Discuss about the Report for Business Strategy Report of External Issue Affection.
The aim of the report is to analyze the various factors that lead a company to adopt strategies to move parts of its business activities offshore resulting in the loss of a number of local jobs. In order to achieve this aim, analysis of both internal and external factors that affect the business operation of an organization. In this report, Telstra has been selected for the case study. Report suggested that Telstra has confirmed its off shore shift that resulted in shifting of 670 Australian jobs (ABC News. 2014). A detail analysis of the internal and external issues that has forced the company to take initiative to shift their business offshore will be done in the report. In addition to this, discussion of the impact on the stakeholders of the organization will also be made. Following this, an explanation shall be made to find the reason that helps to continue a number of jobs in Australia.
Telstra Corporation or Telstra is Australia’s largest telecommunication and Media Company which operates with telecommunication networks, mobile, internet, television and other entertainment products and services. With total revenue of A$ 27.1 Billion, the company is head quartered at Melbourne, Australia (telstra.com.au, 2016). When business outsourcing transgresses the national boundaries of a country, outsourcing takes the form of off sourcing. Both internal and external factors are equally responsible for a company to take strategic decision to undertake off shore expansion of business.
As pointed out by Wójcik (2013), that a company can find out strategies to improve the internal business of their company but it becomes challenging for the company to fight against the external changes that results in the loss of the business of the company. Therefore, external factors are highly responsible for the company to move off shore. Some of the external factors for Telstra that compelled the company to move off shore are:
Increase in competitors:
Top competitors like Vodafone Group Public Limited, Optus Systems Pty Limited and Spark New Zealand Limited supported the regulations proposed by the Government. It was found that of 499 base stations located at different regions, 427 belonged to Telstra. Keeping this particular factor in mind, it can be easily said that this situation created greater impact on the business of the particular company (The Sydney Morning Herald. 2016). Therefore, sharing network shall put negative impact on the profitability of the company.
Political factors:
Roaming regulations: Government has launched a number of competitive laws to detect the misuse of the market power of the telecommunication companies. Australian Competition and Consumer Commission has also declared their intention of asking the domestic telecom service providers to keep a check on the roaming services to the competitors’ network to operate on the Telstra network in major regional and rural areas (telstra.com.au, 2016). In this matter, Tony Warren, Executive of Telstra group commented that a declaration of the mobile roaming coverage would stop the Company to remain a differentiator in the Australian market. This made the management to remove their rationale for investment in the regions of Australia.
Decreasing market share:
With the advent of several telecom regulations, it was found that the share of the Company considerable declined. The Vice President of Victorian Farmers Federation also welcomed the regulation set by ACCC on the roaming regulations to open up to a competitive market. It has been found that several other companies from other countries as well use the option of outsourcing or off shoring their service when they find that there is less opportunity of growth in their own country (telstra.com.au, 2016). This was exactly undertaken by Telstra when its market share found to decrease.
Emphasis on perfect processes:
Many Companies focus to strengthen their business operation by improving their standardization in the internal processes of the business. In order to save time and management’s involvement in a particular business project, major companies often take the help of other companies in other countries to carry out their business operations (telstra.com.au, 2016). For Telstra as well, this point is equally valid. In order to think of expansion and bigger operational facility, going off shore is the best process to implement in the business.
As pointed out by Wójcik (2013), when a company takes the opportunity of moving off-shore, it becomes one of the steps that they undertake to increase their profit margin. The issues that Telstra faced were not new to the Company but in 1998 as well as in 2005, Telstra released similar discussions in their paper. Network sharing agreement was also ended in the year 2012 and since then the Company do not have any kind of domestic roaming agreements till today. The management has pointed out that network coverage is clearly an important feature for a telecom company and any kind of changes in such plans definitely impact the business operation of a company.
As pointed out by Fratocchi et al. (2014), that a company undertakes the opportunity to go off shore due to a number of internal factors as well. These factors might range from internal business decisions to the incapability of the labor force in action. Reading Kotlarsky, Scarbrough and Oshri (2014), it has been found that in recent perspective, companies are moving in a sophisticated and more mission-critical function. Moving to countries like China, India and other such countries can provide highly skilled labor with scientific and engineering intelligence. It is for the same reason that many companies of United States and Europe to grab the strategies of moving off shore. The need of skilled and low waged labor makes a Company to take strategic decisions regarding their out sourcing (Dawley, 2014).
