Expansion of an Indian software firm into the New Asian Markets- Solved
India is now one of the export markets in Asia and that foreign direct investment in India also has risen significantly. While India’s medium to long term growth depends largely on the speed and extent of ongoing reforms, its current growth outlook overshadows that of the Asian markets which face slow growth in these years. Expansion of Indian software firms into the new Asian markets is important because during past years India has boomed its image in the computer software industry and has established a solid reputation of its software business process and mechanisms that the firms could positively share into the Asian markets. Thus, it is interesting in a way, because expansion of business is not already novel into the Asian market in terms of software firms as technology in Asia reflects a stable paradigm for an Indian software firm to expand their market to Asia and that some software production and distribution are done in the Asian region mostly in the countries like China and Japan. It is interesting to note that expansion of software firms could help foster collaboration ways and strengthen partnerships between India and Asian countries involved for the expansion. As the research study will highlight the expansion of India’s software firm within the new Asian markets in lieu to its diverse economy that become one of the fastest growing emerging markets in the world.
In particular, such novel economy service sectors like information technology, IT, telecommunications and finance are growing rapidly, though opportunities also are emerging in advanced technology manufacturing. However, at a time when much of Asia outside China faces slow growth as India’s growth prospects look relatively robust. Despite growing trade and investment, foreign companies in India consider it a challenging business environment. The study will then incorporate and integrate research information and evidences to give clear and justifiable emphasis of India’s expansion of software industry to the new Asian markets as the details will be reflected in the literature review, methodology as well as the areas for future research. The study in focus that the researcher is doing supports every acceptable information for the software firm based in India and having a sales and support office in Hong Kong for its Customers in Hong Kong. The company has good products, infrastructure and highly skilled people in India. They want to expand the business in to the other Asian countries like China, Malaysia and Singapore and want to use the resources efficiently and effectively in Hong Kong and India. The company had made lot of plans for expansion and could not able to implement the plans for expansion. The company has decided to send some of their staffs for higher education, by that they will bring more knowledge and professionalism to the business. The company selected me for the higher education, because of my performance in the marketing and administration department.
The results of the dissertation will be implemented in to the business and will get the real results after implemented. If the expansion has taken place successfully, the researcher will get more confidence and will achieve more things in my career. That is the why the researcher is much interesting and vigorous in doing this research. Being an Asian based business, the company would like to expand the possible Asian markets and stabilize the business there and will move on to the expansion of European nations and others parts of the world later. The ultimate aim of each and every business is make profit and grows the business to make more profit every year. In the very high competitive environment they cannot able to survive in a single region or country, so the business people plan to sell their products all over the world to gain more customer and by them attaining high profits as they targeted. The environment where the business exists has to be considered at all the times. Sometimes the environment affects the business (like financial disaster, natural disaster) very badly, at that time the business people doesn’t know how to handle the situation and this leads to poor cash balance for the companies and might be lost almost all of its resources.
This is major disadvantage of having single market business. To avoid these types of risk, all businesses have to expand their operations in other alternative markets where they can find lot of potential opportunities for the products and services. After entering in to the new market, it can use the resources of the two or more markets in an efficient and effective way to achieve high profits. Operating in two or more markets will be the competitive advantage for the company. The company can utilize the facilities fully, provided by the governments of the country. By expanding the business in different countries gives us more confidence to be more competitive with the global companies. The exchange of technology, the transfer of knowledge and the cultural exchange between the companies motivates employees to perform better. The expansion process of starting your business in the new market is high risk and needs lot of money. The companies can outsource some of the jobs within the other branches to reduce the operating cost. The expansion is the necessary tool for success in today’s highly competitive global business environment. After the Y2K boom (explained in Appendix 1), the world has been suffered by the economic crisis at the end of the year 2001. At that time all businesses are suffered lot and try to reduce their production and operating costs to meet their expenses. We have realized that “Depending on single market will be more risky” and we decided to expand our business in to the other markets, where we have good potential opportunities of our products and services. But expanding the business is not an easy task. Lot of time, money and manpower are involved in the process and the level of risk is high.
India has become the outsourcing destination of choice for many American and European firms looking to cut costs while maintaining mission-critical software development. India also boasts a highly trained workforce fluent in English and the kind of technological infrastructure that gives it a clear edge against competing low-cost centers in Russia and China. The company has its head office in India with greater infra structure and selling their products to the Indian markets. Around 100 employees are working in the development centre. Analyzing the new markets will be an interesting task. The analysis covers the competitors, entry methods, and barriers, power of customers, culture and suppliers in each country separately. (1994)
1.2 Research Aims and Objective:
- To expand a software business in to the new markets.
- To determine the impacts of the expansion of software firms.
- To find out the market potential for software industry in the countries, China, Malaysia and Singapore.
- To give recommendations for the expansion, to use the resources effectively and efficiently and to achieve the success in the long term.
1.3 Research Questions:
- Why business needs expansion and what are the impacts by the expansion?
- How to identify the market potential of the software industry in China, Malaysia and Singapore?
- What are the recommendations will be given to the company for success in the long term?
- Research Methodology:
2.1 Primary Research:
‘Qualitative data collection methods can be expensive and time consuming, although it can be argued that qualitative data in business research provides a more ‘real’ basis for analysis and interpretation’ (Collis & Hussey, 2003 p. 212) There are various methods to collect the primary data for the research. Some of them are listed below and discussed in detail.
Critical Incident Technique
2.2.1 Critical Incident Technique:
Critical incident technique will be used in-depth interviews and it has flexible principles in it and can be changed according to the researcher based upon the situations. “Adopting a positivistic approach, Flanangan recommends that only simple types of judgments should be required of observers, who should be qualified. All observations should be evaluated by the observer in terms of an agreed statement of the activity. By following these principles, it is possible to gather facts ‘in a rather objective fashion with only a minimum of inferences and interpretation of a more subjective nature’. By 1954, from (2003). The main disadvantage of this method is there is a chance for the participant to loose the memory of the event which the researcher talking about and there is chance to give wrong information and it makes the analysis in to very complex stage. ( 2003)
In this data collection method the researcher request the participant to records some information or events in the diary for a specified time period. After the time period the researcher use the data from the diary for the research. The method helps researcher to collect sensitive and valuable data. The disadvantages in this method are the participant has to enter the exact information as required by the researcher, lot of time consumed to collect the data, writing styles of the participant may affect the data collection process also.
2.2.3 Focus Groups:
In this method the researcher will make a group of people to discuss about the given topic and gather the data for the research. The people who are participating in the discussion should have a good knowledge and experience in the field, which is related to the topic. The main disadvantage in this method is gathering of people to a same place and it will consume lot of time and effort.
Telephone interviews have some disadvantages. The interviewer could not able to collect the reliable data and the time. If the person we want to interviewed might be busy and couldn’t able to get the appointment for the interview and it will delay the research. Personal interviews have lot of advantages. We can get reliable information and detailed information. To have successful interview the researcher need to know almost all the details of the interviewed person and it will help the researcher to get the more inputs. (2005). If the interviewer has any doubts, he may have the chance to clarify with the person at the same time. But to get the appointment from the person for the interview will be an up hill task and it might delay the research.
In the Observation method, the research has to observe the participant very carefully. The researcher will get the real and actual inputs from the participant. “The main disadvantage is that most observations are made by individuals who systematically observe and record a phenomenon, and it is difficult to translate the events or happenings in to scientifically useful information”. ( 2005)
Moreover, some of the above methods were rejected as it does not directly correlate to the points needed for the reliability of the information used in the study as the process could not be easily implemented within a short span of time and that it is quite difficult to parallel its interpretations ways for instance, how to come correct and efficient assessment like for example using the process of SPSS for example, the use of ANOVA and Chi Square methods. Questionnaires are used because it has served the appropriate purpose in answering the research questions and that in a way, it provides the researcher first hand information from the respected participants that amicably integrates their honest and direct views as well as perspectives of the study’s issues and concerns, giving relevance to the central idea that supported the research findings and evidences respectively.
The questionnaire is an open-closed, unstructured type in the form of survey questionnaire as the questionnaires are used in this research to collect the data as it is easier for the researcher to send the questionnaires and the participants will respond the questionnaires whenever they have time. This will save more time and easy to collect and analyze the data. The study calls for non-probability approach of sample selection for convenience to the researcher. The more disperse the characteristics of samples, the more attributes and intervening variables could be analyzed. Quantitative and qualitative data will be analyzed. Quantitative will be sourced to the primary data gathered and will be undergone into compilation, frequencies, percentages and determination of relationships under the SPSS program. Qualitative data will come from the open-ended questions in the questionnaire that will reflect the personal opinions of respondents not included in the selection. This data will be significant when quantitative data is discovered to have deviations from the hypothesized variables. The survey questionnaire will be used as the primary instrument in the study. The researcher will include initial questions as to determine the attributes of the samples. The questionnaire will also include questions pertaining to the factors that affect the expansion of software industries in the Asian region. Likert scale will be used in the study to determine the strength of the responses especially the degree of agreeableness of disagreeableness of the selection of answers.
