Business Strategy Report: Analyzing BT in Telecommunications

This report provides a comprehensive analysis of British Telecom's (BT) business strategy within the UK telecommunications sector, employing various strategic management tools and techniques to assess its current position. It examines both the internal and external environments affecting BT, including a PESTLE analysis highlighting political and economic factors like Brexit and regulatory impacts, and an Ansoff's Growth Matrix evaluating BT's growth strategies. The report also delves into BT's strategic capabilities using the VRIO model to determine its strengths and weaknesses, analyzes the telecommunications sector using Porter's Five Forces, and interprets BT's strategic direction using Bowman’s Strategy Clock. The analysis identifies key challenges and opportunities for BT in a competitive market, making it a valuable resource for academic research on the UK telecommunications industry. Desklib provides access to this and other solved assignments.

BUSINESS STRATEGY: BT (British Telecom)
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Table of Contents
Introduction...................................................................................................................3
Task 1 External Environmental analysis......................................................................3
i PESTLE analysis........................................................................................................3
ii Ansoff's Growth matrix...............................................................................................5
Task 2 – The internal environment and organisation capabilities................................7
i. Explain strategic capability........................................................................................7
ii VRIO’ model to determine the strategic capabilities..................................................7
iii Organisation strength and weakness........................................................................8
Task 3 – Analysing the telecommunications sector.....................................................9
Porter's Five Force Model.............................................................................................9
Task 4 – Understanding and interpreting strategic direction......................................14
Bowman’s strategy clock model.................................................................................14
Conclusion..................................................................................................................17
References.................................................................................................................19
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Introduction
The success of any organisation is based on the strategic planning of management.
Similarly, management decide the business strategy based on the external and
internal business environment. This research report is developed for the academic
purpose and is an analysis of the UK based telecommunication company, BT (also
known as British Telecom). This report analyse the current strategic position of BT in
telecommunication industry by using different strategic management tool and
technique. This report covers both internal and external scope of BT, find out the
current business situation of BT. The telecommunication market of UK is very
competitive due to several factors, and companies are facing constant threat to
maintain their position in market. Especially small companies are struggling to
maintain their market share in domestic and international market. This report can be
a great help for those academics who are planning to perform further research on
UK telecommunication market.
Task 1 External Environmental analysis
i PESTLE analysis
PESTLE analysis framework is used to analyse the macroeconomic environment
and this is significant for any manager for strategy formulation (Greenspan, 2015).
Therefore a PESTLE analysis on the macroeconomic environment of BT has been
done to understand how the external business environment is affecting the business
organisation.
Political factors
British telecommunication industry has always been greatly influenced by the British
Government. British government has made many rules which should be obeyed by
any business organisation if it is running business within UK market. In last few
years, the UK industries along with the people of UK have seen much of political
instability due to the Brexit agreement. The British Government has taken the
decision to remove themselves from the list of EU countries to enjoy the liberal
market of UK. However, in this process most of the UK companies have lost that
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right to run business in EU countries. Naturally, it has created a negative impact on
the overall economic growth of the UK and telecommunication companies like BT is
no exception in this scenario (Dhingra et al., 2016).
Politics of any country has the potential to create a dramatic effect on the future of
BT presenting many opportunities and threats in existing and future developments of
BT. The strong presence of UK ombudsman system has been a great help for
customer and the major threats for companies. Customer has the right to lodge a
complaint against BT and if the Ombudsman authority found BT guilt then the
company has to pay compensation to the customer. Alongside, the UK government
has introduced their Environmental Protection Act 1990 due to which any business
(especially telecommunication) which uses natural resources should have strong
business strategy to make a sustainable environment. The initial telecommunication
market was 'monopolistic' market where BT was the only provider however with the
privatisation of telecommunication market in 1984 allowed new entrants and
increased the competition level for BT.
Economic factors
There are several economical factors which should be considered for the BT. The
economic growth, inflation and rate of interest all these factors have direct impact on
the business of BT. BT played the role of a great contributor towards the economical
growth of UK. It not only helped to flourishes the domestic market, but through their
global business BT have also earned considerable amount of foreign revenue.
Despite the global economical crisis, BT has managed to be consistent with their
business profit. The telecommunication sector of UK has generated £ 3.8 billion in
retail revenue in the first quarter of 2017 which is low from the previous quarter but
definitely higher than the last year (Deloitte, 2018).
Social Factors
According to a survey done by the Deloitte more than 50% of the population in
between 16-75 years in UK use smart phone while walking, this is a total population
of 22 million people of the UK. This survey report clearly suggests that mobile phone
and network is a biggest part of the UK social life. The lifestyle of the people in UK
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society is completely addicted to technologies and gadget. Therefore, Bt has a
golden and opportunities market in UK.
