Strategic Analysis of BT in the UK Telecommunications Market: A Report

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BUSINESS STRATEGY-
TELECOMMUNICATION SECTOR (UK)
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Table of Contents
INTRODUCTION........................................................................................................................3
OVERVIEW OF THE ORGANIZATION.....................................................................................4
TASK 1 – THE EXTERNAL ENVIRONMENT.................................................................................5
TASK 2 – THE INTERNAL ENVIRONMENT AND ORGANIZATION CAPABILITIES..........................8
TASK 3 – ANALYZING THE TELECOMMUNICATION SECTOR...................................................11
TASK 4 – UNDERSTANDING AND INTERPRETING STRATEGIC DIRECTION...............................14
CONCLUSION.......................................................................................................................... 17
REFERENCES........................................................................................................................... 18
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INTRODUCTION
The evolution of the telecom industry in the world has proved and transformed the dynamic
of the communication environment of the world. The mobile sector of telecommunication is
growing at a very faster rate all over the world. In the United Kingdom, the
telecommunication has evolved from initial days of the telegraph to the modern phone
networks, mobile broadband with internet services. As per the survey has done there is a
growing and faster trend of telecommunication in the UK also. According to market research
in the UK telecommunication, it has been found that the market of telecommunication in
the UK is growing and expanding with the estimated growth of 2%-4% by 2014.
The strategy is the science and art of marshalling and planning of the resources for their
most effective and efficient use within the organization. This can also be defined as the
detailed plan that is being prepared for the achievement of success in the business or to
achieve the particular and specified goals and objectives (Cadle et al., 2014).
This assignment provides the business strategy of BT. The first section of the report will
provide the insights into the external environment of BT that will affect its strategic
decisions with the use of Ansoff matrix and growth matrix. PESTLE analysis will be done for
the environmental analysis of the BT. The second section of the report will provide an
understanding of the internal environment of the organization with major capabilities. This
will be done with the application of the VRIO/VRIN model that will analyze the strategic
capabilities of BT with the strength and weakness of the organization. The third part will
provide the strategies for the improvement of the competitive position in the market with
the use of porter five forces; balance scorecard etc. for BT. The last part will provide the
understanding of the strategic directions with the application of the theories, models and
concepts like Bowman strategy.
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OVERVIEW OF THE ORGANIZATION
British Telecom is one of the leading telecommunication service providers in the world.
British Telecommunication was introduced in 1984 that is headquartered in London, UK. It
has been operating in 180 countries. The introduction of BT was proved to be the turning
point for the development of the telecommunications of the UK. The company has started
its operations with the broadband and landline services and entered into the mobile market
and after it has expanded to the television services. The retail division of BT has become the
leading and largest supplier in the UK that delivers the services of broadband, telephony and
television to more than 18 million consumers. It has offered the low cost calling for the
broadband plans. The vision of the company is to be highly dedicated to helping customers
in the fast-changing world. The mission of the company is to be the leader in delivering
network services (BT Group Plc, 2018).
The overall strategy of BT is to be the "Brand for Business" for SMEs of the UK. It has also
ensured to be the global leader in the BT global services by 2020. The strategy also ensures
to be a sustainable and responsible business leader. The financial strategy of BT is to
improve the ‘free cash flow" in the long term by 2020. It also includes reducing the overall
debt level year on year.
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TASK 1 – THE EXTERNAL ENVIRONMENT
An environment is the sum total of all elements, conditions, factors and situation present in
the surroundings which may affect the organization in a positive and negative manner.
Environment analysis is the strategic technique and tool that identifies all internal and
external elements that can affect the performance of the organization. The analysis involves
the assessment of opportunity or threat level (Yüksel, 2012).
The environment in which BT operates and conducts the business has a great effect on the
organization and its strategy.
PESTLE MODEL FOR ENVIRONMENTAL ANALYSIS
The changing macro environment can be understood and analyzed with the help of the
PESTLE model that helps managers in influencing the change in the environment. PESTLE
model comprises of six factors that affect the business environment of the organization.
There is a positive and negative effect of PESTLE factors on BT (Yüksel, 2012).
Political factors: These factors are influenced by the government in the form of set
regulations and rules. The implication of Brexit has a major effect on the business of BT. It is
beneficial for British Telecom because it will increase the interest rates and this will
decrease the pension liability. On the other hand, the UK maintains the good relationship
with both its several countries and its neighbours around the world with the help of the
trade links and other activities that ensure political stability in its strategic partners.
