Global Communication

Global Communication Benchmarking

Introduction

Increasing profitability while using cost-cutting measures can either fail or succeed based on the strategy used. Global Communications is like any other corporation finding itself in a situation to make drastic operational changes. In order to survive it must cut costs in order to improve profitability. The Global Communication senior leadership team developed an aggressive approach to remedy their financial losses. First, Global Communications will offer a new video service and a satellite version of broadband to its small business and consumer customers. This will allow small business owners Internet access anytime using wireless phones or PC cards. Second, Global Communications will identify cost-cutting measures that will help them to improve profitability. To do this they will create call centers in India and Ireland in its effort in becoming global.

In order for Global Communications to move forward with their plan, it must downsize its domestic centers. Downsizing its workforce will have major implications. Some of the current call center reps who are going to relocate to the expanding consumer call centers will be expected to take an average 10 percent salary cut. The issues with the labor union and coming to an agreement with them. Those implications will affect Global Communications' entire strategy. The question is will Global Communications increase profitability in the long run due to this plan to downsize. On the other hand will Global Communications experience increase profitability in the short term and experience new problems due to the downsizing plan? Before Global Communications begins implementing their cost-cutting strategy, Global communication has to look at how other companies faired. Global Communications needs to apply generic benchmarking to identify potential solutions to their problems by looking at how companies in other industries have dealt with similar issues whether successful or unsuccessful.

Generic Benchmarking: Overview

Competitive benchmarking helps reflect two problems, one obvious and one subtle. The obvious shortcoming is where competitors are not likely to share and surrender a competitive advantage. Less obvious is that if the problem is more generic than specific to the industry. The industry has excluded the consideration of the majority of organizations, one of which might have discovered the best answer. Looking beyond your own industry for the best practice is called generic benchmarking (Maul, 2006). Generic benchmarking can generate significant payoffs to an organization looking for the solution to a problem. In some respects, it is more difficult, since it requires more imagination and the ability to detect relevance by looking beyond the industry. Organizations and leaders can go beyond benchmarking the best in their industry. By benchmarking the best across all industries and applying those best practices, it is possible to improve one's position and become the best practice in an industry. Generic benchmarking helps to realize this goal (Maul, 2006).

Generic Benchmarking: Companies Researched

Dell, Inc.

In this section, the group will discuss the cost cutting issues in an effort to improve profitability. The company selected is Dell. Dell used various methods to improve profitability: inventory management, cost cutting via offshore development and services and many others. We will study Dell's cost cutting model and benchmark results and identify potential solutions for Global Communications. Dell operates principally in the United States, Europe, Middle East and Africa, and Asia Pacific-Japan. The company was founded in 1984 by Michael Dell as Dell Computer Corporation and changed its name to Dell, Inc. in 2003. Dell is headquartered in Round Rock, Texas (Yahoo Finance, 2006).

Dell did beat forecast after intense cost cutting in year 2002. Dell reported a slight increase in revenue to $8.07 billion for its first fiscal quarter of 2003, compared with $8.03 billion in the same quarter in fiscal 2002. Net income was flat on the year-ago quarter, at $457 million. Intense cost-cutting has helped Dell outperform its rivals. The company has laid-off 3,500 employees during the past year, and has pushed operating costs down to 9.9% of revenue, compared with 10.7% in the year-ago quarter. Dell planned to reduce total overheads by $1 billion by the end of the 2003 fiscal year (Faragher, 2002). How did Dell achieve this success? Is it better inventory and supply change management, better sales force, cost cutting, outsourcing, offshore support. The industry experts say Dell's cost cutting via outsourcing, offshore development and support played a major role in increasing profitability. Along with the cost-cutting model, enhanced supply change management and other strategies are contributing factors to Dell's upturn.

Desktop outsourcing prices are at the lowest levels in history, having fallen approximately 20% in the past 18 to 24 months. Dell has been the driving force behind this phenomenon. In 2004, Dell Services have increased market share in the mid-market (1,000 to 4,000 seats) with services based on its own product set, hardware price advantages, and a highly automated, flexible, partner-driven services strategy. At the same time, the mid-market is selectively outsourcing their desktop operations, aligning nicely with Dell's services portfolio. Dell may not have nearly as much success against IBM Global Services and HP Services in the Global. For Dell to improve its position in the changing Global 1,000 market, it offered broader, more complete outsourcing services, improved its ability to manage multi-vendor platforms on a global scale, and moved to a more relationship-based, high-touch services mindset. Dell has relationships with investors and financial analysts, and strategic direction and global oversight of Corporate Communications.

Dell's outsourcing and cost-cutting measures ended up costing customers. In the NewsForge article "Dell, Inc. may or may not be saving a ton of money by outsourcing its tech support, but it is definitely losing loyal customers as a result of the move. And if the comments I recently saw on the Austin LUG mailing list are any indication, the flow of customers away from Dell is only going to increase." (Barr, 2003). What is the outcome? One side is cutting cost, the other side unhappy customers, and a potential risk of losing business. Dell's globalization and communication strategy is an answer to such questions. Dell analyzed regular customers versus premium customers from enterprise business. By providing appropriate training and improving serviceability,