Strategic Planning And A Business Strategy Business Essay

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A business strategy of an organization indicates how it's going to success in the marketplace. In today's highly competitive and dynamic market businesses try to secure and define their future with the best strategies.

Major driver for a business strategy is the right approach of the needs of its target customers.

British Telecom, as a market leader in the information and telecommunications plyed key role in developing a strategy not only in the organization but in the entire telecommunications industry in the United Kingdom.

In this document I have researched and described the strategic corporation development history and the current strategic situation of British Telecom, further I have elaborated the recommendations and the choices available for the company in its way forward.

Sending information over distances has become very easy today because of the vast varied technologies available in the world. Starting from the mobile phone, fixed telephone, radio and TV today's technology has driven to 4th generation mobile networks, IP multimedia communication subsystems & satellite telecommunications.

Today there is huge number of private telecommunications businesses in the UK. Among them as a telephone (mobile and fixed), television products and services, broadband and IT solution provider, British Telecom holds a special position.

The company operates overseas in 170 countries with more than 1800 products and services serving homes and individuals, domestic businesses, multinational companies, Government organizations.

Chapter 1

Strategic Corporation Development History

In 1969 the pst office act of Britain fully nationalized the Governement Post Office(GPO) as the Post Office leaving a monopoly of telecommunication to a new department 'Post office communication' division.

The British telecom act of 1981 separated the telecommunication services from post office which resulted in two different corporations.

BT was privatized in 1984 and before that it was holding a legal monopoly over fixed telephone lines in the Britain. Before privatization the company wanted to control its financial systems and streamline the financial and operational processes in early 1980s, which did not become a success.

As a result of this in 1982 a new national fixed line network operator was introduced to compete with BT. New organization was a subsidiary of "Cable and Wireless" and was named as "Mercury". With this introduction it created a duopoly in the market in telecommunication. Government in 1983 announced of a Duopoly policy enabling the two companies to be in the market without further competition for the next seven years.

In the mean time the government made BT a private company in 1984 by selling 50.2% of its shares.

The process of privatization was planned to be conducted in either of the below strategies.

Making BT an integrated company

Restructuring BT by splitting distance and local services

The government decided to follow the first method with lots of support from BT's then management. But BT was forbidden from conducting some services.

In 1991 the duopoly period ended. The liberalization of the industry gradually had taken place by this time.

Developments during the period of Duopoly

During this period the industry had a soft transition due to the lack of competition in the market. Role of regulation supported BT a lot in their growth and it had a lot of bargaining power.

There was no threat of new entrants and BT had a huge power over both its suppliers and buyers. The competition created by the "Mercury" was minimal and BT had an advantage over competition. But the duopoly condition gradually helped BT to transit to a competitive market.

In this document I'm analyzing the strategies company went through starting from 1991.

Developments after 1991

In 1991 BT came up with new vision of "becoming leading telecommunication operator in the UK market". This was a very important point when it comes to strategic development of the company.

In 1991 when the telecommunication market was opened for competition BT started its first major restructuring process. After one year of reorganization the new structure was introduced with lots of job cuts. It was a market sector focused structure. The three focus area were the individual customers, domestic businesses and multinational businesses.

In order to expand worldwide, the company began the first steps by creating strategic alliances with overseas companies. As a result of this in 1993 BT started a joint venture with American telecommunication provider "MCI"( http://www.mci.com/). By 1995 due to multinational demands, BT started several alliances with international companies. (e.g. Italian BNL , German VIAG Interkom KG, Swedish Telenordia etc.)

Below given "Ansoff Matrix" (Product market growth matrix) shows that the company was following a 'Market Development' from 1991 to 1995 as it was promoting existing telecommunication products and services into new markets through alliances.

Picture, downloaded from google images.

In 1996, in addition to the existing strategy, the company took new steps to extend the product lines with interactive advanced multimedia services. New target markets were set in American, European and Asia Pacific regions. During this period new creative ideas were brought into the business such as interactive services and videos for home shopping.

The focus behind these steps were to make BT a global telecom player. By the end of 1996 BT was reaching the first largest internet in the world with a new strategic approach of 'Merging' with MCI (Company Web http://www.mci.com/).

This partnership ended in the end 1997 Worldcom's (Company Web http://www.worldcomgroup.com/) massive offer of $ 37 B for MCI.

