Giffgaff's Competitive Advantage in the UK Telecom Market

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Business Strategy

Table of Contents
Task 1 –..........................................................................................................................................3
P1 and M1 - Applying appropriate frameworks to critically analyze the impact and
influence of the macro environment on a given organization and its strategies.................3
Task.................................................................................................................................................8
P2 – Critically evaluate and analyse the internal environment and capabilities of a given
organisation using appropriate frameworks..............................................................................8
ii. Strengths and weaknesses of the organisation.............................................................10
Task 3-..........................................................................................................................................12
Evaluation of competitive forces of telecommunications sector for British
telecommunications, UK using analytical tools and models (P3, M3)................................12
Task 4...........................................................................................................................................16
P4 - Applying a range of theories, concepts and models, interpret and devise strategic
planning for a given organization..............................................................................................16
Modeling the strategic direction of the organization based on concepts or models.........16
D1 - Critique and interpret information and data applying environmental and competitive
analysis to produce a set of valid strategic directions, objectives and tactical actions....28
Conclusion....................................................................................................................................29
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Introduction
The term telecommunications sector refers to the companies who are dealing with
communications and transmission of data. Telecommunication also incorporates cell
phone assistance providers as well as wireless communication channels. The
telecommunications sectors play one of the vital roles in the UK industry, it is also
known as Telecommunications services. This sector does not involve those companies
who are dealing with Television and radio broadcasting. An efficient approach for
telecoms is able to improve business views. It also helps the company to fulfil the
organizational goals and operational efficiency. This study tries to incorporate the
various business strategies as well as the methods adopted for evaluating both the
macro as well as the micro environmental factors which are associated with the
company.
The selected organization for the present study is Giffgaff. It runs on the O2 network.
Giffgaff is an implicit mobile channel; they started their journey in 2009. The Giffgaff
team believes in hearing their clients and provides rewards (Giffgaff.com, 2019). It
works on proper customer service, marketing and sales.
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Task 1 –
P1 and M1 - Applying appropriate frameworks to critically analyze the impact and
influence of the macro environment on a given organization and its strategies
i. PESTLE model for environmental analysis
The above table describes the PESTLE analysis of Giffgaff. It includes several factors
like P (Political), E (Economical), S (Social), T (Technological), L (Legal) and E
(Environmental) factors.
Political
Political factors refer to corruption, tax policies etc (Baradat and Phillips,
2016). It is hard to predict the political scenario of any country, as it is the
long term process. So, it is necessary to build a complete strategy before
starting the work. Change of regulation, Effect of new legislation as per the
policy of British government can affect the telecom business, as this can
interfere with the communication of customers. If violated, or if the political
scenario of the particular country is unstable, then this factor could be of
negative to the growth of business.
Also the Laws enforced by the UK government in relation to the business
like contract laws are compiled to be followed by the GiffGaff. The
intellectual property rights also affect the company.
Economical
This dimension is associated with the economic aspects of a country,
like economic growth, rate of inflation etc. GiffGaff industry gets
affected by these factors as the decrease in the revenue by 6% every
year in UK has resulted for the decrease in the opportunities in
relation to the employment. Economic factors refer to the rise in the
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price of electronic devices, such as mobile phones, tablets etc. which
leads to an overall increment of the products which affects the
customer’s budget. Moreover, it is necessary for the respective
organization to leave their customers freely, if they like the service
then they will definitely come. Even last year Giffgaff handed out
different plans to their over one million customers, which they can
change in every month as per their requirement. Even they offer to
recommend the suitable plan for the customers as per their need.
Certainly this move helped the business to grow. Rate of inflation
may affect sales as the disposable income will be less in the hands of
the customers and they will go for plans with more economic rates
thereby increasing post Brexit sales.
Social
It also protects its member’s privacy against advertisers to use in
different social media platform. Apart from these, Giffgaff team also
does charity for cancer affected kids. These social activities increase
the reputation as well as the brand image of the company across the
globe. These create a positive impact and strengthen the bond with
the customer. Giffgaff lets members stay or leave without the hassles
of a contract respecting the fact that members can find a different
plan that is better for them and hence giving them a lot in terms of
freedom of choice. Their service is quick and reflects the on the go
lifestyle of the UK-ites. The fast pace of lifestyle will make buyers
wants to take up a connection with Giffgaff if it is free of some minor
connectivity hassles. Also the social factors like social class also affect the
GiffGaff. As for example, the GiffGaff cannot promote the premium ranges
to the general public if the majority of the population was from lower class
rather they need to rely on the niche market.
