Macro Environment Influence on Strategic Management Decisions of an Enterprise

BUSINESS STRATEGY INTRODUCTION 3 MAIN BODY3 LO 1 3 P1Analysis of appropriate frameworks and their influence on macro environment on give organisations and their strategies. 7 M3 Appropriate Strategies.8 LO 4 8 P4 Strategic plan and application of Ansoff matrix and Bowman's Strategy Clock.8 M4 Strategic Plan. Further, this report highlights application of Porter's 5 force analysis and application of Bowman's Model and Ansoff matrix to determine the proper market strategies to

BUSINESS STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
LO 1.................................................................................................................................................3
P1 Analysis of appropriate frameworks and their influence on macro environment on give
organisations and their strategies............................................................................................3
M1 Critical analysis of strategic management decisions.......................................................5
LO 2.................................................................................................................................................5
P2 Analysis of internal model through applying VRIN model..............................................5
M2 Swot Analysis to conduct internal analysis of the company............................................6
LO 3.................................................................................................................................................7
P3 Porter's Five Force Analysis for evaluating the competitive environment.......................7
M3 Appropriate Strategies.....................................................................................................8
LO 4.................................................................................................................................................8
P4 Strategic plan and application of Ansoff matrix and Bowman's Strategy Clock..............8
M4 Strategic Plan.................................................................................................................10
D1 A set of strategic directions and actions.........................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business Strategy can be defined as a defined set of actions or plans formulated to be
implemented on the business operations so that the required targets and goals of the company
can be achieved. O2 Company is a leading telecommunication firm operating in the UK and to
become a leader in the particular field of telecom industry, it is necessary that they formulate
proper business strategies. This report highlights the macro environment surrounding it through
proper analysis along with the analysis of the framework for both internal and external
environment. Further, this report highlights application of Porter's 5 force analysis and
application of Bowman's Model and Ansoff matrix to determine the proper market strategies to
be implemented.
MAIN BODY
LO 1
P1 Analysis of appropriate frameworks and their influence on macro environment on give
organisations and their strategies.
The business environment is the integrated effect of internal environment of a firm and its
external environment that surround the industry in which it is operating. There are many factors
that tare involved in a business environment and while internal factors can be controlled, external
factors can be controlled by the management of the company (Amran and et.al., 2016). O2
Company, to ascertain the positive or negative impact that these factors might have, conducts a
regular and efficient environmental scanning of both internal and external environment
surrounding the company.
To conduct the external environment analysis, analysing the PESTLE factors is the best
technique :-
Political Factor :- The various government laws and regulations have been experiencing many
issues. The rising issues of net neutrality and increasing usage of internet has been the two
milestones in the way the telecom industries adopt. Net neutrality however prevents telecom
industries in reducing data speeds. Governments do not fully understand the various problems
that arise in telecommunication sector. O2 company is hugely affected as there is regular
struggle between the government and telecommunication industries (Moseley III, 2017).
Economical Factors :- In the telecommunication industry, interest rates and the inflation,
deflation aspect are a very important in determining the growth or decline of an economy.
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Technology like internet and Wi-Fi are assisting factors in growth of any businesses. Also, the
process of various telecom services depend on different factors like location, customer base etc.
O2 company uses internet etc. to capture and target the entire market by expanding through
social media pages, websites etc. this has helped them in creating better marketing policies to
gather more customers.
Social Factors :- Expanding in rural areas is both difficult and expensive for the telecom sector
as the cost for developing and giving services in those areas is more than the returns generated
which are very slow (Akter and et.al., 2016). Hence, for companies like O2, horizontal growth is
very limited. Also, the limited number of options that a customer has in telecom sector, the
companies have created a monopoly. They are left with no other option but to buy the packages
and deals that they are provided with as communicating with friends, family, connecting with the
outside world, finding and developing careers through online mechanisms is the rising need of
the hour.
Technological Factor :- The rising need of telecom sector has led to development of a lot of
innovations in the telecom sector. O2 company has come up with the recent technological
innovation or replacing copper layering in their wire with fibre one. This has been copied by
many telecom companies as this reduces the cost and enhance the safety of the users. The
requirement of data connectivity all the time has led to the internet services being provided
through data packs which connect the users with outward world on their mobile phones(Higgins,
Omer and Phillips, 2015).
