Business Strategy in UK Telecommunication Sector: An O2 Case Study

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BUSINESS STRATEGY (UK TELECOMMUNICATION SECTOR)
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Table of Contents
Introduction...................................................................................................................... 3
Company Background..................................................................................................3
Task 1: Critical Analysis of the external environment of the company (LO1)..................4
PESTLE Analysis..........................................................................................................4
Ansoff's Matrix Model....................................................................................................8
Task 2: Critical Analysis of the internal environment of the company (LO2)..................10
VRIO Model................................................................................................................ 10
SWOT analysis........................................................................................................... 12
Task 3: Proposing various strategies using models to improve the market competition of
the company (LO3)........................................................................................................ 14
Porter’s Five Forces Model.........................................................................................14
Task 4: Proposing strategic plans to provide better ideas to the company using
various models (LO4).....................................................................................................16
Bowman’s Strategic Clock Model...............................................................................16
Porter’s generic strategies..........................................................................................18
Conclusion..................................................................................................................... 19
Reference List................................................................................................................ 20
Appendix:....................................................................................................................... 22
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Introduction
Business Strategy is a strict working plan which mainly helps the company to improve
its financial status and also help in improving its position. According to Aithal (2017), a
proper business plan and strategies also help an organization to improve its financial
status, help to meet threats and challenges, attract a large consumer base and also
strengthen performance. The particular assignment is mainly designed to analyze the
business strategies that are followed by O2 Telecommunication Company in the UK for
managing its operational framework and systematic development.
Company Background
O2 Company is one of the leading telecommunication network providers in the UK. The
company provides a wide range of services to both consumers and different
enterprises. The company aims to differentiate themselves from their rival groups by
taking continuous initiatives to make their network the best. The company has almost
provided network connections to almost 32 million people in the form of 2G, 3G and 4G
services along with O2 Wi-Fi services. The company has reported having almost 450
outlets operating in various parts of UK. The company was the single network operator
in UK to be awarded the Glassdoor Employees Choices Award in the year
2018.According to the current data’s about the financial structure of the company, the
O2 company's annual return rose by 2.2 % that is almost £5.728 billion by attracting the
customer base of Lycamobile, Sky Mobile, TESCO (O2.co.uk, 2019).
Task 1: Critical Analysis of the external environment of the company (LO1)
Macro environment analysis refers to the analysis of external factors that influences
business decisions and success including political environment, economic condition of
the country, social and legal issues and so on.
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i) PESTLE Analysis
Pestle Analysis is a qualitative framework that is used to analyze the macro
environmental factors of a company that is directly concerned with its systematic
development. As opined by Barba et al. (2016), the PESTLE analysis provides a birds-
eye view of the entire company’s framework. There are six factors present in the
PESTLE analysis framework which help to analyze the external environment of
business companies. This has seen that approximately 22 million people of UK use
Smartphone in their regular life. However, maintaining their position in UK
telecommunication sector becomes a specific challenge for telecommunication
companies. The framework of PESTLE analysis includes political, economic, socio-
cultural, technological, legal and environmental factors. These factors help to analyze
the impact and influence of external environment in business companies like O2
Company.
Factors Description Impact on
telecommunicati
on sector
Political ● Political Stability: The political condition of
UK is stable [ Refer to Appendix 1]
● Tax Policy: The corporation tax were cut to a
new level of 20% by 2015
(Theglobaleconomy.com, 2019).
Positive
Economic ● Inflation Rate: The inflation rate of UK has
increased to a considerable level by 2018.
● Labor Cost: The labor cost of the country
has also increased by 4.1 % in the first quarter
of the year (JAN -MAR) 2018 as compared to
2017.
● Employment Rate: The employment rate of
UK has also increased by 76.10% in December
Positive
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2018 compared to 75.80% in November.
Social ● Demographics: The growth rate of
population of UK is 0.58%.
● Gender Diversity: As per reports the
proportion of businesses with at least one
woman in senior management has grown from
68% in 2015, to 75% in 2018.
● Ethnicity: As per 2011 Census, England
and Wales were the most ethnically diverse
regions, where 40.2% of residents were
identified to be Asian, Black, Mixed or other
groups.
Positive
Technological ● New invention: Future Smartphone
innovation, connectivity sensor, improved Wi-Fi
services.
● Cyber Security: The cyber security system
of UK is more advanced thereby reducing the
rate of cyber crimes.