A number of internal factors that compel a Company to take decision to take outsourcing are:
Absence of specialists or experts: In many cases, the sole driver that forces a company to go off shore is the inability or incompetency of the leaders of the Company to manage the operation of the business. In a competitive world, it is important to understand the needs and demand of the dynamic environment (France and Pope 2016). Failing to cope with such situations, some companies grab the option of going offshore.
Irregular risk factors: Australia faced sudden risk factors at regular interval of time in situations related to the telecom industry. With regular up downs in the rules and regulatory of the telecom business, it was challenging for Telstra to operate in the competitive market scenario. In case of outsourcing or off shoring a business project, the responsibility of the business gets distributed and is narrowed down (Vitasek, Ledyard and Manrodt 2013). As a result a Company gets prone to the risk factors that arise at any point of time in a market.
In case of Telstra, it can be said that lack of skilled labor is one of the main issue that the company has been facing since a long time. In Asian countries like India or China, availability of skilled and low paid workers is easily available. There is great provision for call centers in these countries and many companies from around the Globe are grabbing this opportunity to outsource their business and gain more net profit. Telstra also wanted to grab the same opportunity and access to the qualified personnel of the particular country. Customers of the Company also had complaints regarding the quality of network that the Company served. These complaints against the Company created a negative image of the Company in the market (Gerbl, McIvor and Loane 2014). This was another vital factor for Telstra to move off shore for creating greater reach of their business to people around the world.
Stakeholders of Telstra include internal stakeholders like the employees, team of management, owners and directors of the Company. External stakeholders include shareholders, customers, dealers and other business partners as well.
Primary stakeholders are the group of people who are directly affected either positively or negatively by any kind of action of the agency or the organization. Primary stakeholders of Telstra are all Australians ranging from customers, shareholders and other publics who show greater interest on the matters of the telecom company (Gerbl et al. 2016). It has to be understood that Telstra operates in a community of metropolitan, regional as well as remote areas of Australia. Telstra operates with great responsibility in terms of designing, operating and managing the products and services of the company. These primary stakeholders have been found to get engaged with the community organization of Telstra. Therefore, it can be easily assumed that any kind of business move is bound to affect this group of primary stakeholders of the Company.
Customers of Telstra include residents of Australia, small and medium size enterprises and other governmental heads as well. These customers are largely depended on the quality, accessibility and affordability of the product (Lacity and Willcocks 2013). In case if the company goes off shore their might arise certain issues regarding the personal information and services provided to these customers.
It has been found that Telstra works with a diverse range of employees including 29,000 employees. The employees get ample opportunity to involve in the business operation of the Company. The employees are always asked to express their views on the business of the Company. Therefore, off shoring the business is a big issue that definitely put impact on the business operation.
Another important stakeholder of the company is the Governmental bodies. The local, state and national level Ministers and leaders to other department staffs are depended on the service of this telecommunication department (Duan et al. 2014). Telstra’s corporate and relationship management team always focus on keeping a good relation with these people. However, in case the Company goes off shore, the company has to be more focused on delivering their information to a world-class information solution.
Telstra is a member of the Mobile Carriers Forum that deals with the social and environmental issues. It is also a member of Australian Industry Group and Business Council of Australia. Other stakeholders of Telstra include major companies and organizations which are greatly depended on information communication technology (telstra.com.au 2016). These industries are also interested in any kind of issues that impact the business of a telecommunication industry. Therefore, in case moving off shore becomes one of the strategies of the Company, it is going to affect these federal bodies of Australia as well.
As pointed out by Lacity and Willcocks (2013), a company cannot completely shift its business to other country. In case a company has to undertake the option of shifting its operation to other country or countries, a part of the business operation always remains in the base country. It has been identified that moving off shore shall result in a net loss of 116 jobs from Telstra who are citizens of Australia. However, there shall remain 128 existing job in the country and 12 new ones shall be created. It has also been commented that initiatives have been undertaken by the management of the team to operate in other country by sending a number of important officials to the target country. However, their specification of the role has not been defined yet.
Moving a business completely to another country is not feasible for a company. It has to be understood that a company take the opportunity to move its business operation to other country just to grab the opportunities of skilled or low waged laborer or the market opportunity of that particular country. In this situation, it has to be mention that an Australia based company cannot take the risk of completely shifting its operation to another country. In such case, the complete identity of the company might get lost (Duan et al. 2014). The company has tom leave its mark on the home country to maintain a personal identity. It is usually happen that the main operations and higher designated posts’ job remained in the home country and only the business operation that are depend on a large number of labor support shift to the other country where off shoring has been decided to take place.
