9_50 Cognizant EA (Group 6).docx

9_50 Cognizant EA (Group 6).docx - 1 Cognizant External...

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1 Cognizant External Analysis Ticker Symbol: CTSH 4 October 2016 MGT 121-B Lyndsay Borko Nicole Donini Jesse Nakashian Jared Pearson Travis Short Michael Sulfita Cognizant is an Information Technology Consulting firm founded in 1994, with a focus on helping organizations “rethink, reinvent, and re-wire.” In 2015, we saw a tremendous growth in revenue,
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2 operating income, and stockholders’ equity 1 . Cognizant expands over many industries, but for this analysis, we are focusing on the IT Consulting Industry 2 . An IT Consultant is a person/company that works in partnership with their clients to advise them how to best utilize information technologies to better their business objectives. In this industry, we have many large rivals such as IBM, Hewlett Packard (HP), and Accenture. Cognizant has a market share of 7%, IBM 28%, HP 16%, and Accenture 19% 3 . These have been selected as Cognizant’s rivals because they are the leading companies in the industry, and although they are much bigger than Cognizant, Cognizant still holds its own percentage of the market share. In the past 5 years, the IT Consulting industry performed well in a challenging economic climate. Financial services and insurance policies enabled the IT Consulting industry to expand. Over the next 5 years, industry revenue is expected to grow. Increasing mergers and acquisitions activity will inspire demand for IT consultants and will require assistance 4 . The biggest pressure Cognizant has is its rivalry with its competitors. Threat of new entry, threat of substitutes, and power of suppliers are all low, but the power of buyers is high. The buyers hold the power of which consulting company to choose, and there are many competitors, including the large companies mentioned earlier. Luckily, in an age in which technology is a necessity of most if not all businesses, the services Cognizant offers will always be in demand. However, it is Cognizant’s responsibility to draw the consumer in and convince them to utilize their company over the competition. Five Forces Threat of New Entry- Low The threat of new entry is low for this industry. This is an industry which requires substantial expertise in order for a company to thrive. It would be difficult for a person or group of people to easily start a consulting company, as they would immediately have to hire many knowledgeable professionals. 1 Revenue of IT consulting in the United States from 2009 to 2014 (in billion U.S. dollars), Retrieved from http://www.statista.com/statistics/293746/revenue-of-it-consulting-in-the-us/ 2 "The Cognizant Growth Story Company Overview The Cognizant Growth Story . N.p., n.d. Web. 13 Sept. 2016. 3 Bloomberg L.P. (2006) Industry Info, Industry Revenue, CTSH US. Retrieved Sep. 13, 2016 from Bloomberg Database 4 IT Consulting in the US: Market Research Report. (2016, April). Retrieved September 27, 2016.
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3 Even if another company were to successfully enter the industry, they would have to concern themselves with economies of scale and brand loyalty. There are many big companies to compete with such as IBM and HP. As a new company, it is very hard to enter into an industry and be able to keep up with the
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