Technological changes have been setting an unrelenting pace and telecommunications is one of the sectors where growth challenges have been particularly intense for the business organizations. Unrelenting growth from intense competition that has been the distinguishing feature of the telecommunications industry is a positive development for the consumers, both institutional and individual, because the result is one of multiplying choices and plunging prices. However plunging prices puts a serious dent in the profitability of the companies offering the choices to the consumers.
As a result, companies offering telecommunications products and services have to constantly adapt. When it comes to adapting to competitive challenges, the company making the adaptation has three tools which the management of that company can employ. These three tools are differentiation, cost minimization and quick response (cited in Gregory, 2007). Global Communications, in response to the competitive challenges it was facing, opted to use differentiation and cost minimization. On the one hand it was using different segmentation techniques to offer new products and services to new segments of customers.
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On the other hand, it was outsourcing to India and Ireland to cut costs. However the strategic focus was on cost minimization because of declining margins in the industry. The strategy followed in cost reduction was to move operations to Ireland and India where labor costs were low. However, an organization is made up of several stakeholders whose interests sometimes conflict. In the scenario with Global Communications, the management was having a conflict of interest with the labor union because on the one hand, the management needed to keep costs down and on the other hand, the employees needed job security. This conflict of interest between two groups of stakeholders forms the core of the scenario.
Issue and Opportunity Identification
This is the age of globalization and for companies like Global Communications in the telecommunications industry, this has opened up a world of opportunities. Economies in the West have matured and thus demand in these countries has been stagnating. With intense competition into the bargain, the telecommunications companies have been forced to differentiate their products and services and reduce the cost of delivering those products and services. The means applied to reducing costs are forming strategic alliances and outsourcing to offshore centers.
Global Communications adopted both strategies. For example it formed alliances with satellite and broadband providers to diversify its products and services. It also contemplated moving to India and Ireland at the time the scenario played out. It was moving offshore that created the problems surrounding labor relations at Global Communications. However the management of the company had no choice as intensifying competition meant that the very survival of the company was in question.
Global Communications was caught between a rock and a hard place because on one hand, it was facing intense competitive rivalry and on the other, costs of doing business in the industry were spiraling because labor costs were spiraling. The only way the management of the company could get out of this tight spot was to further globalize its operations and that objective became attainable with the strategic plan that targeted moving call centers to India and Ireland.
An organization is made up of several groups of stakeholders (cited in David, 2006). The management team is one of the group and the Union another. Employees unionize because it gives them bargaining strength when negotiating with the management in terms of ensuring a conducive working environment. Frequently there are conflicts of interest between the two groups of stakeholders because one group owns the company and the other does not. Therefore, in terms of compensation and benefits, the management will try to get away with less while employees will try to get away with more (cited in David, 2006).
As a result there are potentialities for adversarial relations between the two groups of stakeholders. This is illustrated in the Global Communications scenario. The management is effectively trying to downsize the workforce with a view to cutting costs. The Union at the company does not accept this because of loss of job security. At the end of the scenario, it was apparent that the management had not been able to put a positive spin on their strategic plan because union representatives had vowed to pursue the issue through the government and any other means to bring to light the unethical conduct that the management had resorted to in the interest of profit maximization.
It was unethical because the management was expected to treat the Union as a partner it its business decisions and the decision to move offshore had been taken without consulting the Union. Communication channels were also not good at the company as several key personnel had been left out of the loop and they came to know of the decision long after the Union members had found out.
Stakeholder Perspectives/Ethical Dilemmas
Business ethics is a thorny issue because problems in this area arise from the clash of perspectives between stakeholder groups interacting in an organizational setting (cited in David, 2006) . In the Global Communications scenario, there are several stakeholder groups to be identified. The competitors are stakeholders in that it is because of them that Global Communications is having to restructure its business with the associated damaged relations with the Union.
Global Communications was also forming strategic alliances with satellite and broadband service providers. These strategic partners are also stakeholders. However the two most important stakeholder groups in the scenario are the management and the union. In the scenario, the management is committing an ethical breach because it is implementing an agenda as a result of which the union members will lose their benefits and even job security.
