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University of Roehampton
Instructor: Nataliya Acc-Nikmehr
Report by: Sanjay Ghosh
STRATEGY AND
INNOVATION
Year: 2016
Table of Contents
Section 1
Strategy Recommendations and Evaluation Summary
3
DIGSE Concept
3
Internal Recommendation
4
External Recommendation
Scanstep, Competitive Advantage, Stakeholders Analysis 4
Section 2
The Company BT Group
Product and Services
Market
BT Strategy and Intent
Implication of strategic analysis and future direction
6
6
6
6
7
10
10
11
11
13
14
14
14
17
17
18
18
Appendices
19
References
20
pg. 1
Section 1
pg. 2
BT DIGSE Concept
Where;
D = Development
I = Intelligence
G = Growth
S = Sustainability
E = Excellence
pg. 3
SS = Strong Strategy
SS
BT already has most of the above concept in place but the excellence part. Excellence would
help and support BT, for better performance results in all the sectors, viability and
sustainability.
Internal Recommendation
The VRIOS details the internal skills and capabilities, together with internal value chain and
SCOT analysis helps to understand the internal structure of BT. Although, BT, rates better as
compared to its competitors, emphasis have to be stretched on sustainability for EE, fibre BB
and definite development, growth, intelligence and excellence for BT TV.
External Recommendation
Scanstep, Competitive Advantage, Stakeholders Analysist
The Scanstep analysis gives us a broad view of BT. Although, PESTLE is commonly used
framework, I have used Scanstep framework to be able to cover the cultural and natural
aspect. Looking into the framework, my recommendations would be to pay extra attention to
Authority aspect and comply with rules and regulations, keeping the customers (subscribers)
happy.
I have also taken the five forces of competitive analysis and stakeholders analysis to
understand BTs position. After careful analysis, my recommendation would be constant
market monitor, laying strong emphasis on price of its services. There is high risk from threat
of substitutes. I believe, if this is got given prior importance and excellence is not gained, it
will be matter of time, when BT will lose its competitive advantage from other five forces as
laid by Porter.
BT gives utmost importance to customers and its shareholders and needs to take care not to
arise conflict.
Conclusion
Although, I have tried and covered most of the areas of BTs strategy, its business and
innovation, my report is limited and does not cover the financial aspect of the business. It is
also limited and needs more research in Human Resource, Marketing and Promotions.
pg. 4
Section 2
pg. 5
pg. 6
The strategy to delivery great customer service, through hostile competing market,
recognising competitive advantage, retaining relative profits, by differentiating its products,
keeping innovations at the heart of business, constant growth, maintaining consistency at all
organisational levels, defining standards and following strict business practices, Hamel and
Prahalad (2005). The success lies behind global leadership, innovation and sustainability.
In line with Hamel and Prahalad (2005), I agree with BTs strategic intent for future. The
intent to capture the winning essence, having a stable strategy over the years with a set target.
For example: the success of EE, the creation of first internet, watch on demand services, 999
services.
Recommendation: In my view, although, BT differentiates its products and being a key
investor in growth and innovation, BT should try and develop products hard enough for its
competitors to imitate and prioritise excellence through work and research.
Implication of strategic analysis and future direction
Looking into the strategy and taking the recommendation, BT is in a stronger position to
achieve its future target. To name a few, the target of 9/10 people having fibre BB by 2020
and help 10m people overcome social disadvantage (btplc.com, 2016).
CSR: Corporate Social Responsibility
BT is very ambitious with CSR and has set targets to achieve by 2020 (btplc.com,
2016).
- BT wants to help 10 million socially disadvantaged people access better
healthcare, learning or employment opportunities.
- Carbon emission will be cut at least 3 times through its own business.
- BT aims to raise 10 billion for good cause.
- Has plans to teach 5 million children become technically smart and
- Will inspire two thirds of its employees to volunteer.
BT has partnered with Comic Relief as a joint CSR initiative and has pledged to raise
500,000 by matching every pound customers donate through a recurring 1, 3 and
5 donated to the supporters club (OReilly, 2013).
