Business Strategies of British Telecom: A Comprehensive Analysis

This assignment delves into the strategic orientation of British Telecom (BT), the UK's largest telecommunications company. It examines the company's external and internal environments using frameworks like Ansoff's growth matrix, VRIO model, SWOT analysis, and Bowman's strategic clock. The analysis explores the impact of political, economic, social, technological, environmental, and legal factors on BT's operations. It also evaluates the company's strengths, weaknesses, opportunities, and threats, and analyzes the competitive landscape of the UK telecommunications sector through Porter's Five Forces. Finally, the assignment provides recommendations for strategic options available to BT, outlining a strategic route for the company's future success.

2018
BUSINESS STRATEGIES
BRITISH TELECOMMUNICATION

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INTRODUCTION
The telecom sector in the UK is continuously growing and the emergence of new
technologies related to Artificial intelligence and Internet of things has made this sector
highly competitive. The current assignment will discuss the strategic orientation of
British Telecom (BT) which is the largest telecommunication company in the UK. The
assignment will highlight the external and internal environment of the company with the
help of different theories and models such as Ansoff growth matrix, VRIO model and
SWOT analysis. The external environment of the company is influenced by the large
number of telecommunication service providers in the UK such as O2, Giffgaff, Virgin
mobile, Vodafone, Three and Tesco mobile. In addition, new technologies such as SD-
Wan and cloud-based service applications require BT to strategically plan its research
and development activities so that it can maintain its competitive edge. To analyse the
strategic direction of BT communications and its competitive position in the market,
Bowman’s strategic clock will also be discussed which is helpful to understand different
strategies to be adopted to produce a differentiation of services from other rival
companies in the telecommunication sector.
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OVERVIEW OF BRITISH TELECOM (BT)
BT is a multinational telecommunication service provider based in the UK. Currently, BT
is operating in 180 countries of the world and it is the largest fixed line broadband and
mobile communication service provider in the UK. In January 2016, it acquired EE
communications and expanded its operation further in the UK. The digital
communication services of the company cover almost 90% of geographical area in the
UK and at present, it is planning its launch its 5G services in the UK (BT, 2018).
Figure 1: British Telecom
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TASK 1
THE EXTERNAL ENVIRONMENT
PESTEL ANALYSIS
The external environment of BT consists of different political, economic, technological
and environmental factors. How these factors influence the business operations and the
decision making of the company is explained below:
Political Factors
BT is operating in 180 countries of the world, which expose it to a variety of political
risks. These risks include the legal framework of the country, intellectual property
legislation, Industry safety regulations imposed by the government for employees and
the policies of the government regarding spectrum allocation to the foreign companies.
All these factors need to be considered by BT before entering a certain market.
Economic Factors
To implement new technologies such as SD-WAN and cloud-based mobile applications,
BT has to invest a large amount of capital in the research and development activities. In
addition, to provide connectivity in rural areas the company has to install new towers,
which increases the cost of operations of the company (Walker and Sankaran, 2014).
Social Factors
The internet penetration has been continuously increasing in all the emerging
economies which have opened a new market for BT. The use of internet-enabled
Smartphones has also been increased which has caused an increase in the demand for
fast internet. People use their smartphones for booking tickets, shopping and streaming
videos online which require high-speed internet.
Technological Factors
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The technology in the communication continuously keeps changing. From wire based
digital communication to wireless communication, the technology has always played an
important role in the telecommunication sector all over the world. New technologies in
communication sector are based on cloud-based computing and the company has to
manage its resources to apply these technologies in the business (Mithas, et al. 2013).
Environmental Factors
The regulatory authorities in communication sector in different parts of the world impose
different environment conservation laws on the companies working in
telecommunication sector which makes an impact on the operation of the company. In
addition, BT has to face telecommunication infrastructure damage due to bad weather
and storm in many countries of the world due to which the cost of the company is
increased (Kolios and Read, 2013).
Legal Factors
In telecommunication sector, different laws and legislation assuring the privacy of the
customers and data protection has to be followed by the companies. Any unauthorized
access to the database of the company can cause great danger to the personal data of
the users and can cause monetary loss to the company in the form of penalties and
fines. The cases of malicious calls and cybercrime also need to be checked in order to
provide safe and reliable services to the customers.
