Management of Change
Table of Contents
Part 1: Coursework Assignment
Executive Summary p. 3
Introduction
A. Background of PCCW Limited p. 4
B. General Issues p. 6
Environmental and Drivers of Change
A. General Environment Analysis p. 8
B. External Environment Analysis
PEST Analysis p. 8
Porter’s 5 Forces Model p. 10
C. Internal Environment Analysis p. 11
Identification of Issues p. 12
Part 2: Final Assignment
Executive Summary p. 16
Prescription for Change
A. Vision for Renewed Organization p. 17
B. Direction for Scope and Change p. 18
C. Speed of Change p. 19
Proposed Actions p. 21
Part 1: Coursework Assignment
Executive Summary
During the turn of the century, the world experiences more drastic changes than before, which include changes in the environment, culture, education, knowledge, the society, and technology. The world has evolved into a massive ball of information and technology that led to the expansion and the development of the society in several aspects. However, despite the improvement of the performance of many companies, these changes also contributed to the distress of some, which are not apt for these changes. From this, it can be understood that, existing and persisting in the business industry is not as easy as it seems. Because of these, many business organizations and companies are encountering a variety of problems and issues that determine their success or failure in the market and in the industry. These problems and issues arise from the external and internal changes that the company encounters.
From these, this assignment discusses a specific company in Hong Kong, which encountered a number of problems, in relation to the changes that happened in its internal and external environments. The profile of the company, including the general issues and problems that the company faces will be evaluated and discussed, using the different tools of analysis. Moreover, the issues identified will be tackled in relation to the scope of its change.
Introduction
A. Background of Company: PCCW Limited
It has been reported that PCCW Limited is the largest telecommunication enterprise in Hong Kong, and have been listed on Hong Kong Stock Exchange since October 18, 1994 ( 2006). The company is also one of Asia’s leading competitors in Information and Communication Technologies or ICT ( 2007).
The business was formed by Li Tzar Kai, Richard, the younger son of Hong Kong tycoon and billionaire Li Ka Shing, and is formerly called the Pacific Century Development, and investment holding company. Its English name became Pacific Century Cyber Works Limited on August 9, 2002.
The company contributes in enhancing the image of Hong Kong as a center of technology and business superiority, with its outstanding innovation, especially in terms of IP-based business services, New Generation Fixed Line services, broadband pay-TV, Internet access, media content, large-scale IT solutions, mobility, and wireless innovations ( 2007). It also facilitates and encourages international, most especially Western organizations to bring their businesses to Asia, run operations across the region, and bring Asian businesses to other parts of the world.
Currently, it has approximately 17,000 employees, located in different parts of the globe, including mainland China, South America, Japan, Korea, Thailand, Malaysia, Singapore, Taiwan, Europe, the United States, India, and the Middle East ( 2007), and form the technology flagship of the Pacific Century Group ( 2000).
In addition to the mentioned services, PCCW also provides solutions for port management, security and CCTV systems, audio and visual solutions, and technical support and maintenance services to various sectors in the industry, such as governments, public services, aviation, and broadcast engineering operations ( 2007).
Furthermore, the number of the company’s employees and the extent of its services enable it to achieve its mission and vision, which is to provide innovative and practical technological and communication solutions and services to its market. It also seeks to maintain and sustain a global corporate identity, which is needed to represent the company’s new leadership position in the satellite, telephony and Internet service industries (2007). In addition, with the contribution of its large team of professionals, experiences and knowledge in the IT industry, the company integrates and influences both the Hong Kong and Chinese resources in providing excellent ICT solutions that would help consumers develop innovative and challenging business opportunities that would attain operation efficiency ( 2007). The company also seeks to create an identity, including strategy, naming and complete visuals, which will enable it to communicate all of its service offerings, while expressing a unique blend of agility and stability ( 2007) that will enable its consumers to recognize its contribution in the market and in the industry.
B. General Issues: Changes, Concerns, Problems
The start of its problems occurred when it offered Cable and Wireless PCCW stock and US billion in bank loans (2006). It has been the subject of much ridicule, since many residents are PCCW stockholders, and with the purchase, the company’s stock price was reduced by 96% in 2003, from its peak in 2000. In 2003, Cable and Wireless finished paying in all the stock from the 14.7% stake it had, which amounted to US billion at the time, and yielded only .9 billion of sales in the end. Because of this, Richard Li resigned as the company’s chief executive officer and agreed to sell his indirectly held 22.66% stake in the company for a total of HK.16 billion (2006).
