Impact and Influence of Macro Environment on Business Strategy

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Impact and influence of macro environment on business strategy........................................1
M1....................................................................................................................................................4
TAKS 2 ...........................................................................................................................................4
P2 The internal environment and organisation capabilities........................................................4
M2....................................................................................................................................................7
TASK 3............................................................................................................................................7
P3 Competitiveness of UK's telecommunication sector.............................................................7
M3....................................................................................................................................................9
TASK 4..........................................................................................................................................10
P4 Understanding and interpreting strategic direction..............................................................10
M4..................................................................................................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES .............................................................................................................................13

INTRODUCTION
Business strategy is crucial for every company to formulate and develop in order to run
company's activities in standard order. It helps in planning effective strategies in order to achieve
business goals and objectives with perfection. Strategies become effective when the company
succeed after implementing those strategies. In other words, business strategy can be defined as a
working plan formulated by a company for achieving vision, competitive advantage, earn
maximum profits, optimizing financial performance, etc (Ackermann and Audretsch, 2013).
British Telecom is a multinational holding company which has been operating in more than 180
countries. It provide fixed lines, mobile and broadband services in United Kingdom and is the
largest provider of these. It has its headquarters in London, UK. It provide telecom services to
corporate and government customers across the world. This assignment will mainly focus on
impact and influence of macro environment on the business strategy of company. It will also
describes assessment of internal environment and organisational capabilities. Competitiveness of
UK's telecommunication sector and analysis of strategic direction of company is also mentioned
under this assignment.
TASK 1
P1 Impact and influence of macro environment on business strategy.
Telecommunication undergo great impact and challenges from external environment in
order to maintain position in global market. British Telecommunication is a global company and
operating in many countries (Annabi and McGann, 2013). This increases the risks and challenges
for company. PESTEL Analysis helps company to measure the risks and impact caused by
macro environment and rival teams. PESTEL stands for political, economical, social,
technological, environmental and legal. This tools help ion identifying influences in above
mentioned areas.
PESTEL Analysis of British Telecom shows different challenges faced by company in
different sectors.
Political factor: This factor plays a significant role in determining the different impact
on BT group. As British Telecom is operating in dozens of countries, they are exposed to
different political condition and environment of different countries. This greatly impact the
working of company and also increases political risks. BT have been successful in managing and
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diversifying the systematic risks of political environment. They can analyse following factors
before entering into a new market:
 Industrial safety regulations in telecommunication sector.
 Different employee benefits.
 Working week regulation in telecommunication.
 Different employment legislations- minimum wages and overtime, etc.
 Tax related laws and trading and tariff regulations.
 Regulations related to pricing.
 Intellectual property protection.
 Legal framework for contract enforcement.
Economic factor: This includes tax rates, inflation rates, saving rate, interest rate,
foreign exchange rate, economic cycle and much more. These factors greatly impact BT.
Company have to formulate plans by considering country's economic conditions so that they can
achieve success in respective country. BT can consider following things:
 Economic growth rate in country.
 Business cycle stage (e.g., recession, recovery, etc.)
 Labour costs and productivity.
 Education level in economy.
 Quality of infrastructure in telecommunication sector.
 Inflation and interest rates.
Social factor: Culture of society and way of performing things greatly impact the culture
of organisation. It is important for marketers of BT group to know about beliefs and attitudes of
customers in order to plan their marketing strategies. This will increase benefits of company.
Following social factors are analysed:
 Entrepreneurial spirit of people.
 Culture and beliefs.
 Class structure, hierarchy and power structure of company.
 Demographics and talent of population.
Technological factor: This is a fast growing area where there is new advancements in
technology on daily basis (Auzair, 2011). It is necessary for BT to adapt and implement new
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technologies as fast as possible. Due to this, technology is disrupting various industries across
the globe. Following analysis can be done:
 Technology's impact on pricing of product.
 Rate of technology diffusion.
 Impact on cost structure in telecommunication structure.
 Recent technological developments by competitors of BT.
 Impact on value chain structure in telecommunication sector.
Environmental factor: This is an important factor to be considered by BT in order to
enter in existing markets. They need to perform careful investigation of environment standards
that are needed to carry out operations in that area because different markets have different
environmental norms which can pose both negative and positive impact on company. Following
are some factors which can be considered by BT:
 Air and water pollution.
 Weather and climatic change.
 Laws regulating environmental pollution.
 Attitudes toward and support for renewable energy.
 Waste management in telecommunication sector.
