The most dynamic sector of the world economy, incorporating a large number of operations is the telecommunication sector. For this type of industry, technology is the heart. Mobile telecommunication sector is growing with a fast pace all across world and in UK, the trend is same. A survey being carried out by Deloitte discovered that around 53% of people falling in the age group 16 to 75 years are making use of smart phones in United Kingdom. Furthermore, the revenue generated in this industry has also depicted as an increasing trend (Grant, 2005). Many mobile telecommunication companies are operating successfully in the markets of UK such as Vodafone, British telecom, EE, etc. The presence of these global players has resulted in fierce competition within telecommunication sector. Because of such level of competition, it is becoming difficult for organizations to sustain a competitive position in the market as well as to expand internationally
Consequently, the present research report is being undertaken with an aim to analyze the internal as well as external environment of British Telecom. BT is global telecommunication company which deals in mobile, TV, fiber and fixed primarily in UK and around 180 nations of the world. Company was established in the year 1969 and has its headquarters in London, UK. The business of British telecom is regulated by British telecom regulator Ofcom. The firm is also diversifying into information technology as well as digital products as there are less regulations and laws (British telecom, 2018). The main vision of the company is to secure position of leading mobile telecommunication provided by enriching life of consumers and helping them to have connection all throughout the globe. But there are numerous factors that act as a hindrance for successful operations of the business concern. Therefore, the current research report will critically analyze such factors that influence the strategic decision making of British Telecom. In addition to this, the internal capabilities of the firm will be evaluated by applying approaches and models. Further various strategic options available for British telecom will be evaluated in later part of the report.
PESTEL analysis of British telecom
The factors being involved in PESTEL analysis influence the operations and decision making power of the business. With this analysis, firm can make plans beforehand and can penetrate the market. In addition to this, with this framework, business will be in a position to tackle all t revolving issues around the society. Therefore, it is quite significant for company to evaluate these factors (Summanen and Pollitt, 2003). Additionally, organization can attain a competitive advantage, as they will be in a position to gaze knowledge about scope and limitations of their business. PESTEL analysis of British Telecom is defined underneath:
- Political – It includes various elements like trade restrictions, political stability, tariff, labor laws as well as environmental laws. Because of the political issues, company faces many problems and issues. With the alteration of government, laws and legislations also change. Due to high rate of inflation, the government of UK pressurizes the company to reduce price. Due to this, different changes have been made in internal and external environment of British Telecom.
- Economical – Economical factor is quite significant for the firms like British Telecom. Due to rapid development in the state, chances of firm to expand in various parts also increase. Further, they get an opportunity to establish a new unit in the well-developed zones. The gross domestic product of UK is good enough and this shows that people have more income level. People with high income level are more prone to adapt the latest technology related to communication (Akio, 2005). Pertaining to this, the overall profits level of the British telecom increases. But due to economic slowdown in Asian and European nations, the firm is compelled to cut their prices and profits. The global uncertainty forces firm to change their strategies. Additionally, BT has good base of customers and relationships and thus, the management is ready to alter their approach from unit pricing to unit based tariffs. Because of this; the organization is in a good condition to serve their clients.
- Social – This factor relates with the cultural values, beliefs, society, beliefs and values of people wherein the firm operates their business. Consequently, it can be well attributed that it is a quite dynamic domain and thus, to succeed, firms are required to have flexible policies and procedures. It is important to develop such policies that match with the culture of the local nation. There are many countries, where mobile internet services are banned because of its misuse. British Telecom is a European company, however they have altered their services according to the preferences and social factors of the people. For illustration, it was found that near about 53 percent of 16 to 75 years of people make use of smartphones in the UK.
- Technological – British Telecom is known for its innovation. Company has a mission to consider recent trends in technology and communication world. But, the firm faces high level of competition in the market and therefore, to attain an edge over others in the market, it is vital for firm to go one step ahead of the technology (Bouckaert, Van Dijk and Verboven, 2010). Further, the firm has employed good amount in high speed network as well as alliances for 5G development.
