O2 Mobile Network Business Strategies: A Comprehensive Analysis

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BUSINESS STRATEGY
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Contents
INTRODUCTION...........................................................................................................................................4
TASK 1: THE EXTERNAL ENVIRONMENT.......................................................................................................5
1.1 PESTLE MODEL FOR ENVIRONMENTAL ANALYSIS:............................................................................5
1.2 ANSOFF’S GROWTH VECTOR MATRIX FOR ANALYZING STRATEGIC POSITION OF O2.......................7
TASK 2: THE INTERNAL ENVIRONMENT AND CAPABILITIES OF MOBILE NETWORK O2...............................9
2.1 VRIO/VRIN MODEL...........................................................................................................................11
2.2 STRENGTH AND WEAKNESS OF O2..................................................................................................13
TASK 3: ANALYSIS OF TELECOMMUNICATION SECTOR..............................................................................15
TASK 4: UNDERSTANDING AND INTERPRETING STRATEGIC DIRECTION OF O2.........................................19
CONCLUSION:............................................................................................................................................24
REFERENCES:.............................................................................................................................................25
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LIST OF FIGURES:
Figure 1 PESTLE Analysis..............................................................................................................................5
Figure 2 Ansoff's product/ market matrix....................................................................................................7
Figure 3 McKinsey 7s Model........................................................................................................................9
Figure 4 ORGANIZATION STRUCTURE FOR TELEFONICA............................................................................10
Figure 5: VRIO FRAMEWORK.....................................................................................................................11
Figure 6 SWOT analysis..............................................................................................................................13
Figure 7 PORTER'S FIVE FORCES MODEL...................................................................................................15
Figure 8: BALANCED SCORECARD APPROACH...........................................................................................17
Figure 9: BOWMAN'S STRATEGY CLOCK MODEL.......................................................................................19
Figure 10: PORTER'S GENERIC STRATEGIES...............................................................................................21
Figure 11 HYBRID STRATEGY......................................................................................................................23
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INTRODUCTION
Business strategy refers to the long term business planning done by the managers in order to
achieve the goals of the organization which results in satisfying the customers and increase the
market share of the company. The business strategy also focuses on creating some competitive
advantage, for example, setting the low price as compared to competitors.
In this report, the business strategies of O2 will be studied in detail. O2, formed in 1985, is the
second largest mobile network operator in the U.K. having 25 million subscribers. The internal
and external environment of O2 will be discussed using different models to do proper analysis
and interpretation of the network operator for conducting this research report.
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TASK 1: THE EXTERNAL ENVIRONMENT
The internal and external environment has a major impact on a business and its operations.
The external environment of a company comprises of its competitors, government, suppliers,
customers, etc. (Aithal, 2016). The biggest competitor of O2 is EE, which stands first in the
market of UK.
1.1 PESTLE MODEL FOR ENVIRONMENTAL ANALYSIS:
Figure 1 PESTLE Analysis
(Source: Aithal, 2016)
POLITICAL ENVIRONMENT: The rules and regulations formed by the government of the country
affect the working of the O2 in the long run. O2 must follow these rules and regulations to
prevent themselves from any government intervention. O2 works under a legal framework
guided by the top managers under the rules and regulations framed by the government (Špaček
and Vacík, 2016). The company takes into account all legal requirements and follows the same to
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avoid any future social or legal issues. There arise many conflicts between government and
people on how to handle telecom networks. The people wish that the internet should be
treated as a basic human right by the government as it is very part of life in today's world.
ECONOMIC FACTORS: If there is a rise in prices due to inflation, this will directly affect the price
of data plans provided by the networks operator O2. The market of the mobile network is
highly competitive as all the service providers bring new and cheap plans into existence to
attract consumers. Thus, in such competitive market, O2 will have to work efficiently in
achieving its objective of growth and deliver best customer service at a reasonable price to
increase the satisfaction of customers (Špaček and Vacík, 2016). The growth of the company
contributes to the GDP of the country, it also gives rise to many employment opportunities as in
today's era, many companies need access to the internet for all its activities and for marketing.
SOCIAL FACTORS: It is the primary responsibility of O2 to work for the welfare of the society as
the business performs its operations within the society and uses the resources of the society,
therefore, it must work in favour of society to enhance its goodwill. O2 mobile network
supports charitable trusts like Teenager cancer trust and Air Ambulance services. O2 provides
information and advice on issues like child protection, customer safety, the health risk of
mobile users, etc. therefore O2 follows ethical and moral corporate responsibilities which help
in raising goodwill of the company. O2 is the first company in Europe that uses Facebook to
integrate support forums (Araujo and Urizar, 2016).
TECHNOLOGICAL FACTORS: Earlier, mobile phones were used only for calling, sending
messages, taking pictures, etc. With the introduction of the internet and advancement in
technology, the scenario is completely changed, now the people have access to the internet
and they can search for any information easily, they use many social media platforms to talk to
their closed one, etc. (Špaček and Vacík, 2016) O2 is the world's first company to launch GPRS
mobile data network and provide 4G connections supplied by Huawei technology co. ltd. O2
works continuously to cope up with changing technological demands and to maintain its
position in the market.
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LEGAL FACTORS: O2 works systematically and follows all legal guidelines provided by the
government. It works under International Standards (ISO) to ensure the quality and safety of
the product. In the telecommunication industry, OFCOM (office of communication) is a
regulatory body that keeps an eye on all the companies within the industry to check whether
they follow the required rules. These rules and regulations are set by The International
Commission on Non-Ionizing Radiation Protection (ICNIRP).
