H/508/0526 RAC International Telecommunications Unit 2 Level 5
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Virgin Media Limited is a British company which provides multiple services of internet, telephone, televisions in United Kingdom. Since the year 2014 the company is working as a subsidiary of Liberty Global Plc which is another international telecommunications and the televisions company which is based on London. The company is also listed at the London Stock Exchange and NASDAQ Stock Market. The report discusses various parameters of the company is enable readers to get a comprehensive insight into the situation and the environment of the company. Various tools have been made used in the analysis and these are PESTTLE analysis, SWOT analysis, Porter’s Five force analysis, Bowman’s strategy clock model. Towards the end some of the recommendations are also discussed using which the company can increase its competitiveness in the market.
Virgin is one of the innovative media business which is formed after the combination of Tele west and NTL and then the company was rebranded as Virgin Media. The company has a unique strength of innovation and branding. The company is the only company in UK which provides all the four media services to the people which includes the digital TV services, land lien phones, broadband and the packages of mobile phones (Virgin Media, 2018). The ability with which the company offers these all four services in one packages is the USP of the company and this also sets them apart from their competitors.
The PESTLE analysis would help in analyzing the macro environment which surrounds the company.
Political factors: These have a direct impact on the business operations and some of these include the legal issues, safety and health laws, government tax policies, stability of the government in UK. The overall situation in UK is very much stable. TRAI exist in UK which has come up with new rules for the telecom sectors from time to time and they keep amending their directions. The country is very much peaceful and in the future also there seems to be no chance of these.
Economic factors: Then the economic factors of UK also support the growth of the company as the per capital income of the people is very high and the interest rate in the country is less. The economic condition of the nation is stable. The dominance of youth in the nation is increasing and the economy of the country is boosting.
Social: Then social factors also affect the demand of such servicers in the market. The mobility level of people is increasing which has increased the demand. Then remarkable changes are taking place in the human life style and the perceptions of tradition are changing in the new globalized world. This way the demand of such services in increasing (GEMSTAR-TV GUIDE INTERNATIONAL INC v VIRGIN MEDIA LTD, 2011). They have to deal with the issue for the training of the staff.
Technological: Many new technological changes are taking place in this industry to which Virgin Media has also to keep itself updated at all the times. These are related to the changing technology, new scientific attitude, government investment, obsolesce rates and many more changes have forced the company to remain active on this front.
This matrix was invented in 1957 by Igor Ansoff who is famously known as the father of Strategic management and this was publishes in HBR. This tells about the market and product choices which is available to organizations. This acts as a basis for the for the setting of the objectives of an organization and the four strategies of the company are as follows:
Market penetration: This occurs when the organization tried to tap the market with their recent services and products. The strategy begins with the existing customers of organization and this helps the companies in increasing its sales. Virgin Media applied the strategy to capture market share by launching their broadband services and it also laid stress son the advertisements campaigns for getting deals from the SKY.
Product development: In this the companies develop new products and this helps in development of new products. They have developed many products related to their bard band services which is to improve the portfolio offerings to the company.
Market development: This is strategy in which a company moves beyond their existing customer base and they start searching new customers for the services and products. This staring involves the searching of the new segment and this is done by reaching for entirely new market and this helps in attracting new customers or new uses of products and services by the customers. They relaunched the B2C arm of the company as Virgin Media business to that they are able to capture more market share.
Diversification: The world id becoming a common place to live and they’re increasingly becoming demanding for similar products of lifestyle. There are many changes in the international trade and this has become possible to liberalization and globalization. The diversification involves the movement of the services and products in the new markets altogether. Virgin Group started with Virgin Media and this was just another strategy of diversification done by the company.
Overall the mentioned stages in the Ansoff model contains many factors and risk element attached to them. The market penetration is considered as a the most less risky strategy and on the other hand diversification is considered as a high risk strategy as this involves huge investment costs and this is due to the fact that the new products move to entirely enter new markets. This model can be applied to the company Virgin. The company makes use of all the four different strategies of the Ansoff’s model from time to time and this is done by it depending upon the situation.
The company lays emphasis on three strategic priorities in their manifesto and these are:
Growing the business
Engaging the people
Fixing the fundamentals
The company has created a board portfolio which is tailored as per the needs of the customers. They also keep interacting with their customers and this is done even by the agents of the company who do home installations of the phones. They also use management tool named Net promoter which is to measure and monitor the customer feedback. This helping measuring the performance of the company and for making improvement as per their suggestions and feedback.
They make use of the differentiation leader strategy and this is also used in their advertising campaigns. The advertisement of the company also put emphasis on the fact that this is the fastest network of the company and it also offers premium content to their customers. Even in a survey conducted also the broadband speed o the company is seen to be biggest.
This is a very important tool which helps in analyzing the internal and the external environment of the company. The strengths and the weaknesses helps in analyzing the internal environment and the opportunities and threats analyzed the external environments.