2.3 Some of the advantages of questionnaires are:
Questionnaires are especially useful when the respondents must remain anonymous. They can be distributed and returned in ways that respondents can feel confident that their identities are secure. Questionnaires can be an efficient means of collecting information from the point of view of the respondents. Questionnaires should be brief so that respondents spend no more than ten to fifteen minutes completing them.
The methodology to be used in the research will be the questionnaires. The information gathered from them will be used as a primary and secondary data for the research. Questionnaires will be sent to the participants in Singapore, Malaysia and China markets. Questions are prepared and listed in appendix 2. The alternative sources are determined and will be used to collect the data. The study consisted of a systematic mix of primary and secondary data, which provided insights for understanding and answering some questions pertaining to the India’s software industry as the study is based on extensive literature survey and exploratory pilot studies to understand the role of expansion to the new Asian markets in software and services firms in India and the sources of competitiveness in these firms. The respondents for the questionnaire survey are from the firms in the software and services industry in India. The discussions with software professionals have also been incorporated using formal and informal approaches for getting hands on experience from industry professionals through brainstorming and discussions. A questionnaire is one of the three primary ways of collecting needs assessment information. The other two ways are interview and focus group. The questions asked should be relevant to the research problem, this is very important and complex as questionnaires should be as short as possible. The open questions allow respondents to answer in their own words and give any answer; closed questions restrict respondents to selecting from the provided answers. Put another way open questions elicit unstructured responses and closed questions elicit structured responses. The choice between open and closed questions depends on the general research problem, the type of data researchers seeks, and where the researcher wants to place the onus of interpretation. The onus of interpretation refers to the person responsible for interpreting the response and casting its meaning as appropriate to other responses. Researchers need to be careful about response bias with questionnaires as respondents’ rate people whom they like or respect high on all scales, regardless of the person’s actual performance.
The results from primary and secondary data sources have been synthesized and an attempt will be made to formulate a framework for evaluating firm level understanding. The study includes primary and secondary data collection and analyses, using various statistical tools and techniques. The primary data include idea generation, discussions from the industry, brainstorming and through questionnaire survey. The secondary data include literature survey, study of relevant journal articles and books using databases and Web sites. This indicates that most of the software firms in India focus on short-term performance. The reasons for the short-term focus may be that there are pressures from stakeholders to perform in the Asian stock markets and also, pressure to perform better every quarter is another reason.
The questionnaires are provided in this study and that the respondents were given such response choices. The results have been tabulated in every question in the survey. (2001) The study required an organized data gathering in order to pinpoint the research philosophies and theories that will be included in the research, the methodology of the research and the instruments of data interpretation. The descriptive research method uses observation as in this method; it is possible that the study would be inexpensive and time-efficient. Thus, this study will use the descriptive approach. Descriptive method of research is to gather information about the present existing condition.
The purpose of employing this method is to describe the nature of a situation, as it exists at the time of the study and to explore the cause/s of particular phenomena. The researcher opted to use this kind of research considering the desire of the researcher to obtain first hand data from the respondents so as to formulate rational and sound conclusions and recommendations for the study. Moreover, the research requires an organized data gathering in order to pinpoint theories included in the research, the methodology of the research and the instruments of data interpretation. (2000) There also incorporates a direct respondent observation as it is possible that the study would be inexpensive and time efficient as the chosen method gathers information about India’s software firms expanding into Asian markets, in employing the method is to describe the nature of a situation, as it exists at the time of the study and to explore the reasons and causes for the arising issues involved and being investigated by the researcher within a specific structure and context. (1995) The researcher opted to use this design considering the desire of the researcher to obtain first hand information data from the respondents so as to formulate simple and direct conclusion and recommendations for the research study. (1995) The research study will employ a matter of quantitative and quantitative research design as the study intends to find substantial real evidence in the process for the software industry as it can have standard measures needed to be executed in accomplishing the tasks for conducting researches as needed for the completion of the empirical research.
The data to be utilized in the research will be both primary data and secondary data. While the primary data are collected straight from the sources and are gathered through the survey which will be the key research tool, the secondary data are collected from current related literatures as generated by large organizations. The secondary data will also assist the researcher in the development of the questionnaire such that will be used to retrieve primary data. The secondary data thus comes as a support for the acquisition of primary data. The research will utilize a Qualitative approach in gathering information which will be sufficient enough to provide a medium for interaction and opinion tabulation that will be correspond to the opinions closely to the precise opinions of the users themselves. The primary source of data will come from a researcher-made survey questionnaire, which will be given to the respondents. The questionnaire method is administered by having the respondents answer a form of questions. The items of the questionnaire will tackle on firm developments since the application of corporate governance. Specific details will focus on questions regarding operational performance and firm value.
The usage of the secondary data for the researcher will be “answering research questions or solving some or all of the research problems, helping in problem formulation and/or devising more concrete and focused research questions, deciding about the appropriateness of a certain research method or even suggesting better research methods for a particular problem, providing benchmarking measures and other findings that can be compared later on with the results of the study at hand” (2005). The secondary data for the research will be collect from variable sources like websites, government statistics bureau, Business organizations, Chamber of Commerce, Trade centers and Consulates, census reports, books, magazines, journals, periodicals, television and radio. There are large numbers of theories, articles and ideas have been used for the secondary research. Data have collected from Magazines, Television, Radio, Websites, Books, and Journals, etc.
2.3 Limitations of methods used
The research will be based on a single company and the expansion for the three markets (China, Singapore and Malaysia).The research will be applicable to the expansion for these three markets. For other markets the research will not be applicable. This research has done only for a company and it doesn’t applicable to other Software firms. The data collected for the research will be used only for the research and not for any other purposes. The data collected for the research might not be 100 percent real data. Because The Questionnaires might be filled up by some other persons like the targeted participants’ secretary or someone might fill up the questionnaires upon the request of the participants or someone else from the participant’s company. It is important to make the research domain as focused as possible, as otherwise the researcher can be overwhelmed with impertinent data and needless work. The questions and constructs only help in the research work and they should be defined in a way to allow for modifications and enhancements as appropriate. (1995) Moreover, designing, organizing and conducting a questionnaire survey is like establishing and running a business as it requires good knowledge and skill and specific training although some people assume that starting a business requires no special skills beyond a willingness to try as contrary to common assumptions, a questionnaire is more than a list of questions. Rather, it is a scientific instrument for measuring and collecting particular kinds of data and must be designed in accordance with particular specifications and tailored to the specific aims of the reviewer. Once the problem has been defined and the decision to conduct a survey finalized, the surveyor should next decide what survey method should be used to obtain the desired information from the respondents. Although it is sometimes possible to survey an entire population, generally this technique would result in an unwieldy amount of data. To limit the population surveyed, a sample is drawn to reflect the characteristics of the total population. By using a carefully drawn sample, the surveyor is assured that potential respondents have been selected in a standard, scientific manner. Successful questionnaire development includes identifying the specific problem, understanding the subject matter and knowing the respondents, as appropriate survey method, sample size, type of sampling and type of questions have to be given adequate consideration. Finally, researchers has limit how many questions a questionnaire asks because most people will allocate only a limited amount of time for filling out questionnaires. In the survey research, sampling is unnecessary because the researcher surveys the entire population. If the researcher is interested in the attitudes of only specific employees at one company using one computer program, he or she can survey the entire population and not worry about sampling procedures. In most cases, though, researchers are interested in generalizing the findings from a given sample to a larger population. Depending on the type of information solicited, the researcher may want to quantitatively measure reliability and validity. Reliability refers to the extent that the questionnaire elicits the same answers from the same people at different times. One way to measure reliability is to ask respondents a few questions twice in the questionnaire. After the questionnaire data have been analyzed, a post mortem should be held in which the researcher evaluates the success of the methods used. No survey is perfect, and taking stock of what did and did not work will improve the quality of future research. Part of the evaluation is determining reliability and validity, as discussed earlier; however, other evaluation activities should also be conducted. The follow-up procedure should be evaluated to determine whether it improved response rates and whether it was worth its expense. The questionnaire itself also needs to be evaluated. Even with pilot testing, problems can arise with question ambiguity, questionnaire length, unanswered questions, and misread instructions.
