Report on the Business Environment Factors Affecting British Telecom

This report offers a comprehensive analysis of British Telecom's (BT) business environment, examining both macro and micro factors that influence its operations. The report utilizes tools such as PESTLE analysis to dissect the political, economic, social, technological, legal, and environmental forces impacting BT. It explores the challenges faced by BT, including technological advancements, customer demand, and competition. The report also includes an industry analysis and internal analysis, along with strategic recommendations for BT to navigate its competitive landscape. The report highlights opportunities and threats, such as the impact of Brexit, technological changes, and customer expectations. Furthermore, it emphasizes the importance of adapting to the external environment for effective business operations and achieving set goals. The report concludes with recommendations for BT to consider these factors when formulating policies and strategies, ultimately contributing to the company's success in the telecommunications industry.

Introduction to the
Business
Environment

EXECUTIVE SUMMARY
Present report contain information about the various factors that exist in business environment
and affect the performance and operations of a business enterprise. In order to operate in an
effective manner and to achieve set goals and objectives, it is very essential for entity to
formulate policies as per the trends exist in external environment. Various methods and tools
such as PESTLE, SWOT and many more are utilise in this report. It is recommended to British
Telecom to consider each and every factor exist in business environment while formulate
policies and strategies for business operations.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY ..................................................................................................................................1
Macro-Environmental Analysis..................................................................................................2
Industry analysis..........................................................................................................................8
Internal analysis........................................................................................................................12
Decision making and recommendations...................................................................................14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16
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INTRODUCTION
British Telecom is an international telecommunication holding company and is
headquartered in London. It is the largest services provider in mobile, broadband and fixed-line
services in UK and operates in more than 180 countries(Calabrese, and et. al., 2018). BT was the
first telecom company in Britain which was formed in 1980 and was privatise in year 1984 after
being independent from Post Office in year 1981. It deals in number of products like
Fixed-line telephony, Mobile telephony, Broadband internet, Fibre optic communication, Digital
television, IT and network services, Home security, Telecommunication equipments, Supply
chain managements. Its mission is to provide quality services and great experience to customers,
BT is a customer centric business that work toward creating values among shareholders and
delivering excellent and continuous improving services. Life is becoming more difficult due to te
convergence of technologies and various changes are taking place faster so, BT's vision is to
make complexity transparent by making things easier so that each individual, organisation and
business to realise their potential through the usage of communications.
MAIN BODY
British Telecom is the oldest and first telecommunication company of Britain which was
established in year 1846. It offer its services globally in areas such as mobile, broadband, fixed
phone, fibre etc. and has more than 100,000 employees around UK(Charter, M 2017). There are
number of challenges faced by BT in its operations such as changing demand of customers,
increasing need of high speed network, competitors with same service at relatively low price,
rapid changes in technologies etc. It is recommended to British Telecom that before entering into
new market company must analysis its micro and macro environmental forces that may affect the
operations and its functioning. Company must also perform industrial and swot analysis in order
to determine various threats and opportunities that are present in the environment in which it
operates.

Macro-Environmental Analysis
External environment refers to the external factors or forces that may influence the
functioning and operations of an organisation. It is basically divided into two type i.e. micro
environment and macro environment.
Macro Environment:-
Forces present in external environment which are not under the control of the company
and have a direct impact over the economy of business are known as macro environmental
factor. If these factors remains unchecked than it have a negative impact over the operations and
working conditions of the company(Cook, 2017). Macro environmental analysis help in
identifying the number of opportunities present that a firm can exploit which in turn will increase
the profitability of business and threat that will affect the industry as a whole.
PESTEL analysis is a tool which identifies various macro factor or changes that are
present in external environment of the British Telecom. It help in determining what impact these
forces have over the industry and organisation. For instance it assist BT in determining
economical factors such as interest rate , inflation and tax rate that affect the pricing per plan
offered to customer. PESTEL analysis also identifies legislation issues that may affect the
operations of company such as government, monopolies and changing demand of customers.
PESTEL analysis
PESTEL is an analytical tool which assist BT communication in analysis various threats
and opportunities present in its external environment by examining various forces such as
political, economical, social, technological, legal and environmental factors (PESTLE Analysis.
