Growth & Portfolio Strategy

4.4.Growth & Portfolio Strategy

As a starting point, members of the working group defined the product and service portfolio of the Kosovo IT industry by taking into account the results of the strategic analysis (internal and external analysis) and using special analytical frameworks and tools. These tools included the Digital Transformation Framework, Gartner’s Hype Cycle and the Key Capability Matrix.

The following diagram (figure 32) illustrates the digital transformation framework for the Kosovo economy, supporting the development of innovative IT products and services, reflecting digital trends such as cloud computing or big data and analytics.

Figure : Digital transformation framework for the growth & portfolio strategy

Source: Capgemini

In the framework of several joint strategy workshops, the working group developed the following overall core product and service portfolio of the Kosovo IT industry:

Figure : Core product and service portfolio of the Kosovo IT industry

The above product and service portfolio directly reflects the key capabilities and core competences of the Kosovo IT industry, identified through the strategic analysis.

As a next step in defining its growth and portfolio strategy, the working group elaborated a Product-Market-Growth Matrix (also known as an “Ansoff-Matrix”), describing four alternative strategies for Kosovo IT enterprises to tap into new market opportunities:

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  Market Penetration: Penetrating existing markets with existing products
  
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  Market Development: Developing new markets for existing products
  
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  Product Development: Developing new products for existing markets
  
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  Diversification: Developing new products for new markets (horizontal, vertical, lateral)
  

Figure : Ansoff-Matrix

Following the principle of strategic fit and the aforementioned agile focus strategy, the working group defined a growth strategy for the Kosovo IT industry, which could be described as organic growth based on existing core business models and core competences.

The underlying idea is to begin by penetrating and developing strategic target markets and then progressively expand into new market and product segments, along existing core competences and business models. The key features of this growth strategy are illustrated in the growth strategy mind map below:

Figure : Growth strategy framework

As can be seen from the above chart, in the long run, additional growth in the Kosovo IT industry will be generated by developing new target markets, customer segments, products & services, business models and channels. The different branches of the growth strategy mind map represent the future growth paths for the Kosovo IT industry.

The basic idea behind this growth and portfolio strategy is to tap into additional business opportunities on a sustainable basis, without overstretching the capabilities and resources of the Kosovo IT industry. This will be achieved by focusing on existing core competences and business models, whilst gradually developing additional skills and capabilities. According to the agile approach, the growth strategy also needs to be regularly evaluated and, if necessary, repositioned.

4.5.Market Entry Strategy

With reference to the market entry strategy for the Kosovo IT industry, there are two central questions which need to be addressed. Firstly, whether Kosovo IT enterprises should enter target markets with IT products or services? Secondly, what are the different strategic market entry options?

The results of the internal analysis have shown that the majority of Kosovo IT firms have little export experience and possess rather limited endowments of physical and human capital. Moreover, important support elements for a product strategy, such as venture capital, established distribution networks or strong R&D and innovation capabilities currently do not exist in Kosovo.

Based on these considerations, the strategy working group drew the conclusion that a product strategy is currently beyond the capabilities of most Kosovo IT companies and would therefore be unrealistic. Hence, the Kosovo it industry will focus its market entry strategy primarily on the provision of IT services.

Accordingly, the Kosovo IT industry will enter the selected target markets with the service portfolio defined in the previous chapter (see chapter 4.4). Special emphasis will be placed on the provision of high-end and high-quality software development services and related IT services that require excellent technical expertise as well as project management skills. In this context, the specific key capabilities of Kosovo IT companies in the areas of web design and mobile applications should be leveraged. Hence, IT firms will have to develop deep domain expertise and further develop their software engineering and IT project management capabilities. In addition, they could complement software development and testing with design and IT consulting services in order to provide integrated service portfolios to their clients. That way, Kosovo IT companies will be able to execute complex IT projects for their clients along the entire software project cycle – from system analysis to software development, testing and deployment.

Specializing in high-end software development and IT services will help reduce exposure to market volatility, as demand for such services s is less price-elastic and competitive pressure is lower compared to other IT service segments.

Notwithstanding, in the medium and long term, the Kosovo IT industry should not pursue a pure service strategy but should also try to develop and market specialized niche software products in target export markets. In this context, ICK and Kosovo start-ups could play a decisive role in developing innovative software products, especially in the mobile sphere.

While keeping the focus on services, promoting exports of software products could help increase the value added and create a basis for product-related services (e.g. IT consulting support services). As a matter of fact, bundling IT services with innovative products might be an attractive future option for Kosovo’s IT industry.

Concerning the second question, the working group identified five different strategic market entry options for the Kosovo IT industry, taking into consideration the results of the internal analysis, as well as the structural characteristics of the selected target export markets:

Figure : The five different export market entry options for the Kosovo IT industry

The above shown entry options are closely related to the target groups identified in the market analysis (chapter 3.2.3).

However, it deserves mentioning that digital marketing is becoming increasingly important in the software and nearshoring market with regards to branding and business development. Therefore, the Kosovo IT Strategy also envisages special measures in the area of web-marketing, social media marketing, social CRM as well as IT job exchanges and special outsourcing portals.

Since the selection of the most appropriate market entry option will finally have to be made on the micro-level by the individual companies, it is relatively difficult to define a common market entry strategy for the whole Kosovo IT industry. Kosovo IT companies will not have to stick to a single entry mode, but can combine several entry options, depending on their objectives, business model, product/service portfolio, export experience, resources and of course the structural characteristics and requirements of the target market.

Although the decision for the most appropriate market entry option on the micro-level will have to be taken by the individual enterprises, the working group developed a general market entry strategy for the Kosovo IT industry, which is supposed to serve as an overall guideline for entering strategic target markets on the industry level. Reflecting the generic strategy of agile focus and the above considerations, this market entry strategy for the Kosovo IT industry comprises four key elements, outlined in the following table:

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  Lack of branding has been identified as a primary obstacle to Kosovo IT export
  
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  Positioning in domestic as well as international markets
  
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  Selection of potential business partners (outsourcing/offshoring) is often based on image and reputation of a country and its IT industry (“country branding”)
  
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  Successful brand enables IT companies to build stable, long-term customer relationship and demand
  
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  Increasing the visibility on international markets
  
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  Branding is an important source for differentiation
  
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  Generating competitive advantages and increasing margins and profitability
  
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  Basis for expansion into product/service improvements, new lines and categories
  

The branding concept for the Kosovo IT industry will have to be based on clearly defined core brand values. These values need to reflect the overall goal as well as the generic and market entry strategy. Thus, the branding goal will be based on quality, company excellence, agility and cost-efficiency.

The goal of the market entry strategy outlined above is to enable the Kosovo IT industry to access selected target markets based on a sustainable organic growth, without overstretching the capabilities and resources of Kosovo IT enterprises.

In general, the market entry strategy should be a dynamic process, staying abreast of changes in global IT markets.