Business Strategy: A Critical Analysis of EE Telecommunication Company

Desklib provides past papers and solved assignments for students. This report analyzes EE's business strategy in the UK telecom market.

Business Strategy

BUSINESS STRATEGY
Contents
Introduction.................................................................................................................................................... 3
Task 1 – The external environment.......................................................................................................4
Provide a critical analysis of the macro environment and how it determine your
chosen organisation’s strategic management decisions using..........................................4
i. PESTEL model for environmental analysis.........................................................................4
ii. Ansoff’s growth vector matrix to analyse the organisation’s strategic
positioning.................................................................................................................................................. 6
Task 2 – The internal environment and organisation capabilities...........................................9
Critically evaluate the organisation’s internal environment and its capabilities..........9
i. Applying the VRIO/VRIN model to analyse the strategic capabilities......................9
ii. Strengths and weaknesses of the organisation..............................................................13
Task 3 – Analysing the telecommunications sector....................................................................15
Devise appropriate strategies to improve the organisation’s competitive edge in the
market using suitable analytical tools and model of analysis...........................................15
Task 4 – Understanding and interpreting strategic direction..................................................20
Produce a strategic management plan for the organisation showing clear strategic
direction options available to the organisation........................................................................20
Conclusion.................................................................................................................................................... 23
References.................................................................................................................................................... 24
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Introduction
There are many telecommunication companies operating in UK. The fundamental
principle of all these companies is that they tend to provide excellent services to the
users thereby satisfying them with their varied needs. For good marketing
positioning, it is necessary to conduct external environmental analysis for the
organisation that is EE company that has been chosen as an example for answering
questions for this assignment. External analysis helps to know position of the
company and the possible threats that it could obtain from the rivals. At the same
time, it is vital to conduct internal analysis so that inner capabilities could be
highlighted.
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Task 1 – The external environment
Provide a critical analysis of the macro environment and how it determine your
chosen organisation’s strategic management decisions using
i. PESTEL model for environmental analysis
It is very crucial to undergo with some strategic move for environmental analysis for
EE Telecommunication Company. With the advancement in the technology and
because of increasing competition on telecom sector, it is becoming a necessity to
do environmental analysis so that organisation could take better strategic
management company (Cadle, Paul and Turner, 2014).
Political factors-
Here the strategic decision to be taken depends upon the coverage area by EE
company in the non urban areas. Although the customers of EE company in UK are
much satisfied with its services, still UK government wants better coverage options
and good internet facilities in the rural areas. For this initiative, UK government plans
to invest with the companies like EE to provide services in the rural areas too.
Economic factors-
As with the introduction of taxes imposed on telecommunication sector, there is
evidence in reduction of buying plans by customers. As per the UK economy, better
conditions prevailed in the year 2013, but with the increase in taxes like VAT, there is
much possibility of reduction in tendency of buying plans by customers. With the rise
in inflation, a great decrease in buying power of customers was seen.
Social factors-
It is seen that every customer has a different taste that is unique in itself. Survey was
conducted by Deloitte, according to which it was observed that 53% of 16-75 year
old age groups in UK make use of smart phones during walking. This percentage is
equivalent to 22 million people of UK. In addition to this, the age group of 16-24,
there is huge increase in the count that it up to 74%. Different telecommunication
services that are used by the above mentioned age groups are sharing media files,
documents, instant messaging, making calls, internet surfing or exploring social
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media. Thus, it was observed that every age group has different purpose for
accessing the telecommunication services.
Technological factors-
The telecommunication services are much affected by technologies. EE telecom
company also wants to provide high speed data and network services. In addition to
this, goal is to provide services in the remote areas as well. For this purpose, LTE,
4G techniques have been introduced so that customers maximum invest with this
company. Efforts are also laid to provide high tech services at the low cost due to
high competition in the market (Ho, 2014).
Legal factors-
There are certain laws implemented that are needed to be abide by all the service
providers. Under the legal factors, the cost of roaming and other data related
charges have been removed. No service provider could work against the laws and all
the issues related to consumer’s rights and service providers are resolved under
jurisdiction.
Environmental factors-
The telecommunication service providers have to see that their activities must not
interrupt the environmental factors. For example, their production and designing of
smart phones must be compatible to the natural environment. That is it must not
harm the ecology in any way. In the same way, the use of handsets must be like that
they do not harm the users in any form.
Thus, in the end it can be concluded that the environmental analysis helps to
research all the external factors that impact the EE telecommunication company.
The manager of the company has to keep in mind all the above explained conditions
so that strategic decisions taken have positive impact on the environment in which it
operates. It becomes easy for the company too, to achieve the goals and obtain the
desired targets. The analysis also helps to make strategy so that EE company could
develop and grow.
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ii. Ansoff’s growth vector matrix to analyse the organisation’s strategic
positioning
EE telecommunication company makes use of Ansoff’s growth vector matrix to plan
