Business Environment of Virgin Mobile UK: A Strategic Analysis

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BUSINESS ENVIRONMENT OF VIRGIN MOBILES UK
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BUSINESS ENVIRONMENT OF VIRGIN MOBILES UK
Table of Contents
Introduction......................................................................................................................................3
LO1. Analysis of the impacts and influences of the macro environment on the organisation and
its business strategy [P1].................................................................................................................3
PESTEL model for environmental analysis................................................................................4
Ansoff’s growth vector matrix to analyse the Virgin Mobile UK’s strategic positioning..........5
LO2. Internal environment and capabilities of the organisation [P2].............................................7
VRIO model for the analysis of strategic capabilities possessed by the organisation.................7
Strengths and Weaknesses of the organisation............................................................................9
LO3. Evaluation and application of the outcomes of the analysis using Porter’s Forces model to a
given market [P3]..........................................................................................................................11
Application of Porter’s Five Forces...........................................................................................11
Stakeholder Analysis.................................................................................................................12
LO4. Application of models, theories and concepts to assist with the understanding and
interpretation of strategic direction available to the organisation [P4]..........................................14
Bowman’s Strategic Clock........................................................................................................14
Introduction to Porter’s Generic Choice....................................................................................17
Conclusion.....................................................................................................................................18
References......................................................................................................................................19
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Introduction
The assignment’s purpose is to strategically analyse Virgin Mobile UK’s business strategy.
Being world’s first Mobile Virtual Network Operator, instead of maintaining their own network,
Virgin Mobile UK has the contract to use the network of EE. It is one of the most prominent
brand in UK and has, approximately, 370 million GBP worth revenue in 2017 (Harbord and
Hoernig, 2015).
The first part of the assignment will include the critical analysis of the external environment and
its impacts. Then the assignment will deal with the internal environment analysis of Virgin
Mobile UK. The next part will include the analysis of the forces that may improve the
competitive edge. Lastly, a management plan strategy will be produced for Virgin Mobile UK.
LO1. Analysis of the impacts and influences of the macro environment on the organisation
and its business strategy [P1]
Business environment is very equivocal because of the trailblazing and swift changes (Storey,
2016). The environment is usually the main factors for the success of a company as well as its
biggest threat. The external factors are beyond the control of the company and that affects the
company’s choice and performance because of which it is highly important to include them into
the strategic management process. External analysis will help the organisation to know about the
existing threats due to which the organisation can build subsequent strategies in order to tackle
them (Indris and Primiana, 2015).
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PESTEL model for environmental analysis
PESTEL analysis is an effective and efficient tool for analysing the external environment of an
organisation (Song, Sun and Jin, 2017). The strategic management tool is analysed by the Virgin
Mobile UK manager to understand the impacts of the macro environment of the company.
 Political Factors: According to the research works of Fletcher, et al. (2016), it is found
that Virgin Mobile comes under immense global pressures that adhere the global
regulations. Over the last decade the company has gained from the lower taxation policies
introduced by the government in UK. This has resulted in high profit due to which they
have invested in the research and development projects.
 Economic Factor: Recently, the government’s investment has been increased on
infrastructural developments to enhance the condition of the business environment. This
can be used by Virgin Mobile UK to penetrate in the tier 3 and tier 2 markets. The
enhancement of efficiency in the financial market can benefit Virgin Mobile UK to
access the volatile and diversified financial market and easy liquidity (Moreno-Munoz, et
al., 2016).
 Social Factors: The attitude towards safety and health is becoming neglected due to the
increasing liberalisation. As the failure cost is too high, Virgin Mobile UK must try to
stay away from such attitudes (Vallina-Rodriguez, et al., 2015). Virgin Mobile UK can
test the variety of concepts to serve and support the evolving gender roles in the market.
 Technological Factors: The frequent technological development is causing disturbance
in the supply chain model of Virgin Mobile UK as it provides great access to information
to the channel partners which leads to higher profit sharing (Carah, 2017). Virgin Mobile
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UK may also adapt to the opgraded technology that lowers the production and servicing
cost by restructuring its supply chain.