When analyzing the critical success factors of BT from 1995 to 1997 few focuses of the company are clearly visible. They are listed below:

International/global focus across cultures,

Differentiation through mobile/internet technologies and innovation,

New product developments,

Alliances and merges.

According to the "Ansoff Matrix" this period was focused on "Diversification". When analyzing, it can be noticed that this period created core competencies for BT.

In mid 1998 BT and AT & T (Company Web http://www.att.com/) created a joint venture to combine the international operations of the two companies to gain advantage over competitors. Lots of international businesses were seeking for an international telephone service provider by the year 1998. BT focused on this market segment.

In 2000 BT released its physical connections to other telecom service providers connecting them from their customers to exchanges.

Dynamic economy of the millennium forced BT to focus on its financials as financial problems started to originate. Third generation mobile technology was initiated during this time as BT won the bid for 3G license which left the company in a massive debt.

Changing market and economic condition enforced BT for another strategic change in end 2000. BT separated its business into 5 entities and the mission was to approach voice and data markets in the UK and in Europe. In order to perform this strategy BT formed two individual quoted companies named BT wireless and Future BT.

(Information - http://www.google.co.uk/images?q=bt%20structure&um=1&ie=UTF)

In end 2001 BT wireless separated from the company. This period from 1998 up to 2002 was a business system focused period for BT. Even though there were changes, main target of the company was "Market Penetration".

The communication act of 2003 introduced Ofcom ( the regulation body of the industry) with three main areas of consideration. Those were

Expanding the fixed telephone network

Scheme for the people with special needs

Call box services

(Information - http://en.wikipedia.org/wiki/BT_Group)

In 2004 , 21st century network technology was introduced to BT. This system uses internet protocols to perform telephoning instead of traditional PSTN systems.

In 2005 BT made two major acquisitions with Infonet and Albacom and the coverage of the company was expanded on the same year. From year 2006 to 2009 Bt had made five major acquisitions. ( Dabs.com, PlusNet PLC, International Network services, Rabbit).

BT took an innovative step in 2006 by introducing BT Home HUB.

In 2008 BT acquired Wire One Communications which resulted the company to be the market leader in video conferencing. Recent history shows that it is focusing on extremely innovative areas of the industry to gain competitive advantage via technological innovation.

(Image - http://www.google.co.uk/images?um=1&hl=en&biw=1138&bih=585&tbs)

When looked in to the strategic corporate development of the company the company is built up on vast number of acquisitions and merges. In certain situations in the history BT functioned as a Cost Leader but recent history indicates the differentiation strategy of the company. Above diagram of "Porter's Generic Strategies" gives an idea about the position of BT with its differentiations and broad scope.

Chapter 2

Current Strategic Situation of BT

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In this section, I have made a strategic analysis of BT to evaluate the current strategic situation of the company. Understanding the environment which business operates is the key area of analysis.

The Mission of British Telecom is to "provide differentiated solutions and tailored services to customers, build new routs to market and manage profitably developing products and services". (Information - http://www2.bt.com/static/i/btretail/consumer/quality/fretter.htm)

PEST analysis of BT reviles following information.

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Political impact

BT operates with the government regulations of the UK and EU as a single entity. Even though the market is completely deregulated, BT has to make changes according to the political situations. The telecommunication regulation body of the UK is Ofcom. It is responsible for setting up policies, researching and analyzing competition, licensing and protecting consumers.

The government through Ofcom looks at the potential business and education opportunities through internet and wants consumers to pay comparatively lower prices than other developed regions of the world.

(Refer Appendix 1 Timeline of UK regulation 1985 to 2009)

The government attempts to implement rules to prohibit the illegal material transferred via internet. This makes internet service providers to pay for highly expensive firewall systems. Spam e-mails and websites are needed to be passed through filters in order to identify the quality of the material received by the consumer. The government has stated that downloading copyright material through internet is a threat. BT faces these issues when the business is executed.

Economical Impact

The global economy is currently struggling to recover from the recession. This economic downturn has created a slowdown in the telecommunication markets. But unlike other industries telecommunication industry is not affected majorly by this. But the companies individually suffered a lot.

Deregulation of the market had made companies earn lower margins due to higher competition. When it comes to fixed line communications the developed economies have a high market penetration and the developing economies have a strong growth in the industry.

Social Impact

While the developing markets look for more voice telecommunications, developed markets like UK are moving from voice to data. Some businesses and domestic users are not bothered to keep fixed line communication at their premises and high disposable income is spent on data.

