According to Leo Sun an online business journalist ‘A business and its management need to understand the state of the micro as well as macro-economic environment or else face sinking the business instantly’
In light of the aforementioned statement by Leo Sun this report introduces the concept of macro and industry environmental analyses from a WNS Holdings Limited perspective.
The Cape Peninsula University of Technology (CPUT) mandated its fourth (4th) year BTECH Human Resources Management to select an industry specific organisation and to conduct relevant research and analyses relating to its macro as well as industry environment.
The purpose of this report is to:
‘ Define the concept of macro and industry environment
‘ Introduce WNS Holdings Limited as an organisation
‘ Identify the relevant macro environmental factors (PESTLE) impacting WNS and linking it to an issues priority matrix.
‘ Assess WNS Holdings Limited’s key success indicators aligning it to Michael Porters ‘Five Factor Framework’ with an in-depth view of its rival competitors, business relations, regulations ,bargaining power and industry revolution mechanisms.
The concept of macro (external) environmental analysis reviews factors beyond the control of an organisation while micro environmental analysis relates to the factors within the control of the organisation. (Investopedia 2014)
2. LITERATURE REVIEW
This review will be centred on WNS (Holdings) Limited and the impact of the macro and industry environment on the organisations competitive advantage, sustainability and long term profitability. The macro environmental factors will be assessed based on the concept of PESTLE while the industry environmental factors will consider competitors, suppliers, bargaining power and key stakeholder relationships.
3. METHODS OF INVESTIGATION
Based on the literature review it deemed necessary to use methods such as archival sources to establish the impact of the macro and industry environment has on WNS (Holdings) Limited.
Interviews
Grobler, Warnich, Carrell, Elbert & Hatfield (2005:9) state that ‘an interview is a mechanism allowing valuable interpersonal communication to take place between two persons regarding a particular point of interest.
Having defined the meaning of an interview it should be noted that we could unfortunately not conduct an interview with one of WNS Global Service SA employees regarding the organisation, its vision for the future, however we got the opportunity to listen to an interview that Govindraj Ethiraj conducted with Keshav R Murugesh, Group CEO of WNS Group for the NASCOM India Leadership Forum in 2014. The interviewee (Govindraj Ethiraj) asked specific questions and the purpose of the interviews was to assess the industry challenges as well as the future for WNS (Holdings) Limited.
Research and Archival Sources
WNS (Holdings) Limited’s Annual sustainability report was reviewed and all data contained in the aforementioned report was extracted and presented in terms of the macro and industry specific environment. See appendix 1.
4. DESCRIPTION OF THE ORGANISATION AS WELL AS INDUSTRY
WNS was established in 1996 when the organisation at that time called World Network Services, got the opportunity to offer the back-end business of British Airways as an outsource business partner. The organisation has since grown from a 12 seat outsource company to at 27 020 employee organisation with more than 200 global clients.
The company and industry recognition overview, See appendix 2, www.wns.com/About-Us/Corporate-Overview.aspx The appendix will give a broader understanding of the complex Business Process Management (BPM) industry, where WNS offers global clients operational excellence and expertise to outsource their back-end, voice and technical services in Banking and Financial Services, Insurance, Healthcare, Manufacturing, Media and Entertainment, consulting and professional services, Retail and Consumer packaged goods, Telecom, Shipping and Logistics, Travel and Leisure as well as Utilities to WNS global services. The overview will also give a better understanding of how this organisation has grown from strength to strength and how it has ensured a global footprint over the world to create a sustainable and growing organisation for all its employees as well as excellent expertise and quality service to all its clients and potential clients around the world.
5. FACTORS IN THE MACRO ENVIRONMENT THAT IMPACTS WNS
5.1 Economic Environment
WNS operates in multiple countries and the economic conditions in each country vary and present different challenges for the company in the financial markets and respective economies in general.
In the United States of America (USA) there is a concern about the slow pace of economic recovery from the recession it experienced in 2008 which is affecting new business and consumer spending in the country. As a result of this, the general level of economic activity such as decreases in business and consumer spending. This could result in a decrease in demand for outsourcing services, which will reduce profits (WNS (Holdings) Limited, 2013, p. 7).
