Business Strategy Analysis: Macro and Internal Environments of O2

This report provides a comprehensive analysis of O2's business strategy within the telecommunications sector. It begins by examining the macro environment using PESTEL analysis, considering political, economic, social, technological, environmental, and legal factors impacting O2's operations. The report then applies the Ansoff matrix to evaluate growth strategies, including market penetration, market development, product development, and diversification. Furthermore, the analysis delves into O2's internal environment, assessing strategic capabilities through the VRIN/VRIO model to identify strengths and weaknesses. The report also explores the competitiveness of the UK's telecommunication sector and provides an understanding of strategic direction. Overall, the report provides a detailed overview of the strategic decisions and challenges faced by O2 in a competitive market.

Business Strategy

INTRODUCTION.................................................................................................................................3
TASK 1.................................................................................................................................................3
P1 Analysing macro environment and how it determines strategic management decisions...............3
TASK 2.................................................................................................................................................7
P2 The internal environment and organisation capabilities................................................................7
TASK 3.................................................................................................................................................8
P3 Competitiveness of UK's telecommunication sector.....................................................................8
TASK 4...............................................................................................................................................10
P4 Understanding and interpreting strategic direction.....................................................................10
CONCLUSION...................................................................................................................................12
REFRENCES......................................................................................................................................13

INTRODUCTION
Business strategies are important and play important role in achieving goals and
objectives of business. Strategies involves overall working of business, its policies, rules and
regulation as well with this it is like an management plan which assist in enhancing business
performance of an company (Ackermann and Audretsch, 2013). Business strategy demonstrates
way and sources for accomplishing with potential target and survival in this large competitive
market is not easy. Activities of organisation are totally dependent on its external and internal
factors which are dynamic in nature. This entire assignment is based on telecommunication
sector which is wide in nature and has lots of competition because of several companies.
Apart from this proper formation of business strategy help enterprise in increasing their
performance and protection them from facing several disruption. In this report, PESTEL
analysis of the telecommunication sector and Ansoff’s growth of the business has been
explained for development and growth of business.
TASK 1
P1 Analysing macro environment and how it determines strategic management decisions
Telecommunication sector is wide and have lots of organisation in it O2 is one of
them. It is founded in 1985 by John Carrington they are serving their services in United
Kingdom. Approximately 21,580 employees are working with them. As well headquarter of
O2 is Bath Road, Slough, Berkshire, England, United Kingdom. As per the current dynamic
business environment telecommunication sector is facing lots of changes for carrying out
with the competitive company worldwide (Annabi and McGann, 2013). Moreover, PESTEL
analysis is one of the biggest tool and technique which help in evaluating and understanding
whole industry working in proper manner. As well assist business in building competitive
advantages which assist company in capturing whole market. PESTEL includes political,
economical, social, technological, environmental and legal factors. A firm getting several
resources and techniques from suppliers and environment of different goods and services in
the large market place. Along with this, there are various factors which directly give impact
on ability and capability of company which is offering variety of products to their buyers.
These elements of environment rendering major threats and opportunities for specific
companies. Macro environment includes few external factors which directly gives impact on
working of organisation effectual marketing strategy and policies in great way. There are two

type of environment that is macro and micro which gives their huge impact on business
when changes. Gives major impact on these things such as decision making and developing
strategic marketing in proper manner (Azar, 2011). For analysing these things PESTEL
analysis is best tool.
O2 is one of the biggest telecommunication company which is situated in England,
United Kingdom. Along with this, they are generally managing and controlling large number
of subsidiary. O2 offer international service department which are providing telecom
facilities or services which directly impact on several factors that includes social, economic,
political, technological, Legal and environmental. There are different examinations of macro
environment organisation which are explained as below:
Political – Political factor is that where political volatility and system of several United
Kingdom state after BREXIT period. O2 have to identify several political factors which is
needed for day to day working and when by the government if there any modifications are
made. Then respective organisation has to implement in their business strategy. O2
telecommunication has to follow latest government rules and regulations which are trying to
spread out their network that should be essential for register from state. It mainly includes tax
rate, exchange rate, modification in policies and strategies related to telecom sector.
Economical – Generally interest rate, tax rate and inflation affect telecommunication sector
at wide level. For organisation like O2 is not possible to build tower and supply resources in
rural area because it will be expensive for them (Bharadwaj and et. al., 2013).. But by this
people who are not living cities are affecting. Apart from this, recession can comes with
forceful modification at the time of buying tradition of United Kingdom who is paying
attention to use up their financial assets in better manner. Along with this growth of this
industry is totally depended on customers and technology advancement. This has been direct
on the way to pricing strategy within several telecommunication services and facilities which
additional down their service rate which can assist in attracting or grabbing existing
customers.
Social – Horizontal growth of this sector is limited because it is not possible for company to
expand their business in rural areas. Apart from this it is that factor which assists in
identifying the requirement and wants of clients in the entire community. Smart phones and
mobiles are at present in trend current period of time that is one of the foremost and popular
industries of sale which operate telecom Company. But still there are several aged group

