The Best Network Provider 6. A responsible and Sustainable Business Leader. The Business Environment “In strategy, the environment means everything and everyone outside the organization” Lynch (2005). Organizations will need to take the environmental factors into account, as they will impact on the organization and its strategies, and ultimately their survival. Johnson and Whittington et al. , (2012) states that this environment is what gives organizations “their means for survival”. The business environment is made out of a few layers.
We will write a custom essay sample
on BT Corporate Strategy or any similar
topic specifically for you
The macro environment is the environment in which all industries operate; these are the external influences that will affect the second layer, the microenvironment, which is the more immediate area around a firm and their competitors. “An industry is a group of firms producing products and services that re essentially the same” Johnson and Whittington et al. , (2012). A PESTLE analysis will help organizations understand the macro environment and a SWOT analysis would help understand the microenvironment. To analyze the competition within an industry or sector the Porters Five Forces tool would prove useful.
Strategic Positioning The organizations strategic position explains the impact the external environment will have on the goals and strategies of the organization and the choices must know what your strategic capabilities are, your strategic purpose and the environment in which you are operating. Johnson and Whittington et al. , 2012 say, “Understanding these four factors is central for evaluating the future strategy’. Organizations must decide where they place themselves in the market and how they are going to use their position and competences to gain a competitive advantage on their rivals.
Businesses can’t serve every single customer on the planet; they will have to focus their positioning. When deciding on what strategic position to adapt, organizations must consider the practical implications, as described by Lawson (2002). These implications are cost, quality, flexibility and response. According to Porter (1996) organizations will adopt a strategic position from three sources: Variety-based positioning, being able to serve a wide range of customers, but only offering a narrow selection of services or products.
Needs based positioning, you try and cater
Page 2 BT Corporate Strategy Essay
to all the needs of particular groups of customers. They will all have different needs, which organizations must try and cater to. Access-based positioning is when customers cannot be as easily accessed as with the other groups, such as in low-density or rural areas. The Macro Environment The macro environment, being the outside environment of an organization, onstitutes all future external environmental factors such as governmental policies, laws and regulations, social changes and economic affects to name a few.
An organization might choose to focus on only a few of these factors and only on what is important. For example BT might chose to focus on the technology and economical factors, those would be their key drivers for change. Johnson and Whittington et al. , (2012) explains those key drivers as the environmental factors that will have a high impact on the eventual outcome of organizations strategies, meaning their success or failure. It is important for organizations to realize that there are possible outcomes; each strategy comes with its own set of threats and uncertainty.
Scenario building, using PESTLE analysis and the key drivers for change, is a good exercise for managers to try and imagine possible outcomes. For a large organization such as BT, which has many different strategic business units and operates in many different countries and continents, there will be many environmental factors to consider. BT operates in the telecommunications industry, a highly competitive environment, and one where quick hinking and good analysis is of the outmost importance as technology changes quickly.
Technology moves so fast that a project based on one of your strategies might already be obsolete by the time it is completed. A big environmental change BT has faced and will continue to face is the shift from landline use to mobile usages as smartphones become more common and more advanced and consumers demand instant access to the Internet anywhere they are. The worldwide economy will also affect BT badly, and it already is as their annual revenue is down which BT mainly says is because of difficulties in the Eurozone.
Lack of capitol expenditure by British firms will continue to have a big impact on their revenue, as businesses still don’t want to invest too heavily in upgrading their systems. Their retail costumers are also still holding back as unemployment remains high and there is still a great deal of uncertainty. BT will have to have the dynamic capabilities to change and adapt to these changes in the environment in order to survive. Further analysis of the macro The microenvironment is the immediate environment surrounding the business. This environment can then further be broken down into markets and sectors.
Johnson and Whittington et al. , 2012 define an industry as “a group of firms producing products and services that are essentially the same” whereas they define a market as a “group of customers for specific products or services that are essentially the same”. To analyze the microenvironment organizations might find Porters Five Forces useful. This tool analyzes the competition within the industry or sector, the threat of entry and substitutes, the power of suppliers and buyers and the competition between organizations in that industry.
Within the industry you will then find strategic groups, rganizations that have similar strategies or capabilities. Although the various organizations might have the same characteristics they may be fundamentally different. BT operates in the telecommunications industry and is one of the worlds leading organizations in that industry. You will find businesses such as Virgin and Sky competing in the same industry alongside BT.