 Ecological Factors: The product innovations are also continuously getting altered due to
the recent environmental norms. The products of Virgin Mobile UK must be designed
and produced on the environmental standards and expectations. Virgin Mobile is also
facing an increase in the operations cost due to the extreme weather conditions (Liang
and Yu, 2015).
 Legal Factors: Data protection has emerged as one of the biggest issues related to
privacy and also the intellectual property rights. Virgin Mobile UK must consider the
UK’s legal and technological mechanism to ensure data safety (Harbord and Hoernig,
2015). The company must also follow the business norms of UK as these norms are
consistent with some institutions like World Trading Organisation, European Union, and
so on.
Ansoff’s growth vector matrix to analyse the Virgin Mobile UK’s strategic positioning
It is a strategic management tool that was developed by Igor Ansoff, which is used by
organisations in assessing their strategic position and searching for new ways of achieving
growth by increasing their revenue (Mohajan, 2017). Ansoff suggested four growth strategies
available for companies in order to grow.
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Figure 1. Ansoff Growth Vector Matrix
(Source: Bocken, Fil and Prabhu, 2016)
Market penetration: Following are the marketing penetration strategies the Virgin Mobile UK
can adapt.
 Attracting new customers by offering them products in relatively competitive price.
 A strategic pricing method and promotional activity can help Virgin Mobile UK to get an
advantage over the competitors (Deligianni, Voudouris and Lioukas, 2015).
 Offering new promotional techniques and reduction in price will retain the loyalty of the
existing customers.
Market Development: This strategy is involved with targeting new sets of customers in the
market or to expand to new geographical area. There are various companies like Three Mobile,
Vodafone, etc. that have successfully adapted to this strategy that resulted in their gigantic
expansion. Virgin Mobile UK must also place a new strategy to attract new customers that will
help them increase their customer base. Exchanging old mobile with new, giving another product
free of cost for purchasing a mobile and many such strategies must be adapted by the company
(Al-Azzam,Irtaimeh and Al-Quraan, 2016).
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Product Development: Virgin Mobile must try to offer new products regularly to enhance the
profit. The new mobile phones must have a special feature than its previous model. With offering
new product the company must also produce new accessories (Mohajan, 2017). This will assist
the consumers to stay loyal to the brand as they can buy new products with upgraded technology
regularly.
Diversification: It is the most risky strategy and involves offering new products to the expanded
market. There are a couple of types of diversification, namely related and unrelated (Bocken, Fil
and Prabhu, 2016). Related is expanding to a new market with the existing product whereas
unrelated is introducing new products in new markets. Virgin Mobile UK must offer new
products to new markets to sustain and take advantage of the rapid globalisation.
LO2. Internal environment and capabilities of the organisation [P2]
VRIO model for the analysis of strategic capabilities possessed by the organisation
An analysis of the internal resources of Virgin Mobile UK can be conducted by applying the
VRIO model to analyse the sources, nature and inimitability of the resources that are available to
Virgin Mobile UK.
 Value: As Virgin Mobile UK is a large telecommunication company in the market of the
UK, they have several valuable resources to maintain their competitiveness in that
market. For example, one of their most valuable resources is their leadership (Chatzoglou
et al., 2018). After being purchased by Liberty Global, Virgin Mobile UK gained a larger
customer base in the UK, which has naturally become one of their greatest assets.
Moreover, Virgin Mobile UK already utilise the latest technological infrastructure
possessed by EE from even before being purchased by the Liberty Global, hence now
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they own one of the best telecommunication infrastructure in the entire globe. This has
also become one of their valued resources.
 Rarity: Rare resources often become the source of competitive advantages for a business
organisation. However, in some cases it has been seen that some of the competitors also
have those resources, despite them being rare to obtain. Seo, Park and Choi (2016)
argued that this particular condition is known as competitive parity, and all the companies
have to maintain their access to these resources in order to maintain their
competitiveness. In case of Virgin Mobile UK, their tariff costs are rare resources, as they
are one of the few telecommunication companies in the UK to provide monthly unlimited
internet data packages and unlimited talk time packages within the affordability of middle
and low-income people.
