Nortel Networks Corporation’s Operational Issues

Introduction

My case study for the following essay is the Nortel Networks Corporation regarding its operational issues overseas and how the company has utilised its various marketing strategies to develop its niche in the operational activities overseas and the way it has adopted its global supply chain issues to take its strategic goals forward. In the following report, I will also be mentioning the way Nortel Networks controls its global supply chain and aligns the global operations of the company.

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In 1995 only Nortel celebrated its 100 years and in the same year, the company planned to set a goal for itself to dominate the global market in the public and private network system. After three years only, Nortel took possession of the Bay Networks and re-engineered itself into the functioning of Internet powerhouse providing overall solutions for multi-protocol, multi-service and global networking.

Global Chain Supply Issue

Nortel Networks is a multinational corporation established in North America (US/Canada), and its sales divisions and manufacturing departments are spread in many countries worldwide.

There are many companies in the world, which are taking their manufacturing operations overseas with the expectations that it would help in reducing the costs, including the reduction of the labour costs. But Nortel Networks concept was different; it has outsourced its company forging alliances with different companies worldwide. In 2006 it entered into an alliance with Microsoft Corp., which helped to increase its networking capacity in the communication process.

This also helped them in reduction of the costs including transport costs. (Nortel 2006: Online) The company’s strategy all over the world also has been outsourcing its various development and communication processes. They had factories in Ireland and North Caroline, but for the manufacturing of 95 per cent of its equipment, the company had outsourced to EMS suppliers like Sanmina-SCI, Jabil Circuit and Flextronics. These had equipment like optical switches, secure routers, digital phones, telephone switches etc. (Carbone 2008: Online)

In the period from 2000 to 2004, Nortel Networks has divested the electronic manufacturing services (EMS). It is a great strategic part of the company, which has enabled it to utilise new technologies in the manufacturing processes. These services it has successfully leveraged in its growing supply chain. “Further in its supply chain processes, it is providing to its clients with communications technology and infrastructures with value-added IP data, voice and multimedia services spanning Wireless Networks, Wireline Networks, Enterprise Networks, and Optical Networks”. (BUSINESS WIRE 2004: 1)

The outsourcing and alliances are advantageous for the company, as they had helped it in the reduction of the transport costs and several other hidden costs. It has also helped the company to reduce the operation costs, including 15 per cent of the component cost. The outsourcing process also helps the company to get better output, and as the outsourcing companies and alliance companies are located near to their target customers, they can better contact the clients and address their demands more efficiently. With this outsourcing method of their parts and materials used in the production process, the company could have better control over their cost, quality, delivery and technology process and, according to the market position, can adjust and modify their strategies.

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But they had to face certain setbacks too. The company soon found that due to the vast network of their supply chain, they could not coordinate with their suppliers and found administrative problems in getting control over them. Moreover, many lapses occur in the communication process between the company and its clients. But overall advantages outweigh the disadvantages.

Strategies Adopted by Nortel Networks Corporation to expand its global Chain operations and how the global supply chain has been reorganised in order to meet the new strategy

Nortel Network is a leading company in the field of networking, dominating the world market in communications networking. Now it is operating in 150 countries, offering many services, including broadband, voice over IP, multimedia services, and wireless connections. It celebrated its 100-year anniversary in 1995 and set its target to dominate the global market, reaching the public and private domain in areas of communications, information services, education, and commerce.