people and adults who are generally attracting on the way to organisation facilities and
services in proper manner.
Technological – O2 Telecom Company needs to implement several tools and techniques
which help them in increasing success and growth level in good manner (Ackermann and
Audretsch, 2013). Along with this, this will aids in modifying the technology and develop
proper modification for modern technology in the company. With the assistance of analysing
the business operations, the enterprise can set their target goals and objectives when their
staff members are doing hard work by utilising advanced technology. O2 gives the best
chance for determining definite necessary features for buying their effectual services and
facilities.
Environmental – Factor of this is not stable they changes when climate modify and global
warming both affect telecom services to reach their customers. In relation to the
employment with technological advancement employees working in this sector have to adopt
all the modification related to environment factors. Business of O2 telecom is also affected
because of the same factor.
Legal – Every sector have some legal formalities same as telecommunication sector also and
these must be followed by each and every company working in that industry. Laws and
legislation given by this sector is given by government of that particular nation. O2 Is
following all the legal rules and regulation of United Kingdom.
Ansoff Matrix – This matrix was introduced by H. lgor Ansoff and Harvard Business
Review is that in which it was published in 1957. Title of article in which it was published
name as “strategies for diversification”. The same matrix was used by marketers and business
leader for thinking about or identifying risk of growth in market area (Bucolo and Matthews,
2011). This sometimes also known as market/product expansion grid as well it involves four
strategies which are used for growing. Along with this it also help in identifying market risk
which is associated with each. Four things involved in this are Market development,
diversification, market penetration and product development. O2 telecom use this matrix for
identifying market risk which is involved in their business. Explanation of each element is
given below which is related to same organisation:-
 Market penetration – The first and foremost quadrant in the Ansoff matrix is
market penetration. It is regularly implemented as a strategy when the company
has an present good with a well-known market and requirement a growth strategy

in the market. The best instance of this type scenario is the telecom sector. Most
of the telecom products survive in the market and must cater to that market. In
such situation competition is extreme (Grover and Kohli, 2013). It simply means that
in order to grow, the enterprise may have to go out of its way in which there are
operating at present for increasing market share.
 Market development – Market development is the second market growth strategy
of the same matrix. This strategy is utilised by the company when the targets
market is with their existing goods. When organisation has to grow and develop
new market in that situation organisation like O2 sells their products in new
market place. Apart from this there are several ways through which company can
approach this strategy: new geographic market, distribution channels, new product
dimension and packaging, as well different pricing strategy to attract several
customers.
 Product development – Product development in the Ansoff matrix related to
company which have a high-quality market share in a present market and
therefore may require introducing latest goods for spreading out. This is required
when the enterprise has a better customer base and knows that the market for its
present goods has reached up to diffusion. In this case, the market penetration plan
is not practical for longer period. A new product development scheme that caters
to the present market is an enhanced approach (Jocovic and et. al., 2014). In this
new produce is introduced in existing market as well can modify existing also.
Development related to goods and services take place. While products current
market trend, customer need and wants must be identified by organisation.
Product development only takes place after research, development and innovation.
Along with this properly analyse customers needs and wants.
 Diversification – The diversification strategy in the Ansoff matrix implemented in
the situation when the good is completely new and is being launched in the new
market area. This can be risky because if customers don’t like product they are
offering in market then it will be effectual in profit maximisation.

