The Direct Control of the Organization - Coursework Example

 The Direct Control of the Organization Task 1: Macro environment analysis It is imperative for organizational managers to conduct a macro-environmental analysis of the zone in which it operates. It serves as the point of inception towards strategic analysis. The underlying purpose of such an analysis is for the managers to identify the available opportunities and the existing threats posed by the industry that are outside the direct control of the organization (Anderson and Williams, 2004; MacInnes, et al., 2002). The framework that facilitates the macro-environment analysis of a company is PEST framework. This framework serves as a robust foundation that enables strategists to comprehend the growth and fall in the market, market potential, business position and direction for operation. As a part of this assignment, the researcher will be primarily analysis the macro-environment of Virgin Mobile UK in view of highlighting the factors that affects its strategic decisions. Political Factors: Corporate tax rate is a factor that affects the financial performance of a company significantly. The corporate tax rate in UK during the time period 1999 and 2007 was 30% which was considerably higher than the corporate tax rate recorded during the time period between 2008 and present (Trading Economics, 2014). The amount paid as corporate tax depleted the margin of profit realized by Virgin Mobile in between 1999 and 2007 however, the company still managed to be highly profitable. Fig 1: UK corporate tax rate between 1999 and 2014. (Source: Trading Economics, 2014) Virgin Mobile UK targeted the pre pay customers within the age group 18-35. It enjoyed the advantages of mobile phone subsidies which gave them a three months payback as opposed to a three years contract. This regulation proved to be immensely beneficial for Virgin Mobile UK and was evident in the increasing profit margin for the company. Other political factors that influenced the Telecom industry in UK which in turn affected Virgin Mobile’s strategic decisions are: Bidding of five 3G licenses among 13 companies. Government policies that encouraged innovation and the use of technology. The significant role played by mobile phones in the ongoing elections in the early 2000s. The present political scenario in the country facilitates an environment of deregulation. As a result of that the intensity of competition in the UK telecom industry has amplified by a significant margin. The existence of a highly competitive environment has also increased the bargaining as well as negotiating power of buyers. Similarly due to the deregulation from EU front, the mobile market in the UK is expected to face steep competition from telecom companies based in other countries within Europe. According to the predictions of the company, the political factors in the UK telecom industry will be in favour of the company in the upcoming years which in turn would enable them to increase their customer base significantly and thus contribute towards an increasing turnover. Virgin Mobile has proved itself to be a formidable company of all the companies within the Virgin Empire and has also proven to be the most dynamic company in the UK telecom industry (BBC, 2003). Economic Factors: The inflation in UK resulted in the rise in demands for wages from staff members which in turn increased the cost of Virgin Mobile thereby deteriorating its profit margin. On the other hand the increasing disposable income of UK residents led to a gradual amplification of demands for products and services. These facts hold true for Virgin Mobile and are evident from the company’s growing sales over the last decade or so. The telecom industry in UK experienced an unprecedented level of growth during the period between 1999 and 2010, where the number of mobile phone subscribers increased from 15 Million in 1999 to a staggering 50 million in 2003 (Ofcom, 2014). This increase in mobile phone subscribers provided Virgin Mobile with the opportunity to target a specific customer segment and therefore Virgin Mobile benefited from this unparalleled increasing in the base of customers over that particular time period (Virgin Media, 2010). Thus, over the years, with a consistent increase in the number of customers, Virgin Mobile had the opportunity to tap the market of pre pay customers thereby offering them with simplified tariff structures which was relatively cheaper than the tariff structures provided by its rival companies in the time period that is being studied within this case study. The telecom industry in UK employed a huge man force that contributed significantly towards increasing the confidence of customers thereby leading to the growth of this industry. Owing to this growth Virgin mobile was largely successful in converting the potential customers into loyal customers thereby increasing their profit margin by a huge extent (MBD, 2011). Fig 1: UK inflation rate between 1999 and 2014. (Source: Trading Economics, 2014) As is evident from the figure given above, the rate of inflation has increased at a consistent manner since 1999. As a result of this inflation, availing products and services have become considerably expensive. This in turn has increased the demand for pay hikes by working officials. Therefore, the increased disposable income has amplified the purchasing power of residents in UK. This was evident during the period between 20036 and 2010 which noticed a substantial increase in the number of mobile phone subscribers. Thus, this increasing base of mobile phone subscribers provides Virgin Mobile with the opportunity to market and promote its products and services and widen its target customer base. Social Factors: The evaluation of social and cultural environment enables organizational managers to identify the trend in society beliefs, values, behaviour and norms. The identifications of these