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Effects on Growth and Development Due to Changes in Internal and External Factors

Organization Selected : British Telecom

EXECUTIVE SUMMARY

A business operated in a particular environment. Macro and microenvironment evolve around the business. It is directly related to business operations so it affects business growth to a great extent. In this report it is shown that how British telecom growth and development is affected due to change in internal and external factors. Also, it is discussed that what challenges are being faced by British telecom is various countries. Moreover, porter five force and SWOT analysis is done to identify market condition in which British telecom is operating. Furthermore, it is shown that what are the competencies and resources of British telecom. Apart from this it is described that these both factors can affect the overall business efficiency. If not studied business will not be able to survive in

MAIN BODY :

British telecom is a MNC that is engaged in providing a variety of services to people. The services include dealing in TV, fibre, etc. British telecom was established in the year 1969. In 1984, 50% of its shares were sold to public. This company is the oldest telecom company in UK. It has almost covered the entire market. It provides high quality services to people. The mission of British telecom is to deliver high quality services to people. In the recent era, BT is facing several issues that are affecting its growth (Summanen and Pollitt, 2016). The main issue that company is facing is related to customer service. It is because; the quality of services has been reduced. In addition to this, British telecom is not able to cope up in the global environment. It is because; company is not able to generate enough cash. Due to this, they are not able to upgrade their network. Also, company is not providing proper dividend to the shareholders. Due to lack of finance, British telecom has revised their dividend policy. However, British telecom is operating in all over the world. So they are facing different challenges. The biggest challenge that is faced is Brexit. Due to this they have not been able to expand in EU countries. It has changed laws related to trade, tariff, etc. this is the reason why there has been decrease in productivity of British telecom. Thus, in order to analyse the overall business environment they have done internal and external analysis. Probably this has affected its expansion and operations.

SECTION 1

PESTEL Analysis of British telecom

In this section, PESTLE analysis of British telecom is done. PESTLE analysis is the framework that helps in identifying the external factors related to business. It also helps in understanding how these factors are influencing the business growth. It is also known as macro environment as it contains legal, social, political, etc. factors (King and Lopez, 2016).By analysing these factors, it becomes for business to develop strategies accordingly. PESTLE analysis of British telecom is as follows:

  • Political –This factor plays a significant role as it isrelated to change in political condition of nation. Every business has to work in certain boundaries that have been set up by the government. Any change in political condition of country will affect long term profitability of business. It is because; government will change the rules and regulations, trade policies, tariff, etc. British telecom is a global company that has to ensure that laws and regulations are followed in a proper way. They operate in different countries (JO'Flaherty and Williams, 2016). So, for every country, there are separate policies developed. Moreover, British telecom operates in unstable political environment. Its diversification has led to certain risks. There are several risks that are involved such as tax rate, intellectual property protection, etc. Furthermore, UK is having strong relations with neighbouring countries. So, this has allowed British telecom to expand there. But on the other hand, Brexit has highly affected British telecom’s growth in EU countries. This is because; they have to operate in different environment.In present era many EU countries are facing political issues. So they are changing their laws and regulations. This is restricting British telecom to provide services in that country. But due to popularity of football British telecom has taken over the broadcasting rights. Through this they have entered in new market.
  • Economic –It is the most influencing factor that can affect the business profits. In this, there are many factors included like inflation rate, interest rate, GDP of nation, etc. Before expanding operations, business has to analyse the economic condition of country. This is because; it helps in selecting the appropriate market and setting price of products. Any change in those factors will affect the profits and sales. It also affects the competitive advantage of firm. British telecom majorly operates in developed countries(Bain and Taylor, 2017). Its major revenue comes from UK. So any fluctuation in UK economy will decrease the profits of company. Then they will have to focus on other countries. However, decrease in profit will have a negative impact in growth on British telecom. But company has build its market share in EU. So they can focus on these countries. Due to Brexit UK economy has fluctuated. This has decreased the revenue of British telecom. So now company is focusing on Asian pacific countries. For example- recently in India jio has revolutionised the entire digital industry of the nation. This has attracted many new companies to invest in India. Many nations think that evolution of technology will help in increasing GDP. So they have allowed FDI in telecom sector. However, due to poor economic conditions of countries British telecom sales had declined.
  • Social-This factor is related to change in tastes and preferences of customers, demographics, cultural trends, etc. business products and services are produced according to these factors. They also have to respect the ethics and beliefs of society. This is highly followed by retail sector. Moreover, there is a frequent change in taste and preferences of customers.British telecom operates in telecommunications.So, it has been benefited by this factor. This is because; they provide a bundle of services to people (Sidak and Vassallo, 2014). This gives people a superior product differentiation. Also, due to advancement in technology, people mind-set has changes. It is because of growth in smart phone and devices. So they want a better communication channel and services. This has created a platform for British telecom to expand the business in developing countries. The taste and preference of people has changed. Now they want advanced technological products and services. This will benefit British telecom as it will produce it accordingly to needs of people. Slowly the culture of people is changing. In developing countries there is need of technology. So British telecom can focus on them as it will help in increasing their global presence. Also, in coming years most of the goods and services will be based in technology. Thus, telecom industry will boom. It is an important drive of change that will transform the entire industry.
  • Technological – This is the most crucial factor for telecommunication industry. It is because; the entire industry is based on this technology. They provide products and services as per the advancement in technology. Also, they have to update their products and services. Moreover, it is necessary that company in this sector cope up with technology as failing in this will restrict their growth. They will not be able to compete in the market. British telecom majorly operates in developed countries and so, they have to regularly upgrade their services as per the change in technology. For this, they have invested in 5G technology to improve the internet network. Along with this, they are investing in cloud computing services that have enabled them to improve the service quality. (Shire, Holtgrewe and Kerst, 2017). This factor will play a vital in role in driving change. Developed countries are inventing technology to make the life of people easy. So this has forced British telecom to implement advance and updated systems. It has lead to rise in expenses. But it has provided opportunity to develop the latest products. Also, they can enter in developing countries and compete with local companies.
  • Environmental- The surroundings in which business operate is known as environment. It is important for the business to protect environment as it can affect their brand image. Different markets have different norms and standards that have to be followed by the business. Business is highly influenced by change in weather, climate, etc. Telecommunication industry pollutes environment as it contains tools that releases radiation. So, government has imposed strict regulations for this industry. British telecom has taken several initiatives to reduce the carbon emissions. They are highly contributing in protecting the environment.It has also started using renewable resources. This has helped them to create a positive image in the industry. In this tools and equipments used will generate radiation that will be harmful for people health. For this government will take strict action against it. They will be imposing fines and penalties on companies. So this is a major threat for telecom companies. They must consider and evaluate this factor as it can highly impact their growth and development. Hence, they should start contributing more towards corporate social responsibility. It will help in maintaining good and better image in the society.
  • Legal – different countries have different laws and regulations related to health and safety, working hours, labour wages, etc. (Shittu, Healing and Rajarajan, 2015) on the basis of these laws companies develop rules and regulations. So any change in laws and regulations will directly company operations. They will have to modify their own rules. Also, any influence of trade union will force company to work accordingly. British telecom operates in various countries so they have to follow several rules and regulations. But the major factor that is affecting British telecom is Brexit. It has put restriction on British telecom to operate in other EU countries. Each country is having their own telecom regulatory reforms and norms. Due to this British telecom is not able to grow and develop in those countries. However, in recent time a case with Italian authorities has created poor image of British telecom (Tahir, Rajarajan and Sajjad, 2017). The country has taken legal action against the organisation. Many nations have made changes in their health and safety laws in technological sector. So the negative impact of this is on enterprise. They have to implement high safety measures in working place. Government has set some standards to evaluate the

From the above analysis it can be stated that due to change in certain factor British telecom has benefited in some area while in other there growth has been affected. As British telecom is operating globally, it has successfully able to analyse the market condition in different countries. This has enabled them to develop strategies accordingly and maintaining their market share. Change in technology has provided platform to British telecom to focus on developing countries. But due to Brexit British telecom has to make changes in their laws. Also, the relation of UK with many European nations is affected. This has impacted its economy to a great extent. Along with this, countries like Ireland, Scotland are suffering due to Brexit.

