British Telecom Business Strategies: A Strategic Management Analysis

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BUSINESS STRATEGIES

EXECUTIVE SUMMARY
Telecom industry has evolved; this industry has transformed the communication dynamics
in the world from the simple voice messaging and call to advance and forceful rich services
of media. Telecom industry is known as the basic contributor to the economy of the world.
Now day's life has depended on the telecommunication networks and mobile 5G internet
and its subscribers are increasing their numbers in billions. Here, this report is prepared for
an academic purpose that provides an understanding or analysis of business strategies of
British telecommunications. This report shows the analysis of the current business strategic
position of British telecommunications in a dynamic environment that it operates its
business by using different tools and techniques of strategic management. The analysis
report will include both external and internal scope. The report will determine the various
elements that provide the main competitive advantage to the company. And at the end of
the report, various theories and models will be discussed for the strategic direction of BT.
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Table of Contents
EXECUTIVE SUMMARY............................................................................................................. 1
INTRODUCTION........................................................................................................................3
TASK 1 THE EXTERNAL ENVIRONMENT....................................................................................4
PESTLE ANALYSIS..................................................................................................................4
ANSOFF’S GROWTH VECTOR MATRIX..................................................................................6
TASK 2 THE INTERNAL ENVIRONMENT AND ORGANISATIONAL CAPABILITIES OF BT..............8
VRIO ANALYSIS..................................................................................................................... 8
TASK-3 ANALYZING THE BRITISH TELECOMMUNICATIONS SECTOR.......................................10
TASK 4 UNDERSTANDING AND INTERPRETING STRATEGIC DIRECTION.................................13
STRATEGIC MANAGEMENT PLAN.......................................................................................15
CONCLUSION.......................................................................................................................... 18
REFERENCES........................................................................................................................... 19
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INTRODUCTION
British telecommunication is a continental or multinational telecommunication company
based in Britain. This company is the world's leading service provider of communication. BT
serves in 180 countries. BT is also the biggest provider of fixed-voice and broadband in the
United Kingdom as well as it provides mobile services and TV offers. BT includes the main
seven business line that is business and public sector, global services, wholesale and
ventures, EE (everything everywhere), consumer, service and operations, open reach and
technology. BT has also introduced their new strategy which is consistent offers the services
such as broadband that is supercharged that is providing faster speeds to customers and
also providing the best TV content and late telecom monopoly determined by the bad
customer services.
This report consists of an analysis of BT's current position in the relation of competitors and
the environment by using several techniques of strategic management. The analysis involves
the usage of VRIO, PESTLE, five force models, etc. and also some concepts, models, and
theories such as Bowman's strategy clock model, Porter's generic strategies, Hybrid
strategies that can be used by BT for strategic directions.
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TASK 1 THE EXTERNAL ENVIRONMENT
A business strategy is referred to as a comprehensive long-term action plan that guides
business actions to achieve business goals and objectives. It is a working plan of the
company that aims at meeting its vision through prioritizing objectives and optimizing
financial performance with its business model (Wheelen and Hunger, 2011). The business
strategy of BT is aimed to fulfill its business goal of delivering sustainable profitable revenue
growth in the market. It emphasizes on providing differentiated content, services, and
applications, providing best network services in the UK and become a fully convergent
service provider (BT PLC, 2019). The business environment affects the business goals and
strategies of the company. The external or macro-environmental factors may have a direct
and indirect impact on the business strategies and operations of BT. The macro
environment factors are beyond the direct control of the company and thus, it is very
important to have clear knowledge and understanding of the changes in the macro
environmental factors.
The macro environmental factors can be effectively assessed by applying a PESTLE analysis
model as it covers all the prime factors within the macro environment that could affect the
functionality of the business. The different factors of PESTLE model in relation to the mobile
telecommunication sector are analyzed so that the manager can formulate effective
strategy by considering the existing and possible changes in these factors (Cadle, et al.,
2014). It will also support in analysing the current position of BT in relations to its
environment and competitors.
PESTLE ANALYSIS
 Political:
The BT group operates in the diverse external political microenvironment in the local
and international market. Being a multinational organisation the company is exposed
to the political environment of the UK as well as international political conditions.
The decision of Brexit could be beneficial for the company as it will increase the
interest rate and result in reduced pension liability (Frue, 2016). However, the
bureaucracy and government interference in the telecommunication industry may
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adversely influence the decisions. The battle for net neutrality is the major political
issue that would affect the profitability of the telecommunication business.
 Economic:
The rapid transformation in the global business environment also creates an
increasing need for effective communication products and services. The emergence
of new business and changing investment climate creates a growing demand for
modern communication technology as many of the organisations are transforming
from paper-based to technology-based operations (SWOT & PESTLE, 2018). On the
other hand, the acquisition of EE has supported improving the cost efficiencies for
BT. The increasing need for better infrastructure for communication technology is
raised due to increasing income, education level and standard of living.
