INTRODUCTION TO GLOBAL CORPORATE STRATEGY
Global business strategy refers to the long term plans made by the business organizations to attain global competitiveness in the market. Global Strategy guides the activities of the business to meet the overall objectives of the business entity (Heidtmann, 2011). A strategy defines what needs to be done to establish competitiveness in the market, how the goals will be achieved, and matching the existing strength of the business entity with the global market requirement. This report is prepared to examine the global corporate strategy of British Telecommunication Group Plc (BT). BT is a British multinational telecommunications company having its headquarters in London, United Kingdom. Presently the company has its business operation in 197 countries worldwide. The company mainly provides its services to corporate and government customers in its area of operations (Coyle, B., 2000). The group has its business operations in diversified fields such as BT Global Services, BT Retail, BT Wholesale, Openreach, Broadband, BT TV and etc. This report will examined the external innovation and competitiveness of BT, its strategic alliances strategies, and its organizational structure and development for expansion in the world telecommunication industry.
TASK 1: EXTERNAL INNOVATION AND COMPETITIVENESS
According to Kluyver, (2010) in today's globalized world, organizations are bringing fast innovation in the industry as innovation helps business entities to establish competitiveness in the market. Innovation is taking place with the launch of new products, new services, and new technology (Kluyver, 2010). However as per Majocchi, Mayrhofer, and Camps, (2013) in present scenario, people behavior towards the product is changing at fast pace and because of this reason business entity like BT has to facilitate different and innovative products to the customers. As BT is dealing in telecommunication industry, the industry has seen tremendous changes in the past decade because of adoption of digital technologies. Mennen, (2010) has critically evaluated that telecom industry has seen different phases in its expansion like challenges, opportunities and threats. These phases are encountered due to the influence of external environmental factors (Mennen, 2010). The impact of external environment in the BT innovation and competitiveness can be better understood from the porter five forces model-
1. Threat of New Entrants
Telecommunication industry which is termed to be an oligopoly market as there is few number of sellers who are providing telecommunication services in the market. The telecom market is dominated by few firms who holds maximum market share in the industry (Berger, 2013). In the telecom industry each firm has its own brands value in the market. It is said that in the oligopoly market, sellers are the price setters and because of this reason they earn high profits. But the fear of entry of new entrants is present even though involvement of huge barrier in entry of new firms. In this industry barriers are seen usually related to government licensing, attainment of economies of scale, patents, use of high-end technology, and involvement high of price competition (Harris, 2002). Due to this barrier existing telecom companies earns abnormal profits from their business operations.
In this market, strategy of one firm influences the decision of other firms so it is highly interdependent and this could also be considered to be a reason for the barrier of entry. In this market price competition prevails in the market to a particular extent as after a point all firms makes losses and because of this reason non-price competition is highly seen in this industry (Mockler, 2001). So, in this industry, threat of entry of new firms is lesser as compared to other markets.
2. Threat of Substitute products or services
According to Mennen, (2010) “A Substitute product refers to those products or services which satisfy the need of consumers that another product or services fulfills” whereas Tesseras, (2014) depicts that it is a product or service which has the same utility value as other. For example- Pepsi and Coke, British Telecommunication and Vodafone etc. Threat of substitute products arises in the presence three conditions i.e. relative price performance of substitutes, switching cost, and buyer propensity to substitute. Relative price performance of substitutes means the price of substitute product or services compared to the services available by the BT (Rajagopal, 2006). When the price of substitute services is lower than more consumers will incline towards the other firm. In this, cross elasticity of demand prevails in the market that means change in price of Vodafone services will impact the demand of British Telecommunication. Rajagopal, (2006) ahs critically evaluated that availability of substitute products or service in market affects the business of company in terms of market share, number of buyers, revenues and also on the marketing strategies of companies to attract the customers.
The other factor which influences the threat of substitute is switching cost. The consumer will remain loyal with the BT till the time switching cost is high but when the switching cost will decreased consumer will opt for that services which is cheaper for him. So the companies have to provide better services at the lesser price to retain the market share in the industry (Majocchi, Mayrhofer, and Camps, 2013). As per the Heidtmann, (2011) the other factor which would be considered in threat of substitute product or services would be buyer propensity to substitute. On the other side it also measures the extent to which buyers are ready to opt for other firms' products or services.
