Global Corporate Strategy

TASK 1: EXTERNAL INNOVATION AND COMPETITIVENESS

According to Kluyver, (2010) in today's globalized world, organizations are bringing fast innovation in the industry as innovation helps business entities to establish competitiveness in the market. Innovation is taking place with the launch of new products, new services, and new technology (Kluyver, 2010). However as per Majocchi, Mayrhofer, and Camps, (2013) in the present scenario, people's behaviour towards products is changing at a fast pace and because of this reason, a business entity like BT has to facilitate different and innovative products for customers. As BT is dealing in the telecommunication industry, the industry has seen tremendous changes in the past decade because of the adoption of digital technologies. Mennen, (2010) has critically evaluated that the telecom industry has seen different phases in its expansion challenges, opportunities and threats. These phases are encountered due to the influence of external environmental factors (Mennen, 2010). The impact of the external environment on BT innovation and competitiveness can be better understood from the Porter Five Forces model-

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1. Threat of New Entrants

The telecommunication industry is termed to be an oligopoly market as there are few sellers who are providing telecommunication services in the market. The telecom market is dominated by a few firms that hold the maximum market share in the industry (Berger, 2013). In the telecom industry, each firm has its brand value in the market. It is said that in the oligopoly market, sellers are the price setters and because of this reason they earn high profits. However, the fear of entry of new entrants is present even though the involvement of huge barriers in the entry of new firms. In this industry, barriers are seen usually related to government licensing, attainment of economies of scale, patents, use of high-end technology, and involvement high of price competition (Harris, 2002). Due to this barrier existing telecom companies earn abnormal profits from their business operations.

In this market, the strategy of one firm influences the decision of other firms so it is highly interdependent and this could also be considered to be a reason for the barrier of entry. In this market price competition prevails in the market to a particular extent as after a point all firms make losses and because of this reason non-price competition is highly seen in this industry (Mockler, 2001). So, in this industry, threat of entry of new firms is lesser as compared to other markets.

2. Threat of Substitute products or services

According to Mennen, (2010) “A Substitute product refers to those products or services which satisfy the need of consumers that another product or services fulfil” whereas Tesseras, (2014) depicts that it is a product or service which has the same utility value as others. For example- Pepsi and Coke, British Telecommunication and Vodafone etc. The threat of substitute products arises in the presence of three conditions i.e. relative price performance of substitutes, switching cost, and buyer propensity to substitute. Relative price performance of substitutes means the price of substitute products or services compared to the services available by BT (Rajagopal, 2006). When the price of substitute services is lower more consumers will be inclined towards the other firm. In this, cross elasticity of demand prevails in the market which means a change in the price of Vodafone services will impact the demand of British Telecommunication. Rajagopal, (2006) has critically evaluated that the availability of substitute products or services in the market affects the business of the company in terms of market share, number of buyers, revenues and also on the marketing strategies of companies to attract the customers.

The other factor which influences the threat of substitutes is switching cost. The consumer will remain loyal to the BT till the time switching cost is high but when the switching cost decreases consumer will opt for the services which is cheaper for him. So the companies have to provide better services at a lesser price to retain the market share in the industry (Majocchi, Mayrhofer, and Camps, 2013). As per Heidtmann, (2011) the other factor which would be considered in the threat of substitute products or services would be buyer propensity to substitute. On the other side, it also measures the extent to which buyers are ready to opt for other firms' products or services.

3. Bargaining Power of Buyer

In today's time, the buyer is termed to be the king of the market. This is because firms have to produce or avail goods and services as per the buyer's needs and requirements. All firms are making efforts to attain the buyer's needs and objectives. The bargaining power of the buyer will be increased when the buyer has many alternatives for the buying options (Amiryany and et.al., 2012). According to the recent study of GfK it was found that telecom companies are failing to provide differentiated services to the consumer and because of this reason consumers switch to another brand. In this study, GfK has asserted that consumer behaviour towards different telecom companies like Vodafone, British Telecommunication, and Sky are more or less the same (Tesseras, 2014).

