However the national, multinational and institutional organisations arguably hold substantial bargaining power over the industry and the key players within it. This is partially because of their shear scale & size not only in term of their presence financially but also due to the shear scale of revenues they present to individual telecom operators and on the whole to industry itself. Thus proving the huge presence they have in terms of absolute purchasing power. Effectively theses organisations can dictate certain actions in the industry when they in union but more specifically can heavily influence individual groups in the market, which may reflect their own interests/ agenda’s.
Bargaining power of Suppliers
This group represents all the essential and peripheral suppliers to the industry, which provide the necessary tools for the upkeep and running of the industry itself. The majority of suppliers to the market include those that provide cabling material and satellite operations linked and other resources necessary for the industry’s network capability. Other areas include manufacturing suppliers of telephony products and peripherals like fixed line phones, faxes, papers, mobiles, and nowadays and other accessories as well as more tangible requirement such as other telephony products, as well other organisation specific requirements.
It is clear that like the buyers to the industry, many of its suppliers are fragmented and therefore have less power over the industry, as independent organisation. Thus allowing the industry and the key players within it, to exert pressure on suppliers and dictating action in the interest of the buyers because of the scale of business and revenues the sector represent.
The significance of the low bargaining power of suppliers and the fragmentation within this group is that or the telecom market this represents relatively low switching costs and therefore improved sourcing efficiencies, such that they can effectively become price makers as opposed to price taker. Suppliers can address these issues through collaborative strategies between the various suppliers to the industry. Therefore these suppliers have the ability to exert a degree influence over the domestic telecom sector, which is reflected by research into BT (1999) in the emergence of new global suppliers.
Threat of substitutes
The very nature of the telecommunications industry is fundamentally communication, in its various guises. What is certain is that the industry focus remain, on the delivery and distribution of communications traffic locally, nationally and internationally, and the application of communication via various products and services.
In this day and age communication is at the forefront of business and general consumers remaining the most popular method of communication. The industry itself is by no means under any immediate or significant threat from substitutes although they do exist.
The main substitutes to the industry in terms of the delivery of communications remains postal services. Today’s twenty-four hour business environment and advancing technology has continued to put increasing pressure on postal services, to the extent of making postal services redundant to a degree. This is the result of firms applying new technology to communications needs and requirements, thus reducing inefficiency and time delays in the work place and home. I however, do not believe this to be truly the case; there will always be some paper-based communications, even through many organisations are striving to create the so-called “paperless office”.
Other substitutes exist in the form of alternative network service providers, which largely provide cheaper calls and seemingly better cost for final consumers than the more traditional network providers such as BT in the UK market. The current spate of deregulation and liberalisation, in the telecom market especially in the local, national and international loop network, has encouraged further competition to market pushing down costs for final consumers.
Competitive Rivalry
The basis of competitive rivalry is of a major concern to organisations in general and with specific reference to the telecom market. This can allow the key players assess and compare basis of direct rivalry between themselves and competitors using this in conjunction with the other influences of the five forces model in order to develop competitive strategy. Thus allowing the key players to develop a competitive strategy that would set on a level playing field with their closest rivals and go far as strengthen the position for the organisation in its sector to the detriment of closest rivals.
Within the UK market I believe that competitive rivalry between the key players is based on six main areas of rivalry, based on research conducted, which include:
- Technological superiority
- Innovation
- Internet & 3g Mobile Capabilities
- Global Development
- Competitive Pricing
- Knowledge as a Commodity
The factors stated above represent a clear basis of rivalry in the UK telecom market, which arguably reflect the basis of rivalry in the global industry. The main areas of interest for the domestic market currently, looks at the role of Technology, Innovation and Global development which hold the key to the long term success in the market as a whole and for those within it for the foreseeable future.
