Category: Telecommunications

Introduction

This is financial statement analysis of two companies in telecommunication industry operating in different countries. Etisalat is a company which is listed in United Arab Emirate Stock Exchange and AT&T Telecommunication is listed in New York Stock Exchange. The companies work under different social economic environment although they are in the same industry. This report will provide information to potential investors about investing these companies. Creditors of these companies may find some of the information important especially if the companies are borrowing money to invest in the same country (ICFAI Center for Management Research ICMR., 2004).

Telecommunication industry has seen an increase of competition from companies such as Mobile Companies, Internets Companies and Entry of Telecommunication Company from other countries into the local market. The information from this analysis will help us in understanding and evaluating changes in financial accounts of the two companies. The unusual events affecting operating income, trends or uncertainties affecting or likely to affect operations and impending changes in revenue and expense relations will be noted (Blander, 1994).

Ratio Analysis

Profitability

As far as profitability is concerned, Etisalat has shown a decrease in profitability from the year 2006 to the year 2007. The profit margin was 35.97% in the year 2006 it fell to 34.19% in the year 2007 below slitting further to 33.17% in the year 2008 and it settled at 28.66% in the year 2009. The return on asset and return on equity had more or less the same behaviour because return on asset was 12.76% in the year 2006, in the year 2007 it was 13.91%, in the year 2008 it was 12.38%. This shows that the profit of the company were lower. Return on equity shows that the company had 27.39% in the year 2006.

Looking at the profitability of AT&T you will not that return on equity fluctuated from 6.37 to 12.25 in the year 2006 and the year 2009 respectively. The return of the equity of this company appears to be almost the same as that of Etisalat. The net profit margin of this company appears to be reducing although in a minimal trend. It fell from 11.67% in the year 2006 to 10.05 in the year 2007, 10.37 in the year 2008 before settling at 10.19 in the year 2009.

The return on asset of this company as increased over the four years although it was the highest in the year 2008 at 4.85%, 4.66% in the year 2009 and 4.42% in the year 2007. These three ratios have shown a tremendous decrease which is a sign of poor performance of the two companies. However it should not escape our mind the year 2007 to the year 2009 there was a financial crisis in the world; therefore a poor show or a poor result during the period may be attributed to this.

Liquidity ratios

Both companies Etisalat and AT&T Telecommunication have maintained poor liquids in their financial statement. This is shown by the current and quick ratios (Fontes, 2005). The quick ratio recommended the fraction if 2 to 1, but these companies have a current ratio of less than 1 to 1. This means that there are poor performances in terms of liquidity. The table below shows their current ratios.

As it can be seen from the current ratio both companies are maintaining poor liquidity as the ratio is 2 to 1.

Looking at quick ratio both companies are showing a ratio which is less than 1 to 1 in all the years. This means that the company cannot make short term obligations as they fault you. The ability to offset this short term obligations is in question in both companies although there are from different countries. These ratios are shown below

From the table above it can be noted that the ratios are lower than 1 but also it is almost equivalent to the current ratio. With the above commutation it is clear that both companies ability to pay short term liabilities from the year 2006 to the year 2009 is in question. The quick ratio is decreasing which is an indicative of a negative result.

Asset utilization

Asset utilization ratios for both companies include receivable turn over, average collection period, fixed period turn over and total asset turn over. This ratio is the number of days in which the company collects revenues from account receivable holders (Fridson and Álvarez, 2002). It gives users of financial statement a picture on the efficiency of the management in generating cash inflows from debtors. The account receivable turn over for Etisalat has been decreasing from 25.81 in the year 2006, times 13.06 in the year 2007 while in the year 2008 it was times 11.77. However, it is settled at times 9.45 in the year 2009.

AT&T appeared to be improving its ratio from 3.89 to 7.35 in the year 2007 while in the year 2008 it was 7.73 and 2009 it was 8.21. Average collection period for Etisalat appears to be increasing. AT & T fixed asset turnover ratio is fluctuating from time to time. From a rate of 0.67 times in the year 2006 it has increased to 1.24 times in the year 2007 further to 1.25 times in the year 2009 and settled at 1.23 times in the year 2009. This means that fixed assets is not being used as often as it should be.

Debt utilization

The two company’s debt utilization ratios present a very pleasing sight to the shareholders. The debt to equity shows how much protection there is for creditors. To calculate this ratio total reliabilities of the company is expressed as a percentage of total shareholders’ funds (Ormiston and Fraser, 2004). The debt to total equity ratio of AT & T shows that the firm has recently reduced on some debt and it far outweighs the Equity that it has raised. This a risky capital structure to have and AT & T would be advised to focus on raising funds though Equity rather than debt.

AT& T shows that this ratio was 1.34 times in the year 2006, 1.39 times for the year 2007 while the year 2008 was 1.74 times and in the year 2009 it was 1.63 times. In the case of Etisalat the ratios were 1.15 times for the year 2006, in the year 2007 it was 1.03 times while in year 2008 it was 0.85 times before settling at 0.77 times in the year 2009. The riskiness of the capital structure is reducing for this company. It shows how the creditors will be covered by owner’s equity during time liquation. In both years they are showing high risk.

The debt to total assets ratios demonstrates that both companies have enough Assets to cover its debt sufficiently in case of potential insolvency. The ratio for AT & T is 0.57 times in the year 2006, in the year 2007 it was 0.59 times it went up in the year 2008 to 0.64 and declined to 0.62 times in the year 2009. For Etisalat it was 0.53 times, 0.51 times, 0.45 times and 0.43 times for the year 2006, 2007, 2008 and 2009 respectively.

The interest cover ratio has improved for both companies as it now shows that the interest that Etisalat owes to creditors every year, it made 21.38 times that amount in 2006, 13.14 times in the year 2007, 15.38 times in the year 2008 and 14.23 times in the year 2009.

The interest coverage for AT & T was 5.58 times, 5.82 times, 6.80 times and 6.36 times for year 2006, 2007, 2008 and 2009 respectively. This ratio was increasing drastically.

Market Ratios

Dividend payout ratio is used by potential investors the portion of profit and that is distributed as dividends. Etisalat in 2006 the Dividend payout ratio was 35%, it increased to 39% in the year 2007, in the year 2008 was 37% and in the year 2009. There was a marked increase each year showing that the company’s dividend payout ratio was being increased although decline in profitability.

In the case of AT & T it was 70%, 73%, 74% and 77% for the years 2006,2007, 2008 and 2009 respectively. it has the highest payout ratio as compared to

Cash flow analysis ratios

The cash flows margin of AT & T reveal that the company has been successful in improving its cash flow from sales during the year 2009 and 2007, when compared with the year 2008 and 2006 which had a significant decrease in the cash flows margin. These ratios were 25%, 29%, 27% and 28% respectively. In the case of Etisalat, there is a decrease cash flow margin from 52%, in the year 2006 to 51% for the year 2007, in the year 2008 it was 41% and in the year 2009 it was 33%. Despite this fact, the cash flows margin for Etisalat cannot be described as poor although it showed a significant decrease in cash flows when compared with AT& T.

Degree of leverage

Degree of leverage is a percentage change in earnings before interest and tax divide by change in sales.

DOL = % change in operating income percentage change in sale

Etisalat.

AT&T.

Degree of financial leverage

Degree of financial leverage shows the change in earnings before tax divide by earnings before interest and tax.

Etisalat.

AT&T.

Trend Analysis

This is a useful tool in assessing persistence of performance either in total or by segments is trend percent analysis. Looking at profit margin for the company their trend was as shown below

From the graph above it can be observed that Etisalat has a downward trend as compared to AT& T which a fairly stable trend. However, return on equity, return on assets Etisalat has a better trend as compared with AT & T as shown by the chart below;

It can be seen that investors gain from profits more in Etisalat than in AT&T, although it is in downward trend.

In asset utilization AT&T appears to have a positive trend as all the ratios are improving from the year 2006 to the year 2009 while Etisalat is having the same trend although the ratios are not equal to each other but are almost of the same magnitude. The following chart shows the trend of receivable turnover fixed asset turn over and total asset turn over for the companies.

From the graph above the trend for AT&T appears to be uniform while the trend for Etisalat appears to be down ward trend for both fixed and total asset trun over.

The trend of liquidity for both companies is as shown below.

From the above grapph it appears that they have taken a similar trend in every aspect of liquidity.

In terms of debt utilization it appears that both companies have a fairly similar trend except in times interest and where it is taking opposed direction of each other that is while AT&T is inupward trend Etisalat is in downward trend. The two chart below shows the trend of this ratios for the two companies.

When it comes to cash flow margin Etisalat appears to have a down ward trend while AT&T appears to have an upward trend. The trend graph below explain its all.

Conclusion

After analyzing the financial information of the organizations it can be reasonably concluded that the organizations are pursuing different objectives. The Etisalat appears to be making a good profit in the current era, however, there is no indication towards any new product development, and rather it appears that Etisalat is now focusing towards innovating its older products which is observable from the decreased in the research and development expense.

This trend does not appear to be favourable since in the coming years the prices of gas are expected to rise which will result in decreased sales. AT & T appears to be making a considerable amount of profit and from the profit statement it is apparent that the organization is focusing towards the development of new products which observable through the increased research and development expenditure. The organizations have satisfactory cash flows since most of its creditors have been paid off as is apparent from the cash flow statement, however has resulted in decreased liquidity for the both of them (Tracy, 2009).

Recommendation

An investor who is willing to invest in this industry should invest in Etisalat because it appears it performs well as opposed to the competitor AT&T. In terms of cash flow liquidity, and profitability, Etisalat is a good performer.

List of References

Blander, J., 1994. How To Use Financial Statements- A Guide to Understanding the Numbers. New York: McGraw-Hill Publisher.

Fridson, M., & Álvarez, F., 2002. Financial statement analysis: a practitioner’s guide. New York: John Wiley and Sons.

Fontes, A., 2005. Measuring convergence of National Accounting Standards with International Financial Reporting Standards. Accounting Forum , vol: 29 415-436.

ICFAI Center for Management Research ICMR., 2004. Financial Accounting & Financial Statement Analysis. Hyderabad: ICFAI Center for Management Research.

Ormiston, L., & Fraser, A., 2004. Understanding Financial Statements. New Jersey : Pearson-Prentice Hall.

Tracy, J., 2009. How to Read a Financial Report: Wringing Vital Signs Out of the Numbers. New York: John Wiley and Sons.

Legal issues and standards

Standards for revenue recognition are described and interpreted under several clauses. Financial Accounting Standards Board (FASB) Concept No. 5 states that “generally, revenue is recognized when it has been earned, and realized, or realizable” (Jarnagin, 2008, p. 30). The Concept No. 5 defines ‘earned’ as the condition in which the seller has accomplished all that is necessary to be entitled to benefits in the form of revenues (FASB, 2008).

Realizable is when benefits are expected to be received by the seller with a specified level of certainty. Realized is when benefits have been received by the seller (Jarnagin, 2008). The $1.2 million transaction fails to meet the standards because it may be unrealizable, and it is not completely earned. It is not earned because Excello Telecommunications has not completed all the requirements that make it entitled to receive benefits.

The SEC requirements are summarized in the SEC Accounting Bulletin (SAB) 104 released in December 2003. SAB 104 requires that there be “a persuasive evidence of agreement exists, delivery has occurred, the seller’s price is fixed or determinable, and collectability is reasonably assured” (Epstein, Nach & Bragg, 2009, p. 380).

SAB 104 clarifies the same points outlined in SAB 101. In Excello Telecommunications’ case, the price is determinable if they offer a discount. It meets the requirement of SAB 104 on price. Collectability of payment is only assured if the company delivers the goods as requested by Data Equipment Systems.

Delivery can only be considered to have taken place when the goods are on the shipment. Delivery can also be considered to have taken place when the goods are given to a third party who assumes all the risk of delivery. The same standards are reinforced by the Accounting Principles Board (APB) Opinion No. 10 on which delivery, realization of benefits, and complete removal of assumed risk are considered (Jarnagin, 2008).

The seller is not allowed to have any managerial responsibility for the goods in case there are delivered to a warehouse far from the company’s premises. Under IFRS, the Internal Accounting Standard (IAS) 18 part (14) requires the transfer of risk from the seller to the buyer (IAS 18 Revenue, 2012).

It also requires that the seller should not continue with managerial involvement to a degree that can be performed by the owner. It also mentions realization of benefits. IFRS may be consistent with some parts of GAAP in revenue recognition. Excello Telecommunications should not hold any managerial responsibility when it transfers the goods into another warehouse.

ASC 605 – 25 – 50 – 2 (d) requires that firms disclose provisions for “performance-, cancellation, termination, and refund-type” (FASB, 2009, p. 14). Part (h) of the same section requires disclosure to the effect of changes in the selling price. ASC 605 – 25 – 30 – 6 requires that cancellation be used in determining the extent to which an amount that should recorded (FASB, 2009).

It may require to some extent that the firm records the amount that can be legally recovered when the cancellation occurs. Excello Telecommunications will be required to disclose that it has offered a refund provision to Data Equipment Systems.

Sarbanes-Oxley

Recording of the transaction can be captured under sections 302, 304, 401, and 406. SEC 302 (a) (2) states that the issuer shall “fairly present in all material respects the financial condition and results of operations of the issuer as of, and for, the period presented in the report (Public Law 107-204 107^th Congress, 2002, p. 777).

The issuer is a company that is publicly listed under stocks exchange. Excello Telecommunications wants to list a transaction that should be recognized in the future. It would violate the requirements of SEC 302 (a) (2).

SEC 304 (a) (1) states that the CEO and the CFO “shall reimburse the issuer for any bonus or other incentive-based or equity-based compensation received by that person during the 12-month period” (Public Law 107-204 107^th Congress, 2002, p. 778). It goes to the beneficiaries of the misreport that all their benefits that are derived from the misappropriation shall be nullified. SEC 304 (a) (2) includes nullification of profits derived from the sale of securities as a result of the financial misappropriation.

SEC 401 (b) (1) states that information contained in financial reports must be true, and not misleading. SEC 401 (b) (2) requires that “financial conditions and results of operations must be reconciled with GAAP” (Public Law 107-204 107^th Congress, 2002, p. 786). GAAP revenue recognition requirements have been captured by SAB 104, and FASB Concept No. 5. Excello Telecommunications may put its financial conditions under GAAP by choosing procedures that may make the goods to be considered as delivered before the end of the year.