Soon after three years, it took possession of Bay Networks, providing complete technical support in the Internet powerhouse giving solutions for multi-protocol, multi-service, global networking. In their strategic endeavour, Nortel Networks took possession of yet another company, Alteon Web Systems, providing various solutions and solving problems in the area of content networking for enterprises and service providers. (North Carolina News 2008: Online)

Again in 2001, Sprint forged an agreement with Nortel to invent and promote a cheap voice network for its customers. In 2001, Nortel was selected by China Telecom, China Railcom, and China Unicom to accomplish the task of constructing of entirely new multi-service backbone network in China. Soon after one year, Japan’s largest telecom carriers signed a contract with Nortel for expanding its metro access network framework. In the project that ensues, Nortel started its endeavour to create optical rings for commercial cities across Japan for a metro network. Yet again, in 2002 and then by 2003, many nations of South America and India too signed a contract with Nortel for providing main networking solutions. (North Carolina News 2008: Online)

In its initial stages, Nortel was confined to few areas only, but slowly it began to tap the markets of third world countries, including China, Japan, Brazil, and India. These were all the most potential markets that were untapped, but the strategy of the process of acquisitions of other telecom companies enabled Nortel to capture these markets and was able to place its strong foothold in the markets across the seas.

Owning one of the most important corporate headquarters in the RTP with a staff of more than 2,800 people in Research Triangle Park made Nortel one of the largest private-sector-employer in the Raleigh-Durham area. Nortel also provides support to the local community and local workforce investment, and in this social service endeavour, Nortel Networks Foundation has been sponsoring with the scholarship money to NC State University to encourage and motivate the students for garnering their technology skills with their studies and research process.

Nortel adopted a new strategy in 2000 in order to dominate itself globally, and its main focus was to make its companies more efficient by converting manufacturing plants into important supply chain centres and connect them on a worldwide basis for its functioning in areas of supply and logistics. (McAdam & McCormack 2001: 123) Every system house is equipped with its own supply chain for its products and is responsible for the management of all activities, from understanding the customer’s interests to meeting customer’s satisfaction.

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As a part of its strategic operations, the company made a decision to downsize its operations. They had 23 operating sites all over the world, and John Roth expected that their requirement was not more than seven. The preparations started in the main locations to set the new structure and establish themselves in their market zone as the most favoured system house. (McAdam & McCormack 2001: 123) This created unrest among the employees, as they were afraid their number too could get reduced.

In 1999, the company chose Monkstown, Northern Ireland, as its major system house for the whole of Europe, creating responsibility for transmitting and switching equipment. The company focuses on how best is the supply chain and make sure that there is a proper setting at every stage of their business process. The main purpose of the supply chain is the proper dissemination of messages and information flow from the choice the customer has demanded to the end product towards the customer’s satisfaction.

These system houses are customer-oriented and have formulated what is known as a master scheduling tool for the proper coordination of the orders of the customers and proper functioning on the basis of invoices. Monkstown system house had adopted the customer focus teams to look after the customer’s requirement and towards their services as long from the delivery of the order to fulfilling needs of the customer. (McAdam & McCormack 2001: 126)

The company is also developing the method known as value managed relationships. (McAdam & McCormack 2001: 126) The relationships are formed with the most important suppliers and customers in order to add maximum value to the supply chain. Monkstown is using the self-assessment process to check the quality known as the EFQM Model. (McAdam & McCormack 2001: 123) It is the best measurement system to check the performance and helps in the process of highlighting and improving issues related to performance. For the successful application of these principles, the company won the Northern Ireland best quality award.

The measurement of the supply chain is done with the help of the scorecard system. (McAdam & McCormack 2001: 123) This includes performance checks of the: financial organisation, end-to-end supply chain process, the arena of customer services, and systemic utilisation of all the resources for the future growth process. (McAdam & McCormack 2001: 123)

How the Nortel Networks Corporation controls its global supply chain and aligns the global operations of the company

As part of its strategic moves, Nortel Networks Corporation took another major step in 2004 in their supply chain processes and investment procedures, which could provide a competitive market and be the most valuable assets for the customers. The process involves divesting of the major operational activities that require product integration, testing and repairs being conducted in the system houses at Calgary and Montreal in Canada, Campinas in Brazil, Monkstown in Northern Ireland, and Chateaudun at France, and also related activities involving the management of the supply chain. (Business Wire 2004: 1)

