PM Profitel Inc. Case

As a formerly g all overnment-owned call off monopoly, Profitel enjoyed many decades of minimal competition. heretofore today as a publicly traded enterprise, the federations almost exclusive control over telephone copper wiring across the country keeps its dough mar- gins above 40 pct. Competitors in telephone and DSL wideband continue to rely on Profitels wholesale business, which generates substantially more profit than similar wholesale services in many other countries.However, Profitel has stiff competition in the cellular (mobile) telephone business, and other emerging technologies (voice- over-Internet) threaten Profitels dominance. Based on these threats, Profitels board of directors contumacious to hire an outsider as the new chief executive. Although several qualified candidates expressed an interest in Profitels top job, the board selected Lars Peeters, who had been chief operating officer for six years of a publicly traded Euro- pean telephone company, followed by a brief stint as CEO of a cellular telephone company in the United States until it was acquired by a larger firm.Profitels board couldnt believe its goodness fortune Peeters brought extensive industry knowledge and global experience, a high-octane energy level, self-confidence, decisiveness, and congenial nevertheless strongly persuasive interpersonal style. He also had a unique presence, which caused people to pay worry and respect his leadership. The board was also impressed with Peeters strategy to bolster Profitels profit margins.This included straining investment in the latest wireless broadband engine room (for both cellular telephone and computer Internet) before competitors could gain a foothold, cutting costs through layoffs and reduction of peripheral services, and putting instancy on governance to deregulate its traditional and emerging businesses. When Peeters described his strategy to the board, one board ingredient commented that this was the same strategy Pee ters used in his previous two CEO postings. Peeters dismissed the comment, saying that to each one situation is unique. Peeters lived up to his reputation as a decisive executive.Almost immediately after taking the CEO job at Profitel, he hired two executives from the European company where he previously worked. together over the next two years they cut the workforce by 5 percent and trilled out the new wireless broadband engine room for cellphones and Internet. Costs increased somewhat due to downsizing expenses and the wireless technology rollout. Profitels wireless broadband subscriber list grew quickly because, in ill will of its very high prices, the technology faced limited competition and Profitel was pushing customers off the older technology to the new network.Profitels customer sat- isfaction ratings fell, however. A national consumer research group reported that Profitels broadband offered the countrys worst value. Employee morale also declined due to layoffs and th e companys public take to problems. Some industry experts also noted that Profitel selected its wireless technology without evaluating the alternative emerging wireless technology, which had been gaining fundament in other countries. Peeters aggressive campaign against authorities regulation also had unintended consequences.Rather than achieving less regulation, criticizing government and its telecommunications regulator made Profitel look even more arrogant in the eyes of both customers and government leaders. Profitels board was troubled by the companys lacklustre share price, which had declined 20 percent since Peeters was hired. Some board members also worried that the company had bet on the wrong wireless technology and that subscription levels would stall far below the number necessary to achieve the profits stated in Peeters strategic plan.This concern came closer to reality when a foreign-owned competitor won a $1 billion government contract to improve broadband services in regional areas of the country. Profitels proposal for that regional broadband upgrade specified high prices and limited corporate investment, but Peeters was confident Profitel would be awarded the contract because of its foodstuff dominance and existing infrastructure with the new wireless network.When the government decided otherwise, Profitels board shoot Peeters along with two executives he had hired from the European company where he previously worked. Now, the board had to embark out what went wrong and how to avoid this problem in the future. Questions 1. Which perspective of leadership best explains the problems experienced in this case? Analyze the case using concepts discussed in that leadership perspective. 2. What can organizations do to minimize the leadership problems discussed above?