SEC 406 (a) requires that firms disclose their adherence to the code of ethics. SEC 406 (c) (1) describes that the code of ethics refers to honesty and fairness (Public Law 107-204 107^th Congress, 2002).

AICPA (American Institute Certified Public Accountants) code of professional conduct

The AICPA code of professional conduct requires that members of the AICPA assume responsibilities more than has been specified by law in maintaining and broadening trust and public confidence. ET Section 51 part (1) specifies that members have obligations “above and beyond the requirements of the laws and regulations” (AICPA, 2010, p. 1689). It shows that Excello Telecommunications CFO will be judged based on honorable behavior that can be subjected to the views of the FASB, and the public.

ET Section 53 article II states that AICPA members must serve the public interest, and honor their trust. Part (1) describes the public as “clients, credit grantors, governments, employers, investors, the business and financial community, and others who rely on the objectivity and integrity certified accountants” (AICPA, 2010, p. 1693). Excello Telecommunications has a responsibility to ensure that the information given to the public is trustworthy.

The public rely on the information to make investment decisions. Information that misleads the public may make the public assume risks without returns that match those risks. High risk should be matched by the promise of high returns in the form of interest rates. The information can be used by the public to allocate resources efficiently in areas that incur a higher opportunity cost.

ET Section 53 article II part (2) states that when resolving conflicts associated with the interests, the AICPA member shall be “guided by the precept that when members fulfill their responsibility to the public, clients’ and employers’ interest are best served” (AICPA, 2010, p. 1693). In Excello Telecommunications’ case, the clients and employers are the shareholders. The interest of the shareholders is served when they assume foreseeable risks based on the outcome of the firm’s actual financial performance.

ET Section 53 article II part (3) states the acceptable conduct is to “enter into fee arrangements” (AICPA, 2010, p. 1693). It requires that in case Excello Telecommunications holds the goods for Data Equipment Systems till needed, then it must charge a fee.

ET Section (54) article III part (2) emphasizes the subordination of personal gain to public trust and service. Part (3) of the same section states that “integrity shall be measured in terms of what is right and just” (AICPA, 2010, p. 1695). It is unethical for the CFO to place his personal interest above those of the client, and the public. Stock options and bonuses are personal gains.

Stock prices may also constitute a personal gain when the executive members hold large amounts of the company’s stock. It may appear like an ethical dilemma because the CFO wants to prevent the stock price from falling because of a poor performance which may serve the interest of shareholders. However, it may attract the public making investors to allocate resources inefficiently by allocating their finances to a firm with low financial performance.

The best alternative

The best option is to offer Data Equipment a 10% discount. It may reduce receivables by a large amount ($120,000) but it does not violate any of the GAAP requirements. When Excello transfers the goods to an off-site warehouse it owns, it does not meet the requirements of GAAP.

The seller must transfer all risks to the buyer for payment to be realizable. The seller must also not assume any managerial responsibility. When the goods are delivered with a refundable provision, the requirements are that there should be a full disclosure about the arrangement.

The cancellation provision also requires that only the amount that can be legally recovered be recorded. Excello plans to offer a full refund, there is nothing legally binding in case of a cancellation. It means Excello is not entitled to a realizable benefit. The best option remains to offer a 10% discount. Another weakness of this option is that there is no guarantee that Data Equipment may respond positively to the incentive.

References

AICPA. (2010). Code of professional conduct: As adopted January, 1988, unless otherwise indicated. Web.

Epstein, B., Nach, R., & Bragg, S. (2009). Wiley GAAP 2010: Interpretation and application of generally accepted accounting principles. Hoboken, NJ: Chichester Publication.

FASB. (2009). Accounting standards update: Revenue recognition (Topic 605). Web.

FASB (2008). Statement of financial accounting Concept No. 5: Recognition and measurement in financial statements of business enterprises. Web.

IAS 18 Revenue. (2012). Web.

Jarnagin, B. (2008). 2009 U.S. master GAAP guide. Chicago, IL: CCH.

Public Law 107-204 107^th Congress. (2002). Web.

The paper under consideration dwells upon the role telecommunications has played in the development of the Arab world. It is argued that telecommunications has played significant role in the development of many Arab countries. These changes can be found in different planes: economic, social, political, educational, etc.

Thus, it is mentioned that telecommunication services in the Arab world are put into the private sector, which has made these services more accessible. This has led to certain changes in private life of people. Now increasing number of people prefer using telecommunications to do the shopping (e.g. use their phones to order goods) instead of going to malls or markets.

Apart from shopping habits, telecommunications also have influenced people’s attitude towards other cultures. Thus, now more and more people learn foreign languages (English and Chinese) to be a part of global communication. However, the change is not one-sided. Now Arabic is the seventh top language used in the Internet. More so, it is noted that the development of telecommunications has led to the spread of Shi’i Islam faith to other countries (predominantly Central Asia).

As far as social changes are concerned, telecommunications have influenced the way various issues have been discussed. Thus, such important issues as violence, democracy, civil rights and inequity have gained quite considerable attention.

Notably, telecommunications played really important role during the Arab Spring. Revolutions, rebellions, upheavals and protests in such countries as Egypt, Syria, Libya, Tunisia, Bahrain, Yemen, Algeria, Oman, Jordan, Iraq, Morocco, Saudi Arabia, Lebanon, Sudan and some others were ‘nourished’ by telecommunications as people were able to discuss various issues and share ideas.

Admittedly, telecommunications enabled many people to enter the discourse. Eventually, this led to rise of awareness, and, as a result, to various protests and even revolutions. Therefore, the impact of telecommunications has been significant. At that, it is also pointed out that access to telecommunication services is still low in Arab countries.

It is important to note that the present research is very important as it provides insights into the correlation between technology (telecommunications, to be more precise) and the development of the society. The Arab world has been experiencing a lot of changes throughout decades.

Many of these changes are due to the development of telecommunications in the region. The changes are manifested on different levels: political, social, economic, etc. The paper reveals the correlation between the spread of telecommunication services and changes which are taking place in the region.

Nonetheless, it is possible to note that further research will provide more insights into the development of Arab societies. For instance, the paper does not highlight changes in such important sphere as the sphere of education. Besides, it is mentioned that the position of women in the society (and associated issues like violence, inequity, etc.) has gained a lot of attention due to telecommunication services. Nonetheless, it is still unclear whether this attention has resulted in any changes.

It is also unclear whether the interest to the problem is increasing. Finally, it is noted that governments and other authorities try to control (at least, to certain extent) information interchange via the Internet. It is possible to try to trace the influence of such kind of control on the spread of telecommunications services and the development of the Arab societies, on the whole. Therefore, it is possible to state that the present research can be extended to look at the issue in more detail.

Pluto telecommunication is among the leading companies offering telecommunication services in Ireland, ranging from event production and conference management to marketing support and project management. In the recent times, the company has been on the brink of crumble due to internal wrangles in some of its departments including sales, marketing, and customer services departments that have had several face-off incidences, attributed to bonus allocation and time pressures.

Each department holds an unpleasant opinion of the resulting to unhealthy departmental competition, loss of business and general customer dissatisfaction. Acknowledgement of managerial differences is vital in improving the working relations and increasing productivity (Buchanan & Huczynski 2007).

Analysis

In carrying out the analysis of the Pluto telecommunications company, Sogi analysis comprising of the societal, organisational, group and individual analysis is used. However, Pluto has been analysed with the exclusion of societal level.

Organisational analysis

Organization tradition

Organization tradition refers to the common practices carried out within different departments in an organization. These practices make the organization different from others, and aim at enabling it to have a competitive edge (Organizational analysis 2012). The culture fosters the beliefs and practices common to all the members of the organization, enabling them with a sense of belonging and the motivation to work more diligently as opposed to those who do not uphold this culture.

In Pluto, Ms Tsang strived to work towards a culture of unity and assumed she had achieved it. She was, however, surprised all her efforts had been thwarted by the disagreements among the three departments. The departments had developed other subcultures. Culture determines the interaction of the organization with the outside world and the mechanisms used in achieving its goals. Therefore, a strong culture serves as a hallmark in portraying the actual identity of the organization.

Having a dynamic culture alone does not guarantee success. There are some large organizations with strong cultures, but still suffered losses due to inflexibility in accepting changes especially those that threaten personal interest as explained in the Iron Law of Oligarchy (Michels 1911).

Organizations such as Hewlett Packard were able to make profits since their strong cultures were backed by flexibility towards change. Comparatively, Pluto telecomunications’ culture did not undergo the relevant transformation required, thus the problems it faces. Inspite of the organization’s adaptability culture, the subculture that cropped up served as a significant barrier towards the realisation of their goals.

Organization structure

In Pluto telecommunications, a hierachy development is observable in which members of each department report to a departmental head, who in turn reports to Ms. Tsang. Mathew Craven had the opinion that differentiation as the main reason for the problems; as stated in the contigency theory (Lawrence and Lorsch 1967).

Pluto is viewed as flexible and adaptive towards the various changes in technology a factor attributed to the presence of distinct groups in the organization. However, the organization is viewed differently in terms of differentiation due to the absence of integration within its units of operation as intense competition arises greater change and confrontation of conflict (Beer 1990).

The assumption by Ms. Tsang was that the company’s unity was deflated by the wrangles that arouse as a result of subdivision. Lack of integration is the main cause of parallel communication between the departments, for instance, when a new product was launched by the marketing department without communication to the sales and customer departments.

The inconsistencies in the dependence of the three departments have been underestimated by the organization’s senior management, and this has resulted into lack of communication between the departments (Lawrence & Lorsch 1967).

Functional categorisation has contributed to the narrow specialisation of the departmental heads, other than facilitating an outside the box thinking. This makes it impossible to establish clear roles of each department and with each department treats the other as a completely different entity.

When Ms. Tsang remained with the directors and asked them of the way forward, they could not talk infront of each other, a clear sign of group-thinking a problem similar to that faced by the CEO of Marks and Spenser, Sir Richard Greenbury (Buchanan & Huczynski 2007).

Organisational analysis is better viewed through the ‘SWOT’ theory that outlines its strenghts, weakness, opportunities and threats. Strengths are characterized by voluntary staff participation in programs, improvement of financial resources, good facilities and company recognition; this leads to incorporation of new programmes and increasd investment opportunities among other visionalised aspects (Rural development Initiatives 2001).

However, organisational analysis results to instability of the organistion making it handicapped by limitation in facilities, lack of expertise as people are used to overliance of one another and general decrease in funding especially from external sources (Rural Development Initiatives 2001). The behavoiur displayed by the espoused theory in Organizational analysis is that of being defensive, resistant to change and, employee to employee protection from the manager (Beer 1990).

Group level analysis

Group structure

Each of the three departments in Pluto telecommunications portray a different character from the others as a result of expansion of the organisation leading to the difficulty in internal communication.

The sales team group exhibits characters of a reserved group with each group being guided by its individual needs as a driving force towards achieving the set targets. This mode of operation hampers the spirit of team work and is the likely reason for the lack of cooperation between the sales team and both the customer service and marketing teams (Buchanan & Huczynski 2007).

The customer service department is rather bureaucratic in its handling of the employees. Its employees comprise of the receptionist and the company engineers, who are governed by strict rules and guidelines set by the organization’s top management. Their mode of operation is a forced type, whereby they have no choice but to work.

Their goals are driven by the organization rather than self-interest. In this department, communication is simply done via memos and emails; hence, it is more of institutionalised than the other two departments (Buchanan & Huczynski 2007).

The major challenge to these types of organisations is that they will encounter problems in adapting to new changes (Allcorn 1989). The marketing department on its side tries to work as a team. However, it displays an assorted relationship with its counterparts in customer and sales.

This is echoed by its opinion of the experiences and interactions of its counterparts in the two departments. Such attitudes and lack of a driving force towards cohesion by the heads of the respective departments is detrimental, not only to the organization’s unity but also on its reputation to the public. The lack of interraction leads to contradicting modes of operation, as was experienced by the customer service manager when a customer asked about the product launched by his company and he had no idea (Buchanan & Huczynski 2007).

Group culture

Each of the departments displays a totally different nature, in the way they carry out their activities. A look at the sales team creates an impression of an elite group whose culture is centred on competition and individualism. Their status is described by classy items, such as flashy cars and mobile phones, which drive a sense of pride in the team. As expected, arrogance and unwillingness to share with people of the other departments arises.

The customer service department tends to derive its culture from an institutionalised governance. It tends to shy away from speaking out its concerns, and it is obliged to follow the rules since the members presume to be safer that way (Allcorn 1989, p. 250). This authoritative leadership could suit engineers, but it might totally hamper communication between them and their colleagues, especially in circumstances where the style is informal to some extent.

In this culture, there is maximum monitoring of resources and staff are your most important resource. They react to people especially those in authority making it hard to accept change(Handy & Aitken 1986). The marketing department on its part has a tendency of avoiding interactions with other departments due to the nature of its work. This cripples the organization’s management efforts aimed at creating a unified body.

In such circumstances, each member becomes loyal to his department, more than even the organization itself. These subcultures ultimately lead to deraillance of the general organization’s objectives. These objectives are more often than not compromised as a result of unhealthy interdepartmental competition.

Individual level analysis

Leadership style

According to Allcorn (1989), there is no significant link between the leader’s characteristics and the organization’s performance. However, this is not the case as there is a sustantial evidence of highly successful organizations that are attributed to the strong and effective leadership. A critical analysis of the departments is likely to reveal huge differences in performances that are based on the qualifications of the leadership.

For instance, the marketing department, having the largest number of MBA graduates, is likely to achieve its goals quite easily as less time will be wasted on supervisions. Presumably, Ms. Tsang’s managerial challenges could be arising from leading the less educated or trained; and for this reason, she feels blamed for the disputes facing the departments. She tries hard, to show confidence as the only lady among gentlemen.

She is, however, betrayed by her anger outbursts, which exposes her weakness. Leadership should be the development of a vision on how the future should look like – giving directions on how to achieve it and enmesh all its members in its net (Buchanan & Huczynski, 2007, p. 360).

However, neither did Ms. Tsang nor did her directors raise any issue as apperrtains the vision, and also non of them had shown constructive participation. Ms. Tsang, therefore, needs to redefine her mode of leadership to a more transactive and transformative one. From this, she may manage to get the highest potential from her subordinates (Buchanan & Huczynski 2007).

