Global Communications' strategic response to market stagnation and competition

Global Communications has been experiencing a stagnation in its business characterized by lower profitability indices and lower revenues. The effect of this was obvious on the market, where decreasing demand for the company stock led the share price down from $28 per share to a mere $11 three years later, representing a significant 50% depreciation of the company stock value. The reasons for the stagnation and increasing business difficulties were clear and were identified as the growing competition on the market, filling in any prospects of business opportunities.

In order to address this, the management has proposed a two-fold approach comprising a growth through the diversification and improvement of the business portfolio and an increase in the company's profitability with cost-cutting measures, which would allow the company to become more competitive on the market. At the same time, the company needs to keep in hold any potential internal problems that may arise through negotiations with the Union and Union's dissatisfaction over this, retaining employee motivation and drive. The impact of globalization and downsizing, together with outsourcing and reallocating some of the call centers in India and Ireland will definitely have a direct impact on the workers, with paycuts and layoffs where necessary.

In order to ensure both the acceptance and a degree of backup on the company's strategic plans for the future, a proper communication strategy needs to be setup in order to convince the workers of the necessity of this move for the company's survival and the capacity of the company to grow because of it. Given the fact that there are so many disadvantages on the part of the workers, the management will need to rely on a communication plan that will emphasize the advantages and potential benefits, if any, that the workers may have in the future due to this.

In this sense, we will aim to investigate the efficiency and reliability of the solutions provided by the managerial team while keeping in mind both the internal and external perspectives for the organizations, along with the different levels that each of the solution impacts. We will clearly point out the advantages and disadvantages of each of the solutions and the ways that they are able to impact the overall activity of the company. We will also analyze the solutions from the perspectives related to general organizational communication, such as the complexity of the managerial solution, information richness or communication channels, showing how each of these factors blend into the final communication solution that the management organization has proposed.

Situation Analysis

Issue and Opportunity Identification

As a telecommunication company, Global Communications has been faced with increasing competition on all markets it operated in, including local, long-distance or international markets. While constantly trying to diversify its portfolio of services, it was still affected by cable companies that were able to provide complete solutions covering more than one spectrum or industry.

In order to be able to remain competitive and not face extinction as a company, the management at Global Communication provided a two-fold solution that would include, on one hand, the introduction of new services and, on the other, cost cuts that would take some of the jobs to countries where labor costs remain significantly lower, such as India or Ireland. Such a solution would also provide the necessary push in terms of technology, given the fact that the it and technology sectors were well-developed in these countries and the cost for these types of solutions remained low ("India and Ireland have that expertise and for dirt cheap"). Such an expansion would also provide the ground for the company to become a true global company and would present an excellent basis for future development. The opportunities that the management's strategic plan presented were thus great.

However, the main problem remains the fact than any reallocation and outsourcing approaches has a significant impact on the original employees. Outsourcing is equivalent with cost reductions through layoffs an pay reductions. The relationship between the management and the union/workers seems to be one of cooperation rather than a conflict one: the workers have negotiated in the past and, for the best interests of the company, had agreed to a reduction of their education and health benefits. This shows that they are willing to discuss and negotiate, which is an optimistic approach.

On the other hand, it is less likely that they will embrace in the same manner a solution that will mean more prejudices to their direct interests. This brings the management in the difficult situation of imposing unpopular decisions on the workforce and facing consequences such as governmental actions and a seriously declining morale in the process. The final communication solution should take these things into consideration as well.

Problem Statement

Global Communications will increase its competitiveness on the market by (1) diversifying its services to its clients and making them better adapted to their needs and (2) reducing its costs with measures that include outsourcing to developing countries and countries with lower wages. While aiming to consolidate its position on the market, such measures will also need to keep track of the current employees' reactions and the way these measures affect them.

End-State Vision

One of the best ways by which the management can ensure that the problem with the employees does not occur in the future again and that there is the sort of social rest within the organization, so beneficial for its growth, is to associate employees to the company profits and success. The most proper way by which this can be done is giving out company options on stock or even stock as part of the employees' payment.