The European sovereign debt and economic crisis have contributed to increased volatility and financial instability. As a result many key indicators for sustainable growth remain a challenge. The on-going crises may affect WNS’s liquidity and financial condition negatively. Furthermore should the Eurozone debt crises remain unresolved, WNS’s ability to access financing will be affected (WNS (Holdings) Limited, 2013, p. 7).
A large portion of WNS’s clients are in the insurance and travel industry, in developed countries such as USA and Europe. Economic challenges affecting these industries could reduce the company’s revenue. However, growth and development in these key industries would mean more outsourcing opportunities for WNS (WNS (Holdings) Limited, 2013, p. 8).
In the 2013 and 2012 fiscal period, 35.5% and 44.7% of WNS revenue, respectively, and 31.9% and 33.6% of revenue less repair payments, respectively, were derived from clients in the insurance industry. In the same period, clients in the travel industry contributed 20.5% and 18.8% of WNS’s revenue, respectively, and 21.5% and 22.6% of its revenue less repair payments, respectively (Holdings) Limited, 2013, p. 8).
5.2 Technological Environment
Technology is changing the business landscape as we know it, where we finding new emerging industries while traditional industries become obsolete.
There has been a recent shift from outsourcing call centre related processes where companies are outsourcing a more wider range of complex business processes, such as finance and accounting, research and analytics, human resources and industry-specific solutions. Companies are also asking outsource providers to supply higher-value services which include process re-engineering and transformation services, which will increase competitive advantage as well as increase profits. To supply such complex services and transformational capabilities, WNS has increasingly leveraged strong technology platform solutions in order to deliver value to their customers and smarter processes (WNS (Holdings) Limited, 2013, p. 27).
In response to changes in technology WNS is constantly developing technology-enabled solutions that utilize the latest technology. WNS has become a technologically advanced company which offers a comprehensive data, voice, analytical and business transformation services.
5.3 Political Environment
The political-legal factors of a country may have beneficial or negative impact on a business. Examples of these factors are trade policies, labour legislation, pricing policies, health and safety legislation and industry specific regulators. WNS operates in multiple countries, all with unique political legal environments. This may present challenges and in some cases be beneficial for the company.
In the United Kingdom and USA offshore outsourcing is a politically sensitive issue. Organisations and public figures have voiced their concerns that offshore outsourcing results in the loss of jobs. In response to this, these countries have enacted legislation with the aim of limiting outsourcing operations. This may place become a challenge for WNS in acquiring clients in these countries (WNS (Holdings) Limited, 2013, p. 13).
In India the government has supplied great tax incentives and relaxed certain regulatory restrictions with the aim of encouraging foreign investment in specific sectors within the economy which includes the outsourcing industry. This has benefited WNS. Further benefits are tax holidays, liberalized import and export duties and preferential rules on foreign investment and repatriation (WNS (Holdings) Limited, 2013, p. 19).
5.4 Global Environment
As WNS increases its global presence, international economic conditions present continuous challenges. Certain adverse financial developments have caused a slowdown in the international financial markets which results in a decrease in business and consumer spending. Continued adverse global economic conditions could increase the volatility of the company’s share price.
Operating globally may present challenges when conducting business in a foreign country. In response to globalisation WNS has proactively designed training programmes related to diversity and cross-cultural understanding to groom employees with a global mind-set and soft skills to operate effectively in diverse environments. Furthermore WNS seeks to instil global managers with an awareness and appreciation for cultural diversity and provide them with the support and techniques to operate successfully (WNS (Holdings) Limited, 2013, p. 54)
5.5 Demographic Factors
This refers to the socioeconomic characteristics of a population (i.e income levels, age distribution, geographic distribution, etc.)
WNS conducts its business across the vast expanse of a number of countries (i.e China., South Africa, UK, US, The Philippines, Sri-Lanka, etc.), each with varying macro environmental factors. It can therefore be stated that WNS has a huge appreciation for embracing diversity. The over-arching business strategy remains consistent in an attempt to generate clean profits. The Financial Reports provide evidence of this in that there is constant growth.
