Macro Environment Analysis

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Requirement

This assessment item is Part 1 of this report.
Your task is to:
? Choose an organisation
? Select an overseas country of your choice
? Conduct a analysis of the macro environment (ie the economic, political, legal, cultural and ethical environment) that your chosen business would need to be aware of if they were going to "do business" in this country.
Your assessment should be prepared in report style format and should include the following content:
? Executive summary of main findings of report
? Introduction to the report
? Brief company background including why it might consider overseas expansion (Topics 1 & 2)
? Brief introduction to chosen country
? Economic Analysis (Topics 3 & 4)
? Political & Legal Analysis (Topic 5)
? Culture and Ethics (Topic 6)
? Conclusions
? Reference list (in APA format)

Solution

Executive summary

This paper aims at analyzing the macro-environment of India IT industry and to find the scope and suitability of Revolution IT to expand business in this county. The aim of macro environment is to identify the external factors that affect an organization.  Majorly there are five of these factors: economic, political, legal, cultural and ethical that are analyzed in this paper. It is found that India is a good option to expand the business as it has huge potential to absorb the new IT players in the market. Most of the factors in the macro environment are suitable for Revolution IT to set up business here. The challenge will face is in the economic environment regarding the fluctuating interest rates and cultural environment where the company will have to deal with varied cultures and cultural diversity among people in the organization. All other factors i.e. political, legal and ethical suits the expansion of Revolution IT in India. So the company should move ahead and expand its business in the market of India.

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Introduction

Macro environment analysis is concerned with scanning the external environment of any country, region or area where the company operates or is planning to set up its operations. Here in this paper, an analysis of Indian IT sector is done as an Australian company ‘Revolution IT' is planning to expand its operations in India. Revolution IT needs to expand its operations overseas because it will help the company to grow. It hasn’t grabbed many opportunities in new markets till now so expansion will allow the company to utilize the large potential of new markets. The IT sector of India is the fastest growing sectors in the country (Goel & Alhosani, n.d.). The country has attracted inflows of many investments by MNCs and other big domestic countries which have reduced the cost of telecommunications. In today's scenario, the IT sector of India has made the world country leader. It is also advantageous regarding cost advantages, providing skilled human resource and by delivering quality services. India is also one of the fastest growing markets in Asia-Pacific region. The vision of Revolution IT is “To be the best Application Lifecycle Management consultancy in Asia-Pacific” (http://revolutionit.com.au/). We will be the best place to work and have the best service delivery to our customers through the best people, processes and tools." Since the company also targets Asia-Pacific region, so India is a good place for Revolution IT to expand its operations. The aim of macro environment analysis for Revolution IT is to identify the external factors that affect an organization.  Majorly there are five of these factors: economic, political, legal, cultural and ethical. This will benefit the organization in conducting strategic analysis and take the decision whether to move or not. The company will be aware of all the available opportunities in the market of India and will know the threats which he may/may not be able to counter.

Company background

Name of the company: Revolution IT    
History: 

This Company was formed in 2004 in London with the vision of Jamie Duffield, Hamish Leighton and Michael Quill. They identified the opportunity to open this company when they recognized that the testing industry of Australia was not mature much. So the visionaries returned to Australia to form the specialist software testing company. It was set up with core specialty as testing and then it moved to cover solutions across the entire lifecycle of the application. Revolution IT believed in becoming an employer of choice and since then it has developed through strategic acquisitions (http://revolutionit.com.au/).  

About the company: 

Revolution IT makes the software work. It uses the methodologies that are already proven to bring down the IT costs; it strives to meet aggressive timeliness, and it delivers excellent quality of applications. They expertise in mobile, software, web and cloud based testing. It has successfully provided solutions of quality assurance to over 500 clients across Australia. The company has offices in Melbourne, Sydney, Brisbane, Adelaide, Canberra and Singapore (http://revolutionit.com.au/).

The vision of the company: 

"To be the best Application Lifecycle Management consultancy in Asia-Pacific. We will be the best place to work and have the best service delivery to our customers through the best people, processes and tools.” (http://revolutionit.com.au/)

Values of a company: 

Revolution IT believes in collaboration, high performance, integrity and passion to work (http://revolutionit.com.au/). 
Need for expanding overseas: 
Revolution IT needs to expand its operations overseas because it will help the company to grow. It hasn’t grabbed many opportunities in new markets till now so expansion will allow the company to utilize the large potential of new markets. Also, the company should pick new clients for its services now. The company operates in Melbourne, Sydney, Brisbane, Adelaide, Canberra and Singapore. It has the potential to serve more customers abroad so it should expand its activities in other countries as well. 