The purpose of employing such research method is to describe the nature of a situation, as it exists at the time of the study and to explore the causes and effects of the take over situation. Thus, the researcher will use this research process in order to obtain first hand data from useful resources so as to create better and sound conclusion and recommendations for the study. This study will employ a quantitative research method with intention to find valid case evidences useful in emphasizing crucial issues and areas of concern regarding behavior, attitudes, opinions and beliefs. Moreover, designing, organizing and conducting a questionnaire survey is like establishing a good business as it requires good knowledge and skill and specific training although some people assume that starting a business requires no special skills beyond a willingness to try. (1995 ) Therefore, the survey should not pose questions whose answers are interesting but unessential to the main thrust of the investigation. In making these determinations, the surveyor should keep in mind the survey’s end user – the individuals who will use the survey findings to determine questions that will be most meaningful and useful.
- Literature Review:
People are constantly on the look out for innovations that will allow them to tackle difficult and complicated tasks with ease. The need to develop methods or processes that will allow people to complete difficult and complicated tasks is important. The need aroused in order to reduce margins for errors. If people can develop methods or process that will enable them to complete tasks with as little error as possible, they will be able to save both time and resources. This means that more tasks can be completed for lesser costs. (1994) This is especially important for businesses where both time and resources are invaluable. As time progress, people were able to develop tools that will help them achieve this goal. With the invention computers and the development of the internet, human intervention seemed to become less and less. In due time, businesses were able to appreciate the value of computers in their business activities. Soon enough, computers were standard office equipments. People taught themselves to work with machine in order to be more efficient and productive. (1994)
However, people and their activities evolve with the passing of time. Business activities required more from the systems that they were using. They consider that their business would be more productive if their systems were specialized. Thus, the need to develop software that would meet the demands of the market grew and grew into an industry. This industry became the support of business organizations. ( 2004) They provide business with tools that would allow them to improve the range of products and services. Upon entering the 21st century, people and organizations alike began to recognize the role that information and technology will play in their present and futures (2000). More and more individuals and organization are realizing the power of technology especially information technology. Business organizations experienced the efficiency of information technology in all aspects. True enough, technological innovations are sweeping the world off its feet. Some examples of specialized software being used by various business organizations include customer relationship management (CRM), Enterprise Resource Planning (ERP) and supply chain management. This software allows business organizations to determine trends in specific aspects of their business. In turn, these trends pave the way for the formulation of programs or policies that needs to be implemented to maintain or improve the performance of the company. (2004)
A concrete example of some of the uses of technology that helps in enhancing the performance of the business organization can be illustrated with the use of both internal and external networks. Communication is very important when conducting business activities. Every aspect of the transaction must be clear in order to avoid costly mistakes. (1995) The installation and use of internets and intranets will allow employees to communicate in real time without leaving their workstations and thus saving time. (2002) It is also the case that In light of the globalizing market, business organizations see the importance of having and maintaining a reliable information system that will allow them to consolidate their business activities around the world (2002). However, in the same way that the world and its inhabitants evolve, software that makes the system run gets outdated or obsolete. This means that business organizations must be on a constant look out for innovations that will give them more edge over the competition. This also implies that the demand for software will be around as long as businesses and individuals see them as important parts of their activities. In this light, software firms have great chances of experiencing growth now as compared to previous years. (Alasuutari, 1995) As technology is being integrated into the daily routines of people and organizations, the need to support these technologies with software is and will still be evident.
So, opportunities for expansion will be available to software firms. As the demand for the products and services being offered by software firms, they will be able to experience growth that will opportunities to venture forth and just domestically but internationally as well. It has stated earlier that markets are going global. This suggests that businesses around the world are being introduced to the methods and processes being used in the west. The opening of the eastern market will prove to be both fulfilling and challenging. It has been noted for many years that countries in the Asian region are no stranger to technology. Some have the capacity to develop their own technologies and offer it to all over the world. On the other hand, Asia is home to the biggest markets in the world like china and India. (1996) The possibilities can be endless for business organizations that will be able to successfully enter these markets and establish a stronghold on the region. Being able to enter big markets and create a consumer base will assure a company of significant profits. These reasons are just some of the points that need to be considered by a software firm that wishes to expand its operation in new Asian markets. These general characteristics of the Asian market can prove to be helpful in arriving at a decision to enter the Asian Region. Nevertheless, the risks involved in doing so are still evident. The weight of the advantages and the disadvantages of entering the Asian markets seems to be equal, this is the reason why there is a need to dig deeper in order to uncover more specific traits that will ultimately lead to the decision to expand to the Asian region. (1996)
Software Industry – India
The importance of the software industry can be judged by the fact that its contribution to the country’s GDP will increase from 1.4 percent to about 7 percent. More importantly, it is expected to contribute nearly 20 per cent of incremental GDP growth between 2001 and 2008. ( 1996) The industry, which employed 0.8 million people in 2001, is expected to employ over 2 million people directly and create direct employment opportunities for at least an additional 2 million people by 2008 (2002). Realizing the potential of the industry, the captains of the industry speak very highly about the firms. Many professionals and policy makers have called India the software super power of the world. The immense enthusiasm surrounding the industry is understandable as hardly any other Indian industry matches its growth rates in the last decade. The global software market is estimated to be about US$550 billion (2002), and has been growing at about 15 percent per annum ( 2003). India’s share in this market is 1.5 per cent (2000) and is estimated to rise to less than 5 percent (2008). Seen in this light the claim to the title of super power in software services is clearly self-congratulating and exaggerated. Yet India can and should aspire to play in the IT big league ( 2000). Few authors believe that India has the potential to grab global market share of 10 per cent (2002). It is worth noting that the importance of competitiveness is rising among the software firms in recent months ( 2003;2003).
The total estimated world market for software services was US$559 million (2002). The global industry is segmented into four groups: large system integrators (Accenture, Cap Gemini, Ernst & Young, IBM), large outsourcers (EDS, IBM), offshore service providers (TCS, Infosys), and hardware and software providers (HP, i2, SAP, Oracle) (Mehta, 2003). It is worth noting that share of the USA is largest (41 per cent) followed by Japan with 14 percent and Europe (except UK, France and Germany) with 14 per cent. A detailed picture of India’s share in different segments shows the strength, weakness and hence the presence of the Indian firms in these markets (2002; 2002). There are many segments where the firms do not have presence in global markets, these include: IT Training and education, network training and integration, hardware installation and support, and IT consulting. Software is India’s best big hope – software services industry has been India’s revolution for the last decade. These successes were mainly because of evolution of free enterprises where a bunch of techno-entrepreneurs could freely scour the world markets and grab the outsourcing opportunity to India. For India to move beyond the meagre market share, firms will have to grow beyond being volume-dependent firms to be value-capturing organizations. (2002)
There is also a strong need to differentiate firms from India from those of the rest of the world. The low cost of operations and effective delivery mechanisms have become commodities and do not provide long-term sustained competitive advantage. The software firms in India need to move up in the value chain. There is need to do a few complete IT outsourcing deals not just projects. Firms have to increase their visibility globally through brand building. In contrast, the economic value of global scope can be enormous when vendors are serving customers who, despite being global, need the delivery of identical or similar products and services across many markets. In fulfilling the needs of such multi-location global customers, companies have two potential avenues through which to turn global scope into global competitive advantage: providing coordinated services and leveraging their market power (1994).
Thus, the Indian economy was seen as an underachiever in terms of its growth, hampered by domestic regulations and a lack of integration with international trade and investment and financial flows, and characterized by a low density and ser- vice quality of interactive telecommunications opportunities that inhibited productive efficiency, modernization and development, the Indian economy is now presented as one of the “big emerging markets” for the next century (1995). As the past state efforts in industry promotion and training; combined with the lower relative costs of Indian software workers and an exploding world demand for software and computer services, have contributed to widespread excitement both in hiring Indian software workers and in basing software and computer service operations in India (1994; 1993; 1993). India has a cadre of highly skilled and well-educated software and technical workers who are fluent in the English language, the main form in which India’s software exports take place. The new account also provides explanations for this growth in India’s software exports and rapid changes in the use of information technology by focusing on the role of changes in governmental policy (1994).