On the surface they all seem to be the same, but they might have different competences and capabilities and although their products and services seem the same they might be quite different on closer inspection. Johnson and Whittington et al. (2012) suggest that to be able to distinguish between these groups you can group them in two categories: Resources (brands and marketing) and activities (product range) The customers of these groups are referred to as strategic customers, defined by Johnson and Whittington et al. (2012), as “a group of customers who have similar needs that are different from customer needs in other parts of the market”. As mentioned above, BT Group operates in the telecoms industry, its’ main competitors are Deutche Telekom, Telefonica, Virgin Media, Vodafone Group, British Sky Broadcasting Group, TalkTalk nd AT&T to name a few. The United Kingdom is BT’s biggest market with 45% of the Group’s revenue coming from that market (BT Group’s Annual Report 2013).
This is a highly competitive market and most of the businesses in the industry are providing the same or similar services, and it is not easy for a business to stand out. A survey into the bundled communications services and fixed line telecoms providers, conducted by research company Mintel in 2012 shows Just how difficult it is to stand out, with 34% of consumers saying that they do not believe that any one particular provider stands out. This could give the providers in this industry a chance to try and stand out.
But this leaves the bigger providers vulnerable to competition. A new business might enter the market offering more competitive prices and newer technology. The report shows that it is not enough to Just compete on price, as they claim that would only be a short-term strategy and unwise for the long term. More appropriate would be to introduce new technologies instead. To try and attract customers, the big providers offer bundled packages, referred to as ‘quad play, meaning consumers are offered packages that include broadband, home phone, elevision channels and mobile phones.
Virgin Media was the first one to offer this service in 2006 (Mintel 2012). BT is trying to do the same by offering its broadband service; it’s TV over the Internet service BT Vision with the newly introduced BT Sport channel, and landline but they do not currently have a mobile phone offering. The VoIP service Skype will pose a threat to telephone providers as it will become easier has a significant market power being the biggest provider of call packages and line rental with 38% market share in broadband services (BT Annual Report 2012).
But lthough this may be an advantage, having a significant market share might make it more difficult for them to compete in certain areas as regulators, such as Ofcom, might place more restrictions on them by. A SWOT and Porter’s Five Forces analysis is available as an appendix. Company Johnson and Whittington et al. , (2012) describe the term strategic capability as “the capabilities of an organization that contribute to its long-term survival or competitive advantage”.
Depending on the business, resources can be described as physical or tangible assets such as material, machineries and plants and competences being ore intangible assets such as human resources, knowledge and expertise, basically their ability to use their resources. BT’s strategic capabilities are vast, including decades of knowledge of the telecommunications industry, knowledge of the regulatory framework, financial management, marketing and their tens of thousands of employees all with their expertise. They also have a very strong and well-known brand name.
On top of that BT owns and operates all landlines in the I-JK and a huge network of its new fiber optic broadband. And not to mentions their millions of customers. Their tangible assets would be huge to write about here but would also include huge reserves of cash and cash equivalent and the largest fleet of cars in the I-JK, some 26,000 cars. With all of these resources and competences it would be easy to compete with anyone entering the market, and with current competitors. There is hardly anything BT couldn’t do.
BT Group has a wide range of products and services they are able to offer their customers, both retail customers as well as to the public and private sector both in the I-JK and overseas. However as all of their products and ervices are similar to their competitors its hard to see what their competitive advantage is in terms of product offering. Their assets and competences would also be their competitive advantage. They simply have what their competitors don’t have, and it will be difficult for new entrants or current competitors to gain what BT already has.
But is this competitive advantage sustainable? Operating in the telecommunications industry as mentioned above is a risky business. Decades of knowledge might not get you anywhere if your competitor comes out with a technology that you don’t have. Coming out with new products to retain customers nd offering service on a high level is key to their continued success and to sustain their competitive advantage. And although they have a strong financial position, they are still heavily indebt; Just their pension deficit is close to E6b.
Level of Strategy Above figure shows the main levels of strategy on which any organisation base its strategic tactics, however, these strategies can be dissected into further sub categories as shown in the figure below. We will analyse and discuss BT’s current corporate, business and operational strategies in this section. In corporate strategy we will discuss how BT managed to ncrease the stakeholders current value. In business strategy we will measure BT’s strategy on Ansoffs strategic business unit and BT’s current operational strategy will be measure on its ability to develop its internal environment.
