be overcome through vertical integration or some other means of achieving

preferential access

and/or !f the state of development of the process technologies employed in the value

chain indicates that significant innovations can still be reali3ed

and/or !f the process technologies employed in the value chain are sufficiently

comple" to permit significant cost improvements to be reali3ed from learning effects and/or !f the optimal scale for some significant part of the value chain e"ceeds one%

half of the si3e of the market.E

!n case of TCS the key resources which enable it to maintain cost advantage is its highly

skilled human resource organisational practises processes and systems like Fnowledge

'anagement Systems owever it might not be

possible to e"plain each factor in isolation as it1s the mutual synergies of all these factors that

provide or result in the cost advantage for TCS.

The first key resource is the skilled !T human resource which the company employs .TCS has

one of the largest workforce in the !T services sector in the world with an employee base of

over 4 -*.Such a large e"perienced competent and diverse resource pool enables the

company to save on costs as a result of the learning effects. This can be e"plained with a

simple e"ample which might look trivial at first glance. !n case a pro#ect needs some help in

terms of advice and training for a new problem or technology which is not being used at thatlocation /business field. !n smaller companies this would result in the pro#ect hiring e"ternal

consultant or technology specialist to look into the problem and provide insights. Thus adding

the additional cost to the pro#ect. >owever in case of TCS such a situation is very rare as

there is a very high probability that there will be some TCS employee/employees who have

worked on a similar problem or technology. The pro#ect can utilise the help of such TCS

employees to solve the issue thus saving on costs of additional salary cost of e"ternal

consultant which other smaller competitors don1t have access to .0hen this effect is

multiplied with large scale operation of TCS it results in significant savings for the

company .This enables the company to have better cost advantage over its competitor.


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The second key factor is the different organisational practises processes and business models

which TCS follows. ?ver the years the company has built large e"haustive and efficient

internal knowledge management systems .This has resulted in the creation of large

organisational memory which enables it to many times provide new !T solutions which are

actually a combination of earlier implemented technology solutions. This results in costsaving for TCS and adds to its cost advantage.

ence enabling TCS to have a

cost advantage.


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Question 44. Evaluate and discuss the main threats that could potentially undermine this cost/price-based

competitive advantage in the foreseeable future.

!n my opinion TCS faces threats at many fronts which might undermine its cost/price basedcompetitive advantage.

$irstly the TCS business leverages the use of low cost labour force to carry out the most

comple" business operations at its low cost development centre. >owever as the cost of

labour rises in these low cost locations it will become difficult for TCS to use this as key

driving force to maintain cost based competitive advantage.

Secondly competitors of TCS might also build knowledge management systems which are as

robust and efficient as that of TCS .This might undermine the TCSJs ability to use its own

knowledge management systems as a leverage for cost advantage.

Another factor which might be threat to TCSs price based advantage is the building of

similar end to end !T solutions by its competitors like Accenture !nfosys !6' and CTS. This

will no longer allow TCS to utilise cost savings for its end to end !T solutions offering.

$inally the restrictive cross border mobility legislations which are being proposed

/implemented can lead to lower resource mobility and in increased pressure on cost and profit

margin for TCS. ,irectly affecting its ence

affecting the cost based advantage of TCS.

Thus the above mentioned factors are the main threats which might impact the cost/price%

based competitive advantage of TCS in the foreseeable future.


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Question 5!. "rovide a summary discussion in which you discuss how sustainable (possible to maintain

in long term) the above#mentioned competitive advantage seems for the focal company.

! think that it1s possible to maintain or sustain the competitive advantage for TCS if it1s able

to tackle the possible threats. Some of the possible solutions which TCS might engage is

mentioned below.

$irstly TCS can consistently be on a look out for new low cost locations. $or e"ample it can

create new development centres in ultra%low cost locations like 7hilippines and not #ust south

:ast Asian countries like !ndia and China. This will help TCS to maintain its cost advantage

for a long period.

TCS can tackle the problems of similar knowledge management systems and similar end to

end product solutions which its competitor might offer. TCS should use its innovation labs

and academic research tie ups to come up with proprietary solutions .TCS should also

concentrate on filling more patents for its products and increasing its !7; (!ntellectual

7roperty ;ights) portfolio. !n this manner TCS can stop its competitors from offering similar

end to end solutions and can sustain its cost advantage.

TCS can engage in negotiations with the concerned government to e"plain its role in creating

more value for the country of operation. !t can also setup lobbying groups along with its

competitor in order to avoid very restrictive laws from being enforced. 6y engaging in these

kind of activities TCS can avoid being sub#ected to ultra%restrictive laws. Thus continue to

maintain its competitive price advantage.

All the above mentioned steps /plausible solutions if looked into by TCS can help it maintain

its competitive advantage over a long term.


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References

[1] TATA, !ea"ers#i$ %it# trust, 5 &ctober 2'14. [&n(ine]. A)ai(ab(e*

#tt$*++%%%.tata.co.in+aboutus+subin"e-+!ea"ers#i$%it#trust.

[2] TC/, About 0s, 5 &ctober 2'14. [&n(ine]. A)ai(ab(e*

#tt$*++%%%.tcs.co+about+aes+"efau(t.as$-.

[3] orbes, T#e or("s ost nno)ati)e Co$anies, 22 /e$teber 2'14.

[&n(ine]. A)ai(ab(e* #tt$*++%%%.forbes.co+inno)ati)eco$anies+(ist+.

[4] Ties &f n"ia, TC/ oins to$ 1' (oba( T ser)ices co$anies c(ub, 22

/e$teber 2'14. [&n(ine]. A)ai(ab(e*

#tt$*++tieson"ia.in"iaties.co+tec#+tec#ne%s+TC/oinsto$1'(oba(T

ser)icesco$aniesc(ub+artic(es#o%+34'67479.cs .

[5] orbes, T#e or("s :iest ub(ic Co$anies, 5 &ctober 2'14. [&n(ine].

A)ai(ab(e* #tt$*++%%%.forbes.co+(oba(2'''+(ist .

[6] TC/, TC/, 5 &ctober 2'14. [&n(ine]. A)ai(ab(e* #tt$*++%%%.tcs.co .

[7] A. . urra;, A Continenc; eneric /trateies, The

Academy of Management Review, $$. 39'4'', 1988.

[8] TC/, >(oba( ?et%or@ e(i)er; o"e(, TC/, 5 &ctober 2'14. [&n(ine].

A)ai(ab(e*

#tt$*++%%%.tcs.co+about+tcs"iBerence+(oba("e(i)er;+aes+"efau(t.as$-.

[9] T#e TC/ Conno)ation ?et%or@, 5 &ctober 2'14. [&n(ine]. A)ai(ab(e*

#tt$*++%%%.tcs.co+about+tcs"iBerence+inno)ation+net%or@+aes+"efau(t.as

$-. [Accesse" 5 &ctober 2'14].

[1'

]

TC/, TC/ Annua( Re$ort 2'1314, 5 &ctober 2'14. [&n(ine]. A)ai(ab(e*

#tt$*++%%%.tcs.co+in)estors+ocuents+Annua(

2'Re$orts+TC/Annua(Re$ort2'132'14.$"f.

[11

]

s"#aanaon@ar7264, :usiness /trate;T n"ustr;Tata Consu(tanc;

/er)ices, 5 &ctober 2'14. [&n(ine]. A)ai(ab(e*

#tt$s*++%%%.scrib".co+"oc+2228399'+:usiness/trate;Tn"ustr;Tata

Consu(tanc;/er)ices.

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Strategic assessment of Tata Consultancy Services