TASK 2
P2 The internal environment and organisation capabilities
Strategic capability refers to the ability of business to profitably employ competitive
strategy that allows it to carry on and enhance its value over time. Whereas strategic
capability does take into account the strategies a business uses, it main focal point in the
company is their assets, resources and market position, projecting i.e., how well it will be
capable to utilize strategies in the future. There is no particular method or universal way for
measuring or to note strategic capability (Kalyani and Sahoo, 2011). For determining and
identifying the strategic capacity of Vodafone, company have to implement VRIN/VRIO
model which will help them in examining strength and weakness of a firm. Explanation of
this model is stated below that how it will assist enterprise for sustaining in business
environment which is full of competitions.
VRIO Analysis – This was introduced by Jay B. Barney and it is a tool in strategic
planning which is used by company for efficient business decisions. It assists in analysing
competitors or rivalry of Vodafone communication and an enterprise have their short-term
border of competitors. VRIO is an internal factor analyser as well this is used for evaluating
and identifying resources of company. It includes valuable, rare, inimitable and non suitable
further description is given below:-
V- Valuable- Economies of scale source huge infrastructure to an organisation.
R- Rare- International continuance make starters for identifying the Vodafone Telecom
brands which is basically expert material for united offerings related to telecommunication
and mobile sectors.
I- Inimitable- Brand give easy entry to the market segmentation where administration has
culture for being a manager of market area.
N- Non suitable- None
As per the above discussion it has been analysed that VRIN aids administration in
competition advantages and also taking best position in market (Klettner, Clarke and Boersma,
2014). Along with this, each and every company have some strength and weakness the same
Vodafone also have. Description of all these is stated below:
Strength of Vodafone company:-

 Massive market coverage: Vodafone is ranked as 395th amongst 2000 brand by
Forbes. This company is well known for its wide network coverage and distribution as
well it is the second largest telecommunication network in world. They are operating
in more than 25 nations across the world.
 Revenue Generation: Vodafone generate billions of dollars every year and as per the
data of 2016 their revenue is 87.3 billion dollars. Apart from this it is ranked 104 in
figure of sales across the world 2000 list as well 84 in the market value.
 Premium Cost: other telecom operators are penetrating the market. Respective
organisation is differentiating their services regularly and their customers feel proud
that they are Vodafone user (Köseoglu and et. al., 2013).
 Others: apart from the entire above same organisation have their some more strength
such as: subscriber base, marketing, brand recall and brand valuation.
Weakness of Vodafone company:-
 Dropping subscriber base: In the last 4 years subscriber base of Vodafone dropping.
This is the major issue through which it is going on in global market.
 Dropping brand valuation: Main reason of dropping brand value is their dropping
subscription base. Both subscriber base and brand valuation of the firm was strong
from the starting.
 Losing market share in USA: Vodafone is losing their market share in united state
of America with the AT&T and Verizon wireless. Because both of these are
performing more better than the give enterprise as well this is the main reason
Vodafone is losing their market share in USA.
TASK 3
P3 Competitiveness of UK's telecommunication sector
Porters five force model is that which help company in identifying competition of
business in market area. It includes five forces which are given by Porter for analysing
competition which is important for every organisation (Murano and et. al., 2011). So that they
can remain in market for long duration. Telecom industry is wide in nature have lots of
organisation so it simply mean that level of competition is also high. Porter’s five forces
model is explained below:-

Bargaining power of buyers:- Buyers are those in telecom sector who wants best offer with
minimum price because no one want to spend their hard earned money in mobile phone
services. Telecom industry have powerful customer this is the main reason of high bargaining
power of customers. In this situation several enterprises involved in this start giving offers
and some discounts to customers for attracting them. When an administration have large
customers base it will assist them in two manners by offering opportunities to the company
for make sales more effectual and production process. Along with all such new products
reduce defection of existing buyers of the respective industry to their competitors.
Threats of new entrance:- communication industry is that in which lots of new companies
comes with lots of innovative and creative goods in market place with the motive to capture
entire market and for grabbing customers (Oestreicher-Singer and Zalmanson, 2012). Moreover,
with this they give several special as well beneficial offers such as low pricing, reducing cost
and give new value suggestion to customers who assist company in easy selling their
products and along with this they can attract more and more buyers. In UK, threats of new
companies’ entrance are one of the major effects for the business of existing enterprises. The
reason at the back this that it can state that there is requirement growth in telecom industry.
There are few elements which assist in decreasing the level of threats for a company:
 Amount of capital invested by owner of company should be high for coming in
telecom industry.
 Existing brands has loyal, dedicated customers for their goods and services.
 Companies take interest of economies of scale in the existing trading.
Bargaining power of suppliers:- For daily basis activity and performance of business there
is requirement of raw material which is provided by supplier for each and every enterprise of
telecom sector. As well for accomplishing target of daily basis in communication sector
because there is need of several devices in the when suppliers are not coming for delivery of
raw material this directly means that their prices are high. In general words it can be said that
suppliers have bargaining power of cost they can high and low their services and raw material
cost (Schaltegger and Wagner, 2011). But companies under telecom sector can easily come out
of this because they have large number of suppliers.
Threat of substitutes – There are numerous substitutes of goods and services in telecom
industry. Each and every organisation coming in market with something creative and
innovative for attracting as well grabbing more and more buyers and taking high position in