It is important to explain here that when corporate strategy is implemented on any business it converts into business strategy. The corporate strategy remains corporate strategy as long as it is on papers as soon as it is given to the managers of the organisation for implementation it converts into business strategy. Ansoff Product/Market Growth Matrix The Ansoff Product-Market Growth Matrix is a marketing tool created by Igor Ansoff and first published in his article “Strategies for Diversification” in the Harvard Business Review (1957).
Ansoffs matrix is based on four very simple ways of generating four basic alternative directions for strategic development of any company. 1. Market Penetration 2. Product Development 3. Market development 4. Diversification For details see Appendix B Market Penetration The growth strategy inherent in the Market Penetration option is for an organisation seeking to maintain or increase share of its existing products within the market place, ain market leadership, change competitive processes within a matured market, or increase awareness amongst existing consumers states Mercer (1996).
BT’s recent business strategy is to promote its BT Infinity TV by adding a sub product its new sports channel to its already existing broadband based TV channel which is a very good marketing strategy. According to Hooley et al (2004), the option to penetrate deeper within the marketplace is a low risk option that makes use of existing resources. This is exactly what BT is trying to do by launching its new sports channel for existing and new customers. BT has launched its very own sports channel ecently as well as BT’s online gaming for its existing and new customers is providing it an edge over its competitors.
BT Infinity TV which is run on broadband has already brought a number of new customers to the organisation because its competitors either do not offer the bundle services BT is providing or they are charging more for less. John Lewis broadband and Plusnet broadband are few examples. BT inauguration of a sports channel fall in the category of entertainment, but BT is using its existing broadband technology to support its new venture. BT recently also acquired rights to show Champions League and Europa League football matches rom SKY and ‘TV.
In an exclusive E897 million deal British Telecom will be able to show 350 football matches each season from 2015. The deal has been finalised after talks with European governing body UEFA. BT’s marketing strategy is to spread the word through TV ads, internet marketing, and print media in an effort to increase its TV viewers. BT has recently launched its new pay-TV which is also run on its broadband and is providing its brand new sports channel for free to attract more and more customers. BT switching to fibre-optic to increase market share Improving infrastructure within the 13K.
It would provide BT a growth initiative for all its products based on high speed broadband to both its domestic market, SME market, larger corporation market, development of its wholesale market by selling space on the high speed infrastructure to other communication providers. BT’s business strategy is to develop a platform for a whole set of strategic directions to grow in the market. The political objectives of the I-JK government is the driving force for BT’s business strategy to improve the infrastructure of the country.
The I-JK government believes that 98 percent citizen should have access to optic-fiber roadband for better quality of life and for better business. BT is doing it because it is the guardian of the infrastructure of telecommunications in the I-JK and the strategic possibilities to grow in the broadband market are vast. BT will be paid handsomely by the United Kingdom government for their service as one. This is an opportunity for BT for potential growth for the whole range of its business including retail, whole sale, global business.
BT is also doing the similar thing outside of the I-JK but on much smaller scale. Providing a platform for a whole set of growth initiatives, rowth of products based upon high speed broadband to both its domestic market, SME market and indeed the larger corporation market development of its whole sale market by selling space on these high speed structure to other communication providers. BT’s network is already connecting over 11 million I-JK homes to BT Infinity and phone devices is making BT’s stakeholders excited.
Development Market BT wholesale provide complete infrastructure to the UK SME’s Earlier this year it has been announced in by BT’s newest CEO Gavin Patterson that they are going to split retail and enterprise division. The decision came after BT financial figures between April and June 2013 showed a flat fgure. Since the split between the two departments BT wholesale is spreading itself in the UK’s SME market through market penetration. competing with other service providers in the market such as CISCO.
CISCO the American multinational corporation is one of BT’s competitor in the UK SME market holding almost 10% of the market currently, while BT wholesale market share is little more than its competitor the gap is increasing as BT complete solution packages holds a little extra from SME’s. BT is truly a brand of business for SME’s in the I-JK. BT’s business strategy is to provides complete IT solution packages (infrastructure) to British SME’s which includes landlines, internet, TV, computer software’s their updates and their maintenance on cheap rates which is attractive enough for SME to switch to BT.