- Environmental – With the increase in globalization, there is a need to become more ethical. Now, every customer wants that the operator should consider ethical values and must be socially responsible. Since, British Telecom is operating in the global environment; it is quite significant for the firm to take into account facts and analysis. In addition to this, company is also making efforts in reducing t carbon emission as well as they are also switching towards 100 percent renewable energy.
- Legal – British telecom needs to be aware about legal issues in relation with the copy and pirated issues. There have been many events where company was held responsible for legal issues and have paid penalties for same. Further, because of rising competition in market, the company has violated certain regulations of the government. In addition to this, British Telecom is run by Ofcom and thus, the UK telecom regulator makes; way for separation of open reach from British Telecom (Chkanikova, 2015).;
Ansoff Growth Matrix to analyze British Telecom’s strategic positioning
For evaluating the strategic positioning of British Telecom, it is quite vital to make use of Ansoff matrix. It is also being referred as a crucial model for improving the marketing plan and executing it successfully for the firm. Further, it is marketing planning model that offers supportive hands to business by determining the product and market growth strategy. Ansoff matrix also help firm in suggesting that the growth strategy of business concern is highly dependent on new or existing market as well as new and existing product. The resultant of the Ansoff matrix is the growth strategy. British telecom has launched their 3G services by making use of this matrix in the market. The description of model is done as below:
- Market penetration – Market penetration is the stage, wherein firm can sell their existing products in the existing market. Company can carry out this by doing analysis of their rivalries. Concerning this, British telecom has launched same products and services in the same market by adopting new style of marketing (Stonehouse and et.al., 2004). Hence, it is becoming difficult for the companies to make profits in the prevailing market. With this, the company was in a position to identify factors that can significantly influence sale and growth of products and services. Speaking in relation with trends of last four years, the revenue of British telecom has depicted growing trends and thus, they were quite successful in sustaining the existing product in the existing market. Moreover, the organization was also able to grab devotion of clients through adoption of different promotional strategies.
- Market Development – Seeking help through market development strategy, British Telecom has launched their existing products and services in the new market. This is also vital for company. The organization has successfully pushed their wireless technology and services in various parts of Asia with a new strategy. Moreover, the firm has also launched Wi-Fi technology in the market of India (Nielsen and Nielsen, 2011). As company is flourishing in various parts of globe, they are in a great need to adjust the marketing strategy with the changes taking place in geographical location. Additionally, the firm has launched British telecom M-pesa, Opera Mini browser, etc.
- Product Development – With this strategy, new products and services are propelled in the existing market. Considering this, BT has launched the Wi-Fi services in United Kingdom. It helped firm in achieving a competitive advantage over the other rivalry firms in the market. Other than this, the company has also initiated broadband services in varied areas of Europe using this technique. They have also introduced many new products like BT vision and various products in storage arena as well.
- Diversification –Company has initiated their 4G services in the new market by seeking help from diversification strategy. It was a challenging task for the company to build image, reputation, status and attracting the clients headed to new products and services. Further, this has helped firm in getting the idea to develop effective and efficient marketing strategy so as to grab the attention of customers. They have adopted the strategy and established partnership relationship with EE and other mobile telecom operators of UK (Clastres, 2011).
Task – 2
Strategic capability is nothing but an ability of the organization to adopt competitive strategies that can render a supportive hand to firm in maintaining sustainability as well as help in increasing their value over a period of time (Cairo, 2006). Nevertheless, it does not take into account strategies being used by business; rather it focuses in relation with -market position, assets and resources and then forecast the employability of strategies in the near future. The resources and capabilities of British Telecom can be identified by adopting VRIO analysis.
VRIO Model (Barneys Model)
This model is developed by J.B. Barney and it is being defined as a system of evaluating resources and attributes of the company. Further, VRIO framework is generally a practical application of RBV model. In current case, resource based view is broken down into various key aspects that can be evaluated further by the experts (Johnson and Scholes, 2002). The main four elements are Value, Rarity, Imitability and Organization. If the company envisages all the aspects being defined below then they will become more capable and competent in accomplishing competitive advantages over their competitors. Talking in relation with value, it is referred as a significant feature as it helps the company to exploit certain opportunities. Normally, by seeking help through valuable resources, the firm can improve their efficiency as well as effectiveness. Rareness is also a vital feature as through this, firm can make sure that they does not develop same kind of strategies by exploiting the resources in an identical manner. Correspondingly, imitability ensures that the other organization cannot imitate a rare resource and take away the advantage of the company that has been established by them. Finally, the organizations also need to ensure that they are competent enough to combine their strategies as well as resources in an efficient manner so as to achieve best possible results (Cardeal and Antonio, 2012).