It refers to the automation, research and developments etc. Moreover,
Giffgaff uses digital data in order to serve customers in a better way. In
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Technological
2017, approximately 261,000 new members joined Giffgaff raiing the
revenue by 16% to £407m. This increased the yearly profit by 23% to
£28.7m. Being updated and use of the latest technology always bring growth
to the company. Also the recent growth and breakthroughs made by the
competitors like BT Group; Vodafone etc. have affected the GiffGaff for
encountering a new technology.
Legal
Several laws such as consumer protection law, employment law etc
have been implemented by the government for the benefit of both the
consumers as well as the employees. The company has to abide by
all relevant laws and cannot change product prices or cannot mislead
through offers thereby attempting to fool the customers.
Also the discrimination laws are also provided by the government abide by
the GiffGaff to treat good to employees in a fair manner. The international
legislation also affects GiffGaff.
Environmenta
l
It is associated with ecological aspects. In recent times, Giffgaff is
putting an emphasis to use renewable sources for its different
operation to create a carbon negative footprint. They have offered
“greeny bags” which is a bag of goodies the money that the Giff Gaff earns
from it goes to charity for environmental causes (Giffgaff.com, 2019).
Giffgaff has also taken many steps and initiatives for switching towards
100% renewable energy.
Table 1: PESTEL Analysis of Giffgaff
Source: (Created by the author)
ii. Ansoff’s growth vector matrix to analyse the organisation’s strategic positioning
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Ansoff matrix aids in describing various approaches attained by an organization for its
personal marketing systems (Yin, 2016). Two main factors market and product are
counted as the new and present condition. By using Ansoff matrix, the strategic
planning of Giffgaff is discussed below:
Figure 1: Ansoff’s Matrix
Source: (Yin, 2016)
Market Penetration- Business focuses on selling existing products into existing
markets. This strategy is with the low risk where the organisation sells the existing
products in the existing market only. Market penetration is an advanced technique to
manage the overall growth of the company with the current stocks (Zhou et al., 2015).
The market penetration of the broadband and cell phone in the UK is about 87% and
95% respectively, among them the market share of Giffgaff is about 35% and 29%
respectively, as per the survey of 2016. Among 600+ stores in the UK, Giffgaff aims to
touch almost all the outlets for strong communication channels.
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Market Development - Market development is the name given to a growth strategy
where the business seeks to sell its existing products into new markets. It is a unique
technique to recognise the current targets in order to offer the products of the company
(Gegg, Budd and Ison, 2014). By using various technological improvements Giffgaff
mainly targets the inexperienced or the youth section of the community on their
opponents. It allows them to reach the biggest as well as fast-growing network
providers. Technological advancement includes high-speed Wi-Fi for the public.
Product Development - Product development is a strategy where a business aims to
introduce new products into existing markets. Hereby the organisation develops new
products and sells it into existing markets. The first priority for Giffgaff is to afford best-
in-class connectivity across the globe. Apart from that, Giffgaff also concentrates in data
science, analytics, cybersecurity for proper clarifications of the network. For these
following, Giffgaff has become the champion of customer service among telcos in the
UK and they hit 1 million subscribers in 2013.
Diversification - It describes the overall company's growth by developing new
businesses, launching new products in new markets (Bowen, Baker and Powell, 2015).
It is the riskiest growth strategy of all. If there are potential synergies between the
existing business and the new market, it is called as related diversification (Fuller,
2016). Giffgaff, which is a mobile telephone network company have introduced different
types of prepaid scheme offers along with 4G network, which is a related diversification.
On the other hand, the company has started to sell new as well as 2nd hand phones
explaining unrelated diversification.