During the years around 1999 to 2004, Nortel Networks also diversified itself into electronic manufacturing services (EMS). This proved to be the best strategic move enabling the company to tap the latest technologies in their manufacturing process, utilising the best of resources available at the global level and providing quality products at the speed of transmission and adjusting the changing market needs. (Business Wire 2004: 1)

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In the late 1990s, Nortel Networks adopted the agile logistics infrastructure model. In this process, it outsourced its warehousing activities to third parties, including the Kuehne+ Nagel. Between the years 1997 to 2001, the company diverted from its existing fixed logistics cost structure to the most variable one. This was done with the main purpose to actuate “the performance of multiple Nortel Networks logistics service providers around the world, helping the company in its ongoing efforts to build on its advanced supply chain and optimise service to its global customers.” (Kuehne+ Nagel: Online)

By diversifying its logistics operations to the best suppliers, Nortel was able to divert its attention towards the investments and resources and bringing out a competitive edge over the others. In between this strategic move, the company also needed to follow the process of creation of a minimum-inventory merge-in-transit (MIT) fulfilment model. (Kuehne+ Nagel: Online) This model entitled the various components that form the orders be sent through ships from its different points of operation towards its staging location where all the components are joined together to ship the finished orders to the customers finally.

When the contract was awarded to the Kuehne+ Nagel, it formed a separate company with the name KN Lead Logistics (KNLL) as their management strategy for its more than 60 primary and 200 secondary logistics service providers (LSPs) to Nortel Networks. It is connected to Nortel Networks for a wide range of management functions, including looking after the functioning of warehousing, providing delivery and many other logistic operations. It administers the bids for logistic services, does the management of logistic services and metrics management and global systems connectivity. (Kuehne+ Nagel: Online)

As said by Tom Dorvan, head of global logistics of Nortel Networks, “Nortel Networks is seeing faster cash-to-cash cycle times, increased order visibility worldwide, a sharp drop in fixed assets, improved on-time delivery, improved planning processes, and reduced inventory, carrying costs and product obsolescence.” (Kuehne+ Nagel: Online)

As a strategic move, Nortel Networks controls the management of the supply chain in-house, including strategic management activities, overall control responsibilities linked with the company’s different supply chains, including all customer interfaces, customer services, order management, quality assurance, product cost-management, new product introduction, and network solutions integration, testing, and fulfilment.

For further development of the Global supply chain and Global Quality efforts, Nortel in 2005 appointed Joel Hackney as a senior vice president. As reported by Zafirovsky, “Joel is a values-based leader with a proven track record of turning businesses around, developing people and teams, growing sales, enhancing profit margins, increasing delivery service, improving customer satisfaction, and reducing supply chain cycle time.” (Business Wire 2005: 1)

Select a global company of your choice from the IT and telecommunications industry, and discuss how their global strategies compare and contrast with Nortel Networks Corporation

I have taken BT Global services because it is a market leader in customer services related to information technology and technological services. It is also a recipient of the 2007 Market Leadership Award in the attainment of the European customer premise equipment (CPE) and management of the security services (MSS) market. As compared to the Nortel Network, BT has made its presence felt in a number of European countries and the United Kingdom.

As studied by analyst Mr Jose Lopez, “This has allowed the company to expand its products and services beyond its core market, enabling it to promote its MSS offering in larger network services deals, where security is often an added component of the offering.” (PR Newswire 2008: Online) Among the various services, the company offers services like firewall/VPN, IDS/IPS, anti-virus, anti-spam, URL filtering and strong authentication services (PKI). It also gives value-added services to companies, including MessageLabs. (PR Newswire 2008: Online)

In their strategic moves, both the companies have formulated the policies of acquisitions and partnerships with the various companies in the process of manufacturing operations. For e.g., Nortel got the acquisition of Bay Networks and Alteon Web Systems, providing various solutions and solving problems in the area of content networking for enterprises and service providers. At the same time, BT Global Services has made its position strong in the market by taking possession of Infonet in February 2005 and Radianz in the month of March 2005. By acquiring Infonet, the company increased its services of MSS and moreover, the acquisition of Counterpane, known as MSS specialist, in November 2006 was a significant move, which took it one step forward.

