Telstra Corporation: Managing Organizational Change

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Abstract

Telstra Company has undergone various changes spanning from deregulation, managerial changes, employee restructuring, technological changes, stiff competition and financial problems. The company has weathered a lot of storms from the managerial team who resign at will, to a sporadic market with new entrants in the telecommunication field bringing stiff competition to a company that had total monopoly. This has put Telstra Corporation in jeopardy with no clear structures of succession equally affecting the company policies. The management board has not been spared by the shake up with the chairman resigning. This study focuses on in depth study of the current position of Telstra. We will look at the prevailing change situation, how it came to be, and the agents of change.

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The main focus will be various tools of change management employed and how the change was effected. Further the study present the Swot analysis showing the main actual position of the company in the market. The government role in the affairs of the firm is fully articulated. This document describes the marketing mix used in the promotional activities while giving a detailed explanation of the need of technological growth as tool of maintaining and re- engineering the market towards growth. Further, the importance of improving share holders value is exonerated considering the impact of a low equity base on the company’s expansion agenda. The conclusion highlights the areas that require attention to salvage the organisation from the challenges at hand.

Table of content

  • Introduction
  • Telstra Corporation business environment
    • Political environment
    • Economic environment
    • Technological environment
    • Social Environment.
  • The Change strategy.
  • The elements of change: the SWOT analysis
  • The summary

Introduction

In any organisation, change is perceived differently either positively or negatively. It is a transitional process involving employees, work groups and the organisation itself from the current position to a future expected position. The changes come by employing relevant theories and models in a controlled manner while considering the necessary modification to suit the organisation at hand. Organisations may require change in attitude and behaviour of workers, change in technology, adopt new work structures as well as change in strategies. In this report we will look at the main factors that made Telstra corporation desire to change, the basic elements of change used, theories and effective models that the management use in implementing change (Australian Associated Press, 2009).

Our study will span around planning, Telstra organisational tactics of change and assessment of change with a clear explanation of the methods used. Further, this study will look at the political, economic, social and technological changes effected and their effect on the employees, customers, shareholders and the suppliers. The paper will focus on examining and analysing the appropriate change strategies by considering the strength, weakness, opportunity and threats to the corporation.

Telstra Corporation business environment

Telstra Corporation has weathered a lot of storm since deregulation of telecommunication industry having enjoyed monopoly in the sector, until the year 1997. According to Australian Communications Authority (ACA), the company expanded its operations to include telephone exchange lines, distant and local calls in and out of Australia, mobile telephone services, variety of data supply, on line services and internet as a contingency measure.

However, the entry of private companies in the entertainment industry and information convergence posed a threat by making the market very competitive. The company decided to re-organise its strategic business units to be more customer focused and as a tool for growth. It carried out new restructuring to have five strategic business units namely consumer and commercial, network technology, the media and carrier, marketing and retail and international and business. This didn’t improve its financial position as such requiring a change in approach and practice. Later, they engaged in rapid business growth that yielded negative results.

According to contemporary theorist, where such organisational challenges come by, the organisation has to respond drastically to the environment. Therefore, the corporation decided to merge two units, the carrier and the international business units considering the situation at hand (Kotler 2000). They developed a new unit to focus on mobile network namely CDMA in 1999 as a systematic approach to drive the market.

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To enhance its quality management technique considering the increased competition, Telstra concentrated on new sectors like mobile communications which was a great success, bringing a turn round on organisation’s returns. The company adopted a new philosophy and invested heavily in the GSM and CDMA giving a total coverage of 95% across the country which was a customer boom.

Political environment

Telstra is a public company that is in the lime light of the government and the society. The local, state and national governance have shaped the image of the organisation. As tool of promoting public relations and responsible leadership, Telstra communicates all its commercial policies and regulations to the government agencies. To maintain cordial relationship, it conducts its work honestly and openly, maintains good relationship, observes the law by complying with all legislative and statutory regulations.

According to Business Monitor International Report (2005), Telstra participates in government forums and events while working well with government units to offer communication and information solutions. Therefore the company is bound to drop some aggressive policies that are not in the interest of the government. The deregulated field of telecommunication proved a pain to the Company when consultants allowed the Rudd Net Company to unfairly lure its customers with cheaper offers.

This was a contributor to the poor performance of the organisation. It was sidelined by the government which financed NBN from the state fund. The situation made the management employ new defensive investment growth strategies and introduced new competitive products in the market as a contingent measure. Therefore, lack of support from the government meant new strategies and systematic approach to the current business model (Data Monitor Report, August 2004).

