You are to produce a review of the strategic situation of BT Consumer

Introduction You are to produce a review of the strategic situation of BT Consumer , a division of BT Group and the UK’s leading provid er of broadband services , based on the provided case studies BT, BSkyB and the UK broadband/payTV industry 2014 (A) and (B) . This review should take the form of a business report – NOT an essay. Some of the things that you have been expected to include in your essays in the past should not feature in this report. In particu lar: ? Business reports do not include Harvard references . You should not include Harvard references to material drawn from the case studies or core textbooks . ? You should not waste words on describing the theory . You can show you understand it by using it co rrectly in your analysis . ? You are unlikely to get any credit for a critique of the theory. That is not a skill we are testing here. ? You are not expec ted to supplement the case studies with other facts, and you will not get extra marks if you do. We do not test your research skills in this assessment. In you r review you should use theory from the module to: ? Examine BT Consumer ’s business environment ? Analyse B T Consumer ’s current strategy , including its culture, structure and HR strategy Module No. SG6001 Module name : Competitive advantage from Innovation Coursework component: 1 2 ? Appraise the strat egy – how well does it fit the environment, and how likely is it that the company can sustain competitive advantage? This assignment relates specifically to BT Consumer. You should only discuss other parts of the BT Group if what you say is relevant to BT Consumer’s competitive position. Learning Outcomes assessed through this assignment: 1. Discuss the main external contextual factors influencing an organization's competitive advantage and the HR function 3. Appraise the fit of firms’ structure, culture and HR strategies to their competitive strategies 4. Develop rigorous analyses of a firm’s business environment and the implications for competitive advantage and the management of people within private, public and third sector organizations 5. Conduct de tailed analysis and appraisal of a firm’s strategy 7. Communicate complex ideas and analysis in forms suitable for an informed business audience. Details of the task Assignment Instructions Structure You have been asked to produce a management report. It should contain the following: ? Title Page, including the given title in full ? Executive Summary (No more than 20 0 words) o This should summarise your main findings and conclusions . It is not the place where you tell us the contents of the report – that happens in the Introduction ? Contents Page ? Introduction ? Main body, which should also be organised under appropriate headings. You are recommended to use the ones in the Assessment Criteria (be low) ? Conclusion ? Appendices, which should be numbered o Make sure you refer your reader to them as required ? Word count; excluding appendices and reference list . You are not required to provide recommendations. Presentation Your work should be word processed in accordance with the following: ? Font size 12, 1.5 line spacing BT, BSkyB and the UK broadband /pay TV industry in 2014 (A) This case study was prepared by Adrian Haberberg from published sources, for the purposes of classroom discussion and student assessment. It is not intended to furnish examples of good or poor management practice. © Adrian Haberberg and the University of East London, 2014 In November 2013, BT, the UK’s leading provider of fixed line telephone and internet services, sprung a major surprise. It was announced that it had outbid BSkyB for the right s to show live matches in the Champions League, the most prestigiou s European association football tournament. BT had already caused a stir in June 2012, when it outbid BSkyB for live broadcast rights for 37 association football matches in the English Premier League. But in terms of financial commitment, and also in terms of the likely disruption to BSkyB’s business model, this was of a different order of magnitude. What did it portend for the competitive landscape in pay TV, and broadband – for the two indus tries wer e rapidly becoming one? UK broadband and TV At the end of March 2014, there were 22.8 million home and small business broadband connections in the UK. This figure was growing at the rate of around 4% per year 1 . The proportion of adults with some form of internet access was stable at 77% of the population. An increasing number of hou s e holds , just over 6 million , were using superfast broadband (delivered either via a cable service such as Virgin Media, or through a fibre optic c onnection) was growing strongly , by over 50 %. It was not just that access to such connections becoming more widespread – it wa s a vai l able to around ¾ of UK homes. T he proportion that had actually taken ou t superfast contracts had risen sharply to just under 27% , up from 18% a year earlier 2 . People wanted fast connections to download and stream mus ic and video , from subscription TV channels devoted to sport, movies and blockbuster TV series , and from vi deo streaming services such as Netflix and Lovefilm . The BBC, the UK’s national broadcaster, had made a large amount of content available for free via its iPlayer software application (“app”), which work on a wide variety of devices. The other free - to - air UK channels had followed . It was not necessary to have the internet in order to receive live TV . A round 50 digital TV channels were broadcast across the airwaves, using a system known as Freeview. A basic Freeview receiver was embedded in all TV sets sold in the UK, or could be bought separately for less than £25. More expensive devices (£120 - 150) gave viewers the capacity to record programmes, or pause and rewind them while they were being watched. Some offered access to a slight ly larger selection of channels using a system known as Freesat, which required users to install a satellite dish. But most of these more expensive