Latin America: Operational and Leadership Challenges - Thesis Example

?Latin America: Operational and Leadership Challenges Introduction The social media market has grown to comprise of over 215,939,400 Internet users in Latin America (NewMedia Trendwatch, 2011). The market has seen an unprecedented growth of over 1000% since 2000 (NewMedia Trendwatch, 2011), and it is continuing to grow as more and more organizations set up their bases or target the region with aggressive marketing strategies. Social networking sites like Twitter, Facebook, Orkut have made enormous forays into the region as have the social blogging sites.  The reason for the success of these organization is the development of several factors in the region that are able to provide a conducive and facilitating environment for business and changes in the social and cultural fabric of the region that encourages increasing acceptance of social networking. The following sections consist of the PEST analysis of Latin America and highlights the opportunities and threats that social networking organizations may face. The next section deals with the strengths and weakness of social networking organizations like Twitter and Facebook. PEST ANALYSIS: Opportunities and Threats Political-Legal Environment Several countries of the region have accepted a democratic system of government that is influenced by leftist parties, but nevertheless promote free market (Izquierdo and Talvi, 2011). The following figure shows the political stability index for the countries in the region, and it indicates that Ecuador and Bolivia are the most unstable countries. Figure 1: Political Stability Index for Latin American Countries (Source: The Economist, 2011) The Political Stability Index captures various aspects of government including economic distress and social pressures that can lead to an unrest and hence political chaos.  The above figure indicates that Bolivia has the highest risk level for political instability (7.7) while Costa Rica at 3.5, has the lowest risk. For any business to prosper, it is essential that the country have a stable political system and also have a continuity in the governmental policies related to business. The Latin American countries have made progress in maintaining stability, but on an average, the risk of political instability is higher in the region when compared to European and even Asian countries.  However, the local governments are several policies and frameworks that encourage business and foreign investment (Izquierdo and Talvi, 2011).  There are also efforts towards a regional integration, through Mercosur and the Andean community which enable easy trade and flow of business across the Latin America (OECD, 2010). There are also expectations of the several countries of Latin America to form a more integrated inter-governmental body that ensures free movement of people, communication and business across the local borders (OECD, 2010). However, there is are concerns about the business environment as some counties like Chile and Uruguay rates high on the Corruption Perception Index which is a measure of risk of corruption in the government and the public sector (See figure below) Fig 2: Corruption Perception Index (Source: Transparency International, 2011) The political climate nevertheless appears to be conducive for investing in the region as the governments’ appear inclined to facilitate the growth of the region. Economic Environment The Latin American countries have made substantial economic progress in the past two decades though there is still the issue of high inflation and high interest rates (McCoy, 2009). The recent global economic crisis affected several Latin American countries adversely, though the slowdown also led to a reduction in inflation. The economies have however rebounded and there is expected to be a steady growth in the coming years (see figure 3 below) Figure 3: GDP Growth for Latin America, 1999-2014 (Source: McCoy, 2009) The region also suffers from highest income disparities in the world (McCoy, 2009). The Index of Economic freedom, which covers the amount of freedom people have in a region to earn their livelihoods (Heritage International, 2011), indicates some disparity across the regions. Figure 3: Index of Economic Freedom However, overall, the region has traditionally thrived on exports, especially to the North America and Europe. Asia has also emerged as a prominent market for Latin America and the prospects of economic growth for Latin America ride high on the growing economic power of the Asian consumers (Izquierdo and Talvi, 2011).  The governments in the region are willing to strengthen infrastructure and the regulatory environment that can facilitate the foreign investment (McCoy, 2009). The economic environment of the region is therefore vibrant and on a growth path and organizations can benefit by investing locally. Social-Cultural The Latin American region not only has a large population size and also a and high population growth rate, it also has a high percentage of urban population. Figure 4: Urban Population in Latin America (Source: Burson-Marsteller, 2011)   This implies that the majority of the population is localized in urban centers and hence, indicates a larger access to Internet and online networking.  