If we look closely it is clear that these bundle services provided by BT to British SME’s fall in the category of Ansoff matrix market penetration. BT is increasing its business by becoming the brand of business for British SME’s and proving itself a responsible and sustainable business leader. BT Global exploring new markets in Middle east, Africa and Turkey (Infrastructure of 3G nd 46) The idea of developing a market has been introduced by Igor Ansoffto the organisations, he reckon offering an existing product into a new market would increase the profits of the organisation as well as increase the market share for the stakeholders. The various alternatives available would be to leverage an existing product into a new geographical region, using different product dimensions, distributing the products through new channels, or adopting different pricing strategies’ (Proctor, 2000). BT’s market penetration strategy is to target the countries which are underdeveloped and have unsophisticated infrastructure. BT’s business trategy is to invest in these underdeveloped countries with its relatively sophisticated communications market would be greatly profitable for the organisation.
BT is investing in organic growth and in building the infrastructure so it can grow its communication business under BT global. The major goal of market development would be to attract a new customer segment, using a slightly different strategy, into consuming an existing product (Ansoff, 1984). BT’s new business strategy is to develop market, hence they have been investing in the high-growth regions of the world to extend their reach to other developing countries such as Middle east, Africa, India and Turkey.
The risk associated with this strategy has been depicted by Watts et al (1998) to be moderate, due to the risks associated with entering a new market. BT’s strategy is quite simple provide the complete infrastructure in these countries from fiber-optic to internet boosters, from signal towers to broadband and from television to internet. BT Global services is one of the largest networks around the world. BT not only provide services to its multinational customers around the world but helping these regions to grow economically as well as financially.
BT global acquisitions & organic growth: increase market share at group has been performing its duties efficiently by increasing the market share at global level to increase the stakeholder value by acquisitions and mergers. BT group is interested in organic growth, mergers and acquisitions globally rather and for that it is spreading its wings all over the world. While BT provides its services to over 160 countries around the world the headquarters remain the same and most of its employees are from Britain.
BT’s strategy is to obtain more customers globally in short time hence they are willing to create infrastructure by obtaining business artners around the world. BT is investing in the future of telecommunication, IT and Technology business to generate more revenue and increase profits for its shareholders. Ansoff matrix’s describes this strategy as market development. Potential Future strategies of BT GROUP Almost all big companies around the world especially in telecom and IT sector compete at global level therefore BT have only few choices for future growth.
It is very challenging for BT to get competitive advantage which is difficult to imitate for competitors is the most important determinant of business performance in future to eep happy all stakeholders. For this BT’s corporate strategy, business strategy and operational strategy should be aligned in one direction. BT can build its competitive advantage on the basis of product quality, innovation and cost control. Based on global economic environment and the level of competition in IT and Telecom industry, following strategies can be very successful for BT to increase and sustain business performance in future under Ansoff metrics.
BT to re-enter in I-JK mobile phone market with 4G It can be a good strategic choice for BT to reach its existing TV, Broadband and Phone ustomers with new mobile service to re-enter in I-JK market. Under Ansoffs product development strategy BT once again can enter the mobile service market after disposing its first subsidiary mobile service then known as Cellnet which has become now 02 and owned by Telefonica of Spain. The move would be the latest step in BT’s strategy to protect its base of existing customers from new entrants. There are many choices for BT to use the virtual network.
BT can go for mergers, acquestions , Joint ventures of strategic alliances with any of 4G mobile companies like, EE, 02, Vodafone and 3. BT also have the option to pay these companies for use of their virtual networks. For BT EE is the best option as it has already bought some spectrum by auction and have much better network coverage across the Briton. BT’s virtual service is currently being run by Vodafone and provides service to BT’s 90,000 staff Although BT have tried this option before and had to sell this service in 2002 but current business environment is different now.
Millions of BT customers use BT broadband, TV and Telephone but use mobile services of BT’s rivals like Virgin Media which is providing complete package to customer at cheap rate. BT’s all stake holders ill welcome this decision as it will increase BTs revenues and will help BT to retain its customers who are targeted by rivals because of their complete package. Acceptability There should be no resistance from all stake holders as BT is losing its existing customers to its competitors who have competitive advantage over BT and proving a complete package including mobile service.