4. Bargaining Power of Supplier

The bargaining of the supplier is high when the supplier has too many options for the supply of its product and services. But in the telecommunication industry as there are very few firms available in the market the supplier has less influence on the company like BT Group. Johnson, Scholes, and Whittington, (2005) have significantly asserted that the bargaining power of supply plays a very important role in the business of the company as the operational activities of the organization depend upon their behaviour, Such as in terms of cost, quality of material and their capability to offer the product as per the demand of the company business (Johnson, Scholes, and Whittington, 2005).

In this industry, telecom service provider companies like BT Group have high power in negotiation as they purchase the equipment in large quantities. But when the supplier of equipment is a government or state-owned company then the bargaining power of the supplier increases. This type of situation is generally seen in developing countries (Tesseras, 2014).

5. Rivalry among the existing firms

The companies that provide telecommunication services generally operate in cutthroat competition as each firm is providing the same services. According to Amiryany, and et.al., (2012) In this industry, business entities primarily face high-price competition and after that non-price competition prevails in the market. Competition in the telecommunication industry is very tough, each rival firm in this industry has a very strong fight as changes in any factors such as price, product, features etc. make a greater impact on the other companies (Amiryany, and et.al., 2012). BT Group is facing high competition from companies like AT&T, Cable & Wireless, Vodafone, Sky and many others.

However, Lessard, Lucea, and Vives, (2013) show that in this industry firms compete for obtaining maximum customer market share and development of the business in different geographical locations. At a time when the company faces a situation of tough competition from its rivalries, the organization must come up with some competitive advantage in the market (Lessard, Lucea, and Vives, 2013)). It assists the companies to attract the customers of the market and also to retain them for a long-term period as other companies of the market are not offering the same product at the same price but with some best features.

TASK 2: VERTICAL INTEGRATION AND COMPETITIVENESS

(a) Critically assessment of the term strategic alliances in the context of BT

The term strategic alliance refers to the growth and expansion strategy of the companies which are made to establish a business presence in different geographical locations of the world. According to Thompson, Strickland & Gamble, (2007) have critically evaluated that "Strategic alliance is a formal agreement between two or more separate in which there is strategically relevant collaboration of some sort, joint contribution of resources, shared risk, shared control, and shared dependence (Thompson, Strickland & Gamble, 2007). Companies make strategic alliances to explore new opportunities and new insights in the existing or diversified market. However Mockler (2001) considered that in strategic alliance firms don't establish separate entities but they put collaborative efforts to achieve the common objectives (Mockler, 2001). The purpose of strategic alliance is accomplished when the set goals are achieved. The strategic alliance strengthens the company's position in the market and this strong point helps the company establish a competitive advantage over its competitors. BT runs the Alliance Partner Program to boost its presence in different geographical regions and market segments through the distribution of BT's globally networked IT services. Presently BT has a strategic alliance with HP, Avaya, EMEA, and Nortel Enterprise Solutions to enhance and enrich its business operation in the UK and other parts of the world (Lynch, 2006). Based on this, it was asserted that BT has received much recognition for its alliance program.

Merger and Acquisition are the corporate strategies which are used for the expansion and development of the business in diversified locations or markets. In this strategy business entities purchase or join hands with other companies to achieve the strategic objectives. As per the views of Brian Coyle, (2000), "A merger is a combination of two or more companies in which the assets and liabilities of the selling firm are absorbed by the buying firm". On the other hand, the author Thompson, Strickland & Gamble, (2007) states, "Acquisition refers to the purchase of assets such as plant, a division, or even the entire business entity. The difference between a merger and an acquisition is ownership and control (Coyle, 2000).

Heidtmann, (2011) has critically stated that in a merger, the businesses of each company are brought together to form a new entity. This expands the business of the company in terms of capital, income, expenses and also the customer base of the company. In a merger, the senior management of both firms continues their position after the merger. Whereas in acquisition the buying company overtakes the whole ownership and management is being acquired by the buyer. In acquisition, the acquired company operates as a subsidiary firm of the parent organization (Johnson, Scholes, and Whittington, 2005). BT Group works on an acquisition strategy as the company has expanded its business portfolio in a diversified market through acquisition only. BT Group acquired MCI, Infonet, Albacom, Dabs.com, PlusNet Plc, Comsat, Wire One communication, Ufindus, Ribbit and many more. After the acquisition of these companies, BT has expanded its business operation in different areas of the market. By following the policy of merger, the customer base and market share of the company has increased.