Nowadays with the busy lives people maintain their relationships using the technology. During the old days telephone were promoted using the concept of relationship building. But in today's society, relationship building has become extremely popular through social networking websites like facebook, twitter etc.

Modern society's business platform is the internet. Amazon, e-bay are believed to be the standard marketplaces in today's world.

Technological Impact

Technology has breakthrough and emerging trends. With the latest broadband technologies telecommunication trends should be supported with high quality innovation to gain advantages.

Today's markets expect low cost technologies and new concepts such as energy saving, space saving, disposable, recyclable etc.

Porter's five forces analysis

In its history and at present the UK is acting as a market leader in the highly competitive telecommunication industry. Since the time BT was deregulated, thousands of new competitors entered the market to provide telecommunications services. Michael Porter's five forces analysis is a technique to use to identify BT's position in the competitive industry.

As EU initiated new regulations framework for telecommunication industry in 1998 the telecom monopolies were ended and it encouraged competition. In this competitive environment the UK acts the role of the key marketplace.

Competitive rivalry has become high and increasingly growing today. The industry growth affect globally. The new technologies are invented everyday to the industry. People move to the cheapest and the trendiest technologies.

Extremely high infrastructure costs and the existing competition de-motivate new entrants to the industry. This has reduced the threat of new entrants.

Buyer power has become extremely high as low cost better deals are available in the market. The switching costs have become low due to innovations and competition.

Current market share of BT

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Source : IT Candor derived from Ofcom, The communications market 2008

Strength, Weaknesses, Opportunities and Threats analysis of BT

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Strengths

BT currently dominates the telecom market in the United Kingdom with its broadband internet service, fixed line telephone network and public phone booths through out 28M customers. BT owns widest communication coverage in the UK.

As a highly capitalized FTSE 100 company BT is highly reputed and listed in NYSE and London stock exchanges.

BT globally holds its businesses in 170 countries which makes them available anywhere across the globe. It follows an expansion strategy through acquisitions and merges outside UK.

BT uses the state of the art technology to give the company a competitive edge in the market. (The best example of this is BT's movement from Public Switched Telephone Network to Internet Protocol Telephone System by spending £10 Billion. This new technology is also referred to as 21st Century Network.)

Weaknesses

BT lacks in coverage and development of mobile communication networks.

BT has gained a negative image in their customer service. As the customer network grew up BT lost its track on customer relationship management.

Lack of promotion and advertising on new inventions before they are released to the market.

Opportunities

Internet telecommunication services using the new 21st century network will bring cost benefits and a competitive edge due to differentiation. This will enable incomparable cheaper voice transaction.

Rapidly emerging new technologies and trends and the need generated through them makes companies to perform continuous innovation. This is an excellent business opportunity for well established BT

BT's latest innovation, the trading platform BT Tradescape is a radical concept of bringing businesses and customers into the same social media platform to generate close relationships across supply chains.

Expansion of BT vision digital TV, which is currently available for BT customers.

Worldwide partners and the availability of the company created through them makes BT serve anywhere in the world.

Threats

The slowdown of the market due to the credit crunch and the psychology generated through it which makes people spend less is a threat.

Competing in a highly competitive marketplace with cost leaders and differentiates such as Google,O2, Orange, Vodaphone etc (Information - http://www.zdnet.co.uk/news/networking/2006/06/08/bt-google-is-our-biggest-threat-39273864/)

Lack of IT related middle management as BT stopped recruitments of graduates in 2009 due to the credit crunch. (Information http://www.information-age.com/channels/comms-and-networking/news/1067372/bt-axes-graduate-recruitment.thtml)

Even though BT works hard to maintain high CRM standards, the negative psychology and the word of mouth of people on customer services of the company generates a threat.

Financial risks in the bond markets, managing finances in today's economic fluctuations.

In order to sustain in the current market BT is focusing on five fundamental issues.

(Information - http://www.btplc.com/Sharesandperformance/)

Creating a well functioning communication market for customers

Achieving sustainable competition

Looking for the possibilities of reduction in regulation

Making investments in the future compatible technologies and networks

Separating structural and operational functions

BT currently operates in following business areas

Retail - As at today BT has 18.3 million customers served by 18000 employees in its communications market. BT continuously focuses on innovation and new market opportunities to grow the business further. In 2007/ 2008 BT had a revenue of £ 8.48 billion from its retail business.