3. Bargaining Power of Buyer
In today's time, buyer is termed to be as the king of the market. It is because firms have to produce or avail goods and services as per the buyer need and requirement. All firms are making efforts to attain the buyer needs and objectives. The bargaining power of buyer will increased when the buyer has many alternatives for the buying options (Amiryany and et.al., 2012). According to the recent study of GfK it was found that telecom companies are failing to provide the differentiated services to the consumer and because of this reason consumer switch to another brand. In this study GfK has asserted that consumer behavior towards different telecom companies like Vodafone, British Telecommunication, and Sky are more or less the same (Tesseras, 2014).
4. Bargaining Power of Supplier
The bargaining of supplier is high when the supplier has too many options for the supply of its product and services. But in the telecommunication industry as there are very few firms available in the market so the supplier has less influence on the company like BT Group. According to Johnson, Scholes, and Whittington, (2005) they have significantly asserted that bargaining power of supply plays very important role in the business of company as the operational activities of organization is totally depend upon their behavior, Such as in terms of cost, quality of material and their capability to offer the product as per the demand of the company business (Johnson, Scholes, and Whittington, 2005).
In this industry, the telecom service provider companies like BT group has high power in negotiation as they purchased the equipments in large quantity. But when the supplier of equipments is government or state owned companies then the bargaining power of supplier increased. This type of situations is generally seen in developing countries (Tesseras, 2014).
5. Rivalry among the existing firms
The companies who provide telecommunication services are generally operates in cut throat competition as each firm is providing the same services. According to Amiryany, and et.al., (2012) In this industry, business entities primarily face high price competition and after that non-price competition prevails in the market. Competition in telecommunication industry is very tough, each rivalry firm of this industry has very strong fight as change in any of the factor such as price, product, features etc. makes greater impact on the other companies (Amiryany, and et.al., 2012). BT Group is facing high competition from the companies like AT&T, Cable & Wireless, Vodafone, Sky and many others.
However Lessard, Lucea, and Vives, (2013) shows that in this industry firms make competition for obtaining maximum customer market share and development of the business in different geographical locations. At the time when the company faces the situation of tough competition from its rivalries, it is essential that organization should come up with some competitive advantage in the market (Lessard, Lucea, and Vives, 2013)). It assist the companies to attract the customers of market and also to retain them for long term period as other companies of market is not offering the same product with same price but with some best feature.
TASK 2 : VERTICAL INTEGRATION AND COMPETITIVENESS
(a) Critically assessment of the term strategic alliances in the context of BT
The term strategic alliance refers to the growth and expansion strategy of the companies which are made to establish business presence in the different geographical locations of the world. According to Thompson, Strickland & Gamble, (2007) has critically evaluated that "Strategic alliance is a formal agreement between two or more separate in which there is strategically relevant collaboration of some sort, joint contribution of resources, shared risk, shared control, and shared dependence (Thompson, Strickland & Gamble, 2007). Companies make strategic alliance to explore new opportunities and new insights in the existing or diversified market. However Mockler (2001) considered that in strategic alliance firms doesn't establish separate entities but they put collaborative efforts to achieve the common objectives (Mockler, 2001). The purpose of strategic alliance is accomplished when the set goals are achieved. Strategic alliance strengthens the company position in the market and this strong point helps in the company in establishing competitive advantage over its competitors. BT's runs Alliance Partner Program to boost its presence in different geographical regions and market segments through the distribution of BT’s global networked IT services. Presently the BT has strategic alliance with HP, Avaya, EMEA, Nortel Enterprise solutions to enhance and enrich its business operation in UK and other parts of the world (Lynch, 2006). On the basis of this it was asserted that BT has received much recognition for its alliance program.
Merger and Acquisition are the corporate strategies which are used for the expansion and development of the business in diversified location or market. In this strategy business entities purchase or join hands with other companies to achieve the strategic objectives. As per the views of Brian Coyle, (2000) "A merger is combination of two or more companies in which the assets and liabilities of the selling firm are absorbed by the buying firm". On the other hand, the author Thompson, Strickland & Gamble, (2007) states, "Acquisition refers to the purchase of assets such as plant, a division, or event the entire business entity. The difference between the merger and acquisition is of ownership and control (Coyle, 2000).