Technological Factors
The rate of technological changes in global and domestic telecommunication market
in UK is very high. In order to sustain in market any organisations including BT need
to bring innovation in product and technology. Customers are always in demand of
new technology and any company, which is able to offer new technology, is
obviously in a advantageous position in the market. In order to invent
groundbreaking technology BT need to identify development expertise and supply
chain which has potential to produce the new system. Therefore, introducing product
and services with new technology is one of the biggest challenges for BT and has
long term impact on business growth.
Legal Factors
There has always been an on-going debate on how the UK telecommunication
sector should be regulated. BT is run under the framework of the UK communication
Act 2003 (Watson and Hill, 2015). It sought to harmonise communication regulation
within the European Union.
Environmental Factors
The government of UK has taken the initiative of promoting safe environment. Every
business must take the responsibility to reduce the carbon emission. This is
especially applicable for industry where the consumption of natural resources is high.
BT as the biggest energy provider of the UK has also invested lot of revenue for
promoting sustainable environment. This is also known as the CSR (Corporate
Social Responsibility) policy of UK. Certainly, this CSR policy has a positive impact
of the future business environment of BT.
ii Ansoff's Growth matrix
Ansoff growth matrix has been developed to help management team to focus on
aspects of points of business growth (Dawes, 2018).
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Figure 1: Ansoff Matrix
(Source: Dawes, 2018)
Market Penetration; is the accurate growth strategy for the organisation which
seeks to obtain growth with existing product in their current market segment and aim
to increase their market share
Market Development; is best strategy for organisations which is looking for growth
by targeting its existing products to new market segment.
Product Development; is appropriate strategy for organisations which develop new
product targeting their existing market segment (Simmonds, 2015).
Diversification; is the right strategy to gain growth by diversifying product into new
business by developing new products for new markets.
BT has always taken the market penetration as their growth strategy because it is
the least risky strategy for business growth. Simultaneously, BT tries to acquire more
amount of market share with their existing product type. However in order to give
tough competition to the competitors BT has adopted product development as their
new growth strategy. BT has come up with a wide range of product and services for
their existing market to lure more number of customers towards the business.
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Task 2 – The internal environment and organisation capabilities
i. Explain strategic capability
Strategic capability refers to business ability to employ competitive strategies that
allows increasing the value of organisation over time. Rarity of strategic capabilties
of any organisations is ease of transferability, sustainability, core rigidities. Core
competencies lead an organisation to competitive advantages in the following
condition
 When they relate to an activity which is difficult for the competitors to imitate
 When they lead to high level of performance that is visible better than the
rivals
Dynamic capabilities of BT are they are able to renew and recreate their strategic
capabilities to meet the changing demand of market (Zhou et al., 2015). BT has the
collective experience of working in market for long time. Therefore, they have
successfully accumulated organisational knowledge through collective experience,
system, routines and organisational activities. Bringing innovation in business is the
biggest strength for BT.
ii VRIO’ model to determine the strategic capabilities
According to Bringer Werner, felt resource base view competitive advantage of a firm
lies primarily in the application of bundle of value tangible or intangible resources.
This theory is the basis of VRIO framework (Min et al., 2016). A business activity is
full of many resources and together they allow business executives their activities.
Capabilities, which are required for achieving sustainable advantages, are Value,
Rarity, Inimitable and Organised to exploit.
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Figure 2: VRIO Model
(Source: Min et al., 2016)
Valuable Rare Inimitable Organisation
Applicable
Yes No Yes Yes
BT focuses on value
of the service and
provides an obvious
customer value and
gained competitive
advantages among
competitors.
BT is not the only
service provider that
focuses on the
customer value
however they focus
on customer value at
every level of service
throughout the
group.
Any organisation can
imitate the business
strategy of BT as it is
less costly. However
organisations need
to come up with a
good strategy to gain
competitive
advantage in market.
BT is running their
business for a long
time in the market
therefore they have a
strong customer
base. This helped
company to be
successful for many
years.
iii Organisation strength and weakness
It is essential for the management of BT to understand the strength and weaknesses
to formulate the right strategy for business. A brief description of the internal
strengths and weaknesses of the company is analysed below
Strengths Weaknesses
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 Strong presence of brand with
huge number of customer base
 BT has wide range of product and
services which is greater than
their existing competitors like
Vodafone, Talk-Talk.
 The historical base and strong
understanding of market helped
BT to come up with strong
business strategy
 Global market presence
 Availability of network is remote
areas where other competitors
could not supply service
 High value customer care service
 BT has some excellent marketing
strategy which cannot be imitated
by their rivals and thus provide
competitive advantages to
company
 Value added service of BT is one
of the biggest strength of the
company
 Strong financial background and
excellent relationship with the
supplier made BT one of the
biggest energy suppliers in UK
market.