India’s approach to development emphasized national self-reliance and the promotion of national industries or state agencies to develop technologies and
services to meet India’s developmental and economic needs (
1989). The Indian strategy aimed at the national and state-led development of the computer and software industries. The Indian state was vested with and made extensive use of instrumental and structural forms of power in its information and computer service policies and (1989), arguing that these constituted an essential input in the development of software, computer and data services of software exports using telecommunications (1990) that would facilitate the redistribution of software production on a global basis. The development of stronger national and international protection for intellectual property rights was also seen as essential to the development of the software industry. The Indian software industry supported the creation and development of stronger intellectual property rights. It did not view pirated foreign software as a low-cost way to obtain inputs. Rather, foreign software packages which were often copied and distributed in India at far below market value eroded the possibility of the Indian companies producing packaged software for Asian consumers through expanding within the global market. Moreover, Asian foreign software firms that might send work to India were hesitant to do so if they could not be sure of the protection of their proprietary rights. (2004)
Therefore, the success of software industry expansion was seen to be dependent on the policies of governments of Asian countries importing services and countries exporting information technologies. Actual and potential problems in this regard included the availability of short-term work permits in order to fulfill deputation contracts, foreign governments’ policies on domestic procurement that
might limit opportunities for Indian software firms and expansion restrictions for certain technologies that would limit Indian firms’ access to achieve essential tools and inputs needed to be in shape upon entering into the new Asian markets respectively. ( 2003)
3.2 I.T and the Development of an Efficient Information System;
Information technology is spreading like wildfire and it is not just a phenomena being observed in developed countries. Newly industrialized economies in the Asian region are also witnessing the dawn of information technology and its impacts on the business community ( 1992). According to (1994), majority of the businesses, operating in the industrial world needs computers and software to compete and survive the tight competition. (1995:1996) information technology has become a crucial part of the services and products made available to the consumers. Therefore, the need to update software and systems must not be taken lightly by any company that wishes to integrate itself into the global business community. In order to compete, business organization must understand the role of technology in advancing the position of a business. New services and products that are highly dependent on technology are being introduced to the market, which entails that they are also dependent on softwares. To illustrate the point the statements are trying to express, the case of Harrison-Keyes will be presented.
Harrison-Keyes is well-known and established publishing company. They have been around for more than 100 years. In light of the innovations that has been occurring right and left, the company decided to get into e-publishing in order to tap into the internet based consumers. With this, they have implemented an e-publishing initiative. However, early on, they were met with a number of problems that threatens to end their hopes of digitizing their products. (2004) The technologically significant problem that they had to face was the inadequacy of current Harrison-Keyes hardware to support the loads of e-commerce software that will allow them to sell their titles directly from their website. If the problem is not resolved as soon as possible or before the set time of e-book title release, the company will have no other option but to resort to posting or selling their titles through established online booksellers such as Amazon. This means that the company will once again need to provide the necessary expenditure to pay the third party retailer and to be able to fix the technical difficulty that they are experiencing at the moment. Even though, the option to sell their title through a third party vendor, it is still the case that the expenses for such decision has not been projected prior to the launch of the e-publishing initiative. This can send the signal that a disaster is looming in the horizons.
The case of Harrison-Keyes presented a company who is ready to taken on the challenges of the digitizing market. They recognize the need of the consumers for products and services that are more convenient for them. However, the company itself is not technologically ready to launch such a project. The case showed how failure to maintain both hardware and software can foil a good business project and cost the business organization financial damages. also presented that as businesses grow, the need to integrate information technology becomes greater. ( 2004) Today, the growth of the business is tied with the growth of their information system. In turn, information technology is developed by business organization along with their information system. There are six identified stages of information technology growth (1979).
– Data administration
It is believed that as businesses pass through the six stages of Information technology growth, they also experience transformation. This transformation affects their business operations both internally and externally. It can also lead to redesigning the business network and the redefinition of the scope of business (1984). This means that information technology does not only affecting the production process and it also influences the structure of a business. Therefore, the development of an information system is crucial in the realization of the perceived benefits of information technology (2002). Systems analysis is one of the most important processes that need to be undertaken to develop an efficient information system. Systems analysts begin by identifying a problem or an opportunity. Afterwards, the systems analysts along with the stakeholders will have to determine the terms of reference. This is needed in order to establish the boundaries of the investigation. It is also important that the objectives of the system to be developed be defined. (1984)
In addition, feasibility studies and cost analyses must be completed. These will allow the systems analysts to investigate the various options available to them relative to its costs. It is also the case that the mentioned studies and analyses will determine the benefits of the available options. Upon the implementation of the new system, the transformation can take place as stated above.
During the analysis of the cost of the new system to be implemented, software is one of the focuses. Along with the hardware, softwares are needed to support or enhance the performance of the new hardware. Computer software includes the operating system, application packages and few programs. Software provides the detailed instructions or codes needed to guide the operation of a computer system. This means that as newer and newer hardware becomes available to businesses, software must also be updated to maximize the performance and capacity of the hardware. (1984)
This brings us to the point that business development in various industries brings about opportunities to software firms. It has been stated above, that information technology has become a huge part of business activities around he world. This means that the progression of businesses from one information technology stage to another brings about the demand for software products and services. In turn, these demands for new software products and services will result to additional business for software firm and thus the opportunity to expand their operations will be around the corner, so to speak. (1996)
The next section of this chapter will be presenting the status of the software industry. This will allow the research to present the status of the industry. In addition, the traits that mark the industry will also be presented in order to determine the aspects that affect the operation of businesses within the industry. An example of the aspect that will be presented is competition. This will also give a glimpse of what the future holds for software firms.
3.3 Software Industry:
According to (2002), the software industry is highly competitive. Software firms are driven by the need and desire to innovate their own products and services. Being innovative and faster, a software firm can easily capture the market or become the industry leader. This is the reason why software firms are investing more on their research and development. In turn, this focus on research and development causes the industry to be characterized by rapid changes of both new and emerging technologies. The high competition and rapid changes where highlighted by the development and proliferation of the internet and intranet for businesses.
There are two economic characteristics of traded software contributes to the dynamics of competition within the industry. The first characteristic is economics of software production (1996). The production and distribution of software is in the same way like that of records or movies. They are ruled by costs of developments that are fixed. Since most software can be sold to the market without or little customization based on the market segments and it is profitable. The software industry is very lucrative due to the fact that the population of mainframes is less than the installed based of microcomputers (1996). This means that free lance software developers have the encouragement to offer the microcomputer market with application programs that are standardized. In addition, a large market for standardized software was formed due to the diffusion of low-cost microcomputers and potentials for higher profits as well as the association of low entry barriers to software development ( 1996). In the past, it is evident that the promises that the software industry holds true in western countries. In the United States for example, computer producers, independent software vendors as well as users have encouragements to produce software. Computer producers saw that software complement their main products and thus the encouragement to develop software (1996). This means computer producers doubles their profits since they were able to create the need for another product.
3.4 On the Issue of Piracy
Software piracy is the illegal production and distribution of software. It infringes copyright laws since software are produced and distributed without the permission of the copyright holder (“Software Piracy”, n.d.). The presence and persistence of software damages the software industry economically. In 2003, it was estimated that around $50 billion worth of software packages were sold and were installed on personal computers (20004). However, $80 billion worth of software were actually installed on computer worldwide. This means that for every $2 of software purchased, $1 worth was brought illegally ( 2004). In addition, the worldwide piracy rate in 2003 was computed at 36 percent. By region, the highest piracy rate was recorded in eastern where piracy rate was at 71 percent. It was followed by Latin America at 63 percent. The piracy rates in Asia Pacific and Middle East/Africa are at 53 percent and 56 percent respectively. Eastern Europe has the second lowest piracy rate at 36 percent. The region with the lowest piracy rate was the United States and Canada with only 23 percent (2004).
It is also the case that many local software firms are being overthrown by imported pirated software. This is the case since imported pirated software is high-quality and can go head to head with locally produced original software. As a result, tax revenues are also being lost to pirates. Job opportunities in the locality are also being affected due to the absence of a legal market. This means that it is not only the businesses that are affected by piracy but also the society and its people. The ability of the global pirate industry is being attributed to the fact that there is an overwhelming surplus of optical discs available in the market. The figure below shows that the combined legal demands for all disc formats in Taiwan, Hong Kong, China, Malaysia, India, Singapore, Thailand, Poland and Russia is only 1,675 units. However, the estimated capacity of optical discs manufacturing plants in the said countries amount to 17,400 units. This means that there is a huge nominal difference of 15,725. This means that the estimated capacity of the manufacturers’ exceeds the legitimate demand by 20 percent (2003).
|Current estimated pressing capacity 2002|
all disc formats
|Total Legitimate Demand:
all disc formats
Figure 1: Estimated pressing capacity, by country, 2003 (2003)
One can only wonder where these surplus optical discs would end up. Unfortunately, some people managed to put them into a not so good use such as the continued over production of optical discs and the growing popularity of CD burners, the surplus products are being sold to the public. In turn, this resulted to the proliferation of unauthorized copying and distribution of copyrighted data, commonly known as piracy. In addition, over production of optical drives resulted to the decrease of the selling of the product. This factor made piracy even more profitable since the cost of production is minimal. With this continuing trend, it can be hypothesized that the global piracy market still has room to grow.