BT is not going to do this first time as BT has been in this sector before and have competencies to do it again with profit. Feasibility BT has enough financial resource to afford this and have the well-equipped dynamic workforce to manage this. There is competition among 4G mobile companies (Vodafone, EE, 02, 3 etc) to provide BT virtual network. So BT has bargain power to get cheaper rate. BT’s competitor Virgin media is targeting customers by offering 4 for E40 package (mobile, TV, Phone, broadband) including free smart mobile.
It is likely feasible to buy one of these companies to increase market share. To connect the 2 Billion people of South Asian countries through 36 and 4G network infrastructure It can be the good future strategy for BT to enter in this existing market with new product to fulfil the IT and communication thirst of hundreds of millions of oungsters in this region. It is market development under Ansoff model . The best choice for BT to enter in this market is to buy national telecom companies who already have market share and infrastructure.
There is huge gap between the demand and supply of IT and Communications products in these countries especially in Pakistan, Bangladesh and Sri Lanka. Population wise South Asia is the world’s biggest market as about 2 Billion people live in this region and 60 % population consist of youngsters between the ages of 16-35. India is the biggest country in the region with 1. 2 Billion populations and Pakistan comes second with 165 million, Bangladesh with 150 million and Sri Lanka with 20 million.
Suitability All countries have elected democracies and Government policies are favourable for foreign direct investment in telecom sectors. Governments gave contracts by auctions which is open to any company in the world. The World Bank and IMF have forecast more than 6% GDP Growth rate for this region which is very encouraging. The level of competition is bit high in India but very low in other countries. To enter in this market is tough but for company like BT with huge financial resources and global experience it will be easy to enter.
Acceptability The BT stakeholders especially shareholders will not resist it as BT is not going to do this first time in this market as BT is serving many big corporations like Unilever, P&G, Tata Corporation and banks. There is less financial risks associated this project but huge sustainable growth over the long run is expected which will provide more dividends to shareholders in future. Feasibility BT can enter this market by buying national telecom companies who have not players in India like Vodafone, Reliance Group, and Bharti airtel.
These players would resist allowing BT to enter in this market but Government’s legislation will allow BT to id for it in auction. In Pakistan and Sri Lanka I-JAE based telecom company Etisalat dominates the market and can gave BT a tough competition. It is feasible and possible that BT will be successful in this investment as BT’s past experience show that BT not only has the capability to do this but also have enough financial resources to afford it.
To introduce 56 Mobile Network Technologies in I-JK and EIJ by 2018 It is the core corporate strategy of BT to invest in future technologies and innovations for sustainable growth in future. It will be a product development for BT under Ansoff model. It is estimated that by’2020 about 6. billion people across the globe will use mobile networks for data communications and other things like vehicles meters, medical devices and home appliances will also be connected with 56 network.
BT has already achieved 4G technologies successfully and British people will be able to use very first time 4G mobile network in 2014. BT should continue to evolve its existing 4G network capabilities and should start investing in research and development to provide 56 mobile network technologies over the next 5 years. This will provide BT a big competitive edge over its competitors in telecom industry. Suitability It is highly suitable in current domestic and international business environment and is compatible with BT’s vision to invest in innovations and new technologies.
I believe that all the internal and external stakeholders will support this. It will increase BT’s share value which is good for shareholders and BT will have new retail and trade customers and existing customers will trust more on BT. Suppliers and Governments will be happy as it will generate thousands of new Jobs. Acceptability It is a new product development (from 4G to 56) so it will be acceptable for all major take holders because BT is not going to introduce something new or different from existing product and services.
It will provide BT a competitive advantage for which BT can set a premium price for massive profits which all stakeholders want from BT. BT is financially very strong company and has the right financial resource to afford this investment. BT’s past successful track record shows that they have very competent human capital that is capable of building of new networks, capable of handling higher transmission speed and higher data volumes. For example BT has successfully launched 36 &4G networks already. British telecommunication regulator authority (OFCOM) can resist BT to create monopoly and charge higher prices.
BT can also do some acquisitions and mergers with other players like Huawei which is China’s biggest telecom infrastructure provider to develop and launch this new network. Deutsche telecom of Germany, Telecom Italia and Telefonica from Spain can compete in I-JK and EIJ market through EIJ laws of fair competition. China’s Huawei already started working on G5 and opened its research centre in I-JK. Also these companies are capable of launching this before BT and can create strategic alliance against BT.See More on Strategic management