Case Project 1 Finlatics
Question 1: Will the acquisition help in the Improvement of Margins? If Yes, why if not then what
should be the alternate strategy for it?
Answer – MECE Profitability Tree attached on the last page.
Analysis of the Profitability Tree –
1. The root problem of the company lies in its struggle to achieve a competitive year-on-year margin
improvement rate compared to similar IT companies in India. This challenge is influenced by various
factors such as a disproportionate cost structure, low margins in specific regions, and a heavy
reliance on a single product for revenue.
2. The company at present provides IT Services and Maintenance but is more inclined towards
Product Based Revenue generation
3. The Costs are further divided into permanent employees and contractors where in the contractors
are much costlier than Permanent Employees
4. Revenue analysis is done based on several parameters such as Service, Customers, and the
product it sells.
5. Further bifurcations are made based on the Margins in various sectors and countries
6. Upon analyzing the data carefully for every sector and country we can conclude
Profitable Sector BFSI 42%
Profitable Region US 32%
Profitable Product Digital Marketing Products 36%
Major Cost Contractors in India 60%
Most Employees in INDIA 73%
Adding to it we can say that the Margin in India is 9% since the major cost is in India only which is
degrading its margin but the revenue should be consistent from India.
Yes, the acquisition will help in the Improvement of Profit Margins because.
1. Acquisition provides a potential access to Niche Technology
2. It opens a Large Customer Base for cross selling Opportunities.
3. Also provide means for cost optimization
4. Diversification of Revenue stream could lower this risk of relying on Specific Product and
Sectors
Conclusion:-
Successful Integration and careful management of associated challenges are crucial. The company
should proceed with the acquisition if it aligns with its strategic goals. Along with this the company
should continue to focus on optimising internal operations, exploring diversification and enhancing
its competitive position in the existing markets.
Apart from Acquisition, the company may also consider the following Suggestions: -
1. Strategic Diversification –
Diversification of the product portfolio to reduce the reliance on specific products.
Explore growth opportunities in the untapped sectors such as Healthcare, Retail
2. Optimise Cost Structure –
Negotiate with contractors to explore cost-effective alternatives.
Invest strategically in high-potential regions such as the US (healthcare), while addressing
challenges in India
3. Client Retention and Upselling:
Focus on Client retention policies and upselling the existing clients. Build long-term
relations with clients to ensure a good retention rate.
4. Digital Transformation:
Adopt digital transformation processes to streamline processes, enhance agility, and
minimize time consumption along with Human resources.
5. The company must focus on the BFSI Sector as it is Highly profitable for the company.
6. Allocate resources to research and development and stay in the forefront of technology.
7. Customer Feedback and Satisfaction:
Regularly gather customer feedback to understand their needs and satisfaction levels and
bring in changes accordingly.
8. Talent Acquisition Team:
Invest in Talent development programs to upskill the employees.
Also hiring better talent and people having great knowledge of upcoming technology that
helps the company gain new customers.
US 32%
Middle East 27%
Europe 20%
Customer Wise Revenue
Other 21%
IT Solutions 60%
Digital Marketing Products - 90%
Product Wise Revenue Product Based
Other -10%
BFSI -42%
Revenue
Retail - 39%
Sector WIse Margin Health - 14%
Europe - 44%
Country Wise Margin US - 48%
India - 9%
Profit APAC - 14%
Revenue
India - 73%
Others - 27%
Cost
Australia - 5%
APAC - 7%
Revenue
India - 60%
Others - 28%