Economic environment

Telstra privatisation was a result of strained government resources coupled by economic crisis. Therefore, the firm didn’t have any source of capital and the competition was stiff from private enterprises. However the company shares were acceptable in the market.

The escalating financial needs of the company resulted in searching possible means of new capital needed for its expansion strategies. Coupled with stiff competition from the rivals, Telstra sourced for cheap offshore financing and successfully obtained a bond of 100 million NZ dollars spanning for seven years. The fund is instrumental in diversifying the investment base helping in efficient pricing. The company has experienced major business challenges when the government developed new terms and rules that interfere with the business contracts (Gilbert & Sarkar, 2005).

This has been contentious due to already existing contracts that has financial implication on the business undertaking. Despite the tough economic times, the company have braved the problems through innovative customer oriented products that has increased shareholders earnings and customer base brought by creativity after studying the economic environment. The management developed contingent strategies that were converted to workable tasks. This led to the introduction of the GSM and CDMA technologies as scientific management methods that led to recovery of the company.

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Technological environment

The company’s technology is the back bone of its success. Contemporary theory suggests that a rapid change requires systematic management that is in tandem with the future. Telstra Company has been aware of its need to improve technology (Chu & Larson 2006). It has been upgrading its network as a tool of change to remain competitive in the market. The company is consistently studying the market and through the research and development department, it has improved its network, information systems and develops its product in the research laboratories as a tool of aligning the company structure to meet the customer needs and as a corporate strategy.

In the year 2002, there were new strategic changes which were effected through the marketing and enterprises divisions that informed the customers of the new developments. This showed a good understanding of the scientific management theory that emphasises on careful thorough systematic study spanning across input, processes and output to give the desired results (Adelaidenow.com 2010).

This was followed by managerial change that saw Ted pretty being the head of the above unit, while David Moffat became Carrier group head. Dr. Switkowski, the C.E.O explained the importance of the changes as to stimulate business, lower production costs, increase the company’s technology through research and ensure productivity that will provide personalised and seamless experience to the clients. The C.E.O, aware of the personal duty of each employee utilised the administration theory by promoting best practices and apportioned each worker the right position as a tool of civilisation and seeking change in approach and technology.

This was a welcome gesture as it brought in motivation and new energy across Telstra. The new technology had to be communicated to all the stake holders especially the customers and Telstra suppliers. The employees were to be trained fully to provide support to the firm and the customers. This was done as an on – the -job training. The company invested heavily making it borrow finances overseas (Naravandas 2007).

Social environment

Telstra main goal is to impact the society being the principal wealth creator of the firm. The company’s elaborate measurable system has brought impact achieved through employment, purchasing from local firms, pay good dividend, statutory taxes and has invested heavily in the next generation wireless network while providing advanced operations and business support systems. Telstra has reached the rural communities by providing high speed internet which has benefited students, health care workers, government, rural communities and businesses in the remote places. This is a sign of responsibility to ensure competitiveness, economic growth, productivity and sustainability of the local communities (Australian Associated Press, 2009).

The company is leading the country in promoting reduction of green gas emissions by developing innovating solutions that reduce cost of operations, environmental degradation and improve efficiency. Through our high speed internet, customers socialise globally and interact with information bringing productivity. There are increased risks in internet use, but Telstra liaises with users, government and community organisations to address the evolving risks by using measures that promote safe internet use. Telstra is active in increasing participation of the indigenous Australians by partnering in education, health and their economic well being.

The firm responds to community needs through direct donation or scholarship foundation while encouraging Telstra members to participate in community initiatives. The company values the employees and promote full exploit of existing opportunity and potential with freedom, as described by behavioural theorists. The firm’s motto is to provide employment with good terms and conditions as a corporate strategic responsibility. The company policies are clear allowing equity and fair treatment. It has a staff development strategy where emphasis is laid on skill, knowledge and innovation development.

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To retain and attract new customers, we provide reasonable access to internet and other services, as per Telstra universal corporate obligation (Australian Associated Press, 2009). The firm’s customer satisfaction, safe products and services protects clients’ privacy. Telstra leads environmental conservation and its efficient use to reduce the cost of operation being lean production. The company aim is to increase and protect shareholders interest and value. It has a pool of suppliers who contribute to the supply chain and inculcate the right attitude, standard and ethics. Telstra provides an open procurement procedure.

Telstra change strategy

Since the privatisation in 1997, Telstra has undergone numerous changes across the divide. It had managerial challenges where senior management would resign from offices. It coincided with stiff competition from rival companies like Optus which commanded a sizeable market. Telstra had to devise new strategies to counter increasing pressure from the competitors, shareholders, government and the employees.