BT has claimed to have engaged its two thirds employees towards staff retention and
handling climate change (Personnel Today, 2008).
pg. 7
All this helps us to understand the BT approach towards CSR. It has social and environment
CSR embedding sustainability into its culture for all levels.
BT plc Performance Frontier Analysis in terms of ESG sustainability innovations and
improvements
Eccles and Serafeim (2013) in their work Performance Frontier have outlined the important
factors to boost finance and ESG performance by strategically focussing on the ESG issues
that are most relevant to the shareholders value. My analysis is based on the annual report &
20-F from 2012 to 2016 (btplc.com, 2012 to 2016).
The first initiative towards sustainable strategy is to identity the material ESG issue as laid
down by Sustainability Accounting Standards Board (SASB), (sasg.org, 2016).
Since 2011, BT had a new strategic priority to be committed through positive contribution to
the society, economy and environment through its operations, employees, products and
services (btplc.com, 2011). In 2012, I was able to identify BTs role towards creating a better
future (btplc.com, 2012).
The second initiative is to quantify the financial and ESG performance relationship. In the
governance report 2016, Sir Michael Rake, Chairman, has considered 2016 to be a landmark
year for BT (btplc.com, 2016).
By 2016, BT was able to exceed the expectations and government current target of
95% to connect 25 million premises with fibre broadband network.
Better network and products have brought in 900 more engineers. BT has confirmed
1000 permanent jobs in UK, towards better lives.
pg. 8
BT collaborated with IBM to form Media Move to transfer huge media files faster
(better connected).
BT celebrated 40 years for being the forefront in telecom innovation at Adastral labs
(better lives).
Carbon emission to be reduced at least three times (better with less).
Water consumption in office reduced by 10% and waste management working on
minimising wastage such as oil disposal and hazardous material (better with less).
With 102,500 employees; commitment, expertise and diversity are the key elements
of BT success (better lives).
Directors at BT are encouraged to constantly update their skills and knowledge (better
business practice).
No political donations to be made in cash or kind through gift or loan (better business
practice).
Finally, BTs should be able to communicate these ESG concerns and innovations to its
stakeholders.
I believe, BT has been able to match its ESG with its strategic intent. The strategic for
constant growth, innovation, meeting its CSR objectives, is visible from the third initiative.
Blue and Red Ocean Strategy
BT is a pioneer company when it comes to telecommunications. Yet, it did not shy away
from venturing into the television industry. After the upliftment of ban, BT Vision was
launched in 2006 with an aim of 2 3 million subscribers by 2007, (tech.co.uk staff, 2006).
With the expertise knowledge of telecommunications, BT TV was the first company to use
internet to watch on-demand services and additional channels with Freeview
(broadbandchoices.co.uk, 2016). This introduction along with low price should have created
wave in the industry. Kim and Mauborgne the creators of Blue Ocean Strategy, stress on
inventing and creating new demand with low prices, (Kim & Mauborgne, 2004).
BT had the competitive advantage but failed on limitations of imitations. It found getting
dragged towards Red Ocean. It got dragged towards competing in existing market and used
tactics like switch over services to beat the competition.
pg. 9
Towards the end of 2012, BT TV was launched to replace BT Vision. BT has now started
acquiring rights to shows and matches. It is evident that, blue and red ocean strategy have
gone hand in hand with BT. In my view, BT is competing in Red Ocean and needs to come
out with strategies and ideas to place itself in competitive advantage and Blue Ocean.
Social:
In the world of technology and information, internet has become the magic thing to be
interconnected with everyone. BT has committed itself to 3 major programmes of
connected society, net good and improving lives (Btplc.com, 2012).
Cultural:
As BT operates in wider market, it is important for BT to understand the cultural
aspect of how different culture works and to be able to diversify and have inclusion
programs.
Authority:
BT faces constant threat from regulatory bodies like Ofcom. Recently, BT avoided a
near split up with Openreach, by being imposed tougher regulations by Ofcom
(Ft.com, 2016).
pg. 10
Natural:
BT uses natural resources and the use of energy has been on decline for 7th year.
Economy:
The rise of fall of the market, the recent recession, technological advancement, rate of
inflation, are some of the factors that affect the economical factor of scanstep.
