BT Strategic Capabilities Analysis

The assignment requires students to analyze BT's strategic capabilities using the VRIO framework. The report must discuss how BT's valuable, rare, imitable, and organized resources contribute to its competitive advantage in the telecommunications industry. Students are expected to demonstrate a thorough understanding of BT's business environment, market trends, and R&D initiatives, as well as identify potential opportunities for improvement.

Business strategy of BT
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Table of Contents
Task 1 the external environment.................................................................................................................3
1.1 PESTLE model for environmental analysis.......................................................................................3
1.2 Ansoff’s growth vector matrix to analyze the organization’s strategic positioning...............................5
Task 2 The internal environment and organization capabilities..................................................................6
2.1 Explain what strategic capability means............................................................................................6
2.2 Apply the ‘VRIO/VRIN’ model to determine the strategic capabilities possessed by BT....................6
2.3 Identify the organization’s strengths and weaknesses......................................................................8
Task 3 competitiveness of UK’s telecommunications sector using Porter’s five forces model....................8
Task 4 Using Bowman’s strategy clock model, analyses the strategic direction and options available for
BT..............................................................................................................................................................10
Conclusion.................................................................................................................................................11
References.................................................................................................................................................13
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Introduction
Business strategy is the technique to assess how any firm will attain the goals and objective and
also meet the overall expectation of consumers so as to gain competitive advantage in the long
run. It is very important for firms to be clear about their business strategies so as to attain
increased growth and long term sustainability for the future (Arora and et.al., 2017). The present
study has thus focused on making a study about the business strategy of BT (British Telecom)
which belongs to telecommunication sector of UK. The study will analyze the external as well as
internal environment and the capabilities possessed by the organization. Porter’s five forces
model will also be applied which will then be followed by suggesting proper strategies by which
the overall competitive position of the company can be improved.
Task 1 the external environment
1.1 PESTLE model for environmental analysis
In order to assess the overall nature of external environment that is being faced by British
Telecom the need is to focus on Pestle analysis which is as follows;
 Political factors – British Telecom group operates in a diverse political environment. In
UK, the European Union has set the framework for fiber access, spectrum and net
neutrality and thus widening the scope of operations of BT. The policy of Digital Agenda
in UK helps the BT group to promote high speed networks. It is considered that latest
political factor, Brexit, in UK would be beneficial for British Telecom to some extent. It
is so as higher interest rates due to brexit will reduce its pension liability. However, a
recent policy reform introduced by UK telecoms Ofcom announced a three times increase
in license fees to be paid by companies in telecom industry in UK (Akio, 2005). This may
have a negative impact on overall costing of BT. British Telecom has to work under strict
policies introduced by the UK government with respect to network access facilities.
 Economic factors – Economically, globalization is on a rise and with this, more and more
businesses are likely to enter the telecom industry. This demands to introduce more
effective communication and services from British Telecom. A change in investment
climate facilitated by growing demand will lead to emergence of new businesses in the
UK telecom industry. In addition, there will be further opportunities for Mergers &
Acquisitions, with increasing scope of services in the UK telecom industry. In 2015, BT
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had acquired EE from Deutsche Telecom and Orange. This synergy as helped British
Telecom in improving cost efficiencies through economies of scale (Cardeal and
Antonio, 2012). However, economic factors such as tax and interest rates and recession in
UK will also have an affect on business of British Telecom. With this, BT can use factors
like inflation and growth rates as well as industry indicators such as consumer spending
and growth rate to track its growth in future.
 Social factors- Socially, there are a number of positive changes that have an influence on
telecom industry of UK and British Telecom as well. Earning capabilities have increased
leading to increase in investment rates. The ratio of younger to older generation is higher
which results in increased use of internet and various communication technologies.
Growth in use of smart phones and smart devices as well as faster network in future will
lead to an increase in British Telecom operations (Gassmann, 2006).
 Technological factors – In lieu of the current technological advancements British
Telecom is required to keep in pace with technology by working on issues like faster
networks, poor signal and coverage. Investments in high speed network and alliances for
5G network will be the latest technological developments in the telecom industry. BT
has announced to invest £6bn on supe fast broadband and extend high speed service
coverage all across UK by 2020. Capitalizing on ‘Cloud of clouds’ services by Global
Services division of British Telecom will help in achieving high economies of scale.