Legal factor: In order to enter into new legal atmosphere, company should carefully
evaluate the legal environment of particular country. In some countries, their legal framework
does not not have the capacity to protect intellectual property of a company, which leads to theft
and stealing of innovations and inventions of company. That is why, company should analyse
these critical factors before establishing business. Following factors can by considered by BT:
 Data protection laws.
 Health and safety laws.
 Consumer protection laws.
 Copyright, patents and other intellectual property laws.
 Discrimination laws.
 Anti trust laws in telecommunication sector.
Above were the PESTEL Analysis which gives an idea about external factors of market
and give crucial information to avoid risks and challenges. Following is Ansoff Matrix which
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helps company with strategic planning and provides a framework to seniors, managers, superiors
and markets to devise appropriate plans for future growth.
Market penetration: In this phase, BT try to grow in existing markets with the help of
existing products and services. They tries to increase market share in present condition of
existing market (Azar, 2011). BT can expand by selling more products and services in existing
market in order to increase sales and profits. They can increase promotional activities and
distribution of products.
Product development: In this, company provide new products or services to customers
and sell it in existing markets. They can extend their product or service ranges in previous
market. BT have announced various facilities in united kingdom which have attracted many
customers towards their services.
Market development: In this, company tries to enter into new markets with existing
products or services. This help BT to launch wireless facilities and other services in different
countries. They formulate effective strategy to increase profits in new markets.
Diversification: In this, company introduce new products or service in new markets. This
requires strong marketing plans in order to market new product or services. They can distribute
their products to different new location and for that it requires effective distribution channels.
M1
According to (Jocovic and et al, 2014), above mentioned PESTEL Analysis and Ansoff
Matrix gives a proper idea about risks and challenges present in macro environment. With these
effective tools, British Telecom can formulate their plans in order to encounter maximum risks
and challenges they are facing and can face in future.
TAKS 2
P2 The internal environment and organisation capabilities
Internal environment of a company determines the capabilities and capacity of a company
to perform their tasks with efficiency and proficiency. Analysing these factors are as important
as analysing external factors because they both pose great impact on company's success. Internal
factors of company mainly involves its strengths, weaknesses, employee relations, productivity,
financial resources, physical resources, etc. Strategic capability simply refers to the ability of a
business to formulate competitive strategy in order to survive in competitive world and increase
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its value over time. British Telecom is a multinational company and it is very crucial for them to
devise effective plans and strategies through which they can maintain their brand image all round
the world as well as increase its profits and revenues at the same time (Bharadwaj and et al,
2013). Managers of BT should know about company's mission and vision, which can help them
while developing strategies for company. It requires skills, talent, knowledge, capability and
expertise of a managers to formulate effective plans in order to maintain the lead of BT and also
enter into new markets and countries. BT can implement VRIN/ VRIO Framework in order to
determine if a resource is a source of sustainable competitive advantage. For serving as a basis
for sustainable competitive advantages, resources must be:
V - Valuable: If the resources add value to organisation and enable them to exploit
opportunities and protect them against threats, then resource is considered as valuable. If
resources help BT in increasing their customers value then also hey are considered as valuable.
This is done by decreasing the price of product. If any resource fails to meet this condition, then
they are unable to achieve competitive advantage. It is necessary for BT to analyse value of
resource time to time because internal and external condition are changing at very fast speed and
this can make them less valuable and useless.
R – Rare: This include those resources which can be acquired by very few companies. If
resources are both rare and valuable then they give the BT with temporary competitive
advantage. In some situation, companies have same resources and they use those in similar
manner, this sometime leads to competitive parity. This can happen because firms can use
identical resources and can implement same strategies by using them and thus no organisation
will achieve competitive superiority. Company should not ignore valuable products but common
as they are important for them to stay in market.
I – Imitable: It is difficult and costly to imitate by organisation. Imitation can occur in
two ways, first is, by directly imitating the resources and second is by providing the comparable
product or services against the resources. If any company have valuable, rare and costly imitate
resources then they have the power to achieve sustainable competitive advantage. Following are
the reasons why resources are hard to imitate: Historical conditions: Resources which are generated over a long period of time or were
developed due to some historical events are costly and hard to imitate.
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 Casual ambiguity: Sometime, companies are unable to find out particular resources that
are the main reason for achieving competitive advantage.
 Social complexity: Resources which are based on company's culture or interpersonal
relationships.
N – Non substitutable: BT should see that there resources are not replaced by any other
strategically equivalent valuable resources. Resources are considered to be strategically
equivalent when two resources can be utilized separately to implement the same strategy (Bucolo
and Matthews, 2011). These resources can be easily substituted and are not the valid sources of
sustainable competitive advantage.
