EE Digital Communication: Strategic Analysis, Environment, UK Market

This report provides a comprehensive analysis of EE Digital Communications' business strategy within the UK telecom market. It begins with a PESTEL analysis to assess the macro-environmental factors influencing the company, including political, economic, social, technological, environmental, and legal aspects. The report then employs the Ansoff Growth Matrix to evaluate potential growth strategies, such as market penetration, market development, product development, and diversification. Furthermore, it delves into the internal environment and organizational capabilities using the VRIO framework to identify valuable, rare, inimitable, and organized resources. The competitive landscape is examined through Porter's Five Forces, focusing on the bargaining power of customers and suppliers, as well as the threat of new entrants and substitute products. Finally, the report interprets EE's strategic direction, providing insights into its market positioning and future growth prospects within the dynamic digital communication sector. Desklib provides access to this and many other solved assignments for students.

BUSINESS STRATEGY

Table of Contents
INTRODUCTION................................................................................................................................2
Task 1...............................................................................................................................................3
THE EXTERNAL ENVIRONMENT...................................................................................................3
Task 2.............................................................................................................................................10
THE INTERNAL ENVIRONMENT AND ORGANIZATION CAPABILITIES.........................................10
Task 3.............................................................................................................................................15
ANALYZING THE TELECOMMUNICATIONS SECTOR...................................................................15
Task 4.............................................................................................................................................18
UNDERSTANDING AND INTERPRETING STRATEGIC DIRECTION................................................18
CONCLUSION.................................................................................................................................22
REFERENCES...................................................................................................................................23

INTRODUCTION
Digital communication sector is a fast-growing sector and is one of the biggest contributing
sectors in the UK economy and has generated revenue £3.8bn in the first quarter of 2017. The
major telecom companies in the UK are EE, O2, Vodafone, Virgin, Giffgaff and BT. The telecom
companies are fighting hard to survive in the market and retain their market share ( Bhardwaj,
et al. 2013).
The current assignment will highlight the strategies adopted by EE digital communications to
maintain their current market position and increase their market share in the upcoming future.
A study is done on the macro environment of the company with the help of PESTEL analysis
which analyses the external political, economic, social environment of the company.
To determine company’s strategic position in the market the Ansoff’s growth vector model is
explained. The assignment will also analyze the microenvironment of the company with the
help of VRIO model and discuss the strength and weaknesses of the company on the internal
level. To analyze the competitive environment of the company Porter's five force model will be
studied which focuses on the bargaining power of customers and suppliers and the threat of
substitutes and new entrants (Hoejmose, et al. 2013).

Task 1
THE EXTERNAL ENVIRONMENT
Company overview
EE telecommunication is the largest mobile network service provider in the UK. EE was the first
company to launch 4G services in the UK and has a customer base of 30 million users. The
company provides the services of fixed-line telephone, Mobile Telephony, Broadband and
Digital TV. The company provides its services in retail as well as B2B transactions.
The company also sells handsets and other mobile phone accessories.
Figure 1: EE Limited
[Source: http://www.gadgethelpline.com/free-limited-edition-payg-4g-sim-ee-radio-1-djs/]

PESTEL ANALYSIS
EE limited is the leading company in the telecom sector in the UK. The company is facing a
tough competition from the rivalry companies (Newton, 2014). In addition to this, other macro
factors like political, economic, technical, legal, environmental factors are making an impact on
the policy and decision making of the company. The company has been a leader in providing 4G
services and has maintained its position as the largest mobile network operator in the
company. To ensure the efficient operations of the organization the company should analyze all
the macro factors which are discussed below:
Political Factors
The telecom sector is regulated in the UK by Ofcom, which is an independent regulator of the
communication service providers in the UK. Therefore the political factors do not have any
direct influence on the telecommunication industry (Ho, 2014). In addition to this, the
government gives financial and technical support to the companies to expand their network to
every corner of the UK, especially in the rural areas. After the public vote for leaving European
Union, many trade restrictions have been imposed upon the telecom industry which is also
make an impact on the operations and profitability of EE.
Economic Factors
The economic conditions of the UK are improving after the 2008 recession and there has been a
rise in the disposable income of the population. This economic growth has increased the use of
smartphone among every age group and the usage is expected to increase in future also,
however the facilities are not as good in the rural areas, and the company has to invest in
installing more towers in the areas. In addition to this, the advertising via digital media and
expenses of erecting new towers and other infrastructure has increased the overall expenses of
the company.

Social Factors
The use of mobile phones and digital technologies related to internet is sharply increasing and
there has been a rapid increase in the use of smartphones in the daily lives of the people.
People use their smartphones for watching videos, listening to their favourite music, online
booking of tickets, internet surfing and for social networking websites like Facebook, Instagram,
Twitter. For using all these services the users require fast 3G and 4G internet services.
According to a survey, by 2023 almost 92 percent of UK’s population will be using smartphones,
including all the age groups. To cater the needs of such a large number of customers the
company has to expand its systems (Kolios and Read, 2013).
Technological Factors
The technology of mobile communication has developed very rapidly. The digital
communication technology has been upgraded to 4G LTE services. The EE limited was the first
company to introduce 4G services in the UK in the year 2012, but competitors such as Vodafone
and O2 have also launched their 4G services and the competition is intense. However, the 4G
services have not been reached to the entire UK especially rural areas. To make these fast
internet services available in all the areas, the company has to increase the manpower and do
many technological changes in the operations. Countries like Japan have already started
working on fifth generation communication services. The company should follow a proactive
approach to research and development for these facilities and development of infrastructure
for these services.
Environmental Factors
The digital communications do not have any direct ill effect on the environment but they have
many indirect effects such as people switching to new mobile phones and discarding the older
ones, this is creating a large amount of e-waste. There have been many concerns regarding the
usage of clean energy sources and reducing the carbon emission.