Based on this, it is contended that British Telecommunication has established a strong position in the industry with a large product and service portfolio (Harris, 2002). This strong position is termed to be a competitive advantage over the competitors. The company earned £2.091 billion in the year ended 2013 which represents the strong market position of the firm over the industry. The company is also a constituent in the FTSE 100 index because of its large market capitalization.

(b) BT's Global Venture with AT&T

The Global ventures between BT and AT&T come into existence after the break-up of the relationship between BT and MCI. This joint venture was recognized as Concert Communication Services. It was also one of the major joint ventures at the global level where the two most famous companies of the world have agreed to run their business in joint venture form. The joint venture was made to provide multi-service global end-to-end telecommunication services (De Wit and Meyer, 2010). BT Group's aim from this agreement was to provide the best services to the multinational corporation's customers. This agreement helps BT to get speed of global service coverage by leasing bandwidth from national telecom companies. BT Group included various services related to Voice, Data (Internet), Conferencing voice services, high bandwidth data services, messaging, e-mail, electronic data interchange, and video conferencing etc in its portfolio from this agreement. As per the views of Berger, (2013), The company also got the advantage of becoming a global telecommunication company by offering services related to international carriers and internet service providers ( Berger, 2013). The concert agreement serves BT in expanding its multinational customers worldwide which was one of the major reasons for an increase in market share at the global level.

The company can make more than 270 multinational clients besides this the company is also able to explore more than 29000 customers worldwide. The increase in the number of customers and multinational clients in BT group was only due to its activities of merger and joint venture. It has led their business towards a new direction and also helped to increase its revenue and business in the global market. The biggest benefit BT received from Concert is that it was able to leverage the rigid regulatory issue that it was facing in its expansion strategy in the US (Majocchi, Mayrhofer, and Camps, 2013). BT group is able to expand its operation in more than 52 countries and also extended and interlinked its network with 130 countries. Kluyver, (2010) has asserted that joint ventures may lead the business towards the edge of success but it is not possible in all situations. An example of this issue was found in the case of BT Group where the company earned huge money from this joint venture but eventually in the year 2000, both companies separated due to a huge debt burden. Based on this it can be concluded that joint ventures not only increase the business and revenue of the company it may lead to an increase in the debts of an organization where the two merged businesses have not performed well.

TASK 3: ORGANIZATIONAL EXCELLENCE, STRUCTURE AND STRATEGY

Organizational excellence refers to delivering of best performance by the management for the achievements of the organizational needs and the stakeholder's needs. A company would able to achieve organizational excellence by adopting the integrated approach which helps in delivering value-based services to its customers, investors and other stakeholders who have active participation in the operation of the business activity (Coyle, 2000). Organizational excellence brings overall efficiency and effectiveness to the business. The management of a business entity like BT Group would able to achieve organization excellence by ensuring underneath characteristics-

Perform excellence against a known external standard- The known external standard refers to the technological change in the business environment. As BT Group is in the technology field the management needs to ensure that the company has all the required resources, equipment and technology which is prevalent in the industry (Johnson, Scholes, and Whittington, 2005). In today's time, the technological aspect is the most crucial element in any business organization and when the business entity is dealing in the technological field then it becomes very peculiar for the firm, as this sector is dependent on complete innovation and creativity.

Performance excellence in the present condition from the past- The senior management of the BT Group should always compare the business performance and activities to previous performance (Lynch, 2006). When they realise that the work of the business entity has improvised in recent times as compared in comparison to the past then it indicates a sign of performance excellence in the organization's management. Optimality use of scarce resources- The excellence in the organization can be seen when the company can use its scarce resources in the best optimum manner which will help in the reduction of cost, time, and effort (Hitt and Pisano, 2003).

