The purpose of this report is to develop understanding of learner in the context of available strategic direction for their firm. This report is going to discuss growth of telecommunication sector in which potential organization implements different strategy that can assist them to provide desired growth.
- Discuss external environmental forces by implementing PESTEL model.
- Evaluate capability of British Telecom and its internal environmental by implementing VRIO/VRIN model.
- Evaluate market attractiveness and competitiveness by implementing Porter’s five force model.
- Develop an understanding to evaluate available strategic direction for British Telecom.
Business strategy is crucial for every company to formulate and develop in order to run company's activities in standard order. It helps in planning effective strategies in order to achieve business goals and objectives with perfection. Strategies become effective when the company succeed after implementing those strategies. In other words, business strategy can be defined as a working plan formulated by a company for achieving vision, competitive advantage, earn maximum profits, optimizing financial performance, etc (Ackermann and Audretsch, 2013). British Telecom is a multinational holding company which has been operating in more than 180 countries. It provide fixed lines, mobile and broadband services in United Kingdom and is the largest provider of these. It has its headquarters in London, UK. It provide telecom services to corporate and government customers across the world. This assignment will mainly focus on impact and influence of macro environment on the business strategy of company. It will also describes assessment of internal environment and organisational capabilities. Competitiveness of UK's telecommunication sector and analysis of strategic direction of company is also mentioned under this assignment.
P1 Impact and influence of macro environment on business strategy.
Telecommunication undergo great impact and challenges from external environment in order to maintain position in global market. British Telecommunication is a global company and operating in many countries (Annabi and McGann, 2013). This increases the risks and challenges for company. PESTEL Analysis helps company to measure the risks and impact caused by macro environment and rival teams. PESTEL stands for political, economical, social, technological, environmental and legal. This tools help ion identifying influences in above mentioned areas.
PESTEL Analysis of British Telecom shows different challenges faced by company in different sectors.
Political factor: This factor plays a significant role in determining the different impact on BT group. As British Telecom is operating in dozens of countries, they are exposed to different political condition and environment of different countries. This greatly impact the working of company and also increases political risks. BT have been successful in managing and diversifying the systematic risks of political environment. They can analyse following factors before entering into a new market:
- Industrial safety regulations in telecommunication sector.
- Different employee benefits.
- Working week regulation in telecommunication.
- Different employment legislations- minimum wages and overtime, etc.
- Tax related laws and trading and tariff regulations.
- Regulations related to pricing.
- Intellectual property protection.
- Legal framework for contract enforcement.
Economic factor: This includes tax rates, inflation rates, saving rate, interest rate, foreign exchange rate, economic cycle and much more. These factors greatly impact BT. Company have to formulate plans by considering country's economic conditions so that they can achieve success in respective country. BT can consider following things:
- Economic growth rate in country.
- Business cycle stage (e.g., recession, recovery, etc.)
- Labour costs and productivity.
- Education level in economy.
- Quality of infrastructure in telecommunication sector.
- Inflation and interest rates.
Social factor: Culture of society and way of performing things greatly impact the culture of organisation. It is important for marketers of BT group to know about beliefs and attitudes of customers in order to plan their marketing strategies. This will increase benefits of company. Following social factors are analysed:
- Entrepreneurial spirit of people.
- Culture and beliefs.
- Class structure, hierarchy and power structure of company.
- Demographics and talent of population.
Technological factor: This is a fast growing area where there is new advancements in technology on daily basis (Auzair, 2011). It is necessary for BT to adapt and implement new technologies as fast as possible. Due to this, technology is disrupting various industries across the globe. Following analysis can be done:
- Technology's impact on pricing of product.
- Rate of technology diffusion.
- Impact on cost structure in telecommunication structure.
- Recent technological developments by competitors of BT.
- Impact on value chain structure in telecommunication sector.
Environmental factor: This is an important factor to be considered by BT in order to enter in existing markets. They need to perform careful investigation of environment standards that are needed to carry out operations in that area because different markets have different environmental norms which can pose both negative and positive impact on company. Following are some factors which can be considered by BT:
- Air and water pollution.
- Weather and climatic change.
- Laws regulating environmental pollution.
- Attitudes toward and support for renewable energy.
- Waste management in telecommunication sector.
Legal factor: In order to enter into new legal atmosphere, company should carefully evaluate the legal environment of particular country. In some countries, their legal framework does not not have the capacity to protect intellectual property of a company, which leads to theft and stealing of innovations and inventions of company. That is why, company should analyse these critical factors before establishing business. Following factors can by considered by BT:
- Data protection laws.
- Health and safety laws.
- Consumer protection laws.
- Copyright, patents and other intellectual property laws.
- Discrimination laws.
- Anti trust laws in telecommunication sector.
Above were the PESTEL Analysis which gives an idea about external factors of market and give crucial information to avoid risks and challenges. Following is Ansoff Matrix which helps company with strategic planning and provides a framework to seniors, managers, superiors and markets to devise appropriate plans for future growth.