2018).
Political factors:- These analysis includes elements like rules, regulations, government stability,
health and safety law, tax policies, legislative bills etc. Political factors help in determining the
forces that can affect the BT communication's long term profitability as different countries have
differences in their laws and political situation(Crane, and Matten, 2016). There are many ways
government intervenes in telecom industry which have an huge impact over functioning of
telecom providers. Government puts restrictions over on phones and tariff by passing certain
laws and regulations, so each company has to adhere these governmental rules for successful
running of their business. BT has to ensure that a goods and services provided by them must fit
to the privacy and safety law of the country in which it operates(Doh, McGuire, and Ozaki,
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2017). Brexit case proves to be beneficial for British telecom as with the higher interest rate
results in reduction of pension liability of the company.
The major political change is that European union has fixed a framework for telecommunication
sectors which includes fibre access , net neutrality, green ICT that has widening the BT scope of
operations. It is an advantage for British Telecom as Net neutrality would prevent it from
throttling the data as well as net speed.
Economical factors:- It includes factors like inflation rate, taxes, economical cycle, foreign
exchange rate, interest rate etc. that analysis the aggregate investment and demand for product
and services in an economy(Galí, 2015). British Telecom can analyse the economical factor to
determine the industry growth rate and consumer spending to plan their pricing per plan as per
customers preferences. With the synergy from acquiring EE will assists BT in improving cost
efficiency through economies of scale, as EE have strong 4G network which is an opportunity
for BT Group to speed up its network and plan appropriate strategy for accelerating future
growth.
With the expansion of service spectrum, it is introducing many other growth opportunity options
for BT Groups by adding or acquisition of new competencies which have potentials to get
higher return. These opportunities for BT includes acquisition in areas like cloud computing and
micro services, M2M, big data analytics and Internet of things etc.
Social factors:- The socio-cultural environmental analysis will identify trends prevailing in
society's value, behaviour, norms and beliefs etc. that have an great influence over the culture of
an organisation in an environment. These elements help BT Group in understanding the
requirement of customers and in developing marketing strategies to serve their client as per their
requirement. There are many changes that take place in IT area has largely influence the choices
and demand of customers(Gardner, 2016). With the increasing demand of Wi-Fi and internet,
customers want from government to acknovision and missionwledge internet as a basic right of
human and it must be treated same by government and private service provider. So, it is a biggest
disadvantage for BT Group as it may affect the service fees charged by them from clients.
Customers are expecting for more innovative services at relatively low cost, so by providing
bundling services to broadband customers company can differentiate its offer as superior quality
services which may provide it a competitive edge over other.
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Technological factors:- Analysis of these elements will identifies the changes in the application
of technologies and entry of new or updated technology(Goss, 2015). In present era, need for
advancing the telecom services is increasing and competition is also increasing for BT Group
because of changes and up gradation of technologies for providing more advanced services to
customers. For instance telephone companies installing fibre wire or telecom firms are moving
toward entering into wireless business. With the increasing use of smartphones and internet
usage has increases the demand for high speed in data and internet access. This requires more
investments in high speed networks from the big companies like British Telecom Group who
have strong positions in telecom industry in order to stay away from competitions and achieve
high customer satisfaction.
BT's investment in high speed network will assist the company in maintaining the
technological advantage. With the acquisition of EE by BT group has provided a chance to roll-
out the 4G network and extend the high speed service coverage through out UK. Company also
entered into research alliances splicing for introducing 5G network which allows other individual
networks to remain unaffected from stream in bandwidth on network as a whole(Hall, Malinen,
and Vosslamber, 2016).
Another advantage that technological factor has provided to BT Group is the use of 'Cloud of
Cloud'. With the capitalization of Cloud of cloud service company can achieve economies of
scale, as this strategy help in bringing several cloud services under one umbrella. This will create
a single network that to connect all the database so that different cloud applications can be hosted
at one place.