Economic factors: The decrement in the revenue every year by 6% resulting in the
decreasing of employment opportunities in the organization those results into the kick out
some of the employees from the organization. The organization is also building the super-
fast network to ling the UK with other nations on a larger scale. There is a very tough
competition faced by the organization due to the new entry of an organization. The
booming in the economic condition in the UK provides benefit to the organization (Taylor,
2012).
Social factors: Free product bundling for customers of broadband give superior
differentiation of the product and this is beneficial for the BT group. Growth in the
wearable, smart devices and smartphones are providing the connected mindset to the
consumers (Cadle et al., 2014).
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Technological factors: The investments in the alliances and high-speed network for the 5G
development prove to be beneficial in the long run of the organizations. BT can achieve the
economies of scale at the global level be capitalizing on Cloud of clouds services.
Legal factors: The class action lawsuits have affected the BT that is made against its Italian
division. The legal compliance is the major risk for BT and along with this employment and
labour laws are essential to be obeyed with (Cadle et al., 2014).
Environmental factors: BT is focusing on the initiatives at BT for the reduction of the
emission of the carbon so that it can contribute towards the environment and society of the
organization. It has also taken the initiatives to switch towards 100% renewable energy.
Ansoff growth vector matrix to analyses the organization’s strategic position
To have the understanding to decide the direction for the growth of the business the
understanding and knowledge of Ansoff growth matric is needed. According to Ansoff the
business organization select two approaches for their growth strategy and which is product
growth and market growth and this moves in the four different directions each one has with
the different risk level. Following are the four strategies:
Figure 1: Ansoff matrix
[Source: Taylor, 2012]
Market penetration strategy: This is the strategy with the low risk as the organization select
for selling the existing products in the existing market only. The British telecom is already
the market leader in the telecommunication sector with 28% market share (Taylor, 2012).
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Product development strategy: It is the strategy to develop new products for the already
existing markets. BT group is coming with new products for their existing market and
customers. It has captured the 5G market and provides the offering of customization in
some of the products. It has also expanded in IT and data centre services that include
outsourced and data services for desktops, data centres, PC security etc. McDonald's has
always been the fast food industry but it has marketed new burgers.
Market development: This is the strategy followed for the new market with the existing
products. An established product in the market can be offered to the different customer
segment that helps in earning more revenue for the firm and organization. British telecom is
expanding in a new market with the existing products. British Telecom is expanding in Italy
with the same and current products. The other example is Lucozade that was first focused
for sick children and then it has rebranded for targeting athletes (Taylor, 2012).
Diversification: This strategy captures a new market with the introduction of new products.
This leads the organization to enter into new markets where it has not been presented
before. British Telecom is making diversification across a number of products and markets.
British Telecom is entering into the new markets for the purpose of the diversification with
new products offerings. Virgin Megastores, Virgin Cola, Virgin airlines and
telecommunications are the best examples by UK virgin group.
Thus it can be said that the changes in the macro environment are affecting the business
functions and operations of British Telecom. BT needs to apply and introduce many
strategies that can impact the business market and it may result in gaining the competitive
edge (Taylor, 2012).
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TASK 2 – THE INTERNAL ENVIRONMENT AND ORGANIZATION
CAPABILITIES
The internal environment consists of the different factors and aspects that need to be
considered for British Telecom. The internal capabilities of the organization also affect the
business functioning and its performance. These can be the knowledge, capabilities and
competencies the organization need to consider for surviving and growing its value (Cardeal
and Antonio, 2012).
VRIO model: it is the analytical model that focuses on the evaluation of the resources of the
organization and helps in gaining the competitive edge. This model was introduced by Jay
Barney as a way and method that can evaluate the resources of the organization and which
is discussed below:
Figure 2: VRIO model
[Source: Cardeal and Antonio, 2012]
Value: The company resources should be meaningful and valuable for the organization as it
must offer the resources that can add value to the customers and can help in exploiting the
opportunities for neutralizing threats of the organization. The valuable resources are must
for gaining a competitive edge. The valuable resources for British Telecom are its technology
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as it has introduced fibre and copper access services that provides faster speeds of the
internet and efficient data services. The other is its wireless technology.
Rarity: Rarity refers and reflects the rarity of the resources. The resources must be rare and
limited in the organization. It includes the resources and offering that can provide a long-
term competitive advantage. The resources that are rare to the organization are used as the
competitive edge. To gain the competitive edge it promotes the flexible working
environment for their staffs and employees. It has held 75% of the market share of the paid-
TV market. It is one of the no. of telecoms firms that play for the quad market. BT is only
one among the telecom operators of UK having universal service obligation (USO) (Cardeal
and Antonio, 2012)
Imitability: Some of the organisation imitates some of the resources in the case when they
cannot provide rare and valuable resources. The organisation need to offer resources that
are hard to imitate and are costly. British Telecom connects the consumers with the
superfast services of broadband anywhere and anytime at the most affordable price without
any hassles.
