1. Background of the Case

Transcription

1 1 1. Background of the Case Redivivus Technology, a Pune based IT Solution company was established in 2010, by a technocrat Mr. Govinda Mahajan. Redivivus Technologies is catering to its customers with technology based products and other manufacturing companies to enhance their businesses to next level. Even though, Mr. Govinda comes from a rural background, he always wanted to pursue his entrepreneurial dreams of owning a technology company. He believed, technology and automation are the future and would not only impact the manufacturing sector but also small Medium Enterprise (SME) around the globe. Redivivus Technology is a small IT company which a Customer base comprising of small and midsized product companies ranging from startup organizations to established innovation and by inclusive and collaborative understanding of business needs for the customer organizations for developing IT automation solutions. Redivivus operates in following major areas of services: 1. Embedded Application Development. 2. Manufacturing & Process Automation. 3. Mobility Development. 4. Image processing. The case revolves around the marketing dilemma faced by Mr. Govinda Mahajan who is the managing director (MD) of Redivivus Technologies Pvt. Ltd on what should be the marketing strategy of his firm to increase its profitability and enhance its reach in an already competitive IT industry. The issue of how a good marketing strategy can help expand small IT service business is addressed in this case. It also describes how changing business scenarios can affect the entrepreneur s ability to make strategic business decisions. It also talks about the importance of a sound business model for the sustenance and expansion of a business in a particular industry.

2 2 2. Contribution to the IT Industry RTPL is an emerging player in the Information Technology (IT) space which focuses on providing automation, image processing, etc. services to a niche set of customers. As we all know Information Technology (IT) is a knowledge based industry. The contribution of IT industry all over the globe has been very significant. Indian IT Industry is a growing industry and is the major contributor to the Indian GDP. This industry grew from USD 130 Millon to USD 145 Million in The sector has increased its contribution to India s GDP from 1.2 % in 1998 to 8% in USA accounts for more than 60% of Indian IT exports. The major players in the market are TCS, Infosys, Wipro which contributes 25% of the industry sales. The demand for automation in India is tremendously growing as it smoothens the operations at a very low operating cost. Redivivus Technology is a fairly new company which currently serves in pharma sector, FMCG, Cement, Automobiles, Glass and pipes. It foresees potential in untapped market like airlines, shipping, film and television industry, defense and railways to name a few. Over the past few years RTPL has successfully built and sold many technology products with its various OEM partners with strategic focus on customization. This has helped in the constant growth of the IT industry. Graph 1: IT Sector s Share in GDP (in %) of Total GDP

3 3 3. External Environment Analysis A) Economic Analysis Microeconomics also deals with the "theory of the firm". Extending the concept further to firms it deals with how firms adopt different strategies to increase their profits. It deals with the decision-making process at the level of inputs, outputs, prices, production levels, profits and losses of individual firms. The performance of a firm in a particular industry is also affected by various macroeconomic factors such as unemployment rates, gross domestic product (GDP), overall price levels, inflation, etc. In order to analyze the performance of a firm it is important to analyze the general state of the economy. It is also important to understand the drivers of income, savings, investments and employment in an economy. The economic parameters of a country such as GDP growth and its contributors, inflation and interest rates, composition of imports and exports, balance of payment and exchange rate stability, stable monetary and fiscal situation, well developed financial markets, taxation and others, will define its attractiveness as an investment destination. Whether a country depends upon exports or internal consumption, whether this internal consumption is driven by imports or domestic manufacturing, whether the country has high inflation and hence a falling currency etc. are some of the first questions which an investor will think before investing in any country. Country s dependence on other countries in terms of important natural resources such as oil, monitory policies of the Central Banker, Balance of payment positions and forex reserves etc. are very important for an investor to get a comfort level about a country s economic situation. Various economic factors are taken into account while determining the future value of any business. Factors like GDP, inflation, recession, taxation, interest rates, exchange rates, Demand/supply, etc. defines attractiveness for considering an investment decision. Country like India which are heavily depended on exports are trying to make mark in the world by building a strong manufacturing base and increasing its exports to reduce trade deficit. The import- export situation plays crucial role for investor to get comfortable about country s economic situation.

4 4 B) Technological Analysis No dimension of life can ever be imagined today without technological support. Technology is playing crucial role in taking businesses and society to the next level. Development of a scientific temper amongst students leads to an ever technologically evolving society. Countries pushing R&D activities are bound to be at the forefront of technology. Business are affected in many ways by any change in the technological environment. Technology provides dimension to business by offering risk, threat and opportunities. New technology can create and provide new products and services, thereby creating an entire new market for that business. Any improvement in technological products and services can bring down cost and increase productivity. Countries like U.S.A, U.K, etc which heavily spend on R&D are always on the forefront of technology. C) Government initiatives i) Multiplier Grant Scheme: Ministry of Electronics & Information Technology have initiated a scheme (Multiplier Grant Scheme) to encourage R&D activities for developments of new products which can be commercialized at an institutional level. Under this scheme, the government will provide financial support up to twice the amount provided by the industry. ii) Apart from the above-mentioned scheme, the department of Information Technology supports any R&D projects in industries which are of significant economic and strategic advantage to the country. Projects with well-deined goals, milestones, targets are usually preferred. D) Culture The social and cultural aspects of the population of the country, such as the demographic profile in terms of age, education and skills, health, social values, lifestyle factors, all affect the choices that people make in what they buy and consume. Cultures affect businesses in multiple ways. With young population in India, India offers different opportunities and challenges in comparison to say Japan with aging population. With the change in culture, there is a change in the economic activity as well. For example, given

