Argumentation in Favor of the Investment Project in Cuba - Case Study Example

March 12, Argumentation in Favor of the Investment Project in Cuba Fathy Mahgoub …………………. As a response to undertaking the responsibility to provide advises and consultancy on the projected investment in Cuba, I have engaged into an extensive research of the potential risks as well as the opportunities entailed in this expansion plan. Having investigated a number of potential scenarios, I strongly believe that an investment in the Cuban market is indeed a strategic move towards expanding the company and leveraging opportunities that are offered in the particular region. Diagnostic Tool: SWOT Analysis Prior to analyzing some of the most important arguments favoring the subjected project investment, I need to refer to a brief assessment of Egycel’s competitive position and overall performance. For this reason, a SWOT was implemented; SWOT is a diagnostic framework for evaluating a firm’s strengths and potentials as well as weaknesses and threats regarding a particular investment program. The analysis that follows my argumentation is given below: Strengths: Egycel is a leading telecommunications firm in the local market and enjoys high degree of customer loyalty The company has managed to undertake expansion and investment programs in the past in a very successful manner, signifying the capabilities and competencies, as well as the ‘know – how’ of Egycel to effectively leverage opportunities in foreign markets Egycel is oriented towards assuming risks in new markets and has proven that it has managed to transform potentially non – profitable operations into successful projects (at least the in the case of the majority of such projects) Egycel possesses both the technical experience and expertise in building telecommunications’ networks that feature high quality The firm leverages economies of scale; stemming from the increased number of subscribers that use common networks. The economies of scale are translated in the relatively low prices that Egycel can actually offer to customers and in the competitive advantage over its major rivals Egycel’s financial resources make feasible the expansion and the undertaking of a new investment in a foreign market (the company is able to self – finance such a project) Weaknesses: Egycel has failed to successfully implement one investment program (in Iraq) due to the high risks stemming from the political instability (this can also be considered a weakness for the current investment in Cuba, however as it will be later on explained the opportunities significantly outweigh it) Opportunities: The Cuban market is in its infancy (introductory stage of the Product life cycle- PLC) with regards to the Telecommunications industry which fairly implies that there are many opportunities for established, international players (Semuels, 2009) The Cuban telecommunications market has been highly regulated by the country’s government until recently, but there is evidence that deregulation has already initiated and that in the forthcoming years, international telecommunication organizations will capture large shares/portions of the market The licenses granted by the Cuban government are still relatively under-priced compared to other international markets and therefore Egycel can leverage this opportunity for low cost investment (ICT Statistics, 2008) The Cuban market is a very large market in terms of potential subscribers and users. In 2009 only a respective 11% of the total Cuban population used telecommunication services and an even smaller percentage of 2% subscribed to mobile telecommunication services (Semuels, 2009). These figures evidently show that the potentials are literally non – exhaustive. The existing Cuban telecommunication services are over priced and non – affordable to more than 70% of the total country’s population. The rates are very high and in many cases they are above the average salary (Belt and Velazquez, 2007; Cereijo, 2004). Egycel can also take advantage of this and eventually offer significantly lower rates stemming from its scale economies and the ability of the company to agree on better supply terms and have increased bargaining power in the negotiation of prices. The US government announced almost a year ago that it will remove barriers between the two countries and will gradually allow communication links between US and Cuba (Semuels, 2009). This implies that the telecommunications market in Cuba will change in favor of telecom firms, as more and more Cubans will be able to communicate with their relatives or friends that reside in US countries (according to the CIA report on Cuban population, a great portion currently lives in different US regions). (CIA Fact book on Cuba, 2010). The social trends underlining Cuban consumers indicate that especially the young aged population are increasingly adopting US consumption patterns and habits, which is also applicable in the telecommunications sector (Cereijo, 2004). In that sense, Egycels’ opportunities in this area are underpinned by the trend towards ‘modernization’ of the markets. The telecommunications’ infrastructure in Cuba is undergoing a development phase. According to the CIA report on the Cuban market as much as 95% of the fiber optic system has been digitized. this implies that the government itself probably foresees the further development of the particular sector and simultaneously signifies the orientation of the state government towards modernizing the infrastructure as well (CIA Fact Book on Cuba, 2010). Moreover, new submarine fabric optic infrastructure is currently being manufactured in order to connect telecommunication capabilities between Cuba and Venezuela as well as other Latin American countries (Cuba Telecommunications Report, 2010) Threats: Telecommunication services and especially mobile telecommunication services are