Organisational support: If the company or organisation is not well structured and organised
for exploiting the resources in an effective manner and does not get their best value and
returns then it will not gain the sustainability in the competitive edge. British telecom can
use their capabilities and resources in an effective manner (Cardeal and Antonio, 2012).
STRENGTHS AND WEAKNESS
STRENGTHS WEAKNESSES
 It delivers strong customer
experience through their products
and services
 It has a wide spectrum of service and
product offerings
 It has an excellent reputation in all
another leading sector
 BT is only one among the telecom
operators of UK having universal
service obligation (USO)
 High dependency on the market of
the UK with limited presence in the
Asia Pacific area
 The success rate of BT is slow
 The business reputation and goodwill
are continually going down.
 It possesses very high executive
management turnover
 Enhancing the pension deficit
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 It has a strong customer base  Overstretched portfolio of business
 Decreasing efficiency and profitability
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TASK 3 – ANALYZING THE TELECOMMUNICATION SECTOR
British Telecom is the market leader in the telecommunication sector. For the analyzing and
understanding the competitive edge of the organization there are several and various
methods that have been applying for gaining the competitive edge and face cut-throat
competition. There is high and heavy competition in the telecommunication market of the
UK due to the presence of many competitors that offers different products and services.
Porters five forces model can be sued for the identification of threat from the competition
of the external environment. This helps in understanding the competitive forces present in
the market and underlies the current situation of the organization that influencing and
anticipating competition. the analysis with the help of five forces by Porter will be the
essential and important tool for the assessment of the effect of macro environment on the
British Telecom and will help in understanding the impact on providing the services to the
consumers for the revenue generation.
The fiver forces that are described in this model are as follow:
1. New entrants: The threat from the new entrants in the telecommunication industry of
the UK is very less due to the involvement of high cost involves in the infrastructure.
Moreover, there is the presence of high competition between two major telecom operators
with a 37% market share of Virgin and 28% market share of British Telecom. Virgin has
captured major telecom market of UK so overall it can be said that there is less risk of entry
of new competitor (Lee et al., 2012).
2. Buying powers: The powers of buyers are high in the case of BT as it serves the five
million customers. But its competitors Virgin serve 10 million customers due to its premium
and diverse product portfolio. The consumers of the UK are price sensitive due to the
diverse economic conditions that allow it to compensate consumers with its diverse and
wide range of products.
3. Power of supplier: The power of the supplier can be evaluated and assessed in respect of
the received orders for the equipment’s not allowing the buyers to negotiate for credit and
discounts and payment terms. The material cost also determines the power of the supplier.
The BT deals with the various suppliers for its equipment and product material to provide
the quality product that allows operating openly (Lee et al., 2012).
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4. Substitutes: The evolution of the advanced technology and development of the telecom
industry have the communication easy, convenient and user-friendly through a diverse
range of products and services. In the UK market, BT has established its market in the
telecom industry with its products and services. The technology and innovation of BT have
given the competitive edge over other substitutes of the company.
Balanced Score Card
A balanced scorecard is used for managing the business objectives delivery. The
effectiveness of the different approaches for the quality is monitored through self-
assessment models of excellence of business. Along with the traditional financial measures,
BT can use the balanced scorecard method and can analyses the organization from four
dimensions for getting a more balanced view on its strategy and mission is gained for
gaining the competitive edge (Akkermans et al., 2018).
Following is the example of BT that can be effectively used with the application of balanced
scorecard:
Financial objective: The financial objective is to improve the free cash flow in the long term
by 2020. It also includes reducing the overall debt level each year. The objective also
includes to deficit pension by zero. It also ensures paying progressive dividends to their
shareholders.
Customer perspective: The objective is to increase the customer base and increasing
customer experience. To increase the consumer services of the broadband with 97%
penetration is the goals and it will be measured by the market share. And to be the best
network provider in the industry by the end of 2020 and comes under the rank and position
of number one (Akkermans et al., 2018).
Internal process perspective: The objective is to develop the ability to provide and
introducing new services continuously and to develop the ability of the organization to
retain the employees in the organization. The objective is to minimize the turnover rate by
10%. The reports and statements that will depict the decreasing number of turnover will
indicate and measure the objective.
Learning and growth perspective: To expand the market in the global market all around the
world. The diversification must be made with the increment in the range of the products
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