WNS specialises in outsourced business management processes. A strategic approach has been taken to the way in which they have laid out their business models. It has required that WNS examine the demographics of the regions in which it conducts its business to ensure the correct placement of a business process,
For example, an understanding around the income levels of the target clientele would help identify the products’ pricing plan. The consumer behaviour of the population within a certain area would help formulate a strategic marketing plan.
One example of how WNS has taken cognisance of this is that call centre operation has been directed to the regions with a proficiency in the English dialect. In regions such as Sri-Lanka where the population are not as proficient in the use of the English language, WNS has taken a strategic decision to ensure that they do not place call centres in India.
5.6 Socio-Cultural Factors (WNS is global ‘no mention is made of different religions /beliefs impacting business operations?)
Socio-cultural factors are the forces that characterise the relationships and activities of people in a specific region or area (i.e. values, beliefs, attitudes, traditions,etc) (Ask.com, 2014).
South Africa’s population can be characterised by its diversity. The population comprises of four main groups (i.e. Blacks ‘ 79%, Whites ‘9%, Coloureds ‘ 9% and Indian / Asian ‘ 3%).
The topic of education is extremely problematic in the South African context, especially when considering how businesses can breach the skills gap in an attempt to remedy the common problem of unemployment experienced by this economy.
WNS is aware of these factors and the potential threat it might pose. WNS South Africa has formed its own College where they have subscribed to a SETA for accreditation of the training and development plans implemented for staff. This helps improve the levels of education of the workforce which enables the portability of existing staff and this in-turn avails job opportunities.
Specific mention is made in the annual report about the FET College as a WNS initiative to ensure that employees are sufficiently trained to support the industry.
5.7 Environmental / Ecological Factors
In the context of WNS conducting its business operation in China, where the population size is at an extreme of about 1 364 190 000 people, a natural deduction could be made that there would be a huge (great) need for consideration of how business operation impacts the natural environment of an economy (Wikipedia, 2014).
There are huge environmental problems experienced in China with the overgrazing of grasslands, deforestation and ultimately the depletion of the ozone layer. This could be seen as an innovative and exciting business opportunity for WNS where a greater effort be made to promote the sustainability of the natural environment, by means of remaining compliant with environmental protection laws.
‘
LOW Probability of Occurrence HIGH Impact on WNS (Holdings) Limited HIGH LOW
HIGH-PRIORITY
Political (Legal) – International Trade and Business Regulations , Labour Legislation and Political stability
Economical’Globalisation, Competitors (Amazon), Strength of Currency (India, South Africa, UK, USA) , Global recession, Collapse of the European, Capital
Technological- Newest innovation to telecommunications and transactional technology, Breach in IT Systems (Fraudulent) logins
MEDIUM-PRIORITY
Socio-cultural-Religious observances , cultural diversity
Natural- Going Green, environmental laws
LOW PRIORITY
Economic -WNS liquidation /potential acquisition by another major competitor
Political -Collapse of the European Union
Socio ‘Cultural ‘Religious War
Figure 1 – Issues Priority Matrix of WNS (Source: Adapted from Lederman, LL. 1984 ‘Strategic Management P 197)
6. WNS ISSUES PRIORITY MATRIX BRIEF ANALYSIS
Having conducted the Issues Priority Matrix on WNS (Holdings) Limited it has become apparent that the high priority issues which could have an impact on the organisation competitive advantage, sustainability and profitability are political, economic and technological. WNS (Holdings) Limited is impacted by globalisation and is therefore influenced by political stability, international trade regulations, strength of international exchange rates and currencies and well to staying abreast on newest technological systems reducing the risk in fraudulent transactions.
The medium priority issues identified for WNS (Holdings) Limited were Socio Cultural and Natural (Environmental) diversity. WNS is well established across various continents and there could potentially be influenced by religious observances as well a environmental legislation.
The low priority issues for WNS (Holdings) Limited relates to future liquidation or possible acquisition by an opposing competitors, the collapse of the European Union as well as a potential religious war.
7. INDUSTRY ANALYSIS
7.1 Key success factors
WNS’ competitive strengths allow them to prosper and survive within the BPO industry. They have a total of 236 clients across the globe and offer complex services such as finance and accounting, research and analytics and industry-specific solutions. WNS accommodates customer demands by leveraging off technology solutions, analytics, and industry-specific knowledge to deliver best practice. Customers evaluate their BPO/BPM provider by their reputation, industry-specific knowledge, and process expertise across horizontal service offerings, the ability to innovate and reduce costs without diminishing quality of service and their global delivery platform.