and develop strategies so that company could grow on a large scale. This matrix
composes of four strategies that are used by EE Company to analyse their products
and services with market competition and to understand the risks linked with each
strategy. The matrix is explained as below-
Figure 1: Ansoff’s growth vector matrix (Business, 2016)
The four strategies of matrix as used by EE Company are elaborated as below-
Market Penetration-
In this strategy, EE Company tends to increase the sale of its products and services
within existing market. Thus, its focus is to enhance the market share by increasing
revenue for the company. There are several ways to achieve this. For example, EE
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telecom company can decrease the price of its services to attract more customers
towards it and to gain popularity among new customers. Promotion of products could
also be done. Thus, it can be said that to face the increasing competition in the
telecommunication market, it could be the best strategy to gain customer attention
through distribution efforts.
Product development-
In this strategy, EE telecommunication company introduces new product/service
within existing market. Before penetrating into this strategy, it is required that EE
company has to go for thorough research and must have good understanding of the
tastes of existing market consumers. The practical application of this strategy by EE
company could be done in the way by thorough reviews of competitor’s product and
then merging of own resources to create a better product or service that meet the
consumer’s needs. Partnership with other companies could also prove to be benefit
for introducing new product.
Market development-
Under this strategy, EE company introduce its existing products in new market.
Thus, its aim is to target another market that could be a new location, new
geographical area, any other particular region or new customer segment. Before
applying this strategy, EE company has to make sure that the products it is going to
use are best of it. In addition to this, it also has to see that the market in which it is
going to introduce, there exists the demand of the same product or service.
Diversification-
This can be the riskiest strategy as in this new product or service in the new market
is introduced by the company. For applying this strategy, the company has to make
sure that the new product it is going to introduce is in demand by the consumers of
new market. The company also has to understand the market trends of the new
location (Rudnicki and Vagner, .2014)
Thus, it can be concluded that EE telecommunication company makes use of the
above strategies so that it can grow and develop at enough level to satisfy the needs
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of the consumers. It is very important for it to understand the changing trends among
consumers so that related services could be provided to them at low cost.
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Task 2 – The internal environment and organisation capabilities
Critically evaluate the organisation’s internal environment and its capabilities
i. Applying the VRIO/VRIN model to analyse the strategic capabilities
It is important for EE Company to evaluate its own capabilities so that they can be
used in the development of the organisation. VRIO model can be used for this
process that is to evaluate EE’s own resources and capabilities so as to check of it
can survive in the competitive market in the coming time. According to this model,
there are four attributes that must be possessed by EE company so that it can grow
and develop in the market place. The resources within EE company must be
valuable, rare, non-substitutable and imperfectly imitable. VRIO model is the
improved version of VRIN model. It depends a lot on the resources and capabilities
of the EE company for attaining a competitive advantage. Given below is the figure
to explain the concept of VRIO model-
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Figure 2: VRIO model (Knott, 2015)
The above figure explains well that if the resource or capability of EE telecom
company is not valuable, then it can lead to competitive disadvantage. On the
contrary, if the resource or capability is valuable, it is then checked if it is rare or not.
If it is not rare, then there are chances of competitive parity. On the other hand, if the
resources and capabilities of EE telecom company are not costly to imitate and
organized to protect value then it may lead to temporary competitive advantage. In
the last, if all the questions asked result into ‘yes’ then there are high chances of
sustained competitive advantage.
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The different prospects of this model on EE telecom company are explained as
below-
Being valuable-
It is expected that EE’s resources and capabilities must add value so that it become
able to utilise the opportunities and exploit the threats. The values of EE telecom
company must be in the way that they help the company to understand the value of
its consumers. It could be attained by offering high rate services at low rates, thus by
reducing the price value. If the resources are not enough valuable there are possible
chances of competitive disadvantage. The important thing here for the EE telecom
company is that, it should timely check the value of its resources as any change in
the internal or external environment can make them valueless or highly valuable.
Being rare-
The resources that are being possessed by only EE or any other telecom company
could be considered as rare. For example, EE telecom company was the first
company to introduce the concept of LTE and 4G. This capability has made it rare. If
all the telecommunication companies make use of similar resources then it will lead
to competitive parity. Thus, no extraordinary performance could be seen in the
market under such situations. But it is still believed that if the resources and
capabilities are valuable but are common, still they must be preserve as they help in
staying long in the market (Barney and Mackey, 2016).
Cannot be imitate-
A resource or a capability is said to be difficult to imitate if any other company cannot
buy it or cannot have any substitute for it. It can be done in two ways- by producing a
duplicate copy of it or by giving any substitute for it. If EE telecom company has all
the above factors that it its resources and capabilities are valuable, rare and are hard
to imitate by others then there are high chances of sustained competitive advantage
under which huge revenue can be generated. A resource can be difficult to imitate, if
any other company cannot identify it correctly.
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Being rightly organised-
The resources are prone to be well organised in order to save their value for the
company. EE telecommunication company must keep a check on its employees’
performance, its management, its culture and structure to keep its resources
valuable, rare, hard to imitate and organised. Only then there will be possibility of
gaining competitive advantage.
Thus, VRIO model helps to understand the EE telecom company’s internal
environment. It also suggests ways through which further development is possible.
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