Effects on Growth and Development Due to Changes in Internal and External Factors

MAIN BODY:

British Telecom is an MNC that is engaged in providing a variety of services to people. The services include dealing in TV, fiber, etc. British Telecom was established in the year 1969. In 1984, 50% of its shares were sold to the public. This company is the oldest telecom company in the UK. It has almost covered the entire market. It provides high-quality services to people. The mission of British Telecom is to deliver high-quality services to people. In recent eras, BT has been facing several issues that are affecting its growth (Summanen and Pollitt, 2016). The main issue that the company is facing is related to customer service. It is because; the quality of services has been reduced. In addition to this, British telecom is not able to cope with the global environment. It is because; the company is not able to generate enough cash. Due to this, they are not able to upgrade their network. Also, the company is not providing proper dividends to the shareholders. Due to a lack of finance, British Telecom has revised its dividend policy. However, British Telecom is operating all over the world. So they are facing different challenges. The biggest challenge that is faced is Brexit. Due to this, they have not been able to expand in EU countries. It has changed laws related to trade, tariffs, etc. This is the reason why there has been a decrease in the productivity of British telecom. Thus, to analyze the overall business environment they have done internal and external analyses. Probably this has affected its expansion and operations.

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SECTION 1

PESTEL Analysis of British Telecom

In this section, a PESTLE analysis of British telecom is done. PESTLE analysis is the framework that helps identify external factors related to business. It also helps in understanding how these factors are influencing business growth. It is also known as the macro environment as it contains legal, social, political, etc. factors (King and Lopez, 2016). By analyzing these factors, it becomes possible for businesses to develop strategies accordingly. PESTLE analysis of British telecom is as follows:

