Introduction
The report is about British Telecom and presentation of the core activity that it should implement during hard times. This largely includes definition of the project that is proposed with few reasons for selecting the approach adopted. Further, it also reviews justification for the project with the project’s proposed methodology. With this, it is expected to produce planned outcomes and financial implications for the organization.
The Current Problem
British telecommunications (BT) is a UK-based company that operates in 170 countries with principal stakes in networked IT services, telecommunications services and other broadband/ internet products ( 2007). In December 2006, it admitted that it has difficulties in managing the pension fund as life expectancy of pensioners has improved ( 2002). At least £3.4B had added to its pension burden and the problem was intensified by BT’s failure to resolve government negotiations regarding saving BT’s liabilities in case of collapse ( 2006). Pending approval of splitting BT’s pension fund to mitigate the situation, the strategy would prevent the telecommunications giant from spending up to £3B over the next decade. The split will specifically classify guaranteed pension to non-guaranteed ones in to two companies for BT to extend payment of the other half beyond ten years. However, the split is not yet approved by shareholders, government authorities and most especially the pensioners themselves.
The Current Solution
BT is operating in an international environment and also invested its pension fund in many countries among others such as US, Canada, Italy, UK, Switzerland and Japan while holding cash reserves in respect of the asset ( 2007). In effect, the pension fund of the company is exposed to different and wide-range of risk and return scenarios. The political, social, technological and the social characteristics of such countries are variables affecting the ability of the fund to protect pension holders. Different rules in these countries have their own purposes particularly adjusting to what the country requires. As a result, the pension fund undergoes implications that can diversify its risks given a specific level of return.
By going international, BT is able to take advantage of exploiting different country characteristics. Pensions are vital part of the economy and also cornerstone of why the working class is sharing voluntarily some part of their income for their future retirement. In effect, pension funds should not go bankrupt or the company and government regulators would face criticisms from the people. Through internationalization of pension funds, BT is able to hedge risks such as the current situation. This is specific to the company and UK economy. By letting the fund circulate in different economies, the need for splitting the fund is not too sudden. Most importantly, BT has other options when negotiations fail to approve its proposed split. Diversifying in different countries let BT to increase it alternative strategic decisions.
On the contrary, long-term risks such as conflict between two main destination of pension funds like US or say Switzerland can cause devastating effects to the supposedly advantages of international pension funds. For example, US holding to such funds are 40% due to its stable economy while Switzerland holds 20%. In the advent of future conflict, these huge investments can be disrupted and their return-risk performance can be adversely affected. However, such hypothetical case is a very extreme case. It may only happen in case of war between developed countries or disunity among Western and Eastern groups in terms of fighting terrorism or nuclear threats.
Industry Five Forces
General Forces
Specific Forces
Rating
Threat of new entrants
Barriers to entry
· Economies of scale
High
· Product differentiation
Medium to High
· Capital requirements
High
· Switching costs
Medium to High
· Access to distribution channels
Medium to High
· Cost of disadvantages independent of scale
High
Governing policy
High
Expected Retaliation
High
Bargaining power of suppliers
Low
Bargaining power of buyers
Low
Threat of substitute products
Low to Medium
Intensity of rivalry among competitors
· Numerous or equally balanced competitors
High
· Slow industry growth
High to Medium
· High fixed costs or high storage costs
High
· Lack of differentiation or low switching costs
Medium to High
· High strategic stakes
High
· High exit barriers
High
As explained, an attractive industry is one that can provide the platform for a firm to earn above average returns from its invested capital ( 2001). An attractive industry has high entry barriers, low bargaining power of suppliers and buyers, low threats of substitute products, and not-so-fierce rivalry among competitors. As shown by the ratings, BT would likely be able to obtain positive outcomes in global telecommunications industry disrupted mainly from high intensity of rivalry among its future competitors and partly the threat of substitute products like NTL. NTL is also a UK-based company and operating in UK soil but is headquartered and listed in the US ( 2005 ). Its businesses are broadband, digital television, telephony, content and communications services with 50% consumer and 85% business customers within UK. In effect, the focus of proposed solution to ease the financial difficulty of BT should be something that is customer-oriented to minimize rivalry and maintain leadership not only in UK but also in the world industry.
