BT Global Services Strategic Analysis

BT orbicular Services Strategic AnalysisIn the bargon-ass BT Global services scheme has experienced hard times, resulting in the company subject high levels of debt through the heavy use of colligation ventures. In recent times, BT Global Services fall in adapted from this by historical by offering more homogeneous harvest-tides, leading to a needs-based schema focusing on multi subject corporations instead of products intended for domestic use, as they offer in the UK.Their strategy is based on their strategic position in the telecoms industry Hard for new competitors to enter, however they bring in a competitive parity with their main competitors ATT, Verizon Business and Orange Business Services.Their lifesize client base and brand image has vie a key role in their strategy for rumping international corporations and world governments. However, they show a weakness that they project a comparatively high ranking(prenominal) focusing turnover which may endure had a negative effect on their strategy formation process.Due to the size of BT class, it is difficult to judge the mastery of BTGS strategy in relation to the whole of the corporations trading operations. However, as a business unit, their financial results are inconsistent potentially showing that improvements are needed to be made.Recommendations made relate to maintaining key senior focus staff truly differentiating themselves by innovating to create a temporary competitive advantage and to focus on European based international corporations to take advantage of BTs brand power that it has developed in that region.1. Introduction to the reportThis report contains a strategic abbreviation of the international company BT Group (BT) focusing upon its business unit BT Global Services (BTGS) through the lens of strategic formation.The report starts with an analytic thinking of BT Groups overall strategy, and then their subsidiary BT Global Services planetary strategy, then the r eport progresses onto conducting an external and immanent analysis before concluding with recommendations.2. Introduction to the CompanyBritish Telecommunications (BT Group) is ane of the largest publicly traded companies in the FTSE 100 at the present time, with a market capitalisation of 13,818 million (capital of the United Kingdom Stock Exchange, 2011). The company operates in the telecommunications industry provision heterogeneous products ranging from Broadband to Ethernet to Voice.From humble origins as a subsidiary of The Post Office and its initial public offering in 1982, BT has grown into a large multi national company whilst maintaining itself as the market leader in the UK. Since its flotation, BT has been prevalent on the international scene, entering joint ventures with many overseas corporations, most notably ATT. (BT Plc, 2011)3. BT GroupOverall BT Groups strategy has been focused on standardisation of their products and services since 2009 they have decreased their range of products from 3,500 to 1,400 (BT, 2011). In the future BT are planning to combining their planetary communicates into one standard network, by doing this they aim for a cost transformation (BT Plc, 2010).Since Global Services expansion abroad, BT Group has had to change its strategy to protecting its superior market share in the UK after deregulations in the UK and the subsequent emergence of foreign competitors has posed a threat (food turner and Gardiner, 2007). BT Groups strategy for their domestic marker involves variegation into new markets such as Broadband, Online gaming, Voice, TV and IT services (BT Plc, 2010).4. BT Global ServicesBT Global Services have experienced some large changes over the past decade, they have just recovered from incurring large losses standing out from BT groups improving subsidiaries financial achievements their pre-tax profits fell 45% in lead months (BBC, 2009).These large losses were contributed to BTGS bad worldwide strategy during the period of 1994 to 2004. During this period BT set out to become the largest supplier of telecommunications, therefore its strategy was to expand spherically. The companys target market was multinational corporations who have operations in a variety of regions. However, due to BTs industry, heavy investment in physical infrastructure would be needed. To spank these market entry barriers, BTs strategy had to involve forming strategic alliances with foreign companies BT committed itself to numerous joint ventures. By creating a truly global network, they hoped to posses a erratic and rare product to gain the advantage over their competitors who could not offer such a large network (BBC, 1999 Turner and Gardiner, 2007).Nevertheless, this did not succeed. Reasons for this could be attributed to their strategic alliance partnerships. BT failed to maintain stable relationships, such as for example, in their joint venture Concert originally with MCI but due to flaws in a coup detat bid, this failed. BT