assignment business environment

Department for Business and Management Studies Business Environment Coursework Assignment

ICON COLLEGE OF TECHNOLOGY AND

MANAGEMENT

BTEC EDEXCEL LEVEL 5 HND IN BUSINESS

UNIT 1: BUSINESS ENVIRONMENT

DATE: 17/07/2013

Submitted to: Sandhya S. Thirunagari Submitted by: Elena Diana Cosa

Student ID: 200311618

Student ID: 11618 of 17


TABLE OF CONTENT

INTRODUCTION……….. 3

TASK 1…………………… 4

TASK 2…………………… 7

TASK 3…………………… 10

TASK 4…………………... 13

CONCLUSION………….. 15

REFERENCES………….. 16



INTRODUCTION

Incorporate in 1846 as The Electric Telegraph Company, BT Group is the oldest

telecommunication company. It is the first company with network communications. The

company was under total control of government until. In 1982 the government announced

formally the intention to privatize the company and 51 per cent of shares was sold to the private

investors. Two years later 50 per cent of shares was sold to the public and now BT is Public

Limited Company.

BT Group is active in 170 countries and is the leader on telecommunications. The company is

listed on London Stock Exchange and New York too. BT Group provides telecommunications

services to customers in the UK and globally. Their main activities are the provisions of fixed-

line services network IT services, mobile and TV products and broadband.

Just like any company the BT Group has competitors and some of them are: Company Talk Talk,

Company Sky or Vodafone.

I chose this company for my project because of company history and a leader in

telecommunications. In the following pages I will analyze this company in terms of business

environment.



TASK 1

Task 1a

Business can be part of two types of sectors:

1. Private Sector - here businesses are controlled by one or more than two individuals. This

sector has different types of businesses:

- Sole Trader. Is a very common type of business in the private sector. There is only one

person in charge that has full control and keeps all the profits. One of the disadvantages is the

unlimited liability. Because the person is responsible for everything the person pays for the loses.

- Partnership. Is an agreement between two or more persons. They share the profits and

the responsibilities. Like sole traders one of the disadvantages is unlimited liability for all

partners.

- Limited Companies. One or more people can be director, must be registered with a

name and has limited liability. Here is two type of business: Private Limited Companies (tend to

be a small business run in family and is not listed in stock exchange) and Public Limited

Companies (listed on the stock exchange because to sell of company shares to general public).

- Cooperatives. Many people who have something to sell form it. The profits are shared

equally between all members. All the members have a equal right to vote. Some of the

advantages are the tax and benefits from government.

- Franchises. It is a contract between one franchise and one firm. The firm can use the

logo and the all products of the franchises with all responsibilities.

- Charity is a voluntary organization in business. In charge are people who are voluntarily

work by not getting paid for their services.

2. Public Sector. This sector is funded and controlled by local or central government.

UK examples in public sector are: HMRC, NHS, Schools, Social services, Public Libraries,

Police. Their mission is to inform, to protect and to educate the community. Each department

controlled by the government has different missions and goals.



In the following lines I will make a comparison between BT Group and Company Talk Talk. I

will explain their goals and what strategies are used to grow their business.

BT Group believes in a better world with good networks telecommunication and new

technologies with the help and the employees’ experience. The company aim is to create

connections and new possibilities, in this way their business can grow. This is the difference they

make every day.

To stay a leader in the telecommunications BT is following these six strategic steps:

1. “Driving broadband - based consumer services,

2. Being the “ Brand for Business” for UK SMEs,

3. BT Global Services - a global leader,

4. The wholesaler of choice,

5. The best network provider,

6. Responsible and sustainable business leader.” (bt, 2013)

Talk Talk is new in telecommunications market. The company is following a plan based on five

strategies. These are:

1. “Integration of customers gained through acquisition,

2. Improving our operating efficiency and effectiveness,

3. Delivering value for money quad play services,

4. Growing our range of data services for business,

5. Offering fiber access.”

By pursuing these strategies, Talk Talk wants to extend their area of work and develop new

exciting products and new services to attract new customers. (talk talk, 2013 )

Although both companies are in the telecommunications market the objectives are different from

each other. BT Group wants to create new relationships keeping the leadership status in global

telecommunications. In comparison Talk Talk wants to grow and expand the working area. Each

company wants to grow and be the first choice on the market and they do this by following

different strategy and having differing aims.



