Strategic Analysis of O2 - Essay Example

Strategic Analysis Case Study – O2 Task Case Study Selection: Which I chose to be O2 as in e.g. phone provider, Delimiting Parameters In modern market, the development of organizations in various industrial sectors can be achieved only through the continuous improvement of their performance (referring to the issues of productivity and customer satisfaction). On the other hand, the position of competitors should be always taken into consideration having in mind the fact that competition can be differentiated in countries internationally in accordance with the local commercial ethics but also the financial strength of a particular country to respond to the needs of its various industrial activities. Current paper focuses on the examination of the performance of a specific British firm, O2; this firm has achieved to keep its position in its market and further expand its activities through the continuous review and update of its strategies. The specific issue is analytically examined in the sections that follow; the position of the firm in its industry will be identified and evaluated taking into account the response of the firm to the challenges set by the global political and financial crisis. The position of competitors will be also examined while specific suggestions are going to be made regarding the potential improvement of specific parts of the corporate strategy. Appropriate theoretical models (like PESTEL analysis and ANSOFF matrix) will be used in this paper in order to show the changes in the firm’s performance through the years; in this way the choice of this firm as a ‘model’ for business analysis will be justified. Task 2 Using this organization, you are required to undertake the following analyses: a. stakeholder analysis b. PESTLE analysis c. An analysis of the competitive environment of the organization (market boundaries, direct and indirect competitors, Porters 5 forces, etc) d. An analysis of organizational resources, competences and capabilities (portfolio analysis, strengths and weaknesses, etc) e. A SWOT analysis a. Stakeholder analysis In Stakeholder analysis all people or groups of people influencing the firm’s performance have to be identified. In order to understand and evaluate the role of various stakeholders in the performance of O2, it is necessary primarily to identify the firm’s stakeholders; at a next level, their role in the firm’s performance within its industry is going to be appropriately evaluated. The firm’s stakeholders can be listed as follows (a numeric scale from 0-10 [10 is the highest grade] has been used in order to identify the impact/ importance of stakeholders for the performance of O2 and their influence on the firm’s success). Stakeholders of O2 Stakeholders Impact on O2 performance Influence 1. Customers 8 9 2. Employees 10 8 3. Suppliers 9 8 4. Shareholders 10 9 5. British commercial Authorities 8 9 The influence of the above listed stakeholders on the performance of O2 has to be further assessed and evaluated taking into account the conditions of the British market but also the conditions of the international market. It is clear from the list presented above that the firm’s customers have a significant influence on the firm’s success within the British market (given the rank 9); in fact this influence is higher than the importance of customers for the firm’s overall performance (initially estimated this ‘importance’ was given the rank 8). On the other hand, it is proved that the influence of the firm’s customers is higher than that of its suppliers and employees (given the rank 8 – even if the role of employees in the development of the firm’s performance was initially estimated to be high – given the rank 10). From the list presented above it is clear that the following three factors are decisive for the firm’s success in the British market: customers, shareholders and British Authorities (all given the rank 9); on the other hand, suppliers and employees have primarily an important role in the development of the firm’s performance (given the ranks 9 and 10 accordingly) but are proved to be inadequate when are called to support the firm’s expansion in the British market – both given the rank 8 which is lower from that of customers, shareholders and British Authorities, all given the rank 9). b. PESTLE analysis A PESTLE analysis is based on the examination of the role of the following factors on the firm’s performance: a) political environment, b) economic environment, c) social environment, d) technological environment and e) legal environment. Taking into account the current conditions in the British market the above factors could be analyzed as follows: a) Britain’s political environment could be characterized as stable; no particular turbulences appear in the political environment of the specific country which is characterized by the conflict of two major political competitors – parties: the labour party and the conservative one. Both these parties have similar views regarding the development of Britain’s commercial ethics and activities; therefore their conflict does not have a particular influence on the progress of commercial activities across the country; b) Britain’s economic environment is also characterized by stability – despite the turbulences taking place in the international market; the country has a high rate of growth in many industrial sectors – especially in real estate and finance; therefore the development of the performance of firms operating in the country’s various industries is considered to be easily achieved – especially if compared with other countries worldwide with lower rate of growth; O2 is positioned within an important and highly promising market – its performance is expected to be kept at high levels; c) the social environment of Britain is characterized by the following principles/ phenomena: equality, development of social activities for the support of various groups – people with physical or mental disabilities, poor etc. and increased participation of people in the country’s political decisions (strong opposition