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British Telecom Case Study

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BT is the leading telecommunication company in Europe. As the information and telecommunication requirements of people increases, British Telecommunication (BT) has a leading corresponding growth in the size and number of information processed. Therefore, the genuine analyses on BT are required for such an important and strategic company.

In that assignment, we followed the Systems Design approach which includes analysing the components of the system, brainstorming the alternatives to improve the processes and implementation of the preferred solution. First of all, we presented some information on the history of British Telecom considering the expanding process of BT. Then, we identified and analysed its key elements in the expansion of BT into about five different businesses BT Retail, BT Wholesale, BT Global, BT Openworld, BT Exact, and how The Group has re-focused its core activities on voice and data customers. After that, the mission statement of customer focus and excellent service promise, key business processes as to how BT operates and a STEEP analysis as to how BT is affected from external environment took part.

Thereafter, a SWOT analysis was conducted to show the state of BT in business as a brand and its opportunities in new technology and markets in contrast to the decreased volume of fixed calls and another problem to resolve the huge amount of debts. Finally, the critical success factors for BT and strategies to reach the corporate goals were analysed and based on that we proposed a specific information system to support each of the level of the management process named as “Marketing Information System”, which is a kind of Decision Support System upon information requirements of British Telecommunications.

The main findings on BT research and its goals suggest that BT’s main focus is on improving customer satisfaction through the strategies of intelligent pricing and aggressive and creating marketing and enhancing the number of broadband subscribers. Hence, a Marketing Information System (MkIS) was obviously the best alternative upon the goals of the company since there is a need for information about the future of the markets, industry and the company to overcome the huge threat of future innovations.

Consequently, the belief of our group is that the information system proposed (MkIS) can help BT continue its competitive advantage over rivals and prepare BT for the uncertain nature of future.

1 INTRODUCTION

Information systems are transforming the way the businesses are conducted and how the products and services are provided. We need a broad comprehension about information systems in order to achieve higher levels of productivity and effectiveness in factories and offices.

In this assignment we are going to identify and analyze the major telecommunication company in Europe, British Telecommunication (BT) through its key elements, mission statement, key business process and environmental factors, as wells as, strengths, weakness, threats and opportunities to the organization and the critical success factors involved.

Finally, based on the above analysis we are going to propose a specific information system to support each of the level of the management upon information requirements of British Telecommunication.

Sector: Services

Industry: Communication Services

Services: BT is a UK wide communications solutions provider with a global reach in the business market.

Employees: 99,900

Competitors: Cable & Wireless Plc – CWP, Deutsche Telekom AG – DT, France Telecom – FTE.

Historical Development: The British Telecom begins with the introduction of¬†the first commercial telegraph service in the nineteenth century. At that time, the state was controlling all the telegraph and telephone. All the telegraph companies were submitted to the Post Office Company control. The United Kingdom telegraph and telephone services were provided by the General Post Office (GPO) in competition with a few private companies. In 1896, the GPO took over the private sector, becoming the monopoly supplier of telegraph and telephone services in 1912. The GPO ran and developed the British Telephone sector till 1965, at that time, the British Government established a “Steering Group on the Organisation of the Post Office”, the GPO was divided into five different divisions: Post Services, Telecommunications, Saving, Giro and National Data Processing Services.

The British Telecom Act. 1981, transformed the responsibility for telecommunications services from the Post Office, in respect of introduce competition into the UK telecommunication market, also other operator got license to run and develop telecommunications systems, as the public telephone network and instruments supplied to the market.

The strategies of alliances provided to BT a structure of a telecommunication corporation. Moreover, in 2000, BT made public plans to set about of five different business expansions: BT Retail, BT Wholesale, BT Global, BT Openworld, BT Exact. BT Group has re-focused its core activities on voice and data customers primarily based in the UK and elsewhere in Europe – a fiercely competitive market but one in which BT’s businesses have a wealth of expertise on which to build. These business units are:

BT Global Services – BT’s global managed services and solutions provider, serving multi-site organisations world-wide.

BT Wholesale – runs BT’s networks and provides network services and solutions to other communication companies.

BT Exact – BT’s research, technology and IT operations business, helping our customers gain maximum advantage from communications technology, by combining an in-depth knowledge of networks and networked applications.

