British Telecommunications plc (BT) is one of the UK’s largest organisations. Formerly a public utility company it was privatised by the conservative government when they introduced wide spread privatisation of public utilities such as, water, electricity and gas. Privatisation of BT started in 1981 and completed in 1984. BT continues to be one of the world’s leading providers of telecommunications products and services. Company’s main activities include local, long distance and international telecommunications services, mobile communications, Internet services and IT solutions.
In the United Kingdom, BT serves 28 million exchange lines and more than seven million mobile customers. International direct-dialled telephone service is available to more than 200 countries and other overseas territories. All the market’s revenues are sourced from connection fees, monthly line rental charges, call rates, charges for special residential or business services (e. g. private business circuits) and interconnection fees payable from one network operator/provider to another. (see appendix 1 for BT’s structure) Porter’s Five Forces Model (see appendix 2)
Porter (1985) contented that BT is in a ‘Competitive Advantage’ situation as a broad competitive strategy is in place to which certain activities, mainly HRD is being identified as improving the overall organisation performance. Producing quality employee’s that is
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The strategic HRD model allowed BT to be proactive and anticipate change in the environment, providing co-ordination, communication and cooperation but most important ‘a competitive Advantage’. Threat of entrants The telecommunications industry like many industries is relatively unfazed by the threat of entrants, particularly from those who are totally new to the industry. The reason behind the relatively low threat is based on the fact that the industry has very high barriers to entry in the form of regulatory and government bodies such as OFTEL and the Competition Commission.
These barriers sometimes tend to be reflected upon as, there for the protection of the domestic industry as a whole and for those within it to protect them from external competitors whom ultimately put downward pressure on profitability and revenues. For those organisations who have little or no experience or capabilities in the market they will be obstructed from entry. This is particularly due to the substantial investment requirement needed, to set up and build capability.
As well as this it will need to acquire necessary licences for the provision of telecommunications services, as opposed to merely building the tools for the service, which arguably carry their own weight in term of investment requirements but not too the extent of service provision. What is evident is that in the recent spate of privatisation, liberalisation and deregulation, due in part to the world trade organisation agreement on full liberalisation in the telecom sector, is that this has allowed those operators, both foreign and domestic to penetrate through the barriers to the market.
Government and industry regulators in the global economy, particularly to proceed including investment through cross border merger and acquisition. Thus stimulating competition, driving down costs and inefficiency for both operators and final consumers alike and to an extent help government accounts. Existing operators and to an extent peripheral operators, in domestic and international markets, that have the necessary capabilities and resources required, have found penetrating the barriers to entry less of a daunting or difficult task suggesting that market regulation is lax to an extent.
Bargaining Power of Buyers Buyers are an integral part, for long term the survival of any industry and its key players, in so far as maintaining their long term going concerns and to remain in business for the foreseeable future. It is clear that the buyers to the industry, make up a very diverse group as do organisation specific customers, what is evident is that these buyers or consumers have varying degrees of influence on the industry and the organisations within it.
By and large buyers to the telecom industry seem to be split into two very distinct groups, firstly individual consumers and secondly business consumers. The first group identified are by their very nature, unlike to hold any bargaining power over the industry or its key players. This is because of the fact that they act independently, and not unilaterally. Although they act independently their interest are served by various public service lobbyists, regulators and other watchdogs, who can to an extent, exert a limit amount of pressure on the industry in general and the firms within it.
The second group includes business consumers from small local firms to national, multinational organisations and equally large institutions such as national governments. The smaller local businesses are similar to individual consumers and therefore are unlikely to have any influence over the industry and thus in this case both groups remain takers. 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.