Restructuring is an important strategy in the business world. Restructuring is a change in the structure of governance of a company, in its operation that is financing or investment. In a business perspective, restructuring is always meant to achieve a particular purpose or goal both short term or long term.
Organizational restructuring is a process of redefining divisional boundaries and redefinition of corporate governance and resizing of the employee taskforce. This particular study is aimed at reviewing an organizational restructuring of NTT that emanated from an intentional change in the policies of Human Resource of the company.
It is not clear whether restructurings really improve the subsequent performance of an organization or not, but it is clear that better organizations can be the outcome of restructuring. The aim of restructuring is to absorb the shock that comes as a result of a shift in the market and to heal from the poor organization. Companies should develop strategies that will help in adjusting to the changes that come along with the restructuring process. When those changes are not taken into consideration, restructuring costs will automatically go up. Disruptions that come as a result of organizational restructuring may have immense effects on the competitiveness and long-run performance of organizations.
NTT Corporation Inc. Has developed to be among the best communication companies around the globe. The company, founded in 1952, has been operating in 87 countries across the world, with its networking coverage spanning across 196 countries in the globe. The total annual revenue of the company is around 95 Billion US dollars. Beginning March 2018, NTT is running as a single global corporation, as opposed to its former organization, whereby it was composed of subsidiary companies operating independently.
This review is an analysis and evaluation of the effect this organizational restructuring on the performance of the company.
How is the just implemented organizational restructuring of NTT Communications Company going to affect its financial performance?
Firm Performance Concept
Performance can be viewed in two ways, the end result and the process to realize those results. Performance is the capability to define outcomes from the activities of an organization. Performance can be categorized into two: financial related and non-financial related. Using key operational performance indicators, it is possible to measure non-financial performance, for example, market shares, the rate of innovation and customer satisfaction.
Financial performance is a measure of how effectively a business organization is able to utilize its assets in its role of generation of revenue. It is an evaluation of the general revenue turnover of a company within a certain timeline.
This study is going to assess whether the former organizational structure of NTT is going to increase or reduce its revenue inflows. The study will also assess whether the company will continue to dwell on its former performance motivational methodologies such as customer retention, the motivation of employees, the rate of innovation, employee empowerment and alignment of employees in order to sustain itself in the market as a new business organization.
The goal of organizational restructuring is to make a business organization more effective and efficient. Focusing on a long-term benefit. Activities of restructuring may range from resizing of the employee taskforce to redefining divisional boundaries.
The recent move of NTT to restructure its business model is to enable NTT to offer quality services to its clients, and to continue to be a partner of choice to its clients and partners all time. In this new structure, NTT will sit as a corporate entity and will still be headed by the immediate former CEO. However, this is not the first time that NTT is restructuring its business model. In 2016, NTT merged its security operations into one corporation called NTS Security. Staff from these crumbled businesses were transferred to the other three arms of the company– NTT Communications, Dimension Data and NTT Data.
The main reason for the restructuring of the company is because the subsidiary companies, - NTT DATA, NTT Dimension Data and NTT Security have been evolving at a good rate all in specific capabilities.
The New Structural Organization
The company has come up with a novel global company that is under the NTT Corporation, a move that is envisaged to be complete by the end of the fiscal year 2019. This new segment is called NTT Inc. and it will be headed by the former immediate CEO of NTT Communications.
The expenses of implementing this new corporation are estimated to be around 38 billion US dollars, of which 20 billion Us dollars is expected to come from outside Japan.
By the end of March 2019 ending the fiscal year. The three subsidiary companies of NTT Communications will be transformed into one corporation that will be called NTT Inc., as shown in Figure 1 below.
Figure 1: Organizational restructuring of NTT Com.
This move is aimed at improving the global governance of the group, and consumers will benefit from the merge, as they will be able to embrace and integrate their skills and their talents into the global market. Furthermore, the new organizational restructure will increase the competitiveness of the company and enable to leverage the expertise of its employees to their maximum potential. Figure 2 and 3 below shows the structural organization of the company before and after the change.
