EE Limited: A Strategic Analysis of the UK Telecommunications Sector

This assignment examines the strategic position of EE Limited, the largest mobile network operator in the UK, within the rapidly evolving telecommunications sector. It analyzes the company's external environment using PESTEL and Ansoff's growth matrix, and its internal environment through SWOT and VRIO frameworks. The study also applies Porter's Five Forces model to assess the competitive landscape and Bowman's Strategy Clock to understand EE's strategic positioning. The analysis provides insights into the challenges and opportunities facing EE and suggests strategic directions for the company to maintain its market leadership.

BUSINESS STRATEGY

Table of Contents
INTRODUCTION................................................................................................................................2
Task 1...............................................................................................................................................3
THE EXTERNAL ENVIRONMENT...................................................................................................3
Task 2.............................................................................................................................................10
THE INTERNAL ENVIRONMENT AND ORGANIZATION CAPABILITIES.........................................10
Task 3.............................................................................................................................................15
ANALYZING THE TELECOMMUNICATIONS SECTOR...................................................................15
Task 4.............................................................................................................................................18
UNDERSTANDING AND INTERPRETING STRATEGIC DIRECTION................................................18
CONCLUSION.................................................................................................................................22
REFERENCES...................................................................................................................................23

INTRODUCTION
Digital communication sector is a fast-growing sector and is one of the biggest contributing
sectors in the UK economy and has generated revenue £3.8bn in the first quarter of 2017. The
major telecom companies in the UK are EE, O2, Vodafone, Virgin, Giffgaff and BT. The telecom
companies are fighting hard to survive in the market and retain their market share ( Bhardwaj,
et al. 2013).
The current assignment will highlight the strategies adopted by EE digital communications to
maintain their current market position and increase their market share in the upcoming future.
A study is done on the macro environment of the company with the help of PESTEL analysis
which analyses the external political, economic, social environment of the company.
To determine company’s strategic position in the market the Ansoff’s growth vector model is
explained. The assignment will also analyze the microenvironment of the company with the
help of VRIO model and discuss the strength and weaknesses of the company on the internal
level. To analyze the competitive environment of the company Porter's five force model will be
studied which focuses on the bargaining power of customers and suppliers and the threat of
substitutes and new entrants (Hoejmose, et al. 2013).

Task 1
THE EXTERNAL ENVIRONMENT
Company overview
EE telecommunication is the largest mobile network service provider in the UK. EE was the first
company to launch 4G services in the UK and has a customer base of 30 million users. The
company provides the services of fixed-line telephone, Mobile Telephony, Broadband and
Digital TV. The company provides its services in retail as well as B2B transactions.
The company also sells handsets and other mobile phone accessories.
Figure 1: EE Limited
[Source: http://www.gadgethelpline.com/free-limited-edition-payg-4g-sim-ee-radio-1-djs/]

PESTEL ANALYSIS
EE limited is the leading company in the telecom sector in the UK. The company is facing a
tough competition from the rivalry companies (Newton, 2014). In addition to this, other macro
factors like political, economic, technical, legal, environmental factors are making an impact on
the policy and decision making of the company. The company has been a leader in providing 4G
services and has maintained its position as the largest mobile network operator in the
company. To ensure the efficient operations of the organization the company should analyze all
the macro factors which are discussed below:
Political Factors
The telecom sector is regulated in the UK by Ofcom, which is an independent regulator of the
communication service providers in the UK. Therefore the political factors do not have any
direct influence on the telecommunication industry (Ho, 2014). In addition to this, the
government gives financial and technical support to the companies to expand their network to
every corner of the UK, especially in the rural areas. After the public vote for leaving European
Union, many trade restrictions have been imposed upon the telecom industry which is also
make an impact on the operations and profitability of EE.
Economic Factors
The economic conditions of the UK are improving after the 2008 recession and there has been a
rise in the disposable income of the population. This economic growth has increased the use of
smartphone among every age group and the usage is expected to increase in future also,
however the facilities are not as good in the rural areas, and the company has to invest in
installing more towers in the areas. In addition to this, the advertising via digital media and
expenses of erecting new towers and other infrastructure has increased the overall expenses of
the company.

