International Trade Report for Tata Consultancy Services

Published: 2021/11/15
Number of words: 2983

Table of Contents

Executive Summary2
1.0 Introduction.3
2.0 Foreign Market Entry Analysis4
2.1 Firm-level Analysis4
2.2 Industry Level Analysis6
2.3 Country-level Analysis8
3.0 Recommendations8
3.1 Entry Choice Mode8
3.2 Risk Assessment9
4.0 Conclusion10

Executive Summary

The paper explores Tata Consultancy Services as global firm that needs to expand its operations. The company enjoys a huge customer base in countries of operations and has been awarded for being the most innovative technology firm of recent times. The report captures different entry modes that the company can apply to penetrate the Albanian market as a country of destination. Determinants of entry modes discussed in the report include resources, firm size, number of employees and entry to barriers in the foreign market. The report is detailed on the approaches that can help improve operations for Tata Consultancy Services. Equally, the report recommends the most appropriate strategy that Tata Consultancy applies in its international expansion plans. In essence, the report is useful in highlight key factors that might influence the choice of entry mode into a foreign market. The study also covers a risk assessment for Tata Consultancy Services as a leader in IT solutions in a foreign market.

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1.0 Introduction

Tata Consultancy Services is an international firm that offers IT solutions and strategic consultative advice to many people across the world. The company is headquartered in Mumbai, India, and it has been recognized as one of the top firms that provide quality services (Sharma et al., 2007, pg.29). The report seeks to examine Tata Consultancy services as a global firm, which has achieved success in many countries. The fact that the company has achieved success on an international platform makes it the right choice for the report.

Figure 1: Tata Consultancy Services overall information (Forbes, 2020)

The essence of the report is to analyze existing markets that can serve as an opportunity for the company’s expansion. It is important to explore the internationalization strategy that the company uses and choose the best approach that it can apply to enter a new foreign market (Dossani and Kenney, 2004, pg.383). A country that has been identified as a possible opportunity for expansion of Tata Consultancy Services is Albania. Individuals who require services of the company in Albania are served from Rome, Italy, hence the need to establish offices in the country (Kang and Sidhu, 2011, pg.459). The report aims to use various metrics in international trade to determine ways that the company can penetrate the Albanian market in a bid to expand its operations.

2.0 Foreign Market Entry Analysis

2.1 Firm-level Analysis

It is important to examine entry determinants at the firm level to determine whether Tata Consultancy Services can manage to penetrate the proposed Albania market. The first important factor is the financial position of the company in its bid to establish offices and operations in a foreign country (Tara and Kumar, 2016, pg.235). The financial position of the company determines its entry mode in the new market. For instance, TCS enjoys revenue of over $20 billion, with a net profit of approximately $4.5 billion. Examination of the company’s position using a resource-based view indicates that the company is better placed to invest in Albania. Its internal capabilities indicate that Tata Consultancy firm can perform in the market (Kang and Sidhu, 2011, pg.465). For instance, the company was named UK’s top employer and has been rewarded severally as the most innovative firm on a global platform. Tata Consultancy Services’ international expansion strategy is vital to its mode of entry at the firm level.

Figure 2: Number representing the value of Tata Consultancy Services (Forbes, 2020)

The entry mode that the company uses will determine its success in the country. Factors that are important at the firm level include a strategic plan for international development. It is vital to note that expansion plans must align with set objectives for the company (Tara and Kumar, 2016, pg.240). This is to ensure that Tata Consultancy Services makes an impact in Albania as a preferred choice for investment. If the strategic goals do not align, there is a likelihood for the company to fail in the newly identified market. Resources such as the proprietary skills and tacit know-how can play an important role in ensuring that TCS penetrates the Albanian market with ease (Kumar, 2008, pg.141). The firm-level determinants should be observed keenly because they are the source of competitive advantage in the market.

Figure 3: Tat Consultancy Services key statistics (Bloomberg – Tata Consultancy Services, 2020)

The determinants affect the choice of entry mode that a company can use in penetrating a foreign market. In circumstances where a firm lacks the capacity to compete in the new foreign market, the mode of entry must change strategically in a bid to align with the firm’s capabilities (Kumar, 2008, pg.145). As such, firm entry-level factors are an important aspect of Tata’s internationalization strategy. For instance, resources and capabilities within a firm are a critical aspect of success in a foreign market. Tata Consultancy Services is likely to do better in Albania, given its tact know-how, financial position, and brand reputation (Dossani and Kenney, 2004, pg.390). The firm has an established network of resources that can help it achieve its set goals within the foreign market.

Figure 4: Some key financial statistics on TCS (Bloomberg – Tata Consultancy Services, 2020)

2.2 Industry Level Analysis

It is important to examine different factors that affect the choice of entry mode at a market level within the country of interest. For instance, barriers to entry of new businesses are a factor that the company needs to consider before establishing new offices (Brouthers and Brouthers, 2003, pg.1179). The country currently receives services through Rome, Italy. It is of the essence if the firm can set up new offices within the market as a way of expanding their operations. Equally, industrial complexity and uncertainty are a challenge that has plagued many global firms that are establishing in a foreign market. Offering consultative and IT services require strategic planning for a firm to make an impact on the target market (Bhagat, Malhotra and Zhu, 2011, pg.250). It is the duty of management at the firm to analyze various factors in the new market that affect their operations. Market level aspects are important as they might impact the success of the company in a significant manner.

