Organizational Analysis: PCCW Directories on focus

Organizational Analysis: PCCW Directories on focus

INTRODUCTION

Organizations today operate in an environment characterized by hypercompetition (D’ Aveni 1995). While organizations strive to survive the challenges of the niche market they operate, different environmental factors came into surface and have changed the way organizations perform their tasks. In order to be successful, an organization needs to be able to compete effectively through its resources, capabilities, and strategies. Regardless of resources and strategies inherent to any organization, their structure plays a significant role and creates positive implications. Organizational structure affects how managers and leaders perform their given duties particularly on decision making (Schilling & Steensma, 2001). It also determines the way of doing tasks by integrating organizational strategies (Jenster and Hussey, 2001; Donaldson, 1997). As recognized by numerous literatures, effective structure provides stability and outstanding business performance.

This paper attempts to analyze the organizational processes, design, strategies and structure of PCCW Directories, a subsidiary of PCCW Limited. PCCW is an Asian organization that has a centralized organizational structure. Power and control rests on the top of the corporate hierarchy. Recent developments and changes in the both the company’s internal and external environment has led the company to gradually restructure and adopt ‘western’ style of management. The expansion of the company resulted in the creation of different divisions and businesses.

DISCUSSION

Primary Businesses

PCCW (or Pacific Century Cyber Works) Limited is the largest and most comprehensive communications provider in Hong Kong and one of Asia’s leading players in Information and Communications Technologies. PCCW Directories is a part of the Advertising and Interactive Services. It offers highly-effective advertising solutions primarily to small and medium-sized businesses via traditional print directories and catalogues. PCCW Directories is a wholly-owned subsidiary of PCCW Limited. PCCW Directories is one of the leading directory market players in Asia.

The company specializes in directory services where advertisers and users are able to connect through the company’s integrated media platform. The company offers print products, online and telephone inquiry directory services. Among their specific primary businesses, as stated in their corporate website, are:

Internet Yellow Pages – attracting 23 million page views per month, Internet Yellow pages (IYP) is one of the most popular portals in Hong Kong and offers customers maximum advertising exposure on the Web.

Online Search Advertising – this provides a one-stop, online search advertising services that covers local, mainland and overseas markets.

Mobile Yellow Pages – through the mobile yellow pages, consumers are now able to search for, and connect to local services and merchants instantly using their mobile phones.

Corporate Mission and Differentiation Strategy

PCCW recognizes the need to innovate by bringing technology and business excellence through enabling international organizations to bring their business to Asia and similarly running operations across the region while taking Asian business to the rest of the world. The role of innovations is highly acknowledge by PCCW management as seen on its “award-winning innovation, especially in IP-based business services, New Generation Fixed Line services, broadband pay-TV and Internet-access, media content, large-scale IT solutions, mobility and wireless” (PCCW, 2008). Further, PCCW is increasing projects in mainland China and the UK, while extending them to other parts of the world, and serving the growing number of network operators.

The most dominant strategic management paradigm in recent years is known as competitive strategies model. Exemplified by Porter’s (1980, 1985) work, this approach addresses the issue of how firms compete within their product markets. Porter identified two competitive advantages that provide a firm with a defensible position: cost leadership (lower cost) and differentiation. Looking on Porter’s idea of competitive strategies, PCCW uses product differentiation. They rely on the development of new, unique and innovative products and services while extending it to other global market networks. Over time, PCCW considers customers’ belief on unique products. Customers valuing a product’s uniqueness tend to become loyal to both the product and the company producing it (Hitt et al. 2003). This is exactly what PCCW is doing. Through this strategy, new entrants needed a significant amount of resources over time to outdo existing customer loyalty. While new entrants compete through low prices, PCCW is able to manage the balance between product differentiation and pricing strategy.

To keep ahead of its competitors, PCCW is adding new services as quickly as possible on all fronts. Differentiation according to Oden (1997) is a strategy with which the organization seeks to distinguish its products or services from those of competitors. The firm may use advertising, distinctive product features, exceptional service, or new technology to achieve a product perceived as unique. In order to fulfill its differentiation strategy, PCCW Directories offer innovative services and technologies to its consumers. For example PCCW Directories has formed partnerships with online giants such as Google, eBay Hong Kong, SINA Hong Kong and Yahoo! Hong Kong. Users are also able to perform keyword searches via Mobile Yellow Pages to find retailers and suppliers, as well as enjoy discounts and privileges from more than 10,000 participating outlets. These are some of the strategies that PCCW Directories is employing to achieve differentiation (Quin and Cameron 1983). The company is able to achieve its mission of providing quality service to its customers. The organizational structure supports the company’s strategy.

