Global Communications

SCENARIO: GLOBAL COMMUNICATIONS

COMPANY OVERVIEW

On Wall Street, confidence in the telecommunications industry is waning. Stockholders are bemoaning diminishing returns and speculating about the industry's ability to rebound. Understandably, telecommunications companies are under tremendous economic pressure and Global Communications is no exception. Three years ago, its stock traded at $28 per share; today, the stock is valued at $11, more than a 50 percent depreciation.

The problem is obvious: Too much competition. Local, long-distance and international markets are all competing for the same business. New calling features and suites of local and long-distance services helped, but the industry suffered a huge blow at the hands of the cable companies, who stepped in to provide complete solutions encompassing computers, televisions and plain old telephone service (POT). Selecting and entering international markets yielded mixed results.

To pump up the volume, the Global Communications senior leadership team has developed a two-pronged aggressive approach. First, they plan to realize growth through the introduction of new services, primarily to its small business and consumer customers, who will now be served in both local and long-distance markets across the country. To compete with the local telephone and cable companies, Global has created alliances with a satellite provider to offer video services as well as a satellite version of broadband. Partnership with a wireless provider will allow the small business owner anytime Internet access using wireless telephone or PC cards. Even company information hosted in mainframes can be accessed remotely.

Second, the senior team has identified cost-cutting measures that will improve profitability. To maximize both of these initiatives, the company plans to market itself more aggressively on an international level with the goal of becoming a truly global resource.

THE PLAYERS

Katrina Heinz: Global Communications Chief Executive Officer, Katrina was recruited from a European global long-distance provider six months earlier. Increasing both revenue and profits through more aggressive globalization is her primary objective

Sy Rodriguez: Executive Vice President of Consumer Marketing and Sales, Sy has been with GC more than 20 years. Sy is good at what he does, and during his tenure, his charismatic personality has helped him establish relationships with most key stakeholders. Focused and driven, Sy gets results.

Nancy Everhardt: Executive Vice President of Small Business and Marketing Sales, Nancy is new to GC. Her most recent job was at a local telephone company where she grew the small business market by creating innovative packages of valuable solutions for the small- to medium-sized business owner.

Joel Thompson: Executive Vice President of Human Resources and Public Relations, Joel has been at GC the longest of any senior member. In his 25 years with the company, he has developed in-depth understanding of telephone business, as well as effective relationships with all of the key stakeholders, including the Union. The latest round of Union negotiations were difficult; financial problems led to cuts in both education and health benefits.

Maria Antez: Vice President in the Technologies Workers Union, Maria has been the liaison between GC and the Union for the past 10 years. Although she has established effective relationships with most of the GT executives, the Union president is disappointed with her latest GT negotiations and the resultant benefit reductions.

MARCH 2, 2004

To: The Senior Leadership Team

From: Katrina Heinz

The Board has approved our plan! I just spoke with the President, who said the Board completely agrees that we need to enter and compete in local markets AND step up our globalization. They loved the idea of moving some of our technical call centers to India and Ireland (remember, our business case showed that in setting up the new centers, we have the opportunity to reduce unit costs for handling calls by nearly 40%) and thought it clearly supported our strategy to transform into a global corporation within three years.

Congratulations to all of you on putting together a great strategic plan.

MARCH 3, 2004

To: Katrina Heinz

CC: Senior Leadership Team

From: Nancy Everhardt, EVP-Small Business Marketing and Sales

And congratulations to you Katrina on selling the plan to the board! I'm especially happy to see that the outsourcing plan was approved. Small business owners are really looking for increased technical sophistication and India and Ireland have it. The plan just makes sense. Good job!

To: Senior Leadership Team

From: Sy Rodriguez, EVP-Consumer Marketing and Sales

I am also very happy that the outsourcing plan was approved, but let's not forget the work we have to do here. Downsizing our domestic call centers has major implications. Although some of our current call center reps can be relocated to our expanding consumer call centers, many will be let go. Those who are relocated will be expected to take an average 10 percent salary cut, since consumer centers operate on a leaner budget than the small business centers. I don't expect the workers to take this announcement lying down. At tomorrow's meeting, I think we need to figure out how we're going to put a positive spin on this change. And while we're at it, let's talk about what we're going to do with the call center real estate.

From: Maria Antez, Vice-President Technologies Workers Union

To: Joel Thompson, EVP-Human Resources and Public Relations

I just heard about the new plan. I understand the company is under major financial pressures; the Union is trying to help. We just gave up over 20% of our education and health benefits! But this new strategy of globalization and outsourcing concerns me. We need to meet.

From: Joel Thompson, EVP-Human Resources and Public Relations

To: Maria Antez, Vice-President Technologies Workers Union

You have been a great partner, and I understand your concerns.