Infosys case study
Infosys
Financing an Indian Software Start-up
Group Members
Chotipathana Laopoonpittaya
5504640325
Piyawat Jumphonjit
5504641258
Puvadol Pulput
5504641415
Shusidth Volyarngosol
5504641605
Sirichai Juengudomporn
5504641621
1. Define the issues Infosys is facing.
Due to the fact that Infosys wants to offer its stock in the US market, the ‘true’ competitors of this company should be US companies NOT Indian companies. For this reason, it is less than rational to compare the performance of the company to its Indian counterparts. Rather, it is more appropriate to set the company against the benchmarks of that of a US company. Company
Operating Profit/
Employee
Revenue/ employee Infosys
10,674
32,014
Average of US Companies
18,789.50
115,909.80 From the above table, when comparing Infosys with the average US companies, assuming that the labor cost will be the same as average cost of US companies after entering the US market, if the revenue per employee of Infosys does not increase, the operating profit per employee of company will be dramatically decreased because of bearing higher cost of labor. Using operating profit as a guideline, the differences between these two countries are not large comparing with the using revenue instead. The main reason is from the wage differentiation from two countries, U.S.’s labor gets approximately 4 times higher than Indian. In order to maintain competitive on the global basis, Infosys needs to close the gaps between revenue per capita of these two countries. We can achieve three objectives to solve these problems. The first, we have to penetrate in the new market. Then, we have to obtain new and bigger project in order to create new product lines. We also have to maintain a long relationship with the customers. The second, increase Infosys brand equity. They should use a buzz method around the Infosys name but they need to use a differentiation approach. The last is to increase the amount of fixed
Financing an Indian Software Start-up
Group Members
Chotipathana Laopoonpittaya
5504640325
Piyawat Jumphonjit
5504641258
Puvadol Pulput
5504641415
Shusidth Volyarngosol
5504641605
Sirichai Juengudomporn
5504641621
1. Define the issues Infosys is facing.
Due to the fact that Infosys wants to offer its stock in the US market, the ‘true’ competitors of this company should be US companies NOT Indian companies. For this reason, it is less than rational to compare the performance of the company to its Indian counterparts. Rather, it is more appropriate to set the company against the benchmarks of that of a US company. Company
Operating Profit/
Employee
Revenue/ employee Infosys
10,674
32,014
Average of US Companies
18,789.50
115,909.80 From the above table, when comparing Infosys with the average US companies, assuming that the labor cost will be the same as average cost of US companies after entering the US market, if the revenue per employee of Infosys does not increase, the operating profit per employee of company will be dramatically decreased because of bearing higher cost of labor. Using operating profit as a guideline, the differences between these two countries are not large comparing with the using revenue instead. The main reason is from the wage differentiation from two countries, U.S.’s labor gets approximately 4 times higher than Indian. In order to maintain competitive on the global basis, Infosys needs to close the gaps between revenue per capita of these two countries. We can achieve three objectives to solve these problems. The first, we have to penetrate in the new market. Then, we have to obtain new and bigger project in order to create new product lines. We also have to maintain a long relationship with the customers. The second, increase Infosys brand equity. They should use a buzz method around the Infosys name but they need to use a differentiation approach. The last is to increase the amount of fixed