Company Mahindra Satyam

Introduction:

After Satyam Computers overinflated its profits over a period of several years to the tune of approximately $1 Bn the ephemeral Satyam Board subjected the company to an open bid. Tech Mahindra finally emerged triumphant in acquiring crisis-ridden Satyam Computer Services by issuing Rs.58/share[1]. Its new brand identity, 'Mahindra Satyam', was unveiled on June 21, 2009[2]. The new identity will blend core values from the Mahindra Group and the strengths of Satyam, said Mr Anand Mahindra, Vice-Chairman and Managing Director of the Mahindra Group[3]. Though Tech Mahindra acquired Satyam, Tech Mahindra and Mahindra Satyam operate as separate entities.

Through this commentary I shall analyse whether the new entity Mahindra Satyam can regain its past glory and be profitable with the help of SWOT, Ansoff Matrix and Porters' generic strategy.

SWOT analysis of the new brand entity "Mahindra Satyam"

Strengths:

Tech Mahindra is built around the core values of customer satisfaction, quality before price and dignity of the individual and Mahindra Satyam integrates these into Satyam's fabled expertise in the IT industry. The amalgamation has led to Mahindra Satyam's emergence as a powerful player in the IT industry. The new entity "Mahindra Satyam" also benefits from synergies since this acquisition was a horizontal integration for Tech Mahindra. Both companies are planning to share infrastructure in places such as Bangalore, the US and Europe[9]. This synergistic approach will enable Mahindra Satyam to benefit from the best management practices of the Mahindra Group.

Weaknesses

Although, the new entity "Mahindra Satyam" benefits from synergies, Satyam suffered from massive drawbacks before the acquisition. Soon after the scam broke out, Satyam' staff reduced from 53,000 to 48,000 along with the top brass resigning. Mahindra Satyam lost employees with expertise in the industry. Big corporations like Coca-Cola walked out of their contracts with Satyam[10].

Opportunities

Thought the IT industry is undergoing a global slowdown, opportunities for growth and expansion exist for Mahindra Satyam. Mahindra Satyam could strike a merger with Tech Mahindra which would give the former a significant market share and a better market standing. Mahindra Satyam could also look into transforming into an ICT company against its current profile of an IT company, by merging with Tech Mahindra and offering complete telecommunications and IT solutions to clients.

Threats

Several threats also remain for Mahindra Satyam. The $1 Bn liability arising from the Upaid case and many other litigations against Satyam is one of the biggest threats to Mahindra Satyam[11]. Mahindra Satyam also remains vulnerable to takeover by other IT giants with significantly larger revenues and market share. With the current downturn in the economy and the general slowdown of IT industries, Mahindra Satyam is facing the same problems and challenges that the market is facing.

Ansoff Matrix for Mahindra Satyam

The Ansoff Matrix will examine the possibilities for market development and penetration for Mahindra Satyam

Market penetration:

  1. Rebranding: Through this exercise Mahindra Satyam gets a new image that of commitment, efficiency and expertise which will enable it to attract new customers at the same retain the older ones.
  2. The acquisition of Satyam by Tech Mahindra helped the new entity "Mahindra Satyam" to gain fresh contracts from former clients. These contracts, in the range $1 Mn to $20 Mn have resulted in an increased traction in the verticals of healthcare, utilities and retail. Mahindra Satyam managed to revive a deal with a former client, an oil exploration company[12].
  3. Mahindra Satyam is trying to rule out methods to become more cost-effective, to become better at onsite offshore mixes and to reduce prices to attract customers.
  4. Mahindra Satyam has appointed Bain & Co as consultants to prepare a plan to win back the old customers and to offer better transformational experience and new value proposition to the new and existing customers[13].

Product Development:

  1. Mahindra Satyam is trying to strike a merger with Tech Mahindra to offer more products and services to its clients, especially in the telecom sector. This merger will put Mahindra Satyam in the domain of ICT[14] industries against its current profile of an IT company. The move will help Mahindra Satyam to bag contracts from clients in various countries.

Market Development:

  1. Mahindra Satyam has bagged new deals from companies in the Asia-Pacific and Europe. Mahindra Satyam will now provide its services in areas of outsourcing related to enterprise, business intelligence and engineering services in these markets.
  2. Mahindra Satyam has entered into a strategic alliance with Australasia's ICT provider Gen-I. This alliance with Gen-i will help Mahindra Satyam to explore the New Zealand market efficiently[15].

Diversification:

  1. Mahindra Satyam has announced a global alliance partnership with Vision solutions, the leading provider of IBM solutions. This tie-up will enable them to leverage the growing market for HA/DR (high availability and disaster recovery) solutions by exploring new markets and supporting existing clients[16].
  2. Mahindra Satyam would get 110 customers of Tech Mahindra's enterprise service business. This will help Mahindra Satyam to further new products and venture into newer markets.

Porter's Generic Strategies for Mahindra Satyam

In order to understand the competitive advantages for the new entity over the market leaders Infosys, Wipro and TCS I shall use Porter's Generic strategies.

Cost Leadership:

Satyam has made use of predatory pricing strategies for business from 1 or 2 of its clients. With the financial backup of Tech Mahindra, Mahindra Satyam can focus on better pricing. There will be increasing synergies and economies of scale in the long run.

Differentiation:

With Tech Mahindra's track record and Satyam's expertise customers are definitely going to recognize the value created through the new identity and the imminent merger of the two companies will let it create a niche position in the market.

Focus:

Through the takeover the new entity can target its existing customers in IT and with the impending merger with Tech Mahindra it will be a cohesive targeting of Telecom and IT.

Evaluation

The takeover will definitely help the new entity to build the confidence of the shareholders, customers and the demoralised staff. But only when the company can deliver its goods can it sustain itself in the long run. Meanwhile the task is cut for the management to rebuild its tarnished image and market standing.

Conclusion:

The new entity created through the takeover has already set in motion its path to recovery. While there are hurdles in form of the legal settlements, culture clash for the new management and employees and image rebuilding, the new entity under the Tech Mahindra has already secured new clients through alliances and given time it could re establish itself to its earlier position. A imminent merger with Tech Mahindra combined with global recovery the future looks bright for Mahindra Satyam.

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