Legal factors:- Legal factors consists of certain laws and regulations that may affect the
operations and functioning of an organisation. Number of countries having different legal
structure and institutions are not enough robust to protect the intellectual property right of a
company. Being an global service provider BT Group should evaluate these factors before
entering into a new market as it may lead to the theft of organisation's secret sauce and can affect
the competitive edge of company to large. Some of these legal factors that must be consider by
BT Group are Anti-trust law in telecommunication industry, intellectual property law, e-
commerce law, data protection, Healthy and safety law.
There are number of legal compliances that give rise to big risks to telecom service provider like
BT. Apart from employment law and labour law , company also have to complied with several
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laws and licences to operate business efficiently and to avoid legal issues that may affect the
functioning and operations of company.
Environment factors:- this factor consists of factors related to ecological and environmental
aspects that have an huge impact over the demand of company's product & services and the way
business operates(Huang-Horowitz, 2015). It includes environmental regulations, ecological
regulations, sustainability, impact of adverse weather, reduction of carbon footprint, changes in
climate etc. Global warming and changes in climate create disturbance in the network that affect
the way telecom products reached to customers.
BT putting more emphases in reducing the carbon emission which in turn will help in reducing
the global warming to well below 2°C , to achieve this ambition company is using innovative
ways to reduce its dependency over fossil fuels. Further BT also promote energy efficiency by
providing product and services which help customer in cutting down or limit the carbon emission
by at-least three times. This enables customers in avoiding 10 million tonnes of carbon in year
2016/17 which represents its revenue up to 22%. This action of British Telecom will help the
government of UK in meeting its carbon reduction target.
Political Economical Social
 Brexit has reduces the
pension liability of BT.
 Net neutrality help
company in
maintaining cost
efficiency by
preventing it from
throttling of net and
data speed.
 Acquisition of EE
assist company in
achieving economies of
scale and in
accelerating its speed
of network.
 Number of
opportunities present in
economical
environment for BT are
cloud computing, big
data analytics, M2M
 With the decreasing
use of broadband have
an negative impact
over the profitability of
company. So BT can
offer bundling services
to their broad band
customers in order to
maintain its customer
base.
 Major threat in front of
BT is that customer
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etc. wants the charges of
government and private
telecom service
providers to be equal.
Technological Legal Environmental
 Investment in high
speed network help BT
in achieving
technological
advantages.
 Research alliances of
BT with Huawei for
5G network, which will
allow company to
remain unaffected with
the bandwidth of
networks.
 Capitalization of Cloud
of cloud service is an
opportunity for BT
which help in bringing
number of cloud
services under one
umbrella.
 Major threat for BT
company is that it
operates globally and
different countries have
different legal
framework which may
not robust to protect
the intellectual
property
right(Kandachar, and
Halme, 2017)
 Changing climate and
global marketing is an
threat for the company
as it create disturbance
in the network.
 BT action to reduce
carbon emission help in
increasing its revenue
for the year.
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Opportunities of BT
The telecom sector has undergone changes in last decade, it is fuelled by growth in digital
economy which leads to increase in demand among customers for network services. This
provides British Telecom number of opportunities to provide number of services to customers
and can improve the profitability by fulfil their demands. Some of major sectors that provide
opportunities for growth to BT are cloud computing, internet of things application, 4G speed
network, fibre optic connectivity ICT Knowledge Transfer network etc.
With the increasing demand of high speed network, it provides an opportunity to BT for
achieving a competitive edge over others. For exploiting this opportunity company has invested
and collaborated with Nokia and Huawei for the development of 5G network which allows the
networks to remain unaffected due to surge in bandwidth on the network as a whole. By using
5G network company can able to deliver seamless connectivity that is more better than any other
network. BT also started expanding their operations for providing product and services that are
less regulated and also put emphases on telecommunication, high speed broadband internet
services and IT solutions which provides an opportunities to develop an edge over competitors.
Company also started offering BT trade-space online service platform for serving small scale
businesses to make their activities more easy and less time consuming by providing them access
to E-commerce platform(Ketata, Sofka, and Grimpe, 2015)
Threat
Increasing demand for networking services also bring certain threats along with the growing
opportunities. The economies of running a network is very complex and increasing traffic over
network also become a greatest threat for the functioning of BT and is reducing its profitability.