Individuals and motivation

Motivation is a major problem facing the Pluto telecommunications company. As has been seen, the sales department seems to be enjoying the most out of its job with short timelines. The customer service team, on the other hand, experiences quite unfavourable terms as its timeline is usually dictated by the organization and takes unusually long time. Its motivation, usually comes from fear of not achieving rather than self drive.

This reward system, among the sales staff, has been more of a curse than a blessing to the organization because the competition has promoted individualism rather than teamwork. Studies have indicated that the “stick over carrot” system of motivation has severe long-term effects on the ultimate goal of the organization.

People tend to perfect on whatever they are doing if they are doing it in their own will and under positive motivation. However, if subjected to the pressure, they underperform and may not deliver much as stipulated in the McGregor X & Y theories.

The marketing department does not have clearly defined targets; it lacks a scale of measuring the contribution to the organizations overall goal. Setting goals that are specific is motivating than setting general goals (Locke and Latham 1990). If the marketing department members realised that they had a larger workload than the rest, they would develop feelings and become too personal, and this could make them fail to achieve.

Each department, in this case, is motivated in a different way. The sales department is motivated through extrinsic means customer service is forced to deliver through fear and marketing department is not motivated by unspecified goals. Since the extrinsic motivational methods influence the employees’ performance, they cannot be relied on to produce long-term goals.

This is partly because they are bound to transform with the adjustments in the operating environment. Also, they do not provide an environment of sharing ideas through teamwork as each person competes to be the best individually rather than as an organization (Buchanan & Huczynski 2007).

Conclusion

As a result of the expansion of the company, the challenges facing Ms Tsang and the company is as a result of the sub cultural divisions that have cropped within the organization’s departments, threatening to split it. It is said that unity is strength; therefore, the company will not be able to face the external factors with their internal misunderstandings still unresolved.

Their infighting weakens their bargaining prowess in the economic sector as has been clearly seen through their loss of customers. Communication- being an important tool in any organization- has been broken down as depicted in the open contradictions of the management. The different time orientation of each department has further led to the lack of understanding on the needs of each department.

Alternatives

Do nothing

This tactic is aimed at avoiding confrontations and losing of business by the organization. This would, however, result to more severe effects to the organization’s stability and may eventually break down the whole body in the long-run.

Openly confront Ms Tang

The directors have to move away from their group mentality and voice their opinions to Ms Tsang. This should be done tactically so as to avoid confrontation with each other. Having such open discussions will help in bringing the organization to its feet, in terms of communication and creating awareness on the needs of the other departments.

During discussion, people should control their emotions, while the members of the management should make sure they sort out issues at higher levels rather than doing it at personal levels. People tend to work effectively, and self motivated when their boss incorporates their views in making decisions for the organization (McGregor 1960).

Re-structuring the organization

The management should consider reconstructing the organization. One of the alternatives would be to convert the departments from process oriented to market oriented. This would allow flexibility within the organisation and so the ease with which the departments would interchange their roles.

This will also equip each department with wider skills in different fields, hence breaking the job monotony. This also makes the workers feel more involved and appreciated, which boosts their attitude towards work. This, however, poses a risk of decrease in communication at work and lack of specialisation. The restructuring process would further cost the company money, implying an increase in expenses of the organization. This also means that workers will have to be trained in whichever field they are allocated.

Introduction of the involvement culture

This involves participation of the employees towards the organization’s activities such as getting their views on both the internal and external factors affecting the organization. The organization should consider setting up service boxes where the employees, as well as customers, give their observations on what they suppose should be done in achieving the organization’s goals.

This helps in increasing the loyalty and commitment of the workers to the company. Pluto telecommunications should be encouraged to employ the aspect of adaptability culture. This will make it responsive towards the customer’s needs, whilst taking care of the employees’ welfare.

Changing and improving on the reward system

The rewards offered should not only result to short-term achievements, but should most importantly factor in long-term achievements alike. Efforts should be directed at coming up with intrinsic motivation factors, other than relying on extrinsic factors alone.

The organisation should as well come up with a flexible system in which the employees are free to decide on the best way of having their benefits, such as choosing from holidays, being given shopping vouchers, subsidising their medical fee or school fees for their siblings and so on. The employee’s needs should be listened to and possible ways of providing assistance explored. This gives the employee a feeling of self-worth and being appreciated (Buchanan & Huczynski 2007).

Replacement of the directors

Another option will be choosing on new departmental directors. This will clear the personal grudges carried by the current managers into their offices. It will once again open up communication channels between departments, while at the same time harnessing new skills and ideas from the fresh appointees.

The new appointees will be eager to make work in their new positions, and also willing to effect any changes. The main drawback, however, will be in the time they will take in settling down and strengthening the relationship with other employees (Buchanan & Huczynski 2007).

Organizing regular meetings and centralising departments

This will help in strengthening the communication between the directors and Ms Tsang, and will help departmental directors in knowing the progress of each department other than only their own; moreover, centralising the departments will make it easier to monitor their progress. This will also be easier for them to communicate personally and settle any disputes as well as share ideas on the way forward. However, this will mean constructing new offices and facilitating the movements (Handy 1993).

Recommendations

As an immediate cause of action to salvage the organization, the directors should voice their opinions and agree to correct on their mistakes. This should be done in a respective and constructive manner. Secondly, introduction of regular meetings will help in restoring the communication channel and possibly resolving the conflicts.

For the long-term cause; there is a need to modify the culture of the entity, to make it involvement focused, with the objective of creating a cohesive relationship among the three departments. Focus should be shifted from extrinsic motivational factors to intrinsic factors with clear goals and guidelines. Employees are encouraged to work together as a team through the introduction of a variety of motivational factors. Pluto ensures that each department understands the role of each other (Allcom 1991).

Plan of action

A plan of action involves organizing for the meeting of directors so as to discuss pertinent issues and resolve their individual differences. This should take around four days. It should involve establishing of weekly meetings aimed at assessing the progress of the organization and making relevant adjustments. This should take a number of weeks. Introduction of the involvement culture should take a few months (Buchanan & Huczynski 2007).

Bibliography

Allcom, S. 1991, Workplace superstars in resistant organisations, Quarum books, New York.

Beer, M. 1990, Organizational Behaviour and Development. Harvard University. Web.

Buchanan, D. A. & Huczynski, A. H. 2007, Organizational Behaviour, 7th edn, Prentice Hall, London.

Handy, C. B. & Aitken, R. 1986, Understanding shools as organizations, Penguin Books, London.

Handy, C. 1993, Understanding Organizations, Penguin, London.

Lawrence, P. R. & Lorsch, J. W. 1967, Differentiation and Integration in Complex Organizations. Web.

Locke, E. A. and Latham, G. P. 1990, A Theory of Goal Setting and Task Performance. Prentice Hall, New Jersey.

McGregor, D. 1960, The Human Side of Enterprise. Web.

Michels, R. 1911, The Iron Law of Oligarchy. Web.

Organizational analysis. 2012, Encyclopædia Britannica Online. Web.

Rural Development Initiatives 2001, Strengths, Weaknesses, Opportunities and Threats Organizational Analysis (SWOT). Web.

Introduction

Axiom telecommunications was founded in 2003 when the management team found a niche in the corporate world and set out to establish a mobile solutions provider that specifically targeted the corporate world.

Axiom Telecommunications is still a budding company that is yet to operate at multinational level and presently it is located in Dubai (Axiom 2011).

For the purposes of this paper, I ordered for some merchandise and kept active contact with the company until delivery was made to the customer in Kuwait City, the capital city of Kuwait. That was a shipment of 24 Sony Erickson mobile phones to a client in Kuwait City.

The order was made on 23 April 2013 and it was delivered by 8 May 2013 to Kuwait, which was an impressive consignation of goods and services and it beats doing business purely online. I was impressed by the speed and efficiency by which my order was delivered.

The company, as noted above, deals with electronic merchandise, and specifically those that hail from the telecommunications industry, viz. mobile phones, cable phones, projectors, computers, and fibre optics among others.

In addition to all these, the company has a very neat organisational structure that is fitted with all the relevant departments including human resources, executive management, board of directors, and most importantly, it has a customer care unit.

The customer care unit is in charge of handling the company’s interactions with the public and it consists of a team of up to 20 intelligent professional customer care agents. In fact, currently it is the hiring season and the company just posted several vacant positions online on its website.

The most important aspects of customer satisfaction entail quality, money, issue factors, accommodation and cooperation, and on–time deliveries (Morgeson et al. 2011). Axiom Telecommunications has most of these variables balanced at an optimal level to keep customers happy.

The money factor comes in when there are changes to the pricing or billing of delivery. Usually, if customers are not informed beforehand, it could lead to complaints and so with Axiom, the company has a policy of absorbing financial changes that arise after the completion of the original contract with the customer.

Of course, this requirement becomes relevant where there is a vitiating mistake or if the change favours the customer and requires the company to refund money.

The issue of accommodation occurs when customers need the company’s indulgence, for instance to delay a delivery. Axiom tries to accommodate such customers without charging extra fees for storage or any such collateral as ma be negligible.

The quality of goods from Axiom as indicated by the aforementioned consignment is above average and this aspect must be the case for the rest of its goods and services as well for the company receives only positive reviews from peer reviewed software marketing journals.

Additionally, its annual growth is far from studded and this element must have something to do with the good quality of its products and services.

Measures taken by the company to satisfy customers and a comprehensive Comparison of findings with literature

From personal experience, the customer care unit at Axiom is a very dedicated team. There is a 24-hour toll free line by which an agent may be reached anytime from anywhere across the world, in case there is any issue that requires technical support.

However, before lodging any complaints with the customer care team, a customer has access to various basic tasks at the company’s website. Consequently, one can easily browse through the company products and services from the site and then proceed to select what is of one’s choice.

After such a selection, there are very simple steps to follow to make a purchase and at this point customers may need a customer care agent to allay any concerns regarding the safety of the company’s e-commerce options.

If the online process is smooth, the customer care department shall respond by email or by call depending on the method of feedback preferred by the customer.

In this follow up call, the customer care agent goes through the details of the order with emphasis on the specifications required by the customer such as wattage or capacity of memory cards. He or she also confirms the price and channels of delivery (Axiom 2011).

Finally, a last call or email follows the intended delivery date to ensure that the product got to the intended recipient. From the process outlined above, it is clear that there is an integrated system of management at Axiom.

This element requires cooperation and coordination among the various departments such as sales and marketing and at times even the legal department for some customers, who are dissatisfied with the products or services proffered, may at times take legal action against the company.

How the company measures customer satisfaction

Axiom Telecommunications uses the age-old Customer Satisfaction Ratings (CSR) method to analyse the rate of customer gratification. These ratings are obtained from a Customer Satisfaction Survey (CSS), which is carried out by administering surveys (Grigoroudis & Siskos 2010).

These surveys may or may not be structured. Customers are required to fill up their responses on basic deductive questions on how they found the services and products offered by Axiom and what they would like to see improved.

These surveys are handed out manually at points of sale (POS) or at times virtually when a customer goes online to view the company profile in the form of pop up windows.

Additionally, the customer care agents have questionnaires with them and each time a customers calls, s/he is asked a few questions and his or her responses are recorded. Literature review indicates the limitation of these surveys.

Naomi Karten, an expert on customer satisfaction indicates that a customer is likely to respond differently to different customer care agents depending on their likability (Karten 2010).

This assertion implies that a customer could give responses that indicate his or her judgment of the agent rather than that of the company and thus this method is not very reliable.

However, in a bid to defeat this error, Axiom has randomised and impersonal surveys as well, which can be responded to without the bias of having actually encountered an agent.

The limitation is a real problem as even the customer care agents themselves report that some customers are very impressed with them as individuals, to the extent of even seeking for meetings beyond the business threshold. The danger in the manifestation of this limitation is the effect of the customer feedback.

Considering that the response may be an emotional one, where the customer rates certain personnel as poor, such a person is likely to pay the price of these negative sentiments by either getting low hikes (salary raises) or even being demoted (McDougall & Levesque 2000).

This move is de-motivating to such an individual who may actually have done a very good job, but for the customer’s particularly unpleasant disposition.

The reverse is also true and the possibility of the cumulative effect, namely – “rewarding the under-performers and punishing the better performers” (Chemuturi 2010, p. 2). This aspect is not a desirable reputation for an organisation to hold as it is reflected in the employee turn-over ratio.

What measures they take to retain their customers -Comparison of findings with literature

In the quest to retain customers, the Axiom Telecommunications Ltd. keeps all its customers in the company database. This way, the company frequently sends white papers on new technologies and events or symposia organised by the company or events to be attended by the company that could prove interesting to customers.

If customers are not willing to receive these updates, there is an option for unsubscribing or redirecting them to another email address. Additionally, the company has a customer care day annually during which it organises an open house for customers to attend and get to know their service providers better.

A witty trick used by Axiom telecommunications for retention is sending holiday and birthday greetings to its customers regularly. This move is interesting for it has received the largest positive feedback from impressed customers who got a birthday wish from their electronics supplier or retailer.

The company also uses the social network to keep its customers looped. It has a Facebook page, a Twitter page, and even a LinkedIn page. Customers are in a position to see new products online almost daily as they are busy browsing through their social network pages and this keeps business booming for Axiom.

Finally, the annual customer care day is married to the annual cocktail party where the company sells itself to those in attendance.

On this day, a corporate social responsibility act is done to put the customers’ minds at ease about the company’s integrity and only the company and its workers dirt their hands as customers and other shareholders enjoy in the festivities.

If the company empowers its employees (in relation to customer services)

Axiom Telecommunications Company has employee training opportunities that work on a rotational schedule, with employees going for training sessions as per departments.

Each year, each employee gets the opportunity to attend at least three training classes where they are enlightened on any changes that may have hit the market since they left college and they are directed on how to apply such changes for the benefit and growth of the company (Axiom 2011).

The training sessions are held in local resorts and the with the employee’s expenses throughout the session are catered for by the company. Additionally, the employee is not penalised financially for the period of absenteeism from work as upon the beginning of a training session they are given a paid leave.

There are also benchmarking activities that are organised among local competitors in which employees enter into an exchange program with employees from rival firms and in the period of engagement with the other firm, they continue to enjoy their privileges as if they were working in their own offices.

Additionally, the chances of landing promotions are higher for employees that attend these training and benchmarking events for they are not compulsory either.