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Task
P2 – Critically evaluate and analyse the internal environment and capabilities of a
given organisation using appropriate frameworks
i. Applying the ‘VRIO/VRIN’ model to analyse the strategic capabilities possessed by your
chosen organisation
“VRIO” design includes two general analytical standards: one is based on the
positioning view and another one is based on the resource-based view (Kim, Lee and
Shin, 2015). VRIO is the principal procedure for managing the internal review of the
company. It is based on four aspects mentioned below:
Figure 2: VRIO Model
Source: (Kim, Lee and Shin, 2015)
V (Value): The term value refers to how valuable the source is and how quick is it to get
on the market. This particular method is done by increasing or decreasing the product
price. In case, if the product price is too high then it will not available in the market and
in case if the resource is not expensive it should be outsourced as it has no value for
the company. Giffgaff always offers the product at a cheaper price, which acts as a
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positive and pulls in more customers towards the company. Its broadband product value
of 500MB usage ranges between £6.00 - £8.50.The financial resources values for
organisation as it helps in investing the external opportunities and also the employees
also act as same.
R (Rarity): How often the user is getting the product or how inadequate the resource
is? There are very rare companies whose resources are considered as rare. Moreover,
if the resources are rare then it proffers a competitive edge. If any product gets by the
customer quickly then it does not satisfy the rarity definition. Therefore, this could be a
weakness for the company if not properly taken care. Giffgaff provides quick services
ensuring that they are not lagging behind in this case.
I (Imitability): Imitability is necessary for any organization. When a company recognizes that
the company with whom they are competing having a huge success with the same product, at
that time they immediately start working through imitating their product as much as possible, so
that they can come into the competition. Some of the organisation imitates some of the resources
when they cannot provide the valuable and rare resources. There are three main factors behind
imitability are, the past circumstances, the Social Complexity and uncertainty. In the present
time, demands and the products are usually alike but they are different according to their
features. Giffgaff has a capable expert team of developers who checks different products and
schemes offered by the other existing companies of telecommunication sector and then they offer
even better offers for the consumers to give a tough completion to those companies. Imitability is
difficult only for the companies offering something rare, valuable and that which is almost
impossible to imitate. Gigg Gaff connects the consumers with the superfast services of the
broadband anywhere at the most affordable price.
O (Organization): If the company is well-organized then its resources have become
beneficial. Giffgaff is the well-organized telecom sector in the UK. They are making use
of the hitherto unnoticed competitive advantage and will reassess the same in the future
as well. GiffGaff has the organised process of management and system and the structure and
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culture is also smooth. Giff Gaff has attained the ultimate objective for sustainable competitive
edge. The capabilities and resource are also optimum utilised.
ii. Strengths and weaknesses of the organisation
Based on both the Weakness and Strengths, Giffgaff is one of the leading telecom
brand of the UK based on the number of subscribers and generated revenue.
Strengths Weaknesses
 The financial condition is very strong.
 Leading position in diverse competitive
markets
 Providing a favourable working culture and
environment
 They are more customer-oriented as in
their opinion is given a lot of importance
 Most innovative community rewarded at
Social CRM customer Excellence Awards
 Strong online community
● High rates of roaming or steep
roaming charges compared to
other telecom service providers
in comparison to its competitors
like that of Anywhere Sim and
Welcomm Communications.
● Growth of the UK’s local market
is limited compared to global
markets.
● Customer service centers not
available.
● The company infrastructure is
not developed enough to
undertake expansion being
virtually a small company.
● GiffGaff does not have own
network infrastructure
● The size of the company is small
● It operates only in UK
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Table 2: Strength and Weakness Analysis
Source: (Created by the author)
Strengths:
● As Giffgaff has a strong finance team so it maintains a proper balance sheet with
strong accounts reports.
● Giffgaff team has constantly developed and performed excellent customer service.
As the whole service is done via online so it generates push notifications to their portal.
Moreover, they also posted tips and FAQ for the customer's help.
● The company being still small has a viable working environment.
● The word of the customer is everything to them so they are more consumer-
friendly.
Weaknesses:
● As Giffgaff do not have any outlet so the whole process is done through online. In
the case, if there is any problem at the time of dealing with the product like SIM
activation issue, then the customer needs to call at the customer service desk and know
the further procedure. Sometimes, it can bring customers irritation and the company
may lose them.
● Giffgaff does not focus on the Asian market as only British market is of limited
access. So they failed to expand their business.
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