ANSOFF GROWTH VECTOR MATRIX
Ansoff’s matrix is a model which is used by companies to determine market growth
strategies. This matrix suggests strategies four alternative growth strategies. The output
of this analysis helps in deciding the strategic direction of the company. The four growth
strategies are given below:
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Figure2: Ansoff Growth Matrix Model
[Source: https://www.brighthubpm.com/risk-management/52974-the-ansoff-
growth-matrix-and-risk-management/]
Market penetration
In this strategy, the company tries to increase its market share by giving a variety of
promotional offers and increasing the marketing activities. The primary focus is on
increasing customer base by increasing the brand awareness (Taylor, 2012). The tools
used for this purpose include sales promotion offers, differential pricing strategies and
personal selling. Price reduction of products can also be done to attract new customers.
Market development
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This strategy is related to the introduction of products and services of the company in a
new market which is also termed as globalization. Globalization presents new
opportunities to the company for growth. The companies can increase their profit ratios
by achieving economies of scale. But the companies also have to face some political,
economic and technological risks while operating in a global market.
Product development
In this market growth strategy, the company aims to improve the existing products by
adding some extra features and making the product more useful for the customer. For
this purpose, companies increase their research and development activities and focus
on introducing a new path-breaking technology which can provide a competitive edge to
the company and the company can increase its customer base (Hussain, et al. 2013).
This may also include conducting market research and analyze the demand of the
customer regarding additional features in the product.
Diversification
The diversification strategy includes launching a new product in the market. The need
for this strategy arises due to moderate sales of the existing products of the company.
The company invests heavily in the marketing of this new product to establish brand
awareness in the market. The pricing strategies also play an important role in this
market growth strategy.
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M1 ANALYZE THE MACRO ENVIRONMENT AND HOW IT DETERMINES BT’S
STRATEGIC MANAGEMENT DECISIONS
The macro environment of BT consists of the political, economic and technological
situations in the country and the position of competitors in the market. The political
factors include the policies of the government and different regulation which are
imposed by the regulatory authority of telecommunication sector in different countries.
These policies make an impact on the strategic direction of the company. The economic
policies of a country inflation rate, interest rate and foreign exchange rate influence the
operations and the profit-making capability of the company and need to be analyzed
before expanding in a new market (Bharadwaj, et al. 2013). The social factors in a
country like education rate and use of technology also influences the operation of BT.
The use of smartphones has been increased in the UK very rapidly which has increased
the demand for fast internet services. The position of the market and the services
provided by the competitors such as Vodafone, Giffgaff and Virgin mobile also need to
be studied.
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TASK 2
THE INTERNAL ENVIRONMENT AND ORGANIZATION CAPABILITIES
VRIO ANALYSIS
VRIO is a tool used to analyze the internal resources and capabilities of the company.
The internal resources include services, machinery, products and employees of the
company. VRIO analyses the competitive potential of these resources in the market,
and the criteria for evaluation is the degree of imitability, rarity, value and the internal
structure of the company. These factors are explained below:
Figure3: VRIO Analysis
[Source: http://www.business-to-you.com/vrio-from-firm-resources-to-
competitive-advantage/]
Value
This is the basic question to be asked about the firm. Are the resources which are
possessed by the company proving value for it? The resources of the company should
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be able to provide an excellent value to the customers. These resources can be tangible
such as man, machinery, products, and it can also be intangible such as services or
brand recognition of the company (Simão and Diaz, 2013.).
Rarity
The rarity in a product or service provides a competitive advantage to the company. For
example, the products and services of Apple are unique and are able to create a
competitive edge in the market.
Imitability
Another question to be asked in the VRIO analyses is, whether the unique products or
services of the company are imitable or not? If the products of the services of the
company are easily imitable then the competitors will be able to gain a competitive edge
in the market. The uniqueness can be in a product, service or skill of an employee. By
analyzing the degree of imitability of a product, the company can apply for intellectual
property registration.
Organization
The company will be able to take benefit from the resources which have value, are rare,
and are not imitable, only if the organizational structure and the management of the
company are in line with all these positive qualities in the company’s resources. If the
employee management is not well and the company does not have any reward and
recognition policy for this uniqueness, it cannot be sustained for a long time (Cardeal
and Antonio, 2012).
SWOT ANALYSIS OF BT
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STRENGTHS
 Global telecom service provider with
operations in 180 cities.
 BT is successfully operating 26 million
telephone lines in the UK.
 Strong brand awareness in different
countries of the world.
WEAKNESSES
 Not being able to provide 100%
geographical coverage in the UK
 Occasional call drop and problems of
loss in connectivity.
 Limited liquidity in the UK telecom
market.