Following are some strengths and weakness of British Telecom:
Strengths of British Telecom:
 BT is the leading internet and telecommunication provider and operator.
 Provide telecommunications services in more than 180 countries.
 BT provides most British fixed telephone lines with local loop and network connections,
and telephone exchange.
 BT owns world's largest telecom coverage and penetrations.
 It provided communication operations in global markets through acquisitions and re
branding of the domestic and overseas businesses, specially: BT Infonet, BT Radianz,
etc.
 Investing in new internet protocol century network.
 Have healthy balance sheets and strong financial and cash flow operations.
 Have strong base in UK with large number of customer.
 Offers wide variety of products and services.
 Deliver string customer experience through great products and services.
Weaknesses of British Telecom
 BT have less developed mobile business.
 Lack of mobile coverage.
 Occasional payphone operations due to BT operations.
 BT is largely dependent on markets of United Kingdom.
 Loss in branding due to separation of Openreach from BT.
 Large pension deficit.
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 Accounting scandals in Italian business.
M2
According to (Grover and Kohli, 2013), above are some strengths and weaknesses of
British Telecom which describes strong and weak areas of company. As BT is a leading
company, they should work towards eliminating weaknesses which are becoming hurdles in
between their ultimate success. They should convert their weak areas in their strong points as
soon as possible to lead in market and rise above from their current market position.
TASK 3
P3 Competitiveness of UK's telecommunication sector
There is a great competition between different industries of telecommunication sector. It
become crucial for companies to analyse various risks of different entities in order to prepare
counter plan to avoid possible threats and risks. British Telecom have many competitors which
give tough competition to company, they are Orange, Vodafone, Virgin, etc. By using Porter
Five Force Model, BT can determine competitive intensity and attractiveness of an industry.
Following is the Porter Analysis:
Threat of new entrants: New entrant brings new innovations, new ways of doing things
and this pressurize British Telecom to lower its pricing strategy, reduce costs in order to maintain
its positions. BT owns great market share in UK broadband market as compared to other
telecommunication provider such as Virgin. But some risks are present for new entrants which
prevent them from entering the market where there are already competitors with strong hold are
present. Those risks are high cost of infrastructure, government regulations, product
differentiations, etc. BT can tackle new entrant by considering following factors:
 by innovating new products or services. This will attract new customers towards new
products and also provide reason for old customers to buy their products.
 By lowering the prices of products or by building economies of scale.
 By spending money on research and development.
Bargaining power of suppliers: It determines the cost of raw material and other inputs
which is important in determining the cost of company's operations. BT have great links with
number of suppliers and they keep check on quality of raw material by dealing same product
from different suppliers (Svee, Giannoulis and Zdravkovic, 2011). It is an advantage for a
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supplier to stay connected with such a reputed company as they give them huge orders thus
increasing their profits. Thus British Telecom have low risk related to bargaining power of
suppliers. Following are some ways through which company can tackle bargaining power of
suppliers:
 By experimenting with product designs and inventing new products by using different
materials.
 Developing strong linked with dedicated suppliers.
 By making supply chain strong.
 By building up links with multiple suppliers.
Bargaining power of buyer: Customer buy those products or services which are
available at lower prices and offering best services to them. This pressurises BT to make cost
effective products or services to maintain their customers. It become hard to retain customers
every time because customers prefer those who give best services in lower prices, if BT fails to
provide lower products then they can easily switch to other service provides thus loosing
customers by BT (Kalyani and Sahoo, 2011). So, British Telecom have higher risk related to
bargaining power of supplier. Following are some ways through which BT can tackle bargaining
power of buyers:
 By building up a large base of customers. This will reduce bargaining power of
customers.
 By innovating new products or services rapidly.
 By providing customers with some offers and discounts.
Threats of substitute: BT have high and fixed number of telephonic lines which serves
as a great advantage for BT. Major substitutions are accredited to poor customer service and
unacceptable quality of product (Slack, 2015). In this, switching cost is higher as it will include
a buying of a new broadband which means paying for the installation charges again to new
provide. That is why, British Telecom have lower risk related to threats of substitute. BT ca
tackle their threat by following ways:
 By increasing switching cost for customers.
 By understanding the core need of the customers rather then focusing on buying of
customer.
 By being service oriented rather than just product oriented.
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Industry Rivalry: BT continuously face high and intense competition from rials of same
sector, such as Virgin Media, AOL, Vodafone, SKY, etc. BT group operates in very competitive
diversified communication services industry (Klettner, Clarke and Boersma, 2014). So, there is a
high risk related to industry rivalry. Following are some ways through which BT can tackle
industry rivalry:
 By collaborating with competitors in order to increase market share.