 Inimitability: This step signifies the type of resource available to a business organisation
which is very difficult to imitate by another company. Such resources are known as
inimitable resources, and they are considered to be assets for the possessing company. In
case of Virgin Mobile UK, their contract of utilising the telecommunication infrastructure
of EE is one of their inimitable assets, as it allows Virgin Mobile UK to run their entire
business at minimal cost, and other companies cannot easily get into a similar situation.
 Organised to Exploit: These resources are the most valuable resources for an
organisation. According to Knott (2015), it implies a set of resources that the organisation
has an abundant supply as well as an organised process to exploit that resource. For
Virgin Mobile UK, their bundled packages of data, messages and talk time are their most
significant resource, on which they keep constantly researching and improving.
Moreover, by properly evaluating their customer feedbacks, they design the most
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optimised bundles for their customers, and this naturally enhances their brand reputation
and sales figure.
Strengths and Weaknesses of the organisation
As being one of the many telecommunication companies in the UK, Virgin Mobile UK has
several different strengths and weaknesses. These factors indicate an overall situation of the
internal environment of Virgin Mobile UK, and help to identify the key factors that determine
the capability of Virgin Mobile UK to efficiently and their business.
Strengths:
 Virgin Mobile UK has its main strength lying in the fact that they were practically the
first mobile virtual network operator in the entire world (Bull et al., 2016). This has given
Virgin Mobile UK a number of advantages. For instance, their operational cost has been
significantly lower than most of the other mobile network operators.
 The infrastructure maintenance cost of Virgin Mobile UK has also become much less
than other marker competitors.
 Bohari, Hin and Fuad (2017) opined that even after being acquired by Liberty Global,
Virgin Mobile UK has still retained their excellent level of customer service and
customer communication, which has become their strength.
 Virgin Mobile UK utilises regular follow-up communication with its customers, usually
through e-mail, which increases customer loyalty for Virgin Mobile UK and enhances
their sustainability.
 As discussed before, the various bundled data packages offered by Virgin Mobile UK are
also one of their main strong points, enhancing their brand popularity (Phadermrod,
Crowder and Wills, 2019).
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 The research and development of various telecommunication technologies such as 4G or
5G has also been their strength.
Weaknesses:
 Virgin Mobile UK has many weaknesses to cover up. For instance, they do not have their
own infrastructure, and are thus restricted from providing optimal services to their
customers.
 Ervural et al. (2018) opined that Virgin Mobile UK never had a stable ownership, being
constantly tossed around as a subsidiary between various other telecom organisation.
 Virgin Mobile UK does not have very good 4G speed (12.42 Mbps DL) which is much
lesser than other large telecommunication organisations like Vodafone or BT.
 Virgin Mobile UK does not have very good signal strength in rural areas of the UK,
which hampers their service.
 Virgin Mobile UK has a customer experience index of 87%, which is much less than its
infrastructure provider company EE (93%), indicating its deteriorating service.
 Virgin Mobile UK has many outdated HRM policies, such as allowing managerial
recommendations to fill vacancies, which is reducing their workforce efficiency
(Blockeel et al., 2016).
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LO3. Evaluation and application of the outcomes of the analysis using Porter’s Forces
model to a given market [P3]
Application of Porter’s Five Forces
Porters five force is one of the major tools that help in analyzing different component within a
specific industry in an effective and efficient manner. The porters five force considering the
telecom industry of UK will be analyzed in the below passage.
Threats of the new entrants in the market
The threat of new entrants is always present in any sector of the current business market. The UK
market of the telecommunication industry is no exception, as it also gives a lot of opportunities
to any new organisation to start their business there. For instance, Verma (2016) argued that the
current industrial policies of the government of the UK are extremely friendly to the new
organisations, which indicate that any new telecommunication organisation get tax rebate on
their infrastructure and business sales. Naturally, this makes things harder for older
telecommunication organisations like Virgin Mobile UK, especially since Virgin Mobile UK
does not have an infrastructure of its own, and are planning to purchase one soon.
Threats of Substitution
The threat of substituted products is also one of the biggest factors in determining the
competitiveness in the market. For instance, since the digital technologies are going through
rapid development, it will not be very long before newer and faster modes to deliver
telecommunication and other connectivity services will become available, substituting the
existing products. Thus, Virgin Mobile UK will have to keep this factor in mind.
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