Case Study – Practising HRM in a global/international organisation: ACN Inc. 3000 words.
Introduction
ACN Inc. provides a range of discounted utilities, products and services. Founded in Chicago in 1989, it has grown to establish a presence in the USA and Canada, and in 18 countries in Western Europe, and in Australia. The company headquarters remains in Chicago, and there are regional headquarters in Amsterdam and Sydney.
Products and services
The discounted utilities, products and services that the company sells consist of the following:
• North America: landline telecommunications, gas, electricity and water
• Australia: landline telecommunications, and gas maintenance services
• Western Europe: landline telecommunications, with some small mobile telecommunications activities in some countries. It is planned to look into further opportunities in Europe if and when the energy markets of the EU become sufficiently deregulated.
As deregulation has advanced, there have been many entrants into these markets, but the main providers of telecommunications services remain the big national companies: AT&T (USA), BT (Great Britain), and FT (France). Deregulation has, however, forced each to improve its product and service quality. In general, each has been able to use its dominant market position and enduring familiarity to do this effectively.
At the margins, new providers have been able to grow successful, profitable and effective businesses. The shear volume, size and service usage in the telecommunications sector makes this possible – and also, for good providers, highly profitable.
ACN’s core product and service is landline telecommunications. Its strategy is to target the core markets – those customers with AT&T, BT and FT. It does not invest any effort in attempting to persuade customers already with smaller providers to change again, for a second or even a third time. For all the products and services, the basis for business is to acquire capacity from the particular utilities providers, and then sell this capacity on to individual consumers at rates immediately below the local providers’ prices and charges. Thus for example:
• In France, ACN acquired the right to sell landline telecommunications capacity from France Telecom at 1 euro cent per minute. FT sells to customers at 2.5 cents per minute, and so ACN will sell to customers at 2.2 cents per minute.
• In the USA, ACN acquired the right to sell electrical supply capacity from the electricity generating companies at 0.5 US cents per kilowatt hour (kWh). The rate customers are charged by other providers is 1.5 cents per kWh, and so ACN sell to customers at 1.3 cents per kWh.
The products and services are therefore sold as niche offerings immediately below the mass market and established provider rates.
Developing the business
ACN Inc. was founded in 1989. The business gained initial momentum through taking advantage of the deregulation of the US telecommunications and energy markets. Whenever, and wherever, particular markets had been deregulated, the result was to attract entrepreneurs, pioneers and business developers (and sharks) to provide competition for the existing public monopoly or near-monopoly. ACN was one of many such companies at the time. This position was replicated in the UK and elsewhere. In the UK telecommunications sector, BT was ordered to give up part of its landline monopoly. This initially enabled Mercury and others to offer landline services. Subsequently, other companies such as OneTel and Unix were able to buy landline capacity from BT and sell it on at their own preferred rates and ranges of costs and charges. ACN itself entered the UK telecommunications market in 2002 by buying capacity from BT and selling it on at its own preferred charge levels, coming in, as usual, at just below BT rates.
Developing the French market
ACN entered the French telecommunications market in early 2004, and to date it remains a niche and marginal player. When it started in France, ACN followed its usual pattern of buying capacity from the national monopoly, in this case FT. ACN then set about selling to the French population. At that time, 95 per cent of landline traffic in France was carried by FT, so the prospects for ACN looked good.
The sales teams
In employing sales teams, ACN has a tradition of installing regional managers from the head office in Chicago. These managers are then charged with hiring local sales managers and locally recruited sales forces. This method has been used by the company in the various sectors to supply, contract and distribute the company’s products and services. Some have been more successful than others, for although some of the products and services are well established in different locations and cultures, there have been problems getting a commercially viable foothold in the non-English-speaking world. In France the preferred method of recruitment has been to attract employees from the large expatriate English community. This has met with varying degrees of success, both in terms of retention and also in terms of effective sales performance. Sales teams are paid on commission only. Local sales managers are paid a salary – and up to 50 per cent of their reward package is dependent upon sales team performance.
Your task
1 Discuss in detail the assertion that ‘the prospects for ACN look good’ in France. What is the basis for this assertion? What issues have to be tackled in detail? How might this affect the ability to employ and retain sales staff?
2 Identify the strengths and weaknesses of employing expatriate staff in specific locations. What alternatives are open to ACN when seeking sources of labour in these locations?
3 What commitments would staff in non-US locations be entitled to seek from ACN before taking up employment?
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