● Social media use: As per reports social
media usage in UK is more common among the
young population within age group of 18-24
years compared to that of old population within
age group of 68 years.
Legal ●Business law: All the business carried out in
UK follows the laws and regulations contained
in Company Act of 2006.
● Telecommunication law has incorporated
several barriers in service process. All the
telecommunication company's take up business
Negative
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strategies according to the Communication
Act 2003
Environmental ● Green Technology: As per the UK
government policy all the companies have to
adopt strategies that would allow production in a
low carbon emission environment and less
waste generation.
● Waste Management: The generated waste
in UK is generally disposed of sustainable
methods like landfills, incineration, anaerobic
digestion and other methods.
Positive
Table 1: Pestle Factors
(Source: Created by author)
Figure 1: PESTLE analysis framework
(Source: Created by author)
Analysis:
As stated by De Waal (2016), the government in the recent years has taken initiatives to
introduce reforms to the tax system. Taxes were lowered in patent products to increase
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more innovations. In order to attract and provide opportunities to different industry, the
government has set a new trade structure. The low employment rate will be a barrier for
this industry as they have to hire employees with increased rate [Refer to Appendix 2].
Focusing on the social factors, it can be stated that the business of telecommunication
industry can access a greater customer base for the business. It has been seen that
there are approximately 64.1 million populations which can affect telecommunication
business in a positive manner. According to Lieder et al. (2017), most of the people are
leading with high living standard and has high dependency ratio on the
telecommunication industry due to increased use of social media. This has helped the
O2 Company to gain a strong customer base. The UK is a technologically advanced
country and it has always come up with new inventions from time to time. Technological
inventions of UK are equivalent to the progress in the telecommunication market. This
has helped the O2 Company to bring in new inventions in accordance with the
preferences of their consumer base. Legal barriers can affect on the businesses in the
grounds of open access agreements, premium rate services However for the
telecommunication sector of UK most of the company's take up a business proposal
according to the Communication Act 2003. Among environmental factors, the
company tries to take up sustainability strategies to attract more consumers.
Environmental factors can affect the strategic management of business and working
conditions as well. Environmental factors like climate of different regions, laws related to
the pollution of the environment, recycling process, waste management process and
many more can influence the business operations in a country. Moreover, the O2
Company also has to focus on the waste management process in order to carry out its
business operations in a sustainable manner [Refer to Appendix 2].
ii) Ansoff's Matrix Model
Ansoff's growth matrix is a planning model that helps a company to formulate strategies
that would be beneficial for its product and market growth. Ansoff’s growth matrix is
based on certain strategies that help a business to develop its own growth strategies
(Ervural et al., 2018). The main purpose of this matrix is to allow a business to either
launch new products in the existing market or launch the same product in new markets.
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Strategic Applicability in the Main Market
● Market Penetration: O2 Company in the recent years has introduced a new
product named the O2 Wi-Fi Hotspot including 5G service, HSDPA and DSL that
provide free fast reliable Wi-Fi services across various locations (O2.co.uk,
2019). In order to increase its market, the company has taken up strategies that
provide free Wi-Fi not only to O2 customers but also to other consumers
irrespective of their mobile or broadband connections by just subscribing to the
company services. By introducing 5G services in the new market the company
has taken a step in their strategic positioning as the other telecommunication
companies in the UK have not yet taken steps to launch Wi-Fi services including
5G services.
● Market development: O2 Company provides different tariffs system for its
various mobiles and broadband services. The firm proposes differential pricing
that helps it to increase its seller surplus. O2 allows the customers to choose
plans according to their budgets. This helps the company to gain a large
consumer base as the company provides the consumers with the opportunity to
choose network plans according to their affordability.
● Product Development: O2 Company has proposed to upgrade its network
connections and launch 5G Sims by 2019. As per the company, it won't force its
consumers to take up the 5G service as the companies 4G services are quite
fast and reliable. But the company believes that its consumers will surely avail
the 5G services in future (O2.co.uk, 2019). As the company's 4G sims have
proved to provide the best network services to the consumers compared to other
telecommunication companies, therefore the company has taken steps to
upgrade its network connections and launch 5G Sims which the company
believes will be acceptable by the consumers.
● Diversification: As stated by Panwar et al. (2016), strategic diversification of
products is essential for building a strong network in a new market.O2 company
has recently launched its 5G services and if these services gets accepted by the
consumers using other connections or in entirely new markets then the company
can earn a huge amount of profit.