market place. Thus, the same sector has high threats of substitute’s products and services.
Sometimes for selling products and services in market organisation have to reduce their
prices as well have to provide few discounts and offers to customers.
Rivalry within market – Telecommunication sector is broad in nature because main reason
of this is that there are various or large number of administration as well it is the main reason
of rivalry in the market place (Scholes, 2015). Because of this organisations under this sector
have to high and low their prices which give direct effect on their profitability. Generally it
can be said that this whole competition is giving outcomes in generating revenue and profit in
long duration. There are several elements which help telecom industry companies in
competing with this type of situation;
 Administration can created sustainable differences.
 With the assistance of building scale enterprise can compete better.
 Collaborating with the competitors of same industry can enhance market size
rather than competing for small market.
TASK 4
P4 Understanding and interpreting strategic direction
Strategic direction linked to the course of various different functions and activities
which leads in the way of accomplish of administration strategic consummate. Vodafone is
doing their operation in their marketing strategies that is large which is weaker than likely as
organisation has strong place in the large market area (Svee, Giannoulis and Zdravkovic, 2011).
For understanding and suggesting whole strategic way of company, this report is using the
Bowman's strategic clock model which assists enterprise to examine major things in
appropriate method.
Bowman's strategic clock model - It is one of the famous, popular as well valuable
models which is utilised by administration for marketing intention and for evaluating
competitive company real pose by determining different goods and services of
competitors. The same model was introduced by David Faulkner and Cliff Bowman for
explaining three main strategies of Porters generic. Explanation of this model is given
below:

Position 1 (Low cost & Low added value) - This is not competitive business pretence
whose services or offerings is not different and customers understand very low price in
the place of a low rate (Svee, Giannoulis and Zdravkovic, 2011).
Position 2 (Low price) – The second position is linked with economies of scale model
whose motive is to decrease the cost plan for accomplishing of needed enlargement and
achievement. Less productivity margin of goods and high results volume which can
capable administration to accomplish high income and several other benefits also. This
often aids in the way of price wars within competitors firm in this industry.
Position 3 (Hybrid) – According to the present situation, low prices of goods will
automatically distinction in the goods and services which is supplying by the company
(Slack, 2015). Major motive is to manipulate consumer by providing in more effectual cost
as well reasonable price of services which help in generating better positioning in the
market place which is broad in nature.
Position 4 (Differentiation) - The foremost aim is to give range of services on effectual
products, it will aids in giving high level of value added services and stuff to their
required customers. Quality and Branding of offering will play a vital role in the same.
Position 5 (Focused Differentiation) – main motive of maintaining effectual value of
services at high cost which can be first choice of consumer for consuming high
noticeable values.
Position 6 (Hazardous High Margin) - It is linked with the high risk strategy for
position which analyse high cost without giving any apparent cost of particular products.
Position 7 (Monopoly pricing) – In these such kind monopoly of business company
situation, they does not need to focus or stress against specific goods and services so
customers have choice for leaving the purchasing goods or with no any changes.
Position 8 (Market share loss) – This position can be demote as that method which stay
alive in large competitive market area. Also they require determining the standard cost
with focus range of goods and low quality of services or product will result in the way of
loss for their potential customers and also reduction in market share of an administration.

CONCLUSION
From the above the assignment is has been concluded that business strategy formation
help organisation in achieving their goals and objectives in proper manner. It play vital role in
working of business because surrounding in which exist is full of competition for this firm
have to plan proper strategy. Business strategy is formed by top level department of
organisation and in some situation company have to hire and professional person. Strategies
are design after identifying external and internal factors so that company can frame perfect
business strategy. It includes policies, rules and regulation which must be followed by
employees while working.

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Online
Deloitte predicts UK telecommunications sector trends for 2018. 2018. [Online]. Available
through:<https://www2.deloitte.com/uk/en/pages/press-releases/articles/uk-
telecommunications-sector-trends-for-2018.html>.