Airtel Kenya: Cost Reduction Strategies and Recommendations

This report examines cost reduction strategies for Airtel Kenya, focusing on data analysis from the sales department. The analysis identifies key issues, such as the high cost of error repair, which is shown to be statistically significant. The report suggests minimizing errors in the production process to reduce expenses and improve efficiency. Furthermore, it proposes relocating sales and marketing offices to lower floors to reduce rent costs, a significant recurrent expenditure. The report emphasizes the importance of balancing cost reduction with quality, ensuring sustainable financial success for Airtel Kenya. The recommendations are based on the data and aim to improve the company's financial performance through strategic cost-saving measures. The report concludes by rejecting the null hypothesis regarding the relationship between errors and repair costs, accepting the alternative hypothesis based on the data provided.

Running head: AIRTEL COST REDUCTION
Cost Reduction Strategies for Airtel Kenya
Name:
University Affiliation:
Professor:
Date:

AIRTEL COST REDUCTION
2
In any organization, effective cost reduction is a long-term continuous activity. This is
opposed to the traditional approach whereby cost reduction strategies are knee-jack reactions
from immediate crises. It is scarcely possible to separate competitive strategy form strategic cost
reduction. For a proper competitive cost advantage that is not short-lived, there needs to be a
culture that strives to continually improve on the time, the product quality, and cost. This is
achieved through innovation (Bragg, 2011).some of the telecommunication companies that are
currently using sigma five in their operations are Integrated Telecom Company and Bharti
Infratel.
The Company
Airtel Kenya is a communication company based in Kenya. The company has been in the
telecommunication industry for years under different brand names. Ever since its inception as
Kencell Kenya, it has been struggling to remain in the industry.
Problems in the Dataset
From the dataset, there are problems. For instance, there are too many errors and costs
that are related to correcting the errors. The errors will always attract some cost to rectify them.
This means that the company incurs more expenses than needful. Additionally, there is a high
number of process transactions. These are ways that will see the company’s expenditure rise by a
significant margin.

AIRTEL COST REDUCTION
3
Ways to Reduce Cost in the Department
Minimize the number of errors
Hypothesis: There is no statistically significant relationship between the errors and the error
repair cost.
Many departments in companies face increased market competition and consequent
pressures in attempts to reduce cost or control costs. Some companies will opt to relocate their
activities to areas where the related costs of production are low (Spee & Douw, 2014; Weick,
2015). However, there is a need for companies to balance between cost and quality so as to
ensure that quality is not disregarded in pursuit of low cost.
When a company has errors in the production line, they will need to be corrected. In the process
of correcting the errors, there are cost implications. In the data provided, there are particular
months like the 5th month in the area of sales where the cost of labor was less than the error
repair cost. This means the department was paying more for the errors to be corrected than the
payment that was given to those who produced the product. Ultimately, this is not sustainable
and it can potentially bring down the business. Error repair cost is an unnecessary expenditure
since it is paying twice for the same process. In addition to this, the error repair may result to
additional use of the raw materials as part for the product is already wasted and cannot be useful.
Therefore, error must be minimized or eradicated altogether. This will be a sure way for the
company and department to bring the cost in the company low. As the project manager, I would
recommend that the production process is taken seriously s as to ensure that there are no errors.
This way, I will undoubtedly see decreased rates of errors and the cost related to the same.
Essentially, this will be lowering production costs. From the discussion, I reject eh null

AIRTEL COST REDUCTION
4
hypothesis that “there is no statistically significant relationship between the errors and the error
repair cost”. The alternate hypothesis is accepted. This is clearly seen from the data.
Relocate the offices
From the data, some offices are wrongly placed in terms of appropriate floors. For
instance, sales and marketing offices are housed in the higher floors in the building.
Additionally, employees should be relocated to lower floors where the rent is cheaper. Once the
business runs on cheaper rent, it will be on its way to financial success since rent is a recurrent
expenditure (Wheeler, 2015). This will be another reason why I will propose for relocation of the
offices as the project manager. It doesn’t make much financial sense to pay higher rent when
lower rent can be paid.

AIRTEL COST REDUCTION
5
References
Bragg, S. (2011). The Cost Reduction Process. Cost Reduction Analysis, 1-35.
doi:10.1002/9781118268346.ch1
Spee, R., & Douw, W. (2014). Cost‐reduction location strategies. Journal of Corporate Real
Estate, 6(1), 30-38. doi:10.1108/14630010410812225
Weick, K. (2015). Organizing and the process of sense making. Organizational science. Vol
16(4). pp409-42.
Wheeler, G. (2015). Advanced Topics in Statistical Process Control. McGraw Hill, NY.