- Capital access – British Telecom has healthy balance sheets with strong financials. The profits of the firm are increasing and stood at £19,402 million. In addition to this, -company also has strong cash flows of £ 18, 909 million in the year 2016. Furthermore, in order to enhance its own operating capabilities, British telecommunication group is also offering its subsidiary extra capital (Powalla and Bresser, 2007).
- Network capability and string base of customers – British telecom has made significant amount of investment in relation with network and thus, the firm is in a position to provide high speed network with outstanding coverage. Other than this, the firm is also proposing that they have more range in place in comparison with the competitors in United Kingdom. There low frequency 4G signals is also permitting the British telecom to have fast indoor speed of internet (Richards, 2011). The company is also the largest provider that is offering consumer broad band services as well as fixed voice telephony in UK. Through this, they have covered the market share of around 35 percent of consumers. They were able to put in better position in the market to meet out the demand of the customers of UK and thereby, increasing their base.
British Telecom’s strength and weakness
British Telecom is one of the leading broadband internet providers and fixed line telecommunication operators which offer global telecommunication services in more than 170 nations across world. The firm is also participating in London and New York Stock Exchange and is listed in the FTSE 100 index (Hoffmann and Schaper-Rinkel, 2001). One of the major strengths of the firm lies in its British fixed-line telephones with local loop and trunk network connections and telephone exchange. In addition to this, the firm also owns largest nationwide telecom coverage and penetration. The company has strong growth prospects and has diversified range of products as well as flexibility. Furthermore, British Telecom extends their communication operations on the global markets by acquisitions and re-branding of the domestic and overseas business.;
British Telecommunication group is largely dependent on the markets of United Kingdom and it has limited presence in the high growth region of Asia Pacific. In addition to this, one of the major weaknesses of the firm is underdevelopment of mobile business and lack of mobile convergence. Further, they also lack in business strategy in relation with promotion of cheap voice calls as well as other products and services. British Telecommunication also has inefficient ordering system. Due to wide operations, there is an occasional problem related to payphone. General complaints in relation with the customer services being offered by British Telecom are also considered as the major weakness of the firm (DuFour and Marzano, 2015).;;;;
Task – 3
Porter’s five force analysis
For each and every business organization, porter’s five force model is being regarded as the most useful tool. Through this model, the organizations can understand the forces in their working environment that impacts their performance and can make changes in their decisions and strategies accordingly. Therefore, it can be well stated that seeking help of this model, the company can comprehend its competitive environment. It is the most influencing analytical tool for analyzing the competitiveness within the industry (Porter, 2004). Porter’s five force models involves five forces that is threats from substitutes, bargaining power of buyers, bargaining power of suppliers, competitive rivalries and threats from new entrants. The telecommunication industry of UK is influenced by all these factors and these are as follows:;
- Bargaining power of the suppliers – The bargaining power of suppliers in the telecommunication industry is quite high. This is because of the fact that in mobile phone parts business the suppliers have high power to influence the prices of the products. Further, they also place high conditions for making a deal with the providers. For instance, when the company apple launched their new i-phone series in the market, they have signed a deal with the AT&T to ensure that they have leading rights to be the service provider to their phones in USA. Therefore, it can be said that suppliers have high bargaining power in this industry.
- Bargaining power of the buyers – The bargaining power of buyers in the telecommunication industry is quite high. However, a single buyer can not possess the potential to influence the prices offered by the products and services of British Telecom. They enjoy high bargaining power owing to several reasons. The very first reason is there is no differentiation between the providers of services (He, 2015). In other words, the services provided to the valuable clients by the organization are almost similar. Another reason is fierce competition amid the players in the market such as Vodafone, EE and many more. Furthermore, the switching cost is also very low. Clients can easily shift towards the other brand easily because of no cost involved.