Heidtmann, (2011) has critically state that in merger, the businesses of each company are brought together as to form a new entity. This expands the business of the company in terms of capital, income, expenses and also the customer base of company. In merger, the senior management of both the firms continues their position after the mergers. Whereas in acquisition the buying company overtakes the whole ownership and management is being acquired by the buyer. In acquisition the acquired company operates as a subsidiary firm of the parent organization (Johnson, Scholes, and Whittington, 2005). BT Group works on acquisition strategy as the company has expanded its business portfolio in diversified market through acquisition only. BT group acquired MCI, Infonet, Albacom, Dabs.com, PlusNet Plc, Comsat, Wire One communication, Ufindus, Ribbit and many more. After acquisition of these companies, BT has expanded its business operation in different areas of market. By following the policy of merger, the customer base and market share of company has increased.
On the basis of this it is contended that British Telecommunication has establish strong position in the industry with large product and service portfolio (Harris, 2002). This strong position is termed to be as competitive advantage over the competitors. The company earns £2.091 billion in the year ended 2013 which represents the strong market position of the firm over the industry. The company is also a constituent in FTSE 100 index because of its large market capitalization.
(b) BT's Global Venture with AT&T
The Global ventures between BT's and AT&T comes into an existence after the break-up of relation between BT and MCI. This joint venture was recognized as Concert Communication services. It was also one of the major joint venture at global level where the two most famous companies of world has agreed to run their business in joint venture form. The joint venture was made to provide multi-service global end-to-end telecommunication services (De Wit and Meyer, 2010). BT Group aim from this agreement was to provide best services to the multinational corporation customers. This agreement helps the BT to get speed of global service coverage by leasing bandwidth from national telecom companies. BT Group included various services related to Voice, Data (Internet), Conferencing voice services, high bandwidth data services, messaging, e-mail, electronic data interchange, and video conferencing etc in its portfolio from this agreement. As per the views of Berger, (2013), The company also got the advantage to become global telecommunication company by offering services related to international carrier and internet service provider ( Berger, 2013). The concert agreement serves BT in expanding its multinational customer worldwide which was one of the major reason of increase in market share at global level.
The company able to made more than 270 multinational clients besides this the company also able to explore more than 29000 customers worldwide. Increase in number of customers and multinational clients in BT group were only due to its activities of merger and joint venture. It has lead their business towards the new direction and also helps to increase its revenue and business in global market. The biggest benefit the BT received from Concert is that it able to leverage the rigid regulatory issue that it was facing in its expansion strategy in US (Majocchi, Mayrhofer, and Camps, 2013). BT group able to expanded its operation in more than 52 countries and also extended and interlink its network with 130 countries. Kluyver, (2010) has asserted that joint venture may lead the business towards the edge of sucess but it is not possible in all the situations. The example of this issue was found in the case of BT Group where the company earned huge money from this joint venture but eventually in the year ended 2000, both the companies separated due to huge debt burden. On the basis of this it can be concluded that it joint venture not only increase the business and revenue of company it may leads to increase in debts of organization where the two merged business has not performed well.
TASK 3: ORGANIZATIONAL EXCELLENCE, STRUCTURE AND STRATEGY
Organizational excellence refers to delivering of best performance by the management for the successful achievements of the organizational need and with that stakeholders need. A company would able to achieve organizational excellence by adopting the integrated approach which helps in delivering of value based services to its customers, investors and other stakeholders who have active participation in the operation of the business activity (Coyle, 2000). Organizational excellence brings overall efficiency and effectiveness in the business. The management of business entity like BT Group would able to achieve organization excellence by ensuring underneath characteristics-
Perform excellence against a known external standard- The known external standard refers to the technological change in the business environment. As BT Group is in technology field it is very essential for the management to ensure that the company has all required resources, equipments and technology which is prevalent in the industry (Johnson, Scholes, and Whittington, 2005). In today's time, technological aspect is the most crucial element in any business organization and when the business entity is dealing in technological field then it becomes very peculiar for the firm, as this sector is depended on complete innovation and creativity.
