Strategic Analysis of BT Group: Five Forces and Generic Strategies

This report provides a strategic analysis of BT Group, a major telecommunications company in the UK, utilizing Porter's Five Forces and Generic Strategies models. It examines the competitive landscape, including consumer power, supplier relationships, the threat of substitutes, new entrants, and internal rivalry. The analysis assesses the effectiveness of these models in the context of BT Group's operations, considering factors such as customer service strategies, supplier management, and responses to market competition. The report also explores the impact of network convergence, media content offerings, and regulatory factors on BT Group's competitive position. Furthermore, it evaluates the level of threat from new entrants and the intensity of internal rivalry within the UK telecom industry. The report concludes with recommendations based on the strategic analysis, aiming to enhance BT Group's market position and address challenges in the evolving telecommunications sector.

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Strategic Analysis of BT Group

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Executive Summary
The report contributes in providing a practical understanding regarding the applicability of
Porter’s Competitive Strategic models like Porter’s Five Forces and Porter’s Generic Strategy.
The practical applicability of the models is carried out in terms evaluating its use regarding the
case of BT Group Plc, a telecommunications company operating in United Kingdom. Based on
the analysis carried out regarding the applicability of the models upon BT Group Plc effective set
of recommendations are also generated. The report also reflects on the success of applying the
competitive strategy model in case of a business institution in the current era.

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Table of Contents
sIntroductions..................................................................................................................................4
Overview of BT Group................................................................................................................4
Aims and Objectives of the Report..............................................................................................4
Aims.........................................................................................................................................4
Objectives................................................................................................................................4
Porter’s Five Forces Model.............................................................................................................5
Application of Porter’s Five Forces Model on BT Group...............................................................8
Effect of Consumer Power on BT Group....................................................................................8
BT Group and Suppliers..............................................................................................................8
Substitutes for BT Group.............................................................................................................9
Threat of New Entrants..............................................................................................................10
Internal Rivalry in the UK Telecom Industry............................................................................10
Porter’s Generic Strategies............................................................................................................11
Application of Porter’s Generic Strategies on BT Group..............................................................14
Conclusions....................................................................................................................................14
Recommendations..........................................................................................................................15
References......................................................................................................................................17

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Introductions
Overview of BT Group
BT Group based in United Kingdom operates as a global leader in the field of
telecommunications. The company serves the telecommunication needs of customers spread
along United Kingdom and also around 180 different economies spread around the world. BT
Group serves the telecommunication needs of its customers in terms of providing services along
the fixed telephonic lines, broadband, cellular communication and also based on the designing of
contents for the television audiences. BT Group focuses on employing the power of
communications in generating a better world for its customers. In United Kingdom, BT Group
acts as the market leader in the communication sector based on selling diverse products and
services to domestic and business clients associated to the small and also medium sized business
institutions and also to public sector firms (BT Group , 2019).
Aims and Objectives of the Report
Aims
The aim of the report is to reflect both on the theoretical aspects of Porter’s Competitive Strategy
and thereby identify its application associated to BT Group a telecommunications organisation
operating in United Kingdom. It would tend to evaluate in understanding the level of success or
failure regarding the applicability of the two models.

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Objectives
 To understand the theoretical aspects of Porter’s Five Forces framework and also the
Porter’s Generic Strategy.
 To evaluate the applicability of the tenets of Porter’s Competitive Strategies on BT
Group Plc.
 To evaluate the level of success or failure regarding the applicability of Porter’s
Competitive Strategy Models.
Porter’s Five Forces Model
The Porter’s Five Forces Model as introduced by Michael E. Porter is illustrated in the following
diagram.
(Porter, 2017)