In the intention of the PCCW to expand its market, secure its position, and make strategic agreements with other Asian companies, it has borrowed heavily to finance the billion bid for Hong Kong Telecom, which resulted to its debt of US billion ( 2000). Further decline of the company’s performance is brought about by its lack of confidence in the debt repayment plans among shareholders (2000), which contributed to the its reputation as the worst performing blue-chip company on the list of the Hong Kong Stock Exchange in 2002 and 2003 (2006).
In addition to the debt and the change in ownership and management of PCCW are the increasing incidences of competition among the industry. It has been reported that in August 2000, there were 165 external telecommunications services operators and 187 Internet market service providers (2000). The increase in competition led to another cause of the company’s problems, which is the existence of monopoly for domestic fixed telephony. This includes three companies, namely, Hutchison Communications Limited, New T&T Hong Kong Limited, and New World Telephone Limited. This became a major blow for the company, as many telephone operators no longer need the gateways and local networks provided by PCCW ( 2000).
Moreover, another cause of its problems is the reduction of its staffs and workforce, which contribute to the decline of its operations. An additional cause is the failure of the bid between the company and China, for at the time, China resisted to make negotiations with a company that is connected to the Singapore government, which also became the cause of the problems of the Sing Tel’s bid in the past. What the company did was to sold Cable and Wireless HKT for about billion to a one-year-old Internet start-up that had no profit and no consumers (Greenlees 2006).
Furthermore, the problem for the company is the overall failing revenues in Hong Kong, with its failure to make significant progress to the China mainland. With this, heavy investment in infrastructure throughout East Asia must be needed before the full potential of PCCW can be appreciated. In the meantime, the company has focused more on newer target markets, specifically in e-commerce, which contributed to the its revenue of 146%, from the new Internet and Interactive Multimedia Services market (2000).
Environmental and Drivers of Change
Environmental Analysis
A. General
The external environment of PCCW must be analyzed to be able to understand its internal environment. Understanding its external environment would enable the company to generate and come up with strategies and responses, which would contribute to its success in the market and in its industry. In addition, knowing its external environment would enable the company adopt to its changes that would determine either its success or failure in the market.
B. External
PEST Analysis
The PEST Analysis establishes a good analysis of the external effects on a company by breaking them into essential and obvious sorts.
- Political – restrictions in the policies set by the Chinese government in making negotiations and mergers; choice of China in accommodating a company that is not affiliated with the Singapore government; distinct superiority over its legal system; inheriting the British legal system with its international financial transactions upholding the laws and regulatory standards that apply to the financial markets in London or New York
- Economic – development of infrastructures of East Asia as a whole; monopoly; debt of PCCW; changes in the inflation-deflation rates of the dollar; financial crises; collapse of asset prices; distinct superiority over currency and general infrastructure; the Hong Kong dollar is convertible to participate in capital transactions; collapse of asset prices, slow economic growth
- Sociological – conflict with consumers that are major stockholders of the company; unemployment; Dynamic – changes in communication, marketing and management; can be attributed to the changes happening in Hong Kong, such as retaining a distinct superiority over human resources, languages, having an impressive array of human resources that includes not only mainland Chinese who have been educated and trained in the West, but also a standing force of lawyers, accountants and other professionals hailed from every corner of the world; use of the English language, which has long been integrated to into its socioeconomic fabric; competition and rivalry
- Technological – Complex: impacts of e-commerce to the company; development and improvement of its website, utilization and maximization of the Internet
Being one of the busiest cities in the world, its complexity grows to cope with the changes outside its domain. Part of the environment’s complexity is the use of the Internet, which is continuously reinventing the whole customer process, from information to after-sales care ( 2006). The use of the Internet in Hong Kong made negotiations faster, developed new high-tech tools, enhanced Research and Development, hastened operation and production, and contributed to the improvement of analysis and decision-making processes in companies (2006). Because the use of the Internet is one of the most useful tools in closing negotiations in Hong Kong and in establishing communications, it has largely contributed to the complexity of PCCW’s external environment.
Competition Analysis: Porter’s 5 Forces Model of Competition
The model of pure competition suggests that risk-adjusted rates of return should be stable across firms and industries. Nevertheless, a number of economic studies have asserted that different industries can sustain varied levels of profitability, through knowledge of the structure of the industry. With this, Porter’s 5-Forces Model is useful for understanding the context of the industry, in which the firm operates ( 2006).
- Rivalry – This is caused by several factors, such as the presence of a larger number of firms that compete for the same consumers and resources; low switching costs for a consumer can switch from one product to another; strategic stakes are high when a company is losing market position; a diversity of rivals with different histories, cultures, and philosophies; and industry shakeout ( 2006).