The Proposed/ Re-Enforcement Solution
Customer service is a source of competitive advantage ( 2000). According to (cited in 1997), quality is an insufficient source of best net value that makes customer service an augmentation of the uncompleted value strategy (). In this veil, the ACA Group definition of customer service can be accepted all throughout this paper. Excellent customer service (ECS) is the ability to exceed customer expectations in a continuous manner (cited in ). The first part of our discussion will identify customer service requirements for firms to operate within the borders of ECS. The second part will lead us to develop and apply different methods for evaluating customer service quality in different industries. It should be clear that proper planning, implementation, measurement and improvement of a certain customer service strategy is implied in this paper. Also, it is assumed that firms are rational, that is, they build bounded strategies. Further, they are operating under perfect competition to settle market power issues that could deem ECS less useful.
Understand the customers. This is the most obvious and primary task for a firm. There are four basic consumer aspects to know, also called four C’s; namely, customer solution, cost, convenience and communication ( 1990 ). Customer solution is related to differentiation business-level strategy. The latter is a condition in which firms should offer products that customers perceive to be valuable at an acceptable price ( 1980 ). However, when a firm aspires for ECS, customer solution should not end after delivery of the product even the firm is confident of its design and quality. ECS triggers extended customer evaluation process, that even after sales, the buyer is continuously testing the quality of the product especially in the aspect of durability. In effect, the firm should include before-sales ECS features such as free-test, security seals in products packages and product description. These are not only for eye-catching purposes, but more importantly, to aid customers to build rational expectations. Further, the point-of-sales should include knowledgeable and confident salespeople in order to maintain the expectation initially created. Lastly, there should be an after sales service like service-warranties, money back offers and return-exchange policies to resolve complaints which could arise from the first two stages, or possibly from, the product/ service (P/ S) itself.
Customer cost is related to cost leadership business strategy in which firms should offer P/ S with lower-than-competition cost at acceptable features ( 1980 ). Through efficiency of and cost-savings from primary and secondary activities in the value chain, cost leadership can be attained (, , 2003 ). Cost requirement in ECS, however, could involve additional cost relief for customers outside plant operations and efficiency reasons. This becomes possible within marketing rationale implemented through P/ S discounts, bulk-buying incentives and freebies. Such would actually mean aggressive advertising or even an indication of a price war to protect margins from competition. On using cost as an ECS mechanism, in the contrary, firms should prevent to overtake the market of an industry leader, trail in innovation feats or get its P/ S under perceived devaluation in quality.
Customer convenience is the counterpart of place or distribution channel in firms’ view. According to (2000), having a strong channel can lead to success in marketing (). There are different kinds of channels to choose from; namely: direct selling, telemarketing, e-commerce, wholesaler, retailer or through agents. Each of these has their own strength and weaknesses. For example, selling through retailers can support ECS in terms of costing as there is stiff competition and players want to gain market share. But as the P/ S of the firm is scattered over a large geographical area and sold in different markets, lack of monitoring would lead to mishandling and wrong advertising. The efforts of before-sales discussed earlier will be undermined and P/ S would be perceived with less value. However, convenience is a common remark for retailers due to accessibility, over-the-counter payment and chance to bargain.
The task of a firm is to choose channels that provide the highest contribution to ECS. Channels have varying customer privileges like accessibility (retailers), security (wholesalers, malls), interactivity (e-commerce) and support (direct selling, agents). Aside from general privileges, complementary services of such channels need to be evaluated like the payment process, building ergonomics, staff attitude and other channel-specific policies. And finally, customer communication reciprocally refers to the promotion and advertising system of a firm. This last element of customer understanding endeavor (see figure 1) is at the heart, if not the brain (in literal terms), of the process. This is because it addresses the questions such as “Do customers kept informed about the P/ S features in an understandable manner?” and “Do firms listen to the customers?” ( 2000 ).
Imperfect information is written all throughout economic books and other applicable academics. Communication minimizes imperfect information for the firm to advance, although in smaller distance, towards perfect costumer relations. Thus, it is crucial to choose specific communication media that provides the platform which effectively support the two questions of . For example, in resolving the former, advertising media (print-ad like billboards and magazines, audio and video, internet, commercials, etc.) should suit the general environment (see below) above anything else. Without such caution, the P/ S communication may only be viewed as taboo, unhealthy ad and would not serve its purpose ( 2003). ECS requires firm messages to be sent according to the resources and capabilities of the firm. To do this, the cost of advertising media and the content should be balanced to the core competencies of the firm.