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The threat is gained from new entrants to the industry such that the new companies enter the
industry with enhanced potential that in turn help them in cultivating an effective market share in
the given industry. A profitable industry happens to attract considerable number of market
entrants that thereby tend to affect the existing level of profitability enjoyed by firms operating in
the industry. The existing firms are required to generate effective entry barriers through holding
down prices or in terms of generating large scale investments for carrying out expansion
projects. Likewise, the generation of effective barriers to firm entry in the form of patent rights,
copyrights and trademarks further help in restricting the entry of foreign firms in the industry
(Porter, 2017).
Likewise, the industry suffers from increasing threat imposed by powerful suppliers in that they
tend to charge increased prices for accumulating needed value while at the same putting a limit
on the flow of goods and services to the market. Potential suppliers contributing to the flow of
human resources to industries tend to bear the potential of squeezing away with the profits of a
business organisation if it fails to transfer the costs on the prices of products and services.
Suppliers also gain strength in terms of bearing the ability in generating differentiated product or
service offerings to the industry and also in reflecting the existence of potential distribution
networks. Moreover, the existence of large number of suppliers compared to the number of firms
in a given industry also tends to enhance the level of supplier power (Rao, 2017).
Existence of substitute products and services in an industry tends to exert pressure on the sales
and profitability of the goods/services organisations operating in the related industry that tend to
provide effective quality at standardised prices. Business institutions in order to sustain their
market share and profitability in a given industry thus needs to potentially work in generating

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differentiated product and price offerings or in designing attractive marketing and promotional
campaigns for helping in retaining customers in the target markets.
Firms whether operating in the product and/or services industries are faced with potential
challenges associated with the power exerted by the consumers regarding generation of the right
product quality, charging of appropriate prices and also of other benefits that are rendered by
products and services marketed by other firms operating in the like industry. In the age of
internet and multichannel marketing, the buyers are armed with adequate information regarding
price and quality differences between products/services rendered by an institution compared to
its competitors (Tanwar, 2013). Moreover, the existence of buyer groups with also considerable
number of firms performing in a specific industry tends to enhance the level of consumer power.
The existence of large number of firms providing the same category of products/services at
competitive prices tends to increase the chances of customers to switch from one firm to another
thereby increasing the competitive pressure. Business institutions thus focus on the designing of
loyalty programs and schemes such that the same helps in retaining the potential consumer
groups (Porter, 2017).
Finally, the degree or intensity of rivalry between the different firms performing in a stated
industry tends to affect the market share and profit potential of the competing firms. Firms tend
to increasingly compete with each other based on the generation of effective cash discounts,
frequent launching of new products and services, considerable amount of investments in
advertising and promotional campaigns and also through generation of value-additions to the
existing level of services (Porter, 2017).

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Application of Porter’s Five Forces Model on BT Group
Effect of Consumer Power on BT Group
BT Group is strategising on its customer servicing operations for helping in reducing the chances
of customers in switching over to other telecommunication organisations in the British
Telecommunications industry. The firm is working on to enhance the speed level for internet
browsing while is also aiming in the generation of effective contents for its television services.
Further, by 2020 the telecommunications company has also shared its commitment regarding
bringing back its call centres along regions based in Ireland and United Kingdom and not to
depend on outsourcing operations (Sandle, 2018). Network convergence is also on the cards such
that BT Group is aiming in combining its broadband services associated to its mobile and fixed-
line services such that the same enhances the level of Wi-Fi signals available to customers while
acts as a standby in cases of failure of landline services. The television services of BT focuses on
customers enjoy programs associated with additional entertainment channels like Netflix,
Amazon Prime, Sky’s TV and the like on its home platform (Dyer, 2018).
BT Group and Suppliers
BT Group tends to influence the power of its suppliers based on the generation of directives
concerning its expectations and requirements that are needed to be met by the supplier firms. The
suppliers of BT Group are required to ideally meet the quality assurance objectives of the firm
associated to products and services rendered by them while also are needed to reflect the right
level of insurance associated to the dimension of public liability. Further, as suppliers to BT
Group the vendor firms are required to furnish adequate financial details for helping the
management of BT Group evaluate the degree of financial stability of the firm. Finally, as