They have substantial economies of scale as they are able to combine the generic roles like finance and administration and this helps the company to competitively price the products. They have a good brand name and this way they have secured many contracts from Sky. the infrastructure and the technological ability are the internal strengths of the company and this has helped the company to marinating market leadership.
The company has some of the internal weaknesses. The company has to face many cultural issues as two companies came into being. There are many outsourcing and redundancy issues of consumer services and this is done by it to bring the costs. This has led to many loyalty issues among the staff in the company. Due to complexity and the size of the organization, there are chances that many conflicts may arise in the company and the cultural shift issue has to be dealt.
Opportunities: the market of media is increasing at a fast rate and this is posing them many opportunities. The company has offered many bundling offers and they have tried to grasp more market share in the market. The company needs to keep searching for better options for the customers as the customers keep on exploiting opportunities. The company also keep signing many agreements so that they can grab such opportunities.
Threats: The threat which is faced by the company is that of the competitors in the market like of BR, orange and Sky as they are operating as a large market player. The company is also said to have suffer problems from the reliability of their infrastructure (STARSIGHT TELECAST, INC v VIRGIN MEDIA LTD ROVI SOLUTIONS, CORPORATION v VIRGIN MEDIA LTD, 2015). Then this market of media is also constantly changing as if the companies like Virgin Media fails to keep up with the changes than they are chances that they would lose their customers.
VRIO is a business analysis framework which guides a concern to get competitive advantage from the internal resources (Jurevicius, 2018). One of the tool VRIO is used to analyze the internal resources of a company. This helps in analyzing that if the resources possessed by a company. A capability or a resource of a company are those which have four requirements and they are rare, valuable, helps in capturing the value and are also costly to imitate and all these are the sources of the competitive advantage for the company.
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The company has a competitive advantage specially due to the superior technical capabilities of their networks of their cables and the network of their competitors BT is very less and many of their competitors have to really in their cable networks to provide the services, they also have very good pricing strategy which is also a source of competitive advantage by the company. The company is also able to take on their competitors almost four times faster with Voom Fiber service. This offers service which ha speed of 350 Mbps. The company is trying to benefit its business consumers and the economy of UK.
The company is planning to use their fiber optic network to differentiate themselves against their competitors and they have been able to improve dramatically over the years and have each time be able to come with different plans to that they are able to stay ahead of them competes in the market (DataFox, 2018).
Five force analysis
This five force analysis by Porter is a framework tool which is used for analyzing the level of competition in the market. It makes use of five forces in the market which has an impact on the competitive position of a company in the market and this also determines the attractiveness of the company in the industry in the profitability terms. So this helps in understanding the forces which help in shaping the industry.
The study of the competitive advantages of the company can be studied with the aid of the Porter’s five force analysis tool and these are:
Entry barriers: The entry to this telecom sectors cannot be done easily as it is determined by high investment made on fixed asserts. Many significant cost are involved in this which includes the costs of operating a network, establishing it and many other infrastructural costs. the company has spent billions of pounds for laying the optic fiber cables. then the acquiring of the telecast right s of any show is also another entry barrier as the competition is very touch in this. The main game in this industry is not of price but of the sale volume. So it is very difficult for nay new entrant to enter this sectors and expect to earn high rate of return. The competition level is very hard. Then the competition level in the industry is also very high which might to be difficult to by the new entrants in the market. The service complaints are also invited by the telecommunications regulators and even hefty fines are applied on the service providers who provide poor quality. So all the factor stands to reduce the number of the entrant in the excommunications sector.
Rivalry or competition level: The company is facing tough competition in the market from the competitors like BT and SKY and this has mad the competition level intense. Then people are more reliant on internet facilities due to which the market players keep reducing the prices and the investments done by each of them is done very cautiously. They have brand loyalty and strong brand names. Each of them have their unique advantages which makes users to switch the brands. The Sky network offer high television services to their customers and this way they are able to retain its customers even if the company Virgin Media has a superior high speed internet network. The customers also prefer to take all the services from one provider of services as many advantages are attached to this. The switching costs are high due to which Virgin Media is not able to increase its market share in the market.
Power of suppliers: The cost leadership can be maintained in the market if the control can be exercises over the supplier powers. This helps in getting economies of scale. Many competitors are present in this sector and this way the suppliers demand high prices for the services they offer to the companies. They even may refuse to work with nay company if the demands are not met and then they immediately make the decision to provide the services to their competitors. For example, the company Sky charges wholesale prices to their competitors and charge the high wholesale prices to the competitors which also includes the Virgin Media for displaying the premium offerings (Virgin Media employs managed-learning company, 2011). They have all the associated rights of bard casting and that of sports channels in the market. So this way they have become a dominant factor in the market and this way the companies like Virgin Media are not able to match its competitiveness.