OPPORTUNITIES
 Opportunities to provide cheaper
services with the use of VOIP
technology
 Quick growth in the number of
Smartphone users in The UK.
 Opportunities to expand the business
in Smartphone accessories.
THREATS
 Tough competition is given by
Vodafone and O2 (Madsen and
Walker, 2015).
 New regulations in the
telecommunication sector by Ofcom
 Impact on the profitability of BT due to
the devaluation of GBP
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M2 EVALUATE THE STRENGTHS AND WEAKNESSES OF BT’s INTERNAL
CAPABILITIES, STRUCTURE AND SKILL SET
British telecom is providing telecommunication services in the UK for a long time and at
present; it has expanded its operations in a number of countries. The strength of the
company lies in the wide area of its operations. To carry operations in such a large
number of locations the company has to strategically manage the workforce of more
than 106,400 employees. The marketing strategy of the company is also one of its
strengths. The company regularly sponsors Scotland’s rugby league. In 2017, BT
extended its partnership with Scottish Rugby Union.
In 2008, the company was widely criticized for behavioural targeting, which is a
technology to track the web browsing behaviour of the users and use this data to
increase the effectiveness of marketing programs of the company. The company used a
private spyware company for this purpose. This incidence has caused a lot of negative
publicity for the company. In addition, the weak network of the company in some part of
the UK and regular complaints of the customers regarding call drop and congestion in
the network is a weakness of BT which needs to be improved (Franz and Kirchmer,
2012)
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TASK 3 ANALYSING COMPETITIVENESS OF THE UK’S
TELECOMMUNICATION SECTOR THROUGH PORTER FIVE FORCES
OF MARKET
In the telecom sector of UK, is highly advanced and is serving the people with the latest
technologies and services with a variety of costs and quality which differs from one
company to another. There are companies like BT, EE, Vodafone, Virgin and many
more working separately and satisfying people. Still, there are some concerns for these
companies and the people related to the businesses from the different forces present in
the market. Hence, the analysis of the telecom industry of UK is done through Porter's
Five Forces and is illustrated below:
The threat of New Entrants – the costs involved with the licencing at initial stages
need of high-end infrastructure, synchronisation with the fast-changing technology and
the low switching costs of the customers basically hinders new businesses to enter in
the telecom markets of the UK. While at the same time ease in the access through the
marketing channels makes it easier for the existing multinational companies so that they
can make their business successful and hinder other's (Crawford, 2013).
The threat of Substitutes – with the world of high tech business management and
operations, the competition level in the markets os increasing regularly and similarly in
Britain the telecom industry is at its height in terms of competition level with the
presence of world-class multinational companies like BT, Vodafone, Virgin etc.
Bargaining Power of Buyers – all the business strategies and made in accordance
with the customer needs and market requirements and hence the companies like BT
are always ready in search of finding new business fields so that they can attract more
number of customers and make them satisfied more than others (Crawford, 2013).
Bargaining power of Suppliers – generally, this industry operates on its own strengths
and resources and hence this is not a major field of concern for the companies
operating in the telecom industry of the UK.
Industrial Rivalry – at last, this is a field which is also affected by the other forces and
the factors involved in the businesses. But due to the eagerness to earn more revenue,
market power, dominance over others, create large customer base forces companies to
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implement strategies which creates differences between them and generates situations
of rivalry among each other.
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TASK 4
STRATEGIC OPTIONS AVAILABLE FOR THE COMPANY
Strategic directions are the actions that are performed to make an organisation
successful and lead it towards the defined goals and objectives of the company. In the
UK, there are already several telecom companies that are working efficiently and
making a tough and competitive market for others. For the companies like BT, there are
several opportunities available in the markets regarding the business expansion, sales
enhancement, financial directions and many more. BT is operating very firmly and
making its customers successful every day but is still searching for some new business
strategic directions so that they can easily achieve their targets with less use of
resources (Ram and Montibeller, 2013). Hence, for the BT, Bowman’s Strategic Clock
has been described below which depicts available strategic directions available to the
company.
Figure 2: Bowman’s Strategic Clock Model]
Source: [https://www.tutor2u.net/business/reference/strategic-positioning-bowmans-
strategy-clock]
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The Bowman's Strategic Clock is one of the best model tops define and identify the
value and supporting strategic directions for the business, especially for gaining a
strategic position in the markets. For the BT, the different directions available are
described below in eight different positions.
Low price and Low value – generally, this is not a potential position for the company
as here, the customers and the products are given less value with low differentiation.