Size of the Organization

Today, PCCW approximately employs 14,400 employees. The company operates in various regions like in Europe, the Middle East, Africa, the Americas and mainland China, as well as Hong Kong and other parts of Asia such as Singapore, Japan, Thailand, and Malaysia.

Life Cycle

PCCW Directories can be considered as a company that is in the entrepreneurial stage. In the entrepreneurial stage, executive dominance is established through personal, informal management patterns and structure, flexible communication and coordination procedures both within the organization and with its environment. Personal attention and rewards are given for the mobilization of resources and attainment of legitimacy for the organizational domain from the external environments. The creation of the organization’s ideology, and the paternalistic reward system does not rely only on the level of executive professionalism, but rather on his or her entrepreneurial skills. PCCW Directories was formed from the growth of its parent company – PCCW Limited. As a newly formed business, PCCW Directories can be considered as an entrepreneurial organization where all major decisions are made in the top management.

Environment

Every organization faces a different reality in the marketplace depending on its products, customers, technologies, government influences, and so on. There are essential forces that affect organizations within the context of their business operations and performance along with key changes that occur in the general business setting. These comprise forces located at the outer surface of organizations and come from the external environment, plus forces contained by the organization itself or the internal environment (Mukherji and Mukherji, 1998). To be successful, the organizations need to perform certain activities very well. The environment where the organization operates is an important factor in its success. The external environment is an important factor that affects a company’s goals, objectives, strategies and performance. It is also important in the setting of company missions and corporate culture (Deal and Kennedy, 2000). The internal analysis provides an objective understanding of the controllable factors in the organization’s internal environment, identifying those with the greatest long-term impact on the organization’s position. The objective of this analysis is to identify the organization’s major strengths and weaknesses with respect to its overall mission.

According to Duncan (1979), structure is a pattern of interconnections, interactions, and coordination that links the technology, tasks and human components to ensure that the organization accomplishes its purpose. Duncan categorizes a business structure in terms of two general types: functional and decentralized. Most businesses are one of these two or some mixtures of the two. The functional business structure is divided into departments and groups according to the function they perform, while the decentralized organization makes products or geographical divisions independent. Communication in the functional type is usually vertical, up and down a pyramidal structure. The decentralized structure cuts down on the directions from the top and allows each division to act as an autonomous business. Assuming PCCW, because of different factors, such as globalization and its rapid expansion has moved from functional to a more decentralized organization structure. PCCW Directories as a subsidiary acts as an autonomous business.

While PCCW products can be designed and marketed so as to have a more or less general appeal to most members of a market, the role of environment in identifying customers and their varying wants and needs are expected to complete a better competitive advantage by producing a number of different offerings to meet the needs of specific segments (Proctor, 2000). Further, the role of environment is inherent to the nature of market segmentation – the process of clustering people with similar needs into individuals and identifiable groups (Neal and Wurst, 2001; Jain, 2000), as it serves as the primary determinant. The environment constitutes a significant variety of people who probably are the future consumers of the product of service. It serves as the main source of information and knowledge for marketing decision making and strategy formulation and execution. In the recent years, the company had been muddling in a series of transformation without any clear strategic vision or exit strategy (Ng, 2004). Due to the complaints and demands of its shareholders, founder and former chairman Richard Li resigned. PCCW had difficult time in recovering its competitive position even with the presence of billion dollar investments like that of Cable & Wireless purchase of Hong Kong Telecom.

Considering the competitive environment in which PCCW Directories operate, the organization operates in a highly competitive environment where customer needs and demands are changing rapidly. Based on how many external factors that affect the organization and the number of competitors, the dimension of uncertainty can be described as complex. The stability of the environment is also important as it affects the company’s operation. PCCW Directories operate in complex environment where environmental factors especially technology and customer demands and needs are unstable. The demand for flexibility in the company’s services and products and the need for effective advertising tool make the environment unstable for PCCW Directories. In addition, instant competition with other companies also adds to complexity of the environment. The level of uncertainty that the organization needs to deal with is high. There are also numerous other factors that affect the organization’s operation. There are different market forces that affect the company’s operation and strategies. The policies and regulations set by the Hong Kong government and regulatory bodies that oversee the telecommunications and media sectors namely the Office of the Telecommunications Authority (OFTA) and the Broadcasting Authority (BA). Hong Kong’s growing economy has a tremendous impact on the growth of the company. Because of the flourishing economy, strong demand for data services is growing. General growth led to more business premises requiring services. PCCW Limited is committed to maintaining a high standard of corporate governance and strives for transparent, responsible and value-driven management focused on enhancing the value of the company to its shareholders. In order to effectively deal with the external environment, the organization pursues different strategies like investments in research and development, cooperation with other organizations, coordination with the government and other regulation bodies and active marketing and promotion.