- Threat of Substitutes – Substitute products refer to products in other industries ( 2006). The threat to PCCW is the price of the materials being used in order to render service to consumers, which include cables, telephone lines, and many others.
- Buyer Power – This refers to the impact that customers have on a producing industry ( 2006). In Hong Kong, buyer power is strong, such that this could provide PCCW’s rivals with a strong and efficient business.
- Supplier Power – The power of suppliers over PCCW is also strong, as it also contributes to the decline of the business of the company. Due to the increase of prices in the market, prices of raw materials also increases, thus, give additional costs for the company.
- Barriers or Threat to Entry – Threat to the entry of PCCW to the Chinese market is due to China’s preference of being not involved with any company related to the Singapore government. Another barrier to the company’s entry to the Chinese market is also brought about by the lack of development in the entire East Asia, which failed to accommodate the needs of company.
Internal
The internal environment of the company must also be evaluated to be able to grasp and understand its potential for developing teamwork, coordination, and employee development. One of the problems of the company is the change in its ownership, and thus, management, which, in turn, will also change its organizational culture. Organizational cultures evolve slowly, imperceptible, over years, if not decades, and refer to the company’s collections of unspoken rules and traditions ( 2003). With the problems encountered by PCCW, it can be understood that although the company has its own culture in its internal environment, this has not fully contributed to the success of the company as a whole. In addition, although this culture has helped the company gain from its business, it is still not enough to support the growing demand of the company’s consumers and the growing competition in the industry. This culture was even lessened or altered with the reduction of the company’s workforce. Changes in the company’s organizational culture, thus, determine the company’s success and failure in implementing and adopting strategies.
After the acquisition, most of the staffs working in C&W HKT are now working in PCCW. This led to the change in the culture of the company, from a conservative, seniority-based, and non-market driven, it turned to a strongly competitive, performance-based, and customer-focused company. Quality service is now the company’s primary concern, and has been investing millions of dollars in quality and customer service training. Changes also include implementing different quality programs, including quality improvement teams and six sigma programs. These changes in the culture of the company brought about the company’s restructuring process, such as changing the divisions from a cost-center to a profit-center, thus, making all employees motivated to make negotiations and transactions (2003).
Identification of Issues
From the above analysis, several factors can be determined, which need changes. Primarily, the management or style of leadership in the company must be changed, which suits the style and preferences of its employees. The management style of the company’s managers must then be given enough attention to ensure the organization and control of the company’s employees. The scope of this change must be rooted to all of the functions of the company’s manager or its chief executive officer, whom includes planning that, involves defining goals, establishing strategy, and developing sub-plans to coordinate activities ( 2005). Function also includes organizing, which determines what needs to be done, how will it be done and who will do it, leading to directing and motivating all parties and resolving conflicts, controlling, and making sure that the organization has achieved its stated purpose (2005). In short, the scope in the change of management entails the refreshing and reinforcing of the tasks and responsibilities of the manager of chief executive officer of the company.
Another factor that needs changes is the company’s strategies of taking care of their employees or workers. Workers are the company’s valuable assets, for they are able to hasten the production and operation of the company. Without the company’s workforce, its functions and goals in the industry will never be attained. The scope of the change needed in this aspect must include the development of employees as a whole, to be able to contribute to the operations of the company. Changes are needed in the managing staffs or employees for based on the problems encountered by the company some of the members of the workforce of the company lack the capacity to perform well and take the pressure of the responsibilities assigned to them. For this reason, some of them were laid off. In addition, laying off employees is not always an answer to reduction of costs, for sometimes, the debt of the company can be repaid through the efficiency of the operation and the increase in production.
Part 2: Final Assignment
Executive Summary
From the previous assignment, it can be understood that despite the active participation of PCCW in the industry of Hong Kong, it still encounters several problems and issues that makes its business somehow lead into failure. The problems or issues discussed in the previous assignment include the following:
First problem encountered by the company is the change in ownership or management of the company, as Richard Li resigned as the company’s Chief Executive Officer, and even agreed to sell his indirectly held 22.66% stake in the company ( 2006). This problem is the result of another problem of the company, which is the piling up of its debt, which led it to sell its stocks and the whole company to other telecommunications company. Increase in the competition among the industry also became the problem of the company, for with the increase in competition sales and profit will be decreased, thus, becoming a threat to the success of the company in the market. Increase in competition gave way to monopolies, which further reduced the profit of the company. As a response of the company to such problems, they opted to reduce their workforce for cost reduction in the company, due to the slowing down of operations. All of these problems were consequences of Hong Kong’s failure to bid with China, for at the time, China does not want to be associated with a company that is connected to the Singapore government. In addition to this problem, the overall issue encountered by Hong Kong companies, such as PCCW, is the slow development of the infrastructure in East Asia that contributed to the decline of the businesses in different parts of Asia, including Hong Kong.