Task 1b

Stakeholders can be individuals, organizations or groups that are affected directly or indirectly

by the business. Stakeholders can be internal like the employees and external like the

government or the pressure groups. The primary stakeholders in each company are customers,

employees and shareholders. (Lecture notes)

BT Group has a good relationship with the stakeholders. Engaging with their stakeholders it’s

vital for BT in managing corporate responsibility. By doing this, company is increasing their

understanding of stakeholders’ views and expectations. This helps the company to improve their

strategy, processes and products.

BT Group has six particular groups who are important and these are: customers, employees,

investors, partners, suppliers, and community. One of the company engagements is the dialogue

with all stakeholders.

For example, the employees have the opportunity to express their views and opinions on a range

of issues at local, divisional and company level through an annual employees satisfaction survey.

In the case of the customers to provide them a good service and to keep them satisfied, BP

communicates with them using phone calls. By doing phone calls the company finds out what is

the expectation of the customers and the company will achieve what the customers wants and

keep them satisfied. (BT, 2013)



TASK 2

Task 2a

Every country has their own type of economy. Types of economies can be:

- Free market economy is where the government is not involved. The consumers and producers

preferences decides: What, How, and for whom to produce? In the world the US is the closest

country to have a more free market type of economy.

- Command economy is where the government and their employee decides What, How, and for

whom to produce. In the world North Korea has a command economy, where the government is

in control of everything.

- Transition economy is changing from a command economy towards a free market economy. A

good example is China where the economy is changing from a command economy towards a

free market economy.

- Mixed economy is where the government has a little control of the economy.

The UK has a mixed economy where the government has a little control. The government

allocates resource through the companies it owns in the public sector. Competing in the UK there

are many private companies from everywhere.

One of the advantages for BT to be in this type of economy is that it can choose to provide what

services is more profitable. Some of disadvantages are that the company must share the market

with other companies and obey government regulations.

BT Group knows how is to be owned by government and be a private firm. UK economy is more

advanced technologically than North Korea. For BT it’s a good thing because it can offer

advanced broadband Internet services that people need.



Task 2b

The UK government manages the national economy with monetary and fiscal policy. The

government uses the monetary policy to keep the inflation low and minimize the level of

unemployment. The influence of fiscal and monetary policy on a company like BT could be

positive or negative.

Bank of England has the responsibility of monetary policy using the Monetary Policy

Committee, which is formed by nine members. MPC studies the inflationary trends in the

economy looking at range of economic variables such as: unemployment, house price, exchange

rate index and others. From these statistics MPC decides if is necessary to increase, decrease or

leave the interest rate the same. To keep the target of inflation at 2%, the bank of England may

have to increase the interest of rate and that is a bad thing for BT because the rates of the

creditors must to be increased.

Fiscal policy is the use of government spending and taxations to influence the economy; the

government is including taxes for everything. The government this year is changing the structure

of fiscal policy. In the new fiscal policy the government wants to spend £250bn to extend the

superfast broadband in the rural areas (BBC, 2013). This will affect BT in a good way meaning it

will create new lines of telecommunication and their profit will be increased.

A negative impact on BT can have the VAT increase. 2013 UK fiscal policy does not include a

VAT increase and BT will not be affected.



Task 2c

In the UK the purpose of competition policy is to ensure a fair competition between businesses.

Office of Fair Trading (OFT), Competition Commission (CC) and The Secretary of State has the

right to investigate businesses when they try to merge or use methods like price-fixing that will

affect other businesses and consumers.