Political:
National political systems are significant part of environment systems (Pitt &
Koufopoulos, 2012). BT works with more than 400 local authorities to understand
their needs and provide with essential services (Globalservices.bt.com, 2016).
BT plc
Scanstep Analysis
Competitive Analysis
Stakeholders Analysis
Social,
Threat of Entry
Shareholders,
Cultural,
Threat of Substitutes
customers,
Authority,
Bargaining power of
buyers
government,
Security,
Technological,
Economy,
Political
Competitive Analysis
pg. 11
Bargaining power of
suppliers
Industry threats
suppliers,
communities
employers
Understanding the forces that shape industry competition is the starting point for developing
strategy (Porter, 2008). Porters five forces helps to understand the structure of business and
create a strategy for competition. BT with its strong hold over the years is able to fall in the
low growing risk category. The following is the analysis for BT:
pg. 12
Under the leadership of John Petter, BT has largest fixed line and BB provider in UK,
with 10m under its banner (btplc.com). There are now more options in the field of
BB, mobile and cable TV network and hence buyers are now able to negotiate the
terms of contract and prices. Government regulations, means buyers have more rights
and are able to switch over to the competitors with much ease.
BT with its largest customer database, must retain its customers through loyalty
programs, providing enhance customer satisfaction, easier contract renewals. Through
marketing and promotions BT can differentiate with its rivals and appeal new
customers, provide easier switch over services, and give incentives as a bonus to new
customers.
Stakeholders Analysis
In 1977, the Carter Committee (btplc.com, 2016) commissioned the separation of Postal and
telecommunications, from which BT emerged in 1980. Part of the success of BT and the
future of its survival is due to the stakeholders interest. The various stakeholders in BT are;
Shareholders, customers, government, suppliers, communities and employers.
BTs mission is to meet the expectations of its customers, through sustainable growth,
meeting shareholders expectations and bring benefits to the community. Businesses exist to
satisfy the interest and satisfaction of its shareholders, Pitt & Koufopoulos (2012). The
mission statement provides us with the core stakeholders of BTs business; customers,
pg. 13
shareholders (employee shareholders and others) and the society (non-core). Government
plays an important stakeholders role by imposing rules and regulations.
Stakeholders Conflict
With different stakeholders on board, I assume the conflicts of priorities, interests and
perspectives, Pitt & Koufopoulos (2012). For example: Conflicts can arise by shareholders
wanting high prices on BT products, with governments intervention to bring the price down.
The conflict can arise between shareholders and customers, where BT invests heavily in
innovation and shareholders might not want such dedication, to be able to sustain profits.
Implications of External environment
The important effects on the outcomes of the organisations are based on the circumstances
surrounding the organisations, Andrews & Johansen (2013). BT needs to constantly develop
innovative strategy to be able to sustain competitive advantage in competitive business
environment, Ting et al, (2012).
The management decision for organisation performance is based on BTs complexity
dimensions of wide geographic area and heterogeneous products, Andrews & Johansen
(2013). Considering the external analysis, although, there is a conflict of stakeholders, I agree
with BTs innovation strategy based on scanstep and competitive analysis. Although, threat
from substitutes is a low risk, I would consider replication as one of the biggest threat over
the coming decade.
BT plc Internal Structure
I shall use the VRIOS framework to analyse the internal ecosystem of BT plc. VRIOS
framework will take into consideration various dimensions based on ratings to explore into
BTs internal resources, skills and capabilities. This will lead us to understanding of BTs
sustained competitive advantage.
VRIOS is the acronym for; Value Creation, Rarity, Imitation, Organisation Appropriability,
Substitutability
pg. 14
Value Creation
Substitutability
Rarity
Organisation
Imitation
Appropriability
figure: 1.1
BTs VRIOS Capability
Implications
Global Presence
Competitive Advantage
Human Resource
Chairman
CEO
Directors
Employees
BT Group
pg. 15
Business
Development
Competitive parity
Strong Strategy
Excellence
Competitive Parity
CSR
Leaders in
Telecommunication
EE Success
Fibre Broadband
BT TV
C
pg. 16
Scale of Ratings
A = Outstanding generator of value and advantage
B = valuable but not a crucial source of advantage
C = useful but probably of declining significance
D = already declining in significance and unlikely to be sustainable
Strategic Implications
BTs internal and resources forms the key element of its effective strategy, Pitt &
Koufopoulos (2012). The VRIOS for BT provides us with better understanding of its current
position and future plans based on its internal assets, competency and strategies.
