Emirates Telecommunications Corporation, popularly known as Etisalat, is an international telecommunication service provider company based in United Arab Emirates. It is currently rated among the largest mobile network operators in the world and the most powerful company in the United Arab Emirates. It offers a number of services under Telecommunication field in various countries. The company majorly draws its success from proper and apt implementation of organizational policies and culture. Etisalat is a multinational company, thus it is paused with a challenge of managing each of the various affiliate companies within varied geographical locations and subsequently managing policy implementation in each of the companies to meet the overall vision and mission of Etisalat.
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Etisalat has successfully managed to incorporate Matrix organizational structure within its managerial arms which is a merge of divisional and functional structures. The matrix organizational structure allows for monitoring and supervision of each division of the large company at the same time keeping watch on each functional portion within the various divisions. This project singles out the several strategies employed by the company to ensure achievement of its core policies, as well as issues emanating from the same. It touches on the ethical aspects accruing from the same implementation process. The project also explains the stakeholders of Etisalat Company and gives incidences of ethical involvements of the company.
As mentioned earlier, Etisalat Company applies divisional organizational structure and being a multinational company, Etisalat has many affiliate branches spread over various countries, both in Africa and the Middle East. The company offers a wide variety of services including voice carrier services and data services. Besides, the company also offers telecommunication training and consultancy services, manufacture of smart cards and SIM cards as well as laying of submarine cables only to mention but a few. As such, the company is comprised of separate organizations within its umbrella that specifically deals with each of the separate products within the company’s line of production. The location of these divisions is majorly influenced by the demand of the offered commodity. Each of this division’s employees is answerable to the central management (Pugh 1990).
Although in different geographic locations, all the employees work towards the common goal. In this case, the central management has the responsibility of monitoring all these divisions. The divisional organizational structure is employed here for effective management. Under this structure, the larger umbrella company sets up other various divisions in varied geographical location to produce and supply services under its line of production. Each division has its own managerial command that super sees the actual production and distribution of the services. The divisional management then will give its submissions to the central management in this case situated in the United Arab Emirates.
The divisional management is involved in policy making at the central management organ and is then in charge of implementing the same at the divisional level. In divisional structure of organizational management, the divisional managers are more of supervisors and policy implementers. They ensure that organizational policies made at the top organ of management are implemented at the lower levels of operation. However, division structures alone cannot effectively ensure the smooth running of the company. In this regard, another strategy has to be incorporated (Baligh 2006).
The separate divisions under Etisalat Company have different departments within their structure. For instance, there are departments dealing with market research, service delivery, client relations department and managerial department. Each of the divisions in the various countries is broken down into such departments. All these departments are interlinked to ensure efficient and quality service delivery. Necessary structures should thus be put in place to ensure a cohesive operation of all these departments. As such, functional organizational structure is the best strategy for managing these. The functional structure organization encourages specialization of employees as well as team work through proper supervision and coordination; this is the best structure for managing amalgamated divisions which link up into a big firm.
Under this structure, each department carries out the assigned tasks within its jurisdiction and reports to the divisional management. It is more of a delegation strategy where each department is only concerned with a special stipulated task. For instance, Etisalat- Nigeria will have its tasks broken down into discrete sub-tasks. Each task will then under supervision of functional management go on its own way to accomplish its assigned task. The various functional managements will then report back to the divisional management in Nigeria is the one charged with the responsibility of reporting to the central management of the company in United Arab Emirates. This if well followed and adhered to gives the best managerial flow of command as well as policy implementation and should be the reasons as to why the company might have opted to embrace it.
Overall, matrix organization structure is used in the management of the various divisions that make up Etisalat Company. Since the company offers a variety of services which are distributed worldwide depending on the market trends and demand, the divisional organization structure is employed to link all of them to the central management. Consequently, each division is split into smaller functional departments that co-ordinately link up to give the desired service yielding functional organization structure. Therefore, both functional and divisional organizations are used in the management of Etisalat Company. Merging the functional and divisional organizational structures creates the matrix organizational structure. Since the two structures are employed here, then it is evident that Etisalat Company uses matrix organizational structure in its management (Pugh 1990).
