INTERNATIONAL BUSINESSGROUP 8 Case Study Presentation

WIRPO LTD – THE NEW FACE OF GLOBAL COMPETITION

Case IntroductionQuestion 1Question 2Question 3Question 4Question 5

[06] Chu Hoang Anh[26] Vu Anh Kha[66] Ta Ngoc Phuong Thao[69] Nguyen Vinh Ngoc Thi[63] Nguyen Thi Kim Thanh[39] Le Hoai Nam

A giant in technology industry

RANK COMPANY (LEADERS) KEY STRENGTH

1 Accenture Customer References

2 Infosys Technology Demonstrated Competencies

3 Sodexo Balanced Performance

4 ??? Management Capabilities

[06] Chu Hoang Anh

IT products

and services

Consumer care and Lighting

Healthcare

[06] Chu Hoang Anh

[06] Chu Hoang Anh

1945• Establishment• Consumer

care, lighting products

1989• Joint-venture

with GE (Wipro GE medical system)

• Moved into technology sector

1990s

IT and Outsourcing services• Software

development• Back-office

solution, semi-conductor design, applications debug

• IT systems support

2000s• High value-

added applications and softwares; consultancy

• Global expansion

• 9 development centers in US and EU

[06] Chu Hoang Anh

2005 2006 2007 2008 2009 2010 2011

1,870 1,815

2,574

3,4033,758

4,505

5,273

363 436 615 715 7531,055 1,199

Wipro financial outcome

Revenue Income

Achievement

[06] Chu Hoang Anh

Question 1• How outsourcing work to Wipro improve GE

competitiveness in global economy ?

• Does this harm US economy ?

[26] Vu Anh Kha

Outsourcing help GE by:• Greatly reduce labor & operation cost

($300 million)

• Launch pad to other Asian economies

[26] Vu Anh Kha

Long term

Jobs with higher intellectual properties

Higher value added jobs

Short term

• Hurt US workers because many jobs are exported to other country

Effect on US economy:

[26] Vu Anh Kha

Question 2• Did General Electric help to create Wirpo?

• How?

[66] Ta Ngoc Phuong Thao

After GE

• Focus on Technology• 50% revenue from GE

Before GE

• Not clear focus• Tech revenue: $15 mil

Wipro before & after GE

[66] Ta Ngoc Phuong Thao

Wirpo action

• Adopt the Six Sigma process to improve operation efficiency

GE action

• Play off Indian companies against each other to drive down cost

Hard-learned lesson

[66] Ta Ngoc Phuong Thao

Wipro: A new-born expert

By being an contractor for GE, Wipro sharpen its professionalism and move forward to high value-added business and expand its business to the world:

• Hiring local nationals to lead its sales push

• Direct sales presence in 35 countries

[66] Ta Ngoc Phuong Thao

However…• There is an income differentials between software

programmers in the US and India

[69] Nguyen Vinh Ngoc Thi

Question 3• If India’s information technology companies continue to

prosper

• over time what will happen to the income differential between software programmers in the US and India?

• What are the implications for the US economy?

[69] Nguyen Vinh Ngoc Thi

THE SITUATION

• Strength of Indian labor

Talented

Cheap

Solid base of technology

English Speaking

[69] Nguyen Vinh Ngoc Thi

A skilled programmer with 2 or 4 years of experience…

In India

$ 2 one hour

≈$ 10000/ year

In US

≈$ 64,000/ year

[69] Nguyen Vinh Ngoc Thi

If India’s IT companies prosper….

The income gap will narrow…

1. The increased demand of high quality Indian labor

More and more foreign companies outsource their work to India

The demand of Indian engineers

Their average wage

[69] Nguyen Vinh Ngoc Thi

2. The severe competition between Indian headhunters

[69] Nguyen Vinh Ngoc Thi

Decrease in the source of US engineers and programmers

Low cost is unsustainable competitive advantage

• Foreign companies or US will move to another country that has a cheaper source of labor to reduce their costs.

The income gap is really narrower when….

• Indian information technology companies can take self-control to grow their business instead of depending on foreign companies.

WIPRO learnt a valuable lesson from GE

• Wipro moved into high value-added applications by signing a deal to design and engineer tap storage devices for storage technology.

The implication for American economy

• A downward pressure on wages in IT industry

• The price of software maybe will decline

• Focus on more innovative work and higher-skilled activity with a lower cost

• Move to another industry with higher content of knowledge and technology

Division of labor

Question 4

• Since 2000, Wipro has moved abroad, establishing sales offices in 35 nations and design centers in 9 nations.

• > Why is Wipro doing this?

• > What would happen to the company if it did not follow this strategy?

[63] Nguyen Thi Kim Thanh

Why has Wipro moved abroad ?

Oversea expansion as an inevitably objective demand of development process

– Under GE's lead & the hard lesson about efficiency

– To boost sales, enforce prestige & firm foothold

– A global company!!!

[63] Nguyen Thi Kim Thanh

Moving overseas - strategy

[63] Nguyen Thi Kim Thanh

• Sales offices in 35 nations -be mostly staffed by local

nationals! - buy local companies

• 9 product development centers in Europe and US

- more communication with client - deal with language issue

• Wipro wished to be closer to foreign customers and build its local presence

– Be better tailored to the local

market.

– Secure the company's long term

survival and profitability.

Why Wirpo moved abroad?

[63] Nguyen Thi Kim Thanh

• Wipro chased after more lucrative projects beyond the IT work

Improve low-margin end of the software business

move upstream into high value-added applications & services

[63] Nguyen Thi Kim Thanh

Why Wirpo moved abroad?

Scenario… Wipro did not follow international expansion strategy

• Risk of backward lagging behind

• Slower growth and loss of competitive advantage

Q5: Lessons learnt from Wipro

Identify your competitive advantage and use them as a leverage for your company

Low – labor cost is not a sustainable advantage

Global company needs to reinvest their gain into local presence

[39] Le Hoai Nam