factors also enable companies to comprehend the impact that these factors have on their performance. The factors that are considered while analysis this particular segment are population growth rate, age distribution, career attitudes and so and so forth. Over the last ten years or so, GSM Mobile handsets sales have been growing at a rapid rate in the UK telecom industry and therefore had a direct impact on the usage and prevalence of mobile phones. There was increased focus on convergence of technology in the UK telecommunication sector which was significantly influenced by the amplified usage of mobile phones. Popularity of mobile phones was on the rise more than ever before particularly within the younger community in UK. This is precisely the reason why Virgin Mobile decided to implement a niche marketing strategy for its telecom offering and thereafter targeted the relatively younger customer segment. This strategy adopted by Virgin Mobile was quite contrasting to the strategies adopted by companies operating within the same industry. The advertisements were designed in such a way that they drew the attention of the youth and also implemented innovative ideas with the underlying aim of sharing common thoughts and beliefs. Technological Factors: Technological factors can be regarded as a key determinant of a company’s success precisely because it forms a major part of the business mainframe. Such is the same in case of Virgin Mobile as well. As far as the UK telecom industry is concerned, technological advancements have played a crucial role in bringing about unprecedented development. Such advancements have often benefited both service providers as well as the consumers. Virgin Mobile however focused more on enhancing its service offering instead of emphasizing on making technological advancements (Virgin Media, 2008). This is precisely because Virgin Mobile shared T-Mobile’s technical infrastructure in order to keep itself upgraded in terms of technological advancement (Virgin Media, 2007). A contract was signed between T-Mobile and Virgin Mobile where T-mobile was required to upgrade its telephony services to 3G network. This was an appropriate strategy adopted by Virgin Mobile (Virgin Media, 2006). Whilst T-Mobile was assigned with the responsibility of ensuring technological advancements in Virgin Mobile, the latter could allocate all resources towards improving the quality of its service offerings. Task 2: Internal environment analysis Key resources Tangible Resources Physical presence: As far as the key resources of this business segment of Virgin group are concerned, its physical presence has proven to be a resource that can be regarded as a fundamental determinant of the company’s success throughout the world. Operating in more than 40,000 stores in the US and as much stores in its home country (the UK) as well, Virgin Mobile has been largely successful in catering to the needs and requirements of enormously large base of customers (Reuters, 2014). Apart from providing service to customers in the UK and the US, Virgin Mobile has also benefited considerably by providing its products and services to the customers based in the emerging economies such Latin America, India, Mexico and so on and so forth. Given the fact that one of the primary objective of the company is to enhance the quality of its service offerings to the customers, Virgin Mobile has consistently emphasized on increasing its physical presence in order to make sure that no customers leave unaddressed (Virgin Media, 2013). The company believes in conducting face to face interaction with its customers as much as possible so as to be able to understand their expectations and tailor their products and services accordingly (Virgin Media, 2012). This belief of Virgin Mobile has become a reality largely because of the extensive physical presence that the company had been maintaining over the past ten years or so. Human Resource: As mentioned above customer satisfaction and customer retention has been the primary objective of Virgin Mobile throughout its operational life. The company has been largely successful in maintaining the same over the last ten years. This can be attributed to the highly trained and committed workforce employed by Virgin Mobile. Virgin Mobiles’ products and service offering are in complete alignment. Not only does the company design products according to the needs of the product but compliments the same by providing appropriate services with the help of highly skilled workforce (Kainazarova, 2014). The workforce is largely responsible for the technological advancements that the company has gone through over the past few years. Alongside that they have also been the reason of the widened customer base. Virgin Mobile has appropriate training and development programs in place which are directed towards preparing employees to provide appropriate customer service (UK Essays, 2014). Intangible Resource Brand image: Virgin Mobile is very well known for its enhanced brand image. This has largely been possible due to the quality of services that has been provided to the customers. The company enjoys extensive brand awareness owing to its wide networks spread throughout the world (Virgin Media, 2009). Known for mainly targeting the younger segment, the company’s logo as well as its advertisements is strictly meant for the customers between the age group 18 to 35 (Niche Media, 2013; Virgin Mobile Australia, 2013). Very well structured products combined with appropriately tailored services, Virgin Mobile as a brand has proven to be very dynamic in its own right and this has significantly contributed towards the ever growing customer base of the company (Virgin Media, 2011). That is why the brand image of Virgin Mobile, although intangible, but can be considered as a key resources that plays a pivotal role in ensuring that the company succeeds in achieving its objectives. Key