SECTION 2

Five Forces Framework of British telecom

In this section porter, five force analysis of British telecom is done. It is framework that helps in identifying the internal factors that are related to business. It also helps in understanding how these factors are influencing the business growth. It is also known as microenvironment as it contain several factors (Morton, 2017). By analysing these factors it becomes easy for business to identify level of competition in the market. The analysis of British telecom is as follows :-

  • The threat of new entrants- It refers to the entry of new business in the industry. The new entrants can affect the competition in industry. It can restrict the growth of existing companies. In telecommunication industry many new companies have emerged and are providing various types of products and services to people. British telecom operates globally so it has to face tough competition in different countries. Moreover, many new companies are entering in this industry. In developing countries there has been a high rise in new entrants in telecom sector. These companies are providing services at low price. This is a concern for British telecom as they have to compete in those markets (Summanen and Pollitt, 2016). Therefore, it can be said that there is increase in competition in market. Beside this, British telecom has already acquired patents of technology that restricts new business to enter in the market. In many countries, local players are giving tough competition to British telecom. They are offering cheap services to people. Companies like Vodafone has expanded in India. It is collaborating with local business to gain market share. Stiff competition in developing countries has restricted British telecom to operate there.
  • The threat of substitute- in every business there is always a threat of substitute. It refers to using of another company products in order to satisfy their needs. Generally, there is high risk of substitute in retail sector. Also, in telecommunication, there is risk of using threat of substitute. It is because people can use different services. Besides this, it also depends on cost that is incurred by customer while switching. British telecom provides a variety of services to people. But it has resulted in reduction of sales and profits. There is very less risk of threat of substitute in technology. It is because people prefer to use advance goods. But they are having option of buying cheap services from other company.
  • Bargaining power of buyers- Buyers are the people who buy products and service of business. In this factor bargaining power refers to the number of buyers in the market. It means that large number of buyer will highly influence the price of a product or service. They will have more power to drive down the prices (King and Lopez, 2016). British telecom customer base is expanded in wide area. It is having a large customers base. So they can easily lower down the price. This will have an impact on profits of British telecom. Therefore, British telecom must change their price as per market conditions. For this they can follow differentiate pricing strategy. In this the can set price for different services.
  • Bargaining power of suppliers- Suppliers are the people who supply products and service of business. In this factor bargaining power refers to the number of supplier in the market. It means that large number of suppliers will highly influence the price of product or service. They will have more power to drive down the prices. As British telecom is expanded globally, they are having many suppliers in different countries. So they can easily lower down the price. It will affect profits and market share of company. Thus, British telecom must reduce the power of suppliers. It will help in controlling of prices in different markets. Along with this, company can reduce suppliers so they will not be able to make changes in price.
  • Industry rivalry- As the name suggests this factor is related to the level of competition in the industry (JO'Flaherty and Williams, 2016). More the number of companies more will be competition. In telecommunication industry, there are many large players. Also, companies are expanding their operations in developing countries. This has resulted in increase in competition among companies. Due to this they have to develop various strategies according to the competition. British telecom is also facing intense competition in UK from companies like Vodafone, Sky, Talktalk, etc. also, it is facing competition outside UK as well. This has forced them to develop product and services in order to remain survive in the market for long term. Alongside this, British telecom is providing products at low cost through which needs of people are fulfilled. They have gained enough competitive advantage as they provide variety of services to people.

This analysis states that British telecom growth has reduced in recent time. This is because of stiff competition in industry. But company is able to compete with competitors by providing variety of products and services to people. With this they have created a large customer base (Bain and Taylor, 2017). Other than this British telecom has analysed the internal factors effectively. It has enabled them to earn huge revenue. However, the increase in level of competition has declined the revenue of British telecom. Moreover, company set different price of product and has reduced the suppliers to maintain effective pricing policy in the market. Due to its large customer base British telecom has set pricing standards. This has helped them to attract large number of people.

SECTION 3

Resources, skills, Capabilities and Core competencies of British telecom

Every business requires resources to perform task and achieve goals. Besides this, they are having certain skills and capabilities that makes provides them a distinct image in the industry. Alongside this, business has some competencies that help them to gain a competitive advantage over their rivals. Thus , it is important to identify these competencies so that it can be strengthened. It will allow business to enter in new market. In this section resources, capabilities and competencies of British telecom is defined (Nevalainen, 2017). With this it will b easy to identify what skills and resources are required by British telecom to enter in market. They all are included in internal environment of business. Also, by analyzing these British telecom can grow and develop.