‘Cloud of clouds’ strategy helps the companies in bringing all independent and distinct
cloud services under one umbrella (Grant, 2010). Though BT has always catered to the
latest technology but still the company will have to keep track of recent technological
developments by its competitors. Investment in and latest technology would also have an
impact on cost structure and value chain of BT.
 Legal factors – British Telecom has been often affected by various legal aspects. One of
such aspect is ruling by Ofcom, wherein the UK telecom regulator makes way for
separation of open reach from BT. Another regulation is prohibiting use of mobile phones
while driving which has an impact on usage of network thus affecting the overall service
and revenue of British Telecom (Kraaijenbrink, Spender and Groen, 2009). In addition,
scope of services of BT also gets affected by laws related to consumer data protection
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and e – commerce wherein any mishandling of consumer data can cause serious legal
issues to the organization.
 Environmental factors – In today’s times, consumers has become quite informative and
they favor those brands which are responsible towards environment and society. In this
respect, British Telecom laid its focus on environmental problems and take steps to
protect and conserve it. BT has taken initiatives to reduce carbon emissions and has
switched to 100% renewable energy. Also, BT has adhered to recycling of used products
while manufacturing (McLoughlin and Aaker, 2010).
1.2 Ansoff’s growth vector matrix to analyze the organization’s strategic positioning
There can be usage of Ansoff’s growth vector matrix in order to assess the strategic positioning
of BT in UK market.
 Market penetration – in this strategy the company can make wide as well deep coverage
of mobile network in UK. Data adoption can be encouraged followed by making price
adjustments for the clients. The company can further focus on increasing the overall
consumer support. Providing more online services and increasing the number of its retail
outlet in UK (Rashidirad and et.al., 2017). Marketing of a balanced portfolio is also
required that lays emphasis on smart phones and connecting the devices with the top most
brands prevalent in UK. Those smart phones of BT can be promoted that has a presence
of attractive pricing feature.
 Product development – This can be done by introduction of advanced technologies such
as 4G. Modern as well as easy payment methods can also be introduced by the company.
It can further invest in cloud technology so as to connect its services together and offer a
seamless experience to the consumers.
 Market development – As a part of its market development strategy, BT can focus on
establishing a new hub in London for carrying out its product and service innovation
followed by carrying out development activity. New channels can further be created
followed by developing the existing ones. Awareness of the public can also increase
towards the overall service offering of the company (Morton and Nesi, 2018).
 Diversification – The Company can provide new services in form of machine to machine
facility; 3rd party billing systems; push mobile advertising among others.
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Task 2 The internal environment and organization capabilities
2.1 Explain what strategic capability means
Strategic capability is the ability possessed by a business to adapt and employ appropriate
strategies in order to increase its competitive value over the competitors. Here, emphasis is
being laid on use of resources and assets so as to create a value. Strategic capability of a
business is considered as a major component to remain financially viable and growing in
spite of the presence of a large number of competitors in the market. There are many parties
which keep a track of strategic capability of which includes mainly the investors, business
leaders and employees. In this regards, British Telecom can also make attempt to improve its
strategic capability by identifying its capabilities and various resources. BT can track not
only its strategic capabilities but also keep track of its competitors which would help the
company to gain a better understanding of the UK telecommunication industry (Powalla and
Bresser, 2010).
2.2 Apply the ‘VRIO/VRIN’ model to determine the strategic capabilities possessed by BT
VRIO analysis is an analytical tool for evaluating the resources possessed by a firm through
which it can gain competitive advantage over its competitors. Following is the usage of
VRIO model for British Telecom in order to determine its strategic capabilities.
 Value – Value is an attribute that helps a company to exploit certain opportunities. A
valuable resource makes it possible for the company to improve its effectiveness.
British Telecom has valuable resource of its unique research and development
department. BT always engages itself in research and development so as to come up
with novel product and services than the ones offered by competitors. It has laid an
increased emphasis on innovation and registered around 69 patents in the year 2012
(Pierson and Hlavacs, 2015). The company has also started its main R and D center in
Adastral Park UK where it is working on new technologies for creating broadband
applications; IP and data networks, network design among others. It is not possible
for the competitors of BT to copy inventions that are patented to BT group. The
company has come up with key innovations in the telecommunication industry from
their R&D department (Akio, 2005). A study by Statista has revealed that brand
value of the company is 11.49 billion US dollars in the year 2018. This brand value
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has enhanced its overall brand image in the minds of consumers which ensures that
the travellers coming to UK also use its services. This makes the overall equity of the
company as highly valuable one, costly in terms of imitation and organized to exploit
(Palmer and Hartley, 2011).