Understand the general environment and competition. After determining the nature of expectation about the P/ S of a firm, the planning stages of ECS is half-finished. It is likely that meeting what customers expected would lead to increase in demand after implementation. However, time is not stagnant as the environment and competition continues to change that “shocks” bound firm strategies to mediocrity. Of course, it should be prerequisite that a firm planning on ECS has financial and business capability to survive during environmental transitions to continue the strategy. People are naturally non-contended in improvements as time passed-by that addressing four C’s under ECS tend to be costly, complicated and evolutionary. However, when a firm can protect itself from (even exploit) the outside forces, it can minimize (even eradicate) these obstacles against ECS and still tap its benefits.
Protective actions can be done in two ways. In a reactive manner, firms can lobby in the government to impede the entrance of dump products within the national borders. This can sustain ECS practices of local firms since product features and prices are according to local standards and competition. The ECS competition is more predictive and is hindered by foreign advancement that can cause strategy distortions and loose of focus. In a pro-active manner, they can use economic indicators and industry statistics to have a deeper look in the level of consumption, price of raw materials and cost of borrowing. This can enhance production scheduling, financing of different projects and formation of alliances as well as rationalizing ECS. Without shield to outside forces, the internal operations of the firm can become vulnerable as it has always had to react (. 2003 ). External monitoring and internal reorganization (if necessary) should be the mind-set to maintain ECS plan.
Exploitative actions can take two forms. First, firms can formulate principled move to purchase the latest technology available in the industry to gain first mover advantage. By doing so, customer expectation will be exceeded instantly without creating organizational stress through innovation. In addition, this state can be sustained as long as the mass technological acquisitions are delayed relative to the original acquirer. This is in accordance to the indefinite satisfaction rule of consumers. Second, the firm can consider corrupt move especially at times of tight rivalry (. 2003 ). It can “pirate” key managers from its immediate competitors by offering higher salaries and more lucrative benefits. In doing the former, customer service will be likely perceived as above expectation as P/ S, especially the technology-based ones, are new to customers while the second can add worth in decision-making and implementation of ECS. In the contrary, the firm should be able to have liquidity and persuasive ability including plans to mitigate publicity and litigation regarding ethical practices.
Keep corporate direction closer to Direct Marketing. According to (cited in 1997), a firm should have business logic that address methods of customer access, emphasis on P/ S differentiation and approach of economic opportunities (). Direct marketing (DM) can improve and maintain the logic towards ECS. DM is like a face-to-face (B2B and B2C) approach only with the use of efficient platforms and streamlined corporate system ( 2003). When combined, the ECS requirement discussed above leads to DM. Its core strength and firm benefit is derived from communication outcomes (see figure 1 again) wherein the responses of consumers and communication performance of the business (the two vital questions of ) are kept in a database. The environmental condition is exploited because interactivity from e-commerce is necessary to maximize DM capability (like Dell). Customer solution, cost and convenience are easier to resolve as DM is bound to minimize complaints that subsequently builds learning curve. As customers are the most reliable source (but also the most dynamic) of environmental and competitor survey, DM can eliminate research costs and risk of litigation and reputation (in corrupt moves).
It is common to hear a customer comparing the service of one firm to another. In addition, they oftentimes argue about the improvement in economic indications or consumer rights. Above all, points of improvement and maintenance in terms of customer service strategy can be easily derived from the recorded complaints. Four C’s and outside forces can be readily directed to what customer wants and needs. In an effective way, expectations are resolved without deteriorating trust ( 1997 ) while monitoring for consistent excellent service is possible due to real-time communication of any deviation to ECS. Actually, DM is the perfect environment to successfully and efficiently implement before-sales, point-of-sales and after-sales information and services. In addition, customer services are approached with the use of single corporate culture which will not only serve as a source of consistency but also sustainable competitive advantage due to its intangible property.
Conclusion
By having competitive products, BT should be able to increase profitability and lessen the risk of being bankrupt. Pension funds are very essential for a firm that employs thousands of workforces worldwide. But if BT can increase the productivity of its workforce by focusing operations and strategies towards customer satisfaction, the risks attached to pension funds will be supported by increasing returns to the bottom-line. Since pension fund issues affect the overall structure and strategy of BT, the most efficient way to solve it is to relate the problem to the solution, that is, relate the human resources to productivity by having a customer-oriented tactic. The focus on customer service is the core step BT would implement to ease financial burden as well as continue to be competitive in the global telecommunication industry against rivals.
Bibliography
Books
Discussion Paper
Journals/ Magazines
Electronic Sources
Appendix
Attach 1: Customer Understanding Endeavor and ECS Diagram
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