Threat of substitutes: Many players exist like in the bundled services market exist Sky and BT and in the individual segment market exists Vodaphone Talk are in the individual market segment. They all offer comparatively similar services at the competitive prices and this way it becomes difficult for the customers to choose among the services (Asad, 2012). A new sports fan would automatically switch to the Sky Network without paying much attention to the quality provided by the other companies or brands. The customers may sometimes be tempted to switch the brands due to better services. So chances exist that the company Virgin may lose its customers at any time if their competitor BT offers better services to the people.
Even in the case of the network congestion, Virgin Media struggles of providing the network speed and this causes a lot of problem to internet users. If a rival companies provides services whereon speed problem exist, then user may easily switch the brands.
Buyer power: Each of the service provider concentrates on the minimizing the churn rate so the customers enjoys a lot of bargaining power. the service providers have to keep offering discounts and services ate cheap rates. Virgin Media is forced to renegotiate the deals with the customers. This way the bargaining power of the buyers is very string factor.
This is the five force analysis of Porter which is being analyzed for the company for the company and this understanding is important for knowing that the firm has a competitive advantages exist for a firm or not.
Bowman’s Strategic Clock
This is model which helps in exploring the options available with the companies for doing its strategic positioning in the market which is that how product must be positioned in the market so that it gets the best competitive position in the market (ToolsHero, 2018). The Bowman’s Strategic clock helps in illustrating that which options must be used by a business to position itself in the market and this is done based on two dimensions which are the perceived value and the price (tutor2u, 2018).
There are about 8 positions which are being considered in this model and each one tells about how a company must try to stay ahead of others. The explanation of each of position is as follows:
Low added value and price: This is when the low quality is offered to people at low prices.
Low price strategy in which prices are kept low and the differentiation source only form selling high volumes.
Hybrid: This means the usage of both the low price along with product differentiation so that the customers feel that the company is offering the best value on the money invested by them.
Differentiation: In this the customers get the highest perceived added value and this is done by branding or by relating to high quality.
Focus differentiation: This is to position products as the highest price levels but with best quality at the same time.
Risky high margins: this is a risky proposition as the prices are kept high even without offering any perceived value to the customers, if the customers would purchase at this price then the concern would be able to earn high profits.
Monopoly pricing: This is done by monopolist concern where they would have to set prices high as they only exist in the market so the customers are left with no option.
Loss of market share: This is when the concerns offer the products with low perceived value at standard prices and this eventually results in the loss of the market share.
After doing a thought analysis of this Brown’s Clock Strategic analysis, the company seems to have options available at low price strategy and if in the case the company is able to offer something to customers which is unique and is still not been offered by any other competitor in the market then they can go for the focus differentiation. But after considering all the factors, it quite evident that the market of UK telecommunications sectors is highly competitive and the game is not of the profits but of the fact that which company would be able to generate maximum profits by selling more services. So the company to thrive itself in such a competitive environment has to also play on the low pricing strategy. In this they would have to offer high quality to the customers ate less prices and must try to make use of the opportunity to earn profits by selling more services to the people.
The company to get an edge has to come with new products which are distant form its competitors and then only it can expect to earn something extra from the products but at this point the best which can work for the company to make use of low price strategy as the price wars also happen at this position. Then gradually they may make use of the hybrid strategy in which the company can make the customers believe that this is the best value added services which are provided by the company. This position may prove very effective for the company especially when it would be able to offer consistent value added to the customers (Zabala-Iturriagagoitia, 2014).
The company must try to keep up with the pace as the media market is fast moving and the company must try to keep a control over the changing parameters in the market. They have to learn how to improve the convenience and efficacy of the products. The company has to increase their efficacy by making use of the physical evidence tools of the marketing mix. This is the only way that the productivity of the company can increase by making improvements to their service process. This a process or is a tool of marketing miss which aids the companies to understand the effectiveness of the service that are provided to the customers. They must keep on evaluating the manpower skills used at the company by taking constant feedback from them and also the comments of the customs through offline and online procedures. The company can easily come at position 1 of the media market but the company needs to make use of the integrated analysis by doing the quantitative and the qualitative research of the targeted market. They must keep on changing their strategies to stay ahead in the market and to be able to garb more market share in the market.
The report has aided in providing an updated of a telecommunication company operating in UK market named Virgin Media. The telecommunications market of UK is a very competitive market. The report has tried to evaluate the internal and the external environment of the company by making sue of various tools. The analysis of various component has suggested that what steps must be taken by the company in the future to ensure about its increasing market share in the market. The company needs to make use for many strategies so that it can be able to win more customers. The strategies planned by the company would mainly get influenced by the competitors existing in the market as the people in this market generally switch from brand to another.
Asad, M. (2012). Porter Five Forces vs Resource Based View - A Comparison. SSRN Electronic Journal.
DataFox. (2018). Top 5 Virgin Media competitors in the networks and telecom Industry.
GEMSTAR-TV GUIDE INTERNATIONAL INC v VIRGIN MEDIA LTD. (2011). Reports of Patent, Design and Trade Mark Cases, 128(10), pp.707-720.
Jurevicius, O. (2018). Is the VRIO Framework a Key to Competitive Advantage?.
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