Wholesale - BT provides products and services to UK businesses through its networks. BT handles 300 million a day and 350 million internet connections a month through their networks. More than 700 mobile, fixed and internet communications providers have partnered with BT.

BT Global Services - Large organizations that operate in multiple geographic locations are helped with the business communications via BT's Global Services.

BT Operate - This service provides implementations and operations support of communications services for domestic residential customers, communications providers and global enterprises.

BT Innovate and design - This area of business delivers strategic innovations that improve speed, enhance customer experience and reduce costs.

Openreach - This unit of the business maintains and owns the access network that connects Britain's communications providers to their customers.

BT's policy is to achieve best practices in all their operations. Making huge investments in R&D to improve IT and business technology has brought BT expertise in ICT. They currently hold one of the world's largest R&D facilities for new innovations.

Chapter 3

Strategic directions for the future

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Based on the research conducted in the first two chapters, BT's future strategy can be defined using four main areas or layers. Weaknesses of each layer should be eliminated after analyzing the root causes. The main areas of the four layered strategy are as follows:

Network connectivity, infrastructure and mobility

Enterprise and other application ,management

Outsources enterprise

Business transformation

Recommendations

In the above strategic approach Layer 1 consists of two main concerned areas Network connectivity and Enterprise infrastructure.

Network connectivity sub-layer focuses on general customer satisfaction. The strategy used in this section is described below.

IP networking is BT's latest technological tool which I have already explained in above sections. This provides cheap voice and data connections for the customers. In order to gain maximum attraction BT can utilize the 21 Century Network's maximum output and provide added security and consistency in connections.

Non UK Voice connection will be providing voice telecommunication in non UK areas or where ever the 21st Century Network is not implemented. This will follow "Market penetration" as no drastic changes will be made initially.

Enterprise Infrastructure : This sub layer's focuses on ICT infrastructure needs of Organizations.

LAN Management will meet the wired and wire less local area network needs of customers. Customer premises equipment(CPE) management includes installations and configurations of infrastructure.

For example, BT's attempt to provide wired connectivity by fiber optic cables will create unbeatable advantages as no other provider has initiated this. BT has already invested £ 2.5 Billion on this project and its target is to cover 40% of the UK by 2012 and 66% of the UK by 2015.

Layer 2 - Mobility is a main area which I have denoted as a weakness of BT in the SWOT analysis. BT should set their missions to create location independent, platform independent mobile solutions for their customers. Real time information is highly demanded in today's busy lives. Location independency reduces time and cost of travelling or motion. Mobile and flexible work environments should provide quality connectivity to roaming customers. Therefore I believe there will be a huge potential advantage in moving on to mobile solutions. But BT should gain core competencies in order to gain maximum profits as the market is already created and dominated by service providers such as Google, O2, Tom Tom etc.

Application management area mainly concerns on assurance in BT's solutions. It will attract customers by providing services such as extra guarantees via BT's Application Assured Infrastructure, application integration for businesses via BT's i-Bus. Proper content management will enhance customer attractiveness by data warehousing (i.e. storing, managing and delivering data ).

Enterprise applications sub layer will focus on well controlled telecommunication services. Customer relationship management should be the main focus area of this layer as BT currently receives a huge number of dissatisfied customer reactions.(explained in SWOT analysis). Customers should be given enough access through different & situation compatible media. BT can use their internal technologies to improve customer relations.

Layer 3 - Outsourcing can give BT lots of cost saving opportunities. As BT is already partnered with a huge number of companies worldwide, the company should evaluate and analyze the best locations to conduct tasks that will save time and cost while providing improved quality.

Layer 4 - This layer focuses on providing best value to the customers by consultancy, professional services and system integrations. When businesses are transacted through BT's telecommunication platforms, performing the tasks of this layer will add value to the transactions. By doing this BT will be addressing certain business needs of its clients.

Following the recommended four layered strategic approach will lead the company to achieve its goals and prospect in the business.

Reference

http://www.mci.com/

http://www.worldcomgroup.com/

http://www.att.com/

http://www.google.co.uk/images

http://en.wikipedia.org/wiki/BT_Group

http://www2.bt.com/static/i/btretail/consumer/quality/fretter.htm

http://www.btplc.com/Sharesandperformance/

http://candorit.com/

http://www.zdnet.co.uk/news/networking/

http://www.information-age.com/channels/comms-and-networking/news

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