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Situation Analysis and Problem Statement - Global Communications

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Situation Analysis and Problem Statement: Global Communications

Increasing competition and rapid changes in the business world have made organizations re-think about their strengths and core competencies. The growth in off shore outsourcing has exploded in size as companies have sought lower labor costs and sophisticated technologies (Pfannenstein & Tsai, 2004). According to McKinsey Global Institute, the estimated offshore outsourcing activities will increase by 30 to 40% a year for the next five years. Supporting the growth, Forrester Research estimates that 3.3 million white-collar jobs will move overseas by 2015, which would amount to a yearly average from 2000 to 2015 of approximately 220,000 jobs out of a workforce of 138.8 million (Heffes, 2004). The opportunities and challenges of outsourcing will be discussed as it relates to scenario two, Global Communications. Key stakeholders will be identified and how ethical dilemmas may arise in the company. Lastly, the end -state goals will be discussed along with the problem statement.

Global Communications is experiencing economic pressure due to the rise of competitions. In hopes to improve business and to compete with the local telephone and cable companies, the Global Communications senior leadership team has developed two approaches. The first approach is to introduce new services, primarily to its small business and consumer customers, who will now be served in both local and long-distance markets across the country. Global Communications has developed a partnership with a satellite provider to offer video services as well as a satellite version of broadband, which will allow small business owner anytime Internet access using wireless telephone or PC cards.

The second approach, aimed at cutting cost and improving profitability, Global Communications plans to market itself on an international level with the goal of becoming a truly global resource. The company plans to move some of their technical call centers to India and Ireland, where the technology is more sophisticated and where the labor cost is much cheaper. As part of the approach to cutting cost, the company will downsize some of their domestic call centers, leading to the lay off of many employees. Employees, who do remain, will have to relocate and experience a 10% salary cut in order to meet the leaner budget. In efforts to improve business, there will be obstacles that Global Communications must face.

In order to cut cost, many employees will have to be laid off. For some of these employees, the salary they make at Global Communications may be their main source of income. Instead of a double income household, it will be down to a single income. The employees' job loss may be effect their family who may rely on their financial support. According to the Labor Market, the estimated job loss due to outsourcing between the year 1994 and 2002 was more than 500,000 (Thottam, 2004).

Employees who do stay would have to relocate and experience a 10% salary cut.

A 10% salary cut for a low-income family may have a great impact on their lifestyle. Relocating, especially to a foreign country, would have a significant impact not only to the employee but also on their families. Is the employee expected to move his whole family to India or Ireland? Employees and their families would have to make dramatic life style changes because of the time difference and cultural differences. If the families are left behind, they may risk their relationship deteriorating.

A top concern raised when discussing the disadvantages of outsourcing is its tendency to negatively affect employee morale. Indeed, if the promised improved economics of outsourcing are to be fully realized, personnel formerly dedicated to the newly outsourced functions are to be dismissed or transferred. At a minimum, these events would change workers lives dramatically, and cause some increased levels of personal and economic turmoil for the affected staff. Resentment, betrayal--all lead to poor job performance. It is very difficult to build good working relationships with the client when their client is the one that outsourced them. Employees discern the lack of a fair shot for future advancement opportunities within their organization (Nekvasil, 2005).

Global Communications may have to retrain their former employees on how to use the new technologies and resources. Not only is retraining time consuming but it can be costly. Another factor that management has to consider is how to deal with resistant to changes. Employees may be used to working with certain technologies in their previous position and will be reluctant to accepting the changes.

When dealing with a diversified work environment, management needs to focus on cultural differences. Due to cultural differences, people misunderstand and misinterpret each other. What is considered appropriate in one country may not to be appropriate to another. Expectations are created that will not be met. Certain work environment are deal line driven whereas in another county, they aim at building relationships. Assumptions and stereotypes are made that are not accurate. Along with the challenges that Global Communications has to face, there will be opportunities.

The single most important tactical reason for outsourcing is to reduce or control operating costs. Access to an outside provider's lower cost structure is one of the most compelling short-term benefits of outsourcing. In a recent outsourcing Institute survey, companies reported that on average they saw a 40% reduction in costs through outsourcing (Heffes, 2004). According to McKinsey Global Institute 2003 data estimates, every dollar of costs the U.S. moves offshore brings the U.S. a net benefit of $1.12 to $1.14 (in addition to the benefit to the country receiving the investment) (Heffes, 2004). The profit that Global Communications make can be used towards pay raise and better benefits for the employees.

Customers benefit from lower prices, enhanced productivity, and higher value jobs. Outsourcing providers bring extensive world- class resources to meeting the needs of their customers. Partnering with an organization with world-class capabilities can offer access to new technology, tools and techniques that the organization may not currently possess; more structured methodologies,



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