Figure 2: Top and Bottom Pirating Countries (First Annual BSA and IDC Global Software, 2004
Based on the figures shown above, many of the presses that are overproducing are located in the Asian region. (20004). This offsets the high-piracy rates of Vietnam, Indonesia and China.
It was also explained in the First Annual BSA and IDC Global Software (2004) that various factors are contributing to the regional differences of piracy rates. For example, the prices of the software available in relation to the strength of intellectual property protection being offered in the region, is one of these factors. In addition, cultural differences also affect the scope of piracy. Poverty, for example, is the excuse by many when asked about there patronage of pirated software as well as video and music. The proliferation of online piracy is parallel to the development of the internet and other information technology programs and equipments. The promise of a digitized world that the world will shrink with just a click of a button sure went overboard. It is undeniable that the internet has many uses. ( 2003)
The Business Software Alliance is pleased to provide comments on the Final Report of the Commission’s High Level Group (HLG) on Digital Rights Management (DRM) issues. BSA’s member companies have a depth of experience with DRM. In addition to developing and implementing many of the DRM systems now in use, our members have long employed these technologies to assist in managing their rights and in protecting their digital assets. Given their importance, it is essential to the success of Europe that the EU rapidly embraces DRM. The HLG Final Report promises to move the EU in this direction. (2004)
As the Commission recently noted in its Communication on rights management, there is an ongoing demand for such a mechanism to facilitate the dissemination of digital content throughout the EU. On private copying and levies, BSA supports the HLG conclusion that existing levy regimes must be adapted to reflect the emergence of DRM systems that the proliferation of online piracy poses a significant obstacle. Indeed, consumers today already enjoy access to music across a variety of platforms and devices, including under Linux-powered systems. We also call the HLG’s attention to the many initiatives now underway in industry standards bodies and other industry consortia, all designed to explore common solutions and develop open standards to promote DRM interoperability. In addition to stressing interoperability, open standards are most appropriate for mass-market applications. (2004) BSA is a strong supporter of open standards, members participate actively in many standards-setting efforts open and otherwise and have contributed and continue to contribute to the development of numerous individual standards. BSA is interested in these various proposals, each of which has advantages and disadvantages. For example, compliance testing can add value in that it can serve to enable users to meaningfully compare the security offered by differing products. BSA members are deeply involved in efforts to roll-out EU-wide, DRM-based content delivery systems for content. (2004)
The absence of a Community-wide license for rights in content has made this exercise a laborious and time-consuming one, despite significant consumer demand. Ultimately, the shortage of legitimate, convenient alternatives for access to digital content has contributed to high piracy rates in the EU to the detriment of creators, national economies and European culture. BSA strongly supports the HLG conclusion that online piracy poses among the most significant obstacles to DRM success. BSA’s members have long been victims of online piracy. While these companies and others are focused on providing consumers with exciting new technologies and innovative distribution models, it is impossible to compete against unauthorized distributors who make our members’ products available online free of charge. (BSA Final Report, 2004) In order to address online piracy, the HLG Final Report identifies many important steps, including increased consumer awareness of the damage caused by such piracy and robust anti-piracy enforcement against online offenders. The Directive, which provides many useful tools against online piracy, should be implemented immediately into national laws and its provisions should be vigorously enforced. A reduction in online piracy benefits not just industry and the Member States, but serves consumers’ interests as well. (2004) The technology enabling online piracy and the practice of viewing illegal live streaming of sports content constitutes a threat not only to the value of new media rights but also to the value of live television, broadband streaming and mobile rights.
However, it is also a fact that the internet is now home to a number of illegal activities including music piracy. Millions of people, on a daily basis, are engaging in piracy over the internet. Sad to say, copyright and other regulating legislations are falling short of monitoring these illegal transactions. The issue of online piracy became well known when numerous individuals as well as known companies are battling it out in the courtrooms. Charges and counter-charges were filed in the hopes of minimizing if not stopping the proliferation of online piracy. The problem with online piracy was also heightened by the wide utilization of peer-to-peer file sharing. It is the common notion that peer-to-peer file sharing is being used to download music or videos over the internet. However, it can also be used to access programs. (2004) This is also the case with compact discs. It is being used to pirate music, videos and applications. Original applications are being copied onto blank discs and sold to consumers at a cheaper rate. This makes them more appealing to the consumers. This is the case since computers are seen as a luxury most especially by people residing in underdeveloped countries where the benefits of computerization are yet to be explained and experienced. (2004)
3.5 Decision to Expand:
The previous discussion discussions showed that there are indeed many opportunities for software firms. It is just a matter of identifying them and planning the appropriate action to be implemented. Even though, the industry is experiencing set backs from problems such as the narrowing the market and piracy on a global scale, there is still hope that this obstacles can be overcome and the industry will once again post limitless possibilities for business. The case of the software industry is just a matter of tapping into hidden resources. (2004)
In this case, the hidden resources may very well be the creation of new markets. Earlier, it has been identified that market niches such as health care, transportation and security can bring about new business opportunities for software firms. It is also the case that the ever changing face of hardware would eventually result to current software being obsolete. This will again give software firms to introduce new software to the market. As many people are being introduced to the technology of computer, internet and the web, it is inevitable that the market will grow bigger. ( 2004)
The western market has been saturated with software products and services given that most of the software being used the world over comes form software developers in western countries. It is also the case that computers have already been integrated in almost all aspect of life from refrigerators to cancer treatment machines. On the other hand, the eastern market is just beginning to integrate computers into their systems. For example, most households in the east are not yet equipped with computers for business or personal use. (2003)
This means that countries in the east can offer opportunities for both hardware and software firms. If companies in the information technology industry can tap into these potentials then they will be able to create new markets that will allow them to distribute their surplus products and services that the western market can no longer accommodate. In addition, the size of the market in the east most especially in Asia will give them the chance to increase their distribution and eventually production of software products and services. (2004)
In line with this, the realization of this promise lays at expanding the software business overseas. Overseas business expansion opens many options for a business organization. All of the options that will be available to the business will come with its own risks, costs and exercisable control, which varies from case to case. The variety of options available to businesses wishing to enter a new market gives the business a sense of freedom in choosing the entry strategy that is appropriate for their case. However, this freedom should not be taken astride. Careful review of the options available must be made in order to ensure that the entry strategy to be implemented is the best for the business.
There are basic issues that need to be resolved before unveiling international expansion. The first basic issue is marketing. This issue pertains to the manner of managing and implementing managing efforts. It is also in this stage that the country or region and market segments are determined. The second basic issue is sourcing. As suggested by the name, this issue focuses on how the products will be obtain; will they be bought from other producers or will be business manufacture them. The third basic issue is investment and control. The resolution of this basic will determine how the business will actually present itself in the international market; will be entering the market through acquisition or as joint or global partners?
As stated earlier, it is important to resolve issues or study the decision before actually making it. This way the business will be able to complete a risk analysis. In turn, they will be able to lessen the costs if any problems arise in the course of implementing the decision. Being able to prepare for the possible problems before they even show signs of affecting the business will pave the way for the formulation of contingency measures that can be readily implemented when needed. According to (1998), there are five strategies being used by firms when entering new foreign markets. These strategies allow businesses to become familiar with the new business territories. These will also tell them the resources they will need in order to make a successful entry. The five strategies are as follows:
3.5.1 Technical Innovation
Technical innovation pertains to determining the existing products available in the market. As such, companies who wish to make an entry into foreign markets must be able to determine any existing competition. They must know where their products and services stand in relation to the competition. The perception of the market of the competitors’ products and service is also important since this helps in creating brand equity. However, along with the perceived strength of the competition’s products and services, actual performance of competitors must also be investigated. This will show patterns and trends currently applicable in the market.
3.5.2 Product Adaptation:
Products adaptation is needed in order to ensure that the existing products of the company entering the new foreign market fit the demands of the consumers. In the case of software firms, it has been stated standardized software are often offered. If a company wants to make an impact into the new market they must be able to offer something new for the consumers. This means that they must make modifications on their applications based on the target market segments as well as the general demand of the foreign software market.
3.5.3 Availability and security strategy:
The importance of risk management has been stated earlier. The availability and security strategy is one strategy where risk management is most important. This is the case since availability and security strategy pertains to ability of companies to counter transport risks. This means that before entering a foreign market, businesses must be aware of the available infrastructure in the region. It is important that the existing infrastructure support the need of the business regarding distribution of the products and services that they will be offering. If not, the business may run into issues that will result to the failure of the expansion.
3.5.4 Low price strategy:
One of the problems that the software industry faces is that of piracy. Consumers tend to buy products that they perceive gives value to their money. Since most of the pirated software available are of high quality and are comparable to the original, consumers can easily be persuaded to buy the pirated one since it is more cost efficient than the original. The thinking that they only be using the CD, for example, only once, upon installation, adds to the perceived value of the illegal copy.