Those organisations, which apply themselves in new Technology and Innovation proactively, through investment in research and development, are likely to stay at the forefront of market, by creating competitive advantage and building on resources, competencies and their capabilities ahead of the market. Therefore these operators have the potential to influence the direction of the market. The Internet and the 3g Mobile phone are major areas of competitive rivalry, for telecom operations because of the huge potential of these technologies particularly in today’s online age. These are by far the biggest growth segment for telecom operators in the UK and arguably in the global market, which represent potentially huge revenues. It is of no wonder that telecom operators have continued to invest heavily into these areas and build competencies and competitive advantage in these areas.
Global area is another key area that the telecom operators must exploit to enhance revenues, growth and profitability prospects and to ensure their position in the market. The UK telecom market is fairly saturated and shows only marginal growth prospects. However with deregulation and liberalisation taking hold within the global market, thus allowing operators with the capabilities to seek out new opportunities globally that will help to build and enhance overall performance resources and competencies. With a global presence theses operators can therefore target new customers such as Multinational organisation, which represents huge revenues and opportunities for these operators.
One of the implications that new competition in the domestic market has brought as a result of greater deregulation and liberalisation is the downward pressure on costs to final consumers. Effectively competition has caused the operators in the market to reflect on their pricing strategies. This is particularly the case of former state monopoly’s such as BT in the UK telecom market, which has needed to address its pricing such that they are more competitive in light of increasing competition. Consumers themselves have relatively low switching costs, in moving from one operator to another and therefore reflect the need for operators to remain competitively priced.
One source of competitive advantage that tends to be overlooked as a source of competitive rivalry looks at Knowledge as a Commodity. The ability of telecom operators to retain and recruit key personnel can be definite source of competition between rivals, particularly personnel in key fields such as Management, I.T and R&7D.
Overall competitive rivalry remains fierce and this intensity is unlikely to change in the years to come. Global opportunities and Technology remain the backbone of competitive rivalry but in the coming years the internet and 3G Mobiles are likely to be the focus of the telecommunication industry as we strive to move further into the online age.
BT’s Vision and mission
We have set ourselves an ambitious vision: to be the most successful worldwide communications group.
To achieve this, we intend to build shareholder value by:
Seizing the many opportunities open to us in the global market;
Building our current business, focusing on high-growth areas;
Operating to the highest standards of integrity;
Fulfilling our responsibilities to the communities in which we operate.
BT’s vision is to be the most successful global communications group, grasping and developing opportunities, with a mission to provide world class telecommunications and information products and services so as to develop and exploit their network, domestically and internationally to meet the requirements of their customers. They also aim to sustain growth and earnings on behalf of their shareholders and to contribute overall to the general community.
British telecom mission statement:
“To provide world-class telecommunications and information products and services. To develop and exploit our networks, at home and overseas, so that we can:
- Meet the requirements of our customers
- Sustain growth in the earnings of the group on behalf of our shareholders
- Make a fitting contribution to the community in which we conduct business”
BT clearly addresses the purpose of the company’s existence. The most important shareholders addressed in the statement are: Customers, Owners and Community (Partners, Suppliers, Employees). Based on the company’s activities these stakeholders groups are represented in BT’s daily practices.
The company delivers exceptional services and products to its customers through a combination of channels: bricks and mortar locations and in-line service. This way BT satisfies sophisticated needs of various customer groups in its daily practices.
BT is expanding its business through mutually beneficial international partnerships in order to increase and sustain shareholders value and earnings.
BT achieved Investors in People (LiP) accreditation- the largest company ever to have done so. LiP is a British national quality standard, which recognises companies for their investment in people training and development of their people (employees) to achieve business goals. BT considers community investment and good corporate citizenship to be one of its priorities. BT regularly survey its customer groups and employees, consults with a range of community leaders and public figures to find out which issues and problems they want the company to support in the life of the community. For some time, the key concerns, which they have wanted BT to address, have been health, Welfare, Innovations in the Arts, Education and the Communications skills that enable people to over come problems and gain jobs.
