Create a discussion on current business acquisitions……………..
INTRODUCTION
The current world today is experiencing the emergence of very many business enterprises in almost all the fields. Due to the advancement of technological changes, companies are doing whatever they can to make sure they embrace technology so that they not left behind. The companies involved in technogical developments are therefore facing growing demand for their products. The company’s involved are continuously seeking relevant business strategies to make sure they optimally exploit the market(Power point presentation on Leadership 2012) . In so doing they are seeking mergers, acquisitions and partnerships to enhance their presence. They are also seeking to expand their markets by venturing into other continents outside their own in order to maximize returns and serve their customers well.
DESCRIPTION OF THE SITUATION
Infosys Ltd is company that was incorporated in the early 1980s and its India’s second biggest soft ware exporter. The company is looking to acquire another software dealer in Europe and it has set aside 500 million dollars for the venture. This is in realization of the growth potential of the European market. The company has chosen to expand through this way because it will position it strategically close to one of its major markets and be able to offer more competition. The company will also seek to expand its market share by coming into this market and the presence of its products will be felt more as it will directly be dealing with its various agents like distributors, marketers and salesmen. The company in attaining these objectives will need to clearly adopt proper management techniques and optimal production processes in all its operations. This will enhance realization of the set targets of profitability, revenue growth and market penetration.
DISCUSSION OF THE SITUATION.
The company in relying on the stability of the European market in terms of political setup and the currency shifts. Europe has for a long time been stable and their currency has also been relatively stable (Robert, 2011). Lack of major shifts in currency is a key determinant to a company like Infosys entering another market as it means the market targets will be met. Therefore this company’s acquisition of an already established firm will give it a head start in many areas of operation. There will be low costs of entry as compared to setting up a new plant and this trend is being adopted by many companies worldwide so that they can cut on initial set up costs. They also meet a ready market that is already aware of its products and their good quality. They will also not face a lot competition because they already have their market share which should even grow bigger since they will cut on importation costs.
ASSESSMENT OF THE SITUATION
The company that Infosys Ltd is targeting must be a major player in the software business. It must be a competitor in the same market with a good market share and product loyalty in the business. It must also be a company with good management principles and practices and meets its targets on key areas like sales volume, profits, growth and other key indicators. These good principles when combined with those of Infosys Ltd will create a market leader who will have the lion’s share of the market due to enhanced competitive ability, increase in product range and sound management principles. This is what will create customer satisfaction and their loyalty will greatly be enhanced.
References
Robert,S (2011) “ The stability of European Markets” (Online) Available from http://www.eropeanmarkets.org/ (Accessed on 15th April 2012)
Class notes- Power point Presentation on Leadership (2012)
Appendix
Infosys May Spend $500M on Europe Acquisition
By Cornelius Rahn on April 15, 2012
Infosys may make another attempt to acquire a company of that size after it walked away from a plan to buy U.K.-based Axon Group Plc for 407 million pounds ($645 million) in 2008, said Chandrashekar Kakal, the company’s global head of business IT services.
“We do have cash, but we are looking for a company which adds to our capability and becomes complementary to our growth rather than becoming a laggard,” he said in an April 13 phone interview.
Infosys’s war chest of about $4 billion is more than twice the size that of bigger peer Tata Consultancy Services Ltd. (TCS) Indian software companies, after a decade of growth fuelled by the outsourcing of jobs from the U.S., are turning to acquisitions to expand into Europe, currently the second-largest source of their revenues. Making purchases in Europe may help Bangalore-based Infosys achieve a target of getting 40 percent of its sales from the region, up from about 22 percent.
In 2008, Infosys decided against further pursuing a plan to buy Axon after its bid was trumped by New Delhi-based HCL Technologies Ltd. In 2006, Infosys spent $115 million to purchase Citigroup Inc.’s stake in Progeon Ltd., a back-office service provider controlled by Infosys.
Bidding Competition
The company may also make a number of smaller purchases worth about $30 million to $50 million each, Kakal said, adding that such companies would be easier to integrate. He declined to identify any potential targets or specify sectors where acquisitions may be made.
Infosys, which designs and builds software programs and provides back-office support to clients including U.K. phone company BT Group Plc (BT/) and oil company BP Plc, was founded by seven engineers in 1981 with $250 they borrowed from their wives.
Kakal, who joined the company in 1999, oversees Infosys’ development, maintenance, testing and infrastructure management services with about 60,000 employees, according to the company’s website.
While Forrester Research Inc. (FORR) (FORR) forecasts that western and central Europe will have the world’s slowest growth in technology spending in 2012, Infosys says that Indian outsourcing companies could benefit as businesses in Europe need to cut costs.
European Push
Infosys Chief Financial Officer V. Balakrishnan said in a Feb. 29 interview that opportunities for acquisitions are increasing because more European companies have “broken” cost structures. India’s second-biggest software exporter is looking to buy companies that own intellectual property as well as niche consulting firms and corporations that will boost business in France and Germany, he said at the time.
Companies and governments in France and Germany spent a combined $178 billion on information-technology goods and services last year, according to Forrester Research. Together, that made them the world’s third-largest technology market.
The Indian service provider has made inroads into the German market after switching from a sales approach that used almost exclusively English speakers to one that employs 20 percent local consultants, with offshore staff being limited to about 60 percent, Franz-Josef Schuermann, who heads Infosys’s operations in the country, said in the joint interview with Kakal. The company is currently benefitting from the growth of online retailing in the region, he said.
Growth Needed
Worldwide spending on information-technology services will rise 1.3 percent to $856 billion in 2012, slowing from a 6.5 percent increase last year, according to an April 5 report by Stamford, Connecticut-based research firm Gartner Inc.
Infosys also needs to boost growth after the company last week forecast sales that missed analysts’ estimates.
Sales in the year that began April 1 may be between 384.3 billion rupees ($7.5 billion) and 391.4 billion rupees, Infosys said in a statement April 13. Analysts expected revenue of 396.3 billion rupees for the period, the median of 64 estimates compiled by Bloomberg. The company also reported fourth-quarter sales that were lower than analysts predicted.
To contact the reporter on this story: Cornelius Rahn in Frankfurt at [email protected]
To contact the editor responsible for this story: Kenneth Wong at [email protected]
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