Legal Factors :- Regular innovation and upgrading of the technology used in telecommunication
sector has ultimately led to the public telecom sector and infrastructure being liberalized or
deregulated. Also, there has been a change on trend as the industry now gives access to import
and export of the products like mobile phones, tablets etc. and other devices. O2 company, is
frequently impacted by the different issues arising in this industry relating to legislation,
government etc.
Environmental Factors :- The risng temperatures leding to globalwarming and the frquent
change in the climat are raising the questions on the means adopted by the telecom ssector in
making their productsand services avalilable tot he customers (Buckley, Burton and Mirza,
2016). Also, the rising awareness regarding the harmful radiations that the towers set up for
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communcation cast need to be pondered upon s that some effective measure and method can be
developed for operating.
M1 Critical analysis of strategic management decisions.
The strategic mangemetn decisons take by O2 company's management can be evaluated using
stakeholder matrix, benchmarking indicators etc (Davies and Valero, 2017). Environmental
Scanning heps the company in analysign the various decision that the management should take in
order to fromulate successfuldecisions based on the Pestle analysis. The increased focus on the
various aspects like licensing, framework, universal and industry prices, competitor's policies
etc. in the telecom sector have also impacted this industry heavily. Along with this, the rising
development in the changing needs and wants of the customers has led to increase of the O2
company's profit and productivity chart.
LO 2
P2 Analysis of internal model through applying VRIN model.
VRIN Framework :- For evaluating resource of companies like O2, VRIN model is very
effective. It acts as a strong backup supporting the reasoning made through analysis of macro
environment using PESTLE analysis factors which can be used to study their impact on the
customer network of O2 Company (Echchakoui, 2018). VRIN can be used to correctly analyse
internal resources, opportunities and competitive advantage that will help the O2 company in
increasing its resources. Application of VRIN framework in integration with other analytical
tools will help the management in formulating a deeper insight regarding the policies that the
company should adopt in order to excel.
Value :- Here, the management focuses on development of those resources that can help the
company in garnering competitive advantage rather than emphasizing on those whose
availability is easy. This helps the company in gaining competitive advantage (Dawes, J., 2018).
Rareness :- When the resources that the company has, are available only to a select few then
those resources are considered rare. O2 company collects and develops these resources with
great care and take utmost steps in not loosing them.
Imitation :- When the resources that a particular company has are very difficult and costly to
imitate, it give the company an added benefit. The Human resource part of any company which
cannot be easily imitated or copied. O2 company adopts extra measure to retain those individuals
hose contribution level is extremely high.
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Non-substitutable :- In order to utilize full potential of the resources possessed by the company,
it is necessary to effectively implement those resources and ensure that no resources are left ideal
in the firm (Crisp And et.al., 2019).
M2 Swot Analysis to conduct internal analysis of the company.
Strengths
 O2 company has an excellent customer
base as they offer great services and
products to them.
 The company commands a great
reputation in their sector as they hold
many awards like Most Innovative
Community etc. which has raised their
goodwill.
 Their promotional strategies which the
firm has adopted and the tactics
adopted for formulation of business
strategies and policies are highly
efficient and productive.
 O2 company is also conducting many
charitable activities like conducting
CSR activities for Air Ambulance
Service and Teenage Cancer Trust
(Gurcaylilar-Yenidogan and Aksoy,
2018).
Weaknesses
 O2 is a small company at present and
does not entertains adequate staff or
call centres or offices that can assist
them in expanding their activities.
(Lawton, 2017)
 There is lack of availability of any
funds or sources which can be utilized
to conduct advertisement campaigns
and conduct marketing and promotional
activities to a greater extent.
 Slower Services, Lack of Employee
Loyalty etc. are a few factors that can
be accorded to the weakness that the
company has.
Opportunities
 The higher brand recognition and
customer base presents the company
with an opportunity to expand their
targeted market and go global.
 By developing online portal and
serving the requirements of customers,
Threats
Companies like EE Ltd., Vodafone etc. are
tough competitors of O2 and try to capture the
market of the company.
The availability of some services at cheaper
rates by the competitors like a scheme where
the handset + SIM at the price of handset etc.
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it will become easier for the
management to increase their sales.
 The ever changing technology in the
telecom sector and limited number of
competition can act as a plus point for
the O2 company in expanding their
business and move a step ahead from
their competitors.
are creating a loss of customers and revenue
for O2 company.