ENVIRONMENTAL FACTORS: O2 is the first certified company to provide carbon trust standards
as it is highly committed to removing carbon footprint (Aithal, 2016). Also O2 volunteers 10:10
(10% reduction in carbon emission). O2 is also affected by the environment which hinders the
performance and growth of the company.
1.2 ANSOFF’S GROWTH VECTOR MATRIX FOR ANALYZING STRATEGIC
POSITION OF O2
The Ansoff’s growth matrix was created by Igor Ansoff in 1960. It is a very helpful model, used
by companies to grow their revenues by understanding in detail about their existing and
potential products. In this matrix, four possible combinations of product-market are studied:
Figure 2 Ansoff's product/ market matrix
(Source: Dawes, 2018)
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Market penetration: O2 keeps re-inventing its product and also introduces new schemes and
offers to attract its existing customers. O2 focuses on a particular market segment at a time, for
example, giving special discounts to students, etc. O2 faces tough competition in the market
which is the biggest challenge for the company (Gurcaylilar-Yenidogan and Aksoy, 2018). It uses a
multichannel strategy to continue to grow.
Market development: O2 tries to reach new customers through online platforms by promoting
its services on social media. O2 has a good brand image through which it introduces new brand
campaigns to cover new markets. O2 keeps re-inventing itself and bringing new mobile phones
into existence.o2 was the first company to offer i-phone to its customers.
Product development: O2 was the first to launch a 4G network in the UK and offers sim
replacement to its customers for their satisfaction. O2 constantly involve itself in the
advancement of technology which is a very challenging task, thus focusing on bringing
something new for its customers while taking the risk for the company (Gurcaylilar-Yenidogan and
Aksoy, 2018).
Diversification strategy: O2 mobile network operator formulates strategies to enter a new
market by bringing something new into existence with reference to its services to attract new
customers and satisfy the existing ones. The main target of the company is the working
professionals as they make the most use of Personal Digital Assistance (Dawes, 2018).
CONCLUSION
With the help of above report, it can be concluded that the company O2 is directly and
indirectly affected by the external environment of the company which not only affects the
company but also the industry at large. Thus, the company must take into account all the
external factors through PESTLE analysis for decision making to work efficiently.
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TASK 2: THE INTERNAL ENVIRONMENT AND CAPABILITIES OF MOBILE
NETWORK O2
The Internal environment of the company comprises of the rules and regulations within the
company, the SWOT analysis of the company, its objectives, goals, mission, and capabilities to
achieve these goals.
The Strategic capabilities of the organization can be referred as the ability of the firm to
implement the strategies and use its competitiveness in order to increase the quality of product
and enhance its market value (Ravanfar, 2015). The key elements of strategic analysis comprise
of strategic purpose, values, vision, goals and action plans.
MCKINSEY’S 7S MODEL
The internal environment of the network operator O2 can be analyzed by the McKinsey's 7s model
which helps in enhancing the overall effectiveness of a business organization.
Figure 3 McKinsey 7s Model
(Source: Ravanfar, 2015)
STRATEGY: O2 implements the strategy of product differentiation in the company. The business
focuses on the needs and demands of the consumers and brings innovated products, which
makes the company unique and better than the competitors (Hayes, 2018)
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SYSTEM: The Company uses modern network and system by increasing the implementation of
modern technologies like LTE and fibre and deeply transforming the systems.
STRUCTURE: O2 Company of mobile network has introduced a new organizational structure
which is simple, easy to understand and it completely focuses on the clients of the company.
Figure 4 ORGANIZATION STRUCTURE FOR TELEFONICA
(Source: Hayes, 2018)
SKILLS: O2 launched London skills and support hub to boost the digital, entrepreneurial and
working skills of the young people of the country to benefit a large number of people in the UK
and the company as well. The company also initiated a ‘think big' PLATFORM to encourage
young employees to enhance their skills.
STYLE: The phenomenal growth of the company is due to the aggressive leadership style
followed by the company which encourage the employees to work hard for the development of
the organization (Ravanfar, 2015).
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STAFF: The mobile network company O2 has over 450 retail outlets in different parts of the
world covering the volume of 6700 employees who are dedicated to work for the best of the
company and to achieve the organizational goals effectively.
SHARED VALUES: O2 follows the culture of UK with integrity, it works with transparency and
integrity, focuses on customer satisfaction to maintain its goodwill in the country (Hayes, 2018).
2.1 VRIO/VRIN MODEL
Figure 5: VRIO FRAMEWORK
(Source: Kim, et al. 2015)
VRIO stands for value, rarity, imitability and organization. VRIO is a strategic analysis which
gives detailed information about the role of resources of the company and their competitive
advantage (Kim, et al. 2015). O2 uses VRIO matrix to have a better understanding of its
resources in order to have a competitive advantage and increase its market share.
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VALUE RARITY IMITABILTY ORGANIZATION
O2 uses different
strategies to add value
to the organization like
pricing strategy, brand
awareness, customer
loyalty to attract
customers and gain
competitive advantage
(Araujo and Urizar,
2016).
The rarity of o2 is in its
customer network as
the company invests in
building the loyalty of
the consumers. Also,
O2 is the leading brand
in the whole telecom
industry.
Many competitors try
to imitate the
strategies of building
customer network but
none got successful
(Kim, et al. 2015). The
distribution cost
competence is very
difficult to imitate by
competitors.
The structure of the
organization is well
managed and most
diversified in the whole
telecom industry. O2
has a proper track
record of the
leadership team and it
has a pricing analytics
engine.
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