These problems led to the decline of the performance of PCCW, which became an issue in Hong Kong. With this, several implementation or action plans will be proposed, as solutions to the problems and issues encountered. These would include the vision for the renewed organization, the direction and scope of change, and the speed of change.
Prescription for Change – “A Giant Leap for a Strong Come Back”
A. Vision for Renewed Organization
In line with the changes needed by the company, its vision must also change as an answer to its renewed short-term and long-term goals or objectives. Because of this, a new mission statement must also be proposed.
New Mission Statement: PCCW-HKT is an empowered business organization that provides high quality, practical, and innovative technological and communication solutions with its aim for customer satisfaction and brand loyalty. It serves to be the leader in the technological and communication industry, through being a good example for other companies, through putting first the welfare and well-being of the company’s workforce before anything else. The company will also focus on implementing new business and management strategies that would enhance the skills and potentials of the employees. The company will also be creating its identity, which would represent its services and solutions, to contribute to its overall image, as the leading provider of telecommunications and innovative technology in Hong Kong and in other parts of the world.
B. Direction and Scope of Change
The direction and scope of change of the company must involve several steps that would serve as possible solutions to the problems encountered by the company. These directions and scope are as follows:
- Coming up with new projects and strategies as an answer to the delay in development of infrastructures in East Asia
- Collaborating with and making agreements and treaties with China to agree with the bid
- Finding additional revenues to be able to repay debt
- Adopting new management and leadership styles to suit the company’s new ownership and to meet increasing and changing demands of consumers
- Reducing costs through finding new suppliers and cheaper alternative materials
- Reduce laying off of workforce through compensations and new leadership styles
- Joining monopolies to increase profits and lessen competition
- Enhancing the company’s operations management through implementation of Total Quality Management
- Lessening workforce turnovers and retaining workforce through implementation of performance management concepts
- Improvement and development of cultural web in the company and among employees
- Adopting new information system and other communication programs
- Maximization of e-commerce and the use of the Internet for transactions and negotiations
- Retaining customers through customer value and relationship marketing
C. Speed of Change
The direction and scope in relation to the changes of the company must be implemented effectively and efficiently to guarantee the successful come back of PCCW in the market and industry of Hong Kong. However, to maximize and effectively utilize the effects of the scope and direction of these changes, a time frame or period must be set.
- Speed of Change: This must be done in two to three months time after auditing the total revenues and sales of the company.
- Speed of Change: This must be done and implemented in two to three months time after coming up with new strategies, so as not to further reduce the company’s resources in Hong Kong.
- Speed of Change: This must be done simultaneously with attaining agreements with China, to compensate with the loss of resources of the company.
- Speed of Change: This must be accomplished in one or two months time after the selling of the company and after the assigning of its new Chief Executive Officer.
- Speed of Change: This must be done simultaneously with finding additional revenues to reduce costs and not spend the company’s existing resources.
- Speed of Change: This must be implemented soon after the assigning of the new Chief Executive Officer, except for reasons that would present threats to the company.
- Speed of Change: If agreements with China are not successful
- Speed of Change: This must be done one to three months after assigning of the company’s new CEO
- Speed of Change: This must be done three to four months after assigning of the company’s new CEO, to evaluate and assess the performance of the employees under new management
- Speed of Change: This must be accomplished all throughout the employees’ stay in the company
- Speed of Change: This must be adopted and implemented six to eight months of assigning the new CEO
- Speed of Change: This must be accomplished after adopting new IT systems
- Speed of Change: This must be accomplished all throughout the course of the company’s business.
Proposed Actions
One of the problems identified was the lack of overall development of infrastructures in East Asia, and this contributes the company’s becoming stagnant in terms of its development. With this problem, the company should not wait for the development of whole East Asia for it to be able to develop as a company, for the development of East Asia depends on a myriad of factors that interrelate in the economy, politics, and society of different countries under it. With this, PCCW must therefore try to find new materials that would suit the infrastructures in Hong Kong and other parts of East Asia. The company must therefore invest and allocate time and effort on its Research and Development in its quest to find new supplies and materials.