The emerging industries in telecom sector,
tightening regulations et are a few external
environment threats that the company is
currently facing (Moseley III, 2017).
LO 3
P3 Porter's Five Force Analysis for evaluating the competitive environment.
Michael Porter developed Porter's five force analysis for evaluating the present position
of company and the competitor's position in the industry. This helps in conducting competitive
analysis so that the actual position and hold of the competitor's in the industry can be identified.
For applying this model in the O2 company, following are the stages :-
Threat of new entrants :- The telecom industry requires a huge amount of investment as the
capital required in this industry is very high. Also, in this industry, profits generate after a long
time period and since the economies of scale cannot be practised, entry of new firms in the
market is very difficult and rare. The telecom industry is heavily regulated by the government
and obtaining license is very difficult. Even the government firms in this industry are strictly
regulated (Oldman and Tomkins, 2018). All these factor make the entry of new competitors in
this industry very difficult and the monopoly of the few existing firms is too high to break and
hence the new venturers avoid this segment.
Bargaining power of Suppliers :- There are a huge number of suppliers of the raw materials in
the telecom sector in which O2 company is operating. It is easier for companies like these to
switch over to the next supplier who is presenting the same products at possibly a lower range.
Hence, in this sector the bargaining power of suppliers is very low as the switching cost between
two suppliers is very low. This acts as a benefit for companies like O2 as they do not have to
worry about the availability of the raw materials and whenever the management of O2 feels that
the quality has been compromised with, they ca easily switch over to their next best option.
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Bargaining power of Buyers :- At present, the different firms operating in the telecom sector in
UK are giving similar products and services to the targeted customer base (Buckley, Burton and
Mirza, 2016). This has led to lack of manufacturer's control over the prices that they charge. Also
there is a high degree of price sensitivity as purchasing power of the targeted market segment is
weak. Thus by working on their marketing efforts, O2 can improve their customer base and
increase their number.
Threat of Substitute products and services :- At present, O2 is producing those products and
services which cannot be easily replaced in aspect of similar quality or quantity. O2 can garner
large amount of profits by effectively utilising these extra benefits as the quality that O2 provides
in the price charged by them is extremely good for their customers.
Rivalry amongst existing firms :- At present, the major competitors of O2 in this sector are EE
limited, BT Company and Vodafone Company. Hence, without properly evaluating the effect on
their competitors and predicting their reaction to the policies formed by O2 Company, the
management cannot launch any new scheme or policy for their customers (Yuliansyah, Rammal
and Rose, 2016). Hence, the cut throat competition in this industry makes it difficult to formulate
decisions without the proper analysis.
M3 Appropriate Strategies.
After conducting Porter's 5 force Analysis, it can be ascertained that at present the O2 company
holds a good position in the market and has a good customer base (Cramer, 2017). For, gaining
competitive advantage, the O2 company can :-
 Develop and adopt more marketing strategies for those products which have already been
developed so that more customers can be attracted like broadband services etc.
 Adopt those strategies which ill help the company in expanding on a global level.
 O2 Company, the management should launch any new scheme or policy for their
customers after proper market analysis along with its demand and supply analysis.
 By improving marketing efforts, O2 can increase their customer base.
LO 4
P4 Strategic plan and application of Ansoff matrix and Bowman's Strategy Clock.
In order to create a good holding position in the market and exploit maximum share in the
market by developing competitive advantage, it is important for telecommunication companies
like O2 need to formulate a proper strategic plans so that it can implement the strategies in UK
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accordingly. O2 is a leading telecommunication company operating in UK working in the field
of providing telecom products ad services to the customers. It is owned by Telefonica Company
which has its headquarters in Spain.
Ansoff's Vector Matrix :- O2 company, for analysing its strategic position can use Ansoff matrix
(The Ansoff Matrix, 2019). It will help the company in identifying the new markets and
redundant markets thus helping in better evaluation of profits.
Market Penetration :- It will help the O2 company in expanding its reach in the existing
markets through existing product line. Thorugh aggressive marketing strategies, O2 company can
aquire the market share of BT company which will help them in expanding broadbad services
market.
Market Development :- Under this the company is directed to expand into new markets through
their existing products (Akter and et.al., 2016). O2 company can expand its business by going
international like Vodafone which has its operations in many countries. This will help the O2
company in increasing their market share. It will help the company in utilising benefit of
economies of scale.