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suppliers of BT Group the vendor firms are also required to meet appropriate level of security
and legal standards regarding the products and services delivered by them to the firm (BT Group
Plc, 2019). BT Group also focuses on continual development of its supplier potential in terms of
involving suppliers to attend PEM (Partnership Evaluation Process) programs. The designing of
the PEM programs is made for sharing of salient information with the supplier groups for
enhancing their effectiveness and competence in meeting of the group’s performance and
sustainability objectives. Further, BT Group also encourages the existence of diversity in the
vendor firms while also in the carrying out of ethical trading practices. Likewise, the suppliers of
BT Group are also required to effectively meet CSR standards associated with the reduction of
wastages and also in working towards the protection of human rights in terms of not allowing
child labour, workplace discrimination, forced labour hours while also encouraging the
enhancement of collective bargaining, effective compensation and health and safety standards at
the different workplaces (BT Group, 2018).
Substitutes for BT Group
BT Group earns a moderate amount of threat concerning the existence of substitute services for
the media contents flagged on its platform. The group’s management for reducing the level of
increasing threat rendered by local cable companies has decided on integrating sports channels
into its media platform. Currently, the sports arm of BT Group known as BT Sports is authorised
to show soccer matches for premier league for an extra cost of around GBP295 million for every
soccer season. BT was authorised to show around 32 matches however during unattractive slots
in contrast with its previous position of showing 42 matches. The above issue happened to
increase the risk regarding BT Group’s position as a ‘sub-scale’ player in terms of sports media.
The management of BT Group further stated that apart from sports content the group is also

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focusing on aggregating and showing other television media contents (Mkandawire, 2018). The
same is taken to reduce the substitution risk for the firm at a moderate level.
Threat of New Entrants
The telecommunication companies based in United Kingdom are observed to face significant
threat of around 55 percent associated to the entry of foreign firms in the sector. The entry of
foreign entrants into the telecom industry tends to affect the profitability potential and existing
market share of the telecommunication firms operating in United Kingdom. Further, the threat
posed by entry of new firms from the European region to United Kingdom are essentially
governed by the regulations associated to GATS (General Agreement on Trade in Services)
falling under the WTO (Dyer, 2018). Information published during 2016 reflects that the French
telecommunications company, Iliad focused on gaining an effective entry into the United
Kingdom telecommunications market (Palmer, 2016).
Internal Rivalry in the UK Telecom Industry
An analysis carried out during 2016 reflect that BT Group was estimated to lose around GBP1.25
billion on an yearly basis owing to the growth of cheap competitors along the broadband, mobile
and also fixed line communications markets. BT Group’ merger with EE value at round
GBP12.5 billion is taken to help BT in accruing a savings of around GBP540 million on an
yearly basis. However, the above amount of savings is held to be insignificant in terms of
helping BT counter considerable competition from other rivals operating in the firm. Likewise,
the level of market rivalry associated to the firms operating in the broadband industry in United
Kingdom is illustrated in the following figure.

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(Palmer, 2016)
BT Group however focuses on enhancing the level of competitiveness based on the power
generated by current regulations regarding augmenting the level of wholesale prices for fibre
(Palmer, 2016).
Effectiveness and limitation of Porter’s five-force model
Effectiveness
Helps in Gauging Competition
One of the advantages that can be gained from the application of Porter’s model is that it
can help the company to gauge any competition that is present in the industry. In this case, BT
Group can operate in a way that it can help in its growth while operating in an industry that is

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full of competition, which is either high or low. Based on the competition, the company can
analyse its pricing power it possesses so that it can result in the development of the company and
help it to earn good profits. In other words, the pricing power of BT Group can be inversely
proportional to the competition it encounters in the industry, which can be higher than the prices
provided by the competitors and vice versa.
Helpful in Planning
Porter’s five forces can be useful in such industries in which the requirement can be to
have huge investments, which can also be tricky due to the one time investment made by the
company. One disadvantage of the investment is that the companies cannot back off after it has
invested in a project. Hence, by conducting and applying Porter’s analysis, a company like BT
Group, can identify the industries in which the threat of substitutes along with the threat of new
entrant are comparatively less. This is because in the case of new players, BT group can easily
enter into an industry, which may lead to the development of competition in the business market.
Thus, it can be said that the business deal may not be beneficial for the company. Apart from
this, the substitutes for the products of the industry can be provided at a lower pricing power of
the company and the industry as a whole. Therefore, if a company decides to formulate plans for
entering in an industry, the applicaton of Porter’s five forces can be used for conducting the
analysis of the company. The Porter’s five forces can eliminate the industries and competition
that provide close substitutes and include few entry barriers for the development of new
organisations trying to enter the industry.
Dealing with Buyers and Suppliers

