Cognizant SWOT and PESTLE Analysis

Strength

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Weakness

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Opportunity

1. Expansion in Asian and Middle East markets: Asian and Middle Eastern markets have a high potential for growth. This market gives ample opportunity to Cognizant to work on these markets as a source of growth. China and India are two of the world’s fastest going economies. With the acquisition of small IT companies in these geographies, Cognizant has an opportunity to further develop its market there.

2. IT integration across Industries: The IT integration in manufacturing and Bank sector has given ample opportunity for IT sector. For example, The Internet of things (IOT) in manufacturing has given a boost to digital manufacturing. Half of all bank customers around the world now use mobile payments. All the industries though IT services are trying to cut cost to take leverage in the market.

3. Pursuing government projects: The governments of many countries, including the developed ones are pretty weak in basic IT infrastructure. As these countries, along with the developing ones move towards a digital era, the governments will demand more and more IT services. Thus, Cognizant should strategically bid to win projects from the government. Government spending on IT is expected to keep growing for at least few more years now.

Threat

1. Global and regional competitors: Cognizant faces strong competition in the industry as there are many major players operating such as IBM, Accenture, Capgemini, Wipro, Infosys, HCL, etc. which provide similar offerings and services as Cognizant. This also impacts operating margin as the businesses have resorted to cost cutting after the financial downturn and several clients offer projects to the lowest bidder.

2. Visa Fees and legislations: United States is a major market for Cognizant with close to 77.3% of its FY17 revenues, coming from North America. However, majority of Cognizant’s employees are from India and other countries. U.S has increased visa fees for H1B and L1 categories and many other restrictive legislations are being considered which will increase costs and reduce mobility of the workforce which will impact Cognizant. United Kingdom is also coming out with stringent amendments for overseas workers. Cognizant has to take strategic steps to mitigate ‘mobility risks’ in these geographies. These will create the need for hiring more local employees in the above geographies increasing the cost and impacting margins.

Political

1. Impact of Brexit in the UK and European markets: United Kingdom voted in a historic referendum for leaving the EU in 2016, termed as Brexit which resulted in shockwaves across the globe. Cognizant generated 16.2% of its FY17 revenue from Europe and Brexit has brought uncertainty in the political and business environment impacting the IT business. The new policies in these countries will significantly affect the revenue and cost of operation of Cognizant. Brexit has also raised the economic volatility which has resulted in the overall increase in cost and decrease in revenue due to fluctuation in exchange rates.

2. Implementation of stringent visa policies by various governments: The changes in visa policies will have a major impact on IT service providers whose business model dependent on outsourcing. The changes H1B visa policy has already affected the IT industry. The major employee force of Cognizant comes from countries such as India and Philippines because the cost of labor in these countries is low compared to the US, which resulted in a low cost of the project. But with visa constraints, the cost of the IT projects is going to increase. UK has also announced visas to be linked with compensation while Australia and Singapore have also proposed changes in their work visa structures. These policies have been influenced by political and populism factors and will impact player such as Cognizant.

Economical

Social

Technological

Legal

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Environmental

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