Former organization of NTT
Figure 2: Former organization of NTT
New Structural Organization
Figure 3: New Structural Organization with respect to the restructuring process
By the year 2020, NTT Group is aiming at integrating its subsidiary businesses to two novel businesses, except for NTT DATA. One business will take care of global business and the other business will look after the local business in Japan. NTT Data will not be affected by this plan and will remain a single business.
Besides establishing a new entity, the NTT Group has also aimed, as part of its larger organizational restructuring, to come up with a new innovation fund that will be global. This innovation fund shall be called NTT Venture Capital. The fund will aid in evolving the global innovation of the company. In addition, the company will develop its security to improve its commitment to solving existing security problems facing other companies such as cybersecurity. The development has been developed following the constant increase of cybercrimes around the globe that is a major threat to company operations.
Impact of the Structural change on the performance of NTT
The research question for this study is to evaluate and analyse the effect of introducing structural changes to the performance of the NTT Company. This can be in the sense of productivity, investment or profit, with big changes in strategy definitions. The effect of the organizational restructure of NTT can be measured by evaluating the former organizational structure of the company and how and the marketing structures it employed to keep itself in a competitive edge in the market. Then, by considering and evaluating the planning of the new resultant global company, we can evaluate the performance of the organization in its new organizational structure. Through the company’s innovation branch the company will develop strategies to improve its business performance. As a result, the business will realize a growth in its market share which will generate more revenue for the company in return. In addition, the improvement in the security branch will help the company utilize a new market where it will offer security services to other companies reducing their risk to cybercrime. The new venture ensures the business of additional revenue.
The former marketing strategy of NTT Group
NTT Group has made this frantic move so as to remain in the market amidst the current ongoing innovative competitions. Before we look at how this new organizational restructuring will help the company to stay in the market, it is important to look at the former marketing strategies that the company is employing to keep afloat in the competitive market.
The former marketing strategy of NTT group is based on 4Ps (Price, Place, Product and Promotion). These four integrals define the marketing strategy of the NTT Group.
4 Ps Analysis
NTT is one of the most advanced telecommunication companies in the whole world. With its subsidiary companies throughout the world, the company has specialized in offering specific products to its consumers, as part of its strategies to maintain itself in the steady market. The company specializes in offering the following services: Regional communication businesses, long distance, international communication and mobile communication business. The 4 Ps Analysis strategy of NTT is composed of the following integrals:
The company uses different pricing methodologies for its businesses. For mobile-based communication businesses, the company pursues a competitive strategy for its pricing. The industry is composed of many competitors, and this means that there is always a war going on in setting prices. Consumers usually prefer lowest prices and better services in the mobile industry. NTT data pricing strategy is composed of four modules:
- Sales Price Management
- Competitive Positioning
- Optimization of the sales price
- Promotion checks.
The various pricing modules help the company in sourcing of cheap raw material suppliers which lowers the production cost in return. In addition, the modules help in market trends and evaluation to get information on the pricing of products by other businesses and the effect of the market economy on the business. Using the application of the various mentioned measures the company is able to set affordable prices for its products and also the maximum possible revenue that can be obtained from the prices made. the affordability of the company services and products attracts more customers who increase the business revenue.
NTT stores are present throughout the world whereby consumers can buy DOCOMO SIMs, recharging packs and related services. NTT Data owns an online store where consumers can buy various packaged offerings. Apart from the online stores, NTT Data also has its offerings available at retailers in cities and towns across the globe. The goal is to make the offerings available to as many clients as possible. Following the vast expansion and the existence of various stores, clients are able to access the company goods and services right from their localities. The availability ensures of more access which results in more purchases and increasing the business financial performance.
NTT has been immensely engaged in marketing through social media and in Search engine marketing in which it focused on giving better prices and better services. The company usually creates and offers loyalty programs to its clients in order to retain them. In addition to that, it also offers discounts and special offers on specific periods as a way to increase sales and demand. The como0any banners and hoardings are found in various places in retailers’ premises in order to augment its visibility. Therefore, the marketing mix of NTT is made complete through this marketing strategy since it covers all categories of branding. NTT’s theme is ‘Data for People’, a focus on technological factors that are applied to the lives of the clients and customers.