Social Factors
The use of mobile phones and digital technologies related to internet is sharply increasing and
there has been a rapid increase in the use of smartphones in the daily lives of the people.
People use their smartphones for watching videos, listening to their favourite music, online
booking of tickets, internet surfing and for social networking websites like Facebook, Instagram,
Twitter. For using all these services the users require fast 3G and 4G internet services.
According to a survey, by 2023 almost 92 percent of UK’s population will be using smartphones,
including all the age groups. To cater the needs of such a large number of customers the
company has to expand its systems (Kolios and Read, 2013).
Technological Factors
The technology of mobile communication has developed very rapidly. The digital
communication technology has been upgraded to 4G LTE services. The EE limited was the first
company to introduce 4G services in the UK in the year 2012, but competitors such as Vodafone
and O2 have also launched their 4G services and the competition is intense. However, the 4G
services have not been reached to the entire UK especially rural areas. To make these fast
internet services available in all the areas, the company has to increase the manpower and do
many technological changes in the operations. Countries like Japan have already started
working on fifth generation communication services. The company should follow a proactive
approach to research and development for these facilities and development of infrastructure
for these services.
Environmental Factors
The digital communications do not have any direct ill effect on the environment but they have
many indirect effects such as people switching to new mobile phones and discarding the older
ones, this is creating a large amount of e-waste. There have been many concerns regarding the
usage of clean energy sources and reducing the carbon emission.

Legal Factors
EE limited has to follow many regulations related to the communication of digital services.
These regulations are governed and monitored by the telecom industry regulatory authority of
the UK, Ofcom. These regulations are related to the usage of broadband spectrum and the
quality of 4G services. The legislation regarding monopoly and net neutrality and importing
sophisticated communication devices from other countries has caused some trouble to the
company.
The security breaches into the systems of many telecommunication companies have caused
penalties to these companies. So much data is being transferred on the internet on daily basis;
the hackers take advantage of the vulnerabilities in the cyber security systems of the companies
and use the confidential data for illegal activities. The data protection act 1998 ensures that all
the data must be processed by the telecom companies lawfully.
ANSOFF GROWTH MATRIX MODEL
Ansoff’s growth matrix model is a tool which is used by managers to plan the growth strategies
in future, which is done by producing new products or developing the existing products. With
the help of this model, a brainstorming can be done on all the possible strategic options
(Hussain, et al. 2013).

Figure: Ansoff Growth Matrix Model
[Source: https://www.brighthubpm.com/risk-management/52974-the-ansoff-growth-matrix-
and-risk-management/]
Market penetration
In market penetration strategy, the company tries to increase the sales or the number of
customers in the existing market. This is achieved by increasing promotional activities and
adopting competitive pricing strategies, the primary purpose is to increase the usage of the
existing customers. In this strategy, the focus is on the markets and products which are well
known to the company. The strategy has lesser risks but it requires greater investments in
research and development activities.

Market development
In this strategy, the company tries to expand its operation to new markets within the country or
outside the country. This can be achieved by exporting the products in a foreign country and
changing the packaging or adopting new pricing strategy to attract customers in the new
market. This is a risky strategy as compared to the market penetration because the company
has to enter a completely new market and many external factors like political, economic and
legal situations in the host country need to be analyzed before entering (Taylor, 2012).
Product development
In this type of strategy, the company expands the current product range and develops new
products in the existing market. This can be done through a number of ways, like doing
research and development activities, producing new products by collaborating with other
companies or buying the semi-finished products from other companies and selling it by
company’s own brand name.
The product development is done to apply the changes in the technology over the time and to
counter the launch of advanced products by the competitors. To become successful, the
company has to identify the customer needs and preferences and develop products based on
these inputs.
Diversification
In this strategy the company tries to introduce new products in completely new areas of
business, this is a very risky strategy as the company is entering a new market with little or no
experience. Therefore careful assessment of the risk involved in the business becomes very
important. After assessing all the risks involved, a strategy of diversification can be
implemented. The diversification means expanding the operations in new categories but before
entering a new category the company should do proper analysis on the marketing mixes like

people, place and price. After analyzing these factors the company should finalize its plan to
apply the diversification process.