Therefore, businesses who wish to expand their business into a new foreign market must think of programs that will allow them to introduce their products and services in terms of prices. However, at the same time, they must also be able to make the market realize that the extra price they will be paying, as compared to pirated software, will actually give them more value in terms of quality.
3.5.5 Total adaptation and conformity strategy
As connoted by the name of the strategy, total adaptation and conformation strategy pertains to the strategy that allows the business to conform to the new foreign market.
All of the strategies presented above, will permit a business to investigate all of the aspects of their target foreign market, in which, the investigation to the thorough studying of all the factors that will determine the success of the expansion or cause it to fail. Business organizations must learn to look for ways to ensure that the conditions will allow easier implementation of the strategies.
3.6 Knowing the Competition:
It has been stated a number of times in the various discussions above that the software industry is characterized by fierce competition. This is one of the reasons why software firms need to take their business elsewhere, meaning they would need to leave the saturated western market or expand their scope in order survive. Therefore, it is important that businesses analyze the movements of their perceived competition so that they will know how to contend with them.
According to (2000), competition is important since it affects the success of a business venture. added that competition is more than just producing and distributing products and services that matches the needs of the consumers. Competition is about the company’s capability of positioning itself in the market so that they will stand out among the rest in the perception of the consumers. Therefore, it is important to know the factors that help in shaping the perception of the consumers towards certain products and services. On way to do this is to implement a PEST analysis. PEST stands for political, economic, socio-cultural and technological forces. These factors affect business through the consumers. Since these factors help in shaping the perception of the consumers, it suggests that it also affects the purchasing behavior of the market base. For example, the economic damages brought about by piracy can be used to investigate the economic situation of the software industry. This is the case since the profits lost to piracy affects the flow and natural growth of business within the industry. Due to the significant amount of revenue lost to piracy, it cannot be helped if researchers and the legal software itself review the financial impacts of the illegal activities on their businesses. On the other hand, pirates are usually not concerned with the monetary effects of their activities on software firms. This attitude is fuelled by the notion that artists and record labels are already, so a few dollars would go unnoticed. However, if this line of thinking of most pirates, the accumulated “few dollars” that they were referring to would actually amount to billions.
Unfortunately, people are living in a world were everything is interconnected. Every action being performed is ultimately affecting others whether directly or indirectly. The music industry is not a separate entity operating outside the scope of the society. Therefore, the software industry is also subjected to this interconnectivity concept. Contrary to the notion that software firms are the only ones profiting from production and distribution of legal software, the software industry in itself is supporting a large number of jobs worldwide. The next section of the literature review will be discussing the various entry strategies available to businesses who want to expand their operations overseas. The discussion of the entry strategies will pave the way for the evaluation of the entry strategies in the hopes of determining the best choice for software firms. The discussions will include the processes that need to be undertaken in order to implement each entry strategy. In addition, benefits and risks involved in implementing each entry strategy will also be presented.
3.7 Entry Strategies:
Since the 1980s, marketing strategies have played key roles in planning to overcome challenges. It is believed that this line of thinking will continue to direct the activities of business into the 21st century (1999). In addition, it is also believed that good managers have the ability to formulate and implement competitive strategies. This is the case since competitive strategies have the capacity to make the business organization stand out among the sea of competitors within the same industrial sector. Therefore, competitive strategies can ultimately aid business organizations in increasing their profitability and achieve their goals. Strategy is defined as the art of harmonizing the resources to achieve the preferred result (1999). This means that companies must be able to utilize available resources like capital and employees in such a way that they will be able to result in the company’s profitability and/or company growth. further defined strategy by dividing it into three levels. The first level is the higher level corporate strategy. The objective of corporate strategy is to be able to use the resources to achieve the goals of the organization. However, the resources must not be exhausted in the process. The corporate strategy is long termed since it being employed for the business organization’s sustainability.
The second level is the mid-level strategies. These strategies are being implemented for a period of three to five years. These strategies are more specific than corporate strategies. This is the case since they have specific targets that need to be reached. There are four definitive objectives to the mid-level strategies (1999).
Ø enter present markets utilizing readily available products
Ø spread out markets by utilizing readily available products
Ø create new products for present markets
Ø create new markets for new products
The last strategy is the lower level strategies or tactics. In Contrast with the first two strategies, tactics are short termed in nature, around a year. They are usually included in the agenda of the business organization’s annual planning. However, the nature of tactics must not result in non-conformation with long-term strategies and goals. Tactics cover aspects of the business such as (1999):
– product launch
– product packaging
– selection of market segments
– sales force deployment
These strategies are one of businesses’ most valuable tools in ensuring their survival in their respective industrial sectors. This means that the formulation of the suitable strategies for the company can result to a competitive advantage. Therefore, it is important to know the aspects that need to be considered when formulating strategies.
Some of the most important strategies in the business world are entry strategies. The start of any endeavor is crucial in the life cycle of a business.
3.8 Local office:
This type of entry strategy is as simple as setting up an office in the locality. It primarily depends on the mere presence of the company in the area to attract clients. This type of strategy can be related to the establishing a branch which is the basic premise of the strategy.
Local office is advantageous to the mother company in such a way that it will allow the mother company to have access to the capital of local business enterprise and the business will be closely working with the locals. However, it will also prove to be of a disadvantage once the cost of establishing the local office is taken into consideration. Since the local office means that, the mother company must start from scratch in building their presence in the locality they would have to invest in space where the office is to be situated as well as filling the staff positions.(2002)
3.9 Joint venture:
A Joint venture means that the mother company will be teaming up with a domestic company to form a new incorporated company. This type of entry strategy may prove to be beneficial since the mother company will have the expertise of the domestic company in terms of the local market and the possible solutions to possible problems the incorporated may face.
However, as with all strategies, there are also some disadvantages in utilizing this kind of strategy. By entering in a joint venture, partners have to deal with the fact that they will not full control over the company and that they may be difference in views and expectations that can result to future issues. ( 2002)
According to (1991), the decision process to enter in a joint venture is time consuming, messy and understudied. This results in delays in carrying out the decision. Furthermore, the lack of through investigation of the ventures results to lack of pertinent knowledge regarding opportunities and cost.
Forging a business relationship is the key aspect in making a successful entry using the franchising strategy. By opting for this strategy, the investor is assured of a market base and a known product. In addition, the franchisee can expect some level of assistance from the franchisor, and in a stage where an investor is still trying to get use with the new market they would need all the help they could get. This means that all the investor has to do is maintain the business and acquire newer clients.
In relation to the entry strategies presented above, there are a few other strategies that can be incorporated with the main entry strategy to better outline the conditions under which the expanding company will operate as well as the chosen partner if applicable. These additional strategies include counter trade and licensing.
3.11 Counter Trade:
Counter trade is the largest indirect method of exporting. In this strategy, a business organization can expand to markets were competition is less fierce, like new foreign markets, but exchange based on currency is not possible. It is being used to stimulate industries or counter the effects of inadequate raw materials. Counter trade can be perceived as the modern day version of barter. The difference between counter trade and barter is that counter trade uses currencies to underpin the value of the commodities to ensure fair exchange. (2002)
As in any strategy, counter trade also has its disadvantages. Since GATT does not cover the agreements under counter trade, the chance of dumping is great. ( 2003) It is also the case that the goods being offered in counter trade are not international quality; therefore, they will be more costly for consumers and traders. It is also difficult to set the prices of the products being offered as well as the quality of the services. Because of this, it may be difficult to revert to currency trade and hence after counter trading the products may be more difficult to market. In order to counteract these disadvantages, (1988) proposed that the benefits of the trade will offset if not outweigh the disadvantages. Since one of the parties involved can be easily exploited through counter trade, it is important that the systems politics and regulations of the trading partner be thoroughly studied. Lastly, it must be made sure that the payments to be made are not under import controls.
Licensing is giving a trading partner in another country the permission to use the company’s expertise, trademark and skills in manufacturing and processing of a product or services. This means the products or services of the licensor will be manufactured and distributed legally by another company in another country. It is also the case that there is very little expense to be shouldered when entering a licensing, practically only the signing and implementation of the contract. Many known names in the business world is engaging in licensing. One of the best examples of these companies is Coca-Cola. ( 2002)
Licensing is a good way of entering a new market since the expanded operation will under a company who is emerged in the domestic market. This means that the licensee is familiar with the trends and factors that will affect the local operations of the licensor. This is similar to the advantages of a joint venture.
On the other hand, licensing is disadvantageous since there is limited participation on the part of the expanding company. In addition, since licensing involves passing on knowledge and skill, it is possible that once the licensee acquires the needed knowledge they will become competitors.