BT Retail – serving end business and residential customers. And the prime channel to market for other BT businesses.

BT Openworld – BT’s provide a mass market internet business, delivering services to customers in the UK via BT internet and BT Openworld broadband.

2 MISSION STATEMENT ANALYSIS

Collins and Porras (1996) have proposed that the mission statement communicates the firm’s core ideology and visionary goals, consisting in three components: core values to which the firm is committed, core purpose of the firm and visionary goals that the firm’s management decides to pursue. Every organization has a mission, a purpose, and a reason for being. A mission statement must resonate with the people working in and for the organization. It has to express the organization’s purpose in way that inspires commitment, innovation and courage.

British Telecommunications has a large experience with people and the aim is to deliver an excellent service to their customers. BT has first and foremost the premises that “they are passionate about customers”. Through to be passionate about customers, wide knowledge from years of experience quest the best quality of services/products and low prices, the following could be presented as the company’s mission statement:

“BT has the vision to be able to connect people with whomever they want, whenever, however and wherever they want”.

This paragraph shows the focus of the company, how the company corresponds the needs of communication area, establishing strong and long-term relationships with their customers.

3 KEY BUSINESS PROCESSES

A. O’Brien (1998, Ch 1) discuss the subject about business processes, he said¬†that’s a manner in which work is organized, coordinated and focused to produce a valuable product or service, using concrete work flows of material, information and knowledge. Those set activities impact in the business process of any organization, the idea is to bring Processes, People and Information together in order to improve the efficiency and effectiveness of the organization.

As far as BT is concerned they focus on five fundamental issues: The key attributes of a well functioning telecoms market for customers, the achievement of sustainable competition, the possibility of a significant reduction in regulation, deciding efficient and timely investment in next generation networks and the relevance of the issue of structural or operational separation of BT.

How BT operates: BT consists principally of three lines of business: BT Retail, BT Wholesale, BT Global Services. These lines of business are focussed on providing a simple and complete experience for their customers.

Corporate Governance: BT’s policy is to achieve best practice in their standards of business integrity in all their operations in line with their published statement of business practice – “The Way We Work “.

Corporate governace provides the business integrity of all bt s operations

Investment in Research Development and IT support: BT Exact is BT’s research, technology and IT operations business. It offers expertise and experience in Information and Communication Technologies – ICT, backed by a team of technologists and thus providing one of the worlds largest communications research and development facilities for technological innovations.

Financial Instruments and Risk management: The Group holds or issues financial instrument mainly to finance its operations, for the temporary investment of short-term funds; and to manage the currency and interest rate risks arising from its operations and from its sources of finance.

Marketing Management: The achievement of sustainable competition including competition from others in the UK and other international communication markets, selection by BT and its lines of business of the appropriate trading and marketing models for its products and services.

Human Resource Management: BT gives its employees the chance to express their opinions about the company, their managers and the work they do. It encourages managers and their teams to work together, inform its employees about their business through a wide range of communication channels, and in addition to culture change programmes BT invests on the training and development of their employees.

Health and Safety Management: BT has zero (0) tolerance of workplace accidents and have set rigorous targets to effect significant improvements across the company.

4 STEEP ANALYSIS

Sociological Factors: culture ,customer perception, customer requirements and needs affect the operation of business. any change in those factors should be investigated and management decision should be based on such investigation. For example Bt is losing customer since Mobile multimedia communication is placed in today’s society which in general is moving on to a newer and more efficient platform. The mindset is quickly changing from the acceptance of basic fixed line telephone, radio, visual, and data platforms to service with mobility across all media over a single unit. Due to this, the near future may see large shifts in demographics in the usage from basic services to cheap, competitive, and convenient forms of communications. For example the widespread of broadband will provide teleworking which is generally positive for society.

Technological Factors: Technology is the greatest threat for an organizations. New Technologies are introduced everyday and firms are required to keep up with those changes for example companies like BT must keep up with low investments firms providing high value to an equally large target audience through new and innovative products. Being able to use ICTs, and in particular the internet, is increasingly becoming important to getting ahead; whether at school, at work, in business or as a citizen. ICTs are opening up new ways for people to communicate, participate in education, find employment, access public services, buy and sell things, and take in culture and democracy.