For proper functioning of market there is a huge requirement for implication of effective
regulation to protect consumers right. One of the major threat for BT is disruption of services due
to ecological factors which are not under the control of company such as natural calamity.
Another threat which affects the functioning of British Telecom is increasing competition due to
attractiveness of telecom sector because of increasing demand for network services by
customers. It leads to entry of new competitors in market with low price services which in turn
decreasing the profit of BT. Brexit also affect the profitability of the company as it subsequently
has devalued the British pounds. Another risk that is faced by British Telecom is the pressure of
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licences and government legislations, as avoidance of these laws may create legal compliances
and affect the survival of the company at large.
Industry analysis
An external environment is combination of outside elements that affects the performance
of organisation. These factor are not controlled and managed by the company. There are two
types of external environment that are macro and micro environment. In industrial analysis micro
environment is to be considered.
Micro environment: This refers to the factors which have direct impact on the operations and
decision making of an enterprise. Components that affects the performance of business are
customers, marketing intermediaries, financiers, suppliers and public perception. It is very
important to evaluate industrial analysis to understand the various factors that have great impact
on British telecom. There is competitive pressure on BT group because of various other firms
that are in same sector such as Orange, Vodafone, Telefonica and many more. This affects the
operations of company as there are more number of competitors. For achieving competitor
advantage company must formulate appropriate strategies and policies that helps in improving
the performance of BT Group and it leads to generate maximum profit. Industrial analysis is an
essential tool to determine the forces that affects the competitors in an enterprise. It is also
beneficial to adjust strategies which suits competitive environment and to increase the potential
profit(Laszlo, and Cescau, 2017). The bargaining power of suppliers and buyers affect the small
company's capabilities to manage cost and increase prices.
This can be understand by Five forces of Porter's model that are as follows:
Porter's five force model:
This model is based on concept of five forces that identify the competitive intensity and
attractiveness of market. It helps in determine where power lies in business environment. Porter's
five force model is useful in analysing industry's strength and weakness(Industry Analysis.
2018). This model concentrate on how British Telecom Group can improve sustainability
competitive advantage in diversified communication service industry. Managers of BT group
not only use this model to form strategic position in business environment but also examine
profitable opportunities in whole technological sector. Components of this model are:
 Threats of new entrants: New entries in diversified communication service carries
innovation, creativity and various new ways to put pressure on British Telecom group by
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different kinds of strategies such as reducing the cost, lowering the price of product and
services and also offers new value proposal to their customers. British Telecom have to
manage and handle all these challenges and develop effective barriers to safeguards over
its competitive edge. Company have to handle the threats of new entrants by creating
economies of scale so that it helps in reducing the cost of their product and services and
also develop capacities and spend funds on research and development. This helps in
converting their threats into opportunities. Low price of product and services, high cost of
manufacturing, product differentiation and government regulation all these elements acts
as a barrier to entry for new competitors. When British Telecom group not able to
promote there low cost products and services leads to downfall in company and this is
also major hindrance of growth and development(Lewis, and et. al., 2017). There are
various types of barriers to entry of new entrants into marketplace are there is high
investment cost, economies of scale available to existing organisations, regulatory &
legal restrictions and product differentiations. The position of existing companies is good
when there is barrier to entering the market.
 Bargaining power of suppliers: The analysis of supplier power concentrate on size and
focuses on suppliers that are related to business participants. The suppliers of
telecommunication sectors are the manufacturer of fibre optic cables, network equipment,
billing software makers, switch board equipment and many more. All the competitors of
British Telecom Group such as Orange, Vodafone and Telefonica purchase their raw
material from many suppliers. These suppliers are in dominant position so that they can
reduce the margins of BT group that can earn in the market. There are powerful suppliers
in technology segment which uses their power to offer higher prices to
telecommunication companies. Higher supplier bargaining power has impact on these
industries is it reduces the profitability of diversified communication services. There are
various ways that helps in handling the threats of bargaining power of suppliers that are
by developing appropriate supply chain with different suppliers and also experiment with
product design or to introduce new product that manufacture with other raw materials so
when the cost of raw material increase than British Telecom shifts to another product
design or product. There is opportunity for company to build dedicated suppliers whose
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