Running head: AKAMAI LOCALIZATION CHALLENGE 1

Akamai Localization Challenge

Name

Institution Affiliation
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Akamai Localization Challenge

Akamai’s Challenge Company Situation

Akamai is one of the pioneer CDN companies, having started its operations five years

before any other company in this field. After the first two years, the company went public in the

year 2000, which enabled it to obtain adequate resources to expand its operations both in the

local and international markets. There was high demand for CDN solutions influenced by

advancement in internet-based services such as online video streaming, gaming, e-commerce and

other online services (Akamai Technologies, 2019). By the year 2011, Akamai had more than

100,000 servers in 78 countries, which made it the largest CDN. The company had more than

60% market share, which made it adopt the best technology to enhance its global services. From

the year 2009, Akamai started experiencing some competition from new and small entrant

CDNs, causing a loss of some clients. Akamai’s main competitors were US-based Limelight

Company and South Korea's CDNetworks both working in more than eighty countries. Japan's

telecom KDDI also ventured into the CDN business. Microsoft, which was one of the largest

Akamai clients, also ventured into CDN. Akamai experienced massive losses in its client base

both in the United States and other foreign markets (Belson, 2010). The immediate effect was a

significant loss in market share and a reduction in revenues for Akamai, which prompted the

need to find solutions to the company’s current challenge.

Solutions to Akamai’s Localization Challenges

Despite expansion into the global market, Akamai’s processes and structure do not meet

the standards of an international organization. The appropriate solutions to Akamai’s challenges

should help the organization to maintain its current client base, enter new markets, offer
AKAMAI LOCALIZATION CHALLENGE 3

affordable products in all markets and diversify its products. The solutions will help make it

competitive both in local and international markets. The main areas of improvement for

Akamai's processes and structures are discussed below with a focus on products, place, price,

and people.

Change of the Organization Structure. One of the challenges identified from Akamai’s

business model is that the organizational structure does not address the needs of its local

subsidiaries. The organization has more than 2,380 fulltime staff members and many other part-

time or consultant staff members. The organization comprises of three broad functions, which

include the Americas, EMEA, and APJ. Although the organization has a formal functional

structure, decisions are all made at the headquarters offices. The organization has decentralized

its functions about all the local subsidiaries, which do not participate in decision-making. Every

country has many dynamics and factors that influence the performance of the company's

products in comparison to similar local products. The organizational structure adopted by

Akamai makes it difficult for local staff members to make decisions regarding local market

needs (Nwogugu, 2015).

According to Canegrati (2009), the appropriate operational structure that is suitable for

Akamai is a decentralized organizational structure. For instance; Japan should have independent

management that assesses the Japanese market demand to help in determining supply, pricing

and product differentiation. All the local companies must have a local management team in

charge of decision-making on behalf of that market. Management at headquarters should only

provide technical support in the production of the specified market products. Local management

will help in the assessment of market demands, customers’ preferences, and competitors

products, which will enhance the provision of competitive products in terms of quality, quantity,
AKAMAI LOCALIZATION CHALLENGE 4

and pricing (Young, 2013). Each of the decentralized functional structures will reduce the

operational confusion arising from the use of both global and local offices.

Adoption of international human resource management practices. Another

significant challenge established regarding Akamai's global functions is its poor human resource

policies. The organization has a wide base of human resources because of its broad global

presence. International organizations face numerous human resource challenges because of the

different employment laws in different countries (Repantis, Cohen, Smith& Wein, 2010). The

United States employment laws are the reference point for all Akamai employees, which creates

conflict with employment laws in some of the other countries where Akamai has built a

presence. The company pays the sales agents using a similar rate, which creates a difference in

earning between the employees across various countries. The U.S. hourly rate and sales targets

influence the company's pay structure. In Germany, for instance, the weekly hours are 37.5,

while in the U.S., employees work 40-hour weeks. The same applies to France, which has a

lower hourly rate per week in comparison to the U.S. This differences result in discrimination

against some employees because of the variations in compensation for the same workload.