is developed in any case where the political decision taken by the country’s governors are against the public interests). In these social conditions, the corporate plans of O2 should be aligned with the country’s social and cultural ethics and trends offering the chance to all people within the country to have access to the firm’s products/ services with a relatively low cost; d) technology is considered to have a significant importance for the development of firms’ activities around the world; other factors influencing corporate activities (like the response of the firm’s stakeholders to suggested plans and so on) should be also taken into consideration. The specific issue was also examined by Megginson et al. (1972, 75) who noticed that ‘while technology can increase productivity and give major emphasis to social and economic development, the other factors are equally important’. In the case of O2 technology is quite important for the development of the firm’s performance within the British market; therefore the specific factor should be carefully reviewed by the firm’s managers in order to ensure the competitiveness of the firm towards its competitors; e) an extensive network of legal principles has been developed regarding the development of commercial activities across Britain; for the telecommunications sector specific rules ensure that the various parts of organizational activities of firms operating in the particular industry are well protected; these firms’ customers are also protected in all their transactions with the firms operating in the particular sector (see the Telecommunications Act 1984, the Broadcasting Act 1990, the Telecommunications (Voice Telephony) Regulations 1997, the Telecommunications (Licensing) Regulations 1997, the Public Telecommunication System Designation (COLT Telecommunications) Order 1997, the Communications Act 2003 and so on). c. Analysis of the competitive environment of the organization (market boundaries, direct and indirect competitors, Porters 5 forces, etc) In Britain, the development of telecommunications industry is continuous; the firms that operate in the specific industry are facing a strong competition since the development of technology across the specific industry is continuous and the update of each firm’s systems has to be continuous; the specific market cannot be characterized as having ‘strict’ boundaries; it is a market rather available to potential expansions but only if they are appropriately designed and developed. On the other hand, it should be noticed that only five firms currently operate in the specific industry – T-Mobile, Vodafone, O2, Orange and 3. These are the mobile network providers in UK – all other firms that operate in the same industry – like Virgin – have to ‘buy’ lines from one of the above mentioned firms. A careful examination of the British market can lead to the assumption that the following firms should be regarded as the main competitors of O2 within its industry: a) T-Mobile, b) Vodafone, c) Orange and d) 3 (it is the most recent firm in the specific industry established in 2000, see also Mobility Today, online article, 2007). These are the major competitors of O2 in the British market – all other firms that operate in the same industry – like Virgin – can be characterized as indirect competitors with lower influence on the development of the firm’s strategic options. At a next level, the competitiveness of the firm within the British (but also the international) market could be evaluated using the Porter’s five forces model of industry competition. This model (which can be viewed in the Appendix section, Figure 1) can be used in order to represent the influence of various factors on the competitiveness of O2 within the British market. In accordance with the above model, the following factors are expected to influence O2’s performance within the British market: a) competitors, b) customers, c) suppliers, d) industry and e) substitute products. The above factors could be analyzed as follows: a) as noticed above the firm only has 4 major competitors; therefore competition in the specific industry is not extended; however all four firms – the competitors – are strong; therefore the firm’s strategic plans need to be periodically reviewed in order for the firm to remain competitive within its industry (at least to keep its current market share); b) the firm’s customers are expected to be influenced by innovation and pricing in the firm’s services; both these two parts of organizational activity should be carefully designed and developed following the market trends and the competitors’ strategic options; c) the performance of the firm’s suppliers could be characterized as significant (in accordance with the firm’s performance); no particular changes would be required – at least for the moment – in the firm’s relationship with its suppliers in order for the firm’s performance to be kept at high levels; d) industry: as noticed before only 5 firms operate in the specific industry (mobile network providers); there are a few others that also offer similar services but have to cooperate with one of the above firms in order to provide relevant services; therefore no particular threat exist from the potential entrance of new competitors in the specific industry; e) it is not likely that substitute products are developed in the British market; mobile network in Britain is provided by 5 firms; in case that a substitute product/ service is provided by another firm (apart form the above 5 mentioned) then there will be legal consequences for the violator. d. Analysis of organizational resources, competences and capabilities It should be noticed that the strategic planning of all firms should be based on specific principles while specific issues should be also addressed. In accordance with Natterman all firms’ policies should address the following issues/ factors: ‘product characteristics, price, and market opportunity’ (Natterman, 2000, 22). From another point of view, it is noticed by Cook et al. (2001) that all firms operating in modern market should develop their