What type of employees it empowers – Comparison of findings with literature

The training opportunities are open to all as opposed to the trend in some organisations that only train newly recruited employees. This move is a smart one on the part of Axiom as it means that even the seasoned employees who have made it to as far as becoming CEOs or COOs are not locked out of learning new things.

The advantage in this practice is that the company is constantly alert and up to date with global happenings, which makes a versatile team that can tackle any issue that it is confronted with confidently (Hernon & Whitman 2001).

Additionally, such a practice makes the team very resourceful and so in case a customer calls the company offices with a unique and new issue, there shall always be someone with the knowledge to handle the issue.

How the company deals with difficult / angry customers – Comparison of findings with literature

Since its incorporation a decade ago, Axiom has not been involved in any legal scandal in which a customer sued it either for breach of contract or negligence. The company has a remarkable record. However, every now and then there is the occasional dissatisfied customer who causes a scene or makes a disturbing call.

In these cases, the Customer Care Unit director states that he simply advices his team to deal with such matters delicately. He states that if the issue can be easily rectified, the agent should be as polite and cordial as possible while another team member goes on with rectifying the mess.

As aforementioned, the company has a twenty-four hour toll free service for customers to call whenever they encounter a challenge that the company can set right.

An agent always answers any call made through this number and it is available on the company’s website and brochures and pamphlets as well as wrapping papers issued by the company.

When an irate customer calls, the conventional policy is that the agent is to identify the problem and then decide on how to proceed (Fornell, Mithas & Krishnan 2005).

Some issues are referred to the executive directors where the agent lacks the capacity to help and some are referred to the legal department where a customer threatens to take a legal action.

The legal department then analyses the situation and promptly prepares a memorandum advising the board of directors (the board is aware that it can convene any time in case of an emergency).

This requirement is another company policy is the preference for settling matters out of court, and this move is advised by the avoidance of negative publicity, which often arises from public trials.

The systematic procedure of dealing with an irate customer as provided for in various customer satisfaction guidelines includes first listening to the customer before speaking, then apologising and empathising with such a customer to get them to calm down (Hernon & Whitman 2001).

Afterwards, the agent may try to clarify the matter to the customer, or take down notes to be clear on what the customer’s complaint is and probably come up with the best solution to the complaint.

This duty should be executed in a positive tone of voice and immediate action should be taken to ensure that the customer’s needs are met. With tougher or more complex cases, follow up may be necessary and if so, then it should be prompt and forthcoming.

How the company utilises e-marketing / e-commerce, or any other technology used to aid marketing efforts and the advantages and disadvantages – Comparison of findings with literature

Axiom telecommunications is a software as well as hardware provider of electronics. As such, it is directly affected by the globalisation trend that has seen the virtualisation of almost every other task. This company is not willing to be left behind in terms of achieving technology or Internet astuteness.

The company states that when it acquires any new technology, it keeps the best for itself and uses it for a spell before introducing the same to it catalogue. This element may as well be the reason why the quality of its products is appreciated (Axiom 2011).

With the revolution of e- commerce, business firms and companies like Axiom are constantly finding themselves in minefields especially concerning price fluctuations. The market tends to change faster than the product and so some products barely hit the shelf before running out of stock.

The old rules of the game remain the same and so it may not be as easy to change the product, as it may be to change the price. This aspect is the downfall of most companies that utilise e-commerce for they seem to be taking advantage of customers’ desperation.

At Axiom, regardless of market shifts, the management team strives to keep the prices at a minimum with just enough extra to make a sound, but constant profit.

The effect of this strategy is that a company’s appeal is heightened. As other companies triple or even quadruple their prices when the demand is inversely proportional to the quantity, Axiom prices are known throughout Dubai to be the most constant.

Another new phenomenon with e-commerce involves the rules, which include the fact that there is a paradigm shift of power from the seller to the buyer (Chaffey 2004).

With e-commerce, the buyer’s attention is a commodity that is almost as rare as gold and so sellers seek to attract it in any possible way, and sometimes sellers may get overzealous and get unethical by misrepresenting or false advertising.

Axiom avoids these hurdles by posting only the barest of specificities for the products is markets on eBay. It also prevents customers from looking away by offering various attractive incentives such as warranties and gift packs.

The nature of demand has also changed with e-commerce for customers are now looking for different things when they go shopping online. They want speed and self-service menus that are easy to navigate, they want a guarantee of their privacy for as long as they are online, and they want the service to be convenient.

This aspect means that they want to be in a position to make contact with the company when they click on the ‘contact’ icon on the organisation’s website as opposed to being redirected to other commands before being granted access (McFadyen 2008). Axiom is able to provide for all these demands.

When customers purchase new products online, they have several payment options ranging from Moneybookers to PayPal and visa cards.

The site is secure and it does not even store the credit card information on the internal database, which prevents chances of hacking into the company database and accessing millions of customers’ confidential information.

The management at Axiom states that it does not plan to become the next Sony in terms of Cyber warfare scandals. E-commerce presently accounts for 25 per cent of the sales of Axiom, and this percentage keeps growing by the day.

Conclusion

This paper was a brief discussion of crucial customer care information that comes in hand when running a company or a business. The paper’s vignette or case study was Axiom Telecommunications Company, which is a software product and service provider based in Dubai and one that targets the corporate world.

The company has a working Customer Care Unit that cooperates and coordinates its performance with the other departments in the company, such as sales and marketing and legal department and it uses the customer Satisfaction Ratings questionnaires to measure customer satisfaction.

The company also has in-house training sessions organised for all employees although it is not mandatory for one to attend these sessions. Employees have higher chances of being promoted after attending the company’s training and benchmarking activities.

Finally, the company has launched an e-commerce department that is responsible for its online branch.

It has set in place adequate measures to protect customers’ confidential information by not saving the same to the local database. Axiom is a potentially productive and successful company by the estimation of the information provided in this paper.

Reference List

Axiom: Bravenewtalent 2011. Web.

Chaffey, D 2004, E-Business and E-Commerce, Prentice Hall, Upper Saddle River, NJ.

Chemuturi, M 2010, ‘How to Measure Customer Satisfaction’, Newsletter of Technology Evaluation Centres, vol. 4 no. 1, pp.1-8.

Fornell, C, Mithas, S & Krishnan, M 2005, ‘Why do customer relationship management applications affect customer satisfaction’, Journal of Marketing, vol. 69 no. 4, pp.201-209.

Grigoroudis, E & Siskos, Y 2010, Customer Satisfaction Evaluation: Methods for Measuring and Implementing Service Quality, Springer, New York.

Hernon, P & Whitman, J 2001, Delivering satisfaction and service quality: A Customer-based Approach for Libraries, American Library Association, Chicago.

Karten, N 2010, Tales of Whoa and the psychology of customer satisfaction, Oxford University Press, London.

McDougall, G & Levesque, T 2000, ‘Customer satisfaction with services: putting perceived value into the equation’, Journal of Services Marketing, vol.14 no.5, pp. 392-410.

McFadyen, T 2008, eCommerce Best Practices – How to market, sell, and service customers with internet technologies, McFadyen Solutions, Vienna.

Morgeson, F, Mithas, Keiningham, T & Aksoy, L 2011 ‘An Investigation of the Cross-National Determinants of Customer Satisfaction’, Journal of the Academy of Marketing Sciences, vol. 29 no. 2, pp.198-215.

Introduction

The telecommunication sector plays an essential role in the development of modern economies worldwide. It allows countries to get substantial revenues from the exploitation of various information and communication technologies (ICTs), infrastructures, and networks and, therefore, may help them to stimulate the economic growth considerably (Ameen & Willis, 2016). For this reason, it is essential to ensure that the telecommunication sector remains competitive, innovative, and advanced as these features can contribute to the strengthening of the national economy.

As for the telecommunications market in the United Arab Emirates (UAE), its performance is currently flawed. According to Ameen and Willis (2016), two primary telecommunications operators in the UAE, Emirates Telecommunications Corporation (Etisalat) and Emirates Integrated Telecommunications Company (du), have been experiencing a decrease in profitability since 2015. The duopoly structure of the local sector may be viewed as the major reason why it is underperforming nowadays because duopolies and monopolies are characterized by reduced competition levels and, thus, do not motivate enterprises enough to enhance their product portfolios, pricing, quality, and value of services (Enhan, 2016).

In its turn, the lack of competition in the UAE telecommunications market is defined by its present-day legal environment. Therefore, the present paper will aim to analyze relevant laws and policies determining how the sector works nowadays and will focus mainly on the UAE Telecommunications Law and the Competition Law since these pieces of legislation play the most important roles in regulating telecoms and competition across the local markets. As part of the review, major market failures and regulatory flaws will be identified and, consequently, recommendations for the improvement will be proposed.

Overview of the Relevant Regulatory Environment

Sector-Specific Regulations

The most important legislation in the UAE telecoms sector is the Federal Law by Decree No. 3 of 2002 Regarding the Organization of the Telecommunications Sector, also known as the UAE Telecommunications Law. In accordance with the provisions of this law, the Telecommunications Regulatory Authority (TRA) was established and is now responsible for the management of each legal and practical aspect of the sector’s performance. According to Yallapragada (2017), the main duties of this independent governmental body include the monitoring of service quality, promotion of the sector development, as well as creation and enforcement of the relevant policies, norms, and rules. Among them is the General Policy for the Telecommunications Sector in the State of the UAE.

Regulation Objectives

It is valid to say that the latter policy is primarily growth-oriented and is aligned with the government’s overall strategic objectives for the development of non-oil sectors in the country. A few of the ways through which the TRA strives to attain these targets is the promotion and development of new technologies, infrastructure enhancement, and investment in research and development (TRA, 2005). The outlined objectives imply that innovation and efficiency are two of the main goals within the sector-related regulatory framework.

It is worth noting that the policy also emphasizes the need for introducing the competition in the UAE telecommunications sector with the purpose of encouraging better efficiency and quality (TRA, 2005). According to Enhan (2016), innovation induced by greater competition has a greater potential to result in the dynamic efficiency of enterprises or, in other words, their better productivity and performance in terms of higher variety and quality of products and services. By increasing product/service reliability and providing a greater range of choice options for consumers, dynamic efficiency can maximize social welfare in the long run (Enhan, 2016).

Nevertheless, the statement about the gradual introduction of competition in the telecoms has not been realized in practice yet. At the present moment, the existing policy protects the duopoly structure of the telecoms market in the UAE (DLA Piper, 2019). Thus, the chance to simulate allocative, productive and dynamic efficiency gains in the sector may currently be insignificant due to the high degree of monopolization.

Besides, the telecom regulations in the UAE serve to meet the social objectives, including an uninterrupted and universal service provision and consumer protection. For example, consistently with the UAE Federal Telecom Law No. (3) for the Year 2003 and its amendments, TRA must “ensure that the telecommunications services provided throughout the state, are sufficient to satisfy the public demands of those who wish to make use of such services” (TRA, n.d., p. 13). This responsibility of the agency is associated with the prevention of market failure through the promotion of adequate allocation of goods and productive outputs of telecom operators.

As for consumer protection, it refers to the protection of their personal data, promotion of informational and operational transparency, catering to the needs of diverse society members, provision of public communications networks’ security and easy processes for complaint resolution, and so forth (Enhan, 2016). Overall, the UAE Telecommunications Law and the General Policy largely address these issues.

However, as noted by Enhan (2016), consumer protection also implies that individuals’ self-interest in the context of modern economics are met. In other words, consumers should be provided with enough opportunities to choose between multiple options in the market based on their preferences and perceptions of product/service-related economic benefits. It is valid to say that the failure of the current UAE regulatory framework to establish a sufficient level of competition in the telecom sector limits consumers’ chances to choose between operators and services. Therefore, the latter requirement for effective consumer protection is not satisfied in the sector as yet.

The Competition Law

The UAE has introduced its competition law framework merely several years ago. According to Bowden and Girot (2017), it became enacted on 23 February 2013 and now serves as the major means with the help of which the UAE can control anti-competitive practices. Overall, the policy aims to provide restrictions on anti-competitive agreements and behaviors of operators that occupy dominant positions in various UAE markets and sectors (Bowden & Girot, 2017). Additionally, it requires that the “mergers between entities with a sufficiently large combined market share [must] obtain clearance in advance from the Ministry of Economy” (Bowden & Girot, 2017, par. 1).

The latter component of the Competition Law indicates that the Ministry of Economy plays a crucial role in its enforcement. As noted by Global Legal Group (2019), when doing so, the Ministry acts primarily through its Competition Department. Besides, the Competition Law required the establishment of a specialized Competition Regulation Committee that held its first meeting merely in March 2018 (Hogan Lovells Publications, 2018).

The main responsibility of the Committee is to oversee the implementation of the competition policies in the country and develop rules and standards to guide firms’ performance (Hogan Lovells Publications, 2018). According to Enhan (2016), the creation of an independent regulatory authority is a crucial part of the competition promotion process since it ensures that no conflict of interest prevents new entrants from taking a share in the market. Overall, although the Committee’s functions are substantially related to the UAE government as such, the former is still independent in terms of enforcing the regulation “without excessive political interference or enterprises lobbying” (Enhan, 2016, p. 44). Thus, the ministerial department meets the necessary requirement for independence.

Regulation Objectives

The UAE competition policy is similar to the one adopted in the European Union and has the main purpose of promoting economic efficiency. It is primarily designed to address potential market failures inherently associated with monopolies. For instance, when dominant business entities abuse power and, in the attempts to maximize profit, implement price mechanisms that fail to capture costs and values of products/services, it results in distributional efficiency loss (Schmitz Jr, 2016).

In contrast, the establishment of a competition-driven market is always linked to efforts “to optimize the utilization of resources and the allocation welfare of members of the society” (Enhan, 2016, p. 6). In other words, competition is characterized by a free flow of resources and their greater availability to consumers, business competitors, and new entrants in the market. Thus, the Competition Law helps to facilitate exchange in the markets and maximizes opportunities for individual freedom of choice.

At the same time, the Competition Law is growth-oriented because by encouraging competition it also promotes greater innovation and continuous engagement in quality improvement among enterprises. According to Enhan (2016), dynamic efficiency is one of the core features of perfect competition, and it implies that businesses in such an environment need to strive to develop new high-quality and demanded products regularly in order to survive. In this way, in competition-driven markets, innovation becomes an essential component of companies’ strategic thinking and it drives industry development and economic growth.