A few industry key success factors of WNS are that they are well positioned for the evolving BPO/BPM market – they hold portfolios of complex services, transformation capabilities, and technology-enabled solutions. WNS also possess deep industry expertise with their legacy of client relationships, acquisitions and management expertise, their company is divided into industry-focused business units which allow them to be more responsive to customer needs. Another success factor is that they have proven a global delivery platform which benefits their clients by providing them with high-quality services from scalable, efficient and cost-effective locations that also benefit from having language capabilities and cultural alignment in their outsourcing programs. They also have experience in transferring processes offshore and running them efficiently. This was done through developing sophisticated programs that allows them to transfer business processes to their delivery centres. They have also invested in quality processes that are satisfied by the International Standard Organisation, as well as introduced LEAN and the Six Sigma methodologies to improve quality and process delivery.
WNS is technology-intensive organisation and another key success factor is protecting their Intellectual Property. This is done by relying on a combination of confidentiality agreements, nondisclosure agreements, trade secret, copyright and trademark laws. India is also a member of the Berne Convention which is an international intellectual property treaty and they have agreed to recognize protections of intellectual property rights under the laws of foreign countries.
8 RELATIONSHIPS THAT SHAPE THE INDUSTRY
Identifying industry boundaries eludes companies to analyse the competitive forces within the industry environment to establish opportunities and threats. Michael E. Porter developed a framework for industry analysis that shapes the industry competition, known as ‘The Five Forces Model’.
The forces include:
8.1. Rivalry between existing competitions
8.2. Threat of new entrants
8.3. Threats of substitutes
8.4. Bargaining power of buyers
8.5. Bargaining power of suppliers
In addition to the five forces Brandenberg and Nalebuff identified complementors as a relationship and emphasised the importance thereof in their value net framework. (Louw & Venter, 2013:207). Wheelen and Hunger further extended Porter’s five forces model by including the government and industry regulators as a force. (Louw & Venter, 2013, p.210)
8.1. Rivalry between existing competitors
In their 2013 annual report WNS highlighted possible anticipated risk factors which could affect their competitive rivalry. They face competition from onshore and offshore business process outsourcing companies and from information technology companies which offer similar services. The market for outsourcing services is very competitive and they expect competition to intensify and increase from a number of sources. In addition, some of their competitors may enter into strategic or commercial relationships among themselves or with larger, more established companies in order to increase their ability to address client needs, or enter into similar arrangements with potential clients. Increased competition, their inability to compete successfully against competitors, pricing pressures or loss of market share could result in reduced operating margins which could harm their business, results of operations, financial condition and cash flows. (WNS (Holdings) Limited 2013, p. 23).
8.2 Threat of new entrants
WNS emphasised the threat of new entrants as a risk of losing clients. The trend toward offshore outsourcing, international expansion by foreign and domestic competitors and continuing technological changes will result in new and different competitors entering our markets. These competitors may include entrants from the communications, software and data networking industries or entrants in geographic locations with lower costs than those in which we operate. Some of these existing and future competitors have greater financial, human and other resources, longer operating histories, greater technological expertise, more recognizable brand names and more established relationships in the industries that we currently serve or may serve in the future. (WNS (Holdings) Limited 2013, p.23)
8.3 Threat of substitutes
WNS’ primary business is to provide business process outsourcing services such as data processing, finance and accounting, customer care, technology solutions, research and analytics and industry-specific back office and front office processes to industries like Travel, Insurance, Banking and Financial Services, Manufacturing, Retail and Consumer Packed goods. (WNS, n.d)
Clients may also choose to run their business processes themselves, either in their home countries or through captive units located offshore. (WNS (Holdings) Limited 2013, p.23)
8.4 Bargaining power of buyers
As at March 31, 2013, WNS had a diverse client base of 236 clients across a variety of industries and process types, including companies that they believe are among the leading players in their respective industries. A threat known to WNS is that their clients may also choose to run their business processes themselves, either in their home countries or through captive units located offshore. Their 2013 report highlights the risks that a few major clients account for a significant portion of their revenue and any loss of business from these clients could reduce their revenue and significantly harm their business. They further indicated that their revenue is highly dependent on clients concentrated in a few industries, as well as clients located primarily in Europe and the US. Economic slowdowns or factors that affect these industries or the economic environment in Europe or the US could reduce their revenue and seriously harm their business. (WNS (Holdings) Limited 2013, p.14)
8.5 Bargaining power of suppliers
The company has been organized into vertical business units to focus on each of the industries that they target and to manage more effectively their sales and marketing process. They further seek to expand their relationships with existing clients by identifying additional processes that can be transferred to their global delivery centers, cross-selling new services, adding technology-based offerings and expanding into other lines of business and geographies within each client. As a result of this strategy, they have a strong track record of extending the scope of their client relationships over time. (WNS (Holdings) Limited 2013, p.40).