VALUE CHAIN (see appendix3 &4)
British Telecommunications is one of the world's leading telecom services providers. Spending more than £5.5 billion annually, BT's Business Services division controls all procurement and logistics for BT UK.
Telecommunications services would fit all aspects of the value chain model. BT has handled the reorganisation of their logistics network thoroughly and effectively across the whole line. The new warehouse is situated in Magna Park. The new logistics strategy has been implemented to drastically reduce costs and substantially increase client services. BT has chosen this Midlands location for a clear reason: excellent connections with the M1 and M69 motorways, known in the logistics industry as the “golden triangle”.
From scattered to centralised
BT logistics previously operated with regional warehouses that serve specific areas within the whole of the UK, which were the backbones of the network. The new choice for a central warehouse has brought the stocks down substantially: first return and considerable savings. BT’s distribution service was always on a delivery time of 3 days. But clients started demanding “ next day delivery”. Client requirements led BT investing extensively in an all-new logistics system, optimising the new logistics strategy. Investments in new systems concentrated on services, which could offer demonstrable added value. In case, product conversion systems work progress systems, on line services and MSI.
BT acknowledges that the changes do not always follow a level path. In order to explain the cultural change to employees, the company has outlined the new path in a number of pointed such as current position, new strategy, outlook, outlook implementation, organisational change, new internal distribution system and logistics system. Implementing the new strategy is a long and hard process.
IS/IT deployed within the organisation
BT has a world-class reputation for technological innovation and has made considerable investment in research and development amounting 2% of annual turnover, £291 million in 1996/97. They aim to develop products that are valued by customers and have concentrated on exploiting the Internet to the mass market.
The speed of technological advances has taken the telecommunications industry by storm. Some advances barely even thought of a couple of years ago are being taken for granted within the business community and even, although to a lesser degree, by domestic consumers. For example, the simultaneous transmission of voice and data along optical fibres and national cellular radio systems is now the norm. Other services that are already available include:
- Voicemail — an answering service provided by the network operator
- Calling line identification — a caller's name is shown on a display prior to answering
- Call charge advice — call costs can be retrieved immediately after each call
- Electronic data interchange (EDI)
- Video conferences
- Online information.
The speed, range and accessibility of services are growing exponentially. It appears that both domestic and business customers cannot fail to gain by the new era set by these advances in information technology. Even political agendas have seen fit to endorse the changes, which have persuaded telecommunications operators, equipment manufacturers, software developers and entertainment/media organisations to create new alliances for the benefit of all.
Bibliography
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Thompson J L, 2nd edition 1997, Strategic Management: Awareness & Change.
- Applied Economics, an introductory course, 8th edition by Alan Griffith & Stuart Wall.
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Strategic Management concepts and cases 11th edition by Thompson Strickland.
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Exploring Corporate Strategy: Text and Cases 5th edition 1999 by Johnson G and Scholes K.
-
Hussey D, 4th edition; Strategic Management from theory to implementation.
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Stacy R D, 3rd edition; Strategic Management & Organisational Dynamics; The Challenge of Complexity.
- Competitive Advantage Through Information Technology by Jack D. Callon.
-
John L Thomson 4th edition; Strategic Management.
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Lynch R; Corporate Strategy 2nd edition 2000.
- Porter M E; The Competitive Advantage of Nations with a new introduction.
- Mintel Report Telecommunications 2001.
- Key Notes Report: Telecommunication Market 2001.
- BT. co.uk
- BT Annual Report 2001.
- Handout and notes.
SWOT Analysis
STRENGTHS
- The extensive range of services now available to residential and business customers have created immense demand. Sophisticated new technology already in use, with usage constantly growing, from simple voice mail services to Integrated Services Digital Network lines, has enables BT to grow and expand.
- Communication is very important to any business and is vitally important for BT to able to maintain rapid and efficient contact with clients and customers alike.