 The biggest weakness for BT is
their market limitation within UK.
Though BT is one of the biggest
suppliers in the market of UK but
they have no market share is Asia
Pacific Region while one of their
biggest competitors Vodafone has
managed to gain market share in
Asia Pacific Region.
 Recently BT has been separated
from Openreach the biggest
supplier of network and that led to
a big brand loss and increase the
operation cost for BT.
 The numbers of complaint from
the customers are one of the
drawbacks for BT, for some
reason BT has failed to manage
and respond their customer's
complaint on a timely manner. In
most of the cases BT end up
paying penalties or large amount
of compensation to customers.
 Many scandal associated with BT
has impacted the reputation of the
company on a long term basis;
one of such scandal was pension
deficit and accounting scandal in
Italian business.
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Task 3 – Analysing the telecommunications sector
Porter's Five Force Model
Porter defined five different forces, which have to be thought when determining the
attractiveness of any market. Base on the Porter's point of view one should consider
entering into a new business based on the profitability of the industry (Adi, 2015).
Therefore the attractiveness of market is defined by the profitability of the market
offer to its entrants. The stronger these forces are, the less profit can be achieved in
that particular industry and naturally it will be less attractive for the potential entrants.
Figure 3: Porter's Five-Force Model
(Source: Adi, 2015)
The five forces of Porter's model are threat of new entrants, the bargaining power of
buyers, the bargaining power of suppliers, threats of substitute product and services.
The threats of new entrants
According to Porter the threats of new entrants in any industry is the vital factor to
decide the profitability from the industry. He assumes there are six major barriers for
the new entrants to enter in the industry (Moreno-Izquierdo et al., 2016). If an
industry is easy to enter and profitability is high then rivalry soon intensifies. As soon
as the rivalry increase the profitability of the industry decreases. Therefore, existing
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company must create barriers and prevent the entrance of new companies. Threat
from the new entrants is generally high under these following industry or market
condition
 Low amount of capital is required to enter a market
 Existing company have very little power to prevent the entry
 Existing companies have poor brand reputation
 Lack of government regulation
 Low customer loyalty
 Identical products
 Economics scale is easily achievable
 Customer switching cost is low
Considering the condition of UK telecommunication market, above conditions are not
present in UK telecommunication industry. The UK government has very strict
government policies that restrict the entry of new companies in market. Similarly, a
company require huge capital to start business in UK telecommunication sector and
compete with the existing companies like BT. And finally the string brand presence
restrict potential entrants to enter from the UK telecommunication industry.
Therefore, it would be correct to state that the threats of new entrants are low in UK
telecommunication industry.
Bargaining power of buyer
Buyers can demand for lower prices or high quality product from the industry when
they have strong bargaining power. While lower price indicates low profitability,
higher quality normally raises the manufacturing cost (Fabbri and Klapper, 2016).
Unfortunately, in both the condition the profitability is low for the manufacturer. Buyer
apply strong bargaining power under the following condition
 The number of buyers is low
 Switching cost from one supplier to other supplier is low
 The number of substitute is high
 Buyers are price sensitive
In UK telecommunication market buyers possesses strong bargaining power.
Certainly the number of buyers is not low however the numbers of energy supplier
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are high is UK market. Customer can easily switch their supplier with paying zero
switching cost. Because of the high level of competition, companies fixed their
product or service price lower than the rivals. This provides opportunity for the
customer to bargain and choose their provider. Thus, bargaining power of buyers is
high in UK telecommunication market
Bargaining power of Suppliers
Strong bargaining power of supplier allows supplier to supply low quality prices at
higher cost. This has a direct and negative impact of the industry as companies have
to pay high cost for poor quality material. Supplier can exert power in companies
when they understand that producers have very less options of supplier to shift.
Under the following condition suppliers hold strong bargaining power within industry;
 The number of supplier is very limited
 Few substitute of raw material exist in market
 Supplier holds more resources than the manufacturer
 Cost of switching raw material is high
The number of supplier is less in UK market and that increases the bargaining power
of supplier. A recent separation of BT from their main supplier Openreach has a
negative impact on the business in BT. The major reason of supplier holding high
bargaining capacity is the cost of switching product is high in UK market.
Threats of Substitute
Companies feel threatened when customer can easily switch their service provider at
low switching cots and that is possible only when there are plenty of options in
market. The amount of competition in UK telecommunication market among the rival
are very intense. All service provider offer almost same quality product or service
within affordable cost. Therefore, customers get plenty of substitutes for their product
and service and this naturally increases the threats from substitute. BT with that
strategic business plan still managed to provide product at low cost which is major
threats for other companies.
Industry Rivalry
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