Introduction
CSC Australia in Perth is one of the largest providers of IT services in the region and it has 56% of the market in the region.1 One of the advantages of the company is its global nature, i.e. the company operates globally.
Another advantage of the company is its capability to cap liabilities as all multinationals tend to operate in accordance with major corporate laws. Liability capping is essential for CSC Australia as it operates in such areas as coal and gas mining which are often associated with a variety of safety concerns.
Notably, the company pays special attention to safety issues and all company’s employees have the necessary skills to consult clients on numerous safety issues.2
One of the company’s policies is to constantly move to niches where competition is the lowest. Thus, the company manages to reduce expenditure. Nonetheless, there are still a variety of issues to be addressed.
For instance, one of the most urgent issues is increased competition which is aggravated by the on-going debate on the necessity to considerably increase liability capping for companies. Importantly, the increase of liability capping has negative as well as a positive outcome for the company.
Decision Criteria
To develop proper decision criteria, it is possible to employ Michael Porter Framework. The framework reveals five major forces affecting companies. These forces are threat of new competitors, threat of substitute services, bargaining power of buyers, bargaining power of suppliers and intensity of rivalry.3
It is important to note that the five factors are interconnected but some factors are more relevant for a particular company whereas other factors have little influence.4
As for such factors as threat of substitute services or bargaining power of suppliers and buyers, they are quite irrelevant as the company pays a lot of attention to innovation and development of a variety of services for numerous clients with different paying capability.
It is also necessary to note that there will always be demand in this sector as people still heavily rely on production of coal and gas. Porter’s forces can be regarded as appropriate criteria to evaluate possible alternatives for CSC to develop.
Alternatives
The First Alternative: Looking for New Niches
The first possible alternative for CSC Australia is to continue the policies employed in the company. Thus, the company can move to other niches where competition is insignificant.5
First, the intensity of competitive rivalry will be almost insignificant as the company tends to move to niches where only a few providers operate. At that, the existing providers are likely to be small companies which have a very significant drawback as they cannot provide enough liability to the client.
With respect to the debate concerning increase of liability capping, fewer companies (unless they are multinationals) will be able to cap their liabilities.6 Therefore, CSC Australia can operate in the new niche quite effectively as it is likely to be the only company capping liability.
Nonetheless, quite soon every niche gets occupied by different companies. Therefore, the threat of new competition is very high and it makes this alternative quite ineffective as multinationals can also enter the niche chosen by the company. These companies can cap their liabilities and can provide services on different (more favourable) terms.
The Second Alternative: Remaining in the Niches
Looking for new niches is associated with certain risks mentioned above. It is necessary to remain in the niches and develop new services and new offers to remain attractive for the existing clients. However, the intensity of competitive rivalry is quite significant.
The company’s liability cap will not be regarded as one of the most important advantages as many multinationals cap their liabilities and pay a lot of attention to safety.
There is also a threat of new competition as many companies appear and expand their markets. Many multinationals may enter the niches occupied by CSC, which will negatively affect the company’s development.
The Third Alternative: Combining the Two Alternatives
It is possible to come up with another alternative which can be appropriate for the company. CSC Australia can remain in the niches chosen and simultaneously it will search for new niches.
However, remaining in the ‘old’ niche does not mean that the company will simply offer the same services at lower prices or develop some new products. It can be effective to develop services which can address issues in areas associated with higher risks. This can help the company avoid a lot of competition.
Solution
Therefore, it is possible to note that the third option is the most appropriate for the company as the first two are still associated with a lot of competition (new competition and intensive existing competition). Diversification has always been seen as an effective strategy.
Thus, the company should continue searching for new niches, but this cannot be a priority for such large company as CSC Australia. At the same time, the company should develop strategies to remain competitive in the niches where the company is operating.
One of the possible ways to do it is to develop new services which can be applied in areas associated with higher risks. This can lead to certain losses. However, this will positively affect the company’s development in the long run. The company pays a lot of attention to innovation.7
The company is capable of developing new services which will help miners work in more dangerous sites with minimal risk. Admittedly, the company will have to cap its liabilities which can also lead to increased expenditure. However, it is necessary to note that companies (large multinationals) tend to compensate possible losses.8
Therefore, in case of some accident the company will still pay certain compensations. Of course, if the company develops proper products, there will be no need to pay compensations.
Implication
To implement the solution suggested, the company will need to undertake certain steps. In the first place, it is essential to develop a definite strategy. It is crucial to set specific goals. All employees should be aware of the goals and the new strategy. The employees should understand the direction chosen.
The innovation department should focus on the major objective while still working on a variety of projects. The major objective is development of products applicable in more dangerous sites in coal and gas mining. It may be effective to pay more attention to human resources policies.
The company may need to employ more professionals (perhaps, young professionals) who will come up with ideas to address existing issues in the industry. It is also crucial to develop human resources as employees may need to focus on development of quite new products.
Of course, the company will continue searching for new niches. The company has significant experience in this sphere. Apart from offering established services, it is also possible to offer products applicable in dangerous sites. This will help acquire more experience and develop new products.
The company has been cooperating with different companies in different projects.9 Development of new products may require cooperation with other companies. CSC Australia should be ready to collaborate with its rivals.
The company should focus on its services and its capability to address the most serious issues. Besides, the company will also stress its being responsible as it caps its liabilities. The company’s clients should be aware of these advantages of the company.
Therefore, the company should also shape its marketing strategy. Major focus should be made on the new products and the company’s liability capping.
Bibliography
Grundy, Tony. “Rethinking and Reinventing Michael Porter’s Five Forces Model.” Strategic Change 15, no. 1 (2006): 213-229.
Horton, Michael. Interview, Business Capstone Interviews, 2011. Web.
Ketels, Christian H. M. “Michael Porter’s Competitiveness Framework – Recent Learnings and New Research Priorities.” J Ind Compet Trade 6, no. 1 (2006): 115-136.
Kotadia, Munir. “AIA: Uncapped Liability Clause Makes Firms Lie.” ZDNet, 2006. Web.
Stein, Sam. “Robert Menendez Pushes Bill Raising BP’s Oil Spill Liability to $10 Billion.” Huffington Post, 2011. Web.
Footnotes
- Michael Horton, Interview, Business Capstone Interviews, 2011.
- Ibid.
- Christian H. M. Ketels, “Michael Porter’s Competitiveness Framework – Recent Learnings and New Research Priorities,” J Ind Compet Trade 6, no. 1 (2006): 116.
- Tony Grundy, “Rethinking and Reinventing Michael Porter’s Five Forces Model,” Strategic Change 15, no. 1 (2006): 218.
- Michael Horton, Interview, Business Capstone Interviews, 2011.
- Munir Kotadia, “AIA: Uncapped Liability Clause Makes Firms LIe,” ZDNet, 2006.
- Michael Horton, Interview, Business Capstone Interviews, 2011.
- Sam Stein, “Robert Menendez Pushes Bill Raising BP’s Oil Spill Liability to $10 Billion,” Huffington Post, 2011.
- Michael Horton, Interview, Business Capstone Interviews, 2011.