In this case, the hierarchy runs from the functional management to the divisional management and finally to the top most level which is the central management in the United Arab Emirates. Clear strategies are in place to avoid overlap of hierarchy and protocol in order to avoid collisions within the management. Methodologies are devised to also encourage teamwork and coordination amongst the employees since they work from different places but towards a common goal. It can be noted that indeed matrix is the best organizational structure that can be used to manage a large multinational company like Etisalat. It offers distinct levels of involvement from each of the various organizational management levels as well as giving each level total mandate and authority at its involvement in management. It then finally merges all these management levels to yield a compact structure effective in policy implementation and collective goal achievement.
Arising from matrix organization structure, Etisalat Company faces a number of problems in its managerial system. Matrix organization structure is complex in terms of operational units, and thus poses a leadership problem. Due to the improper conception of its functionality by a section of management staff within Etisalat, there have been certain shortcomings being experienced in its implementation. There is unnecessary competition within the divisions due to its dual management nature. Some individuals tend to miss the interpretation of hierarchy while others fee looked down upon or despised by fellow staff. Matrix organizational structure entails divisional management in charge of the overall divisional management and the functional management in charge of respective functional groups under the divisions (Pugh 1990).
A concrete example is the case of Etisalat-Afghanistan. There was a serious crisis facing the company’s affiliate division in Afghan regarding which among the two managerial departments was answerable to the central management of the company. At a given point in time, the management in charge of sales and market research took over the responsibility of advising the central management on the market trends and population tastes and preferences directly without involving the divisional management in Afghanistan.
As a result, the divisional management perceived this as undermine and disowned the information given by the department. This consequently led to discard of vital information regarding the demand of the voice data carriage in Afghan. This is a major problem facing this type of this structure especially where coordination and cohesion is not adequately embraced. This greatly affects the flow of information and idea adoption which in turn affects final decision and policy making within the company (Pugh 1990).
Another serious problem is the cost of implementing the organization structure. The matrix organization structure was adopted by default due to the nature of the company. Implementing the structure has proofed such a costly undertaking given the nature of the different economies of the countries within which the company operates. The initial implementation of the structure led to subsequent drops in revenue. Maintaining the operating costs for the company in the various companies, the domestic tax returns subjected to the company in the respective companies together with the wage cost of sustaining the company’s employees is expensive.
A lot of costs are incurred in managerial harmonization of the various divisions. Some costs are also met as a way of incentives to the employees and this varies from country to country and the nature of the employment. This turns out to be expensive compared to a situation where the company could settle on either pure functional organization structure or divisional organizational structure (Mile & Snow 2003).
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The company has experienced more operational costs of its investments in African countries than in Middle East countries since the Middle East countries are in a close proximity to the central management in the UAE than Africa. A pure functional organizational structure could constrain the company in operation in a single state thus cutting down on most of its operational costs. Huge expenditures could limit the ability of the company to make more investments as well as limits the available capital available to expand the existing investments. Etisalat Company- China has a well-developed market and a subsequent strong link to the local market. Although the company has all these existing structures, it is unable to expand its holdings in the country due to inadequate surplus capital.
The major stakeholder of Etisalat Company is the United Arab Emirates. It owns up to 60% of the company’s shares while the rest 40% is owned by corporate individuals and some foreign investors. United Arab Emirates is one of the richest economies in the Middle East. It draws most of its revenue from the sale of oil imports since it is one of the owners of the largest oil reservoirs in the world. This makes much capital available for investment. Telecommunication industry for a long time was not among the most ventured investment. It thus had a monopoly of operation in the region before other countries started making advancements in the same field. Some local subsidiaries also own some shares in the company. These are rich individuals who control most of the oil exports from the region. Their investment in the telecommunication sector is purely business oriented. Their passion for investing in Etisalat is drawn from the initial huge profits made by the company during its monopolistic period (Mile & Snow 2003).
In other cases, like Etisalat Misr in Egypt, the majority of the shares are owned by the company itself, while some few individuals corporately own shares in the company. The large share ownership of the company can be attributed to the many related service providers available in Egypt. Market and stock analysts argue that it is more advantageous when much of the shares are owned by the company itself since this implies that much of the profits are directed towards the company. This is the scenario at hand in Egypt. The company has set aside a 40% of its total shareholding for the local citizens in which its divisions are situated.