All of the entry strategies presented above are available to business who wish ti enter the Asian software market. However, it is important that before choosing the strategy to be implemented, the resources and capacity of the expanding company be matched to the requirements of the entry strategy to maximize success rates. ( 2002)
In summarizing the discussion on the nature of the software industry, it is evident that fierce competition and narrowed market characterizes the industry. Companies in the western market are attempting to escape the vortex that is threatening to close the doors of the industry to new entrants as well as relatively small forms. Because of this, they have seen the need to look for opportunities off shore. This brings them to the potentials of the Asian market. Even though, competition is already present in the region, they are willing to risk some in order to gain some. Moreover, this confidence is partly because of the size of the Asian market. In order for the entry into the new market to be successful, it is important that entry strategies be studied in relation to the resources and capacity of the expanding company. In addition, the specific conditions of the target market must be investigated in order to minimize the effects of the risks on the venture to be set-up.
4.1.1 Analysis of Market Potential for the Software Business in the New Markets:
The Questionnaires has been prepared to find out the market potential for the software business and distributed to 120 companies, 40 in Singapore, 40 in Malaysia and 40 in china. The responses I got from the 115 companies. The questionnaires and the data are shown in appendix 1. The questions are divided in to groups and analyze the group.
Group 1: Questions 2, 3, 4,
Group 2: Questions 5, 6, 7, 8, 9,
Group 3: Questions 10, 11, 12, 13, 14, 15
Group 4: Questions 16, 17
4.1.2 Analysis on New Market: (Singapore)
Analysis of Group 1:
The qualitative analysis begins with the measurement of the stability of a business. How can we identify the stability of the business? There are many factors to identify it. Here I consider the number of years the company is doing business and the turnover of the company as the key factor. Around thirty seven percentages of the companies are in the business from three to years and thirty three percentages of the companies are in the business between eight to twelve years. The next point we have to consider the turnover of the companies the companies are in the business between three and twelve they are having the turnover between one million US dollar to three million US dollars.
The branches of the companies are the important aspect in this analysis. Around forty percentages of the companies are having their branch and few in India and Malaysia. The main aspect here is, around twenty five percentages of the companies have branches more than one place. Majority of the companies have two branches, India and china respectively. Twenty percentage of the company have the branches in all the three countries.
Analysis of Group 2:
The second part involves the analysis of the Human Resources, computer facilities, and some technological aspects of the companies. Majority of the companies are having less than ten employees and having nearly twenty computers in their offices. This implies the companies are interested in bringing latest technologies to the business to achieve operation efficiency and achieve higher profit.
Almost eighty percentages of the companies are having dedicated server and integrated network with all the computers in the office. The company understands the importance of the information and that’s why they are storing all the business related in the server and the data can be shared by everyone in the office at the same time. Eighty two percentages of the companies are having the website and their own service for the business. Websites and own e-mail ids are more important for the companies to survive in the very competitive environment.
Analysis of Group 3:
This part of analysis involves the technical aspect of the companies such as which software they are using for the business, their contract with the service providers and the satisfaction of the companies, provided by their service providers. While seeing the data all companies are using some software for the business but not using the advancement of technology. The software which are using by the companies are having lot of limitations like cannot share data, cannot add additional documentation system easily and not flexible for the users to use.
Around seventy two percentages of the companies are using Microsoft windows as the operating system. Here the software company has a very big opportunity to make huge money. The companies have to spend lots of money on buying software license for Microsoft products. But the software company can supply other software which can replace Microsoft products and help customers to save huge money, which they are spending on licenses. Apart from the licensing issues sixty percentages of the companies have some contract with the software and service providing companies Out of that sixty companies, majority of the companies have the contract with service providers for less than one year. Around fifty percentage of the companies are satisfied with the service provided by the service providers and rest are not happy with the service providers.
Analysis of Group 4:
Around thirty percentages of the companies are willing to change the existing software within next few years and remaining companies are not having any idea about the change over of the software. Forty seven percentages of the companies are spending less than US$ 10,000 per year for the IT and thirty percentages of the companies are spending from US$ 10.000 to US$20, 000 for IT.
4.1.3 Analysis of New Market: (Malaysia)
Analysis of Group 1:
Forty four percentages of the companies are in the business from eight to twelve years and twenty eight percentages of the companies are in the business between three to eight years. The next point we have to consider the turnover of the companies, around fifty percentages of the companies are having the turnover between one million US dollar to three million US dollars.
The branches of the companies are the important aspect in this analysis. Around forty five percentages of the companies are having their branch in china and thirty five percentages of the companies are having branches in India. The main aspect here is, around fifteen percentages of the companies have more than one branches with in the three countries.
Analysis of Group 2:
The second part involves the analysis of the Human Resources, computer facilities, and some technological aspects of the companies. Majority of the companies are having less than ten employees and having nearly twenty computers in their offices. This implies the companies are interested in bringing latest technologies to the business to achieve operation efficiency and achieve higher profit. Almost seventy percentages of the companies are having dedicated server and integrated network with all the computers in the office. The company understands the importance of the information and that’s why they are storing all the business related in the server and the data can be shared by everyone in the office at the same time. Seventy seven percentages of the companies are having the website and their own service for the business. Websites and own e-mail ids are more important for the companies to survive in the very competitive environment. Rest of the companies are not having any website and e-mail services for the business. The software company has a chance to build website and e-mail services for the twenty three percentages of the companies.
Analysis of Group 3:
The technical aspects are discussed details in the Analysis of New Market (Singapore).
Around seventy percentages of the companies are using some software system for the business. This detail ensures us that the companies are now using some software for the accounting and documentation purpose. So it will easy for us to sell the software to the customers. Seventy seven percentages of companies are using Microsoft windows as the operating system. Here the software company has a very big opportunity to make huge money. Because companies has to spend lots of money on buying software license for Microsoft products. But the software company can supply other software which can replace Microsoft products and help customers to save huge money, which they are spending on licenses. Apart from the licensing issues fifty five percentages of the companies have some contract with the software and service providing companies Out of that twenty four companies, majority of the companies have the contract with service providers for less than one year and between one to two years. Around fifty percentages of the companies are not satisfied with the service provided by the service providers and rest are happy with the service providers.
Analysis of Group 4:
Fifty percentages of the companies are planning to change the software in the next financial year. Around forty percentages of the companies are spending less than US$10,000 for the IT and another 40 percentage of the companies are spending in between US$ 10,000 to US$ 20,000 per years.
4.1.4 Analysis of New Market: (China)
Almost all related points are discussed in the above two analysis and here we are going to analyse some important points which are related to this market. Fifty four percentage of the companies are having their branch in Indian and almost 20 percentage of the companies have branches in Malaysia and around twenty percentage of the companies are having more than one branches in all the three countries.
Sixty three percentages of the companies are having the turnover below US$ 1 Million and twenty three percentages of the companies are having the turnover between US$ 1 Million to US$ 3 Million.
Around thirty percentages of the companies are using the order processing system and another thirty one percent of the companies are using Microsoft software for the business. Other fifteen percentages of the companies are not using any software for the business. Almost fifty percentages of the companies are having contracts with some service providers. Out of the fifty percentage of the companies, fifty percentage they got contract with the service providers for less than I year. Forty three percentages of the companies are spending less than US$ 10,000 per year for IT.
4.1.5 Overall Analysis:
When comparing the three markets, the companies who are doing business between three to eight years are having turn over from US$ 1 million to US$ 3 Million. The companies are doing business between three to eight years are having good turnover when compare to the other ratios. Singapore market has got the higher number of companies are doing business between three to eight years when compare to the other two markets. When compare to the employees and number of the computers, the ratio will be 2:1. Almost all the companies have the dedicated server for the business. When considering the website and e-mail service Singapore has got the less percentage other than the Malaysia and china.
The Singapore companies are using the tally (accounting software) for the business in the higher rate, Malaysian business are using order processing system for the business mostly and Chinese companies they are using almost Microsoft products for the business and documentation purpose. The main key point for us is, whether the software using by the companies are able to integrate all the offices and data to the head office, around 50% of the companies are having any idea about this and rest of the companies they say the software cannot be able to integrate the data or offices. Almost all companies having maintenance contract with the service providers, but overall 35 percent of the companies are not happy with their service providers’ service. Most of the companies are planning to change the software in the next financial year and we cannot say anything about the rest of the companies. If we offer good product with a better price they might buy and we cannot expect the percentage of the companies going to buy. When considering the spending capacity of the IT the companies are spending US$ 10,000 per year.
