British Telecom (BT) Business Strategies in the UK Telecom Sector 2018

This report analyzes British Telecom's (BT) strategic orientation within the competitive UK telecommunications sector. It examines the external environment using PESTEL analysis, highlighting political, economic, social, technological, environmental, and legal factors influencing BT's operations. The report also employs Ansoff's Growth Matrix to evaluate BT's market penetration, development, product development, and diversification strategies. Furthermore, the internal environment is assessed using VRIO analysis to identify valuable, rare, inimitable, and organizationally supported resources. A SWOT analysis outlines BT's strengths, weaknesses, opportunities, and threats. The report also evaluates BT’s internal capabilities, structure, and skill set, and analyzes the competitiveness of the UK telecom sector through Porter's Five Forces.

2018
BUSINESS STRATEGIES
BRITISH TELECOMMUNICATION

1

INTRODUCTION
The telecom sector in the UK is continuously growing and the emergence of new
technologies related to Artificial intelligence and Internet of things has made this sector
highly competitive. The current assignment will discuss the strategic orientation of
British Telecom (BT) which is the largest telecommunication company in the UK. The
assignment will highlight the external and internal environment of the company with the
help of different theories and models such as Ansoff growth matrix, VRIO model and
SWOT analysis. The external environment of the company is influenced by the large
number of telecommunication service providers in the UK such as O2, Giffgaff, Virgin
mobile, Vodafone, Three and Tesco mobile. In addition, new technologies such as SD-
Wan and cloud-based service applications require BT to strategically plan its research
and development activities so that it can maintain its competitive edge. To analyse the
strategic direction of BT communications and its competitive position in the market,
Bowman’s strategic clock will also be discussed which is helpful to understand different
strategies to be adopted to produce a differentiation of services from other rival
companies in the telecommunication sector.
2

OVERVIEW OF BRITISH TELECOM (BT)
BT is a multinational telecommunication service provider based in the UK. Currently, BT
is operating in 180 countries of the world and it is the largest fixed line broadband and
mobile communication service provider in the UK. In January 2016, it acquired EE
communications and expanded its operation further in the UK. The digital
communication services of the company cover almost 90% of geographical area in the
UK and at present, it is planning its launch its 5G services in the UK (BT, 2018).
Figure 1: British Telecom
3

TASK 1
THE EXTERNAL ENVIRONMENT
PESTEL ANALYSIS
The external environment of BT consists of different political, economic, technological
and environmental factors. How these factors influence the business operations and the
decision making of the company is explained below:
Political Factors
BT is operating in 180 countries of the world, which expose it to a variety of political
risks. These risks include the legal framework of the country, intellectual property
legislation, Industry safety regulations imposed by the government for employees and
the policies of the government regarding spectrum allocation to the foreign companies.
All these factors need to be considered by BT before entering a certain market.
Economic Factors
To implement new technologies such as SD-WAN and cloud-based mobile applications,
BT has to invest a large amount of capital in the research and development activities. In
addition, to provide connectivity in rural areas the company has to install new towers,
which increases the cost of operations of the company (Walker and Sankaran, 2014).
Social Factors
The internet penetration has been continuously increasing in all the emerging
economies which have opened a new market for BT. The use of internet-enabled
Smartphones has also been increased which has caused an increase in the demand for
fast internet. People use their smartphones for booking tickets, shopping and streaming
videos online which require high-speed internet.
Technological Factors
4

The technology in the communication continuously keeps changing. From wire based
digital communication to wireless communication, the technology has always played an
important role in the telecommunication sector all over the world. New technologies in
communication sector are based on cloud-based computing and the company has to
manage its resources to apply these technologies in the business (Mithas, et al. 2013).
Environmental Factors
The regulatory authorities in communication sector in different parts of the world impose
different environment conservation laws on the companies working in
telecommunication sector which makes an impact on the operation of the company. In
addition, BT has to face telecommunication infrastructure damage due to bad weather
and storm in many countries of the world due to which the cost of the company is
increased (Kolios and Read, 2013).
Legal Factors
In telecommunication sector, different laws and legislation assuring the privacy of the
customers and data protection has to be followed by the companies. Any unauthorized
access to the database of the company can cause great danger to the personal data of
the users and can cause monetary loss to the company in the form of penalties and
fines. The cases of malicious calls and cybercrime also need to be checked in order to
provide safe and reliable services to the customers.
ANSOFF GROWTH VECTOR MATRIX
Ansoff’s matrix is a model which is used by companies to determine market growth
strategies. This matrix suggests strategies four alternative growth strategies. The output
of this analysis helps in deciding the strategic direction of the company. The four growth
strategies are given below:
5