Summary of Main Flaws in the Regulatory Environment

As such, the passage of the Competition Law and the establishment of relevant regulatory bodies indicates that the UAE is on the right way towards the promotion of competition across its markets, yet the fact that these initiatives were undertaken just recently means that the regulation is on its initial developmental stages. However, the major deficiency of this policy is that it does not regulate the telecommunications sector at all at the present moment. As noted by Global Legal Group (2019), nowadays, “the TRA includes terms in the licenses issued to operators requiring them not to participate in anti-competitive practices” (p. 251).

It means that the UAE Telecommunications Law and especially the current policy of a duopoly market in the sector is contradictory to the general premises of the Competition Law. Clearly, in the UAE, the telecoms sector is still regarded as a natural monopoly and, therefore, the sector-specific regulations play a major role there and serve as an alternative to the competition.

Evaluation of the UAE Telecommunications Policy Alternatives

Liberalization

The main alternative to the telecom market monopolization is its liberalization. Enhan (2016) distinguishes three major elements of market liberalization, including the removal of privileges given to certain enterprises in monopolies, establishment of a regulatory framework and independent agencies that would support the promotion of market openness, and, lastly, consistent implementation of the competition law. At the current stage, the UAE telecom sector does not meet these requirements considering that Etisalat and du are given exclusive rights to operate in the market and the existing regulations exempt them from the influence of the Competition Law.

Taking into account that both of the major telecom operators in the UAE are largely owned by the government, the process of eliminating monopoly privileges in the sector may be complicated and time-consuming. However, liberalization is characterized by many economic and social benefits. The direct effects of deregulation include a significant increase in productivity output due to the entry of new enterprises in the market, improvements in the existing networks and infrastructures, and consequent industry growth (Huderek-Glapska, 2010).

The latter observation is in line with evidence on the acceleration of innovation in liberalized markets as, when put in such a context, businesses commence to undertake significant efforts to diversify products/services and increase their quality for customers (Enhan, 2016). In its turn, an increase in output and the appearance of a wider range of different-quality and distinct-price options contribute to greater product/service consumption levels, leading to economic growth and the emergence of more employment opportunities (Huderek-Glapska, 2010). In this way, both the economic and the social welfare of citizens is promoted through the liberalization process.

Privatization

Privatization may be viewed as a specific tool through which the deregulation of the telecoms sector can take place. Megginson and Netter (2000) broadly define this process as “the deliberate sale by a government of state-owned enterprises (SOEs) or assets to private economic agents” (p. 1). It means that privatization creates barriers to the government’s intervention in the industry and decreases costs linked to this kind of intervention.

However, it is valid to say that privatization alone may have no substantial effect on the market if a regulatory framework supporting the promotion of competition is not developed. As Megginson and Netter (2000) note, the positive effects of privatization, including an increase in the revenue volumes for the state and an achievement of greater economic efficiency, depend on the extent of market failure and are usually particularly pronounced in either competitive markets or “markets that can become readily competitive” (p. 9). In contrast, the effects of privatization are normally weak in natural monopolies and similar market contexts (Megginson & Netter, 2000).

It means that in order to capture the benefits of privatization, the UAE government must be committed to the promotion of market openness and, like in the case with general deregulation, must develop and enforce policies that favor competition.

Costs and Benefits of Monopoly

The abovementioned evidence indicates that if the UAE wants to stimulate economic growth at the national and the sector levels, telecoms deregulation will be more beneficial for it. In contrast, the costs of preserving the market monopolized are significant because monopolies are associated with reduced productivity and negative impacts on economic welfare (Schmitz Jr, 2016). Besides, the fact that in monopolized sectors prices tend to be high adversely impacts product/service accessibility among population groups with lower income levels (Schmitz Jr, 2016).

While the UAE has a high GDP level, which means that a vast majority of citizens have high income and can afford pricy items and services, the issue of telecommunication service accessibility may not be of significant concern for Etisalat and du. Nevertheless, local consumers tend to perceive communication service prices in the country as excessively high and unfair, and this factor can contribute to their dissatisfaction and reduced use of products offered by those companies (Yallapragada, 2017; Kovacs, 2014). Besides, due to the absence of real competition in the sector, the UAE telecoms operators may be insufficiently motivated to innovate and enhance the quality of their products/services. This situation is risky because it limits consumers’ abilities to economize and find optimal tradeoffs between quality and price.

At the same time, it would be wrong to presume that monopoly is associated merely with costs in terms of the UAE telecoms management. As stated by Kovacs (2014), the government’s legislative system is more autocratic than democratic and, therefore, it is in its interests to keep telecommunications centralized. Besides the ability to gain greater profits through the maintenance of high pricing in the context of monopoly and duopoly, the government also exercises a substantial degree of control over every aspect of the industry. For example, it may block certain activities such as the use of such Voice Over Internet Protocol applications as Skype and Face Time (Ameen & Willis, 2016).

This particular type of restriction does not benefit consumers since it prevents them from switching to lower-cost service substitutes. However, the government may use centralized control in order to produce consumer values as well.

In SEOs, the government may control the realization of initiatives aimed at the promotion of innovation and improvement of customer service and satisfaction in accordance with the sector-specific policy. By focusing on these activities, the government will become able to mitigate and respond to the risks pertaining to customer dissatisfaction with telecommunication services to a large extent. Nevertheless, considering all the evidence discussed previously in the paper, it is valid to say that the establishment of the competition-driven market can still substantially enhance the efficacy of sector innovation and quality improvement endeavors.

Recommendation

In order to promote greater economic, allocative, and dynamic efficiency in its telecommunications sector, the UAE needs to work towards the realization of its general policy objective for the gradual introduction of competition. The ways through which the government may satisfy this aim is the inclusion of the telecoms sector in the Competition Law and consequent market liberalization. The reason why these two steps must be undertaken is because, at the present moment, there is a conflict between the major sector regulation, the telecommunications policy objectives aimed at the promotion of competition, and the Competition Law itself. It is valid to say that by extending the influence of the Competition Law on the telecoms sector, this conflict will be automatically resolved.

When commencing the deregulation process, the UAE may follow the British government’s example and primarily exercise the entry control mechanisms. The current UAE duopoly policy is similar to the one that was implemented in Britain in the 1980’s and it granted exclusive rights for two large enterprises’ joint operations in the local telecom market (Enhan, 2016). However, when the policy expired after seven years of action, the British government developed a new one, ensuring that only to qualified domestic entrants are granted with licenses (Enhan, 2016).

Besides, the newly introduced policy, cable companies were allowed to render direct communication services by using their networks and infrastructures and, as a result, a lot of new businesses emerged quickly (Enhan, 2016). In this way, it will be possible to strengthen the competitive force against Etisalat and du.

Noteworthily, when the telecoms sector will start to be guided by the UAE Competition Law, the issue of overlapping jurisdiction between the TRA and the Competition Committee will arise since both of the agencies will have the same responsibilities of ensuring competition promotion in the sector. It may be recommended to give greater authority in the management of competition issues in the telecommunications sector to TRA because it has necessary knowledge and specialization for monitoring the performance of relevant companies. The expertise that TRA management now has will help it to apply more effective tools for the response to environmental changes affecting the market.

Besides the impacts of increased competition that were discussed previously in the paper, such as changes in the rates of demand and supply of goods and provision of more chances for consumers’ economization, another significant economic and social effect of the policy modification will include the improvement in national standards of living. Such an outcome is closely interrelated with an increase in competition-induced labor productivity that may arise as a result of a growing number of job opportunities with the appearance of more telecom operators in the UAE market.

In its turn, a higher standard of living can contribute to the development of human capital in the country, which is regarded as one of the primary factors that indirectly stimulate economic progress (Ali, et al., 2018). It means that the inclusion of the telecommunications sector in the Competition Law will help the UAE meet its strategic objectives much more effectively than the implementation of the sector-specific regulations alone.

Reference List

Ali, M., Egbetokun, A. & Memon, M. H., 2018. Human Capital, Social Capabilities and Economic Growth. Economies , 6(2), pp. 1-18.

Ameen, N. & Willis, R., 2016. An Investigation of the Challenges Facing the Mobile Telecommunications Industry in United Arab Emirates from the Young Consumers’ Perspective. Cambridge, Econstor.

Bowden, J. & Girot, E., 2017. United Arab Emirates: The UAE Competition Law Clarified. Mondaq.

DLA Piper, 2019. Key Telecommunications Laws, Regulations and Policies, London: DLA Piper.

Enhan, L., 2016. Competition and Regulation in the Telecommunications Industry, Barcelona: Universitat Autònoma de Barcelona.

Global Legal Group, 2019. The International Comparative Legal Guide to: Telecoms, Media & Internet Laws & Regulations 2019, London: Global Legal Group.

Hogan Lovells Publications, 2018. The UAE Competition Committee has finally become operational; merger control in the UAE and the GCC region. Hogan Lovells.

Huderek-Glapska, S., 2010. Economic Benefits of Market Liberalization. Evidence from Air Transport in Poland. Journal of International Studies, 3(1), pp. 49-58.

Kovacs, J., 2014. Economic and Legal Analysis of the United Arab Emirates’ Telecommunications Market. , Budapest: Central European University.

Megginson, W. L. & Netter, M. J., 2000. From State to Market: A Survey of Empirical Studies on Privatization, Paris: OECD.

Schmitz Jr, J. A., 2016. The Costs of Monopoly: A New View. Federal Reserve Bank of Minneapolis.

Telecommunications Regulatory Authority, 2005. General Policy for the Telecommunications Sector in the United Arab Emirates 2006 – 2010, Dubai: Telecommunications Regulatory Authority.

Telecommunications Regulatory Authority, n.d.. A view into the UAE’s future ICT scene, Dubai: Telecommunications Regulatory Authority.

Yalllapragada, P., 2017. Determinants of Customer Satisfaction in the Mobile Telecommunications Services among the University Students in Dubai. Advance Research Journal of Multidisciplinary Discoveries, pp. 5-11.

Introduction

Background

The business world today is going through a painful metamorphosis of financial meltdowns and economic upheavals. Big multinational companies such as the Lehman Brothers, Morgan Stanley, Bear Stearns, Washington Mutual, and Merrill Lynch have been left gasping for survival by the current wave of financial crisis, with some already falling into the doldrums of extinction (Pitzke, 2008). This unpleasant wave, coupled with competition for customers in an ever-shrinking market, calls for businesses to come up with new and innovative ways of maintaining old customers while at the same time developing strategies aimed at bringing new customers to the staple (Renee, 2007). Customer loyalty translates to profitability for the company. According to Rese (2003), a general relationship exists between customer retention and customer satisfaction, and subsequently to the level of profitability of a business enterprise. Firms will most likely record impressive profits if customer satisfaction is integrated in everyday day running of their activities as a key business strategy.

Business managers need to realize that their customers are their most valued assets. According to Thomson (2002), no business entity has ever been known to exist without customers. Businesses in all sectors – retail, manufacturing, financial, service, and technological – have to deal with customers at one point in time. Ensuring their satisfaction therefore becomes a core strategy used to propel firms and enterprises into profitability and growth in today’s competitive market. Renee (2007) argues that customer satisfaction entails a holistic understanding of how a customer feels after buying a product or service from a dealer and, in particular, whether or not such a product or service satisfies the client or customer according to his or her own expectations. If used effectively, it has the ability to offer sustainable competitive advantage to businesses.

The Study Context

Located in the Middle East, Saudi Arabia occupies just about 80 percent of the Arabian Peninsula. The 2006 provisional population estimates positioned the country at 27, 019,731, with yearly growth rate of 2.18 percent (“Library of Congress,” 2006). According to provisional estimates by the CIA, the population would have surpassed 28, 686, 633 in July, 2009 (CIA, 2009). The population is distributed mainly along with major cities around the country, providing the much-needed clientele to local and international companies operating in the areas. The telecommunication industry for instance has recorded monumental growth due to the concentration of people in cities. Riyadh, the capital city, has 3.6 million residents; Jeddah, 2.9 million; and Mecca is third with 1.6 million residents. The city of Dharam has 1.6 million residents, while Medina has around 854, 000. The country has a healthy economy that experienced enormous growth from 2003 through to 2005. However, the economy still remains largely reliant on the production and exportation of oil.

Saudi Arabia has made profound advancements in nearly all the key sectors in the telecommunications industry. Of particular concern for this study is the sector of cellular telephony, which has recorded impressive growth and rapid diffusion levels within the last decade. According to Stevenson (2009), Saudi Arabia, Turkey, and Iran represent up to 70 percent of total cellular connections in the whole of Middle East. In the same vein, Saudi Arabia is the second-largest market in the region, representing almost 15 percent of total connections in the Middle East. In March 2007, it was estimated that the country had 21.5 Million subscribers of cellular phones, translating to 89 percent penetration rate. Presently, the penetration rate has exceeded 100 percent.

This unprecedented growth has seen several companies set bases in the country in the hope of making some profits for their stakeholders. The most prominent ones are Saudi Telecom Company (STC), Mobily, Zain, and Bravo. These firms have come with divergent policies and strategies to maintain their customer base, while trying to recruit new clients in the rapidly expanding market. Of importance to the companies is the realization that the mobile market in Saudi Arabia has become more dynamic and competitive in the face of extremely high penetration rates. The strategies employed by individual companies, including customer satisfaction and loyalty will therefore go a long way in determining the market share of each one of the companies. STC, Zain, and Mobily were evaluated in this study.

Statement of Problem

During the past couple of years, the mobile market in Saudi Arabia has risen from strength to strength, reaching dizzyingly high subscription and penetration levels towards the end of 2007. The high penetration rate reveals that customers have positively identified with the services being offered by the four main mobile network operators in the country. The expanding Saudi economy, fuelled by Oil sales, may also have had contributed positively towards the exponential growth of the mobile telecommunications industry since a growing economy means that people will have more money to spend. Still, the rigorous marketing strategies employed by companies offering mobile telephone services, coupled with the cut-throat competition among the service operators to control the market may also have contributed to the speedy growth of the sector in Saudi Arabia (Stevenson, 2007). One thing is clear though; there is a huge market share out there for companies to grab and translate into profitability.

Organizations the world over succeed by going out of their way to perform optimally what matters most to their own clients. However, the interest exhibited by organizations in maximizing customer satisfaction does not automatically mirror corporate altruism (Allen, 2004). Indeed, an interest in clients and customers is almost always egocentric as it is done with the explicit purpose of enhancing businesses to reap some tangible benefits. The underlying principle is that satisfied customers yield greater profits to the company.