The old technology needed replacement to new technological innovation, drastic changes in company culture, marketing approaches and improvement of financial performance (Larry 2008). As a contingent measure the firm became flexible, strategic and resilient in its operations. The management board hired a new C.E.O, Sol Trujillo in the year 2005 who implemented major changes. With a global perspective to change management, he employed multiple approaches to change utilising various theories and models to rejuvenate the dying organisation. He used a systematic change management and strict administration policy where he reviewed employees’ performance with an intention of lying off 20 % of the work force as a performance benchmark.

The poor performers had to improve or else leave but performers were rewarded, Telstra became a great work place. He classified the employees into A and B. Current employees were placed under A and B for new employees and those on expired agreements. Class A would meet their increased cost of living. Class B had 21,000 workers whose contracts were expiring in the next 5 years. As a cost cutting measure, class b would not be guaranteed of annual pay rise, over- time was unavailable for those earning over 52,000 dollars and the hours of work were averaged on 12 months period other than weekly.

To maximise on the company’s market share, he shifted focus to customer satisfaction, increased share holder value and developed a digital future through innovation. The new work policies were resisted and the workers union moved to court, however the chief executive, travailed. The firm laid down over 20% of workers based on performance benchmark (Australian Associated Press, 2009).

As a contingent measure, the firm devised a pricing strategy to counter the excesses of inflation and recession. Telstra maintained the current prices but increased the value of the products by adding free trail subscription. Further, the company decreased prices based on usage. Telstra came up with a skimming policy that helped focus on profit maximisation that would help recovery of investments, after studying customer behavioural changes that were negative for Telstra had lost the competitors. He differentiated the market into high income and low income earners products in tandem with their income and focused on identifying the company problems.

The firm carried out a market research that unleashed the need of new technology of 3G services. The research identified customer behaviour by focusing on group interview as a methodology. Telstra identified certain key areas that were vital in its future (Larry 2008). They carried out aggressive promotion of the 3rd generation services to the high users through advertising and modern public relations strategies. The management resolved to use the integrated services as a tool of differentiating the Telstra clients from those of competitors. This was a pointer to multiple uses of management theory and practice with focus to customer satisfaction and market growth.

Further, the company resolved to utilise its market presence to dominate the 3 G market. This was done by studying the progress of Hutchison, a provider who had missed many opportunities because of errors. Telstra managed to provide the best 3 G service at a higher level, avoiding the mistakes identified from the rival firm. They tailored their products to capture the interest of the customers which received a major boost with many people subscribing to the service.

To enhance performance of the low users’ mobile market, they promoted the use of SMS and prepaid services which added value to the users by alerting clients on the new available tones. This provided diversified Telstra services which earned more profits with a strong network in areas having low usage customers who could purchase the new services. Telstra encouraged corporate clients to advertise by SMS to capture the young. Results were tremendous due to the commission given by the company and the created differentiation which helped to maximise returns.

To retain and attract new subscription, they introduced a discount of 10% on any purchase made within Telstra shop. The organisation developed product bundling accompanied by special offers like free subscriptions. Flexibility was important in countering price competition from rivals. This helped discount the customers in bid of normalising the prices. In Telstra shops, they developed self service through touch monitors and utilised shop staff to fully market their products.

Telstra gave introduction offer which stimulated sales and encouraged more usage. Online newsletters were used to promote brand awareness making them look consumer oriented and more youthful. This was followed by special redeemable offers that brought influx of customer traffic. Management incorporated free give away CD ROMs full of Telstra products benefits and attributes which was distributed through the shops and others social joints.

The company envisaged effective communication across all the departments. They prepared reports showing the strategies and measures employed in analysing the performance which was distributed to all employees as a tool of encouraging ownership. The management utilised coordination and communication strategy with all the stake holders that was instrumental in forecasting future decisions. To manage the risks, the management came up with a vulnerable control strategy which determined the time needed to change any plan. Monitoring of the main competitors was done in reference to the prices and their promotions activities.

At the eve of these changes, the Chief executive officer resigned in the year 2009 followed by the chairman, Donald McGauchie. The former enterprise and government director, Mr David Thodey was appointed the new boss. During their tenure, Telstra had poor relationship with the government. The new leadership was a relief that renewed cooperation with the government. The new boss is to deal with revenue threats and tough markets ahead. He came up with new initiative of gender diversity as an integrated approach making women rise to senior levels. He created a culture of networking and mentoring (Australian Associated Press, 2009).

