Questions:
Task 1
Give a brief overview of the primary external influences to which the organization is subject and briefly explain the particular importance of each to the organization.
This first task should contribute no more than one third of your overall report.
Task 2
Choose one of the following themes:
1. Technological disruption and disruptive innovation
2. Globalization and ‘Guarded’ Globalization
3. Knowledge management
4. Cultural Change and Organisational Culture
I.analyse its relevance to your chosen organization and how it influences policies and decision-making within your chosen organization or industry-sector.
ii. critically evaluate the effectiveness of the organization’s response.
iii. (if possible and appropriate) demonstrate some areas for improvement in the response of the organization.
Answers:
Introduction
Telecommunication is a leading industry which is connecting people situated at different places. BT Group is owned by British telecommunication plc. The company is leading multinational telecommunication services provider. The company is the largest provider of the consumer fixed-line voice and broadband services in the UK. The company also provides ICT services to approximately 5,500 multinational companies across the world in 180 countries. The company believes in delivery delight customer experiences to their customers (BT, 2017). The headquarters of the company is situated at London, United Kingdom. Please refer Appendix 1 for the further details related to the company profile.
In the year 2014, BT launched a new infinity, Netflix, TV packages in the month of November. The new offer of the BT included BT's new mini You View box. In the year 2014, the company launched new plans for 4G mobile plans. The new BT mobiles are coming with the availability of the 4G and unlimited Wi-Fi facilities. The company is looking to expand the business in the rural towns within the UK this will help in the development of those areas (BT, 2017). The competitors of the company include Deutsche, Telecom AG, and Vodafone group. The report talks about the external factors that affect the working of the company. In the external analysis, PESTLE tool is used which helps in analyzing the factors (Browne, 2016). The paper also includes the impact of globalization and guarded globalization that influence the company while making a decision. The evaluation is required to understand that decision made by the company is effective or not.
PESTEL Analysis
This analysis is the external analysis in which political, economic, social, technological, environmental and legal factors influence the working of the company. BT Company’s working also gets affected by these factors (Cadle, Paul & Turner 2010). Each and every company analysis the external factors, for making strategies and action plan according to the analysis.
Political factors
Political factors include the regulations imposed by the government which affects the working of telecom companies. Brexit will indirectly affect the British telecom as it has huge pension debt which was exhausting its performance. But Brexit is beneficial for BT as with the emergence of the higher interest rate the liability of the companies will be reduced (S&P, 2017). This leads to the increase in the possibility of the extra funding available to BT; the amount can be reinvested by the company in the other areas. This factor can affect the working of the company.
Economic factors
Economic factors include interest rate, employment, unemployment, etc. considering the living standard and the scope of the telecom services, BT has future M&A opportunities seeing the economics of the UK. The synergy form between BT and EE will help the company in improving cost efficiencies and low churn rates. Churn rates in the telecom services refer to as the average number of the consumers who quit their services per month.
Social factors
Social factors include the preferences and selections of the buyers due to changes in the trends that affect the working of the company. BT gives free bundling of products for broadband customers, shows the superior product differentiation. As per the trend, there is an increase in the sales of the smart phone, wearable's and smart devices that provide customers a connected mindset. This creates an impact on the production of the products, as the company has to manufacture products according to customer demand.
Technological factors
Telecom companies are totally depended on the technology. Upgraded technology helps the company to introduce new products in the new or existing market. Currently, BT needs to invest in high-speed network and alliance for developing a 5G network (BT, 2017). BT can achieve economies of scale by capitalizing on ‘cloud of clouds’ services by BT’s global services division. For the telecommunication companies, technology plays a vital role in the day to day activities. The company uses technology to provide innovative products to the customers. The changes in the technology made the company to adopt those changes and try to work accordingly.
Legal factors
Legal factors related to the law, rules, and regulations create an impact on the working of the company. There was a class action lawsuit against the BT's Italian division. The UK telecom industry regulator makes way for the separation of Openreach from BT. BT should look towards the changes in laws. Company can easily take the corrective steps to prevent the issues.