considered to be a luxury in the Cuban market; this disposition may be difficult to alter on the consumers’ perceptions The Cuban telecommunications market will always be subject to the decisions or embargoes initiated by the US administration (Semuels, 2009). The Cuban Government may easily change its policy towards the prices for the offered licenses in the onset of protecting the state – controlled monopoly in the telecom services (Etesca Telecoms) (Belt and Velazquez, 2007) Despite the declarations for freeing up the telecommunications market the Cuba Telecommunications Report (2010) state that in the majority of cases until recently the Cuban population needs a special government permit or license in order to purchase and obtain a PC. In addition to that the ‘surfing’ on the World Wide Web is still highly restricted (Belt and Velazquez, 2007). This can seriously hamper future operations of Egycel in case of investment in Cuba. This SWOT analysis has been prepared in order to pinpoint the main issues that eventually constitute the overall argumentation for proceeding to the projected investment in Cuba. Despite the fact that there appear to be some important threats entailed in the forthcoming expansion, the opportunities are clearly outnumbering the risks associated. It is a strategic move on the part of Egycel to undertake the Cuban market while it remains in an infancy stage and which has not been yet exploited by competition. The Cuban Culture In explaining the potentials for undertaking the investment program in the Cuban market, a very useful framework of analysis is Hofstede’s cultural dimension context. Hofstede has argued that markets can be classified with regards to five fundamental dimensions which eventually signify the potentials of successful adoption on the part of consumers. People with diverse cultural backgrounds (on the basis of these dimensions) tend to present diverse consumer behaviour patters. By evaluating the Cuban cultural infrastructure against Hofstede’s dimension, we can draw some preliminary conclusions on the potential acceptance of telecommunications in the Cuban market. Telecommunications is a technology oriented service and as Blodgett et al. (2008) identify, the cultural dimensions are critical for evaluating whether such ‘innovative’ services will be easily adopted in the new market. Scarpaci (2009) has measured the dimensions on the Cuban culture and states that it is characterized by individualism, masculinity, high uncertainty avoidance, high power distance and Confucianism. These dimensions have several implications on the potential performance of Egycel in Cuba. Of particular importance are the three out of the five dimensions; masculinity, high power distance and high uncertainty avoidance. Masculinity is associated with the trends towards adopting new technologies and being more assertive to telecommunications. High uncertainty avoidance implies that the Cuban culture does not place emphasis on the avoidance of risks but values risk and people tend to be oriented towards new technologies. Finally, high power distance means that Cubans will most probably perceive that such new technologies (telecommunications and mobile telecoms) will be more suitable for those that are in the higher hierarchy of the society and those who possess greater power. Although the two dimensions signify a favorable market condition and cultural infrastructure for Egycel, the only issue that needs to be dealt with effectively is the degree of power distance. Although this memo strongly recommends the projected investment plan in Cuba, I have also engaged into a brief research over alternative markets that can offer significant potentials. South Africa is reportedly a yet unexploited and untapped market with regards to the telecommunication services, especially mobile telecoms. The social environment appears to be promising for MNC mobile telecommunication services in South Africa. The country’s growth in the particular sector are reported to exceed 6% at an annual rate. In addition to that, it is estimated that less than 1/3 of the Africa’s total population is currently using wireless telecommunications; a fact that signals much room for further growth and development (Mutula, 2008). The mobile penetration in Africa in 2007 was approximately 27%; this figure is expected to reach 60% in the forthcoming years (Mutula, 2008) This fact is greatly attributed to the social infrastructure that directly links mobile telecommunications with overall development and growth. Moving on, a third alternative choice for Egycel is the Canadian market especially now that there are plans for loosening the restrictions on foreign investment. Berman (2010) stresses that the Canadian governemnt has announced the removal of barriers and the eventual attraction of multinational telecommunication organizations in the domestic market which will be underlined by relatively low costs. The Canadian market is a vast pool of consumers due to the large population and the generally low penetration of mobile telecom services. Concluding I need to stress that this memo has been an attempt to provide evidence for the potential success of Egycel in the Cuban market. Egycel needs to quickly grasp on the opportunities while the respective market has not yet been exploited by international and multinational organiziations. Given the fact that the capital needed is relatively low (as the license fees remain at low levels and there is a degree of sophisticated infrastructure as well as plans for further development), Egycel should proceed into an efficient plan and quickly penetrate the Cuban market. Sincerely, ………………………. References Belt, J.A. and Velazquez, L. (2007). Cuba: Reforming the power, telecommunications and water sectors during a transition. Cuba in Transition, pp. 59-75 Berman, D. (2010). Canadian Telecom Market in Flux [Online]. Available at: http://seekingalpha.com/article/191943-canadian-telecom-market-in-flux. [Accessed on March 9, 2010] Blodgett, J.G., Bakir, A., and Rose, G.M. (2008). A test of the validity of Hofstede’s cultural Framework. Journal of Consumer Marketing. 