Scribd
Upload
14 views4 pages

Project 1

The document identifies the company's low annual margin improvement rate of 11% compared to competitors' 26%, primarily due to high contractor costs and low profitability in certain markets. It suggests an acquisition strategy to improve margins through enhanced pricing power and diversification, while also recommending operational efficiency improvements and product diversification if acquisitions are not feasible. The final guidance emphasizes focusing on high-margin industries like healthcare in the US and Europe, reducing reliance on low-margin markets, and leveraging automation to cut costs.

Uploaded by

himanktaneja2010
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
14 views4 pages

Project 1

The document identifies the company's low annual margin improvement rate of 11% compared to competitors' 26%, primarily due to high contractor costs and low profitability in certain markets. It suggests an acquisition strategy to improve margins through enhanced pricing power and diversification, while also recommending operational efficiency improvements and product diversification if acquisitions are not feasible. The final guidance emphasizes focusing on high-margin industries like healthcare in the US and Europe, reducing reliance on low-margin markets, and leveraging automation to cut costs.

Uploaded by

himanktaneja2010
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 4

Project-1

Identification of the Problem


The company's low annual margin improvement rate (11%) in comparison to
competitors' rate of 26% is its main problem. This is because of:

Contractors are expensive (1.4 times more expensive than permanent staff).

Some markets have low profitability (Asia Pacific: 14%, India: 9% margin).

Due to its revenue concentration in BFSI and digital marketing, it is


susceptible to risks unique to its industry.

restricted growth in high-margin industries and regions (BFSI in India,


healthcare in the US and Europe).

Breakdown of Profitability Revenue Analysis Using the


MECE Framework
Revenue is separated into:

Maintenance & IT Services (60%)

Important markets: Europe (20%), the Middle East (27%), and the US (32%).

Distribution by sector:

High margin (42%) → BFSI (46%)

Healthcare (21%) → Expanding industry

Other industries (public, retail, travel, etc.)

Business of Products (40%)

Digital marketing is the main product, accounting for 90% of sales.

DevOps and cybersecurity don't contribute much.


Growth Potential: BFSI is stable but competitive, and healthcare is expanding
in the US and Europe.

India: BFSI has a low margin despite its strength.

APAC and the Middle East: Low margins and moderate growth.

Evaluation of Costs
Key factors influencing costs:

high costs for contractors (1.4 times those of permanent staff).

high operating costs in Asia Pacific and India, two low-margin regions.

sluggish growth in revenue relative to rivals.

Will an Acquisition Strategy Increase Margins?


Yes, if done properly.
Why?

Improved pricing power → Higher-value projects → More experience with


specialized technologies.

Opportunities for cross-selling → Offering IT solutions to the clientele of the


acquired business.

Diversification by geography and sector → Increasing into BFSI (India) and


healthcare (US/Europe) can boost margins.

Decreased reliance on contractors → High contractor costs are decreased by


purchasing companies with permanent, qualified staff.

Other Approaches (If Acquisition Is Not Possible)


If acquisitions are not feasible, the business ought to think about:
1. Enhancements in Operational Efficiency
Reduce reliance on contractors → Hire full-time staff instead of expensive
contractors.

Reduce project costs by automating IT solutions and maintenance.

2. Product Diversification
Increase your offerings in DevOps and Cybersecurity (rather than just Digital
Marketing).

Combine products and IT services to increase client stickiness.

3. Price changes and market expansion


Target the high-margin industry of healthcare in the US and Europe.

Premium pricing in India's BFSI sector → They are able to raise rates because
it is a core sector.

Leave or lessen your attention to Asia Pacific's low-margin markets.

Final Guidance
Purchase specialized tech firms in:

Higher margins for healthcare IT (US & Europe).

Automation powered by AI and BFSI (India) → Cut expenses and increase


productivity.

Cybersecurity companies will broaden their range of products.

Reduce contractor expenses through automation and internal hiring.

Change in geographic focus:

Increase healthcare in the US and Europe.

Use premium pricing to streamline BFSI operations in India.


Decrease dependence on markets with low profit margins, such as APAC.

The business can boost long-term profitability, diversify revenue, and raise
margins by putting these strategies into practice.

You might also like