• Political -This factor plays a significant role as it is related to changes in the political condition of the nation. Every business has to work within certain boundaries that have been set up by the government. Any change in the political condition of the country will affect the long-term profitability of the business. It is because; the government will change the rules and regulations, trade policies, tariffs, etc. British Telecom is a global company that has to ensure that laws and regulations are followed properly. They operate in different countries (JO'Flaherty and Williams, 2016). So, for every country, there are separate policies developed. Moreover, British Telecom operates in an unstable political environment. Its diversification has led to certain risks. Several risks are involved such as tax rates, intellectual property protection, etc. Furthermore, the UK has strong relations with neighboring countries. So, this has allowed British Telecom to expand there. But on the other hand, Brexit has highly affected British telecom's growth in EU countries. This is because; they have to operate in different environments. In the present era, many EU countries are facing political issues. So they are changing their laws and regulations. This is restricting British Telecom from providing services in that country. But due to the popularity of football British Telecom has taken over the broadcasting rights. Through this, they have entered in new market.
• Economic -It is the most influencing factor that can affect the business profits. In this, there are many factors included like inflation rate, interest rate, GDP of the nation, etc. Before expanding operations, a business has to analyze the economic condition of the country. This is because; it helps in selecting the appropriate market and setting the price of products. Any change in those factors will affect the profits and sales. It also affects the competitive advantage of a firm. British Telecom majorly operates in developed countries(Bain and Taylor, 2017). Its major revenue comes from the UK. So any fluctuation in the UK economy will decrease the profits of the company. Then they will have to focus on other countries. However, a decrease in profit will hurt the growth of British telecom. However, the company has built its market share in the EU. So they can focus on these countries. Due to Brexit UK economy has fluctuated. This has decreased the revenue of British Telecom. So now the company is focusing on Asian Pacific countries. For example- recently in India jig has revolutionized the entire digital industry of the nation. This has attracted many new companies to invest in India. Many nations think that the evolution of technology will help in increasing GDP. So they have allowed FDI in the telecom sector. However, due to poor economic conditions of countries British telecom sales had declined.
• This factor is related to changes in tastes and preferences of customers, demographics, cultural trends, etc. Business products and services are produced according to these factors. They also have to respect the ethics and beliefs of society. This is highly followed by the retail sector. Moreover, there is a frequent change in the tastes and preferences of customers. British Telecom operates in telecommunications. So, it has been benefited by this factor. This is because; they provide a bundle of services to people (Sidak and Vassallo, 2014). This gives people superior product differentiation. Also, due to advancements in technology, people's mindset has changed. This is because of the growth in smartphones and devices. So they want a better communication channel and services. This has created a platform for British Telecom to expand its business in developing countries. The tastes and preferences of people have changed. Now they want advanced technological products and services. This will benefit British telecom as it will produce it according to the needs of people. Slowly the culture of people is changing. In developing countries, there is a need for technology. So British telecom can focus on them as it will help in increasing their global presence. Also, in coming years most of the goods and services will be based on technology. Thus, the telecom industry will boom. It is an important drive of change that will transform the entire industry.
• Technological - This is the most crucial factor for the telecommunication industry. It is because; the entire industry is based on this technology. They provide products and services as per the advancement in technology. Also, they have to update their products and services. Moreover, that company in this sector cope with technology as failing in this must restrict their growth. They will not be able to compete in the market. British telecom majorly operates in developed countries and so, they have to regularly upgrade their services as per the technology change. For this, they have invested in 5G technology to improve the internet network. Along with this, they are investing in cloud computing services that have enabled them to improve the service quality. (Shire, Holtgrewe and Kerst, 2017). This factor will play a vital role in driving change. Developed countries are inventing technology to make the lives of people easy. So this has forced British Telecom to implement advanced and updated systems. It has led to a rise in expenses. But it has provided an opportunity to develop the latest products. Also, they can enter developing countries and compete with local companies.
• Environmental- The surroundings in which businesses operate are known as the environment. The business needs to protect the environment as it can affect their brand image. Different markets have different norms and standards that have to be followed by the business. Business is highly influenced by changes in weather, climate, etc. The telecommunication industry pollutes the environment as it contains tools that release radiation. So, the government has imposed strict regulations on this industry. British Telecom has taken several initiatives to reduce carbon emissions. They are highly contributing to protecting the environment. It has also started using renewable resources. This has helped them to create a positive image in the industry. In this tools and equipment used will generate radiation that will be harmful to people's health. For this government will take strict action against it. They will be imposing fines and penalties on companies. So this is a major threat for telecom companies. They must consider and evaluate this factor as it can highly impact their growth and development. Hence, they should start contributing more towards corporate social responsibility. It will help in maintaining a good and better image in the society.
• Legal - different countries have different laws and regulations related to health and safety, working hours, labor wages, etc. (Shittu, Healing, and Rajarajan, 2015) based on these laws companies develop rules and regulations. So any change in laws and regulations will directly company operations. They will have to modify their own rules. Also, any influence of trade unions will force the company to work accordingly. British Telecom operates in various countries so they have to follow several rules and regulations. But the major factor that is affecting British telecom is Brexit. It has put restrictions on British telecom to operate in other EU countries. Each country has its telecom regulatory reforms and norms. Due to this British telecom is not able to grow and develop in those countries. However, in recent times a case with Italian authorities has created a poor image of British Telecom (Tahir, Rajarajan, and Sajjad, 2017). The country has taken legal action against the organization. Many nations have made changes in their health and safety laws in the technological sector. So the negative impact of this is on enterprise. They have to implement high safety measures in working workplace. The government has set some standards to evaluate the

From the above analysis, it can be stated that due to changes in certain factors British telecom has benefited in some areas while in others their growth has been affected. As British Telecom is operating globally, it has successfully been able to analyze the market condition in different countries. This has enabled them to develop strategies accordingly and maintain their market share. Technology change has provided a platform for British telecom to focus on developing countries. But due to Brexit British telecom has to make changes in their laws. Also, the relationship of the UK with many European nations is affected. This has impacted its economy to a great extent. Along with this, countries like Ireland, and Scotland are suffering due to Brexit.

SECTION 2

Five Forces Framework of British Telecom

In this section, Porter, a force analysis of British telecom is done. It is a framework that helps in identifying the internal factors that are related to business. It also helps in understanding how these factors are influencing business growth. It is also known as a microenvironment as it contains several factors (Morton, 2017). By analyzing these factors it becomes easy for businesses to identify the level of competition in the market. The analysis of British Telecom is as follows:-