Indian IT industry: Overview

The IT sector of India is the fastest growing sectors in the country. It has huge scope for growth and globalization has made it achieve many new milestones over past few years.  The contribution of IT sector of India to its economy has been immense since the 1990s. The liberalization led to an inflow of many investments in the country by MNCs and other big domestic countries which have reduced the cost of telecommunications (Goel & Alhosani, n.d.). In today's scenario, the IT sector of India has made the world country leader. Not only India has attracted companies from all over the world to set up their operations in Indian IT industry, but India has also established its superiority globally regarding cost advantages, providing skilled human resource and by delivering quality services. Big giants like Microsoft, Oracle, and SAP, etc. have set up their captive centers in this country because they saw opportunities in the market of India and they recognized the advantages that market of India offers. These organizations have known the fact that India is one of the fastest growing markets in Asia-Pacific region. The vision of Revolution IT is “To be the best Application Lifecycle Management consultancy in Asia-Pacific. We will be the best place to work and have the best service delivery to our customers through the best people, processes and tools.” Since the company also targets Asia-Pacific region, so India is a good place for Revolution IT to expand its operations. 

Macro environment analysis for Revolution IT in India

The aim of macro environment is to identify the external factors that affect an organization.  Majorly there are five of these factors: economic, political, legal, cultural and ethical. Macro environment analysis is done because it is the beginning step for conducting a strategic analysis of the company. By doing this, the available opportunities in the market can be grabbed, and threats can be countered at the correct time. Also, it helps in analyzing that what all affects the growth of the company or the concerned industry and what all is likely to hamper the growth of the company in future. The analysis is done by managers and leaders of the company who scan the macro factors on a continuous basis by observing the latest trends, watching the news, reading business magazines and by staying in touch with famous leaders of industry. Some mangers and leaders also use networking to stay in touch with the latest trends of industry as they network with political parties to take their support for the successful running of business. It can be done solely by a single person or a team, and it can also be done using a brainstorming technique that will involve the knowledge of many different people of the company who may have very precious knowledge about the industry (Michel Robert, 2006).
The Macro environment analysis for Revolution IT in India is as follows:

Economic environment

The factors in this environment include economic growth rates, employment levels, and raw materials costs, the rate of interest, monetary policies, the rate of exchange and inflation rates.
The IT sector of India is in the phase of growth, and the growth is visible through the increased contribution of this sector to the GDP of India. IT has a major share in the GDP of the country, and it has created many employment opportunities for people in India as well as abroad. A huge share of IT sector (more than 70% of revenue) depends on clients from foreign countries and any fluctuation in the exchange rate leads to considerable fluctuations in business performance. Some measures are taken by IT sector in India to counter the exchange rate fluctuations like hedging exchange risks by using future and forward contracts. By doing so, the losses due to exchange rate fluctuations are mitigated. As per the annual report of Infosys, “Every 1% movement in the Rupee against the US Dollar has an impact of approximately 50 basis points on operating margins” (Michel Robert, 2006). Sometimes the global slowdown makes the exports of services of IT and ITeS dim, but the domestic market in India continues to carry great opportunities.
Revolution IT will face challenges related to fluctuating exchange rates but at the same time, the market takes steps to counter the fluctuations. Apart from this, all other economic factors seem to be suitable for the establishment of Revolution IT in India, and other small problems can be dealt with.

Political environment

In this environment, factors related to rules and regulations of government, tax policies, laws protecting consumers, trading agreements and terror attacks are included. The political factors are concerned with the stability of the political environment of the country and the attitudes of political parties towards businesses.  
In India, the government has always been supportive of the growth of IT services. It has allowed to contract the jobs of IT to other nations and to employ foreigners in domestic IT companies. To provide a comprehensive legal environment to IT companies, the government has strengthened Information Technology Act, 2000. Though the government changes every five years in India but till now the influence of political situation on IT has been very little.  The foreign companies that outsource IT jobs are not burdened with any tax sops by the government of India. Also, good relations are maintained by the Indian government will all major powers of the world.
The only challenge in this environment that Revolution IT could face is for certain levels of ambiguity that surrounds the IT products and services taxation in India and the possible terrorist attacks in India as it continues to get threats from various terrorist groups. Rest all is suitable for setting up business here with respect to the political environment.

The factors in this environment include laws related to national employment, trade rules and regulations, consumer protection, various acts enacted that affects business. Apart from this anything that becomes law or regulations is a part of this environment. The legal needs of every country have to be complied with.
Talking about India, many great Acts have come up that has made it easier for IT sector to grow. IT companies can use legal infrastructure electronically as well due to the enactment of Legal Aspects and Policies IT Act 2000 (Michel Robert, 2006). The government has also strengthened Information Technology Act, 2000. The Acts have been enacted to make the operations of IT sector in line with the policies and procedures of the country and to make uniform rules for all companies in this sector that are set up domestically or come from any foreign country.
The legal environment seems suitable for Revolution IT to expand business in India. The Acts established are all for IT companies both domestic and foreign ones. This will give Revolution IT a positive environment to work. It will just have to make efforts to comply with the rules and regulations. If any problem comes, the company can use the legal way to solve it as all necessary acts are already into place in this country.  