then set up a new joint venture called New Concert with another US telecoms giant ATT. Yet this failed again. These flaws in BTs joint ventures, couple with the big amount of debt that BT built up acquiring them, lead to BTs large losses (BBC, 2001 BBC, 2001 Turner and Gardiner, 2007).In response to these failures, BT radically changed its strategy. This strategic conversion saw BT initiate a radical withdrawal from the majority of its international markets, to consolidate their UK and EU market to protect their main source of revenue, the UK market (Forbes, 2010 Turner and Gardiner, 2007).At present they are forecasting a result of 100m in operating cash flow this year, which is evidence that their electric current strategy is effective and that they have learned from their mistakes in the past. Their change of strategy stinker be pick upn by their offering of an change magnitudely homogeneous service around the globe (BT, 2011). Levitt (1983) high lights the importance of multinational corporations operating in a consistent manor, in BTs case, by offering the same service globally, by doing this BT can operate at a relatively low cost.BTGS are differentiating themselves by utilising a needs-based strategy. By focusing on meeting the needs of large multinational corporations that are constituents of strong global firmament industries, they can differ from their competition by using their breath of scope, thanks to their large multi-protocol switching network (Porter, 1997 BT, 2011).One could say, that BTGS strategy form itself out of an adaptative mode, in which their strategy was decided by many managers with conflicting views compromising over issues to produce their final decision Turner and Gardiners (2007) case study draw poor steering behaviour as a cause for their initial strategys shortcomings (Mintzberg, 1978).BTs intended strategy was to replicate its business in the UK globally, however through the regulation i n a stream of decisions, the realised strategy became focused on consolidating their home market and the European market, whilst taking on lighter activities worldwide. Their strategy has been formed through the environment of the dynamic telecommunications market, influenced by many changes in leadership (BBC, 2001 Mintzberg, 1978).5. External AnalysisDe Wit and Mayer (2004) state that external and internal assessments are needful for the diagnosing aspect to a realised strategy. Using Porters (2008) five forces, focusing on potential entrants of new competition and direct competitors, one can see how the competitive environment has affected BTGS strategy formation.Threat of new entrantsThe need for infrastructure to enter the market makes it very difficult for small firms to enter because of the huge amount of investment required. This point can be emphasised because one can see the problems BT experienced when they attempted to set up their own global system with joint ventures. Therefore all of BTs competition is from other large multinational telecommunication companies.New competitors may also find a bar to establish a market share due to brand issues multinational corporations have high prerequisites and need established companies that have a track disgrace of consistent and reliable services (Gardiner and Turner, 2004).However the global telecommunications industry has an estimated worth of 3.7 trillion dollars which may attract large multinational companies that have the resources to diversify their operations, such as Virgin group has done in the past in different markets (Plunkett Research Ltd, 2010).Direct competitorsThe global telecommunications market is made up of large competitors which have access to a large pool of funds for extensive advertising campaigns. These multinational corporations such as Orange Business Services, ATT and Verizon Business are strong competitors with strong brand images in their own right however Ovum (2009) report s that the BT brand is dominant when compared.Since ATT was granted an operating licence in 1994, they have been in competition for BTGS MNCs but also BT groups domestic client base (Fagan, 1994). BTGS competitor ATT, have a resembling strategy of differentiated their products to multinational corporations. sooner Concert ATT strategy had involved leasing out its use of networks from BT, however they began to offer the same standardised service as they offered when cooperating with BT in Concert joint venture, supplying businesses with their own global IP network (ATT, 2011). This is very similar to BTs strategy of targeting MNCs, and so poses a great threat their joint venture in the past had a negative affect on BTGS performance (BT Plc, 2002).Since the end of the joint venture, ATT have been heavily investing in improving their global infrastructure, and in product innovation (Pappalardo and Mears, 2002).Cooperation with this competitor in the past has proved troublesome, howev er BT and ATT have joined an additional strategic alliance by