Besides, BT has also acquired BT Albacom, one of the largest telecom operators in the Italian business market transmitting data, providing voice and internet services to more than 240,000 Italian businesses and in an arena of international companies.

Nortel and BT have forged a joined collaboration with each other to market the ITS anywhere for Nortel. This is a platform that would increase the access to the investors’ phone calls, and communication is easily accessed and monitored whether for trading purposes or otherwise, providing an increase in the access to information and business continuity to market the trading organisations all across the globe.

As part of their strategic decision, Nortel made decisions to downsize its operations. In this process, they established what was known as the preferred system house, and Monkstown Northern Ireland was selected as the main system house for Europe, creating responsibility for transmitting and switching equipment to utilise the supply chain facilities fully and assure proper setting at every stage of their business process.

In its motion, it was found that when BT Global Services (BTGS) took over the charge of BT Retail’s broadband business, it added a chapter in the growth history of the BT Group. Six years ago, BTGS earned multi million profits by signing deals with the companies like Unilever, InBev, PepsiCo and Thomson Reuters. Like Nortel Company, it is also managing its global operations across many of the technological centres, including Asia, the United States and Europe.

Their focus is now shifting away from “multiple verticals toward supersectors and onto the horizontal plane of managing global operations across technology centres in Asia, professional services in the US and country operations in Europe”. (Hipperson & Molony 2008: Online) But unlike, Nortel whose main strategies involved customer services in every stage of the supply chain, BT has not taken their services propositions further even though they have created their niche in various integrations programs.

While their acquisition programmes are more inclined towards forming application capabilities rather than networking, BTGS is still trying its very best to form deals for outsourcing its global network business. The same is not true with Nortel, which has diversified its major operational activities like product integration process, measurements of testing and repairs in the system houses at Calgary and Montreal in Canada, Campinas at Brazil, Monkstown in Northern Ireland, and Chateaudun at France, and also related activities involving the management of the supply chain.

In their strategic move company also forged a deal with CyberLogitec, which was considered as one of the biggest Asia Pacific deals done out of the region. Bristol-Myers Squibb and Jacobs in America are also two of the other biggest deals.

In its yet another strategic move, BT called a global vision, which it announced at the Gartner Wireless and Mobile Summit in London on 17th and 18th April 2007: Rocky Mahajan, Director of mobility, BT International, said, “At the core of our vision is value creation- value through mobilising business processes, while cost reduction is always important the real benefit from mobilising your business is improving the efficiency and flexibility of your workforce. We can help large organisations make huge advances in productivity by automating paper-based processes and empowering workers to collaborate and perform effectively wherever they are.” (BT Global Services: Online)

It is a fixed-mobile convergence solution, which is made available to eight European countries like the UK, Belgium, Holland, France, Germany, Italy, Spain and Switzerland. In the words of Mr Lopez, “the company’s continued growth is based on a strong business model, which reflects its commitment toward global connectivity, quick transition to 21st-century networks and services, as well as its emphasis on customer satisfaction.” (PR Newswire 2008: Online)

Conclusion

Nortel Networks is an international company providing internet and communication services, empowering the world with the power to cut across boundary lines through its optical, wireless, local internet and e-business solutions. The technologies it provides help in bringing efficient working, increased speed and increased performance level by supplying networks that connect people to each other and disseminates messages.

Nortel Networks has spread its network in more than 150 countries. The company has been involved in the very aspect of networking solutions from designing to developments services, including assembly and from marketing and sale to financing, installation, servicing and finally support. It helps the Fortune 500 companies to run their day to day operations with ease, helping them in reducing their operation costs, simplifying their management and administrations tasks, and helping the companies towards the fruitful utilisation of their resources. Besides helping small scale to medium industries, it also provides technological support to spread the Government’s most critical messages across with proficiency, speed and accuracy.

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