Task 2
THE INTERNAL ENVIRONMENT AND ORGANIZATION CAPABILITIES
VRIO ANALYSIS
VRIO is an analytical tool which is used for the evaluation of company’s resources and the
competitive position. A company can have resources in the form of land machinery, people,
process or systems. All these resources are unique assets of the company and the competitors
can try to imitate these resources. If they provide the same services in the lower price range it
can reduce the company's market share (Cardeal and Antonio, 2012). In order to maintain its
competitive advantage, the company should strategically manage these resources. Effectively
managing these unique resources can help the company increase its overall market share. The
four questions- are the resources Valuable, rare, imitable and organized are discussed below:
Figure: VRIO Analysis
[Source: http://www.business-to-you.com/vrio-from-firm-resources-to-competitive-
advantage/]

Value
If a resource is helpful in taking advantage of the market conditions then it has a value to the
company. By knowing the exact capability of a resource, managers can take the right decisions
regarding the utilization of these resources for achieving a particular goal. The resources can be
tangible or intangible. The tangible resources include land, machinery and these resources do
not play an active role in gaining competitive advantage, but intangible resources such as brand
value, intellectual property, and unique methodologies related to training or leadership can
offer a competitive edge over rivals. These resources may also include a good relationship with
customers or suppliers and unique skills of the employees, all these assets are the valuable
resources for the company.
Rarity
Rarity is some quality in an organization that is very valuable and rare. These rare resources can
help the organization take a lead over the rivals. A manager having unique leadership qualities
or an employee having unique work skills, all these assets are rare resources for the company.
The company should take strategic decisions to safeguard these unique resources. If the rarity
is in the human resource then the company should make proactive efforts in retaining the
talented employees in the organization (Simão and Diaz, 2013).
Imitability
Imitation is very common phenomena in the competitive business. Companies try to imitate
the successful products of the rival companies and launch a similar product in a lower price
range. The prices are always kept less than the initial entrant, as it already has brand
recognition. In a competitive business, an analysis should be made on the possibility of
imitability of a product or service. If the imitation can be done easily then how much will it cost,
based on these inputs the company can decide its strategies such as applying for the patent and
other legal options.

Organization
At last, the question arises that whether the company is ready to take benefits of the
competitive advantage of value, rarity and imitability. At this stage the managers should
organize the functions and structure of an organization to have a competitive advantage over
the rivals. The management should design reward and bonus programs to retain the talented
employees If these systems are not in place the employee may switch to a rival company.
EE’s VRIO capability
Valuable? Rare? Costly to imitate? Is company organized to
exploit this?
YES YES YES YES
EE Limited’s most valuable asset is the strength of 13000 employees across the UK. The
company follows a strong and efficient recruitment process and keeps the employees
motivated by the means of rewards and bonuses. Special training programs are conducted for
the employees to provide the skills to communicate effectively with the customers. The
company also maintains complete employee database with the help of advanced software
programs. All these resources are unique and are hard to imitate for any rival company.
SWOT ANALYSIS
Strengths
 A large customer base of 30 million user
 The company has the largest coverage of 4G network across the UK

 The company also has the largest number of stores in the UK which is around 600,
including 100 franchise stores
 The company has established itself as the market leader by becoming the first company
to provide 4G services in the UK and provides its services to around 70% population of
the UK (Sevkli, et al, 2012)
 The company sponsors big football tournaments every season which has increased its
brand visibility.
Weaknesses
 The company was started in 2010 and has a weak brand recall as compared to the
already established brands like Vodafone and BT
 There have been many issues regarding weak signals and lower connectivity. Last year
the 4G services of EE were stopped for a day, all across the UK. Incidences like this,
create a negative brand image of the company (chen, et al. 2014)
 Over recent years the company has been focusing on B2B business and in the process,
has loosed its grip on the retail segment and individual customers
Opportunities
 Increasing Smartphone usage and tremendous growth prospects in the telecom
industry
 As EE limited is the largest 4G services provider in the UK and has developed
excellent infrastructure for these services, the company has a good platform to
provide 4G LTE services in the B2B sector
 The company can expand its business by selling 4G enabled devices and other
accessories related to the 4G services (van, et al. 2012)
Threat