4.2. Product Analysis:
The company has limited range of the products. They are having an accounting package and an order processing system. The second product is the key product for the company this product can be able to integrate the data in the branch office to the head office. By using the software the chairman/CEO of the company can able to see how much sales has been done in the branch offices per day and also purchase, inventory, sampling and all other information they required and also easy for them to control the overall business. This software helps the managers to make the decisions. The product is useful for companies who are having branches in the developing countries, where in some places they cannot get high speed internet connection and the product only requires a telephone connection to transfer the data. The products are developed for the international trading companies and the company doesn’t have any products for other industries.
4.3 Analysis of HR Principles of the Company:
The researcher has spent more time on analyzing the HR principles of the company. The company has around 40 employees in the head office, India. The employees are given one year training after they recruited in the company. The company train the employees to use latest technologically advanced products to develop the products for the company. After the training period the employees are transferred in to the R&D Department, there they have to work with a team. After some years of the experience the employee has permitted to work directly with the customers. The decision making is depends on the CEO of the company and the things should be changed in the future and more powers given to the managers to make the decision at the correct time. Flexibility, Human resource management and human resource planning has to de done regularly with out any disturbance.
The main human resource problem in the world level is recruiting and retaining workers, especially the skilled ones are raising the cost of business. This is the major problem for under developing countries in the world. (The Economist, April 16th – 22nd 2005). This is the other main issues for the software firms in India. People are switching their jobs very often. To avoid the company has to provide better salary, rewards and nice working environment to the employees better than the competitors.
- The company has to employ the local people in the new markets which help the company to get local contacts and the local people can sell the product to the customers faster than us, sometimes.
- The company has to concentrate more on R&D and develop new and innovative products and has to be develop the existing products continuously to get an better market share than the competitors.
- The employees have to motivate by some rewards, promotions, foreign trips. This thing helps the business to keep the employees enthusiastic and work hard for the company.
- Decision making should be centralized, that means more powers has to given to the managers, development team managers and chief accountant.
- Regarding product side, the company has to concentrate to develop products, which can be used through internet will gives more competitive advantage for the business in the market place.
When comparing the three markets, the Singapore market has a very good potential for the software business to expand. The companies in the market are in the business more than three years and having good turn over range. The Singapore companies have the good IT infrastructure like dedicated server, centralized data storage, website and e-mail for the business. The company doesn’t need to spend more on IT equipments, if they buy the product from the software company. Fifty percentages of the companies are using the tally (accounting system) for the business, so the chance of the buying rate of our software will be better when compare to the other markets. The Singapore service providers have a good rate of service satisfaction from the customers and in other the companies are suffering by the service providers. By looking this way the Singapore customers are willing to buy new things when it’s required for the business and this implies they will ready to accept the new and innovative things. That’s the reason I am suggesting the company has to enter in to the Singapore market first and slowly they can expand in to the Malaysia and china markets. The product The Company has to employ the local peoples in the new markets and make advantage of their local language and knowing their cultures that will help them to do better business in the market place.
5.1 Limitations of the Research:
The dissertation study was done in support of an Indian software company and must not go beyond the research points and will cater only to the relevance of the software industry expansion done by India within the context ways of the new Asian markets and that it is indeed better and reasonable that the targeted customers for the realization of the study were the Indian companies doing business in the market places in line with several company details have been collected by the help of Indian Chamber of Commerce in Singapore, Malaysia and Hong Kong. There has to be few companies have been selected for the data collection purpose. So the results cannot be relied upon completely, since if the choice has gone wrong things may vary and the study is useful as based only on the trading companies in the new markets and not considering any other business.
6.1 Areas of Further Research:
There is an interesting pattern for software industries in India in support of its technology advancement processes as to India, in a way, to save on costs and gradually are expanding because of the quality they are creating out of IP as these companies continue to find the task of finding the people with right skill sets a challenging task. aside, the situation is changing of late as more software firms are entering in the new Asian markets as there should be reliable research regarding strategic arrangements by means of programs and are working with them closely to build the necessary manpower and have the impact of India’s booming computer industry although the future is bright and holds potential, much needs to be done in order to make things look brighter. For one thing, Indian software firms need to invest properly within its research and development so as to remain competitive not just for new Asian markets but as well as in the global markets and have a wide company base as the other vital reason – the software industry then, has to figure out how to come out of this vicious cycle. Alongside, convergence is set to lead to new personalized technology products and more work gradually getting outsourced to Indian software services providers, including in the embedded systems arena.
Thus, there maintains that creating the relevant hardware, operating systems, and software applications is becoming a key activity for a large number of companies that expect to derive business benefits from the expanding Asian market and others respectively. Although India’s software firms are creating interesting trade and investment opportunities for Asian markets in a range of fast growing ‘new economy’ sectors and high performing states; as well, higher incomes and trade liberalization are boosting new Asia commodity, niche manufactures and services exports to India. Furthermore, Asian businesses operating in India can expect incremental changes to continue; more comprehensive reform is unlikely given political constraints the central government faces. Major changes to the business environment also are unlikely in the short to medium term, though some states gradually are reducing red tape and increasing labour market flexibility. Infrastructure shortages are likely to remain acute for some time. As India’s industry deepens, its growth potential is huge and that the businesses are accessing promising trade and investment opportunities and prospects for expanding commercial relations are strong. However, there needs for such needed spin-off of such software boom is that designers of software for embedded systems and software development tools are expected to witness rapid growth.
Though this new Asian markets may appear smaller, going beyond this research may imply the view that future research can deal to the embedded test automation tools segment in which the Indian companies can explore in the future as the test automation tools, currently used in the US market will continue to lead in terms of technology refinement designed for software industry expansion. Aside, India has been relatively unsuccessful in the new economy of IT and other technologically sophisticated industries, especially in the software industry, as well as in having secured foreign direct investment in the automotive industries for which it has long been noted. The crucial problem faced by most companies is that of finding outlets in highly competitive markets and then of securing regular payments from dealers. The new and rapidly developing software industry of India also depends significantly on personalized transactions as there is a conscious effort to develop relationships of trust with clients, partly through personalized transactions, though these are then secured by very detailed formal agreements.
This is often necessary because much of the work that is undertaken by Indian companies involves the supply of consultancy services requiring access to confidential information when a new firm starts up in the software industry, that it relies for business on contacts established by the owners whilst they were themselves working as the owners of software companies have to build up their clientele and that Indian firms are dedicated to securing formal recognition of their ability to achieve high quality standards than are firms in Asia, since this is a way of securing business without having to spend time and energy on the cultivation of personalized transactions and the building up of process trust. Moreover, in the software industry there is a striking combination of formal contract and institutionally backed sanctions and incentives, with trust built through personal connections that the extent to which transactions depend upon trust varies according to the nature of the product and of the markets that are supplied, and these with the scale and the sophistication of the enterprise. Larger firms supplying finished products in higher-income markets are able to rely in significant sanctions to which their trading partners as embedded in a personalized relationship of the software companies, the transactions between Indian firms reflect power differences rather than trust as understood to imply democratic support.
There was a success of the Indian economy over the past decade and a gradual process of economic reform in the world’s most populous democracy, firms from the sub-continent are setting up ventures in Asia in a variety of sectors as the oil and IT sectors are also proving to be popular. Indian IT companies have increased their presence in new Asian markets that have set up operations in the country in recent years, while Indian software exports to new Asian markets increased from core within several years. The increasing interest of Indian firms in selling to Asian markets and in setting up factories on the continent marks an important step in the maturity of the global economy In fact, India’s perennial low visibility is a curious phenomenon. The good news is that India’s economy and political traditions are firmly democratic and free-market oriented, and English is the de facto national language. While the rest of Asia’s overheated economies have been imploding, moreover, India’s stock market and currency have demonstrated almost rock-like stability and that Indian technology companies need to learn new skills. Indian software entrepreneurs have managed to build a national industry for custom application development as Microsoft has already started cutting partnership deals with Indian companies.
As Bill Gates barnstormed India last March of 2005 and his local managers have been aggressively recruiting local development and service partners ever since. If the software industry has to grow at a healthy rate in the future continues to be an issue in the areas of its embedded systems as most Indian firms have developed skills in the digital domain so, the firms with skills in analogue and mixed domains are few in number. The research considers only the expansion of the firm in to the new Asian markets. The research can be extended to the expansion of other markets also. For expanding in to the other markets, the data has to be collected from the new markets for analysis. Thus, using the data collected in the research can be used in the new product development and can develop a new product for the each individual markets. Other opportunities in the same market can be identified and expand the business in the new markets. For any business, product is more important. Everyday the technology changing and lot of new technology has developing very dramatically. In such case the product analysis will be area for the further research. There is such peculiar cyclical nature of the software industry and existing huge capacities in the global arena is a matter that people are currently confronted with and the inherent advantages in India for a fabulous facility is unlikely to come by in the medium term but the plan work for the industry’s expansion will grow as also incorporates tools for economic business relating the niche space.