Performance excellence in the present condition from the past- The senior management of the BT Group should always compare the business performance and activities as to previous performance (Lynch, 2006). When they realized that the work of business entity is improvised in the recent time as compared in comparison to past then it indicates a sign of performance Excellency in the organization management. Optimality use of scarce resource- The excellence in the organization can be seen when the company is able to use its scarce resource in the best optimum manner which will help in reduction of cost, time, and efforts (Hitt and Pisano, 2003).
The key elements which helps in attainment of excellence in the organization excellence
The senior management of the British Telecommunication will able to enhance its organization excellence with the help of following elements-
- Operational Efficiency- A business entity will able to achieve long term prospective growth of its business activities when it able to establish efficient and effective working environment with optimization (Heidtmann, 2011). This can be done by implementing Total Quality Management in the organization activities. It helps in assessing the loopholes which are creating hindrance in the business activities.
- Significant Human Resource Management- Excellence in human resource management comes from the initial phase only i.e. planning of human resource requirement and then it follows recruitment, selection, developing, retaining, and managing and controlling.
- Consumer Centric Approach- This element is related to identifying and satisfying the need of customer by offering innovative product and services (Mennen, 2010). As BT Group is dealing in oligopoly market, it is true that one organization strategy affects the move of other business entities. BT group can overcome from this shortfall by concentrating the customer needs and requirements.
- Exploring of New Markets- BT Group has always made efforts to explore new markets and products from its corporate strategy (Kluyver, 2010). The company able to get command over Broadband, Mobility, Information Technology, Process Innovation in its area of business operation.
- Restructuring of Business and activities- This element is also considered to be key element in the achievement of organization excellence. The senior management of the BT Group should review the company structure the way it is formulated. The organizational structure should be prepared on the basis of standardization or on the basis of division in which the business entity is dealing
- Corporate Image Building- It is the most crucial aspect in presenting the organizational excellence. To establish reputations in the minds of consumer the company must put significant efforts in its functioning and service providence which will helps in establishing brand image of the firm.
BT Group has adopted combined organization structure which includes line structure geographical location and functional area (Tesseras, 2014). This organizational structure is usually adopted in the organization has presence in large number of areas. BT group follows an organizational structure in which a hierarchy of communication channel is followed. In 4 major countries, company has positioned VP who looks after the overall functioning of the Corporate. They communicate the functioning of the business entity to senior vice president of technology and Innovation and he further gives information to the Chief Technology officer of the BT Group.
Disruptive innovation refers to an innovation which assists in developing new market and value network and after certain period of time it break up the exiting market and value network. In other words, disruptive innovation means creation of new market and opportunities and simultaneously disrupting the existing technology (Lessard, Lucea, and Vives, 2013). BT Group is already providing services related to Broadband, Mobility, Information Technology but this are the areas which are still not explored in the market. The company management should discover more insights of this market to enhance its business operation. The Silicon Valley team has identified some technologies areas which BT group can targeted to expand its business activities and product and services portfolio (Coyle, 2000). This would come when the company makes corporate strategy related to disruptive innovation.
The company identified following technology areas which can be focused to achieve disruptive innovation-
- Broadband: Consumer application form, Personal content management, Home monitoring and Well Being and Global IP Protocol.
- Mobility: Consumer VOIP Services, Converged Messaging, In-car Services, E- Directories, Mobile TV
- Information Technology: Hosted Application Services, Business Communications Dashboards, Network APIs for Application, Managed Service Outsourcing, Data Center Visualization, XML Switching
- Next Generation Consumer Experience: Digital Home Support, Service Agent Technology and Knowledge Management
- Process Innovation: Field Force Optimization, Massive Logs Exploitation and Data Integrity Validation
- Network Technologies: Winmax And WiBro, Ethernet, Home Gateways, Deep Pocket Inspection and Mobility Session Management.
This report was conducted to analyze the global corporate strategy of British Telecommunication Group Plc. The report was made to explain what knowledge and skill are applied by the management in framing corporate strategies. The report explained the business environment of telecommunication industry in the context of BT Group. In the study it was found that BT Group has 5 divisions in which it operates namely, BT Global Services, BT Retail, BT Wholesale, Openreach, BT Technology, Services and Operations. From the research, it was found that BT Group has made enough profit from its joint venture with AT&T and MCI (Kluyver, 2010). Lastly, the aspects related to organization excellence, structure, and strategy was discussed.
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