Ofcom is an independent organization which makes sure that people in the UK can get the best

from their communications services and are protected from scams and sharp practices. BT was

investigate by Ofcom many times, because BT competitors complained to Ofcom for many

reason such as BT abusing of power, became an monopoly or increasing the price to fast

(Ofcom, 2013).

Talk Talk made a complaint against BT group at Ofcom for reason of abusing a dominant

position under UK and EU competition law by increased the wholesale price of broadband. This

investigation was opened in May 2013. After the investigation, Ofcom decided not to cut the BT

superfast broadband price and not impose the price controls on BT Group because it did not

affect the consumer. According to The Telegraph newspaper, Ofcom will maintain an existing

requirement on BT to offer access on fair and reasonable terms but that strict wholesale price

controls could undermine the economic case for rollout of fiber optic cables (Williams, 2013).

In 2012, in a dispute between BT and Ofcom about BT claiming that pension costs and deficit

repair contributions are relevant business costs, the CC ruled in favor of Ofcom. BT cannot

include these costs in the base cost (Dalton, 2012)

The regulatory framework in UK can have a positive or negative affect on BT profits. Although

it may negative impact, keeping the customers happy will become a positive impact on the

company as well.



TASK 3

Task 3a

There are four types of market structure. These are:

1. Perfect Competition. This type of market structure is only in theory, doesn't exist in reality. In

a perfect competitive market are “n” sellers and “n” buyers and there are no barriers to entry and

exit market.

2. Monopolistic Competition. This type of market structure is similar with perfect competition;

the difference here is the buyers are identifying the sellers in different ways like looking at the

price and quality of similar product.

3. Monopoly. In this type of market structure there is only one company producing and selling

the products.

4. Duopoly. In this market structure there are two companies producing and selling similar

products.

3. Oligopoly. These types of market structure are referring at the market who has selling

homogeneous or differentiated products. Here are few sellers on the market.

BT Group is part of oligopoly competition, because in the market there are a few companies who

are providing the same services like them: Talk Talk, Sky, Vodafone, Virgin Media and EE.

They are in competition with many companies but in the provision of the fixed-line service, two

major companies BT GROUP and Virgin Media share the market and this would make a

duopoly competition dominating the market.

In the Oligopoly competition a company can decide the price by looking at their competition. In

this type of competitive market the demand decides the production. BT Group demand curve is

elastic because if they increase the price of their products the demand will decrease; when the

price decreases the demand is increasing.



Task 3b

BT products are considered to be price elastic. This means that the consumer can live without

BT’s products. Because of their elastic nature the demand for BT services is more likely to be

affected by factors like price, income, substitutes, taste and fashion, advertising, the level and

structure of the population and the consumers expectations of BT products.

The law of demand says that when everything else is the same when if the price increases the

quantity decreases and the opposite. The demand for BT services can be influenced by many

factors. For example, if the people’s income is decreasing the quantity for BT products is

decreasing too. Another factor influencing the demand for BT services is the level and structure

of the population. In UK because of new immigrants coming in the population is increasing. The

demand for BT services or product is also increasing, that is a good thing for the company

because it increases the profits.

The supply curve is influenced by factors like technology, natural shocks, cost of the production,

expectation of the producers and social factors. In business the understanding is that when the

price is increasing the supply is increasing too.

Technology factor has a positive and negative impact on BT. Fiber optics makes for faster

Internet speed and people want that installed in their homes therefore BT has seen an increase in

the demand for his broadband installations.

In the graph the point where the demand curve and the supply are meeting together that is

equilibrium and each new point is a new market price for the demand and supply of the product.



Task 3c

Competition and the acceptance of UK of new people with different background cultures are

factors, which can influence the company in good or bad way. In the market of

telecommunication there are few strong players; Company Sky, Company Talk Talk or Virgin

media. For BT being on the market for a long time is an advantage because their trust with

people is much stronger. The competitors may provide services or products at lower price and

that is a disadvantage for BT, losing some of the customers.