Product Development :- Here the company is expected to crate a new product which they can
use to serve the existing market. O2 company can launch new services of broadband having
speed of 100 Mbps which will help them in targeting more customers and hence increasing their
market share and profits.
Diversification :- Under this the company is advised to launch new products and services in an
entirely new market. There is an increased risk level under this strategy and this might lead to the
company being affected negatively.
Bowman's Strategy Clock Model :- This model is particularly used by marketers in the
company for evaluating the firm's position in the competitive environment in comparison to
other competitors in the industry. This was mainly used for analysing the competitive position of
the O2 company in the present environment (Bowman's Strategic Clock (Strategic Positioning),
2017). It was developed by Cliff Bowman and David Faulkner which was a further elaboration
of Porter's Generic Strategy. This model put forwards the 8 strategies that are possible by placing
them in 4 main quadrants. The axis comprises of the price of the products and their added value.
This results in a resemblance of a clock type structure thus generating the above name. The eight
strategies are :-
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Low price and low added value :- Here, the competition is very low as the product lacks any
differentiation quality and adds a little value, even thought he price is very low. Under this, the
management tries to price their product even lower than their competitors so that benefits can be
drawn.
Low price :- This is a stage of Low cost leaders i.e. for capturing the market, management needs
to lower their rices and this can be achieved only when economies of scale is practised.
Hybrid :- Here although the price is relatively lower, yet the product has some differentiation
qualities in it and hence the consumers perceive that there is some added value.
Differentiation :- Here, the focus is on providing high degree of differentiation to the customers
by providing a very high value added product (Scholes, 2015). This helps in creating brand value
and increase the loyalty amongst customers.
Focused differentiation :- In this stage, the prices of the product are high and their sale is also
high as the customers expect a higher degree of value. It targets a premium segment by charging
high prices.
Risky High Margins :- When a product is classified under this strategy, it ultimately turns into a
loss making sector after initial stage of generating a huge number of profits. The products are
highly priced and the value added is not that high. So customers find its replacement quick
enough.
Monopoly market pricing :- Here, there is a single entity offering the product and the buyers
have no other option except to buy what the sellers intend to sell and at the price they quote
(Higgins, Omer and Phillips, 2015).
Loss of market share :- This strategy is perceived to be a complete failure where the pricing is
at middle level ad the value derived is lower. Thus consumers have to be won over to target
them.
Using this model, O2 Company can analyse how they should place their products so that they
can utilize the maximum benefits in the competitive environment. This can be used to increase
the value of the product s and services provided by the so that there can be grater impact.
M4 Strategic Plan.
O2 can become more competitive and stronger by clearly formulating plans and strategies
so that they can achieve the position that they aim to achieve (Amran and et.al., 2016). There is
very limited availability of resources in this industry and the management has to utilize their
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resources in the best way. For this, the management need to identify the opportunities and threats
in the existing market so that they expand in the market on a global level and compete with other
competitors. For implementing the strategic plan to achieve the desired goals, the management of
O2 company should focus on following elements :- Customers, Owners, Government legislation,
vendors etc.
D1 A set of strategic directions and actions.
The implementation of the plan is not an only concern for the management as they have
to continuously evaluate and monitor that the plans have been implemented in the way that they
require. The leaders and mangers have to continuously evaluate and revaluate the plan and its
implementation. O2 Company should analyse the manner in which they should position their
products so that maximum benefits can be utilized in the competitive environment. This will
help them in redirecting their efforts towards removal of any deviations if they occur and adopt
appropriate methods for implementing those strategies. At present, O2 Company should avoid
adoption of this strategy as such diversification can create a loss making situation for company
with its present level of expertise and knowledge. And, it is important for companies like O2
operating in the telecom sector to formulate strategic plans. The strategy formulated can be
implemented in the manner which can either affect a company in a positive manner or in a
negative manner.
CONCLUSION
After going through the research conducted in above report, it can be concluded that for proper
analysis of external environment, PESTLE analysis is very important. Application of VRIN
model helps in the analysis of internal environment and the management can take better
decisions by conducting SWOT analysis. Further, this report also applied Ansoff matrix to
analyse the market position of the O2 company at present and how they should expand further.
The competitive environment has been analysed using the Porter's five forces and all the aspects
concerning the industry in which they operate have been identified. Lastly, this report presented
a strategic plan that would assist the management in further expansion and Bowman's Strategic
Clock Model was discussed so that the various strategies could be identified.
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