  • Resources – It is related to basic resources that is required in performing task. Basically, it includes human, financial and physical resources. These three are basic requirements that must be available in proper quality and quantity. British telecom is having unique and sufficient resources that helps them to implement strategies in effective way. They use high quality raw materials in technology so that service quality can be enhanced. Moreover, its financial position is stable and strong enough in telecom industry. Due to this it is known as largest telecom company in UK. British telecom is having advanced technological tools and equipments through which they offer services to people. They have also installed cloud computing software that provide various types of service to customers.
  • Skills – It refers to the skills that employees must possess in organisation so that activities can be performed and goals can be achieved. Manager must possess skills to develop plans and take effective decisions. It will help in ensuring that business operations run in smooth way. In such as stiff competition business required highly qualified and experienced people in their organisation (Brown, Ghosh and Taylor, 2016). It helps in developing creative organisational culture. Also, new talent brings in new ideas and innovation. British telecom is having sufficient skills to hire experienced person. They are having people that has helped in developing products and services. It has provided support to British telecom to increase their product portfolio. Moreover, due to this change management is easily implemented. It has also helped company to enhance quality of product and services. This has resulted in increase in customer satisfaction. Furthermore, British telecom is able to retain them and create a large market share.
  • Capabilities- it refers to the strategies that is made by British telecom in current dynamic environment. These strategies are key factor that helps in dealing with challenges. Also, it shows that how strategic process will be followed by British telecom . Decision are driven by change in external factors and multiple goals. British telecom is having less resources as compared to telecommunication services. In a report it was analysed that there was fall in sales in 2013 (Damiani, 2015). Also, it was evaluated that British telecom profits rise by 40% but there was decline in sales up to 4%. British telecom is having capability to grow in developing counties. Also, they are having experts that can provide suggestions to improve efficiency. Moreover, they identify weak areas and improve them. Due to its high presence in UK and Europe British telecom has developed a distinct image. There is also chance that business may suffer due to advancement in technology. This might have to rise cost of services and goods.
  • Core competencies- Generally, it is related to strength of company and is included in internal analysis. British telecom is having a strong market share and customer base in UK. This make them a well known recognised telecom company in other countries. Due to strong image of British telecom in UK it has expanded operations in other countries. Similarly, its product portfolio helps in providing variety of products and services to people. This has enabled them to attract large number of people. Also, it has developed a marketplace in which British telecom enjoys a greater profits (Geppert, Matten and Williams, 2016). However, manager in British telecom control and evaluate the operations. This helps in integrating the efforts and achieving goals and objectives. For example- innovation in British telecom is done in all segments by developing an effective plan. On this basis resources are allocated to them. In this way common goals are achieved.

These four elements in internal analysis of British telecom states that company is having a better advantage in core competencies. They have gained competitive advantage in UK that has build strong image. Moreover, enterprise is capable enough that it can take step to enter in new markets in global world. This is because it is having advanced technology that is attracting people. They are successfully able to meet people needs. Similarly, British telecom has already covered UK market share. It has build positive image in mind of people. In context to this organisation is having experienced employees who are always working hard. They frequently develop services according to market conditions. In this way goals are achieved.

SECTION 4

Application of SWOT Analysis and decision making in British telecom

In this section SWOT analysis of British telecom is done. It is framework that helps in identifying the internal factors that are related to business. It also helps in understanding how these factors influences business growth (Liu, and Fazlollahi, FutureWei Technologies Inc, 2015). It is also known as micro environment as it described the strength, weakness, opportunities and threats of business. The SWOT analysis of British telecom is as follows :-

Strengths

  • It means the strengths of company through which it has gained competitive advantage in the market. With this company compete with rivals. The strength of British telecom is that it is having a very strong financial position in UK. The business concept followed helps British telecom to generate cash flow that enables them to meet their goals. There is high increase in their revenues.
  • Besides this, British telecom is the largest provider of broadband services in UK. It has covered 35% of market share. Its operations are spread in three sectors that includes business, consumer and infrastructure (Kumar, 2014).
  • British telecom is having a strong product portfolio. This attracts a large number of people to buy their products. Its portfolio includes EE, ventures, wholesale, etc. Company is having approx. 5.83 million customers in UK.
  • British telecom provides high quality products and services to people. They frequently use technology in order to enhance the quality of service. With this they are able to retain their customers. It has also upgraded their broadband service from 38MBPS to 52MBPS.

