Problem Solution: Global Communications Corporation

Problem Solution: Global Communications Corporation

Lola A. Singleton

University of Phoenix

Problem Solution: Global Communications Corporation

The Nine-Step Problem-Solving Model will aid in analyzing the Global Communications situation. The steps of the Nine-Step Problem-Solving Model are (1) Describe the situation, (2) Frame the right problem, (3) Describe end-state and goals, (4) Identify alternatives, (5) Evaluate alternatives, (6) Identify and assess risks, (7) Make the decision, (8) Develop and implement the solution, and (9) Evaluate results. (University of Phoenix) Step-by-step method will aid in identifying the issues involved and the possible opportunities. The model will help identify what perspectives stakeholders may have and identify any ethical dilemmas that may occur. The problem-solving model will aid in defining Global Communications' "real" problem and developing end-state goals.

Situation Background (Step 1)

The purpose of the Situation Background is to describe the issues, opportunities, and ethical dilemmas faced by Scenario Two: Global Communications. (University of Phoenix) Global Communications, a telecommunications company, is under economic pressure because of overspending, low profit returns, and too much competition in the telecommunications industry. According to Boatwright, Cagan, and Vogel, "innovation requires radical change and a new vision. Stakeholders must know that innovation is not an option, but a necessity. Innovation is not about a leap in technology. Innovation is about a leap in consumer value. Stakeholders must realize that marketplace success is not about what is happening in the company, but about what is going on in the daily lives of the customers. Innovation requires systematic change at all levels of the company, and it often means changing how decisions are made. According to the authors, Innovation leads to valued product and service differentiation, which leads to a clear brand identity, which drives corporate strategy from top to bottom". (Boatwright, Cagan, & Vogel, 2006)In order to relieve the economic pressure, the Global Communications senior leadership team has developed an aggressive plan to bring the company back into the frontline of the industry. The plan will impose tactics that will be radical and cause distress within stakeholders. For these tactics to affect the company in a positive way, an analysis of the situation will be performed.

Issue Identification

Part one of the Situation Background is Issue Identification, which identifies the challenges Global Communications is facing. According to the white paper (Scenario Two: Global Communications), Global Communications has six issues caused by their financial pressures. First, the company has had major decrease in profits because of overspending, low sales, and high competition within the industry. Second, there is low morale among Global Communications' employees because of recent cutbacks in education and health benefits. The morale of the employees will further decrease with the knowledge of future layoffs. Third, the relationship between Global Communications and the Technologies Workers Union has weakened due breaking of contracts and lack of communication within the company. Fourth, Global Communications has a lack of organization and employee commitment because of the company's failure to communicate openly with stakeholders. The lack of communication has stressed the commitment within the company. Fifth, Global Communications may have possible employee retention problems because of relocation of call centers and decrease in benefits and salary. Finally, closing technical call centers will leave real estate empty. However, these issues may lead to opportunities for Global Communications' expansion.

Opportunity Identification

Part two of the Situation Background is Opportunity Identification, which identifies the opportunities Global Communications is facing. Global Communications has five possible opportunities as a result of previous stated challenges. According to the white paper (Scenario Two: Global Communications), the opportunities available to Global Communications will allow the company to reposition themselves as a leader within the telecommunications industry and regain the trust of the employees. First, Global Communications will increase profits by becoming a leader in industry by branching out globally.

According to Bryan, Lyhons, and Rosenthal, "the answer competing in market capitalization and winning lies in a combination of rapid earnings growth and increasing returns on book equity, with the emphasis on the latter. Bryan, Lyhons, and Rosenthal analyzed the 100 global companies that had seen the greatest increase in market capitalization since 1992. Collectively, they grew from almost $1.8 trillion in 1992 to $4.6 trillion in 1997 - a compound growth rate of 24 % , as against the market average for all large stocks worldwide of about 14 % . This outstanding performance is not surprising given that the group's earnings increased at a compound rate of 23 % during this period, while their return on equity (ROE) rose from about 11 to 19 % .

The 100 companies in the list represent many different countries and industries. 58 had their headquarters in the United States, one was based in Canada, 30 were European, and 11 were from Asia (mostly Japan). 32 were in largely globalized industries such as petroleum and automotive, 16 were in the "born global" electronics industries (computers and software), 31 were in rapidly globalizing industries including consumer packaged goods and pharmaceuticals, and 21 were global companies operating in mainly local industries such as food, insurance, and banking.

We took the spectacular growth in market capitalization for these companies and broke growth into two components: increases in book value and increases in market value over book. Not surprisingly, the growth in market capitalization is primarily due to a rise in market value over book value, rather than to growth in book value. The collective market-to-book ratio of the 100 global companies rose from 2.1 in 1992 to 4.2 in 1997, when the US average was about 2.

The implication is clear: market-to-book ratios are related more directly to returns on book equity than to earnings growth. Companies that have achieved strong income growth while maintaining a reasonable return on book equity have been successful, but those that have been able to produce very high returns on book equity