This method is likely to ensure that the employees will become more interested not only in the day-to-day operations and their day-to-day/short-term profits, but also in the way that the company is developing over a longer period of time. It is also an excellent way to ensure that they will also participate to a long-term vision of the company.

Alternative Solutions

The company has at this point several potential alternative solutions. The first solution would involve not restructuring the business, keeping the same business format, but trying to increase revenues by diversifying the portfolio and by creating new services that will provide the technological competitive advantage needed. The company does not need to outsource its call centers to India and Ireland, for example, but it can use these countries to create technological centers in these countries, so as to benefit from the cheap technology being developed in these countries.

The second alternative solution is to work exactly on the strategic plan proposed by the current management, including outsourcing and layoffs. However, this will need to be doubled by measures to counter morale decline and to ensure that the remaining employees will still be committed, despite pay cuts and renouncing several education and health benefits. The company will also need to act in order to avoid prosecution over not respecting the work contract and try to avoid conflict with the government, because the union has announced action with all means to avoid this situation ("We cannot and will not go along with this situation quietly. In fairness, I want to inform you that we will take action both through the government and all other available resources").

Analysis of Alternative Solutions

The first solution includes retaining the current structure of the organization, but increasing investments in technology, which can also be outsourced so as to produce the best results, at lower costs. This solution scored a 2.82 in my alternative solution evaluation matrix, scoring 5 in terms of diversifying the portfolio of services, 3 in terms of increasing competitiveness and 1 in terms of reducing costs. The reason the scoring only amounted to 2.82 because the weighting was different: 3, 4 and 4 for the three goals, respectively.

The first goal was rated as 5, because outsourcing technology and further investments in this area is likely to boost competitiveness by providing new services and better technology, while simply creating new services with the help of new technology. On the other hand, increasing competitiveness was rated 3, because the company will only increase competitiveness in terms of diversifying the portfolio of services, but will still retain potential problems in terms of labor costs. Additionally, allocating new funds to technology investments will create potential problems in terms of cost imbalances and potential budgetary issues. The last goal was rated with 1, because this type of solution is more likely to increase costs rather than decrease them.

The second alternative solution received a final 3.73 rating, obtaining 3 in terms of the impact on the first issue, 4 on increasing competitiveness and 4 in reducing costs. In terms of the impact on the first issue at hand, the solution scored only a 3 because, while addressing partially the problem, it tends to focus more on the cost reduction component rather than on the actual diversifying impact that the solution is likely to have. On the other hand, it scored a 4 on the second issue because it reasonably balances both components. The final 4 is explained with the fact that, while clearly impacting cost reduction with decreasing labor, technology and innovation costs, it also partly takes into consideration additional costs, such as the social or legal costs that such a solution implies.

Risk Assessment and Mitigation Techniques

For the first alternative solution, the main risk is that the solution doesn't address the current problems of the company. Indeed, while attempting to diversify and consolidate the business, it does not address the issue of cost-reduction.

The second alternative solution, because of its complexity and implications, has more risks than the first. The first set of risks relates to the investments in the foreign countries: political, economical, social or demographical risks. In a country like Ireland, member of the European Union and a consolidated economy, these risks seem to be very low. On the other hand, in a country like India, with a population of 1 billion individuals, most of them living in poverty, and with a democracy where terrorist attacks and extremists still may have their way, this risk is much higher.

Optimal Solution

Despite higher risk levels, the best solution seems to remain the one that includes both technological and call center outsourcing. To this, one needs to add both the internal restructuring needed (included layoffs and paycuts, if necessary), both also the additional incentives that can make this an interesting proposal for the remaining employees (profit association, financial rewards in options and company stock).

Implementation Plan

There are two important things that the company needs to ensure when implementing the selected optimal solution: measures to improve company's profitability and competitiveness on the market and internal communication. In both cases, the viability and future success of the company rely on these two measures.

The first part comprises the establishment of the call centers and technological centers in Ireland and India, corroborated with the entire mechanism of job redistribution and cost reduction. The foreign implementation will be established, first of all, at the highest echelons of the company, the upper management who will negotiate with the local governments the conditions of the investment, while the recruitment and training processes should be shared between the HR and the it departments. The actual implementation, including recruiting local workforce and opening the centers, should not take more than 4-6 months.

