Market potential of the Czech Republic for IT Consulting firms

Diplomarbeit von Katerina Fischerova

Abstract:

The determination to expand abroad especially in the form of foreign direct investment involves very important and complex decisions that have to be based on a detailed analysis and understanding of opportunities as well as threats. The main goal of this thesis is to provide a framework for this decision making in the context of the formulation of long-term competitive strategy.

The thesis is divided into two main parts. The first, theoretical one, should outline the approaches to strategic management in consulting companies with special focus on international expansion. It attempts to provide sound background to strategic management in order to answer the following: Which principles can be used to manage a consulting company successfully? How should FDI decisions be involved in the strategic management?

Furthermore, a broader theoretical framework for analysing market opportunities will be introduced, which can be applied to any other market a company might decide to enter. An answer to the following question should be found in the text: What analytical proceedings should be carried out before final decision to invest in a country is made?

The second, analytical part, will be based largely on the tools described in the first part. The goal is to provide detailed description of the business environment in the Czech Republic in order to give a qualified answer to the following question: Is Czech Republic a strategic opportunity for an IT consulting firm?

It has been realised by many firms that the CEE market might have an attractive potential and therefore should be paid at least a minimal attention. Nevertheless, I do not want to overestimate its importance and on the following pages I will try to make a critical assessment whether the Czech Republic should be regarded as a potential opportunity or not.

Last but not least, the provided theoretical frameworks and analysis of the Czech IT market can be regarded either as a form of present or future knowledge (i.e. something a company should have in order to sustain or develop its present market position).

Short explanations to the limitations set. In this thesis I will not attempt to develop any empirical models, my main interest will lie in model-building at a verbal or a conceptual level, that an IT consulting company may use to analyse the opportunities of international expansion.

In the theoretical part only an overview of reasons to expand abroad is given and not a detailed analysis is carried out. The same applies to techniques for international market screening.

In the analytical part I will follow a very narrowed concept of country screening - an analysis of the market potential of a single country. In this focus I will be putting myself at a risk of two common errors. First, in my analysis I will not study in details other countries, which could have better potential. Second, I will spend time on analysing the market potential of the Czech Republic and come the conclusion of rather poor prospects for an entry. Nevertheless, even negative conclusions will prevent an IT consulting company to make losses because of investments into the Czech Republic.

For the reason of limited time I will not carry out a thorough comparative analysis of market opportunities in Central and Eastern Europe. For illustration I will refer in the macro-level analysis of the Czech Republic to the development of Hungary and Poland, which can be seen as the biggest rivals for foreign investors.

There is also limitation to the persuasive power of the data gained from market research. Proceedings will be explained in the next chapter, here is focus on the explanation of limited meaningfulness of results. Due to rather hesitant behaviour of respondents I have chosen to concentrate on the development of trust to all SAP Partners (was possible as there are only 36 of them in total) and only to half of customers. My aim was to receive back as many questionnaires as possible from these two groups. Despite my hard work the success was around 30%, to be more specific 33% in case of SAP Partners, 36% in case of customers (here however has to be taken into consideration that not all customers were contacted). These factors can to some extent cause misleading interpretation of the reality. Despite my attempts to make objective conclusions, there is a possibility that some experts in IT consulting in the Czech Republic would disagree.

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