British Telecom (BT) Case Study

Introduction

British Telecom is an organisation which for most of its existence enjoyed a dominating place within the market due to its position as sole trader in UK markets.  In 1984 the movement to public ownership ended the privatisation of the Telecoms Company and prior to this in 1982 the monopoly had ended when an alternative source of supply to the market place was granted licence to operate. These changes to the market forced a change within the mix of the industry and BT was forced to adapt in order to retain their previous position of market leader. The modern organisation BT has become a vast complex business offering general consumer goods and services through traditional and new technologies but alongside this has developed a commercial offering with consultancy and business solutions in order to prompt growth and secure longevity for the organisation through differing markets. BT identifies their primary source of customer base within commercial outlets thus the focus for the business falls within this function. However the domestic market retains a sizeable share of the total revenue generated thus the sector is carefully managed and invested in which enables the security of this sector.

Reasons for Success

Key reasons for success can be identified within the company’s ability to adapt to consumer needs. BT were quick to adapt to mobile telecoms when they were introduced and also invested in internet opportunities for the mainstream domestic and commercial markets, beginning with standard dial up connections and followed by mainstream broadband offers. Whilst these adaptations to market products have retained a level of consumer success BT have also used mediums of acquisition and technological development to secure global growth for the business. BT looked to develop international connections through a merger with MCI. Although the potential merger with MCI in 1984 resulted in another organisation fulfilling the requirements and completing on the final deal BT left the situation with a settlement of $465million and netted further pre tax profits when they sold all concerns in MCI in 2000. The unsuccessful merger with MCI left BT with a requirement for an overseas partner, this led to a relationship with AT&T. Unfortunately this partnership was also unsuccessful, although the deal was completed in full the partners were unable to work together and personal differences were cited when the merger broke up. The venture was dissolved and the assets were split between the two parties, BT secured $400million and a portion of the worldwide communications shares whilst AT&T retained the US markets. One could suggest BT success has been equally distributed between the growth in domestic technology and products to retain a level of market share whilst for the overall business key acquisitions and mergers have resulted in large levels of profits for BT to provide growth and investment. However in 2001 BT were identified as supporting large levels of debt which was attributed to the development and research of new technology for mobile phone telecoms. In an attempt to return to levels of positive cash flow BT began to sell or lease assets in order to generate cash flow.

Challenges and Outlook

BTs focus for the future remains fixed between the two functions of commercial and domestic markets, both local and international. Focus within domestic markets will require continued improvement to customer service levels coupled with acknowledgement of the economic strains within UK markets which will require specific consumer attention to ensure the right products are available at the right time to meet the expectations and demands of those in the market place. With increasing levels of domestic competition this field becomes a key driver to ensure success for the future. With the customer mix of products showing the largest percentage mix is in commercial markets there is also key competitive action within this sector thus BT will require focus on technology advances where speed and entry to market is key combined with the ability to secure innovative networking for businesses to operate. The product mix within commercial and domestic would lead one to assume the key driver for future challenge will be to protect the domestic fixed telecoms lines but at the same time to develop and drive the commercial software business which is highly competitive and with large technology investment required can lead to moderate to high business risk in terms of investment and strategy.