• The threat of new entrants- It refers to the entry of new business in the industry. The new entrants can affect the competition in the industry. It can restrict the growth of existing companies. In the telecommunication industry, many new companies have emerged and are providing various types of products and services to people. British Telecom operates globally so it has to face tough competition in different countries. Moreover, many new companies are entering this industry. In developing countries, there has been a high rise in new entrants in the telecom sector. These companies are providing services at low prices. This is a concern for British telecom as they have to compete in those markets (Summanen and Pollitt, 2016). Therefore, it can be said that there is an increase in competition in the market. Besides this, British Telecom has already acquired patents of technology that restrict new businesses from entering the market. In many countries, local players are giving tough competition to British Telecom. They are offering cheap services to people. Companies like Vodafone have expanded in India. It is collaborating with local businesses to gain market share. Stiff competition in developing countries has restricted British telecom to operate there.
• The threat of substitute- in every business there is always a threat of substitute. It refers to using another company's products to satisfy their needs. Generally, there is a high risk of substitutes in the retail sector. Also, in telecommunication, there is a risk of using the threat of substitutes. This is because people can use different services. Besides this, it also depends on the cost that is incurred by customers while switching. British Telecom provides a variety of services to people. But it has resulted in a reduction in sales and profits. There is very little risk of the threat of substitutes in technology. This is because people prefer to use advanced goods. But they have to have the option of buying cheap services from other companies.
• Bargaining power of buyers- Buyers are the people who buy products and services of business. In this factor bargaining power refers to the number of buyers in the market. It means that a large number of buyers will highly influence the price of a product or service. They will have more power to drive down the prices (King and Lopez, 2016). British telecom customer base is expanded in a wide area. It has a large customer base. So they can easily lower down the price. This will have an impact on the profits of British Telecom. Therefore, British Telecom must change its price as per market conditions. For this, they can follow a differentiated pricing strategy. In this, they can set prices for different services.
• Bargaining power of suppliers- Suppliers are the people who supply products and services of business. In this factor bargaining power refers to the number of suppliers in the market. It means that a large number of suppliers will highly influence the price of a product or service. They will have more power to drive down the prices. As British Telecom is expanding globally, they have many suppliers in different countries. So they can easily lower down the price. It will affect the profits and market share of the company. Thus, British Telecom must reduce the power of suppliers. It will help in controlling prices in different markets. Along with this, the company can reduce suppliers so they will not be able to make changes in price.
• Industry rivalry- As the name suggests this factor is related to the level of competition in the industry (JO'Flaherty and Williams, 2016). More the number of companies more competition. In the telecommunication industry, there are many large players. Also, companies are expanding their operations in developing countries. This has increased competition among companies. Due to this, they have to develop various strategies according to the competition. British Telecom is also facing intense competition in the UK from companies like Vodafone, Sky, TalkTalk, etc., and it is facing competition outside the UK as well. This has forced them to develop products and services to survive in the market for the long term. Alongside this, British telecom is providing products at low cost through which the needs of people are fulfilled. They have gained enough competitive advantage as they provide a variety of services to people.

This analysis states that British telecom growth has reduced in recent times. This is because of stiff competition in the industry. However, the company can compete with competitors by providing a variety of products and services to people. With this, they have created a large customer base (Bain and Taylor, 2017). Other than this British Telecom has analysed the internal factors effectively. It has enabled them to earn huge revenue. However, the increase in the level of competition has declined the revenue of British telecom. Moreover, the company sets different product prices and has reduced the suppliers to maintain an effective pricing policy in the market. Due to its large customer base, British Telecom has set pricing standards. This has helped them to attract a large number of people.

SECTION 3

Resources, Skills, Capabilities, and Core Competencies of British Telecom

Every business requires resources to perform tasks and achieve goals. Besides this, they have certain skills and capabilities that provide them with a distinct image in the industry. Alongside this, the business has some competencies that help them to gain a competitive advantage over their rivals. Thus, it is important to identify these competencies so that they can be strengthened. It will allow businesses to enter in new market. In this section resources, capabilities, and competencies of British telecom are defined (Nevalainen, 2017). With this, it will be easy to identify what skills and resources are required by British Telecom to enter in market. They all are included in the internal environment of business. Also, by analyzing these British telecom can grow and develop.