- Threats from new entrants – To enter in the telecommunication sector are very difficult for the new service providers. In addition, the threat from the new entrant is also highly impacted by the economies of scale of the existing companies operating in the market. The costs of taking a position in the new market are very high because of the good brand image and reputation of the existing companies. In addition to this, there are some factors such as huge licensee fees, changing trends and technology and regulatory issues that restraint the new firms to enter into the telecommunication sector or market. But, because of the higher costs, there are many new arrivals in the market but they face immense pressure as well as competition from the existing giant players (Robert Mitchell, Shepherd and Sharfman, 2011).
- Threats from substitutes – The threat of substitute is relatively moderate in this particular industry. But for British Telecom it is very high. Due to improvement in the market of broad band services like G-talk, Skype, Video-conferencing, the threat of substitute is high and intense.
- Competitive rivalry – The threat of rivalry in telecommunication sector of UK is highly impacted by high number of firms in the market. In addition to this, there are very few large corporations which are fighting for larger market share and thus, there is less threat of rivalry. The companies in the market are competing with each other intensely. Further, the growth of the market in this sector is quite slow and therefore, companies fight in order to gain larger marker share (McLaughlin, 2016). The switching cost is also very low because of which the level of competitive rivalry is relatively up. Other than this, the differentiation in the product is also very low and therefore, intensity of rivalry tends to increase.
Task – 4
Bowman’s Strategy Clock model and strategic options for British Telecom;
Articulating in relation with the Bowman’s strategy clock model, it is being referred as the model that provides support to the companies in identifying the options for strategic positioning. In another words, it provides help to the firms in exploring different ways by which the products and services can be positioned in the market in order to have a competitive place in the market. Thus, the aim of the strategic clock is to reflect that the business will have variety of options for positioning the products based on the two main magnitudes that is price and the perceived value (Robert Mitchell, Shepherd and Sharfman, 2011).;;;
Figure 1: Bowman's strategy clock model
(Strategy Clock, 2015)
- Low price/low added value – The products are not differentiated and it is not a competitive position for the business. Additionally, the perceived value is very little and there is lower price.
- Low price – Business at this position is a low cost leader. The margin of profits is low and the sales volume is quite high (Gassmann, 2006).
- Hybrid – It is the hybrid position that involves low prices and some amount of differentiation.
- Differentiation – It provides high level of perceived value to the consumers. Branding as well as quality of the product plays a major role.
- Focused differentiation – It focuses in regards with offering products with higher prices and customers get high level of perceived value in return (Dibb, 2010).
- Risky and high margins – With this strategy, company sets the prices of the products and services high and they did not offer anything related to the perceived value. It is also known as uncompetitive strategy, where products and services are being sold at premium prices.
- Monopoly pricing – In such type of market, there is only one player in the market that deals with the specific products and services. They also set prices as per there will.
- Loss of market share – This is being regarded as the position of disaster, in other words companies set the prices of the products low and provide no perceived value in turn. It is a situation of win-win.
Strategic direction and options
On the basis of strategic clock model, British Telecom has the options to adopt diversification strategy. It is important for the company to diversify their market and should enter into electronic equipment market. According to this model, the company will be offering high level of perceived value to their clients by keeping the price of the products moderate. The firm will be discovering new market with new products and services. But, this strategy encompasses high level of risk because the firm is entering into an unknown market without having any kind of experience (Cardle, Pauland Turner, 2010). British Telecom should enter in to en electronic market like, BT TV, washing machine, Microwaves etc. With this, the British Telecom can achieve success and aware the brand to gain loyalty towards the company.
Thus, in a nut shell, the report has scrutinized internal as well as external environmental factors that impact the strategic decisions of British Telecom. The company has invested good amount towards the network and therefore, they are in a position to offer high speed network with excellent coverage. The main strength of the BT is their brand image and reputation. Though maintaining position is essential to remain updated with the latest technology and trends in the market.;;
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