Structure of the Organization

In reference to Mintzberg (1979), who introduced five (5) structural configurations ranging from a ‘simple structure’ to a ‘divisionalised form’, the growth of PCCW has led to the formation of other divisions, which handle different businesses. PCCW Directories is one of the divisions of PCCW. It is assumed that the organization’s structure is divisional. In general, the divisionalized form uses markets for products as a basis for grouping units or divisions that will have full control of operating functions to serve these markets (Riahi-Belakaoui 1995). PCCW developed different divisions that will handle different specialties, products and services. PCCW Directories as a division of PCCW ltd. is concerned with highly effective advertising solutions primarily to small and medium-sized business. The company specializes in directory services.

In relation to centralization, PCCW possesses a high level. Like many Asian contemporaries, PCCW is a family controlled firm. Historically, Asian firms are highly centralized. PCCW was tightly controlled and managed in hierarchy dominated by the founders and their immediate family members. The hierarchy of authority is considered as centralized. Centralization according to Hendrick (2002) has something to do with where formal decision-making occurs within the organization. In centralized work systems like PCCW, formal decision-making is concentrated in a relatively few individuals, group, or level, usually high in the organization. The board of directors of the company is responsible for the management of the company. Key responsibilities include formulation of the overall strategies of the company and its subsidiaries, the setting of management targets and supervision of management performance (PCCW Annual Report 2005).

Similarly, PCCW have high degree of specialization or professionalism. Because of intense competition, globalization and demands for Asian firms to adopt western style of management, firms such as PCCW are starting to adopt a more flexible corporate structure (Yeung 2005). PCCW is positioning itself as a major telecom player in the Asian Region, with long-term ambition to venture into the established markets in Europe. PCCW is now venturing into the UK’s wireless broadband business while its core business remains in Hong Kong’s fixed lines. This wireless broadband venture is new to the UK market as well as there are currently no operators offering such services.

Low complexity is seen in the entire managerial framework of PCCW as it uses Porter’s differentiation as competitive strategy. It is also attributed to the fact that PCCW originated to a family business, thus, there is a systematic or single source of control and authority. There is also low degree of formalization. PCCW do have defined rules that are to be strictly implemented on the functions of decision-making and taking, communication initiatives, and control mechanisms. The management however is motivated to work on a single mission where their governing rules are illuminated in making corporate policies that are to be adopted in all local and regional network levels.

Technology

Technology refers to the equipment and techniques that are being used in managing and processing relevant information the most effective way possible (Baltzer 1991). Considering continuous efforts to innovate, PCCW’s technology plays a crucial role in the whole business operations and corporate competitiveness. Since centralized organisations like PCCW have strict rules, standards, hierarchy and legitimate authority, where the markets are characterised by prices, competition and exchange relationship, affecting traditions, shared values and beliefs, and trust, technology functions as determinant of pace and timing of tasks, providing information to managers on performance, and dictates standards.

Looking on Woodward’s ideas, technology and structure of PCCW is categorized on Group III, which is the continuous process production. Competition in the telecom industry is in hyper mode, thus, PCCW needed to come up and create new products and services that will uphold its brand image as a leader in communications services in Hong Kong and one of Asia’s leading players in Information and Communications Technologies (ICT). Considering the various regions in which they operate as well as competition, differentiation strategy through continuous process production is the most useful way to manage technology. The Model of Continuous Improvement (see Appendix 1) provides similar and relevant processes and concepts related to business organisations. It recognises the primary role of culture, communication, and commitment. Also, the model indicates the interconnectedness of teams, tools, and systems. The focal point of the model is the consumers and suppliers, which are the key players of an economic endeavour. The model also involves the existence of various changes and in order to cope up, continuous development must be ensured. In application to PCCW, this model can determine the need to change in relevance to the existing trend in the niche market.