interlinking their video-conferencing product network (Taylor, 2010). By using this strategic alliances, BT have been able to stem competition from ATT and maintain their MNC client base.6. Internal AnalysisFollowing on from the external analysis using a SWOT analysis, focused on BTGS strengths and weaknesses, one can further inspect the diagnosing aspect of strategy formation.StrengthsBTGS has an increasing brand power, which BTs management have been focusing on customer service (Servicedesk, 2009). The image that BT has built upon over the decades have given BT Global Services a good keister in which to build and maintain its own.BTGS has a large client base comprising of MNCs such as Siemens and BNP Paribas, these providing BT with large volume sales. BT Global Services have also managed to secure key sole(a) contracts, such as supplying Unilever with a four year contract. By securing these contracts, BT have pushed out the competition and have created an opportunity for them to extend these contracts in the future (Harris, 2010International, 2010BT Plc, 2009).WeaknessesA large weakness that BTGS possess is relatively high executive management turnover, since 2001 BTGS has seen many changes in management which may have diluted the companys strategic vision (BBC, 2001 BT Plc, 2010 Servicedesk, 2009 Glick, 2008).Finally, the need for an extensive global network is a necessity for BTGS, without it they have no value on their products from their clients perspective. These network infrastructures carry high maintenance costs and must be constantly innovated to compete effectively.7. Evaluation of StrategyOverall BT Global Services strategy seems to be overdependent on joint ventures which have led BT into large debt problems. Evidence for this can be seen in their financial reports as they coincide with the break up of their joint venture New Concert BTGS suffered a loss of 1,459m in 2003 surprising ly after they recorded their largest profit of 8,911m in 2001 (FAME, 2011). Whilst their turnover has been steadily increasing from 2006, BTGS management have been unable to make consistent gains on their return on total assets (FAME, 2011). This could be because of the senior management not efficiently utilising their assets.Their trade-off of excluding offering domestic telecommunication products globally has, in my opinion, been a good strategic move because, for example the US market for Ethernet services is saturated with uncut competition (Vertical, 2007). Their strategy of focusing on multinational corporations fits well with their other operationsThe deregulation of telecommunications has had a large impact on their global strategy as governments in developing countries lift competition rules to end state owned monopolies (Poh, 1994). This deregulation has allowed BT to branch out internationally and to set up global networks to offer their prospective clients.Since the ba nking crisis, BT Groups share price has been steadily rising, however this may not be due to Global Services but other operations of the group such as BT Retail or BT Innovate, therefore it is difficult to judge BTGS strategys success on the groups overall share performance (London Stock Exchange, 2011).8. findingIn conclusion, BT Global services strategy can be viewed as insufficient. Their strategy has proved successful in the fact that they are acquiring exclusive contracts steadily increasing their total revenue over the past five years and maintaining themselves as one of the largest international telecommunications company. One the other hand, they have been incurring large losses and sub optimal return on assets shedding a pessimistic view on the strategys success.Their external and internal environment can be seen as contradictory the limited threat to new entrants and their large client base show a favourable business environment, however their current competitors and the need to maintain such a large infrastructure pose a great threat.9. RecommendationsTaking into consideration BT Global Services past strategic history and their internal and external environment, recommendations to improve their global strategy would includeCreating and sustaining a clear strategic vision by maintaining key senior management staff, by doing this BTGS will be able to maintain their objectives in accordance to their joint ventures, a problem they had with Concert.Truly differentiating themselves from ATT and Verizon Business, these two companies offer very similar IT and telecoms solutions to multinational corporations Innovating will help create a temporary competitive advantage.Focusing on the European telecommunications market to continue securing key exclusive contracts with multinational corporations head-quartered there to take advantage of the strength that the BT brand has in that region.10. ReferencesAndersen, T. J. (2004) Integrating the Strategy Formation P rocess An International Perspective. 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