 Competitors like O2 and Vodafone have also launched their 4G services and are giving a
tough competition to the EE telecom. In future, the company may also lose its market
share due to these competitive forces
 The launch of internet calling services (VOIP) by the competitors has also shifted some
of the customer base of the company to these rival companies

Task 3
ANALYZING THE TELECOMMUNICATIONS SECTOR
PORTERS FIVE FORCES ANALYSIS
Porter Five Forces Model is a tool to identify the forces which can make an impact on the
competitive environment of a company (Dobbs, 2012). After carefully analysing these forces,
the top management can design strategies to face these forces and increase company’s
profitability ratio.
Industry rivalry: High risk
The digital combination industry in the UK is highly competitive with many big players in the
market like Vodafone, O2 and BT; these companies are following aggressive marketing policies
and have lowered the prices of their packages. In the digital TV segment companies like SKY and
Virgin are giving tough competition to EE. These companies are providing cheaper packages
with other added promotional schemes like a free subscription for new customers.EE should
keep itself aware of all the moves by the competitors and the unique qualities of their product,
and after detailed analysis the top management should design the most appropriate strategies
to maintain its competitive advantage.
High competition in the market reduces the profitability of the company as the expenses of the
company increases in developing new products in order to face the competition given by new
launches by the rival companies (Yunna and Yisheng, 2014).
The threat of new entrants: Low risk

The threat of new entrant for EE limited is low as entering into telecom sector requires huge
capital investment in Towers installation, research and development and other infrastructure
development. New companies have to do great investments in the research and development
of the new technology so that they can compete with the existing players in the market, but If
a company with large capital base enters the market, it can make big capital investments in the
telecom sector and can give tough competition to EE communications. In addition to this, EE
limited has a strong customer base and brand loyalty, to make a place among big companies
like EE, Vodafone and O2 is a difficult task for a new entrant (Mathooko and Ogutu, 2015).
The threat of substitutes: Medium risk
Voice over Internet protocol (VOIP) services like Skype, Viber and WhatsApp are providing free
internet telephony services and this is affecting the voice and the messaging services of the
company. According to a report by BBC, the mobile communication companies are losing
around 59 million pounds daily due to Skype. If the rival companies are providing the same
services at reduced prices there is a threat that the customers can switch to the rival company
products and it can badly affect the market share of the company. To retain its customer base
EE should focus on providing better services and diversify the product range (Lee, et al. 2012).
Bargaining power of the buyers: Medium risk
If the customers have an available choice in the same price range, the bargaining power of the
customer increase and they can demand lowering the price or providing better customer
services. If not satisfied with the services the customers can also opt for mobile operator
portability facilities. New plans launched by the competitors in a lower price range also
increases the bargaining power of the customer and the customer can also make a switch to
other companies which will reduce the market share of EE limited. The company should focus

on research and development activities and should provide better internet services at lower
cost.
The buyers include both retail as well as B2B customers. EE is the leader in providing 4G
services and hence it also supplies broadband spectrum to the businesses. If these buyers have
the option of other 4G suppliers who can provide these 4G spectrums at comparatively lower
prices then it increases the bargaining power of the buyer. EE should focus on good trade
relationship with the buyers to increase the brand loyalty.
Bargaining power of suppliers: Low risk
EE has switched to the 4G services but the coverage has not reached to all the parts of the
country. To expand this network to the remote locations, the company has to rely on the
suppliers. If the company has no alternative option other than the existing suppliers the
bargaining power of the suppliers increase and they can demand raise at their service prices.
EE has strong ties with the suppliers all across the UK and the suppliers stay committed to the
company due to large orders provided by the company. The company deals with a number of
suppliers, in place of depending on a single supplier; this reduces the bargaining power of
suppliers.