Moreover, the past decades have steadily added jobs to the local economies and reduced unemployment (McCoy, 2009). Research has also found that social networking and blogging is used not only for personal interactions and communications, but by organizations who want to communicate with their stakeholders or for manage their public image. A research conducted on the use of social media by 160 high revenue organizations in the eighth Latin American countries found that a majority of these organizations employee twitter, YouTube, Facebook and other social networking sites to release company related information, to communicate with customers or receive their feedback and to develop their brands (Burson-Marsteller, 2010).  The following figure indicates that the organizations in Latin America are increasingly adopting online social networking as a means to market themselves and also to communicate with their customers and other stakeholders. Fig 5: Companies Using At Least One Social Media Platform (source: Burson-Marsteller, 2010) The above figure shows that 49% of the 160 organizations that participated in the study were using one or more forms of social media networking. These figures are less than what was found for global organizations in a similar study. See figure below: Figure 6: Companies Using Social Media in Regions Other than Latin America (Source: Burson-Marsteller, 2010) It is seen that 79% of organizations have adopted online social networking strategy, with almost saturation levels reaching in Europe and the US. In the case of Latin America, it the business environment indicates that there is scope for more and more organizations to take on social networking sites as means of interaction with the customers and stakeholders. This makes Latin America a lucrative investment option for CL, which already is a job and classifieds’ site and which ensures that business organizations may already be using it for recruitment. CL can expand to become a social networking site, where the organizations can do more than just recruitment. Technological Environment The region has seen investment in the development of infrastructure and technology to boost the GDP growths. There have been widespread changes and modifications in the regulatory framework to encourage the introduction and adoption of new technologies like 3G, WiMAX, convergence, digital TV  and IP-based communications. Countries like Chile and Argentina have liberalized the telecom sector completely, while in other countries there is a phasal diversification of the governmental monopoly of the sector.  The broadband sub-sector has penetrated greatly in the region and there it has reached a saturation point in some countries (Budde, 2009). Overall, the technological environment of the region appears conducive to doing an Internet based business like the one that is proposed for CL. The above analysis has highlighted the fact that Latin America provides immense opportunity for an organization like CL to start its social-networking style operations. The large population size of the region, with high percentage urban customers having access to the internet means that CL can expand its current offering to include a social networking module. The technological and the economical environment of the region is encouraging and the readiness of the local people and organizations to socially interact online indicates that there is a specific scope for CL to enter the market. The next section examines some of the Strengths that enable other social networking organizations, like Facebook (Sonico) and Orkut, to become leaders in the Latin American market. Also, the section also discusses the weaknesses of these organizations that need to be avoided by CL for its own expansion.   Strengths and Weaknesses of Social Networking Media Companies Strengths Financial Backup Sonico (Facebook) and Orkut (Google) are parts of large international media organizations that have access to internal funds for expansion. Orkut is a leader in the Latin American region due to its early start and massive investment and marketing strategy backed by the diverse business operations of Google like search engine and advertising (NewMedia Trendwatch, 2011). CL too is a powerful organization which already has a large customer base through its classifieds and which is a highly profitable organization. Like Google and Facebook, CL  also has is financially strong and invest in the technology and marketing for its new venture. Aggressive Local Recruitment Another strength that is observed for both the sites is its aggressive recruitment and development of committed workforce. Orkut and Facebook hire local talent to guide and direct their local business and to acquire a local workforce that is well-versed in the local culture and ethics. CL may also adopt a similar strategy of hiring and developing local talent to further its operations in the region.  