This is also unethical because of the wide-ranging repercussion that will resonate throughout the industry. If every company in the telecommunications industry began to follow GC’s example, then employees in the US would no longer have any job security because they would be losing their jobs to whichever countries happened to have the lowest labor costs.
The company will become a market leader in the US in terms of providing the best customer service in the industry.
The current state of the industry in which Global Communications is operating has a highly competitive structure. Not only is it facing competition from traditional service providers, but cable companies are also diversifying into the telecommunications industry. What all this means for Global Communications is that it’s stock price has been diminishing steadily. The only reason this is happening is that the company’s profitability is going down.
Therefore the management of Global Communications has to do something in order to turn profits around. This they decided to accomplish by forming strategic alliances on the one hand and by moving to India and Ireland on the other hand. Whether these strategies will close the gap or not between the current state of plunging stock prices and the end-state vision of becoming a market leader is not certain. Clearly the challenges of turning the company around are huge and the change has to be managed very carefully because there are many stakeholder groups involved.
In the scenario presented, the most important stakeholder group standing in the way of the management implementing the aforementioned strategies is the union. The challenges are particularly circuitous when it comes to moving offshore to India and Ireland because outsourcing means loss of job security for the employees in home country. Many people will have to be laid off and even for those who are allowed to stay, the level of compensation and benefits will have to come down. There is an ethical issue in the current framework because the agreement between the management and the trade union is that the two parties will cooperate in ensuring profit maximization for Global Communication.
The terms and conditions of the strategy as outlined in present scenario are rather one-sided in that the management is doing what it can to reduce costs with no regard for the consequences it will have on the union members. In fact, as we can see from the conversations taking place between the management teams, the leaders in this case are trying to present the message to the employees in the most acceptable manner. They are certainly not trying to re-formulate the strategy in a way that will benefit the union equally.
Of course business decisions always have trade-offs. In this case however, the two partners, the management and the union, went their separate ways instead of collaborating on the project of managing change. If Global Communications is to become a market leader, then the top challenge for the management will be to improve labor relations that were damaged as a result of their autocratic approach to decision-making.
One of the most powerful market forces affecting an organization’s profitability is the state of competitive rivalry. In the telecommunications industry, the rivalry is particularly intense. Global Communications is following cost reduction among others to stay competitive. However because of the different interests of different stakeholder groups, implementation of strategy has hit a major roadblock. The challenge is to circumvent the hurdle of labor relations. Unless the company improves its labor relations, its organizational effectiveness will suffer and the end-state vision will remain out of reach.
Aaker, David A. (2004). Strategic Market Management. McGraw Hill/Irwin.
Dess, Gregory G., et al. (2007). Strategic Management: Creating Competitive Advantage.
Fred, David. (2006). Strategic Management: Concepts and Cases. Prentice Hall.
Hill, Charles., and Gareth Jones. (2007). Strategic Management Theory: An Integrated
Approach. McGraw Hill/Irwin.
Issue and Opportunity Identification
|Issue||Opportunity||Reference to Specific
|The management team did not take into consideration the effect that outsourcing would have on the union members. As a result, the scenario ended with union representatives vowing actions against Global Communications. Unless the management resolved the issue of labor relations, its objectives of restructuring to stay competitive would be defeated.
|Global Communications can move its people around to international locations and capitalize on their experience and expertise. This would also maintain employee morale as layoffs would be minimized.
|“To remain internationally competitive firms must sustain a high rate of internal learning that both refines current practices and adopts new ones” (Aaker, 2004, p. 17).
|Strategic Human Resource Management.|
The Interests, Rights, and
Values of Each Group
|Cable companies||Increasing profits by diversifying into telecommunications|
|Satellite and broadband service providers||Forming strategic alliances to achieve economies of scale.|
|The management at GC||Profit maximization|
|The union at GC||Job security|
End State Goals
|Improved labor relations|
|Profitable customer service centers in India and Ireland|
|Greater profitability through diversification from strategic alliances|
|Development of a decision making process that takes different stakeholder perspectives into consideration|
|Improvement of the formal communication structure|
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