Market penetration: In this phase, BT try to grow in existing markets with the help of existing products and services. They tries to increase market share in present condition of existing market (Azar, 2011). BT can expand by selling more products and services in existing market in order to increase sales and profits. They can increase promotional activities and distribution of products.
Product development: In this, company provide new products or services to customers and sell it in existing markets. They can extend their product or service ranges in previous market. BT have announced various facilities in united kingdom which have attracted many customers towards their services.
Market development: In this, company tries to enter into new markets with existing products or services. This help BT to launch wireless facilities and other services in different countries. They formulate effective strategy to increase profits in new markets.
Diversification: In this, company introduce new products or service in new markets. This requires strong marketing plans in order to market new product or services. They can distribute their products to different new location and for that it requires effective distribution channels.
Also Read: Business Strategy & Telecommunication Sector
According to (Jocovic and et al, 2014), above mentioned PESTEL Analysis and Ansoff Matrix gives a proper idea about risks and challenges present in macro environment. With these effective tools, British Telecom can formulate their plans in order to encounter maximum risks and challenges they are facing and can face in future.
P2 The internal environment and organisation capabilities
Internal environment of a company determines the capabilities and capacity of a company to perform their tasks with efficiency and proficiency. Analysing these factors are as important as analysing external factors because they both pose great impact on company's success. Internal factors of company mainly involves its strengths, weaknesses, employee relations, productivity, financial resources, physical resources, etc. Strategic capability simply refers to the ability of a business to formulate competitive strategy in order to survive in competitive world and increase its value over time. British Telecom is a multinational company and it is very crucial for them to devise effective plans and strategies through which they can maintain their brand image all round the world as well as increase its profits and revenues at the same time (Bharadwaj and et al, 2013). Managers of BT should know about company's mission and vision, which can help them while developing strategies for company. It requires skills, talent, knowledge, capability and expertise of a managers to formulate effective plans in order to maintain the lead of BT and also enter into new markets and countries. BT can implement VRIN/ VRIO Framework in order to determine if a resource is a source of sustainable competitive advantage. For serving as a basis for sustainable competitive advantages, resources must be:
V - Valuable: If the resources add value to organisation and enable them to exploit opportunities and protect them against threats, then resource is considered as valuable. If resources help BT in increasing their customers value then also hey are considered as valuable. This is done by decreasing the price of product. If any resource fails to meet this condition, then they are unable to achieve competitive advantage. It is necessary for BT to analyse value of resource time to time because internal and external condition are changing at very fast speed and this can make them less valuable and useless.
R – Rare: This include those resources which can be acquired by very few companies. If resources are both rare and valuable then they give the BT with temporary competitive advantage. In some situation, companies have same resources and they use those in similar manner, this sometime leads to competitive parity. This can happen because firms can use identical resources and can implement same strategies by using them and thus no organisation will achieve competitive superiority. Company should not ignore valuable products but common as they are important for them to stay in market.
I – Imitable: It is difficult and costly to imitate by organisation. Imitation can occur in two ways, first is, by directly imitating the resources and second is by providing the comparable product or services against the resources. If any company have valuable, rare and costly imitate resources then they have the power to achieve sustainable competitive advantage. Following are the reasons why resources are hard to imitate:
- Historical conditions: Resources which are generated over a long period of time or were developed due to some historical events are costly and hard to imitate.
- Casual ambiguity: Sometime, companies are unable to find out particular resources that are the main reason for achieving competitive advantage.
- Social complexity: Resources which are based on company's culture or interpersonal relationships.
N – Non substitutable: BT should see that there resources are not replaced by any other strategically equivalent valuable resources. Resources are considered to be strategically equivalent when two resources can be utilized separately to implement the same strategy (Bucolo and Matthews, 2011). These resources can be easily substituted and are not the valid sources of sustainable competitive advantage.
Following are some strengths and weakness of British Telecom:
Strengths of British Telecom:
- BT is the leading internet and telecommunication provider and operator.
- Provide telecommunications services in more than 180 countries.
- BT provides most British fixed telephone lines with local loop and network connections, and telephone exchange.
- BT owns world's largest telecom coverage and penetrations.
- It provided communication operations in global markets through acquisitions and re branding of the domestic and overseas businesses, specially: BT Infonet, BT Radianz, etc.
- Investing in new internet protocol century network.
- Have healthy balance sheets and strong financial and cash flow operations.
- Have strong base in UK with large number of customer.
- Offers wide variety of products and services.
- Deliver string customer experience through great products and services.
Weaknesses of British Telecom
- BT have less developed mobile business.
- Lack of mobile coverage.
- Occasional payphone operations due to BT operations.
- BT is largely dependent on markets of United Kingdom.
- Loss in branding due to separation of Openreach from BT.
- Large pension deficit.
- Accounting scandals in Italian business.