Simple Site Navigation One essential strength of both Orkut and Sonico is that both the sites are very easy to use, simple and provide easy navigation across features. This makes the sites popular and facilitates people to interact with each other without facing any complex technology or navigation. A similar format is needed for CL, that integrates social networking and business (classifieds/ads) in a seamless manner.   Weaknesses Technological Vulnerability One weakness that all the social networking sites suffer from is related to security of its members’ information. There is scope of technological glitches that can enable the leakage of user information to the advertisers (Steele and Vascellaro, 2010) as well as scope for hacking (Krishnamurthy and Wills, 2009). These problems have been found to affect several social networking sites, including Facebook, and cause widespread panic among the users. Organizations that aim to foray into the social networking market, therefore  need to develop robust systems and intricate privacy laws to help with the confidentiality. Monitoring and Control Social networking organizations also face the problem of managing and controling the user generated content. The very nature of the operations makes social networking a potent force that can generate public opinion or fuel uprisings as was seen in the case of Egypt (Stutter, 2011). The immense potential to reach out to diverse people across physical barriers or national  borders, means that the social networking media can be used to disseminate information or generate opinion on an unprecedented scale. The organizations need to maintain a balance between allowing the users to have the freedome to interact with each other, and controlling the spread of panic, terror or rumors. This is a fine balance and organizations need to be prepared to take a call at the right time with the right response so that the users are not affronted and also damage is controlled.  Too Many Applications and Tools There has been a recent upsurge in the number of applications, tools and gadgets that social networking sites like Facebook provide for their users. This, leads to the clutter and adds to the complexity of the navigation and hence may deter some users from enrolling.  CL can therefore need to maintain its social networking site easy to navigate and integrate it with only the relevant applications that facilitate its core business like classifieds or creating  a job platform. References Budde, P. (ed) (2009). 2008 Latin America - Telecoms, Mobile and Broadband in Southern Cone. NY: Paul Budde Communication Pty Ltd. Burson-Marsteller, (2011). Latin American Corporate Social Media Study. (Online) available at: http://www.burson-marsteller.com/Innovation_and_insights/blogs_and_podcasts/BM_Blog/Lists/Posts/Post.aspx?ID=216 Izquierdo, Y. and Talvi, E. (2011). One Region, Two Speeds? Challenges of the New Global Economic Order for Latin America and the Caribbean. Calgary, Canada: Inter-American Development Bank (IDB) Kaufmann, D., A. Kraay, and M. Mastruzzi. (2003). Governance Matters III: Governance Indicators for 1996–2002. World Bank, World Bank Policy Research Working Paper 3106. Krishnamurthy, B. and Wills, C. E. (2009).On the Leakage of Personally Identifiable Information Via Online Social Networks. ACM, 1, pp. 7-12 McCoy, T. L. (2009). Latin American Business Environment Report. Fl: Center for Latin American Studies, University of Florida NewMedia Trendwatch (2011, August 23).World Usage Patterns & Demographics. [Online]. Available at: http://www.newmediatrendwatch.com/world-overview/34-world-usage-patterns-and-demographics Organization for Economic Co-operation and Development (OECD). (2010). Latin American Economic Outlook 2010. NY: Development Center for OECD. Reuters (2010, May 27). Facebook’s strength may be its greatest weakness [Online] available at: http://blogs.reuters.com/columns/2010/05/26/facebooks-strength-may-be-its-greatest-weakness/ Steele, E. and Vascellaro, J. E. (May 21, 2010). Facebook, MySpace Confront Privacy Loophole. The Wall Street Journal. [Online] available at: http://online.wsj.com/article/SB10001424052748704513104575256701215465596.html Sutter, J. D. (2011, February 21). The faces of Egypt's 'Revolution 2.0'. CNN.com [Online] available at: http://edition.cnn.com/2011/TECH/innovation/02/21/egypt.internet.revolution/index.html The Economist, 2011) Social Unrest: Political Instability Index (Online) Available at: http://viewswire.eiu.com/site_info.asp?info_name=social_unrest_table&page=noads&rf=0 Transparency International, 2011. Corruption Perception Index. (Online). http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results Heritage International (2011). Index of Economic Freedom (online) available at: http://www.heritage.org/Index/ranking Read More