This is meant to encourage ownership by the locals hence involvement in the stakeholder decision making, which are vital to the overall performance of the company in its early stages. For instance, the company faced several oppositions during its establishment in Nigeria due to poor international relations between Nigeria and United Arab Emirates. However, due to share ownership in the company by Nigerian tycoons, the company finally established lest they risked losing their investment (Mile & Snow 2003).
Etisalat Company is so much concerned with the ethical practices of whatever country it operates in. This has been made to be a culture within the management of the company. For instance, the company only owns up to a maximum of up to 60% of the shares and leaves the rest for the locals. The company also discourages any foreign skill importation and exportation, a scenario where certain individuals with certain special skills are moved from country to country to offer the required services. The company fully apprehends and encourages local participation of the citizens of whatever country where it establishes its division (Baligh 2006).
As a policy, this company takes all the employees of a given division are from the host country. This has been done through the training and consultancy scheme where the locals are trained to take both expertise and managerial roles within the company. It opens up employment opportunities hence helping improve the livelihoods of the citizens as well as a source of revenue. This also ensures that people with the relevant skills in both telecommunication and management are absorbed to work in the company. Through encouraging local participation, the company has found ready acceptance in whatever country it seeks to establish an affiliate division.
Local citizen participation also helps cut down the operational cost of the company since it is cheaper to hire labour within a country compared to that hired from outside the country. The culture also restores community confidence in the company thus winning the local support from within the country of operation. Every organization that scores highly on local support is bound to bound to experience minimal opposition thus a smooth operation. Such like companies enjoy economy of scales other privileges as may be offered by the local population (Baligh 2006).
Etisalat Company is a service company whose major revenue is obtained from the levies charged for the services offered. It is quite clear that all the services offered are essential hence required worldwide. Due to various factors put into consideration before establishing an affiliate division, the various divisions are scattered worldwide. This subsequently implies that the levy charged for the offered services differ from the country of production to other countries where the same service is exported. To be more considerate of the host country, the rate of levy application is slightly lower within the host country. Citizens of the host country are able to access the respective services at a lower fee than other places where the same service is imported. This creates a large local market for the product as well as a good rapport with the company.
Etisalat has managed to use this as a strategy to beat other competitors offering the same type of product. An example is the internet service offered in United Arab Emirates. The company faces major competition from Huawei, a Chinese company offering the same services. Etisalat has successfully beaten this competitor due to its imposition of low internet rates on local consumers unlike the Huawei, new in the market, has to make maximum revenue. Hence, the great concern in ethics has seen the company thrive well in United Arab Emirates. The company also offers most of the incentives to the local citizens’ thus encouraging local consumption (Ron et al 2002).
The Etisalat Telecommunications Company has derived much of its market success and growth due to proper organization structures and organizational set up. A multi-national company as it is, it has managed to clearly outline the managerial and administrative hierarchy to minimize cases of leadership conflicts. The company also has put measures in place to encourage interdependence between the various operating units, encouraging collective participation to foster common-goal oriented employee environment (Ron et al 2002).
The company enjoyed a monopolistic market structure in its initial stages of establishment, especially in the Middle East. As time goes by, more companies in the same field have come thus prompting Etisalat to adopt the best strategy that could it survival in the competitive market. Through the involvement of the local population in labour and share buyout, the company managed to win the local support hence thriving well in the competitive market. Any organizational structure employed in any setting has consequences and as such, the matrix structure employed by Etisalat was the major cause of leadership clashes (Ron et al 2002).
The company has strategies in place to help counter this hence running the structure with minimal hitches. This has made the company to earn its place among the most prominent and successful companies not only in the Middle east, but in the whole world. This is a good example of a company which has incorporated the best organizational structures, taken into consideration the societal ethical concerns and emerged successful in a very competitive economy. Etisalat offers the best research company in terms of organizational management structures and their effects on any organizational setting.
Baligh, Henry. Organization structures: Theory and design Analysis and prescription. London: Springler Publishers, 2006. Print.
Mile, Raymond and Charles Snow. Strategy, structure and process. Stanford, California: Stanford University press, 2003. Print.
Pugh, Derrick. Organization Theory: Selected Readings. Harmondsworth, London: Penguin, 1990. Print.
Ron, Ashkens, Dave Ulrich, Todd Jack and Steve Kerr. The boundary less organization. New York: Jossey-Bass publishers, 2002. Print.