Numerous studies have been undertaken regarding the satisfaction of individual customers. However, nothing much is yet to be known regarding organizational-wide practices with respect to client and customer satisfaction (Allen, 2004). To promote the development of further knowledge, this study concerned itself with evaluating the factors that make the customers to be satisfied from the organizational perspective by looking at the budding telecommunications industry in Saudi Arabia.

Objectives of the study

The general objective of the study was to explore the various factors and strategies that contribute to customer satisfaction from an organizational point of reference by evaluating several mobile network operators doing business in Saudi Arabia. The following were the specific objectives:

1. Establishing if the products and services offered by organizations can effectively take ownership for driving, developing and maintaining customer satisfaction and loyalty priorities for whole organization
2. Establishing the benchmarks and strategies used by organizations to ascertain if the services they put on display satisfies their customers
3. Exploring whether employee satisfaction through incentives can play a significant role in successful client satisfaction program.
4. Exploring if staff recruitment and on job training programs on customer service translates to better customer service and satisfaction.

Key Research questions

The study was guided by the following research questions:

1. Can the development of an aggressive customer satisfaction policy put the products and services offered by an organization in a central, customer-oriented role within the whole organization?
2. What, between staff attitudes, quality of products and services, and pricing, mostly affects and influences the type and nature of relationships that customers establish with organizations?
3. Are the money and resources used by organizations to develop and maintain customer satisfaction justifiable empirically?

Value of the Study

The value of this study can never be underestimated. Businesses all over the world are suffering under the weight of poor or inadequate customer satisfaction strategies aimed at harnessing the immense opportunities arising from retaining business clients and customers. This study came up with a body of knowledge that could effectively be used by business managers to arrange their core business processes around the demands, needs, and requirements of their prestigious customers. In addition, results generated from the study can be used by businesses to boost their profitability as a satisfied customer is a worthy asset to the organization (Fojtik, 2009). Indeed, the pursuit of customer satisfaction should be treated like any other profit-driven investment.

Review of Related Literature

The General Overview

The telecommunication industry in Saudi Arabia is as robust as her economy. The privatization of the sector was largely accomplished in 1998 (“Library of Congress,” 2006). Presently, Saudi Telecommunications Company, employing over 70,000, dominates the sector. Saudi Arabia has an up-to-date and expanding telephone system, with over 3.6 million main lines by 2004 (“The Library of Congress”). Presently, it is expected that this number has grown by 10-15 percent.

But perhaps one of the areas that have recorded substantial growth and rapid diffusion is the cellular mobile telephone sector. By the end of 2004, over 9 million Saudi citizens were using cellular phones (“The Library of Congress,” 2006). According to Stevenson (2009), the average market penetration of mobile phones in Saudi Arabia was around 89 percent by the end of 2007. Saudi Arabia, along with Turkey and Iran represented just about 70 percent of all mobile telephone connections in the Middle East. According to Stevenson, the country is the second-largest market in the Middle East, representing about 15 percent of total connections in the region.

By the end of 2006, Saudi Arabia has already surpassed the 20 million mobile phone connections mark. Available estimates reveal that the mobile telephony market grew by another 20 percent in 2007. Today, penetration rates have surpassed the 100 percent mark. This has been made possible by the proliferation of companies offering the service, and the cut-throat competition for customers that ensues. Below, a number of these companies are sampled.

Saudi Telecommunications Company (STC)

Background

Saudi Telecom (STC) commenced its commercial operations in 1998 as the country’s sole telecommunication operator with over six hundred thousand subscribers. In 2000, the telecommunication giant had 1.4 million subscribers, and the number surged to 2.5 million with the introduction of its prepared card called Sawa, later on in the same year (STC, 2009).Towards the end of 2002, the government sold off 30 percent of STC shares to Saudi citizens and organizations. By the end of the subscription period for the IPO, requests for the much-coveted shares exceeded the number offered by 3.5 times. The company had in excess of five million subscribers by the time it was listed on the Saudi Stock Exchange.

In 2005, STC was ranked the country’s fourth-largest company in terms of market capitalization, with over 12 million mobile subscribers and over 3.3 million fixed lines. Presently, the company covers about 98 percent of Saudi Arabia, and is a major shareholder in Arab Satellite Communications Organization. This company deals in satellite communications and digital television broadcasting. STC also holds shares in the renowned satellite-based mobile telephone company called Thuraya Satellite Telecommunications Company.

Customer Satisfaction Strategies for STC

Customer Satisfaction before Competition

Prior to July 2004, STC used to operate a monopoly in the telecommunications industry, having to be the sole operator from the time the industry was liberalized in 1998. The Saudi government granted the second mobile operator license to Etisalat, owners of Mobily, in 2004, initiating a new competitive age for STC. Immediately after the liberalization of the telecommunications industry was undertaken, STC drew a 5 year period transformation program based on clearly articulated objectives. Activities for the first phase, known as diagnostic phase, were undertaken in 1998. The second phase extended from 1999 to 2000, and was known as design phase. The third and fourth phases, referred to as consolidation and implementation phases respectively, took place between 2000 and 2003 (STC, 2002).

In all the phases in the strategy paper, customer satisfaction was viewed as a crucial component towards achieving economic breakthrough. This was done through addition of value to customers through reduction of tariffs for both mobile and fixed landline charges; service innovation; service segmentation; servicing quality; brand equity building; and fast-tracking the telecommunication market, including distribution channels (STC, 2002). Although STC practiced a monopoly during this time, the above strategies used in customer satisfaction enabled the firm’s client base to grow from 600, 000 in 1998 to over 2.5 Million in 2000. This in turn enabled the company to achieve an average growth rate of 14 percent for the three years from 1998 to 2000. Increased growth rate was expected to continue.

Customer Satisfaction after competition

The introduction of the second mobile telephone operator in 2004 brought the need to reshape and restructure customer satisfaction strategies practiced by STC in the hope that this could help maintain its immense clientele base, in addition to recruiting new ones. In this respect, STC engaged in aggressive marketing strategies after the introduction of Mobily into the market. The company had to implement cost-effective strategies to maximize and add value to its mobile network, in addition to boosting bottom-line revenue (“Telecommunication Report,” 2009). It had to learn how to effectively deal with increased data traffic and emerging technologies that enhanced customer satisfaction. These strategies were being implemented with the explicit aim of locking up the STC market share to potential competition from Mobily.

In addition to the strategies it was using before introduction of competition, and which are mentioned above, the telecommunication giant engaged in other ventures that added customer value to its services. For instance, in 2008, STC signed a five-year sponsorship contract with English premier league leaders, Manchester United, to provide fans, otherwise known as customers, with exclusive content including goals, news updates, and fashionable ring tones (STC, 2009). In addition to being one of the organizations offering the lowest tariffs on 3G technology, STC came up with other value additions for their services aimed at maximizing customer satisfaction. These included mobile TV, Internet accessibility over mobile phones, and video calls.

The company also diversified its products and services to ensure that every customer was well catered for. Presently, products and services on offer include prepaid subscription plans, monthly post-paid subscription plans, roaming services, Multi-Media Service, WAP, fixed line services, Internet, 3.5 G services, VSAT services, and Blackberry oriented mobile services (“Telecommunications Report,” 2009). Having realized that the youth are the future of the Telecommunication industry, STC has come up with one of the most enticing prepaid packages targeting the youth aged between 18 and 25. The results have been impressive for STC. Today, the company through its mobile services provider, ALJAWAL, has a customer base of over 17 million. Through its residential lines unit, ALHATIF, the organization serves over 4 million landline customers. Latest figures indicate that STC has about 73 Percent of the telecommunications industry’s market share (“Telecommunication Report”).

Customer Expectations before Mobily’s Entry

According to Sharp, Page, and Dawas (2000), measuring customer satisfaction in organizations operating in a monopoly is of no relevance at all. Also, organizations operating in a monopoly should not be worried about customer loyalty. In most instances, such organizations engage in customer satisfaction practices to keep up with the regulator’s requirements rather than for purpose of maintaining customers. It is therefore imperative to note that though customer satisfaction and expectation strategies had been included in the original blueprint guiding STC immediately after the industry’s liberalization in 1998, customer preferences , needs, and wants, could not take precedence over other crucial organizational processes during that time.

During the period between 1998 and 2004, the market forces of demand and supply within Saudi’s telecommunications industry were controlled by the monopoly service provider – STC. The demand for mobile cellular services was very high, and could not be sufficiently matched by the supply of quality mobile services. Emphasis was not laid on what the customers wanted but rather what the organization was able to offer to the customers (Brown, 2007). In the landline unit, customers could not be offered the telephone lines on demand but rather had to wait for years to be connected. The customers had no choice other than to accept what was being offered by STC. Indeed, it was a challenging task for one telephone service provider to provide communications requirements to the entire Saudi population.

Customer Behaviour after Mobily’s Entry

The second mobile operator to hit the Saudi telecommunication sector was licensed in 2004, heralding an end to the monopoly of STC in the sector of mobile services provision. Mobily, as it came to be known introduced competition in the industry and gave customers the space of choice (Jinfeng & Chaoyang, 2006). This meant that customers could exert their needs, expectations, and preferences; and service providers, especially STC, had to re-organize their strategies to revolve around the needs of customers rather than the organization. In short, they had to map out key consumer expectations and correlate them with their products and services delivery in order to maintain their market share. The beneficiaries of the competition that ensued were customers as they enjoyed a wide range of products and services, reductions in tariff rates, and value-added services.

Mobily

Background

Mobily is the official telecommunication arm of Etihad Etisalat, and is engaged in the provision of a converged line of mobile and data services in Saudi Arabia. It is the second organization to be granted an operational license for mobile services, after the Saudi Telecoms Company. The organization has managed to wrestle substantial number of customers from STC due to its excellent record in quality service delivery and value addition. Towards the end of 2008, the company had a customer base of eleven million customers, representing almost 43 percent market share in the mobile services sector in Saudi Arabia. Although it is the second mobile network operator, it was the pioneer in offering 3G services in the country. (Prasad, 2008). Besides offering GSM services, the company also offers 3 and 3.5 G voice and data services, including multimedia streaming with speeds of up to 7.2 mbps.

Market Penetration for Mobily and Customer Satisfaction

Mobily entered the Saudi telecommunications market at a time when mobile penetration level was below 40 percent (Prasad, 2008). It was granted a license to operate in Saudi Arabia in 2004, and began its roll-out in earnest in 2005. There was a lot of potential for growth due to huge number of individuals and companies in need of quality communication products and services, not to mention the fact that the Saudi economy was booming during that period. However, challenges presented themselves by way of the fact that Mobily was committing itself into a market that had been dominated by a monopoly for nearly six years.

The answer to this challenge came in the form of coming up with products and services that had been tailor-made to fit the specific needs and requirements of customers. It scored a first by introducing the high-speed 3G internet services into the market, enabling customers to enjoy access to the internet even while on the move (Prasad, 2008). Presently, Mobily is planning on how they will launch another service that will give customers their value for money due to its fast internet speed of up to 14.4 mbps.

Mobily was also able to penetrate the Saudi telecommunications market by coming up with innovative products and services that answered the particular needs of all the age groups within the market, especially the youth and high-end users (Prasad, 2008).

Such services included live calls, high-speed internet connections, live TV, multiplayer gaming, and Video/ Audio on-demand streaming services. Many of these services were unheard of prior to Mobily’s entry into the Saudi market. It could therefore be said that successful entry into the market for Mobily was dependent on trying to identify with the needs and aspirations of the customers, and going out of its way to ensure that all these needs are met. The firm segregated the market, following the fundamental basics of customer satisfaction more than anything else. This made it possible to come up with services that answered the needs of the corporate and high-value customers on one hand, and lifestyle-based offerings on the other hand. Mobily’s marketing strategy revolved around the conviction that each market segment in society has unique needs and characteristics. The needs of a student are uniquely different from those of a frequent traveler. The diversification worked wonders for the company in terms of customer satisfaction.

Competition between Mobily and STC

The kind of competition between the two telecommunication giants operating in Saudi Arabia ensured that the customers were the biggest beneficiaries. It was clear to STC that offering poor services in the face of this competition will see their customers cross over to Mobily’s mobile network, an objective that the company’s management was less likely to implement. On the other hand, Mobily led between the lines from the very onset and started to produce and market their products and services using strategies of customer satisfaction and quality service diversification. This ensured their entry into a market that had exceedingly been monopolized by STC (Ramkumar, 2007). The first six months of Mobily’s operation saw it amassing around 2.2 million mobile subscribers, making it the fastest-growing organization in the whole of North Africa and the Middle East in terms of customer acquisition during the first year of operation.

Zain

Background

Formerly known as Mobile Telecommunications Co. (MTC), Zain is the pioneer mobile operator in the Middle East, and the second-largest Kuwaiti organization in terms of market capitalization. It ventured into the Saudi telecommunications industry as the third mobile phone operator in 2008. The company posted a net loss of about $204.1 million during its first quarter, a situation termed as normal for any organization venturing into the telecommunications industry due to its massive requirements of capital and market expenditure during the start-up phase. However, industry analysts project that Zain will be back into profitability by 2010 (Patricia, 2009). Zain recorded a seven percent share of the market within the first four months of operation.

Zain’s Competition Strategies

Competition in a market where mobile penetration rate is thought to be in excess of 100 percent can often be bruising for a start-up company. However, this was not so for Zain, thanks to the strategies employed by the company, directly targeting the customers. One of the company’s packages going by the name of ‘You pay we pay’ saw the company garner 966, 000 subscribers during the first two months in operation. This package was all about maximizing customer satisfaction in that, customers’ phones were credited for free with the exact amount of airtime that the customers could have paid for during the previous month. This was to be a lifetime offer for the first 500,000 customers (Patricia, 2009). This way, Zain was able to penetrate a seemingly saturated mobile market in Saudi Arabia. This package, according to industry analysts sought to heighten value in the market.

A supplementary launch offer made by Zain in its attempt to penetrate the Saudi market came in the form of a double Zain SIM pack, whereby calls between the two numbers were charged at a low premium rate (Patricia, 2009). This again centered on maximizing the value for customers, while offering them the opportunity to enjoy lower tariff rates. When one of the two accounts was recharged, the customers’ phones were credited with 100 percent bonus credit split between the two SIM cards. This customer satisfaction strategy also helped Zain to penetrate and effectively compete in the market.