It is important to emphasize the need of a mechanism of feedback and control that can ensure that the company management always knows the progress on these foreign sites. This type of mechanism can include regular updates from the local managers, monthly conferences with both them and some of the employees and monthly visits from the management team that can also boost morale with the new employees.

Internally, the success of this optimal solution and of the final implementation plan again relies on two different components: incentives to boost morale and the communication plan. In terms of the incentives to boost morale, this obviously refers to the remaining employees and these are the measures by which the union can also be appeased. Incentives have to rely on associating the employees to the company's future and this can be done with both financial incentives and their managed inclusion in the decision making process.

In terms of the communication plan, the best communication channel remains the union and its representatives who, as we have seen, have remained, even in the past, open to discussion and negotiation, despite the fact that the relationship is tense at this moment. Given the information richness and the complexity of the situation, one could also suggests joint meetings between the employees and the management, in which the managerial team can better explain the long-term strategic plan for the company and obtain employee adhesion to future company goals. It is important to note that the key to making this solution functional is the appropriate communication of its positive consequences to the employees.

Evaluation of Results

The proposed goals combine financial objectives (company profitability, company viability) with HR and employee - related measures (internal social cohesion). All metrics reflection have been translated into quantitative measure, such as the stock price, the employee productivity or the number of customers. These metrics do not necessarily reflect 100% the goal that they have been matched with, but they provide a good idea/reflection on how that goal is progressing. For example, an increase in employee productivity will tend to show that the employees are satisfied with their incentives with the company and that they are translating this into good productivity levels. A measure such as the number of customers (with a 15% increase target) will also show that the company's outsourcing is paying off, that the better and cheaper services are attracting new customers.

Conclusion

The present case study showed a common situation where the company was no longer viable in a global market because of increasing competitiveness on the market. In order to address this problem, the suggested optimal decision combined outsourcing in countries such as Ireland and India, with better and cheaper technology, with an internal plan to retain employees and include them in future strategic development decisions.

In implementing this plan internally, the communication plan and the incentives offered to the remaining employees played a crucial role in reducing the drop in morale levels and in ensuring that the remaining employees would fully support the strategic decisions involved.

Issue and Opportunity Identification

Issue

Opportunity

Concept

Increasing competition on the telecommunication market, with reduced (so far) action from the management

Niche markets and new technology development

Outsourcing

Impact on original employees

Increased internal communication

Communication plan

Stakeholder Perspectives

Stakeholder Groups

The Interests, Rights, and Values of Each Group

Management

Maximizing shareholders' profits.

Increasing company value

Maintaining employee moral and social cohesion within the company

Workers

Defending short and medium term financial gains

Long-term perspective to balance costs and revenues

Stockholders

Sole interest in financial perspective of the company

Increase in stock prices

Customers

New, and better and cheaper services

Foreign entities

Strong support for outsourcing in their countries

Analysis of Alternative Solutions

Risk Assessment and Mitigation Techniques

Alternative Solution

Risks and Probability

Consequence and Severity

Mitigation Techniques

Retain current structure, with no outsourcing

Does not address the cost reduction issue of the company

Severe: the company will need to increase its revenues to the degree to which these can effectively cover costs

Turn to second alternative solution

Outsource

Political, economical, social risks

Dissatisfied employees

Severe: can affect the investment

Severe: can affect employee productivity

Good negotiations with local authorities

Good internal communication, proper incentives

Optimal Solution Implementation Plan

Deliverable

Timeline

Who is Responsible

Start outsourced sites

4-6 months

Management, HR and it Departments

Improve company profitability

Financial, Marketing and Sales

Feedback and control mechanism

2-4 months

Local managers, upper management

Internal communication month

Upper management

Evaluation of Results

End-State Goals

Metrics

Target

Company profitability

Financial ratios: profit per share, profit margin

10% increase

Company viability

Stock price

Double the price in the first year

Internal 'social cohesion'

Employee productivity

10% increase

Increase market share/consolidate position on the market

Number of customers

15% increase

Problem Solution: Global Communications