25(6), pp. 339–349 Cereijo, M. (2004). Cuba: Fundamental Telecommunication Plan. Institute for Cuban and Cuban-American Studies [Online] Available at: http://pdf.usaid.gov/pdf_docs/PNADA642.pdf [Accessed on March 8, 2010] CIA World Fact Book on Cuba (2010). Cuba Telecommunications [Online] Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/cu.html [Accessed on March 7, 2010] Cuba Telecommunications Report (2010). Cuba – Telecoms, Mobile and Broadband. [Online]. Available at: http://www.budde.com.au/Research/Cuba-Telecoms-Mobile-and-Broadband.html. [Accessed on March 10] Mutula, S.M. (2008). Digital divide and economic development: case study of sub-Saharan Africa. The Electronic Library. 26(4), pp. 468 - 489 Scarpaci, (2009). Fifteen years of Entrepreneurship in Cuba: Challenges and Opportunities. Cuba in Transition, pp. 349-353 Semuels, A. (2009) How Obamas lifting of rules for Cuba might affect telecom companies. [Online] Available at: http://latimesblogs.latimes.com/technology/2009/04/cuba-telecom.html. [Accessed on March 8, 2010]. The Top Ten Telecom Service Providers (2008). Positioning, Performance, and SWOT Analysis. Business Insights, Ltd. Name:………. Address………. March 12, 2010 Fathy Mahgoub Egycel Telecommunications Dear Mr. Mahgoub In the onset of Egycel’s decision to proceed into the investment in Cuba, the Human Resource Department (which I am heading) needs to undertake strategic action towards ensuring the employees’ motivation and participation in the achievement of successful results. Having discussed the subject with the HR managers on the possible course of action and having considered alternative options and scenarios, we have concluded the Egycel should adopt the Expectancy Model of Motivation perspective and the Socio-technical approach to job design and therefore employ strategic actions towards these ends. The Expectancy Theory of Motivation was initially conceptualized by Vroom in the early 1960s but it was further developed by Porter and Lawler who proposed that individuals engage into particular behaviors predominantly on the basis of their own self - interest. The specific theory suggests that employees will act based on the probability that specific products/results/outcomes will be eventually achieved. These outcomes are highly interrelated to individual interests and the driving force behind any activity is the motivation to attain ‘personal objectives’. This driving force (motivation) is a product of three interrelated variables; first the individuals’ expectancy that a particular behaviour will bring about particular results, second the individuals’ estimation that the decided upon performance will eventually produce reward and third the individuals’ willingness and desire to receive reward (Steers et al., 2004). The Expectancy Theory is built on three fundamental constructs; the Expectancy, the Valence and the Instrumentality. Valence is the desire of employees to reach a certain first level outcome that is associated with rewards, instrumentality is the employees’ estimation that their actions and efforts will gradually lead to a desired performance, which in turn will lead to the desired reward, and expectancy refers to the employees’ estimation that increased effort will increase the possibility of achieving successful performance (Ramlall, 2004). The Expectancy theory places great emphasis on the extrinsic dimension of motivation as it predominantly stresses the importance of reward in any given adopted behaviour on the part of individuals (Newstrom and Davis, 1997). For this very reason, the HR department will focus on developing an extensive reward system so that employees will eventually identify with the objectives of Egycel and will be motivated to enthusiastically participate in the efforts towards succeeding in the new investment project. With regards to the job design and given that the motivation theory that will be adopted is based on the enrichment of the rewarding system for employees, the HR department has decided to deploy the Socio – technical approach to job design. This approach is more effective because it considers the interactive forces of the social and technical aspects of the work as essential in employees’ performance and productivity. The socio – technical approach suggests that jobs need to be optimal in the integration of technical attributes and social aspects. Employees will increase their efforts towards improving performance when they work in groups or work systems collectively. The particular approach provides incentives for better performance as it incorporates both the technical features for the job and at the same time places emphasis on the needs of individuals to function in a social environment. Finally, given the fact that the new investment project in Cuba is indeed a collective effort of all the organizational members, the particular approach will eventually offer more substantial results. I hope I have essentially explained the two issues that we are dealing with in the HR department and I certainly hope that you can identify with the two approaches. Sincerely, Your Name…………………… Signature…………………… References, Isaac, R.J., Zerbe, W.J. and Pitt, D.C. (2001). Leadership and Motivation: the effective application of Expectancy theory. Journal of Managerial Issues, 13(2), pp. 212-226 Newstrom, J.W. and Davis, K. (1997). Organizational Behaviour: Human Behaviour at Work. Tenth Edition. New York: McGraw Hill Ramlall, (2004). A Review of Employee Motivation Theories and their Implications for Employee Retention Within Organizations, Journal of American Academy of Business, 5(1/2), pp. 52-63 Read More