The key elements which help in the attainment of excellence in the organization excellence

The senior management of British Telecommunication will be able to enhance its organisational excellence with the help of the following elements-

• Operational Efficiency- A business entity will able to achieve long-term prospective growth of its business activities when it can establish an efficient and effective working environment with optimization (Heidtmann, 2011). This can be done by implementing Total Quality Management in the organization's activities. It helps in assessing the loopholes which are creating hindrances in business activities.
• Significant Human Resource Management- Excellence in human resource management comes from the initial phase only i.e. planning of human resource requirements and then it follows recruitment, selection, developing, retaining, and managing and controlling.
• Consumer-Centric Approach- This element is related to identifying and satisfying the needs of customers by offering innovative products and services (Mennen, 2010). As BT Group is dealing in an oligopoly market, one organization's strategy indeed affects the move of other business entities. BT Group can overcome this shortfall by concentrating on the customer needs and requirements.
• Exploring of New Markets- BT Group has always made efforts to explore new markets and products from its corporate strategy (Kluyver, 2010). The company can get command over Broadband, Mobility, Information Technology, and Process Innovation in its area of business operation.
• Restructuring of Business and Activities- This element is also considered to be a key element in the achievement of organisational excellence. The senior management of the BT Group should review the company structure and the way it is formulated. The organizational structure should be prepared based on standardization or based on the division in which the business entity is dealing.
• Corporate Image Building- It is the most crucial aspect of presenting organizational excellence. To establish a reputation in the minds of consumers the company must put significant efforts into its functioning and service providence which will help in establishing the brand image of the firm.

BT Group has adopted a combined organisational structure which includes line structure geographical location and functional area (Tesseras, 2014). This organizational structure is usually adopted in the organization has presence in a large number of areas. BT group follows an organizational structure in which a hierarchy of communication channels is followed. In 4 major countries, the company has positioned a VP who looks after the overall functioning of the corporation. They communicate the functioning of the business entity to the senior vice president of technology and Innovation and he further gives information to the Chief Technology Officer of the BT Group.

Disruptive innovation refers to an innovation which assists in developing a new market and value network and after a certain period, it breaks up the existing market and value network. In other words, disruptive innovation means the creation of new markets and opportunities and simultaneously disrupting the existing technology (Lessard, Lucea, and Vives, 2013). BT Group is already providing services related to Broadband, Mobility, and Information Technology but these are the areas which are still not explored in the market. The company management should discover more insights into this market to enhance its business operation. The Silicon Valley team has identified some technology areas which BT group can target to expand its business activities and product and services portfolio (Coyle, 2000). This would come when the company makes a corporate strategy related to disruptive innovation.

The company identified the following technology areas which can be focused on to achieve disruptive innovation-

• Broadband: Consumer application form, Personal content management, Home monitoring and well-being and Global IP Protocol.
• Mobility: Consumer VOIP Services, Converged Messaging, In-car Services, E- Directories, Mobile TV
• Information Technology: Hosted Application Services, Business Communications Dashboards, Network APIs for Applications, Managed Service Outsourcing, Data Center Visualization, XML Switching
• Next-Generation Consumer Experience: Digital Home Support, Service Agent Technology and Knowledge Management
• Process Innovation: Field Force Optimization, Massive Logs Exploitation and Data Integrity Validation
• Network Technologies: Winmax And WiBro, Ethernet, Home Gateways, Deep Pocket Inspection and Mobility Session Management.

CONCLUSION

This report was conducted to analyze the global corporate strategy of British Telecommunication Group Plc. The report was made to explain what knowledge and skills are applied by the management in framing corporate strategies. The report explained the business environment of the telecommunication industry in the context of BT Group. In the study, it was found that BT Group has 5 divisions in which it operates namely, BT Global Services, BT Retail, BT Wholesale, Openreach, BT Technology, Services and Operations. From the research, it was found that BT Group has made enough profit from its joint venture with AT&T and MCI (Kluyver, 2010). Lastly, the aspects related to organization excellence, structure, and strategy were discussed.

REFERENCES

• Amiryany, N., and et.al., 2012. Acquisition reconfiguration capability. European Journal of Innovation Management.
• Berger, A., 2013. Global Corporate Strategy - Honda Case Study. GRIN Verlag.
• Coyle, B., 2000. Mergers and Acquisitions. Global Professional Publishing.
• De Wit, B. and Meyer, R., 2010. Strategy Process, Content, and Context International Perspective, 4th Edition, Cengage Learning.
• Gopinath, C., 2003. When acquisitions go awry: pitfalls in executing corporate strategy. Journal of Business Strategy.
• Harris, R. P., 2002. European Challenge: developing global organizations. European Business Review.
• Heidtmann, D., 2011. International strategic alliances and cultural diversity - German companies getting involved in Iran, India and China. Diplomica Verlag.

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