 By building a sustainable differentiations.
 By building scale so that it can compete better.
Source: Porter five force mode, 2015.
M3
From above scenario, it is clear that BT has been facing great competition from its rival
teams and is considering various ways and techniques in order to avoid possible threats and risks
of company. They can analyse their weak areas in which they are lacking behind and formulate
strategies in order to eliminate them. They can devise competitive strategies through which they
can achieve competitive advantage over others.
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Illustration 1: Porter five force model

TASK 4
P4 Understanding and interpreting strategic direction
Strategic directions is referred to course of action that leads to achievement of
organisational goals and objectives. In order to understand strategic path of organisation,
company uses Bowman's strategic clock model which help enterprise to investigate major things
in proper manner.
Bowman's strategic clock model – It is an effective model which is used by company to
develop marketing strategy in order to analyse competitive positions compared to other
competitors. It helps in exploring various options for strategic positioning. This model was
founded by David Faulkner and Cliff Bowman for explaining three major strategies of Porters
generic (Köseoglu and et al, 2013). This model also emphasis on competitive place in the large
market place. The primary motive of this framework is to analyse and examine the position of
effective products which is based on two main dimension such as perceived price and value. This
model is explained as below:
Low Price and Low Value Added (Position 1): Company don't choose to compete in this
category. This is basically considered as “ bargain basement” and many firms avoid to stay in
this position. Companies choose this stage only when there product don't have unique value.
Firm can apply this by cost effective selling volume and by attracting new and potential
customers on continuous basis (Scholes, 2015). Company should ensure that no other firm is able
to undercut you.
Low Price (Position 2): Company can choose this option for their products when they are
low cost leaders. This option become profitable when company sales high volume of their
products in order to increase their profit margin as they have low margin of profitability. If any
company which is a low cost leader wants to sustain this approach, then they should have high
volume or strong strategic reason for its position. With this they can become a powerful force in
market (Schaltegger and Wagner, 2011).
Hybrid (Position 3): These are those companies which provide product and services to its
customers at lower prices as compared to other low cost competitors. Volume is the main issue
in this but companies offer goods and services at fair prices. Example of such approach is
discount departments. If the quality of product and services are good then consumer is assured of
reasonable prices. This approach helps company to increase customer loyalty.
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Differentiation (Position 4): In this, companies try to provide differentiated products with
unique qualities which are valued by customers. When any company design highly valued and
unique products they can easily gain competitive edge from others as they are mostly preferred
by customers (Murano and et. Al, 2011). Branding is a key role in differentiation strategy that
allows company to develop high quality products with reasonable prices.
Focused Differentiation (Position 5): In this approach, company offer unique and
differentiated product at high prices. It is adopted by those companies where customers prefer
products on the basis of quality and value. It is not necessary that the value of product is good
but their perception of high value is enough to charge very high prices. Such companies are:
Armani, Gucci, Rolls Royce, etc.
Increased Price and Standard Product (Position 6): Sometime company just increases
the prices of product without any increase in the value of product. This is based on customer, if
they accept high prices, company will benefited with higher profits and isn't, their market share
fall, until the company make adjustment to their price and value (Oestreicher-Singer and
Zalmanson, 2012). This type of strategy falls in long term as unjustified high prices can be
revealed in competitive market anytime.
High Price / Low price (Position 7): This approach is implemented in that market where
only one company offers the good and services. In this company don't have to bother about
adding up value in product or services, if any customer need that product, they will definitely pay
the price set by company. There is no future scope for monopolists in market economy because
there is entrance of new companies and they are forced to compete n a more level playing field.
Low Value / Standard Price (Position 8): Any company using this approach will
definitely loose market share. If company have low value product or services, the on way
company will set it is on price.
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Source: Bowman's strategic clock model, 2017.
M4
Form above mentioned approaches, company can formulate effective management plans
in order to retain their place in market. They should focus on providing best product and services
to customers at good and reasonable prices so that they can attract large number of customers.
CONCLUSION
From above assignment, it has been concluded that Business strategy are an important
part of organisation which help company to achieve set goals within specified time limit. In order
to develop effective business strategy, company have to analyse various external and internal
factors which can pose negative as well as positive effect on success of company. This will
company to devise better plans after researching appropriate factors. Company can use different
tools and models like PESTEL Analysis, SWOT Analysis, Bowman's strategic clock model,
Porter Five Force Model, etc., which help company to analyse threats, opportunities, strengths
and weakness of company. British Telecom is a global company and their managers should have
the expertise to design effective plans which can maintain their position in global market.
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Illustration 2: Bowman's strategic clock model

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