capabilities Marketing: Virgin Mobile as a brand is known to be very stylish and original. The fundamental belief of the conglomerate was that no business is difficult and that the company had the ability to do it better than others by implementing effective marketing strategies as well as by incorporating value added elements within the service offerings. Virgin mobile has adhered to this strategy very closely and this has enabled the company to enhance the reputation of its brand significantly (Souppouris, 2013). Virgin Mobile has made a considerable proportion of investments on their advertisement campaign and these investments have been made from the sales revenue generated by the company (Virgin Mobile, 2012). The company believes in designing ads specific to its customer segment and that is why the advertisements are designed in an innovative manner (Chapman, 2013). Another major capability of the company is to utilize a chunk of its finances in order to sponsor high profile events (both sports and music) so as to achieve its marketing objectives. The TV commercials of Virgin Mobile were rated amongst the top few advertisements till 2004. The company also signs famous personalities to star in their advertisements in order to connect with the customers instantly (Campaign brief, 2014; DMG Radio Australia, 2014). Therefore, the underlying capability lies in the marketing team employed by the company which has given optimum effort in order to make sure that the company is represented appropriately in front of the audience. Product innovation: Virgin mobile has always been a pioneer in innovating new products and service offerings. It was the first company to offer tariff at a flat rate without any form concealed costs. The company was also the first to offer free voice mail service to its subscribers. The service provided by Virgin mobile enabled customers to carry forward their pre-paid airtime bundle on to the next month if they remain unused in the current month (Virgin Media, 2014). The information technology mainframe incorporated by the company enabled customers to make payments through cash, debit and credit cards as well as internet banking. The range of mobile phones sold by Virgin Mobile was wider than any other service providers during the time period between 2001 and 2010. The company also offered separate pay-monthly financing schemes to those customers who did not want to involve any form of contract. Virgin Mobile also emphasized a lot on the way their products were packaged in order to ensure that their customers had a hassle free buying experience. Sales and Distribution Channel: Virgin Mobile has successfully handled the sales and distribution of its products in an effective and efficient manner through its broad network of retail outlets (Virgin Mobile, n.d.). The company utilized its megastores in order to setup stores within stores so as to be able to promote its services and products appropriately. In order to ensure the same, dedicated specialists were recruited as sales representatives (Sawhney, Wolcott and Arroniz, 2011). The distribution and selling points were designed in such a way that they appealed to the customers and made them feel relaxed whenever they visited any of the outlets. The in-store representatives were provided with adequate training in order for them to be able to appease the customers that in turn added to the experience of the company. Task 3: Challenges faced while analyzing the internal and external environment One of the major challenges faced while conducting the PEST analysis was scarcity of data. The data was available in a fragmented manner and it was quite difficult for the researcher to correlate the data with the situation of the case study company appropriately. In addition to that another challenge that the researcher faced while conducting the microenvironment analysis was the restriction of components that could be included for analysis. This is precisely because, a company’s strategic decisions and financial performance is not only affected by political, economical, social and technological factors but also by other market wide factors such as environmental and legal. The restriction of word count also prevented the researcher from carrying out an extensive analysis of the factors which were actually included within the PEST framework. Moreover the researcher was also not able to include other market wide factors within that have a significant impact on the financial performance of the case study company. The market fluctuations were also not explained because of word count constraint within the framework for analysis. As far as the challenges faced while conducting the internal environment analysis is concerned, word count proved to be restricting factor in this case as well. The research could not explain the key resources of the company in depth and detail. In addition other tangible assets that form the part of a company’s key resources could not be incorporated within the analysis. Furthermore, there was no scope of conducting any comparative analysis. A comparative analysis with a competing company could have induced robustness within the research, but the scarcity of data prevented the researcher from conducting any such analysis. The financial performance of the company was also not evaluated properly. However, the same was necessary in order to ensure that having appropriate resources and capabilities did benefit the company as had been mentioned within the case study analysis. Reference List Anderson, J. and Williams, B., 2004. Unbundling the mobile value chain. Business Strategy Review, 15(3), pp. 51-57. BBC, 2003. Virgin Mobile reports strong sales. [online] Available at: [Accessed 30 July 2014]. Campaign brief, 2014. Virgin Mobile Australia enlists Glee star Jane Lynch to front new 'Make Mobile Better' campaign via Havas Worldwide Australia + One Green Bean. [online] Available at: Read More