5 5 nuclear families and working spouses in metro cities in India, there has been an increase in demand for day cares facilities, packaged foods and hotel chains/restaurants. Competitive pressures at the young generation are also resulting in life style diseases such as diabetes, sugar, hyper tension etc. This offers opportunity set for several new businesses in the country. Culture plays an important role in any business since it recognizes people s behavior, values, skills, age group, etc. It affects business in multiple ways. For instance, the employee age group determines the skill set acquired by the organization which can help them create a potential competitive advantage in the industry. With a young population, there are lot of opportunities and challenges that can be worked upon, unlike china and japan with an ageing population. It also provides competitive pressure which offers opportunities for several new businesses in the country. 4. Problems faced by the Firm 1) The firm is unable to retain its own customer base because of lack of competitive advantage, small size of operations and lack of customization due to rapid change in customer needs. 2) Lack of sound marketing strategy. 5. Reasons for the development of the Problems A) There is no concrete market mapping to find out the market potential for various automation services currently developed by the firm due lack of human resource. B) The firm already has a wide range of IT products developed for various industries but there is no segmentation of the potential customers. C) The firm is unable to interpret customer requirements because it does not have structure which aligns customer s segments with each of its requirements. D)The firm never focused on proper training of employees which also led to lack of employee retention.

6 6 6. Proposed Business Model The key activities of Redivivus Technology Pvt ltd are to provide standard as well as customized IT solutions and automation solution to meet various customer needs. The main cost involved for Redivivus Technology are on compensation of the employees, company expenses, building and maintenance of it infrastructure which includes serves, leasing lines, connectivity cables, etc. They can adopt a strategy called as cost leadership to establish competitive advantage by reducing the cost of their operations. The cost can be reduced by lowering the dependency on the OEM s (Original Equipment manufacturer) and by focusing on In-house development. Also, the firm can opt for Best-cost provider strategy because their solutions have less competitive advantage and economies of scale are achievable through higher service volumes (providing solutions to large number of customers). The firm can increase the value of current IT Solutions by creating a feature which is not yet being implemented in any other IT Solutions and which cannot be easily imitated by its competitor. The firm can form marketing teams to target various customer segments as per business usage and demographics. The potential customers can be attracted from new target markets like film and television industry, Defense, aircraft and ship building. The profitability of the firm can be better accessed in the business usage type because of better knowledge of the cost to revenue chain of each type of business usage.

7 7 KEY ACTIVITIES - IT solutions & Automation solutions COST SOURCE - IT Team company office IT infrastructure. VALUE PROPOSITION- Low cost automation, IT Solution Flexibility in services since they are not in standard services. customized IT services REVENUE SOURCE- Automation OEM's Direct customers TARGET CUSTOMER- FMCG, Automobiles,cement, pharma MARKETING CHANNEL/CRM - Automation OEM'S Less dependence on Direct selling No CRM activity as of now. 7. Proposed Alternate Strategic Solution (Tabular form Action Plan) I. Segmentation The firm should focus on the current as well as their potential market by applying the strategy of market segmentation which is primarily the subdivision of market or given population into segments with defined characteristics. The firm should subdivide the market on the basis of the following characteristics 1. The firm should target industries which are highly dependent on automation and technology to provide services to end customers. 2. The customer segmentation should be based on factors like age, taste, utility, etc. because with advancement of technology, the younger generation will be accustomed to usage of high end technological services.

8 8 II. Targeting It is a type of strategy which is used for selection of potential customers that the firm can sell its services to. 1) The firm should select a target market after SWOT analysis. It helps the firm to direct its marketing efforts to a specific set of customers. 2) The firm should reduce its dependency on OEM and focus on tapping customers through direct marketing. SWOT TABLE Strengths Opportunities 1) Focused on niche market. 2) Highly customized services. 3) Provide end to end business automation solution. 4) Open source software which has the benefit of lower cost, higher flexibility, more secured and greater accountability. Such software also has long term viability and is always made using cutting edge technology. 1) Exploration of new market. 2) Development of automated marketing strategy. 3) Regular training and workshops for existing employees. 4) Creation of new customer base. 1) Lack of human resource. 2) Heavily dependent on OEM partners. 3) Lack of marketing automation because initially the marketing department focus only on sales where the impetus given on cold calling to generate new business leads. 4) Unable to customized their solutions and services as per the changing customer needs which led to loss of market share. 1) Competition from already existing players while venturing into new market. 2) Losing business to OEM partners due to high dependency. 3) Limited profitability at the initial stage of entering into new market. 4) Lack of exposure to diversified market. Weaknesses Threats

9 9 III. Positioning Positioning refers to how a particular customer perceives the quality of the services provided by the firm. It also means how a brand is able to create image in customer s mind. 1) Adoption of low cost strategy to differentiate its services in the market. 2) Development of innovative solutions which can be used by wide range of customers. Segmentation Multistage Segmentation Targeting 30% through OEMs (niche market) Positioning Print Automation Manufacturing Automation Inspection Automation Image Processing Business Sector wise Demographic usage wise wise 70% Direct Marketing Differentiation based positioning through high customization Differentiation based positioning through high quality service

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11 11 9. Recommendations 1) Focus on recruitment of skilled human power and make the environment more conducive to ensure employee retention. 2) Try an understand the customer needs more thoroughly to ensure better service quality and increase market penetration. 3) Focus on R&D activities for development of innovative solutions to reduce the dependency on OEM partners. 10. References