In relation to the performance of the workforce, performance management can be implemented, which is an important process for influencing both the extrinsic and intrinsic motivations of employees, that is, increasing employees’ perceptions and understanding of job tasks and subsequently their job satisfaction. Performance management also serves to focus employee efforts and attention on critical tasks using performance feedback, which therefore assists employees in reducing job errors and minimizing the risks of learning through trial and error. This can be attributed to human resource specialists, academics, and consultants who proclaim that performance management is a critically needed tool for effective human resource management ( 1993). This, in turn, is based on the belief that an effectively designed, implemented, and administered performance management system can provide the organization, the manager, and the employee a myriad of benefits ( 1987). The literature on performance management generally suggests that the management process can increase employee motivation and productivity, provide a solid basis for wage and salary administration, facilitate discussions concerning employee growth and development, provide data for human resource decisions, and provide managers with a useful communication tool for employee goal setting and performance planning (1989).
Reduction of costs of the company can be achieved through outsourcing units or departments, such as its customer relationship management system and its call center. In addition to outsourcing, the company can also reduce costs by switching stations, such that changing their usage would enhance the use of the stations and reduce their maintenance costs ( 2007). Another solution for the problems of the company is to increase its revenues, which can be done in two ways. First, the company can increase its prices, which would be difficult, as it has to seek first the approval of the current OFTA policy; so the second strategy is more applicable, which is to add new services, such as adapting the VoIP over broadband internet. This is becoming the trend in Hong Kong, thus, its implementation, along with adding some value added services that Hong Kong Broadband Network lacks, is the best source of additional revenue ( 2007). In addition to this, the company can also promote new services, packages and promos to attract more users.
Moreover, improvement of the operations strategy of the company can be implemented to ensure its success and efficiency in the market. Improving the company’s operations strategy involves supply chain management, which is the coordination of the different relationships existing across the supply chain, and involves both intra-business and inter-business relationships (1997). In managing the different aspects of the supply chain, the nature of the process links between the different components differ because of the different characteristics and requirements in developing a relationship between these processes. This is because the movers of integration are contextual differing across the different process links. The integration of the process of procurement and warehouse inventory differs from the integration of transportation and warehouse retrieval. The difference is explained by the fact that there is process links considered as more critical than other links. Because of this, the allocation of resources in the different process links also differs. ( 1995).
Another proposed solution is the implementation of Total Quality Management of TQM, which is an approach to improving the effectiveness and flexibility of businesses as a whole. It is essentially a way of organizing and involving the whole organization; every department, every activity, every single person at every level (2002). It is a combination of quality and management tools aimed at increasing business and reducing losses due to wasteful practices, and a method by which management and employees can become involved in the continuous improvement of the production of goods and services (2006). Wilson (1995) reports, that through the application of total quality management in a company, the senior management will empower all levels of management, including self-management of the employees to manage quality system. These benefits are grouped into five key areas, namely, continuous improvement, multifunctional teams, reduction in variation, supplier integration, and education and training ( 1995).
In relation to meeting the increasing demands of consumers, customer value and relationship marketing must be implemented. Customers set up a hierarchy of values, wants and needs based on empirical data, opinions, word-of-mouth references, and previous experiences with products and services, and use this information to make purchasing decisions (1991). Today, the importance of market positioning depends on not only the products, services, and needs of the customers, but on the company’s competitive strategy, pricing, packaging, distribution, service, support and communications, such as the use of advanced technologies. Customer value then must be given additional importance of the company, most especially their stockholders. A good venue for developing perceived value is through the Internet, representing a state of pure competition, where there exist many buyers and sellers and a lot of market information on which to base decisions in purchasing or patronizing a product or service (2004). This, in turn, enhances the relationship marketing of the company, which emphasizes on building longer term relationships with customers, understanding their needs, and in providing a range of products and services to existing customers as they need them (2007). In addition, the company can lower their prices, implement and promote loyalty programs, provide value-added services, and employ analytic customer relationship management ( 2007).
Furthermore, the changes can be further enhanced through the development of the culture of the employees in the company, such that improving also their intercultural communication and competence. Intercultural competence can be defined as the ability to develop and maintain relationships, the ability to communicate effectively and appropriately with minimal loss or distortion, and the ability to attain compliance and obtain cooperation with individuals from other cultures (2000). With intercultural competence, many individuals can relate to other individuals having different cultures effectively.
Cultural and intercultural communication and competence can be developed with the implementation of effective and efficient leadership and management styles. (2000) emphasizes six leadership styles that can be adopted by a team leader or manager to effectively manage his or her team, namely, Authoritative or Charismatic leadership, Affiliative leadership, Democratic leadership, Coaching leadership, Pacesetting leadership, and Coercive leadership. One or several of these styles can be adopted to ensure the control of the employees, and the unity in the workplace. Moreover, with effective leadership, the company will be able to manage diversity and conflict in the workplace, which are means to successful operations and effective public service ( 2003).
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