For new clients, they seek to provide value-added solutions by leveraging their deep industry knowledge and process expertise. As a result of their capabilities and industry vertical go-to-market approach, they’ve been able to compete effectively for new opportunities as they arise. (WNS (Holdings) Limited 2013, p.41).
9. EXTENDED MODEL OF INDUSTRY COMPETITION
9.1 Government Regulations
Due to the industry and geographic diversity of their operations and services, their operations are subject to a variety of rules and regulations, and several federal and state agencies in Europe, China, Costa Rica, India, the Philippines, Singapore, South Africa, Sri Lanka, United Arab Emirates and the US that regulate various aspects of their business. Failure to adhere to the regulations that govern their business could result in them being unable to effectively perform their services. Failure to adhere to regulations that govern their clients’ businesses could result in breaches of contract with their clients. (WNS (Holdings) Limited 2013, p.69).
9.2 Complimentary
Their business strategy objective is to strengthen their position as a leading global business process outsourcing provider. To achieve this, they will seek to amongst other increase their client base, expand their existing relationships and further develop their industry expertise. They thus far have made significant investments to accelerate their growth which include the expansion of other sales channels including the development of new partnerships and alliances and broadening their engagement with outsourcing industry advisors and analysts (WNS (Holdings) Limited 2013:40).
10. INDUSTRY EVOLUTION ‘ COMPETITION OVER TIME
It is clear that any organisation’s product or service will fall within a life cycle and it is because of this life cycle that organisations need to be very strategic to ensure competitiveness through innovation and quality of service/product. Competitive rivalry will always depend on the growth in the industry and the level of competition in the industry. With WNS we have found that it one of the fastest growing organisations within its industry, See appendix 3, press release in October 2013 regarding WNS growth. WNS has expanded its service range to create a vertical service delivery centre. This model have shown great growth and clients welcome the focus that their industry enjoys with the competence of WNS expertise in all these fields.
The industry lifecycle has several growth phases that they have to go through, namely:
a) Development phase: A product or service is on offer and few competitors in the market ‘ this could be temporary in nature
For WNS this phase started in 1996 when they started the outsourcing industry in India with British Airways with only 12 employees with very little competitors
b) Growth phase: Product or service on offer and more competitors in the market to profit from the bigger market share.
For WNS this started in July 2006 when it was listed on the NYSE and with enormous growth and acquisitions moved their headcount to +- 24000 employees and more than 200 global clients
c) Shake out phase: This phase is known as the early phase of maturity and this is when the competitors are really increasing but because of weak competitors their result in poor profitability.
WNS has been in this phase for the past 5 years as they are globally very strong and strategically placed themselves in the forefront of the industry with the right skills and business model to ensure client delight and quality of product/service.
d) Maturity phase: Growth peaks slow down and emphasis on retaining market share, many competitors and little market share. This is normally when acquisitions and mergers happen.
e) Decline: Competitors may drop out as the need for product/service will drop as well
No specific timeframes for the lifecycle ‘ it may last a few months or even decades, like for instance the BPM industry. In the US the call centre industry, which is a part of the BPM industry is about 45 years old, in India this service/industry is about 35 years old and in South Africa only 10 years, which means, for an organisation like WNS who have service centres in all global continents, the lifecycle of their product/service offering is definitely still in growing phase.