Figure 5: Commitments at country level (World Bank, 2020)

The level of competition in the market is also a factor that the consultancy firm must observe before investing. This will help a firm realize where a gap exists, and purpose to meet the need. In a highly competitive market, it is important to develop strategic approaches that can help gain a competitive advantage in the industry. A poor competitive strategy will see Tata fail in the designated market as far as business operations are concerned (Bhagat, Malhotra and Zhu, 2011, pg.255). A low level of competition in the market is an indication that the firm might do better on an international platform. It is the duty of management for a firm to assess the competition level in a market before venturing to invest. The fact that the company thrives in a high level of tacit know-how is evidence of the fact that it can gain a competitive advantage in the market.

Other determinants of entry mode at the industry level include market potential within the designated country. The Albanian market has the demand for IT and consultation services across different sectors in the economy (Brouthers and Brouthers, 2003, pg.1180). As such, it can sustain TCS‘s business operations as the need for IT-related services has risen in the recent past. The level of consolidation and the industry value chain can also impact the mode of entry that a particular brand will use in the market. Such factors are critical in determining the success of entry of a business in a foreign market.

2.3 Country-level Analysis

An examination of country-level determinants of entry is necessary for Tata’s expansive trajectory. For instance, it is vital to check on the scope of the Albanian IT industry in its bid to establish new offices in the region (Stevens and Dykes, 2013, pg.387). The first determinant for entry in a new market at a country level is the economic condition of the host country. Countries with notable economic growth records are better placed to host innovative firms such as Tata Consultancy Services. This is because people need various services that the company offers, and the fact that it is a global leader in other regions makes it a better match for the Albanian market. In essence, the country is welcoming and provides a set of a legal framework that must be adhered to by new investors (Pan and David, 2000, pg.545). Laws and other regulations in different countries vary, which poses a challenge to Tata establishing new offices. However, the organization should comply with the requirements and put up within the Albanian market restrictions.

The institutional framework that is in a country can determine the mode of entry of business for new firms. In a society, there are formal institutions and informal ones that help shape behavior of individuals (Pan and David, 2000, pg.535). Institutions are responsible for setting up laws on trade operations and restrictions, which makes it necessary to set objectives per institutional orientation in the country (Stevens and Dykes, 2013, pg.390). Formal institutional factors in the country include infrastructural facilities that support business and other operations within the Albanian context.

3.0 Recommendations

3.1 Entry Choice Mode

There are two modes that the company can use to penetrate the Albanian market, including the equity and non-equity option. The equity approach has more options that can be used, including joint ventures and wholly-owned subsidiaries (Sharma et al., 2007, pg.30). The wholly-owned subsidiaries category is further narrowed to acquisitions and Greenfield investments. The non-equity approach is further subdivided into options such as contract agreements and exports. Tata has applied a number of such approaches to enter a new mart with a high success rate. Proper strategies can help the company manage its new territories at ease (Xie, Reddy and Liang, 2017, pg.127). Contractual agreements in the market include licensing, franchising, and crucial turn-key projects. It is important to note that a combination of the modes might be difficult to manage. The right choice can help an organization make an effect in the market where it previously did not exist. Tata Consultancy Services has the option of using exports to the country as a way of serving the needs of customers in the region (Erramilli, Agarwal and Dev, 2002, pg.223). Exporting is the process that the company undertakes in the selling of services and products to a foreign country.

Given the position of the company in the industry, Tata Consultancy Services can opt to use acquisitions as the best approach with lower risks as compared to Greenfield investments. The company has not established its operations in the country before, and there is a need to use the most appropriate way to penetrate the market (Erramilli, Agarwal and Dev, 2002, pg.228). Greenfield investments are expensive to set up, especially for companies that are not stable financially. Acquisitions are based on ventures that are on the verge of closure or auction. The risks involved in acquisitions are low, hence the need to consider using the approach.

3.2 Risk Assessment

It is important to consider the fact that business is a risk, especially for individuals investing in a foreign country where the organization never existed before. The first risk that the consultancy firm is likely to face in Albania is differences in culture and practices. Taking over a company’s operations might mean adopting their culture before initiating changes with time (Rasheed, 2005, pg.41). The clash of cultures in the new country is likely to be a significant cause of failure. Management has to embrace liberalism and multiculturalism in the event of taking over operations through mergers and acquisitions (Xie, Reddy and Liang, 2017, pg.133). Miscalculations in the evaluation of assets might be a problem at a later stage of the company. It is proper to conduct a risk assessment on the same before implementing various operations in the new country.

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A close examination of Tata Consultancy Services’ reports and performance indicates it is likely to do better in the new market, hence the need to proceed with acquisitions despite the risks involved (Rasheed, 2005, pg.44). The risks can be mitigated by ensuring that a rigorous process of examination is undertaken for proper valuation.

4.0 Conclusion

Tata Consultancy Services is one firm that can do better in the world of business if given the right support in the new country. It is well known globally for providing IT solutions to clients through several organized chain supplies. The firm must establish offices in Albania as a way of ensuring that its client base in the region is covered. The logic behind selection of Albania as a destination for expansion is to meet the needs of customers who go all the way to Rome in Italy to receive services. The firm has the potential of doing better as its innovative technologies have seen it gain popularity across the world. The company should use mergers and acquisitions as a strategic entry mode o the new market. Mergers and acquisitions provide an affordable way of entering a new market for consultation and IT services firms such as Tata. Risks associated with the establishment of business in the area include legal implications, barriers of entry, and miscalculation in the evaluation of assets. However, Tata has a chance of doing better, given its resources and capabilities.


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