 Social:
The social factors are creating a positive change in the telecommunication industry.
The investment rates in the society are increased that reflects in the increasing use
of Smartphones, smart devices and wearable are influencing customers to become
more connected. The monopolistic nature of the telecommunication organisation
has made BT in charge of both internet and mobile carriers (Frue, 2016).
Telecommunication becomes an important aspect of society.
 Technological:
The disrupting changes in the communication industry have a great impact on the
services and operations of BT. the development of a 5G network has created a need
for investments in the high-speed network and alliance for 5G. With its ‘cloud of
clouds’ services, the global service division of BT would facilitate the company in
achieving the economies of scale.
 Legal:
The regulation of the UK telecom regulator Ofcom (Office of Communications)
affects the strategies and decisions within the telecommunication industry. with the
regulations, the Openreach could be separated from BT (SWOT & PESTLE, 2018). The
legal issues related to government policies, monopolies and customers could
influence the business decisions of BT.
 Environmental:
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The increasing issue of climate change and global warming has created major
concern in the business environment of all business sectors. Telecommunication
organisations are providing solutions by providing paper-less and environment-
friendly communication and information access solutions. BT is also focusing on
reducing carbon emission in the environment and switching to 100% renewable
energy sources (BT PLC, 2019).
ANSOFF’S GROWTH VECTOR MATRIX
Ansoff matrix is a tool for analysing and planning growth strategies of a business
organisation. It focuses on firms present and potential products and markets by considering
ways to achieve business growth through existing or new products in the new or existing
market (Hussain, et al., 2013). This matrix presents four strategies that can be used to attain
growth in the new and existing market and to analyse risks associated with each strategy.
[Source: CFI, 2019]
 Market penetration: it focuses on achieving growth by increasing sales of the
existing products in the current market segment. Here, the main aim is to increase
market share.
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 Product development: this strategy focuses on developing new products to offer in
the existing market segments.
 Market development: it focuses on achieving growth through targeting customers in
the new market segments with existing products (Hussain, et al., 2013).
 Diversification: this strategy focuses on diversifying with the development of the
new product to offer into a new market.
By analysing the Ansoff model, it can be stated that currently, BT adopts the strategy of
market penetration for broadening and deepening customer relationships along with
achieving its organisational goal of creating a sustainable profitable revenue growth
(Reuters, 2019). BT is continuously emphasising on the improving customer relationship
with its diversified product range of landline, digital television, mobile and IT services
offered to the corporate and public sector customers.
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TASK 2 THE INTERNAL ENVIRONMENT AND ORGANISATIONAL
CAPABILITIES OF BT
The internal environment of an organisation is also called as microenvironment. The internal
business environment is composed of all those factors that are in direct relationship with a
company like competitors, customers, employees, suppliers, culture and investors, etc. the
organisations have controlled the impact of such factors on the business (Claudiu, et al.,
2011). The internal environment represents or formulated by the strategic capabilities of an
organisations.
Strategic capabilities refer to the overall organisational capabilities that enable the
development and implementation of the strategies in order to achieve a sustainable
advantage. The strategic process of BT is moved in an incremental approach by adopting
changes in the internal and external environment of the company (Rothaermel, 2013). A
tool of VRIO analysis can be effectively applied to analyse the strategic capabilities of the
British Telecommunication.
VRIO ANALYSIS
This analysis helps in determining the business strengths and weaknesses. This is mainly
used by the wide range of organization which helps in knowing the business deeply, this will
enable the deep understanding of VRIO of British telecommunication that will help in
developing the strategic plan for the company. So, here are four points:
 Value:
This point refers to the value of potential resources of the organization, determining
whether these resources are having some value to the company or not. All the
resources and things which can help the company in exploiting the market will be
considered as valuable. And the things or the resources which are not a contribution
to the company's growth will be considered as the weakness of the company as they
are the disadvantage to the company. This shows the negative and positive side of
everything within your company which supports the company in the long run for
success (Ahmad, A., 2011). BT is also having many valuable resources which provide
benefit to the company such as the strong base of the customer in UK, strong cash
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flow and finance from the operation and healthy balance sheet, a wide range of
products and services and strong customer experience by delivering quality products
and services. But BT has some weakness also such as highly dependent on the
market of UK, less presence in the Asia Pacific region, accounting scandals in the
business of Italy, increase in cost and loss of branding and high pension deficit. Rarity:
Rarity refers to the things which are hard to achieve in business, these are
exceptional valuable goods and services or anything that has existed in the company.