Environmental factors
Environmental factors need to be maintained and taken care by the organization. Social responsibility needs to be fulfilled by the company. Organization wide focus is required to reduce the carbon emissions. To maintain the healthy environment company need to take the corrective steps. The customer would like to prefer the brand that fulfills the responsibility towards the environment and towards the society (Epstein & Buhovac 2014). In the year 2011, BT launched its 1st online fund raising services for the UK, named as BT MyDonate. This charity supports helps the KidsOut, Women’s Aid, Cancer Research, etc. (BT, 2017).
Above discussed are few primary external factors which influence the company to bring the changes. With the help of the research & development company can make use of technology in the products and bring diversity. This will also enhance the demand of the products. This will also provide an opportunity to the company to expand the business with the new product in the new markets. The company also faces threat from the rival's but company should have enough capabilities to deal with the competitors. Threats and opportunities are included in the external analysis.
Globalization and Guarded globalization
Globalization- It is a business process in which organization progresses global operations on an international scale (Michie 2011). In the other words, it is the free movement of goods and services. Globalization provides an opportunity to the business to expand the business across the world.
Guarded Globalization- It occurs when government becomes cautious of opening more industries to multinational companies (Bremmer 2014). The government chooses the regions or countries where they want to perform the activity of the globalization.
Globalization related to the BT
Telecommunication industry is a very wide industry which wants to expand the business from the home country to foreign countries. Globalization gives an opportunity to adapt the new technologies from foreign countries, using that technology company can make plans or strategies for expanding business across the world. Guarded globalization opened an option for the government to select the country where they believe the expansion will be successful. The world economy is constantly changing and upgrading. The impact of globalization is not only for telecommunication but for different industries.
Globalization influence policies and decision-making of BT
Initially, the telecommunication industry was owned and operated by the government but after the emergence of the globalization, these companies became the private companies. The guarded globalization helped in increasing the level of the competition among the multi-national companies.
Expansion plan within the UK
Expansion of the business is required not only across the world but within the home country as well. Along with the expansion of the business, the company is trying to expand broadband plans in the UK. Currently, BT said that company is planning for expanding the 4G coverage beyond 95% in the country by 2020. The company said that they are delivering broadband services to 10m households and businesses at the similar time period. Adding value to this service, the company is planning to expand the distance to 12m. These decision taken by the company for expanding the business, it is possible because of the globalization. Expansion ultimately leads to the job opportunities in the country, for implementing the strategies and plan there is need of the resources and human resource is one of the important resources.
Expansion plan of BT across the world
BT is maintaining operation not only in the UK but in other 180 countries. The company grabs the opportunity of setting operations across the world at the time of globalization. BT online streaming services such as Netflix are continuously increases in demand by the customers across the world. This was possible because right decision was taken by BT at the time of the Globalization (Harb, Yaacoub, Kassem, & Baena 2017). Expansion outside the territory or movement of goods was possible because of globalization.
Profit maximization
BT took the advantage of globalization for maximizing the profit. BT is continuously following the positive growth in the adjusted profit. By the end of 31st March 2016, BT analysis that adjusted profit before tax rose by 11.2% year on year that is $1.1b. The increase in the profit is only possible with the increase in the revenue of the company; it was improved by 22% to $5.6b (The Economist Intelligence Unit, 2016). This performance shows that company is having a strong customer business. Revenue of the company includes both revenue from home country and revenue from the foreign sales. Globalization made it possible for the company to do the business with the foreign countries. BT believes in delivering delight services to the customer; so that company can easily form connections with the customers.
Ethical concerns
Customer choices get affected with the emergence of globalization. Customers are becoming aware of their decision what is right and what is wrong. Considering these companies need to take the corrective steps including ethical and environmental concerns. BT improved the quality and services that company offers to the customer at the normal prices. This shows that company is fulfilling the corporate social responsibility (Mandhachitara & Poolthong 2011). The company should understand that they need to think from the customer's point of view as well.