• Resources - It is related to basic resources that are required in performing tasks. It includes human, financial, and physical resources. These three are basic requirements that must be available in proper quality and quantity. British Telecom has unique and sufficient resources that help them to implement strategies effectively. They use high-quality raw materials in technology so that service quality can be enhanced. Moreover, its financial position is stable and strong enough in the telecom industry. Due to this, it is known as the largest telecom company in the UK. British Telecom has advanced technological tools and equipment through which they offer services to people. They have also installed cloud computing software that provides various types of service to customers.
• Skills - These refer to the skills that employees must possess in the organization so that activities can be performed and goals can be achieved. Managers must possess the skills to develop plans and make effective decisions. It will help in ensuring that business operations run smoothly. In such stiff competition, businesses require highly qualified and experienced people in their organization (Brown, Ghosh, and Taylor, 2016). It helps in developing a creative organizational culture. Also, new talent brings in new ideas and innovation. British Telecom has sufficient skills to hire experienced people. They have people who have helped in developing products and services. It has provided support to British Telecom to increase its product portfolio. Moreover, due to this change management is easily implemented. It has also helped the company to enhance the quality of its products and services. This has increased customer satisfaction. Furthermore, British Telecom can retain them and create a large market share.
• Capabilities- This refers to the strategies that are made by British telecom in the current dynamic environment. These strategies are the key factor that helps in dealing with challenges. Also, it shows how the strategic process will be followed by British Telecom. Decisions are driven by changes in external factors and multiple goals. British Telecom has fewer resources as compared to telecommunication services. In a report, it was analyzed that there was a fall in sales in 2013 (Damiani, 2015). Also, it was evaluated that British telecom profits rose by 40% but there was a decline in sales up to 4%. British Telecom can grow in developing countries. Also, they have experts that can provide suggestions to improve efficiency. Moreover, they identify weak areas and improve them. Due to its high presence in the UK and Europe, British Telecom has developed a distinct image. There is also a chance that businesses may suffer due to advancements in technology. This might have to raise the cost of services and goods.
• Core competencies- Generally, it is related to the strength of the company and are included in internal analysis. British Telecom has a strong market share and customer base in the UK. This makes them a well-known recognized telecom company in other countries. Due to the strong image of British telecom in the UK, it has expanded operations in other countries. Similarly, its product portfolio helps in providing a variety of products and services to people. This has enabled them to attract a large number of people. Also, it has developed a marketplace in which British telecom enjoys greater profits (Geppert, Matten, and Williams, 2016). However, managers in British telecom control and evaluate the operations. This helps in integrating the efforts and achieving goals and objectives. For example- innovation in British telecom is done in all segments by developing an effective plan. On this basis, resources are allocated to them. In this way, common goals are achieved.

These four elements in the internal analysis of British telecom state that the company has a better advantage in core competencies. They have gained a competitive advantage in the UK that has built a strong image. Moreover, the enterprise is capable enough that it can take steps to enter new markets in a global world. This is because it has advanced technology that is attracting people. They are successfully able to meet people's needs. Similarly, British Telecom has already covered the UK market share. It has built a positive image in the minds of people. In context, this organization has experienced employees who are always working hard. They frequently develop services according to market conditions. In this way, goals are achieved.

SECTION 4

Application of SWOT Analysis and Decision-Making in British Telecom

In this section SWOT analysis of British telecom is done. It is a framework that helps in identifying the internal factors that are related to business. It also helps in understanding how these factors influence business growth (Liu, and Fazlollahi, FutureWei Technologies Inc, 2015). It is also known as the microenvironment as it describes the strengths, weaknesses, opportunities, and threats of business. The SWOT analysis of British Telecomm is as follows:-

Strengths

• It means the strengths of the company through which it has gained a competitive advantage in the market. This company competes with rivals. The strength of British Telecom is that it has a very strong financial position in the UK. The business concept followed helps British Telecom to generate cash flow that enables them to meet their goals. There is a high increase in their revenues.
• Besides this, British Telecom is the largest provider of broadband services in the UK. It has covered 35% of market share. Its operations are spread over three sectors that include business, consumer, and infrastructure (Kumar, 2014).
• British Telecom has a strong product portfolio. This attracts a large number of people to buy their products. Its portfolio includes EE, ventures, wholesale, etc. The company has approx. 5.83 million customers in the UK.
• British Telecom provides high-quality products and services to people. They frequently use technology to enhance the quality of service. With this, they can retain their customers. It has also upgraded its broadband service from 38MBPS to 52MBPS.