- In the domestic sector, it is not uncommon to find fixed-line telephone points in most rooms of the house, and in many cases a second fixed line, either fax or PC modem dedicated. It is also quite likely that members of the household will possess a mobile phone.
- The UK telecommunications industry has become one of the most competitive communications markets globally, mainly due to the fact that deregulation occurred relatively early. The intense competition generated by deregulation created a fertile environment for the development of new technology for BT. BT has moved forward, expanding into new territories abroad while protecting its markets at home.
- BT has been allowed by Office of telecommunications (OFTEL) to maintain its powerful position in the industry.
- Universities and research institutions have provided knowledge and assistance to BT.
WEAKNESSES
- The UK telecommunications market is constantly active, with rapid movement in almost all sectors. This means that BT must have its wits about. BT has to update its strategy with regard to the ever-changing landscapes of economic, technical and regulatory pressures.
- Already there is so much consumer choice as to which equipment to buy or which service to subscribe to, that the market may be in some danger of confusing the consumer so much, it may put off potential, or even in some cases current, subscribers.
OPPORTUNITIES
- BT especially looks opportunities in formerly owned state monopolies, where the scope available for development is extensive. These markets are more often than not inefficient, out-dated, poorly equipped and over-manned: subscriber ship is expensive and therefore not within the reach of the general population. BT wants to seize the opportunity of turning these sorts of markets around, thereby creating for itself increased dominance within the global market.
- The government allowed BT to purchase the remaining share of Cellnet Ltd. This will allow BT to offer the kind of fully integrated services it wants to.
THREATS
- The growing strength of the Internet offers a potential threat in two ways: data transmission and voice telephony. At present, Internet voice telephony is poor but enhanced technology being developed to eliminate this problem may soon alter the quality of the service to a degree where it will pose a threat to fixed-line transmissions and therefore fixed-line revenues.
- Another threat to fixed-line services comes from wireless cellular networks. Rapid improvements in call quality; geographical coverage and reliability, coupled with cost-effective ways of subscribing to mobile telephony may pose a long-term threat.
- Third-generation (3G) mobile phones are a reality, and these provide services such as Internet access.
Appendix 1
BT’s structure
BT’s UK fixed network business is being split into two parts:
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BT Wholesale: selling network capacity and call terminations to other carriers. A new network based company, with a working title of NetCo, will be created during 2001.
-
BT Retail: serving end business and residential customers.
Three high growth businesses have been created to operate in UK and overseas:
-
BT Ignite: a data-centred broadband IP business focused on corporate and wholesale markets.
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BT openworld: a mass-market Internet business focused increasingly on broadband services.
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BT wireless / mmO2 plc: an international mobile business emphasising mobile data and next generation services. It is the intention to list mmO2 towards the end of 2001.
-
BT is also a partner in Concert.
BRITISH
TELECOMMUNICATIONS
UK
BY HARDEEP KAUR
Porter’s Competitive Model for BT
Potential New Entrants
Foreign companies
New start up
Government policy
Established company entering a new market segment
Bargaining Power of Suppliers Bargaining Power of Buyers
Equipment manufacturers Business consumers
Government Individual consumers
Government Other telecom groups
Intra-Industry Rivalry
Cable & Wireless, Redstone
Colt telecom,
Energis,
NTL, Thus
Telewest, AT&T
Worldcom
Atlantic
Global Crossing
Kingston
Substitute Products and Services
Postal services
BRITISH TELECOMMUNICATION VALUE CHAIN
Firm
HRM
IT
Pro
INBOUND OPERATIONS OUTBOUND MARKETING SERVICES
LOSISTICS LOGISTICS SALES
BRITISH TELECOMMUNICATION VALUE CHAIN
Firm
HRM
IT
Pro
INBOUND OPERATIONS OUTBOUND MARKETING SERVICES
LOSISTICS LOGISTICS SALES