In the last two decades in UK the competitor Sky dominated football transmission market. To

overthrown Sky, BT has introduced a new sport channels in the TV package. There will be live

football and other sports from other countries in Europe and global. Because of Sky high prices

is estimated that only one in five homes in UK take sports channels. BT’s new sport channel is

free with BT Broadband. BT have made it easier for people by offering three different ways to

watch: by using competitors satellite platform such as Sky, watching on BT TV and by watching

it online or on the mobile phone. For people who are deaf BT channels come with subtitles and

BT Vision channels have sign language interpreter.

To launch the new sport channels BT has set aside £100 millions for promoting and advertising.

According to Gavin Patterson, chief executive of BT Retail, the launch of BT Sport is an

important moment for the UK TV market. BT will shake up the market, which is great news for

sports fans whether their passion is football, rugby or any of the other sports we will be showing.

Fans will hopefully be cheering across the UK at the prospect of watching their favorite teams

for free.

In its financial results for May, BT revealed its pay TV customer base increased by 40,000 to

840,000 in the first quarter, placing it ahead of rivals Virgin Media and BSkyB, while total group

revenues for the quarter dipped 2% to £4.785bn (Durrani, 2013)

Apart from regular customers, for businesses BT offers BT Sport exclusive offers for pubs and

clubs.



TASK 4

Task 4a

The exchanges of services and goods between other countries its called international trade. The

price of foreign currency one pound can buy its called the exchange rate.

Changes in the exchange rate affects the price of UK imports and exports. An increase in the

value of pound means it can buy more dollars and the pound was appreciated having a stronger

value. When the value falls it means with one pound you buy less dollars and that is a

depreciation of the pound.

When the value of pound is depreciated it benefits the UK exporters. In the case of business that

import raw materials and foreign-made goods when the pound is depreciated companies face

higher costs therefore they will have to increase prices or reduce profits.

Globalization refers to the world becoming interconnected because of trade and cultural

exchanges between countries. . Globalization is a result of companies operating in many

countries, freer movement of goods, capitals and services. Globalization has a positive impact for

BT Group because now the company is bringing more profit from operating in 170 different

countries around the world.

Globalization has made it possible for BT to find cheap labor, access to new markets with

potential customers, and cheap raw materials. From globalization BT shareholders are the ones

profiting more and in certain areas customers have another choice in BT products.



Task 4b

European Union is an economic and political partnership between 28 countries in Europe.

Almost all member countries have adopted the single currency that is EURO. Some countries

like the UK have chosen to keep their own currency. UK sterling is stronger than the Euro. All

countries, which are in EU, must obey the regulation of the EU. The benefits of being in EU for

UK businesses are: increasing in market size, greater access to cheap factors of production, low

administration cost to trade and access to EU government contracts.

Communication regulation in each EU country is conducted by regulation determined by EU

directives and regulation and recommendation. The way and the speed of implementing EU

directives are different for each country.

In the EU, BT operates in key markets employing around 13000 people.

One of the EU directives affecting BT is the RoHS directive. This directive restricts the use of

certain substances considered hazardous in electrical and electronic equipment. As a result BT

have introduced DECT phones designed and manufactured to fully comply with the EU

directive.

EU Digital Agenda sets goals for broadband deployment across Europe that are challenging for

BT. The European Commission develops new guidance on access to next generation fiber access

networks and BT is supporting the policy which encourages innovation and competition.

The Commission addresses also the improvement of functioning of the Telecoms Single Market.

BT is supporting the commission to drive for a level playing field between countries, because BT

believes that full benefits of innovation are to be enjoyed not just by consumers, but businesses

as well.



CONCLUSION

I have chosen BT organization because of their longevity in the market of telecommunications.

During this assignment I learned a lot of things about the company and also how to apply the

business environment theory in practice. Sometimes it was difficult to find the resources but

overall I enjoyed the research while doing all tasks given.



REFERENCES

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