Weakness

  • Its major weakness of dependency on UK market for sales and profits. So any change in economy of UK will impact British telecom to a great extent. There will be huge decline in profits of company.
  • The company is having limited liquidity. They maintain large amount of cash as profits. So they are not able to expand in markets. Moreover, these profits are distributed it shareholders. It allows them to restrict growth of British telecom.
  • In recent time there has been large pension deficit and accounting scandals in Italy. This has affected the currency rate of Europe (Clark and Luckie, 2014). It has also hurt the finances of business in telecom industry. Due to this it has weakened the value of British telecom.
  • British telecom is not having enough presence in Asian pacific countries. This reduces their global presence. This is another weakness of company. It allows other MNC to provide services in those countries.

Opportunities

  • British telecom is developing 5G services by collaborating with Nokia and Huawei. With this they can expand operations in UK. Also, company has entered in alliance with Huawei. This gives them a huge opportunity to expand their connectivity by improving it.
  • Many nations have made trade laws easy in telecom sector (Abreu and Cardoso, 2017). So there is chance that British telecom can use grab this opportunity and operate in those countries. In this way they can generate large revenue.
  • UK is famous for football. British telecom has successfully retained the rights of European football until 2021 that will help them to develop market. This deal will help company to continue their media rights. With this they will can bolster in DRH market.
  • In last year British telecom launched their mobile. It was very successful as in just one month 400000 customers were added. Moreover, British telecom has merged with EE. It has allowed them to create a large mobile network. They can take advantage of this to develop products and services for other market segment in different sectors.
  • They can expand business in Asian pacific countries (Karamanis, Rontogianni and Mousiolis, 2015). It will help in generating more sales and revenues. Also, with this they can increase global presence as well as customer base. Furthermore, company will be not have to depend on UK for their profits and sales.

Threats

  • The major threat British telecom can have is due to Brexit. It can affect their operations in different countries. Due to Brexit trade and tariff policies are changed. This has made it difficult for British telecom to get license for providing telecommunication services. Also, change in regulations of countries can impact growth of British telecom.
  • There has been rise in competitor in UK in this sector. So in the future there will be intense competition in UK. Also, other companies are providing service at low cost. This can affect profit of British telecom.
  • At last there government can change their regulation and license (Brown, Ghosh and Taylor, 2016). This will highly affect British telecom operations in UK. They will not be able to provide high quality services. Also, the freedom of operating freely will be reduced.

Decision making

In British telecom decision making is done by top management. They develop and decide goals and objectives that have to be achieved. As British telecom is operates globally. They have to ensure that decision taken is effective as wrong decision will affect the overall operations. Also, it is necessary that different and effective strategies are developed to deal with complex situation so that operations can run in smooth way (Geppert, Matten and Williams, 2016). However, decision are taken according to the situation of country. It entirely depends in top management whether they want to operate in particular country or not. In addition to this decision are taken in different segments. This is why British telecom is operating successfully in UK and other countries. Also, British telecom has hired qualified and experienced manager and leader to implement decisions. They also allocate resources to each segment to achieve goals and objectives. The reason of developing different goals of each segment is that they all differ in size and growth. So overall integration of efforts will help in attaining common goals of British telecom. There is a systematic way of implementation of strategies and decision. This ensure that activities are performed in step by step manner. Apart from this, standards are set by management so that results can be measured (Kumar, 2014. Clark and Luckie, 2014). This helps in identifying weak areas and taking measures to improve them.

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CONCLUSION :

This report concludes that there are many factors that can affect business growth and development. Every business requires resources to perform tasks and achieve goals It depends on business how they react to it and what strategies are followed to minimize its impact. In this internal and external environment of British telecom is discussed. In internal porter's five force model and SWOT analysis is done. This will help in evaluating the competition in the market. With this strategies can be developed that will help in maintaining growth and competitive advantage. Basically, business is highly affected by macro factors rather than micro factors. It is because macro factors is spread in wider area. In British telecom, decision-making is done by top management. This analysis states that British telecom growth has reduced in recent time. This is because of stiff competition in the industry. But the company is able to compete with competitors by providing a variety of products and services to people. With this they have created a large customer base. Besides this, they are having certain skills and capabilities that provide them a distinct image in the industry.

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