Zain’s Customer Satisfaction Strategies

The telecommunication giant actively developed customer satisfaction through the development and delivery of a high-end network quality system, in addition to undertaking a rapid network roll-out Programme that enabled customers to trust the organization as a reliable, responsible, and caring partner (Zain, 2008). It was also the promise of Zain to pay special attention to the requirements of their customers with the explicit aim of offering exceptional service quality and customer care.

Conclusion

The above case studies seem to point to the fact that customer satisfaction is an integral component necessary for the growth of organizations the world over. The telecommunication industry is a sensitive one since it directly deals with offering services to the customers. Failure to meet their needs and requirements may therefore prove detrimental to the very tenets that govern an organization. An analysis of the Saudi Arabian telecommunications industry has proved beyond reproach that offering services that are tailored to meet the needs, aspirations, and expectations of customers are the best way to go for any organization intending to make a headway in the ever-competitive business environment.

Methodology

Theoretical Framework

Perhaps one of the most persuasive empirical associations between customer satisfaction and organizational profitability revolves around the American Customer Satisfaction Index (ACSI) model. Developed in 1994, the ACSI model is comprised of 3 primary objectives. First, the model has the ability to measure or quantify the quality of an economic output while relying on subjective client input. Second, the model has the ability to provide a conceptual structure used in understanding how the quality of product or service relates to economic indicators (Allen, 2004). Finally, the ACSI business model has the ability to provide a forecast of future economic predictability by measuring the intangible importance of buyer-seller relationships.

The ACSI model is of the argument that casual progression begins with client expectations and professed quality measures, which cumulatively affect the perceived value of a service or product, together with customer satisfaction (Allen, 2004). According to the model, customer satisfaction has two precursors: customer complaints and customer loyalty. The latter is quantified in terms of price forbearance and client retention. In the same vein, the model argues that companies values repeat customers as a representation of substantial profit base. Consequently, customer satisfaction and retention, explained as the reported repurchase probability, forms a strong forecaster of profitability. It is therefore imperative to argue that the model, as it is used today, can effectively confirm the associations among quality service, client satisfaction, and financial performance (Allen). Below is a diagrammatic representation of the ACSI model of customer satisfaction

Research Design

This study utilized qualitative research methodology to explore the various interplay of factors that necessitated customer satisfaction at an individual and organizational-wide level by evaluating and analyzing the telecommunications industry in Saudi Arabia. The companies targeted for the study included Saudi Telecommunications Company, Mobily, and Zain. The study utilized the qualitative research design in its attempt to generate descriptive information about the strategies and policies used by these telecommunication giants in their attempt to control the immense and ever-expanding market in the region. Qualitative research design was also used in trying to establish the benchmarks for success in customer satisfaction. Finally, the research design was used to come up with organizational indicators that could be used to correlate profitability and customer satisfaction.

Qualitative research designs are useful when the respondents are too multifaceted to be answered by a straightforward yes or no hypothesis (“Experiment Resources,” 2009). The research designs can also be utilized to effectively understand a product or service through the eyes of the customers, in addition to undertaking an in-depth exploration of the customers’ experiences and expectations (Beadley, 2007). These types of research designs are also easier to plan and execute, and also useful when budgetary assessments have to be factored in.

According to Chenail, George, Wulf, Duffy, and Charles (2009), qualitative research design is the best tool to be used when the aim of the study is to gather an in-depth understanding of human characteristics and behavior, including the reasons that govern such behavior. This is the objective of this study; to try and understand the factors behind customer satisfaction. The design is best at investigating the why and how, not just the what, where, and when.

Target Population

The target population for this study included customers or subscribers of the three firms offering telecommunication services in Saudi Arabia – STC, Mobily, and Zain. These were either males or females, knowledgeable enough to give an account of what makes them feel satisfied. The target population for this study also included customer relationship managers of the three companies, or their representatives. This group was specifically chosen to shed light on organizational-wide management practices and strategies that are being constantly used by the organizations for purpose of offering maximum customer satisfaction.

Methods of data collection

Primary data was collected through the use of personalized in-depth interviews. There were two sets of structures for the in-depth interviews, one for the customers and the other for customer relationship managers or their representatives within the selected telecommunication industries. In the structures, focus was laid on trying to bring out all the underlying factors that informed customer satisfaction from an individual’s as well as the organizational point of view. In the same vein, factors that directed individual’s choice of one Telecommunication Company over the other, including the factors that informed the interrelationship between individual customers and the organizations were sought.

In-depth interviews are effective in exploring perspectives of a particular thought, program or situation (Boyce & Neale, 2006). In addition to conducting an extensive review of the companies involved in the study, secondary data was also collected from the administrative data of these telecommunication companies in the form of call volumes data and fact-sheets relating to customer feedback. According to Beadley (2007), customer feedback – including complaints, suggestions, and complaints – can be effectively used to reveal current areas for improvement as well as in the identification of the suitability of customer satisfaction strategies in organizations.

Study Limitations and Constraints

Although there are many other telecommunication industries in Saudi Arabia, this study was limited to studying the three named organizations, – STC, Mobily, and Zain. Therefore, while the design may provide the basis for generalization of the study findings with regard to customer satisfaction strategies in the above-named companies, the same cannot be done on other telecommunication companies operating within Saudi Arabia. A more comprehensive study would have shed more light on the factors that make customers feel satisfied, in addition to the relationship between customer satisfaction and organizational profitability.

Results

Introduction

This study aimed at exploring the factors that made customers be satisfied from an organizational-wide perspective as well as from an individual customer’s perspective. The study relied heavily on the analysis of Saudi Arabia telecommunications industry with specific reference being made on three companies that offered mobile services in the country – Saudi Telecoms Ltd., Mobily, and Zain. In that effect, semi-structured in-depth interviews were conducted on subscribers who used the products and services of the above-named companies. A different set of semi-structured in-depth interview schedules was administered to customer relationship-building managers of the three companies, or their representatives.

The in-depth interviews were centered around trying to understand the multifaceted thought processes, behaviors, attitudes, values, and interpersonal dynamics that informed the practice of customer satisfaction, and if such satisfaction translates into economic well-being for organizations. The analysis of the interviews brought several interrelated themes based on the objectives of the study as well as the questions that guided the study.

Strategies used by companies to achieve Customer Satisfaction

The underlying themes arising from the study revealed that all the executives were in agreement that customer satisfaction was an engine for economic growth for organizations in today’s competitive environment. According to them, monopoly hurt competition as it effectively made the customers lack the freedom of choice and independence. According to one representative of STC, the company was indeed making more money than it used to during the monopolistic days as it had effectively learned to diversify its products and services around the needs and requirements of its customers.

After careful analysis of the qualitative data, it was clear that all three companies had engaged in rigorous development and introduction of value-added services into the market for the explicit purpose of maintaining a foothold in the competitive telecommunications market. This was being done through the introduction of services such as Mobile TVs, Internet accessibility over mobile phones, Video calls, and Video and Audio Streaming services. Through thoughtful probing, it was revealed that such services were not the primary core businesses for the organizations but were rather meant to keep customers satisfied.

Another theme that came up strongly regarding the topic of interest is service segmentation. Industry players were all in agreement that optimum customer satisfaction was only possible in highly segmented markets as the needs and aspirations of one segment are always totally different from those of another segment. In this respect, all companies under the study reported having come up with enticing prepaid or post-paid packages targeting various segments in society. All the executives agreed to have used age and income as the basis of segmenting the market.

Service innovation and servicing quality were other themes that arose during the process of data analysis. Zain’s representative argued that it was the former that enabled them to penetrate into a market that seemed flooded. Mobily was able to penetrate the market due to the fact that it engaged in offering innovative products and services that answered the needs of all age groups within the market (Prasad, 2008). Due to their innovation of the ‘You pay we pay’ package, Zain was able to amass for itself a 7 percent market share within the first two months in operation (Patricia, 2009).

The quality of services offered was also of great importance as all the industry players were in agreement that voice clarity during calls made the customers stick with the preferred network provider. To win customer satisfaction, for instance, Zain had heavily invested in a high-end network quality system together with a rapid network rollout Programme. All the service providers were in agreement that exceptional service quality and customer care were key ingredients towards attaining optimum customer satisfaction. Other themes that arose from the study regarding the factors by which customer satisfaction could be achieved include reduction of tariffs, brand equity building, and improving distribution channels.

All the company executives were in agreement that customer satisfaction directly translates into increased profitability for the organizations. Some underlying themes resulting from the study also revealed that companies do invest huge amounts of money for on-the-job training of their employees on proper customer handling and care. Zain and Mobily had an extensive training Programme for new staff members that run a span of two months, while STC had an intensive one-month training Programme for their new members of staff. This underlines the great importance and value that the firms hold on ensuring optimal customer satisfaction. Members of staff were also remunerated relatively well to motivate them in service delivery.

Customer satisfaction from the Customers’ Perspective

All the customers interviewed for the study were in agreement that various interrelated factors had to be put into play to achieve the desired customer satisfaction. To them, businesses must always encourage face-to-face dealings with their clients, in addition to exercising an open door policy where customers can always have access to relevant staff to answer their queries and clarifications (Thomson, 2002). Most respondents were in agreement that members of staff dealing directly with the customers must be friendly and approachable. Messages coming from the customers must also be responded to promptly to keep them well informed. Respondents said they felt irritated when they were kept waiting for days for a response that could have taken hours to formulate.

In addition to above, many respondents targeted for the study argued that businesses must always maintain an explicitly defined customer service policy. Respondents also argued that it was the function of business managers to anticipate the needs of their customers, and go out of their way to help them achieve those needs and requirements. Attention to detail and honoring your promises also serve to facilitate customer satisfaction.

Discussion

The bottom line for this study is that people tend to seek gratifying experiences while avoiding the painful ones. They will therefore tend to return to business enterprises that meet or surpass their needs and requirements whilst avoiding business entities that fail to meet them (Hill, Roche, Allen, 2007). It is therefore imperative for business managers to come up with products and services that meet the needs and requirements of the customers. The prepaid card introduced by STC called Sawa saw the customer base within the organization plummet from 600, 000 in 1998 to 2.5 million in 2000 (STC, 2009). Such growth is crucially important for the long-run development and sustenance of a business entity.

Many solutions have been given regarding what really makes a customer to be satisfied and therefore maintain loyalty to the organization. From the organizational side, factors such as cost reductions, service innovation, service segmentation, servicing quality, aggressive marketing strategies, effective use of emerging technologies, and value-added services have all been advanced. This study can therefore serve as a point of reference for business managers who want to improve their business systems using the above-named processes. It should always be remembered that there is a firm correlation between quality, customer satisfaction, and financial performance according to the ACSI model of customer loyalty (Allen, 2004).

The customers have spoken too. According to them, face-to-face dealings should be the norm rather than the exception when working towards effective customer satisfaction. Businesses must always maintain properly defined customer service policies. Such policies ensure that customers are kept in the know about the operations of the company thereby eliminating the annoyance that customers have to put up with when they are being shuffled from one person to another during their stages of inquiry about a product or service (Thomson, 2002). Anticipating the needs and requirements of customers is advantageous for business managers in that such an action always reinforces the rapport between the business and customers, ensuring that customer loyalty is maintained in the process.

Works Cited

Allen, D.R. Customer Satisfaction Research Management.2004. American Society for Quality. Web.

Beadley, S.P.T. (2007). How to Measure Customer Satisfaction: A Tool to Improve the Experiences of Customers. 2007. Web.

Boyce, C., Neale, P. Conducting In-depth Interviews: A Guide for Designing and Conducting In-depth Interviews for Evaluation Input. 2006. Web.

Brown, SL. What is “The Customer Expectation Paradox?” 2007. Web.

Chenail, R.J., George, S., Wulf, D., Duffy, M., & Charles, L.L. “Qualitative Research Design.” The Qualitative Report, Vol. 13, No. 2. (2009).

CIA. The World Fact Book: Saudi Arabia. 2009. Web.

Experiment Resources.com. Qualitative Research Designs. 2009. Web.

Fojtik, C. Calculating the Strategic Value of Customer Satisfaction: What do your Metrics Tell You?Web.

Hill, N., Roche, G., & Allen, R. Customer Satisfaction – The Customer Experience through the Customers Eyes (1^st ed). Cogent Publishing. 2004. Web.

Jinfeng, B. & Chaoyang, L. “Studies on the Evolution of Market and Customer Behaviour.” Systems, Man, and Cybernetics, Vol. 1, Issue 5, pp 220-225. (2006).

Library of Congress – Federal Research Division. Country Profile: Saudi Arabia. 2006.

Pitzke, M. US financial Crisis: The World as we know it is Going Down. 2008. Web.

Patricia, M.L.E. Zain Saudi’s Q1 Loss Narrows to $ 204 Million. 2009. Web.

Prasad, U. Mobily all Set to Offer Wimax Services in Saudi Arabia. 2008. Web.

Ramkumar, I. “STC, Mobily, fight it out for Big Slice. Arab News. Web.

Rese, M. “Relationship Marketing and Customer Satisfaction: An Information Economics Perspective.” Marketing Theory, Vol. 3, No. 1, pp. 97-117 (2003). Web.

Renee, H. Marketing: customer Satisfaction. 2007. Web.

Saudi Arabia: Internet Usage and Marketing Report. 2008. Web.

Sharp, B., Page, N., & Dawes, J. A New Approach to Customer Satisfaction, Service Quality and Relationship Quality Research. 2000. Web.

Saudi Telecom Corporation. Telecom Privatization and Learning’s in the Kingdom of Saudi Arabia. 2002. Web.

Stevenson, M.T. The evolution of Mobile Phones in Saudi Arabia (Present and Future). 2007. Web.

Telecommunication Report Saudi Arabia. 2009. Web.

Telecommunication Companies Saudi Arabia. 2009. Web.

Thomson, A. Customer Satisfaction in 7 Steps. 2002. Web.

Zain. Strategy. 2008. Web.

In order to improve organizational performance, four main improvement strategies may be employed; these are repair, refinement, renovation, and reinvention (Besterfield et al, 2003, pp.131-33). Each of these strategies is unique and is applied depending on the desired outcome. The telecommunications industry is faced with the growing need for improvement in order to keep up with the ever-growing competition among service providers.

New and existing service providers have to come up with ways of improving their products and services and at the same time meet budgetary requirements (Stamatis, 2004, p. 67). Communication service providers refine their business processes in order to make them more efficient and economical. A telecommunication service provider may improve the quality of customer care by training customer care executives on how to deliver services in a polite and efficient manner. Improving the customer feedback process is another way of business refinement in this industry.