11. COMPETITOR ANALYSIS
WNS top competitors are ExL Service Holdings, Genpact Limited, Infosys Technologies Limited, etc. WNS clients may also become a competitor should they choose to run their business processes in-house, either in their home countries or through confined units located offshore. WNS utilizes Hoover’s ‘ a business research company to conduct up-to-date information about companies, decision-makers and industries. Hoover’s provide WNS with a competitive landscape report which benchmarks on over 30 parameters related to profitability, sales, growth, market cap, employees etc. This report is utilised to conduct a competitive analysis, identifying trends and inform corporate strategy.
Competitors are moving towards offshore outsourcing and expanding internationally which results in new and different competitors entering the BPO market. These competitors may include entrants from the communications, software and data networking industries or entrants in geographic locations with lower costs than those in which we operate (WNS (Holdings) Limited, 2013, p. 23). Other competitors may enter into strategic relationships among themselves or with larger established companies in order to obtain new clients.
WNS operates and competes on a local and global level.
12. CUSTOMER ANALYSIS
WNS segmented its business through vertical industry-focused business units which enable them to provide more specialized services tailored to address each respective industry. The major industry verticals WNS targets are the insurance; banking and financial services, travel and leisure; retail; media and entertainment; manufacturing and telecommunication, and public sector industries. In addition to the vertical units, WNS also offers horizontal services that are common across multiples industries. These horizontal services include contact centres, finance and accounting, research and analytics, technology and legal and human resources services.
13. CONCLUSION
The final conclusion to this assignment was to find out how the macro factors can influence the strategic approach of an organisation like WNS, who is a global organisation still in the growth phase how they have managed to strategically place themselves in the forefront of their industry. They have strategically placed them in the top end of the market with a client base of more than 200 worldwide and strategically ensuring a footprint in all continents to be able to leverage off all technical, political, demographical (languages), socio cultural factors to ensure their growth. They have been very successful financially and this will keep investors and shareholders happy. Their strength to analyse the competition and to analyse the data of their clients to increase their excellent service and value add to the customers/clients will ensure new business ventures and by implementing new business strategies it will keep them in the growth phase for some time to come and will ensure that they realise their vision of becoming the largest BPM organisation globally.
14. BIBLIOGRAPHY
Books/Reports
Grobler, P.A., W??rnich, S., Carrell, M.R., Elbert, N.F. & Hatfield, R.D., 2005. Human Resources Management in South Africa. Cengage Learning Inc.: United Kingdom
Louw, L. & Venter, P., 2010. Strategic Management Developing Sustainability in Southern Africa. 2nd ed. Cape Town: Oxford University Press.
WNS (Holdings) Limited, 2013. Annual report Pursuant to Section 13 or 15(d) of the Securities exchange Act for the fiscal year ended March 31, 2013. Washington: WNS (Holdings) Limited.
Internet Sources
Ask.com, 2014. What are socio-cultural factors. [Online]
Available at: http://www.ask.com/question/what-are-sociocultural-factors?ad=dirN&o=0
[Accessed 01 May 2014].
The Strategic CFO. n.d. Threat of New Entrants.
Available at: http://strategiccfo.com/wikicfo/threat-of-new-entrants-one-of-porters-five-forces/
[Accessed on 30 April 2014]
Investopedia
Available at: http://www.investopedia.com/terms/m/macro-environment.asp
[Accessed on 26 April 2014]
Leo Sun ‘Macro environment and the Business
Available at: http://www.businessdictionary.com/article/598/macroeconomic-factors-and-the-management-environment/
[Accessed on 26 April 2014]
Wikipedia, 2014. WNS Global Services. [Online]
Available at: http://en.wikipedia.org/wiki/WNS_Global_Services
[Accessed 01 May 2014].
WNS. Global Services. 2014. About Us [Online]
Available at: http://www.wns.com/About-Us.aspx
[Accessed on 1 May 2014]
NASCOM India Leadership forum 2014 ‘ Interview with Keshav Murukesh, CEO of WNS Global Services [Online]
Available at: https://www.youtube.com/watch?v=byptulcpjl4
[Accessed on 1 May 2014]
Appendices
Appendix Contents
‘ Appendix 1: WNS Sustainability Report