Weakness

• Its major weakness of dependency on the UK market for sales and profits. So any change in the economy of the UK will impact British telecom to a great extent. There will be a huge decline in the profits of the company.
• The company has limited liquidity. They maintain large amounts of cash as profits. So they are not able to expand in markets. Moreover, these profits are distributed it shareholders. It allows them to restrict the growth of British telecom.
• In recent times there has been a large pension deficit and accounting scandals in Italy. This has affected the currency rate of Europe (Clark and Luckie, 2014). It has also hurt the finances of businesses in the telecom industry. Due to this, it has weakened the value of British telecom.
• BritisTelecomom does not have enough presence in Asian Pacific countries. This reduces their global presence. This is another weakness of the company. It allows other MNCs to provide services in those countries.

Opportunities

• British Telecomm is developing 5G services by collaborating with Nokia and Huawei. With this, they can expand operations in the UK. Also, the company has entered an alliance with Huawei. This gives them a huge opportunity to expand their connectivity by improving it.
• Many nations have made trade laws easy in the telecom sector (Abreu and Cardoso, 2017). So there is a chance that British Telecom can grab this opportunity and operate in those countries. In this way, they can generate large revenue.
• The UK is famous for football. British Telecom has successfully retained the rights of European football until 2021 which will help them to develop the market. This deal will help the company to continue its media rights. With this, they can bolster in DRH market.
• Last year British Telecom launched their mobile. It was very successful as in just one month 400000 customers were added. Moreover, British Telecom has merged with EE. It has allowed them to create a large mobile network. They can take advantage of this to develop products and services for other market segments in different sectors.
• They can expand business in Asian Pacific countries (Karamanis, Rontogianni, and Mousiolis, 2015). It will help in generating more sales and revenues. Also, with this, they can increase their global presence as well as customer base. Furthermore, the company will not have to depend on the UK for its profits and sales.

Threats

• The major threat British telecom can have is due to Brexit. It can affect their operations in different countries. Due to Brexit trade and tariff policies are changed. This has made it difficult for British Telecom to get a license for providing telecommunication services. Also,  changes in regulations of countries can impact the growth of British telecom.
• There has been a rise in competitors in the UK in this sector. So in the future, there will be intense competition in the UK. Also, other companies are providing service at low cost. This can affect the profit of British Telecom.
• At last, the government can change its regulations and lilicensesBrown, Ghosh, and Taylor, 2016). This will highly affect British telecom operations in the UK. They will not be able to provide high-quality services. Also, the freedom to operate freely will be reduced.

Decision making

In British telecom, decision-making is done by top management. They develop and decide goals and objectives that have to be achieved. As British Telecom operates globally. They have to ensure that the decision taken is effective as the wrong decision will affect the overall operations. Also, different and effective strategies must be developed to deal with complex situations so that operations can run smoothly way (Geppert, Matten, and Williams, 2016). However, decisions are taken according to the situation of the country. It entirely depends on top management whether they want to operate in a particular country or not. In addition to this decisions are taken in different segments. This is why British Telecom is operating successfully in the UK and other countries. Also, British Telecom has hired qualified and experienced managers and leaders to implement decisions. They also allocate resources to each segment to achieve goals and objectives. The reason for developing different goals for each segment is that they all differ in size and growth. So overall integration of efforts will help in attaining common goals of British telecom. There is a systematic implementation of strategies and decisions. This ensures that activities are performed in a step-by-step manner. Apart from this, standards are set by management so that results can be measured (Kumar, 2014. Clark and Luckie, 2014). This helps in identifying weak areas and taking measures to improve them.

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CONCLUSION :

This report concludes that many factors can affect business growth and development. Every business requires resources to perform tasks and achieve goals It depends on business how they react to it and what strategies are followed to minimize its impact. This internal and external environment of British telecom is discussed. Internal Porter's five force model and SWOT analysis are done. This will help in evaluating the competition in the market. With this strategies can be developed that will help in maintaining growth and competitive advantage. Business is highly affected by macro factors rather than micro factors. This is because macro factors cover a wide area. In British Telecom, decision-making is done by top management. This analysis states that British telecom growth has reduced in recent times. This is because of stiff competition in the industry. However, the company can compete with competitors by providing a variety of products and services to people. With this, they have created a large customer base. Besides this, they have certain skills and capabilities that provide them with a distinct image in the industry.

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