 Rare- Rareness is that attribute which ensures that companies do not develop similar
strategies like that of competitors by exploiting resources in a different manner. One
of the strategies that British Telecom focuses is on keeping low price of the products
as compared to competitors’ s as to gain more and more number of customers. In
addition, another strategy of reducing wastage in the production process along with
the freeing up of resources has enable BT to generate products and services in cost-
effective ways. This affordability, in turn, is then shifted to gain customers. This is
one of the most important strategic capabilities of the company that has made BT
quite successful (Margea, Hurbean and Artene, 2014).
 Imitability – This attribute makes sure that competitors do no copy a rare resource
and take away the advantage that a firm has create on its own. British Telecom
ensures the maximum utilization of its unique resources (Cardeal and Antonio, 2012).
The products offered by BT are unique in its own ways. These products are made
using inventions patented by BT which means that the company could create a lasting
competitive advantage because its rivals are unable to copy the innovations.
 Organization – Organization ensures that strategies and resources are combined in an
effective way so as to achieve the best possible outcome. British Telecom adapts
effective and strategies in order to match up with the dynamic nature of the
telecommunications industry. The company also deals with constant technological
innovation within the sector along with the emergence of new markets in order to
stand ahead of the competition.
V
(Valuable)
R (Rare) I (Costly to
imitate)
O (Organized to
exploit)
Strategic
capabilities
Research and Yes No No Yes
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Developmen
t
Brand equity Yes Yes Yes Yes
Cost
leadership
No Yes No No
2.3 Identify the organization’s strengths and weaknesses
Strengths
From the above VRIO analysis it has been found that the core strength of the company leis in its
cost leadership approach that has BT quite successful one within the UK market. It further
engages itself in many research and development activities to provide innovative products and
services to the consumers. The company further offers a wide range of products in the area of
digital TV, mobile and fixed line telephony, internet as well as IT services (Ainapur, Singh and
Vittal, 2015). The company has further got a strong presence in UK market with a large number
of consumers who are loyal to its service offerings.
Weakness
The company lacks a business strategy that may aid in promotion of cheap voice calls. The
company has also faced several complaints about the consumer service provided by company. A
news article by Christie has revealed that BT received around 28 complaints for every 10000
consumers who were on broadband (Christie, 2018).
Task 3 competitiveness of UK’s telecommunications sector using Porter’s five forces model
Porter’s five forces model is a technique that can be used for assessing the overall competitive
positioning of any company in a given industry. The usage of this model in present case will help
in getting an idea about the forces that are influencing the overall business strategy of the
company. They will further act as a guideline in making new strategies for the coming future.
 Bargaining power of buyers- The buyers in UK Telecom market are inclusive of
individuals and business firms that are a part of IT and banking industry. There is a
presence of high bargaining power of consumers which influences the overall working of
BT. This is as the company has to provide best offers at the minimum possible rate. They
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also demand for discounts and offers which puts a pressure on overall profitability of the
company.
 Bargaining power of suppliers- Almost all the firms including BT is dependent on many
suppliers for buying the raw materials. This increases the Bargaining power of suppliers
and puts them in a dominant position. The influences the working of BT as suppliers
decrease the overall margins earned by the company within UK market. If suppliers are
in high power then they may use the negotiation power to get high price from the telecom
firms.
 Threats of new entrants- The new entrants who came in Telecommunications sector
influence the operations of company as they bring with them innovation, novel ways to
do things and also put a pressure by using lower pricing strategy. In a few cases they may
also provide new value propositions to the clients. But as of now this threat is quite low
for the company due to presence of high barriers to entry (Margea, Hurbean and Artene,
2014). The present government in UK has increased the licensing fee to be paid by
telecom firms at thrice rate. This hike may not be affordable by the new operators.
Moreover setting of a telecom firm requires significant amount of investment in the area
of setting the infrastructure and maintaining it. However if a new entrant manages to
make an entry in UK Telecommunications sector then it msy pose a threat to the
company.
 Threats of substitutes- There is a presence of high substitute threat for BT in UK market.