Economical Factors:national and global economy and crises affect the business. For example, BT had fared pretty decently compared to global slowdown in various economies during the years 1998-2001. However, it had a 30bn GBP debt burden. On the other hand, financial figures suggest that the European markets are not proving to be very profitable. BT has a target to provide 5 million broadband connections by 2006 and to enable broadband for all telephone exchanges. That importance given to broadband internet access derives from the fact that there will be direct social and economic benefits. The economic argument is strongest of all, with researchers arguing that countries with better internet services will compete more strongly in the global economy.

Ecological Factors: Telecommunications are perceived as an environmentally friendly technology. But as one of the UK’s largest companies – and biggest energy consumers – BT has an inevitable impact on the environment. They have a duty to manage this and to report on their performance – as they have done since 1992. Good environmental management saves money and improves business efficiency. BT’s environmental management system complies with ISO 14001, an international standard for the certification of environmental management systems. However, Health, Safety & Environmental management system standard based on the requirements of ISO 14001, any changes in this norm would force the company to modify its HS&E System and would have a huge impact on its normal and continuous development.

Political Factors: political factors like political instability international political relations between countries affect the business enormously for example The political scenario facing BT at present is one of de-regulation, of economies at large and of the telecommunications sector, mostly on a global scale, so as to become aware of WTO guidelines of fair trans-national market competition. This suggests that BT on the whole can view this as an advantage and step up efforts, moving stealthily to acquire controlling stakes through holding companies or alliances, so as to come to a position to control firms in recently opened markets. Also European and American regulators have recently decided to allow foreign and multinational participation in their markets just as long as it does not interfere with monopolistic issues.

5 SWOT ANALYSIS

5.1 STRENGTHS

BT as a brand: BT is a large scale commercial enterprise and has long experience in the field of telecommunication dating back to 1845. Currently, BT is the market leader in UK thanks to its highly effective and competent senior management. Only in the UK, BT serves over 20 million business and residential customers with more than 29 million exchange lines, as well as providing network services to other operators, and also is a leading telecommunication services provider in Europe.

Moreover, the company raised £5.9 billion with a successful rights issue in 2002, which was the biggest ever in the UK. This increased the competitive advantage of BT against rivals.(Available from: BT website and BT annual report, 2004)

Strategic alliances and international activities: BT is a leading global telecommunication service provider through its technological infrastructure and alliances with local companies. The company now provides services to more than 400 cities in 100 countries. Also BT’s strategic alliance with AT&T and its strong network capability in Europe, especially in France and Germany, is an important factor for their market power. (Available from: BT international corporate presentation, www.serenate.org/presentations/sow/BrunoTideman2.ppt)

Success with new services: New services and non-core services such as ICT, broadband and mobility have become the most important revenue sources The decline in the revenues with traditional services is expected to be outweighed the income with new services. Moreover, it is estimated that 50% of the future revenue growth of BT will be from the new services, especially from broadband and mobility services such as WiFi. (Available from: Datamonitor Business Information Center).

Stable market share: The consumer calls market share of BT, its core business, has been around 73% for a long time in spite of competitive pressure. The revenues are also stable. This stabilization is mainly due to the efforts of BT Together and the success of broadband services. (Available from: Datamonitor Business Information Center)

Restructuring: BT changed its internal structure by creating new and clearly defined business units in 2002. The group closed a number of non-core businesses and implemented a more customer-focused service. This resulted in improvements in customer services and helped BT to decrease its debt amount from £30 billion to nearly £9 billion in 2 years. (Available from: Annual report BT, 2004)

Cost leadership: BT has achieved in costs than the average of telecommunication companies in Europe. Since 2001, it has made major reductions in costs of operations and a further ¬£1 billion is estimated to be reduced in the near future by creating “21st century network” with high performance and lower operating costs. (Available from: Annual report BT, 2004)

5.2 WEAKNESSES

Core business operations: Core business operations and UK fixed calls market has decreased by 7% in volume in 2003 due to increasing substitution to cheap mobile communication and internet communication. (Available from: Annual report BT).Therefore, BT’s reliance on basic services for revenue might prove wrong due to cheap mobile data solutions that compete with fixed¬†line systems. Moreover, this problem seems to continue until majority of BT customers commence to upgrade to new services like broadband and other mobile systems. The loss of directory enquiries resulted in lower revenues as well.