The global presence of BT along with its success in strategies like CSR, innovation, R & D
and recent success in EE, gives BT the monopoly to dominate the market and harder for
others to imitate.
The 8 areas of business in BT Group are customer oriented, focussing on different aspects of
business, technology and various services. BT still manipulates the telecommunication line,
but with recent changes in government regulations and growing competitions, the business
development of BT seems to be at declining position (competitive parity).
Future Strategy Actions
Strategy implementation helps create the future (Crittenden & Crittenden, 2008). BT has in
place a better future strategy to be a responsible and sustainable business leader, by playing a
role to create greater value to society and environment (btplc.com, 2013).
In my opinion and based on VRIOS;
I would put ample emphasis on BT TV. They can start by creating the value of BT
TV. As laid by Peter Drucker, it should take the 8 key results areas for long term
survival and prosperity, (Schulz & Hofer, 1999).
BT needs to improvise and provide excellent and outstanding services.
Although BT has 85% coverage for fibre BB, this is an area where the no of
competitors is increasing and possibly able to provide better pricing in future. BT
needs to come out with innovative ideas to be able to maintain brand loyalty.
EE is a successful part of BT and it must ensure it continue to hold the market and
possibly increase in coming years.
pg. 17
SCOT Analysis
If we are to really understand a companys competitive potential, we need to understand the
sources of its competitivenessthat is, its skills and capabilities, (Schulz, 2012). SCOT is the
acronym for Skills, Capabilities, Opportunities and Threats.
BT plcs strategy is to broaden and deepen customer relationships (btplc.com, 2016). Based
on this strategy and understanding the source of competitiveness, BT starts investing in the
skills (people) and capabilities (assets to support people), Schulz (2012). These skills and
capabilities will help BT to match with the Opportunities and Threats (Schulz & Hofer,
1999).
future
revenue
growth
past and
current
capabilities
pg. 18
Skills
Knowledge of industry
Wide geographical coverage
BT Group portfolio of services and products to meet customers demands
Strong work force
Maintains strong ethics and Human rights
Capabilities
BTs 999 emergency call service a lifesaving no
Innovation at the heart of business. Has Innovation, Research, Development and
technology centres around the world (btplc.com, 2015).
World Class Results
Huge customer base.
Committed to CSR and Sustainability
Taking into the above skills and capabilities, in my view BT plc is capable of meeting its goal
of profitable revenue growth. With the above, BT Plc will be able to look into its customers
first and then its competitors (Schulz & Hofer, 1999). It does face challenges and not all
units of BT Group are profiting. For example: BT TV faces a stiff competition from its
rivalries. It has ample of opportunities of market knowledge and monopoly the threat of
substitutability, imitation of products by competitors always exists.
Appendices
Better connected was supported by access to fibre broadband and increasing digital
literacy. Fibre Broadband will help raise the economic benefits for the UK by being
the key contributor. Digital literacy will help individuals to develop the knowledge of
essential services online.
Better with less is a net good force to help individuals and businesses to reduce
carbon footprints through use of services. BT has the ISO 4001 certification since
1999 for the environment management systems. The certification covers parts of
European countries; Belgium, Ireland, Netherlands, Italy, Spain and Germany. To
reduce energy and carbon emissions it has strategies in place to improve energy
efficiency, generate renewable energy and purchase of low and zero carbon intensity
electricity.
pg. 19
Connected Society: With the help of digital connections, BT intends to help improve
society (btplc.com, 2012).
Net Good: To help society live within the constraints of our planets resources through
our products and people (btplc.com, 2012).
Improving lives: To help improve hundreds of millions of lives globally through our
products and people (btplc.com, 2012).
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pg. 20
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pg. 24