If the case of Telstra is taken into consideration, it has to be said that the company planned only to shift the customer support channel to the Asian countries like India, China, whereas the important decision making process that requires the involvement of the higher authorities like the managing director or the CEO remain in Australia (Baltzan 2012). The management commented on this initiative that only a part of their operation shall be shifted to Asian countries to grab the opportunity of the skilled and low waged laborer who are available in these countries in abundance (Kim et al. 2013). However, all kind of business decision shall be based completely on the decision making procedure that the management shall decide operating from Australia only.
The shifting handover is done only to maximize the profit of the country and not to shift its business operation. Off shoring can be considered as one of the reasons that fulfill the objective of expansion of the business (Stanger 2014). Therefore, it can be said that off shoring is not the process of shifting the business entirely on another country but to use the resources of the other country and make best utilization of it. The same approach has been taken by Telstra in its recent business operation to overcome the issues that the company was facing in operating in Australia.
Conclusion:
The report based on the analysis of the opportunities that an organization gains when it opt for shifting a part of its business operation over sea. In case of Telstra, a number of internal and external factors have resulted in adoption of the strategies that ultimately resulted in the factor that the company has to off shore its business in other countries like India and China. It has been found that by undertaking the strategies for off shoring, the company tend to improve its business function to a great extent that resulted in improving the condition and fight against the odds that Telstra had to face in its home country. However, it has also been found that it is never feasible to transfer the entire business off shore because it might result in loss of identity of the business or disturb the business strategies and operations undertaken by the company. Therefore, it is likely to use the resources of the other country that might include both human resource and physical resources like land or climate, and the main part of the business still remained in the home country.
References:
ABC News. 2014. Telstra confirms 670 Australian jobs to go offshore. [online] Available at: https://www.abc.net.au/news/2014-07-23/telstra-to-move-almost-700-australia-jobs-offshore/5619102https://www.abc.net.au/news/2014-07-23/telstra-to-move-almost-700-australia-jobs-offshore/5619102 [Accessed 8 Sep. 2016].
Baltzan, P., 2012. Business driven technology. McGraw-Hill/Irwin.
Dawley, S., 2014. Creating new paths? Offshore wind, policy activism, and peripheral region development. Economic Geography, 90(1), pp.91-112.
Dhar, S., 2012. From outsourcing to Cloud computing: evolution of IT services. Management Research Review, 35(8), pp.664-675.
Duan, C., Grover, V., Roberts, N. and Balakrishnan, N., 2014. Firm valuation effects of the decision to adopt relationally governed business process outsourcing arrangements. International Journal of Production Research,52(15), pp.4673-4694.
France, C. and Pope, N., 2016. The Effect of Offshore Shifts on Brand Attitude and Corporate Image. In Looking Forward, Looking Back: Drawing on the Past to Shape the Future of Marketing (pp. 305-308). Springer International Publishing.
Fratocchi, L., Di Mauro, C., Barbieri, P., Nassimbeni, G. and Zanoni, A., 2014. When manufacturing moves back: Concepts and questions. Journal of Purchasing and Supply Management, 20(1), pp.54-59.
Gerbl, M., Gerbl, M., McIvor, R., McIvor, R., Humphreys, P. and Humphreys, P., 2016. Making the business process outsourcing decision: why distance matters. International Journal of Operations & Production Management,36(9), pp.1037-1064.
Gerbl, M., McIvor, R. and Loane, S., 2014. Near or Far: A Multi theory lens to examine the business process outsourcing decision.
Kim, Y.J., Song, J., Baker, J. and Kim, J., 2013. An examination of the importance of core competencies and relationship management in IT outsourcing agreements: empirical evidence from an eastern cultural context. Journal of Global Information Management (JGIM), 21(3), pp.21-41.
Kotlarsky, J., Scarbrough, H., and Oshri, I. 2014. Coordinating expertise across knowledge boundaries in offshore-outsourcing projects: The role of codification. Management Information Systems Quarterly, 38(2), 607-627.
Lacity, M.C. and Willcocks, L.P., 2013. Outsourcing business processes for innovation. MIT Sloan management review, 54(3), p.63.
Stanger, A., 2014. One nation under contract: The outsourcing of American power and the future of foreign policy. Yale University Press.
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The Sydney Morning Herald. 2016. Telstra may be forced to open up regional mobile networks. [online] Available at: https://www.smh.com.au/business/consumer-affairs/telstra-may-be-forced-to-open-up-mobile-networks-in-regional-and-remote-areas-20160905-gr8qeh.html [Accessed 8 Sep. 2016].
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