Mergers and acquisitions
Guarded globalization opened the gate for the multinational companies to acquired or merge with the companies to sustain in the competitive market. The merger is grouping of 2 companies who decided to work together for achieving the common goals and objectives (Gaughan 2010). On the other hand, an acquisition is when a company took a decision to purchase another company who is in the same industry (Larsen-Freeman & Long 2014). On 5th February 2015, BT announced that company will purchase EE from Deutsche Telekom at $ 12.5 billion (Town, & Simpson, 2016). This is not the first acquisition of the company, earlier in the year 2005 company acquired Infonet based in EI Segundo. The company acquired the second largest telecom operator in the Italian business market that is Albacom. These mergers and acquisition were promising because of globalization.
Technology advancement
Each and every telecommunication industry needs advanced technology to bring changes in the products and services they are offering to their customers. Technology helped out BT to increase the customer satisfaction and loyalty towards the brand (Goggin 2012). Globalization made it possible to form a business with the countries where trading in context to technology can easily be done. On 1st October 2007, BT took advantage and purchased Chesterfield based Lynx technology. BT acquire Ribbit in 2008, the reason behind acquiring Ribbit is to add on technology to the telephony features. It also provides availability to the web developers to create software and application for telephones. In the field of telecommunication, technology development comes first for day to day operations. This decision helped the company to earn profit and get success in the near future (Hunaiti, Tairo, Sedoyeka & Elgazzar 2010).
Effectiveness of organization’s response
The above discussed were the organizational response, the response of the company took place at the duration of the guarded globalization. The effectiveness of these responses needs to be analyzed by the company. These responses can bring failure or success of the company. Below discussed is the evaluation based on the responses.
Effectiveness of the expansion plan of BT
BT took step towards business expansion across the world. They got success in delivering services to 180 countries. The below images represented the delivery of the services globally. The company employed approximately 17,000 employees across the world. The company consists of 4 global service hubs. The company provides support to the customer in 25 languages.
(Source: BT, 2017)
BT investments enhance the expansion of services in the UK. At the time of the recession, BT group was the only company who invested in the development of fiber broadband across the UK. Now, the company is having the advantage of investing at that time. Seven years ago, BT invested additional amount than other competitors such as Sky, TT, and virgin to expand business in the UK. Currently, almost 90% of the market is covered with Fiber broadband company is willing to improve it to 95% till the end of the year (BT, 2017). The graph shows the amount invested by the company in 7 years. Though company took a huge risk of doing investment at the time when no other competitors were investing.
(Source: BT, 2017)
Effectiveness of Profit maximization decision
Every company contains willingness of earning maximum profit as compared to its competitors. The graph shows the EBIT (Earnings before interest and tax) of the company which is rising year to year. 23.04 is the highest number achieved by the company in the year 2016.
(Source: Capital Cube, 2017)
The below image shows the dividend company is paying to the shareholders is increasing since 2009, but the graphical representation also shows that after 2008 company faced the down step in normalized earnings and in dividends. Apart from this company faced up and downs in the revenue in the year 2013 and 2014. BT has a focus on the efficiency and cost cutting which enhances the profit margins and improved ROCE (returns on capital employed).
(Source: Kingham, 2016)
According to the analysis, it is said that 87% of the people switched to BT mobile in last 1 year. Out of this 87 %, 68% people contain SIM- only deal. Now the company is willing to add services to their broadband packages. The reason behind customer found BT as a preferable brand is fast broadband speed attracts 26% people, value to money evaluated by 15% people, rest 10% might be loyal customers or recommended customers or heard good things. The numbers of the customer for a company will probably increase in future. This brings an opportunity for the company for earning a profit.
(Source: YouGov, 2017)
Effectiveness of Mergers and acquisition
Mergers and acquisition play an effective role in the growth of the company. BT paid $12.5 billion for acquiring EE. The company paid the price by issuing new shares, apart from issuing shares; Company paid $ 3.5 billion in cash. This increased the debt of the company approximately $10-14 billion. So acquiring is not so easy for company. Company should have capabilities of gathering the financial resources. Though, after acquiring the company BT profit will increase and it will also help in enhancing the goodwill/brand value of the company. Generally, for doing big acquisitions company needs to be prepared with the strategies and efforts to crack the deal. The process of acquiring any company is a time-consuming process.