While the strategies of the company are designed towards the low-cost marketing and
sales strategies which are defined in the bargain basement strategies of the BT group.
Low Price – company has low-cost fibres, SIM plans, broadband deals and many more
things for entertainment at very low prices than others which shows BT's low-cost
positioning strategy. Further, in future also, with the lots of experience, the company can
make more strategic costs to create a large customer base and give a tough
competition to others.
Hybrid – this field of Bowman’s strategies includes both the low price and differentiation
products according to the competition level in the markets and hence with the large
range of products, BT can use this hybrid strategic field (Shakhshir, 2014).
Differentiation – the major aim of the differentiation of the products and services is to
target a specific group of people according to their capabilities and requirements. BT
group can involve this strategy for attaining high market values and a successful brand
name.
Focused Differentiation – with the high end and high-cost products, to show the high
perceived value products companies use focused differentiation strategies. Generally,
this type of positioning is adopted by large multinational brands and hence it shows the
strengths of the BT group.
Risky High Margins – with the very high end and high perceived value products
company can use this strategic positioning direction but this is a complex field where
using and involving it can doom the company towards big failures.
Monopoly Pricing – being a single telecom services provider in many regions BT
group has the opportunity to make some strategic valuable positioning strategy which
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can generate high revenue for the company and enhance its market position (Eyvrigh,
2016).
Loss of Market Share – in the competitive market of UK with several other fast-growing
companies, the risks are always present in the markets. Here companies use their low-
end products and strategies which are always unlikely to win the eye of the customers
of the location.
Whereas, with the above mentioned strategic directions available for the BT group
especially in the UK, there is a theory given by Michael Porter of Porter Generic
Strategies, where there is four major fields of cost leadership, cost focus, differentiation
and differentiation focus (Tanwar, 2013). According to Porter, these are the strategic
ways to make any business sustainable and efficient. Regards to the cost leadership, as
mentioned above, BT can enhance the market position through delivering the best
products and services with high quality at comparatively very low prices whereas, in the
cost focus field, BT can make some strategic costs for some specific group of people. In
the cost-focused strategy, the segmentation has to be done according to the market and
customer requirements so that company can attain their business goals and objectives
by making people satisfied (Mckeown, 2012).
While in the same scenario, the BT group can implement some segmentation and
targeting so that firm can attain a unique position in the markets. Whereas in the
focused market differentiation strategic company should make their internal business
stable first so that can handle the aggressive mode of growth in the markets and hence
further attain market positions. These two segments in the focus field are different in
implementation and target audience of the company. In cost focus, a firm seeks to have
a customer base by selling products and services at low costs and in differentiation a
firm seeks to target some new groups of people and then implement effective marketing
and positioning strategies.
RECOMMENDATIONS WITH STRATEGIC ROUTE AND CONCLUSION
For the companies like BT group in the UK, by serving the people and making the best
in the telecom industry by giving value to the people, regular customers and all the
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stakeholders of the business, in the markets there are several strategic options
available for the company. With respect to the costing, marketing, customer service and
other business functions all the profitable fields for BT are open and hence they can
make the best out of their business. Further, the use of the Bowman's strategic clock
and other tools like Porter's generic strategies they can use their skills and strengths for
delivering the best products and the services which are far away from the current
standards present in the markets. Moreover, for making some immediate actions and
their implementation, BT can implement strategies by following the sequential
procedure of:
Immediate action - by developing some immediate and urgent plans regarding the
mission, vision and goals of the company, at the same time they can develop a
business portfolio for new markets, products and strategies for future with internal team
and employee's management.
Midterm actions – make effective use of the strategies, technology and the resources
available with the company. In addition to this, where they can make their supply chain,
procurement processes and other aspects effective (Gassmann, et al. 2010).
Long-term actions – distribution of the resources of the company, cost management,
market development and product development according to the availability and capacity
of the company.
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CONCLUSION
British Telecom is the largest telecommunication service provider in the United
Kingdom. The current assignment discussed the business strategy of the company to
market its services and the external environment of the company which is making an
impact on the strategic decision making of the company. The external environment of
the company includes the political and economic situations in the UK and the use of
technology in the telecommunication sector, some new technologies related with
artificial intelligence has revolutionised this sector and the technology of Voice over
internet protocol (VOIP) has made it possible to provide high-speed internet to each and
every person at affordable prices. The assignment also highlighted the marketing
strategy of the company to create a competitive edge in the digital communication
market.
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