Figure2: Ansoff Growth Matrix Model
[Source: https://www.brighthubpm.com/risk-management/52974-the-ansoff-
growth-matrix-and-risk-management/]
Market penetration
In this strategy, the company tries to increase its market share by giving a variety of
promotional offers and increasing the marketing activities. The primary focus is on
increasing customer base by increasing the brand awareness (Taylor, 2012). The tools
used for this purpose include sales promotion offers, differential pricing strategies and
personal selling. Price reduction of products can also be done to attract new customers.
Market development
6

This strategy is related to the introduction of products and services of the company in a
new market which is also termed as globalization. Globalization presents new
opportunities to the company for growth. The companies can increase their profit ratios
by achieving economies of scale. But the companies also have to face some political,
economic and technological risks while operating in a global market.
Product development
In this market growth strategy, the company aims to improve the existing products by
adding some extra features and making the product more useful for the customer. For
this purpose, companies increase their research and development activities and focus
on introducing a new path-breaking technology which can provide a competitive edge to
the company and the company can increase its customer base (Hussain, et al. 2013).
This may also include conducting market research and analyze the demand of the
customer regarding additional features in the product.
Diversification
The diversification strategy includes launching a new product in the market. The need
for this strategy arises due to moderate sales of the existing products of the company.
The company invests heavily in the marketing of this new product to establish brand
awareness in the market. The pricing strategies also play an important role in this
market growth strategy.
7

M1 ANALYZE THE MACRO ENVIRONMENT AND HOW IT DETERMINES BT’S
STRATEGIC MANAGEMENT DECISIONS
The macro environment of BT consists of the political, economic and technological
situations in the country and the position of competitors in the market. The political
factors include the policies of the government and different regulation which are
imposed by the regulatory authority of telecommunication sector in different countries.
These policies make an impact on the strategic direction of the company. The economic
policies of a country inflation rate, interest rate and foreign exchange rate influence the
operations and the profit-making capability of the company and need to be analyzed
before expanding in a new market (Bharadwaj, et al. 2013). The social factors in a
country like education rate and use of technology also influences the operation of BT.
The use of smartphones has been increased in the UK very rapidly which has increased
the demand for fast internet services. The position of the market and the services
provided by the competitors such as Vodafone, Giffgaff and Virgin mobile also need to
be studied.
8

TASK 2
THE INTERNAL ENVIRONMENT AND ORGANIZATION CAPABILITIES
VRIO ANALYSIS
VRIO is a tool used to analyze the internal resources and capabilities of the company.
The internal resources include services, machinery, products and employees of the
company. VRIO analyses the competitive potential of these resources in the market,
and the criteria for evaluation is the degree of imitability, rarity, value and the internal
structure of the company. These factors are explained below:
Figure3: VRIO Analysis
[Source: http://www.business-to-you.com/vrio-from-firm-resources-to-
competitive-advantage/]
Value
This is the basic question to be asked about the firm. Are the resources which are
possessed by the company proving value for it? The resources of the company should
9

be able to provide an excellent value to the customers. These resources can be tangible
such as man, machinery, products, and it can also be intangible such as services or
brand recognition of the company (Simão and Diaz, 2013.).
Rarity
The rarity in a product or service provides a competitive advantage to the company. For
example, the products and services of Apple are unique and are able to create a
competitive edge in the market.
Imitability
Another question to be asked in the VRIO analyses is, whether the unique products or
services of the company are imitable or not? If the products of the services of the
company are easily imitable then the competitors will be able to gain a competitive edge
in the market. The uniqueness can be in a product, service or skill of an employee. By
analyzing the degree of imitability of a product, the company can apply for intellectual
property registration.
Organization
The company will be able to take benefit from the resources which have value, are rare,
and are not imitable, only if the organizational structure and the management of the
company are in line with all these positive qualities in the company’s resources. If the
employee management is not well and the company does not have any reward and
recognition policy for this uniqueness, it cannot be sustained for a long time (Cardeal
and Antonio, 2012).
SWOT ANALYSIS OF BT
10

STRENGTHS
 Global telecom service provider with
operations in 180 cities.
 BT is successfully operating 26 million
telephone lines in the UK.
 Strong brand awareness in different
countries of the world.
WEAKNESSES
 Not being able to provide 100%
geographical coverage in the UK
 Occasional call drop and problems of
loss in connectivity.
 Limited liquidity in the UK telecom
market.
OPPORTUNITIES
 Opportunities to provide cheaper
services with the use of VOIP
technology
 Quick growth in the number of
Smartphone users in The UK.
 Opportunities to expand the business
in Smartphone accessories.
THREATS
 Tough competition is given by
Vodafone and O2 (Madsen and
Walker, 2015).
 New regulations in the
telecommunication sector by Ofcom
 Impact on the profitability of BT due to
the devaluation of GBP
11