This is as there has been an increased usage of broad band services and presence of many
applications like Facbook messenger, Bottim, Skype etc that are substituting the use of
services provided by mobile operators. These have influenced the overall work of BT by
decreasing the profit and sales revenue. The company is further required to strengthen its
research and development department so as to meet the needs of consumers in different
ways and provide them product offerings that are different from the ones given by
substitutes. This has thus increased the overall costing of company spent research and
development activities (Palmer and Hartley, 2011).
 Rivalry within the market- This threat is very high for the company in UK market due to
presence of competitors such as Vodafone, Virgin among others. All are competing with
each other in the area of pricing and through bringing innovation in the product and
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services offered by them to the consumers. This has put an influence on the overall
working of BT as the company is required to bring down its prices which are leading to a
decrease in profit figures.
Task 4 Using Bowman’s strategy clock model, analyses the strategic direction and options
available for BT
The Bowman's Strategy Clock was developed by Cliff Bowman during the year 1996. It can be
regarded as an expansion of Porter’s Generic Strategies and provides strategic options for the
firm with the help of which it can gain a competitive advantage (Margea, Hurbean and Artene,
2014).
Option 1: Low Price / Low Added Value
This strategy can be utilized by BT when there is an absence of differentiated value for the
product and services offered by the company. But this is not the situation with BT hence the
option is of no use for the company.
Option 2: Low Price
With this option the company can sell its product and service offerings at a fairly low cost and
can thus become a market leader in the nation. This strategy may result in decreasing the profit
margins and the requirement may be to generate high volume of sales (Geppert Matten, and
Williams, 2016). This may again not be possible for the company on account of intense
competition prevalent in the market. This option is somewhat possible for the company as it
always adheres with cost leadership approach hence low priced services can be offered to the
consumers.
Option 3: Hybrid
This option is all about offering low priced services to the consumers but which are of high
value. If BT is able to adopt this strategy in the coming future then it can garner an image of that
firm which offers quality services at reaodnle rates. This will help to get a competitive advantage
of the firm and also result in improved customer loyalty (Margea, Hurbean and Artene, 2014).
Option 4: Differentiation
With the help of Differentiation option, the company can introduce some unique features in the
services such as fast network; good consumer service among others. This is most likely to aid in
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getting an edge over rival firms. The strategy may assist the firms in gaining high profit margins
but the need will be to put in high amount of investment and maintenance in it.
Option 5: Focused Differentiation
This option is all about offering products to the consumers that are high in terms of prices as well
as value. This strategy is most effective in those industries where consumers are ready to buy the
offerings of company in the basis of just the perceived value. The consumers may not get real
value from the deal but the perception developed by the company is enough to charge high prices
for them. This strategy is however not at all effective for BT due to the presence of intense
competition within the market and presence of similar kinds of products.
Option 6: Increased Price and Standard Product
With the help of this option, a chance is taken by company and it increases the overall price of
product and services. An increase may not be brought in the overall value by adding any extra
feature or innovation. This leads to a win win situation where the increased pricing is accepted
by the client (Menychtas, A. and et.al., 2014). The strategy holds a lot of risk for the company as
there is an increased awareness in the consumers and are also sensitive towards any increase in
the pricing done by the company. In price is increased in any form without any added benefit
then there can be a loss of market share which may not be afforded by the company at any cost.
Option 7: High Price / Low Value
The present strategy is best for that market where a single firm has a monopolistic presence. This
kind of market as well as the firm is not much concerned about adding value to the product.
Hence if a consumer is a need of the product or service offering then he is most likely to pay a
higher charge for it. But this strategy would be a big loss for BT as the industry within UK is a
highly competitive one.
Option 8: Low Value / Standard Price
This strategy cannot be used by BT as offering products of low value but standard price will led
to a loss of market share as well as consumer loyalty in just a short span of time (Palmer and
Hartley, 2011).
Conclusion
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A conclusion can be drawn from the above report that BT is a well-known name in the telecom
sector of UK. The overall external environment has further been supporting the overall growth of
company such as policy of Digital Agenda that promote high speed networks; increased use of
internet and various communication technologies etc. But on a negative note, there is a presence
of issues such as three times increase in license fees; as tax and interest rates and recession in
UK; laws related to consumer data protection and e – commerce among others. As per the VRIO
framework the strategic capabilities of BT are in form of good brand value, research and
development activities, cost leadership in the market on account of waste reduction among
others.
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