devices , and many mid - and high - end TV sets, could be connected to the internet, and featured apps for iPl ayer and other free services, such as YouTube . Some also served as gateways to subscription services of various kinds , offering apps for gaming sites and streaming services . Broadband access was needed to use any of these internet - based services, and faster broa dband significantly improved the user experience. People were increasingly using the same providers for their TV, broadband and fixed line telephone services. It was becoming the norm for service providers to offer all three of these services – the “triple play” . Virgin Media and TalkTalk offered the “quadruple play”, including mobile telephone services as well . BT was poised to join them , in partnership with EverthingEverwhere (EE) . EE , originally a mobile phone provider, had moved into the fixed broadband market and was poised to launch a TV service 3 . Broadband providers Chart 1 shows the market shares of the largest providers at the end of 2013 4 : The five major providers differed somewhat in their approach to the broadband and TV market. BT * BT ’s leading position in the UK broadband industry c ould be traced back t o its roots – it was once publicly owned and the monopoly supplier of fixed line telephones . However, its share of that market has shrunk t o 30% , and Sky had wooed away many broadb and customer s . BT launched a pay - TV service in 2006, but b y 2012, it was estimated to be losing 200,000 customers to Sky every quarter , mostly people who already subscribed to Sky’s satellite TV service 5 . Its fig ht back involved a substantial upgrade to its TV offering. Firstly, it rolled out the YouView set - top box, which offered many of the * note that more details of BT’s strategy will be available in a separate case study 31% 20% 15% 20% 3% 10% Chart 1: Market share of internet service providers BT Virgin Media TalkTalk Sky EE Others 1 BT, BSkyB and the UK broadband/pay TV industry in 2014 ( B ) This case study was prepared by Adrian Haberberg a nd Elaine Yerby from published sources, for the purposes of classroom discussion and student assessment. It is not intended to furnish examples of good or poor management practice. © Adrian Haberberg and the University of East London, 2014 BT Group When BT first appeared, as British Telecom, in 1980, it was the monopoly supplier of telephony services in the UK, a subsidiary of the Post Office. It was privatised in stages during the 1980s and assumed its present identity when the industry was opened up to full competition in 1991. The compan y ha d diversified considerably from those early beginnings. In October 2014 it had five lines of business: ? BT Global Servic es had been built by acquisition during the 1990s. Its business was the provision of networking solutions to large international organisations ? BT B usiness provided voice telephony, networks and broadband to SMEs and larger firms in the UK and Ireland ? BT Wholesale sold communications products, mainly to other telecoms firms, such as mobile operators, in mainland Great Britain ? Openreach (see the (A) case) was a regulated utility that provided telephone linkages between telephone exchanges and subscribers. ? BT Consumer is the main focus of this case study. It sold voice, broadband and TV services to UK households. Services include d cloud storage and over 5 million wi - fi hotspots in the UK . BT also owned Plusnet, which operated as a separate company. Plusnet s old broadband services in competition with BT, and ran branded internet services for firms such as John Lewis. The following figures show the revenues and EBITDA by line of business: Source: BT (2014) Annual Report, p. 30. Note that some of Openreach’s revenues are internal sales to other BT businesses . 2 In addition, BT has 13,500 employees in BT Technology, Service and Operations, which manages networks and systems for the five lines of business. It also undertakes R&D and manages BT’s patent portfolio. The following figure summarises financial results for the past three years . By revenues, BT was ranked 421 among the world’s largest companies 1 , and was the world’s 18 th largest telecoms firm 2 - of UK players, only Vodafone was larger . On 31 March 2014 it had cash reserves and investments totalling £2.5 billion, having generated about the same sum in free cash flow during the year. Source: BT (2014) Annual Report, p. 8 . BT Consumer BT’s leading position in the UK broadband industry could be traced back many years . The company’s broadband offering first appeared as an add - on to its fixed - line telephone service, and the company’s high broadband market share derived from its dominant share in fixed - line telephony. How ever, its share of that market ha d shrunk to 30% , with the UK government encouraging competition in the sector for the sake of national efficiency. I n any case it was unlikely that profits could be extracted from “plain old telephone services”, as the indu stry refer red to them , for much longer . Although modern internet protocol (IP) technology ha d reduced the effective cost of a telephone call to almost zero, the price, led by operators such as Skype, was likely to fall to the same level. This insight led BT to a realisation that in order to make decent returns, it would need to sell services, rather than simply provide connections. All five of its business lines had grown in this way, and the consumer business was no exception. The move into pay TV was a l ogical extension of this strategy. The investment in sports rights, t he recruitment of well - known presenters and the building of an ultra - modern studio in London’s Olympic Park were a strong signal , to the world in general and BT’s own staff, that the com pany was in the TV business for the long term. The first words of Jake Humphrey, BT’s lead sports presenter were “ we are where Sky were 20 years ago” . The He ad of BT Vision was quoted as saying: “ We are a very different proposition than ESPN or Setanta. 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