NTT Group has a highly trained and experienced employee taskforce that totals up to 240000 throughout the world. These employees are drawn from various backgrounds and are committed to putting their best energies and intellect for the good of the organization. As one way of motivating the employees, the outstanding ones are regularly awarded special rewards. Furthermore, there are benefits and retain programs that are offered to exemplary employees in order to have them retained in the organization. Employees are always encouraged to come up with innovative ideas that will help the company to maneuver through the dynamic and fast changing technological world. The employees of NTT are encouraged to embrace their diversity and foster motivation, creativity and skill in order to provide the clients with the best services. The motivation created enhanced quality and maximum production that promotes the business revenue. In addition, the business is assured of the market for its products from the high growing youth population since they are interested in technological devices and communication services.
Impact of Organizational Restructuring on Corporate Growth of NTT
In order to correctly estimate the effect of organizational restructuring on corporate structure, the study has borrowed from a questionnaire from the fundamental survey conducted by the Japanese Business Corporation that was established in the year 1992. The survey involved asking companies whether they have attempted to incorporate any changes to their organizational structures within three years before that. In this study, the same questionnaire has been borrowed.
In doing this analysis, it is important to consider other factors that would affect the performance of the organization besides the organizational restructuring. For example, every business organization has different motivating factors affecting its performance which cannot be related to any other organization. This differs from firm one firm to another, depending on what type of firm or organization it is. For example, a firm’s technological status can be measured by its development trend and its researching capability. Consequently, in this study, all factors that have been thought to be complementary factors which may affect the performance of NTT Communications Company have been considered and analyzed in order to determine the growth rate of NTT Communications.
Corporate performance has always been analyzed by investigating the growth factors that would influence it. According to this type of research, advanced and older business organizations have minimal chances of becoming bankrupt. Considering this analysis, this study has also taken into consideration an analysis technique that will take into account the effect of general bankruptcy in the analysis of organizational restructuring of NTTS, and no further changes on its corporate performance.
The impact of Organizational Restructuring on wages of NTT
NTT has embarked on motivating employees through a number of ways. Exemplary employees are rewarded on a regular basis and are also retained for the benefit of the company. Furthermore, the employees are encouraged and motivated to come up with innovative and creative ideas that will help the company to surge forward in the competitive market. Thus, in this way, it is expected that even in the aftermath of the restructuring of the company, the employees’ wages will increase in the expectation of a better economic advantage of the company.
It is expected that the restructuring will increase value-added on each employee, it may on the other hand increase productivity by downsizing the employee taskforce in subsequent years after the restructuring. However, this move is aimed at strengthening the firm’s competitiveness and therefore bring about economic advantages by increasing the pay wages, and in that case, the prospect of the employees’ detainment is not assured. While in the aftermath some employees may lose their job, NTT Corp is more likely to increase the quality of its services that it offers to its customers base, and not necessarily maintain the number of its employees. According to the management of NTT Corporation, this move is a new strategic initiative that is expected to increase the quality of service offered to its clients globally, providing a greater penetration and scale, and promote innovation so as to help fulfil the clients’ needs towards achieving a greater digital transformation. The company also envisages motivating its employee taskforce to commit themselves to global researching and development. This will be made possible through the Research and development fund (NTT Venture Capital) that has also been created as part of the wider organizational restructuring of the company.
Organizational Restructuring on Efficiency Performance of NTT
The underlying principle of the restructuring of a company is to increase the sustainability and existence of companies through increasing efficiency and its cost-effectiveness. Corporate restructuring can either be a move towards solving a crisis in a company or be a desperate move of a company to survive in the market. While restructuring is a lengthy and expensive process, the most challenging task is to persuade employees to understand the importance of the reform efforts.
Restructuring is not necessarily for troubled companies. It may also be used for transforming under-performing business organizations to make them better. However, if the management is not well prepared for the move, the results may be disappointing, as there are many factors that need to be considered in the wake of the restructuring move. Restructuring basically involves three main processes:
- Defining problems
- Identifying solutions
- Get resources to sustain the company during the restructuring process
All these tasks need to be properly considered if the restructuring will contribute to an increased performance efficiency of the organization being restructured.