Effectiveness of Ethical concerns
The company should know what is ethically right or wrong, this can decide the future of the company. This is the moral duty of the company to take the steps or decision considering the general public and customers. Social responsibility and concerns are needed to be taken care on the priority basis (Lewis & Potter, 2011).
Effectiveness of the technology advancement
Telecommunication industry is incomplete without technology. Technology is essential to manage the day to day operations and to expand the business across the world (Kende, et.al. 2012). BT maintains own IT team who keep eye on the changes so that company can adopt the advanced technology. The below image shows that technology is maximum used by the telecom industry as compared to other (Bates, 2014). Telecom industry uses 30% use of the IT industry. Currently, the company is testing ultrafast technology in apartment blocks and business centers in Swansea (BT Today, 2017). The company spends huge amount for bringing fantastic technology that leads to network innovation and ultimately enhances the growth of the company. In the year 2013, BT and Huawei announced that they are going to conduct a joint technical trial of Fibre to the distribution point (BT Newsbyte, 2017).
The above analysis shows that most of the decisions taken by the company are effective. These decision helped company in growing and developing into the market.
Areas of Improvement in the organization response
The responses made by the company at the time of globalization and guarded globalization. Talking about BT, the company responded very well and took a corrective step which enhances the growth and profit of the company. There are some of the improvements required in the responses of the company.
Improvement in the working conditions
BT was required to take decision for the working conditions. The workplace is the only place which attracts job seekers and that's how the company can easily fulfill the need of the human resources. The company should be in the list of the best working places where employees are important assets of the company (Grous 2016). BT should take care of employees' rights; the pension is the most important criteria that need to be fulfilled by the employer. The company is facing problems related to the pension, pension deficits is a problem that cannot be ignored by the company easily. Though, BT understands its responsibility towards the employees and company is trying to reduce the deficits of the pensions. The company is also getting success in reducing the deficits.
Reduction in debt
BT has to borrow more than $14 billion. Though company is large in size comparatively the amount is more than the size of the company. It is not easy for the company to reduce the borrowings, if a company is having borrowings then the company also have to pay interest on that. The estimated interest which company is paying right now in a year is $500. Fulfilling the payment of dividends and interests reduce the profit of the company. Hence, the debt remains the unsettled (Chabrak, Craig, & Daidj, 2016).
Reduction in the investment of infrastructure
BT spends billions on infrastructure to make the company stand still. Nowadays, building and maintaining the infrastructure is the most expensive business. On an average company spends $2.7 billion a year on capital assets. Though this expenditure does not bring any push in the growth of the company still it is required to maintain the upgrade the services that company is using. By reducing the amount on this investment company can procure the money for reducing the debt.
Improvement in the prices of packages
Packages that company is offering to the customers need to be rephrased. Globalization created an impact on all the industries including all the companies. To deal with the competition companies need to lower the prices of the products and services company is offering. This might result in the enhancement in the demand for the products and make the customers aware about the brand (Sen, Joe-Wong, Ha & Chiang 2013).
Conclusion
The above report talks about the environmental analysis of British Telecom Company. The environmental analysis includes both internal and external analysis. The external analysis is a hurdle in the expansion of the business. The working and decision of the BT get affected by external factors. The company needs to take corrective steps to deal with the external factors. Globalization influence BT in making policies and decision making. The responses include profit maximization, expansion plans include both within the UK and globally, etc. The effectiveness of this response can be measured by seeing the growth and success of the company. The responses converted into the decision which decides the future of the company.
The company is growing in the market after acquiring the EE Company. BT mergers and acquisitions help the company to sustain in the market, this is one of the sustainable advantages of the company. The company adopted the technologies which are essentials for the daily operations of the company. The adoption of the technology is possible because of the free trading facility, this provided an opportunity to the company to grab the technology. BT keeps eye on the technological changes so that whenever changes occur company can upgrade the technology. The technology helps the company in introducing new products in the existing or new market.
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