BT international: Market value of Global communications is estimated to be nearly £100 billion. AT&T and BT alliance on this share has declined sharply after the failure of CONCERT, the worldwide private network company. The failure decreased the competitive advantage of BT against its rivals in Europe such as Deutsche Telekom, France Telecom and mobile giant Vodafone (Molony, 2002).

Debts: BT has large amounts of debts of £8.425 billion in 2004. Although the debt was nearly 30 billion in 2001 and has been reduced considerably since then, it is still in a level that threatens the company.

5.3 OPPORTUNITIES

Broadband services: Bt has increased its broadband subscribers tremendously since 2002. In the first quarter of 2002, the numbers of subscribers were 66,000. This number rose sharply to nearly 2.2 million people. With the introduction of WiFi technology, the demand for broadband is estimated to grow and the future revenues will be greater covering loss in core businesses. (Available from: Annual report BT,2004).

21st century network: To create an intelligent, flexible and customer focused network for the 21st century, networks will be renewed and simplified through reduction in network elements. The company expects long term savings and revenues from the project. These new networks will result in simplified communication and less maintenance of data and voice calls.

Information and Communication Technologies (ICT) sector: In corporate environments, ICT networks are regarded as vital for productivity and competitive advantage. BT increased its ICT contract sales from ¬£4.4 billion to ¬£7 billion by nearly 60%. BT’s competitive advantage on ICT sector¬†improves and opportunities grow.

UK economy: There is strong relationship between the growth of UK economy and call volumes in UK. Any improvement in the economy could result in 2 or 3 % more growth for BT. This is mainly due to the price regime of BT in UK, which makes it unable to make rises in tariffs.

5.4 THREATS

Technology: Although Bt invests huge amounts in R&D for communication inventions, the latest cutting edge technology is a considerable threat for BT. High bandwidth microwave and satellite networks are being set up through out Europe by companies like Worldcom. Voice over internet protocol (VoIP) is the biggest threat for the core business call revenues of BT. VoIP’s usage is increasing mainly in corporate environments and fixed line call revenues are decreasing relatively.

Mobile Phones: Customers opt to communicate through mobile phones instead of fixed line phone more and more everyday because of the factors of flexibility and cheapness of those lines. As the core businesses of BT declines, there is a threat of revenue loss in the future unless BT has an established revenue growth through broadband.

Regulations: UK market and the other markets that BT operates in are highly competitive and fully open to entry. Regulations have been set by the governments to ensure the continuum of the competitiveness of the markets and of an anti-monopolistic environment. Therefore, BT has been barred from buying control stocks in rival organisations. This situation would enable smaller companies to grow globally becoming competitive threat to BT and other large companies.

Cable networks: A much quicker alternative to broadband services is cable networks. NTL and Telewest, the most important competitors of BT broadband, have been working to upgrade their networks to provide broadband services in all areas covered by cable networks. This situation threatens the recent success of BT broadband services.

6 ANALYSIS OF CRITICAL SUCCESS FACTORS

The critical success factors for any company are a small number of easily identifiable operational goals shaped by the industry, the firm, the manager, and the broader environment that are believed to assure the success of an organization. They are used to determine the information requirements of an organization. At BT these had been the evolution of Company Vision and Key Strategic Goals during the last ten years.

PERIOD VISION KEY GOALS STRATEGIC FOCUS

1994 – 1996 “To be the most successful worldwide telecommunications group” *Core Competencies *International Focus

*Financial Focus *Global Focus

*Mobile Focus *Internet Focus

*Culture Focus *Differentiation

*Market Penetration

*Product Development

*International Alliancing

*Technological Innovation

1997 – 2002 “To be the most successful worldwide communications group” *Strategic Alliance Focus *Shareholder Value

*Multimedia Focus *Data Focus

*Business Systems *Wireless Technology

*Synergistic Focus *Cultural Reform *Hybrid Strategy

*Market Penetration

*Product Development

*Global Alliancing/Integration

*Technological Innovation

2003 – 2005 “Enable people to connect with whomever they want, whenever, however and wherever they want” *Relentless focus on improving customer satisfaction (Reduce costumer dissatisfaction by 25% a year over the 3 years to the 2005 financial year).