Task 4
UNDERSTANDING AND INTERPRETING STRATEGIC DIRECTION
BOWMAN'S STRATEGY CLOCK
Bowman strategy clock is a model which is used to determine a company's strategic position
with respect to its competitors. It explains eight strategic positions involving a different
combination of perceived value and prices. This is an effective tool to determine the current
competitive position of the company and adjustment to be done to maintain this competitive
position (Radut, 2015).
Figure: Bowman's Strategic Clock

[Source: https://www.tutor2u.net/business/reference/strategic-positioning-bowmans-
strategy-clock]
Low Price and Low Value Added
In this strategy, the goods are very cheap and are not of very high quality. The primary focus is
to produce as cheap goods as possible to cut out any competition in the market. This type of
strategy puts the company in a strong position in the market and increase the overall profit
margin, but the company cannot stay at this position for a long time, as the competitors who
are suffering losses will respond by lowering their prices too. This type of pricing can lower the
perceived value of the product. Generally, medium and small sized are not able to follow this
approach because supplying the products at a low price range, requires bulk manufacturing
facilities (Wright, et al. 2013).
Low Price
In this strategy the business is positioned as low-cost products with added value. The profit
margin is very less in these types of products but the company is able to make good profits due
to a high volume of production. The competition in this category is intense and it causes price
war among the companies. In this strategy the customers have a better-perceived value as the
products are in affordable range and also provide good value to the customers.
Hybrid
This is a combination of first two positions. The products have a low price and product
differentiation is also done in terms of quality. The customers are persuaded that the product is
a perfect combination of low price and added value. These types of products are highly

appreciated by the customers because good quality products in the affordable price range are
available. This type of selling creates a brand loyalty for the products.
Differentiation
This strategy aims at producing high-quality products with some added value. Branding of the
product is very important to establish brand awareness. A high quality with added perceived
value gives a good value to the customers and also increases the profit margins of the company.
To produce a differentiation of the product, an effective marketing of the product is very
necessary.
Focused Differentiation
This strategy aims at producing very high-quality products in a premium price range. This
pricing strategy is generally followed by luxury brands where a customer is ready to pay high
prices for the product due to the high perceived value. An example can be the Apple iPhone
where customers have strong brand following and are ready to pay high prices due to the high
perceived value of Apple products. This strategy gives high profits margins to the company but
the company should ensure good quality of products or services consistently and use advanced
technologies and R&D facilities.
Risky High Margins
In this strategy the company sets exceptionally high prices for its products and services without
any enhanced perceived value. This strategy does not work for a long time as customers are
likely to switch to other products providing same services at lower cost. This type strategy is
effective where there are no substitute companies, but this condition also attracts new players
to enter the market.
Monopoly Pricing

When only one company is offering the product the company has a monopoly. The company
can set high prices for their products and services as the customers have no other alternatives.
Usually, such businesses are regulated by the government which restricts them to set
monopolistic prices (Grünewald and Torriti, 2013).
Loss of Market Share
In this type of strategy the company sets standard price range for the products with low
perceived value. These types of products are the low-quality imitations of the superior quality
products from the competitors. This type of strategy will cause a loss in market share and brand
value (Liebenau, et al, 2012).
EE limited can effectively use the Bowman's strategy clock model for determining the strategic
position and pricing strategies. The price of the services greatly affects the customer choices. A
comparison between the rates provided by the companies is easily available online, the
company has to be very careful in determining the prices for the services. The company had set
the prices for 4G services at a higher level in the starting due to higher infrastructure and
administrative expenses in enabling 4G services throughout the country, but now all the major
competitors have launched their 4G services and EE should review its old pricing and adjust the
prices accordingly.

CONCLUSION
The current assignment discussed the current situations in the UK telecom sector. This sector is
going through much technological advancement due to the introduction of 4G services.
Moreover, the use of internet services via smartphones has also increased which has created
intense competition among the major telecom services provider companies like EE, O2 and
Vodafone. The assignment made a detailed study on the market position and the strategies
followed by EE limited to maintain its position as the largest telecom service provider in the UK.
The external environment of the company is analyzed with the help of Ansoff’s growth matrix
and the PESTEL analysis while internal factors are analyzed with the help of SWOT analysis and
VRIO. The assignment also discussed Bowman’s strategy clock model which is helpful in
deciding the right strategy.

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