Cultural environment

This environment represents society's culture in which a company operates. The factors of this environment are demographics, the growth rate of population, education levels, age distribution, distribution of wealth, social classes, conditions of living of people and lifestyle.
India is a land of a variety of cultures that are popular worldwide. Almost every state in this country follows a separate culture. So businesses have to deal with a lot of diversity management in their organizations. The role of language is very important in doing business in any country (Kenichi, 2002). English is being spoken in India widely, and it makes companies do business with India easily. The working population in India is also increasing, and the skilled people are available in abundance in India. It is a place of immense intellectual capital, and it has a huge potential for employment opportunities.
Revolution IT will have to face the biggest obstacle in Indian cultural environment i.e. it will have to deal with the huge cultural differences that country has. People do things differently in India. The business culture of this country is influenced by various religions and traditions present in the country.  To be successful here, Revolution IT will have to understand the effect of the hierarchical mindset of people and the complex communication patterns in the country.

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Ethical environment

The issue of ethics has gained importance in past few years especially since the popular ‘Satyam scam’ has occurred in the country. Ethics are the moral principles and values that channelize the actions, decisions, policies, etc. of an individual in the company, group, or anybody concerned with the company. Whenever the people face any moral dilemmas, ethics serve as the guidelines on how the person should act in the right manner and be just and fair to all (Kenichi,  2002). Whenever ethical violations occur in the company, the employees, executives and sometimes the entire business is held accountable for it. If any business wants to build trust and develop confidence among the stakeholders, then it has to develop corporate ethics and practice them. 
Revolution IT should not focus on earning short term gains when it comes to India because people value ethics a lot here. The instances of fraud cannot be hidden from the public for a long time.  So the company will have to take care initially while setting up the business that it does not fail to create a good image in the eyes of people of India. This cannot be regarded as a challenge for the company. Instead, it should be regarded as a necessity as well as the opportunity to set up business in India and for running it successfully. 

Conclusion

The IT industry of India is in the condition of perfect competition, and various companies are dotting across India for setting up their foot in IT sector. It is not a difficult task as the entry and exit barriers are low here for IT companies. But differentiation of product is low as most of the IT companies offer similar products and services which are often homogeneous. The impediments to the flow of information are low, everybody is fully aware of the trends in the market and is willing to grab the new opportunities. The analysis of macro environment is hence important to conduct for Revolution IT. It is found that India is a good option to expand the business as it has huge potential to absorb the new IT players in the market. Most of the factors in the macro environment are suitable for Revolution IT to set up business here. The challenge will face is in the economic environment regarding the fluctuating interest rates and cultural environment where the company will have to deal with varied cultures and cultural diversity among people in the organization. All other factors i.e. political, legal and ethical suits the expansion of Revolution IT in India. So the company should move ahead and expand its business in the market of India. 

References

  • Arora and Athreya S., “The Software Industry and India’s Economic Development”, Information Economics and Policy, Vol 14, 2002,pp 25-273.

  • Dataquest, “Industry Overview” Vol, XXIII, No. 13 July, 2005, New Delhi.

  • DIT (Department of Information Technology)( Information Technology Annual Report, 2006-07”, Ministry of Information and Communication, Government of India (www.mit.gov.in), 2007.

  • Essays, UK. (November 2013). The Indian Information Technology Industry. Retrieved from https://www.ukessays.com/essays/management%20/the-indian-information-technology-industry.php?cref=1

  • Goel, A., & Alhosani, A. India: A Macro Level Analysis of World's Fastest Growing Economy. SSRN Electronic Journal. http://dx.doi.org/10.2139/ssrn.1271007

  • Michel Robert, (2006). The New Strategic Thinking: Pure & Simple, McGraw-Hill.

  • Kenichi Ohmae, (2002). The Mind of the Strategist, Tata McGraw-Hill Education.

  • Kenichi Ohmae, Nicholas Brealey, (2000). The Invisible Continent: Four Strategic Imperatives of the New Economy, 1 st edition, HarperBusiness.

  • N. Kumar, “Indian Software Industry Development: International and National\ Perspective”, Economic and Political Weekly vol 36 (44), 2001

  • Nasscom, “Software Industry in IndiaA Strategic Review”, National Association of Software and Services Companies, New Delhi ,2007

  • Online sources:

  • http://revolutionit.com.au/

  • http://www.authorstream.com/Presentation/titu957-939800-indian-it-industry-ppt/

  • http://www.slideshare.net/NiteshSinghPatel/pest-it-32360882

  • http://www.reuters.com/article/2012/12/11/idUS73089+11-Dec-2012+BW20121211

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