The company may also improve the business by repairing the existing product. This short-term approach does not necessarily improve the business process but is nonetheless important especially in the telecommunications industry. For example, if the call billing system is faulty then it should be fixed urgently otherwise it may cost the company a lot of money or customers. Occasionally it is important to renovate products and services to stay ahead of the competition.

This may be done by establishing new calling tariffs that are cheaper to the consumer but profitable for the organization in the long run. Renovation is primarily achieved through the improvement of technology and infrastructure, like installing boosters that have more capability. Reinvention took on the telecommunication industry with the advent of cellular phones, the industry is dynamic such that it has become possible to browse, send money and even pay bills on the phone. We are yet to see even greater reinventions (Hamilton, 2004, p.67).

The retail sector of the telecommunication industry is always faced with product design problems where the retail team needs to improve the existing products or to come up with new products that will satisfy the consumer needs and enable the organization to stay ahead of the competition (Cleland & Roland, 2006, P.45). We face the problem of identifying the consumer need and tailoring a product that will suit this consumer and at the same time bring in profit for the company.

The first phase of solving this problem is to identify the opportunity from a field study and customer survey, we may establish that customers do not prefer a certain tariff compared to other tariffs at a statistical rate of 26% for unknown reasons. We then analyze data that we have gathered about the tariff from customers as well as management to establish why it is not popular (Chrissis, Konrad & Shrum, 2003, p.34).

Using the data we then come up with an optimal solution, we may discover that the reason the tariff is not popular is that it is expensive for the average customer. We may resolve this problem by lowering calling rates at peak periods of the day as well as having promotions that will attract the consumer. We then implement these changes with the help of our technical support team; the statistical department then takes measurements of the results. If the results are satisfactory then we proceed to certify the solution (standardize the solution) if it is not satisfactory, we go back to the drawing board and try to discover why our solutions did not work. Using our results, we can establish which areas need improvement and then plan future courses of action (Bjarne, 2007, p. 43).

References

Besterfield, D. H., Besterfield-Michna, C., Besterfield, G. H., & Besterfield-Sacre, M. (2003). Total quality management. Upper Saddle River, N.J.: Pearson Education.

Bjarne, K. (2007). Project Management‎: Theory and practice. New York: Teknisk Forlag.

Chrissis, M., Konrad, M. & Shrum, S. ( 2003). Guidelines for Process Integration and Product Improvement. New York: Addison-Wesley Professional.

Cleland, D. I. & Roland G. (2006). Global project management handbook. Washington: McGraw-Hill Professional.

Hamilton, A. (2004). Handbook of Project Management Procedures. Henderson:TTL Publishing.

Stamatis, D. H. (2004). Six Sigma Fundamentals: A Complete Guide to the System, Methods and Tools. New York: Productivity Press.

Organization Overview

• The organization was founded on the state initiative in 2003 (Telecommunications Regulatory Authority, 2019).
• The desire to promote the telecommunications sector in the UAE (Telecommunications Regulatory Authority, 2019).
• Modernizing the current digital database of the state.
• Adhering to the national excellence development plan (“Guideline,” 2017).
• Promoting the electronic government environment in the country.
• Improving all telecommunications areas based on modern technologies.

The Telecommunications Regulatory Authority company (TRA) has set itself quite clear and ambitious goals. Based on the assessment of its activities, the corporation seeks to improve the existing digital base in the UAE and give its residents an opportunity to use modern developments in the field of communications. One of the TRA’s strategies is following “the framework of Abu Dhabi Plan” that involves transforming the sector in question based on the digitalization of its services (“Guideline,” 2017, p. 11).

Assessment Process

• Several important criteria are required to evaluate the company’s performance.
• Team dynamics is promoted by the leadership of the organization.
• The assessment includes preparing an analysis plan and interaction with the staff.
• Scoring implies assessing the results obtained based on the research
• To achieve consensus, both subjective and official data will be used.

The process of evaluating the activities of the organization in question is based on applying a number of valuable criteria. Such parameters will be involved as leadership, strategic plans, partnership and resources, products and services, as well as customer, people, society, and key results. Utilizing the practice of interaction with the employees of the company may allow determining the primary forces of TRA’s activity and its significant achievements over the whole period of work in the UAE’s market.

Assessment Findings (Strengths)

• Telecommunications as the key area are developed successfully.
• Implementing the fastest promotion plan (ElSherif, Alomari, & Alkatheeri, 2016).
• Introducing the Smart Pass program (Telecommunications Regulatory Authority, 2019).
• Gradual equipping all branches of life with digital innovations.
• Cooperation with two large telecommunication companies (Yaghi & Al-Jenaibi, 2017).
• Interaction with the government for creating a unified working system.

TRA’s strategic work involves interacting with some of the major participants in the country’s digital market and cooperating with the authorities, which is aimed at promoting relevant innovations. The gradual introduction of new features is the corporation’s official plan. Individual programs, for instance, the Smart Pass, suggest a transition to the new principles of regulating all public spheres. Engaging the latest developments in the field of telecommunications ensures work in a stable and productive environment.

Assessment Findings (Areas for Improvements)

• Using mobile technology for all types of services.
• Strengthening staff retention policies and promotion incentive systems.
• The wider involvement of the population in the discussion of upcoming changes.
• Social activities aimed at promoting the products created.
• Consumer protection and ensuring an effective interaction program.
• Work on products complying with the current digital trends.

Despite the success of TRA in the UAE market, some areas of the organization’s activities can be improved to increase productivity and consumer acceptance. In particular, career guidance work with the staff is essential in order to retain highly qualified specialists. Also, according to Alqudah (2018), mobile technologies should be implemented in all spheres without exception, which is TRA’s omission. Social activities aimed at promoting products and consulting with the public on possible innovations can also be a valuable practice.

Assessment Findings (Score)

Assessment Findings (Learning)

• Continuous work on innovations implies introducing new strategic solutions (“Guideline,” 2017).
• Evaluating productivity allows making conclusions regarding the effectiveness of specific policies.
• The influence of different stakeholders is significant, including both government boards and the public (Yaghi & Al-Jenaibi, 2017).
• The country’s development plan is based on introducing technologies in the field of telecommunications (“Guideline,” 2017).
• The engagement of the TRA’s management in interaction with the staff stimulates productivity.
• Development goals cannot contradict the national innovation plan.

Based on the analysis, it can be noted that TRA copes with the assigned tasks successfully enough, although some modes of operation may be revised a little. Compliance with the national development plans is a significant aspect of activity, which, in turn, implies the need to follow formally established standards. In general, the nature of individual TRA’s practices is effective, and possible adjustments may increase its productivity.

Recommendations

• The interaction between the management and staff should be advanced.
• Population involvement is to be more active.
• Analyzing market trends is a mandatory task.
• Using appropriate performance measurement techniques can improve productivity.
• The significance of this study lies in an opportunity to assess the prospects for the development of TRA.
• The assessment contributes to the formulation of relevant and effective growth strategies.

The continuous assessment of personnel work is a mandatory practice provided by the national quality standards of activity. Relevant recommendations proposed as a guideline for further development may have positive outcomes for both the organization and the population. The value of the analysis is that specific perspectives can be determined, and the formulation of certain growth strategies may be carried out on the basis of the findings and recommendations compiled during the research.

References

Alqudah, M. A. (2018). Consumer protection in mobile payments in the UAE: The current state of play, challenges and the way ahead. Information & CommunicationsTechnologyLaw, 27(2), 166-184.

ElSherif, H. M., Alomari, K. M., & Alkatheeri, A. S. A. A. O. (2016). Mobile government services satisfaction and usage analysis: UAE government smart services case study. InternationalJournalofComputerScienceandMobileComputing, 5(3), 291-302.

Guideline: Abu Dhabi excellence award in government performance fifth cycle – First version. (2017). Web.

Telecommunications Regulatory Authority. (2019). About TRA: Vision, mission & values. Web.

Yaghi, A., & Al-Jenaibi, B. (2017). Organizational readiness for e-governance: A study of public agencies in the United Arab Emirates. SouthAsianJournalofManagement, 24(1), 7-31.

Duopoly in ICT Sector of the UAE

• Duopoly limits;
  • Market competition.
  • Product development.
• Legal environment:
  • Law and the Competition Law regulates telecoms and competition across the country.

1. Emirates Telecommunications Corporation (Etisalat).
2. Emirates Integrated Telecommunications Company (du).

With the growing global need to digitalize all industries, the role of information and communication technologies (ICTs) becomes especially important. In the UAE, there are two telecommunications operators, such as Emirates Telecommunications Corporation (Etisalat) and Emirates Integrated Telecommunications Company (du). This duopoly structure limits the market competition and product development. The current legal environment of the UAE is another factor that impedes the progress in the field of ICT. In this connection, it is critical to analyze Law and the Competition Law of the country to identify regulatory flaws and provide pertinent recommendations for the market.

Telecommunications Regulatory Authority (TRA)

• Innovation Objectives:
  • Promotion and development of new technologies
  • Infrastructure enhancement
  • Investment in research and development (Kovacs 2014)
• Practice:
  • TRA protects the current duopoly in the ICT market
• Social Objectives:
  • Uninterrupted and universal Service provision
  • consumer protection:
    • Personal data confidentiality
    • Operational transparency
    • Public communication networks
• TRA fails to ensure options:
  • Customers have limited opportunities to select in the telecom sector (Enhan 2016).

The overview of the sector-specific regulations in the UAE shows that the Federal Law by Decree No. 3 of 2002 Regarding the Organization of the Telecommunications Sector is the main law. According to it, the Telecommunications Regulatory Authority (TRA) is assigned the role of monitoring service quality, creating and enforcing relevant policies, norms, and rules, as well as promoting the sector development. Among the key innovation objectives, it is important to mention the promotion of modern technologies, which are expected to enhance competition, which is also proposed to be supported by the investment in research. However, the existing position of the TRA protects the duopoly state on the UAE’s ICT market. The social objectives that are presented on the slide aim to ensure the social well-being of the Emirati population by providing consumer protection and safe Internet experience, as stated in UAE Federal Telecom Law No. (3) for the year 2003 and its amendments. The policy analysis makes it clear that the existing regulatory framework cannot provide customers with the opportunity to choose among the companies in the telecom sector.

Competition Law

Responsible Bodies:

• the Ministry of Economy.
• the Competition Regulation Committee (2013).
• the UAE government.

Regulation Objectives:

• Economic Efficiency Promotion:
  • Creating a competition-driven market;
  • Minimizing abuse power of monopolists;
• Orientation Towards Innovation:
  • Continuous quality enhancement;
  • Strategic thinking;
• Addressing Flaws:
  • Regulation is on the developmental stage.

The UAE’s completion law that was enacted in 2013 controls anti-competitive practices by reviewing the related agreements and behaviors as well as mergers between the large companies. In particular, it is required that the “mergers between entities with a sufficiently large combined market share [must] obtain clearance in advance from the Ministry of Economy” (Bowden & Girot, 2017, par. 1). In turn, the Competition Regulation Committee is created to monitor the completion practices and elaborate on the guidelines that should aid the companies operating in the country. of This independent regulatory authority is closely linked to the UAE government and its directions. Nevertheless, the Committee can also act independently, “without excessive political interference or enterprises lobbying” (Enhan, 2016, p. 44). The competition law is expected to promote the economic efficiency of the telecom sector and lead to a more comprehensive review of the market. The facilitation of the exchange on the market is another objective that is pursued by the mentioned Committee. While discussing the Competition Law, it is essential to pay attention to the fact that the fact that it was adopted only in 2013 points to the developmental stage. One of the statements used by the TRA contradicts the committee’s agenda since the former encourages monopolies not to participate in anti-monopoly policy.

Policy Alternatives

Among the alternatives to the present telecom structure of the UAE, one may suggest liberalization that refers to removing the privileges for Etisalat and du, as well as establishing the independent agencies. Considering that there are only two companies that operate in the ICT sector, it is possible to suggest that the different-quality and distinct-price products would be more demanded by customers, which would stimulate the market growth tremendously. In addition, this alternative would facilitate the implementation of innovations in the sector, which can be driven by the better competition. Privatization is another option that focuses on limiting the ability of the government to intervene in the market. However, it should be stressed that only in case if the government is also committed to the idea of an open market, this alternative would work. One may anticipate that privatization leads to greater economic efficiency and higher revenue volumes. One more alternative is monopoly that is associated with higher product prices and, accordingly, lower product quality and customer demand. While it is also possible to preserve the current duopoly, it is not associated with the market development due to high costs, significant government control, and customer dissatisfaction.

Recommendations

1. Gradual introduction of competition in the telecom sector based on Competition Law.
2. Inclusion of the telecoms sector in the Competition Law and consequent market liberalization.
3. Elimination of conflicts in regulations.
4. Facilitation of the market entry control mechanisms to strengthen the competitive force.
5. Promote competition-induced labor productivity.

Based on the analysis of the policies that are adopted in the UAE’s telecom sector, it should be recommended to gradually introduce the competition into the market by employing the Competitive Law. The market liberalization should be followed to allow more companies to enter the sector and increase competition. Accordingly, it is important to eliminate the inconsistencies in the regulations. The market entry mechanisms should be facilitated, while competition-induced labor productivity should be encouraged.

Canadian Pacific Salmon Fishery Case Study

The policy analysis is related to the Canadian Pacific Salmon Fishery case study with regard to the role of the government that intervenes in the market. Both the UAE’s telecom market and Canada’s Fishery lack economically efficient use, and the policies need to be adjusted to address these insufficiencies. The current regulatory regimes need to be changes, and the case study presents the guideline for the UAE’s telecom sector situation.

Reference List

Bowden, J & Girot, E 2017, ‘United Arab Emirates: the UAE competition law clarified’, Mondaq. Web.

Enhan, L 2016, Competition and regulation in the telecommunications Industry, Universitat Autònoma de Barcelona, Barcelona.

Huderek-Glapska, S 2010, ‘Economic benefits of market liberalization. Evidence from Air Transport in Poland’, Journal of International Studies, vol. 3, no. 1, pp. 49-58.

Kovacs, J 2014, Economic and legal analysis of the United Arab Emirates’ Telecommunications Market, Central European University, Budapest.

Megginson, WL & Netter, MJ 2000, From state to market: a survey of empirical studies on privatization, OECD, Paris.