*Broadband at the heart of BT (Broadband available to exchanges serving over 99% of UK homes and businesses by summer 2005)

*Create mobility services and solutions

*Transform the network for 21st century (Build a robust network that meets new challenges as unpredictable weather events)

*Achieve Competitive advantage through cost leadership

*Lead the world in network centric solutions (Use of teleconferencing and flexible working, Online environmental management systems)

*Reinvent traditional business

*Motivate people and live values (Proactive approach to flexible working, diversity and learning and development improves employee satisfaction). *Improve service (Program Promise made, Promise kept)

*Aggressive and creative marketing

*Price innovation

*Reduce costs/improve margin

*Long term partnership with the customers (create new, market opportunities)

Table 1. Critical Success Factors

7 INFORMATION SYSTEM SOLUTION

INFORMATION REQUIREMENTS OF BRITISH TELECOMMUNICATIONS

LEVELS

GOALS

STRATEGIES

INFORMATION REQUIREMENTS

Strategic

Level

Improving customers satisfaction

Aggressive and creative marketing

Introducing new technologies (WIFI, Broadband)

Predicting the future of the organisation

Partnerships with other technology companies

Future of markets and organisation

Customer Trends

Political Information

Economic Analysis

Technologic Information

Management

Level

Improving effectiveness & efficiency of resources

Applying company goals

Promotional Activities

Pricing Strategies

Cost Reduction Techniques

Customers Loyalty Schemes

Marketing Information

Financial Information

Manpower

Government Regulations

Policies

Operational

Level

Improving costumer service “Promise Made Promise Kept” Program

Decreasing Response Time

Enhancing Capacities

Increasing Response Speed Day-to-day changes in the Business Environment

Marketing Research

Marketing Mix

Regular Reports

Table 2. Table 2: Information requirements of British Telecommunications

BT is the leading telecommunication services provider in UK and other parts of Europe as described in the previous parts of the report. To remain its strengths in the telecommunication industry and core competitive advantage, the company needs to achieve the critical success factors. These have been mentioned in previous parts. Some crucial success factors for BT are (Table 1):

Relentless focus on improving customer services

Broadband at the heart of BT

Transform the network for 21st century

Achieve Competitive advantage through cost leadership

Lead the world in network centric solutions

Upon these critical success factors the information needs for each organisational level can be seen in Table 2. Every level of organisation requires different types of information to support their decision making process through strategic goals and implemented strategies of their unique level. Top management needs aggregated information about customer trends and future of the industry and business, whereas management level is to find the most effective and efficient ways to implement the strategies and goals set by senior management. Finally, operational level staff and line managers have the duties of directly facing customer needs and satisfying their day to day problems and questions.

According to the Table 2, it can be observed that main requirement and goal of the BT is “improving customer satisfaction”. Hence, the most important strategies to achieve those goals are classified as:

Improving customer service

Planning an aggressive and creative marketing strategy

Price innovation

Cost reductions

Setting long term partnership with customers

Creating new marketing opportunities

Therefore, final conclusion is that BT needs a Decision Support System – DSS which provides the data about markets, channels, political and economic environment, new technologies and processes them, stores the information¬†gathered, processes them for the decision making of each organisational levels upon strategies described above. The DSS proposed for BT is obviously a “Marketing Information System (MkIS)” designed to generate and disseminate an orderly flow of pertinent information for marketing decision makers to improve their marketing planning, implementation and control. The proposed system is described in the next part intensively.

PROPOSED SYSTEM

The “Marketing Information System (MkIS)” which is shown at Figure 1, helps managers handle information and knowledge in order to improve the effectiveness of decision-making. This system provides information for dealing with its customers, data about its own performance, about its markets, and more and more, information about its whole environment (including social, political, economic and cultural factors; ‘Macro-Marketing’ in other words). But all this information cannot be processed identically. It must therefore, combine Marketing strategy with Marketing operations. Also, it must have coherence with overall Marketing Vision of the company and Specific Strategies planned to achieve.