It is basically held on the advantage which is not available in the same field to other
competitors; these rarities refers to the specific qualification or needs of the
organization. BT is providing fixed line services with the use of advanced technology
which is rarely found in the in this sector or can be said that few are there. Imitability:
In business, imitation is available everywhere when the company sees the success of
other company in the same sector they try to imitate that product or business to
enter in the market to give the direct competition to the business. Doing imitation is
not easy at all because new entrants will feel the loyalty issue while running a
business with old competitors. But imitation helps in knowing and predicts the thing
that is going to happen in the future in order to give competition. In the telecom
sector imitation is everywhere, many things have imitated by BT and BT has imitated
many things from virgin and sky telecom (Ahmad, A., 2011). Organisation:
This is the last point which refers to the structure of the company should be
designed in a way that can help in taking all the advantage which we have discussed
above can be obtained. So its all about thinking that how can a company develop its
structure that ensures success by using the available valuable resources of BT. The
organization structure of BT is completely supporting the working as their positive
side which is an advancement in technology which effectively used by this company
for their operations.
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TASK-3 ANALYZING THE BRITISH TELECOMMUNICATIONS SECTOR
To gain the knowledge about the British telecommunication position in the united kingdom
and also in worlds telecommunication industry the Michael Porter's five force model will be
the most effective tool to analyze the forces that affect the BT micro-environment. It will
enable the understanding of how these forces impact on the practice of its services for its
consumers and its profits. This model helps in determining the strength and ability of the
firm to produce, evaluate the rate of return in excess as per the cost of the capital in the BT.
This analysis helps in identifying the current competition in order to develop a strategic
framework for the business. The porter five forces are:
Threat Of New Entrants: new entrants in enlarge communication services provides new
ways of doing things, innovation and pressure on BT by adopting the strategy of lowing
prices of services, proving new values theories to the customer and reducing cost. To
safeguard the competitive edge of the BT group, the company needs to manage the
effectiveness and challenges to overcome this barrier. But the threat of new entrants in the
United Kingdom is low due to involvement high cost of infrastructure. In the UK market
competition is seen between the two major providers that are BT and virgin. Whereas virgin
has a 37% market share in media services and BT has a 27% market share in broadband
showed in the latest research. The second-largest broadband is provided by the virgin in
fixed line in the UK which is having 22% market share as it entered late in the whereas the
low pricing strategy has failed and doors have opened for the virgin to enter in the market.
There are signing new players in this industry as government approval is required to access
in the market but the absence of government in 1999 has allowed access to BT to gain the
strength in this industry with their innovative products and uniqueness, that why the threat
of new entrants is moderate to low.
Bargaining Power Of Buyers: in the case of British telecommunication the power of buyers
is high as British communication provide services approx. 5 million consumers on the other
side virgin have 8.2 million customer base and sky telecom is serving 10 million costumers
due to their premium product and low price points has increased its customer base. This
indicates the availability of high buyer's power which allows shopping for best available
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products in the market (Sutherland, E., 2014). BT is providing a large portfolio of its diverse
product which gives a competitive advantage to attract consumers with efficient services
and effective products. The consumers in the UK are very price sensitive because of the
condition and economic changes so, this allows the industry to compensate consumer
through the extensive scope of product with very little variance, for example, BT's fixed line.
The biggest advantage of BT is its competitive price instead of the presence of strong
competition of virgin and sky. So the power of buyers is moderate to low.
Bargaining Power Of Suppliers: the evaluation of supplier's power can be determined
through the orders they receive which enable buyers to negotiate and purchase for
constructive credit and discounts and other payment expressions. Whereas suppliers do
have competition in themselves. As a supplier, Motorola, Nokia, and Ericson are competing
for market shares. British telecommunication also has a remarkable product with quality
and price. The cost of material is an important part which gives the power to the supplier
and becomes an important element of operational cost for a company. If talking about
British telecommunication, this company is dealing with various suppliers for equipment
material and product in order to produce the high-quality product, this allows the BT to act
and operate openly which provides the long reach and opportunity to explore the market.
This also gives the chance to untie the one specific supplier. BT commit only with those
suppliers who can give quality product assurance. Therefore the bargaining power of
supplier is low in the case of BT (Sutherland, E., 2014).
Threat Of Substitute Products Or Services: the exposure of new technology and
development in the telecommunication industry is providing convenient, swift, user-
friendly, approachable and easy communication through a different range of products and
services. Through a variety of products and services, BT has already established itself in the
UK market and it is also proving higher fixed-line services by a good establishment. The price
of BT products has given the hold to substitute, but the advanced technology and innovation
have given the competitive advantage over another substitute (Sutherland, E., 2014). The
switching cost will be high for the consumers as installation charges and broadband will take
some cost. Therefore the threat of substitute is low for BT.
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