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Figure 2: Ansoff’s Matrix Model
(Source: Panwar et al., 2016)
The Ansoff's Growth Matrix is a tool that allows a particular company to develop
strategies that could help in the growth of its market and acceptance of its new
launches. If this matrix was not used by the O2 Company then the company would not
be able to understand the actual market scenario of its product. Secondly, the company
would also not be able to understand the potential risks that it might face by launching a
brand new product in a completely new market and this all together would hamper its
all-round growth and development.
Task 2: Critical Analysis of the internal environment of the company (LO2)
This task focuses on analyzing the internal environment of Virgin Mobile including its
strengths and weaknesses and strategic capabilities. VRIO models and SWOT model
are two useful models to analyze a company's internal environment.
VRIO Model
VRIO framework is referring to a framework for business analysis and this help
companies to form different parts of the strategic scheme of business. As opined by
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Hernández and Garcia (2018), the factors of the VRIO framework can be used to
understand the opportunities available for the Vodafone Company to expand its
business size.
Valuable
The O2 Company takes up a cost-effective strategy that ensures that the cost invested
in different resources is lower than the expected annual return of the company. The
main aim of the company is to maintain cost effectiveness regarding technological
resources. Thus the main strategy of the O2 Company involves using valuable
resources for producing low -cost mobiles which are of better quality and helps in
increasing competitive advantage. The resource of the company is considered to be
valuable as the company makes use of sustainable products which helps to maintain
environmental sustainability at a lower cost.
Rare
As opined by Vargas and Garcia (2019), apart from valuable, the company's products
must be rare and distinct from the rival groups that would make it unique. The main
reason for the success of the O2 Company is its innovative and creative business
strategies. For instance, the company takes up the target marketing strategy where it
divides its customers according to the type of payment. The company has broadly
divided its customer base into prepaid, post-pay and business subscriber. This helps
the consumers to pay their mobile bills according to their convenience.
Inimitable
The uniqueness of resources helps the organizations to make it costly to imitate.
Inimitable means the competitors of the organization are unable to duplicate the
resources and strategies while developing their products. Over the years the O2
Company has maintained its uniqueness regarding its resources and introduces unique
products such as Sim-free mobiles. Thus, the company is able to stand out in the
telecom market in the UK by holding a firm position in the competitive market.
Organized to Capture Value
As stated by Toro et al. (2016), the resources may not be valuable if they are not
properly organized and utilized. Especially for a large organization like O2 which is
situated in a different location in the UK and other countries maintaining the resources
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are difficult. However, analyzing the internal environment it is found, the company
effectively manages the organizational and operational framework in accordance with
the influence of the internal environment.
Figure 3: VRIO model
(Source: Created by Author)
SWOT analysis
As opined by Abdel et al. (2018), SWOT analysis enables a business organization to
take up strategies that would help to analyze its position in the competitive market and
accordingly take up new strategies to adopt new business strategies that would help the
company to overcome potential threats and at the same time acquire a strategic
position by grabbing the opportunities.
STRENGTH
● A large number of outlets
● Low-cost structure
● Automation of activities helped to
WEAKNESS
● Limited success from other
business
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ValuableRareInimitableOrganizedtoCaptureValue

improve the quality of its products
● A large number of satisfied
consumers
● Improper positioning of its products
● Huge investment in training
employees.
OPPORTUNITY
● Changing consumer behaviour has
helped the company to enter new
markets.
● UK governments Green Drive
Policy have helped the company to
expand its business further.
● Low inflation rate in the country
has helped to increase the
customer base of the company
THREATS
● Failure in producing new products
compared to its rival groups.
● Intense competition from rival
groups like Vodafone, Three
Mobile.
● The new governmental policies like
the Paris Agreement (2016) can
pose a threat to the existing
products of the company
Table 2: SWOT Analysis
(Source Created by author)
Analysis
The O2 Company Is one of the leading telecommunication companies in the UK. The
Company has a consumer base of over 32 million owing to its strategies like target
marketing, low-cost pricing which helps the company to gain the support of its
consumers. The company also has a high annual return of about £5.728 billion owing to
its large market size where the company has almost 450 outlets operating in different parts
of the UK (O2.co.uk, 2019).
But the company also has certain weaknesses that hinder its all-round development.
The company has admitted to investing a lot on its employee training programmers but
in reality, the company has hardly achieved any success in the UK market. Besides the
company's faulty strategies have led to improper positioning of its products in the new
market. According to Pisano (2015), all these weakness have posed threats to the
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