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Operation Management - Case Study Example

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In March 2002 British Telecom (BT) announced it would cut the wholesale line rental fees that broadband service providers were being charged for access to BT's Wholesale Line Rental (WLR) program. This was an attempt by BT to raise the number of digital subscribers to one million by the summer of 2003…
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Operation Management Case Study
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Download file to see previous pages "During briefings, executives were forced to concede that more than a quarter of a million customers have defected in the past three months alone." (http://www.cwu.org/uploads/documents/RD0410208%20%20BT%20Price%20Regualtion.doc). Not only are they losing customers, the regulator OFCOM has announced that it wishes BT to lower its wholesale rates by another 9%.
OFCOM rules and directives such as the one requesting BT to lower its rates by an additional 9%, is part of the evidence showing that BT must operate in a strict regulatory environment. This environment affects BT's residential as well as the WRL scenario. The way the WRL works is that BT owns the communications infrastructure. OFCOM rules have forced BT to open this communications infrastructure to low-cost rivals by renting them access at wholesale prices. These rivals such as Carphone Warehouse (Talktalk) and Onetel then supply their customers with rates that allow the companies to take advantage, and to profit, from the wholesale rates.
The way that BT is combating these regulatory constraints, and an environment that helps their competitors, is by offering a wider variety of services that include broadband and mobile communications. Despite the public's voracious appetite for both of these services, BT still has some huge challenges to overcome.
"We're managing a transition from the old world to the new," said Karen Witts, CFO of BT Wholesale. "Traditional revenues are declining and we have to match that with new wave revenues, but these revenues have lower margins" (http://www.financialdirector.co.uk/accountancyage/features/2147006).
The wholesale division of BT then will become even more important to BT's financial success throughout the next decade. Other challenges the division will have to overcome include complying with the regulations (that may differ significantly) set in other countries that they wish to do business in. BT must also be very careful of not becoming overly dominant in the marketplace. If they do, OFCOM may step in and say "you are too big." OFCOM has already ensured that BT must give their competitors equality of price and the same access to BT's fixed lines as BT's own retail business has.
The telecom industry is also very competitive and highly complex. BT has met some of these challenges and continues to do so, on a daily basis. In 2005 BT set up a new access division that is called Openreach. This separate entity will report all its results as a stand alone company and will provide wholesalers with 30 million access lines. The division is comprised of 30,000 people, 8 billion in assets and is projected to show 4 billion a year in revenues.

OpManage/ pg 3
BT is known as the supplier's supplier of non-cable broadband in the UK. Of the 631,000 new homes connected to its broadband lines during the past three months, only 27% of those chose an actual broadband service from BT Retail, leading to the conclusion that although BT is concentrating (and seemingly doing a good job) on its wholesale division, its more profitable retail division may need the concentration as well. (http://www.ofcom.org.uk/consult/condocs/statement_tsr/statement.pdf).
Unlike BT, a local soft drink bottler has different problems to face. The soft drink bottler must consider the possible production methods that are available for use, and then choose the one that is most ...Download file to see next pagesRead More
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