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In case a company operates in a competitive market, the bargaining power of suppliers
along with the bargaining power buyers needs to be taken into consideration. In case the powers
are less than the company is, then the company can gain dual advantage mainly because the
company can gain the advantage of obtaining proper and effective raw materials required for
production at reasonable rate. This is mainly because if the number of suppliers is more than the
competition will increase among the industry players. Hence, in order to continue with its
business, it is necessary that BT group continue with the effectiveness of the products that can
help the company in obtaining good deals from suppliers. On the other side increase in the
bargaining power of buyers can be weak only in the case of the products of the company being
inelastic in nature than the competition. Hence, the price of the company can increase in this
case.
Limitation
Ignore Other Factors
One of the biggest disadvantages that can be gained from the application of Porter’s Five
Force model is that it takes into consideration the factors that help itself in the market while
ignoring the other factors that may have a bearing on the severity of the environment particularly
the environment in which the company operates. In this case, an example can be given to
strengthen the understanding. If a company like BT group, is operating in an industry in which
all the five factors associated with the Porter’s five forces is weak along with lack of substitution
and competition, the government can introduce new tax rates. This can force the industry to
make products or conduct certain amendments related to the products associated with the

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industry. In this case, application of Porter’s Five Forces analysis may not be useful for the
market.
No Industry will be Perfect Fit
Another limitation that can be associated with the application of the Porter’s Five Forces
framework is that in an industry none of the competitors can be considered as perfect fit in the
business. This makes sense since it cannot be expected that one industry can consist of every
possible positive points and hence, the company need to be concerned due to the applicaton of
Porter’s analysis so that the perfect industry can be found for a company to conduct its business
in a proper manner. Example can be provided in terms of the imperfect nature of the human
beings since each one of the people possesses certain shortcomings. This can be associated on a
similar note with industries that are imperfect since every industry possesses certain limitations
on the thing. Thus, the ignoring of the limitations/shortcomings can help in the creation of
various opportunities.
Not Useful for All Industries Alike
A third limitation of the model is that that it cannot be applied to all industries. An
example can be provided in the application of the framework in industries like technology or
fashion. In these industries, the five forces factors such technology and consumer taste play a
major role in which case the model may fail to bring the desired results. Therefore, in other
words, as it is not useful for every industry, the application of the model cannot be universal.

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Conclusions
The analysis carried out in the report ideally reflects the success of applicability of the strategic
models like porter’s five forces analysis and also the generic strategies related to the case of BT
Group that acts as the market leader in the UK Telecommunications industry. The application of
porter’s five forces model reveals the competitive advantage gained by BT Group in the
telecommunications industry while also reflects on the competitive situation in the industry
associated with the existence of rival companies and also pertaining to the threat gained based on
the chances of entry of new firms in the market. It reveals the strategies undertaken by BT Group
to counter the pressure generated by stakeholders like buyer and supplier groups while also
evaluates the threat imposed based on the existence of other substitute solutions rendered by
other media content firms operating in the telecom industry of UK.
Further, the application of Porter’s Generic Strategy also highlighted the manner through which
differentiated product or market offerings are rendered by BT Group for gaining and sustaining
an effective presence in the United Kingdom’s telecommunication industry. The level of use of
the differentiated strategy is analysed for BT Group in terms of generating different types of
differentiation market offerings for attracting and retaining customers from the broader target
market. The two models of competition rendered by M.E. Porter during 1985 thus significantly
highlight the competitive situation of British Telecom along its home market.
Recommendations
BT Group apart from working further in the launching of differentiated customer offerings and
telecommunication solutions also needs to work on strengthening its cost leadership approach in
the United Kingdom telecommunication market. The promotion and growth in the development

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of digital products would help BT Group reduce the level of operational cost and thereby gain on
needed productivity in terms of gaining the potential in serving a global consumer base in an
integrated fashion. Likewise, the firm also needs to focus in reducing the level of operational and
manpower costs in that the same would contribute in achieving a cost-leadership position in the
long run. Working based on the above process would help BT Group in adequately meeting the
parameters of differentiated and cost leadership strategy as identified in Porter’s Generic
Strategy model.

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