Culture and Power

Organizational culture includes the values, norms, rites, rituals, ceremonies, heroes, and scoundrels in the history of the organization. The two major roles of culture are (1) adaptation to the organization’s external environment, and (2) coordination of internal systems and processes (Sims 2002). On the case of PCCW, it is a bureaucratic organisation involving the following main characteristics: Rules and procedures, Specialisation and division of labour, Hierarchy of authority, Technically qualified personnel, Separate position and incumbent, and Written communications and records as identified by Weber. Rational-legal authority is practiced in PCCW where authority legitimated by virtue of supremacy of law and formal rules is used in conducting the organisation. In terms of French and Raven power types; PCCW employs legitimate power where formal standards, rules and laws are exercised. With the leadership and managerial expertise of Richard Li, the execution of PCCW strategies is bounded on formal and legitimate source of power. Li’s power supported by clear corporate governance initiatives possesses outstanding ability to cope with uncertainty, position in information network, and control over physical and financial resources. Culturally speaking, PCCW projects an outstanding traditional Chinese culture. Again, PCCW originated in a family owned business, so its organizational culture is not far from Chinese leadership and managerial attributes. This is the dominant type of culture exemplified by a significant number of members of the organisation. However, a considerable percentage of western implications affect other segment of the company. Core values are similarly expressed by the dominant culture that is comprehensive and award-winning, innovative communications business services as well as technological advantage. It could also be assumed that subcultures occur in local or regional offices due to national, cultural, and individual diversity of upper member of the management. Mission culture is exemplified by PCCW. It is characterised by focus on the organisation’s purpose and on the attainment of goals; high performance is usually rewarded for success; managers share organisation’s goals and future direction; and environment is relatively stable.

Effectiveness

Kaplan and Norton (2001) devised the Balance Scorecard (BSC) to measure performance of organisations. The idea behind balanced scorecards is that managers need to broaden their analysis and understanding of the organisation to include four (4) elements: Financial, Customers, Internal Business Processes, and Learning and Growth (Kaplan and Norton, 2001). In the case of PCCW, the company’s mission includes the continuous process of producing comprehensive and award-winning innovative communications business services (consumer perspective). Over the years, PCCW invested on strategic alliances and new projects and extends their operations as seen on the growing networks globally while maintaining progressive growth on their services and business process. They continue to deliver a quadruple-play strategy to create value by leveraging assets, while capitalizing on synergies and pursuing new opportunities for growth. Further progress is intended in turning round the core telecommunications business, as well as expanding 3G mobile service and growing highly-successful TV & Content business. Also, the management laid the groundwork for projects outside Hong Kong (business process perspective). PCCW’s financial performance for the first two quarters of 2007 signified growth in core revenue amounting to HK$ 9,507 compared to HK$ 8,848 in 2006 (financial perspective). Finally, PCCW plays significant function and various contributions in the regions and communities they operate through PCCW Foundation’s support for education and professional development as they implement Workplace English Campaign. They provide communications services for different social service schemes including students, single parents, unemployed, distresses and elderly who enjoy the advantages of their counselling hotlines, info-line services for Medilink, and some networks documenting sources of employment (learning and growth perspective). Having all of these at hand, it could be said that PCCW is an effective organization as supported by its competitive and strategically appropriate organizational structure.

CONCLUSION

PCCW Directories is one of the leading directory market players in Asia. The company’s primary businesses include internet yellow pages, online search advertising, and mobile yellow pages. Like many Asian companies, PCCW’s organizational structure is centralized with power and control at the top of the organizational hierarchy. However, because of different environmental factors, the company is gradually adopting a more flexible corporate structure. PCCW Directories is a wholly-owned subsidiary of PCCW Limited. PCCW Limited’s success and growth has led it to adopt a divisional structure. Based of Porter’s competitive advantage model, we can say the PCCW pursues differentiation as its corporate mission and strategy. Differentiation is a strategy with which the organization seeks to distinguish its products or services from those of competitors. PCCW Directories as a subsidiary is still in the entrepreneurial stage. PCCW is moving from functional to a more decentralized organizational structure wherein different processes are handled by different divisions or business units. PCCW operates in a complex environment where the level of uncertainty is high. In order to deal with uncertainty the company strategically invests in different activities such as research and development. The company also builds relationships with other organizations through coordination, joint ventures and acquisitions. The power and control in the company, primarily lies in the top management. Only a small group of people decides on the company’s affairs.

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