For the case of NTT, according to the management, the restituting is that will involve merging of its five subsidiaries to form a global holding corporation, it is expected that the brand confusion and internal competition that had been witnessed as a result of the subsidiaries offering the same products will be done away with, and thus increasing the performance of the company in the long run. The NTT executives further urge that the merger is the best strategy to help the company to cope with the fast dynamically evolving market in the globe. For NTT Corporation this move will bring new value and work to expand the presence of the company in the worldwide market. According to the management executives, it is predicted that the consequential merged global company will garner an estimated 38 Billion Us Dollars in its operating annual revenue. This prospect is an indication of a more efficient performance index of NTT, in the aftermath of its restructuring.
Organizational Restructuring on Productivity of NTT
To pursue a responsible restructuring move, an organization need to invest in its employee taskforce, to offer them a competitive advantage, and to motivate them to be more innovative. In this case, an organization may choose to follow procedures like training of employees and motivating them to engage in research and innovation practices, thus encouraging them to be part of the design and execution of the organization’s processes. These practices must be carried out in hand with the structural reforms of the organization for an effective transition, that will still sustain the company’s economic status in the market. This kind of approach will enhance the performance of the company and increase the productivity of its employees while sustaining a good long-term financial performance of the organization.
NTT is one of the companies that have the best employee motivation approaches and methodologies. Formerly, as one way of motivating its employees, there is a regular awarding program of the best serving employees within a determined period of time. Furthermore, there is a detainment program that is aimed at retaining the most exemplary and innovative employees in the organization. Employees are always encouraged to come up with innovative ideas that will help the company to maneuver through the dynamic market. Furthermore, the employees of NTT are encouraged to embrace their diversity and foster motivation, creativity and skill in order to provide the clients with the best services. Hence, with the current strategy, it is expected that the company will keep on with this tradition, as it is one of its marketing strategies in the marketing mix. The fact that the company is moving towards a single global entity as opposed to subsidiaries means that the customer-centric approach will be more intense, as the focus will now move from many companies to a single global entity. This will translate to increasing the productivity of the global company.
Organizational Restructuring and Revenue Flow of NTT
The organization theory concept helps a company to diagnose and analyse its financial implications, and the changes that the company may need in order to keep itself in a competitive edge in the market. The theory presents managers with tools to help explain the decline and to understand turnout. Organizational theory presents tools for the analysis and understanding of how powerful companies such as Lehman Brothers could fall and how companies such as Bank of America could emerge and rise almost overnight to be a giant in the market. Organizational theory helps to explain history as well as what may take place in the future, so as to manage organizations more effectively.
Concepts of organization theory apply to organizations in any industry. Since the industry is composed of many competitors, this means that there is always a war going on in setting prices. Formerly, the company pursued a competitive strategy for its pricing. The company embraced the 4Ps marketing strategy, whereby it had it had its prices varied according to the location of its subsidiary business in the globe. This helped to leverage its prices according to the economy and sustainability of the country where the subsidiary business was located. This revitalized NTT’s products, thus helping the company to maintain a constant market for its products across the globe. Consumers usually prefer lowest prices and better services in the mobile industry. It is expected that the resulting global corporation will employ this price strategy, and will, therefore, maintain a steady market for its products, hence increasing its financial flow. It is expected that the global company will generate up to $95 Billion annual revenue.
Restructuring activities are conducted in a view to creating a profitable, more focused and efficient company. However, structural reforms in an organization can have two effects; they can either result to a more focused and economically competent organization or it can also be the start of the fall of the company. To achieve these aspirations, a number of factors have to be looked at, which include employee retention, cash required to tender the restructuring transitional process and the prospect of the new structural redefinition strategy to sustain the company in the market.
In this study, I have evaluated the impact of the organizational restructuring of NTT Communications Company on its future productivity. I looked into the former marketing strategies of the company in its former organizational structure, which enabled me to assess the future performance of the new company. I have done the analysis in two steps. First, the paper analyzed how the former organizational structure of the company impacted its performance. Secondly, I assessed the measures that the company has put forth to cope up with the market in its new organizational structure, and how those measures may help the company to increase its performance.
The study suggests that the just implemented organizational reforms of NTT Communications may lead to improvement in its future performance and productivity only if the company will stick to its marketing strategies that used to run its subsidiary companies and also stick to employment motivational methodologies that it used to have.
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