The elements of change: SWOT analysis

The strengths

Telstra has a high brand awareness coupled with a competitive advantage gained from the various products it offers like mobile services, fast internet and fixed line services. It has dominated the telecommunication market across the country putting it ahead of other providers. The company has a strong financial base boosted by its increased revenue growth of 8.5% in the year 2005. It is the biggest mobile service provider in Australia having a subscription growth of 76, 000 in the year 2004/2005. It has a superior network coverage with a wide spread distribution sales shops across Australia. Telstra Company is proud of controlling a large telecommunication market of 75%.

Weaknesses

The Company has failed in its recent international business ventures. It has recorded decreasing sales in the CSL mobile operator. It is facing problems of succession and corporate stability due to the recent resignation of the Chief executive Ziggy Switkowski. The government has been over scrutinising its stake in the company compared to that of other telecommunication players (Telstra Half Year Report 2005).

Opportunities

There is continued growth of mobile subscribers with an increase of 15.4 % by June 2004. The company is taking advantage of the growing market of the 3G mobile services and has entered in agreement with the Hutchison that will help increase deployment while lowering the costs. Telstra has partnered with NTT Do Coco, a Japanese company that gave license to offer I – mode. It has extended its GSM network and CDMA to the rural bringing growth in subscriber base. Telstra has entered into prepaid contracts which account for 43% of mobile services in June 2004, which is a sign of growth opportunities.

The SMS usage has been growing in the telecommunication mobile service by 28% in the year 2003 and 2004. The intention of full privatisation by the government will reduce restrictions like raising capital or using its equity to acquire new opportunities, according to Telstra Corporation Limited, Third Quarter Market 2004-05.

Threats

The market of mobile telecommunication is almost saturated. The rival companies, Optus and Australia Vodafone have signed agreements to build 3G network site which will run together with radio leading to lower cost that will their offer prices. There is stiff competition from convergent devices and services of multimedia in the voice and text industry. The rival Optus is growing significantly pose a major threat to grow prospects of Telstra (Telstra Annual Report 2004).

Conclusion

The analysis indicates that the company has been making significant progress in telecommunication, however the opportunities are numerous and if well managed using the best model of change involving the study of the business environment coupled with thorough field study will help gear the ethics, technology, work force and the financial patterns of the organisation towards making Telstra an organisation of choice. This can be achieved through strategic management of existing resources with an inclination towards progressive growth that is embedded in workable tasks. Employee motivation is vital to successful implementation of growth strategy.

The distribution of tasks should reflect the organisational agenda in line with the vision mission and objectives. The management consistency and organised succession of leadership is needed to reflect consistent changes that show learning from the history. Further, poor planning on succession has negative image that hurt the image of Telstra. The investors’ confidence is deteriorating and this affects the company’s ability to raise equity. The precarious relationship between the company and the employees creates chaotic situations that make Telstra to lose competent workers to rivals. The marketing strategies need to be tailored to customer needs while considering their disposable income.

The strained relationship with the government has cost the company good contracts that would have repositioned its market more poignantly. Embracing technological development continuously is vital to sustainability and a future prospect of Telstra. Therefore, continued research and development will reposition the company as a global leader of telecommunication across the market (Palmer, Dunford and Akin 2008).

References

Australian Associated Press, 2009, Telstra confirms changes to executive team. Web.

Australian Communications Authority (ACA), Telecommunications Performance Report (2003), Chapter 6: Mobile Telecommunications Services. Web.

Adelaidenow.com 2010, Telstra announces changes to executive team. Web.

Business Monitor International Report (BMI), Telecommunications Forecasts, Quarter 1, (2005). Web.

Chu, M. & Larson, B. (2006). JA world wide: Managing change in multi – governed environment. Harvard Business Review. Web.

Data Monitor Report (2004), Telstra Corporation Limited. Web.

Gilbert, C. & Sarkar, R. (2005). Merck: Conflict and change. Harvard: Harvard Business School.

Kotler, P. (2000) Marketing Management (The Millennium ed.). New Jersey: Prentice-Hall.

Konrad, A. & Mitchell, J. (2005). Christina Gold leading change at Western Union. Harvard Business Review. Web.

Larry, K. (2008). Building a business. Web.

Naravandas, D. (2007). Ericsson: Leading in times of change. Harvard Business Review. Web.

Palmer, I., Dunford, R. and Akin, G. (2008). Managing organizational change: a multiple perspectives approach, 2nd edition, New York: McGraw-Hill Irwin.

Telstra Annual Report 2004. Web.

Telstra Corporation Limited, Third Quarter Market 2004-05. Web.

Telstra Half Year Report 2005. Web.

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