Legal Factors
EE limited has to follow many regulations related to the communication of digital services.
These regulations are governed and monitored by the telecom industry regulatory authority of
the UK, Ofcom. These regulations are related to the usage of broadband spectrum and the
quality of 4G services. The legislation regarding monopoly and net neutrality and importing
sophisticated communication devices from other countries has caused some trouble to the
company.
The security breaches into the systems of many telecommunication companies have caused
penalties to these companies. So much data is being transferred on the internet on daily basis;
the hackers take advantage of the vulnerabilities in the cyber security systems of the companies
and use the confidential data for illegal activities. The data protection act 1998 ensures that all
the data must be processed by the telecom companies lawfully.
ANSOFF GROWTH MATRIX MODEL
Ansoff’s growth matrix model is a tool which is used by managers to plan the growth strategies
in future, which is done by producing new products or developing the existing products. With
the help of this model, a brainstorming can be done on all the possible strategic options
(Hussain, et al. 2013).

Figure: Ansoff Growth Matrix Model
[Source: https://www.brighthubpm.com/risk-management/52974-the-ansoff-growth-matrix-
and-risk-management/]
Market penetration
In market penetration strategy, the company tries to increase the sales or the number of
customers in the existing market. This is achieved by increasing promotional activities and
adopting competitive pricing strategies, the primary purpose is to increase the usage of the
existing customers. In this strategy, the focus is on the markets and products which are well
known to the company. The strategy has lesser risks but it requires greater investments in
research and development activities.

Market development
In this strategy, the company tries to expand its operation to new markets within the country or
outside the country. This can be achieved by exporting the products in a foreign country and
changing the packaging or adopting new pricing strategy to attract customers in the new
market. This is a risky strategy as compared to the market penetration because the company
has to enter a completely new market and many external factors like political, economic and
legal situations in the host country need to be analyzed before entering (Taylor, 2012).
Product development
In this type of strategy, the company expands the current product range and develops new
products in the existing market. This can be done through a number of ways, like doing
research and development activities, producing new products by collaborating with other
companies or buying the semi-finished products from other companies and selling it by
company’s own brand name.
The product development is done to apply the changes in the technology over the time and to
counter the launch of advanced products by the competitors. To become successful, the
company has to identify the customer needs and preferences and develop products based on
these inputs.
Diversification
In this strategy the company tries to introduce new products in completely new areas of
business, this is a very risky strategy as the company is entering a new market with little or no
experience. Therefore careful assessment of the risk involved in the business becomes very
important. After assessing all the risks involved, a strategy of diversification can be
implemented. The diversification means expanding the operations in new categories but before
entering a new category the company should do proper analysis on the marketing mixes like

people, place and price. After analyzing these factors the company should finalize its plan to
apply the diversification process.

Task 2
THE INTERNAL ENVIRONMENT AND ORGANIZATION CAPABILITIES
VRIO ANALYSIS
VRIO is an analytical tool which is used for the evaluation of company’s resources and the
competitive position. A company can have resources in the form of land machinery, people,
process or systems. All these resources are unique assets of the company and the competitors
can try to imitate these resources. If they provide the same services in the lower price range it
can reduce the company's market share (Cardeal and Antonio, 2012). In order to maintain its
competitive advantage, the company should strategically manage these resources. Effectively
managing these unique resources can help the company increase its overall market share. The
four questions- are the resources Valuable, rare, imitable and organized are discussed below:
Figure: VRIO Analysis
[Source: http://www.business-to-you.com/vrio-from-firm-resources-to-competitive-
advantage/]

Value
If a resource is helpful in taking advantage of the market conditions then it has a value to the
company. By knowing the exact capability of a resource, managers can take the right decisions
regarding the utilization of these resources for achieving a particular goal. The resources can be
tangible or intangible. The tangible resources include land, machinery and these resources do
not play an active role in gaining competitive advantage, but intangible resources such as brand
value, intellectual property, and unique methodologies related to training or leadership can
offer a competitive edge over rivals. These resources may also include a good relationship with
customers or suppliers and unique skills of the employees, all these assets are the valuable
resources for the company.
Rarity
Rarity is some quality in an organization that is very valuable and rare. These rare resources can
help the organization take a lead over the rivals. A manager having unique leadership qualities
or an employee having unique work skills, all these assets are rare resources for the company.
The company should take strategic decisions to safeguard these unique resources. If the rarity
is in the human resource then the company should make proactive efforts in retaining the
talented employees in the organization (Simão and Diaz, 2013).
Imitability
Imitation is very common phenomena in the competitive business. Companies try to imitate
the successful products of the rival companies and launch a similar product in a lower price
range. The prices are always kept less than the initial entrant, as it already has brand
recognition. In a competitive business, an analysis should be made on the possibility of
imitability of a product or service. If the imitation can be done easily then how much will it cost,
based on these inputs the company can decide its strategies such as applying for the patent and
other legal options.