The first part of the system is the sources of information which exist in the marketing environment. External information such as information about Markets (Statistics about Customer/ contact interaction history, Prospects of clients, from the website or any other sources, can be used for future marketing communications. Results of direct marketing, a series of segmented groups in order to control and intended to achieve to know more about the customers), Channels (Distributors, Supply-Chain Relations), Competitors (Information about new products in the market), Economy (Changes in the economy), Technology (New generation of actual products), Political (Changes in policies that can be affect telecommunications sector) and finally Legal information (Government and other Regulations) are gathered in that part.

The second part of the system is the Databases. At this level, the information is stored and reported to the next part of the system (Developing information). Some examples of Databases: “Future events in¬†advance”, using a website in where we can ask to the costumers about new ideas in products, based on their needs. Another Database that we can use is Sales Actual vs Sales planned, we have to take the decision about marketing mix. Also we can implement a Database for key performance indicators of marketing and forecasting of opportunities through customer satisfaction surveys.

The third part of the system is composed by these patterns: Internal Report System (This system generates internal information and reports such as orders, inventory levels, billing, salespeople record, customer details, locations, products and specifications, prices and date kept on record for future use), Marketing Research System (It’s a proactive system search for new information, such as new products, new customers, new studies about technologies, an attempt to continuously monitor the marketing environment), Marketing Models (This models are analytical and mathematical models such as Time series models, Elasticity models and Statistical models to provide a concrete base for Decision Support System), finally Marketing Intelligence System (This system is entirely based on the experiences of the marketing manager for decision making process. This experiences can be either unsystematic in which the manager is exposed to information unintentionally in daily life or systematic in which focused programmes, scanning information of the economy and business environment, using techniques like benchmarking and renewing actual procedures based on it take part in decision making process.

The fourth part of the system is called Decisions, in which the top management(Decisions to change the infrastructure of the company), middle (the ways to improve processes) and line management(Day-to-day decisions in service upon strategies) can take the decisions based on patterns or models results and can measure the progress of all marketing activities from one.

The benefits of the implementation of this system can be summarized in these points: The system improves decision making, is effective in campaign executions and measurement of the different activities planned at the beginning and are based on real reports.

COST OF THE IMPLEMENTATION MARKETING INFORMATION SYSTEM

The cost of the implementation of any information system required an analysis of the Non-recurring cost or development that consist of Hardware, purchase software and labour, and the recurring cost or operation and maintenance, as well as, the relation between cost benefice that would provide the information system.

“Information system costs are about two percent of revenue in a typical firm. Of this two percent the largest cost is people next come hardware followed by software and assorted other costs such a supplies”(Mallach 1989)

Using the above quotation we could get a cost estimate of under £500,000 over the revenue of 2004.

Nevertheless, the real cost of implementation of any information system is not a specific number, we could have a budget to invest in a system analysis for a period of time to get an estimated of the information system cost, on the other hand the highest cost is buying and application that fails to maintain the needs of company.

Figure 1. Marketing Information System for BT

8 CONCLUSION

BT is a very huge company and regarded as the industry benchmark for a long time.The main revenue growth source have always been the core businesses such as fixed lines and servicing them. However, this situation is changing with the introduction of mobile communication and internet communication. Upon that, BT has changed its strategies through that direction. Broadband is becoming the most important revenue source and marketing of these services is crucial for the growth of the company.

The effect of the decrease in fixed lines was the significant decrease in the market price. The company experienced its lowest market price in September 2004 at £1.85. This is a very huge down turn and the company should do something to level off this problem.

The solution assigned can be summarized into some points like implementing a more customer focused to increase the loyalty of customers, enhancing the number of broadband subscribers and giving them high quality service, shifting to a more aggressive and creative marketing strategy and changing the networks which will be compatible with the global requirements of communication.

In this paper, after the analysis about the company and future state of business, it was concluded that a marketing strategy based on the information flow backed by Marketing Information System could result in significant benefits for the organizational goal orientation of BT. Such a strategy can attract the investors upon future prospects and market price increase, and then BT would not be seen as an old and sclerotic organisation.

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