Sourcing of employees for top-level management jobs also affects the productivity of Akamai

employees. The company should decentralize human resource functions to ensure that all

employees work under local employment laws to reduce labor disputes and enhance employees’

performance (Ceil, 2016).

Change in product pricing. One of the challenges that ensure Akamai's products face

stiff competition in local markets is the huge price differences in comparison to local products.

Local CDNs provide their services at lower prices because of the company’s price their products

based on current market demand and supply factors (Muralidharan, 2008). In most of the
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countries, local products are approximately 20% cheaper than those of Akamai. Taking this fact

into account, most local consumers prefer to use locally produced solutions that they experience

as being affordable. Akamai bases its pricing for global products on prevailing prices in the

United States. This method of pricing is not appropriate because of the high foreign exchange

rates and inflation in most of the other countries. Many clients consider Akamai products to be

premium because of the organization’s high prices. Despite the advanced technology and high

efficiency of its products, clients buying decisions depend on their income. Akamai should

devise a pricing strategy that takes into account the economic factors in every country in which it

operates (Ogbuehi, 2011). The company may further consider providing differentiated products

to enhance target marketing and affordability of its products.

Market awareness program. Although Akamai has been in the same business for many

years, very few people know about the brand and its products. This brand is only dominant in the

United States and parts of Europe and remains relatively unknown in most other nations. The

company did not focus on its branding strategy, ensuring that knowledge of its brand and

products is popular with a small target market. The primary target market for the company’s

products was the multinationals such as Microsoft and Samsung. The company did not create

adequate awareness of its products to small scale consumers. The company should come up with

a branding strategy that will focus on marketing the products of the companies to a wide target

market. The company should strengthen its link with small consumers who comprise more than

60% of the CDN market. A market program that uses all available marketing and branding

strategies should serve to enhance Akamai's branding. The company can also consider aiming at

becoming a household product, as have companies such as Coca-Cola, Samsung, or Pepsi,

among other prominent brands (Alon, Littrell & Chan, 2009).

Conclusion. Akamai’s venture into the CDN business was timely because of the many

opportunities, which existed in both the local and international environments. Going public

enabled the company to expand its organization globally. Although the company went global,

there was stiff competition from local companies, which led to a reduction in its revenues and

market share. The company should institute corrective measures as outlined above to ensure it

overcomes the competition and positions itself as a leading CDN.

References

Akamai Technologies, I. (2019). Akamai addresses the performance and complexity challenges

of image-heavy websites with new image manager. Retrieved from

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complexity-challenges-of-image-heavy-websites-with-new-image-manager-300330304.html

Alon, I., Littrell, R., & Chan, A. (2009). Branding in China: Global product strategy

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Belson, D. (2010). Akamai state of the internet report, Q4 2009. ACM SIGOPS Operating

Systems Review, 44(3), 27. doi: 10.1145/1842733.1842738

Canegrati, T. (2009). Global account management for sales organization in multinational

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Ceil, C. (2016). Performance management and international human resource management

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Muralidharan, R. (2008). Environmental scanning and strategic decisions in multinational

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10.1108/1525383x200300004

Nwogugu, M. (2015). Decision analysis, risk management, and strategic alliances: The case of

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Ogbuehi, A. (2011). Pricing strategies in high-inflation markets: Implications for the

multinational corporation. Journal of Applied Business Research (JABR), 9(1), 44. doi:

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Repantis, T., Cohen, J., Smith, S., & Wein, J. (2010). Scaling a monitoring infrastructure for the

Akamai network. ACM SIGOPS Operating Systems Review, 44(3), 20. doi:

10.1145/1842733.1842737

Young, J. (2013). Multi-actor infringement after Akamai v. Limelight. SSRN Electronic Journal.

doi: 10.2139/ssrn.2425987