strategies focusing on ‘making and keeping relationships, implementing new technology in the supply channel, the use of forecasting to increase supply chain effectiveness, outsourcing to increase efficiency, and cost management as a strategic weapon’ (Cook et al., 2001, 14). Additional strategic options and resources are available to modern firms operating in the international market – taking into account the characteristics and the trends of each market, the customer preferences and the financial support available for the realization of the relevant plans. In the case of O2 the firm’s resources available for the realization of the firm’s strategic plans should be characterized as adequate (referring mostly to the firm’s employees and suppliers but also to the technology available throughout the organizational departments). The firm’s managers have managed to identify the preferences of the public in Britain and develop a series of options for the firm’s customers (see also the corporate website). In this context, the firm can be considered as being able to face successfully its competitors within the specific industry. The firm’s strengths and weaknesses – as identified through its activities – are further analyzed in the section that follows. e. SWOT analysis In accordance with Steyn (2004, 615) ‘successful organisations are knowledge-creating organisations, which produce, disseminate and embody new knowledge in new products and services’. In other words, the identification of the firm’s strengths, weaknesses, opportunities and threats (i.e. SWOT analysis of O2) cannot help towards the increase of the firm’s competitiveness unless there is appropriate support for the achievement of the targets set both in the short and the long term. In any case, knowledge management is considered to have a crucial role in the development of firm’s performance within the British market. In a more thorough analysis of the firm’s strengths – weaknesses – opportunities and threats, the following assumptions can be made: a) strengths: the firm is one of the 5 major competitors in the British mobile network providing industry, since its establishment in 2001 the firm’s performance is continuously developed, the firm’s customers are loyal (in accordance with the figures related with the firm’s performance in 2007 – ‘40 million fixed and mobile customers’ (corporate website, 2008)) b) weaknesses: there are no specific plans for update of the firm’s IS and policies, no thorough review of the firm’s strategic options seems to have taken place recently (in accordance with the corporate website) c) opportunities: the specific industry of the British market is under continuous growth, the entrance of other firms in the specific industry (as direct competitors) is not fully permitted yet; specific procedure is required; the firm can further expand its activities without having the fear of a continuous increasing competition and d) threats: existing competitors are extremely developed; services offered in the specific industry are continuously reviewed; potential expansion of the market the years that follow; no guarantee for stability in the specific market. Task 3 Analyse the strategic options available to your chosen organization (O2) over the next 12 months, evaluating those offering the best prospect of a sustainable competitive advantage, using appropriate models The design and the development of a firm’s strategic plan should be carefully reviewed in order to ensure the firm’s competitiveness both in the short and the long term. Potential changes should be also introduced in current firm’s strategic options in case that they are found to be necessary. In accordance with Newman et al. (1996, 753) ‘work units that are managed consistent with national cultural expectations will be better performing than work units whose management practices do not fit the national culture’. In this context, the managers of O2 should pay particular attention on the local ethics and culture (as noticed above) making sure that the firm’s strategic options are competitive if compared with the relevant plans of the competitors. Towards this direction, Ansoff Matrix (see Appendix section, Figure 2) can be used in order to identify and evaluate strategic options available to O2 in order for the firm’s performance to be kept at high levels. In the specific matrix it is clear that the following two factors should be reviewed by firm’s managers in order for its strategy to be appropriately updated: product and market. Moreover, in accordance with Ansoff Matrix four strategies are available to the firm’s managers in order for its performance to be developed: a) market penetration, b) market development, c) product development and d) diversification (product in the above model can be regarded as equal with service). The above model could be combined with the Herzberg model (see Figure 3, Appendix); in this way both the needs of the public and the needs of the firm’s employees would be addressed and the development of the firm’s performance would be guaranteed even in the long term. References Cook, J. S., Debree, K., Feroleto, A. (2001). From Raw Materials to Customers: Supply Chain Management in the Service Industry. SAM Advanced Management Journal, 66(4): 14-23 Megginson, L. C. (1972). Personnel: A Behavioral Approach to Administration. Richard D. Irwin. Homewood Mobility Today (2007) UK Network Providers, available at http://mobilitytoday.com/news/007968/UK_Network_Providers Nattermann, P.M. (2000). Best Practice [Neq] Best Strategy. The McKinsey Quarterly, 22-27 Newman, K. L., Nollen, S. D. (1996). Culture and Congruence: The Fit between Management Practices and National Culture. Journal of International Business Studies, 27(4): 753-773 Steyn, G. (2004). Harnessing the Power of Knowledge in Higher Education. Education, 124(4): 615-623 http://www.o2.co.uk/ Appendix Figure 1 – Five forces of industry competition (Porter, 1998, 22) Figure 2 – Ansoff Matrix (source: http://www.valuebasedmanagement.net) Figure 3 – Herzberg (Two Factor Theory, source: www.valuebasedmanagement.net) Read More