Question

a manager is working in a telecom company,what legal political and economic factors he needs to be aware of in managing globally?

Answer 1

Solution:

2020 is becoming a path-breaking year that could completely transform the telecom industry in the years to come. Movement restrictions due to the COVID-19 is forcing people around the world to completely rely on telecom providers to work, study, shop, get entertained, and stay connected with friends/family. New and exciting concepts such as 5G, IoT (Internet of Things), and Autonomous Vehicles are also on the horizon. As people become more and more aware of the importance of healthier living, the adoption of new smart devices such as smartwatches and fitness bands are also witnessing exponential growth. All these observations indicate that connectivity is likely to remain central to our lives in the coming years. A rise in smartphone usage is opening up more profitable opportunities for the entire telecom industry.

According to industry analysts, the global telecom market size is currently valued at USD 1.74 trillion and expected to grow at a compound annual growth rate (CAGR) of 5.0% from 2020 to 2027.

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Following is a brief analysis of the Political, Economic, and Legal factors affecting the global Telecom industry:

Legal factors:

Legal compliance is a major requirement for telecom providers. Apart from local labor and employment laws, there are several other country-specific laws and licenses that need to be complied with. For example, in India, the telecom space is regulated by TRAI (Telecom Regulatory Authority of India) which was established in 1997 to regulate services and tariffs of service providers. There are several laws including those related to telemarketing and privacy that must be complied with. The legal landscape varies from one country to another. Without proper compliance, a company can face a penalty or even get disqualified.

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Political factors:

General political risks for the telecom sector are related to regulations, licensing, national spectrums, and trade barriers. Generally, these issues have affected the network operators more than equipment and service providers. There is an increased focus to tap opportunities in growing markets like China and India. However, these markets continue to be highly regulated by the respective governments.

National security and human rights issues are major sources of political pressure for the telecom sector. Governments across the world have taken stern measures to monitor and control communications motivated by political and security reasons. These measures continue to become more stringent due to terrorism and cyber-security crimes. In addition, certain countries maintain trade barriers to restrict the entry of foreign telecom operators.

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Economic Factors:

The role of economic factors is also important in the context of the telecom industry. During recession, the sector sees a lot of cutbacks on telecom related spending. Post Covid-19, global economies are showing signs of contraction (de-growth) and recovery could take several years. This could hurt the sector in the immediate and mid-term. However, as economies come back on track and employment levels increase, the consumer is likely to increase their spending. The growth can be accelerated through new technology adoptions such as 5G that would drive new adoption. Removal of trade barriers could translate into new opportunities for all.