Table of Contents
1. Introduction page
1.1 Company Profile - BBC page
2. PESTEL Analysis page
3. Strategic Analysis of the BBC page
3.1 Value Chain Analysis page
3.2 Porter’s Five Forces Analysis page
3.3 SWOT Analysis page
4. Conclusion page
5. Bibliography page
In the following report, the publicly funded British Broadcasting Corporation (BBC), which plays a major role in the worldwide broadcasting industry, is going to be examined. The PESTEL analysis provides a general overview of the environment, the company operates in. In order to present a solid strategic assessment, Porter’s Five Forces and the Value Chain analysis will be applied, so that the competitive environment can be illustrated.
Concluding, the SWOT analysis provides the reader with strength and weaknesses as well as potential opportunities and threats the BBC faces.
1.1 Company Profile
The BBC is worldwide the biggest corporation in the broadcasting sector (Crunchbase, 2011) with the mission “to enrich people’s lives with programmes that inform, educate and entertain” (BBC, 2011). It currently employs 22,800 people (Lyall, 2010). The British Broadcasting Company converted on 1 January 1927 into the British Broadcasting Corporation and is based on a Royal Charter and Agreement as a public service broadcaster, which allows the BBC to be on autonomous editorial terms and explains the public obligations the company has. The BBC is mostly financed by licence fees (£145.50 since April 2010), paid by UK households who own at least one television and offers apart from eight national television channels and ten radio stations also other services, such as BBC Online, BBC Mobile and various local radio and television stations (BBC, 2011 and Sweney and Robinson 2010).
The BBC Worldwide, the commercial arm of the BBC, made only in 2009, according to the New York Times (Lyall, 2010), a profit of $ 187 million before tax, which is returned into the BBC investment funds. It informs people around the world in over 30 languages.
2. PESTEL Analysis
In order to illustrate the external environment and factors the BBC faces, a PESTEL analysis was conducted.
Regarding the political environment, it has to be outlined that, the BBC is founded on a Royal Charter and controlled by a Board of Governors. However, its chairman assures that the BBC is operating with the public interest at its core. “I t must remain absolutely independent from political and commercial influence” (BBC, 2004). Hence, it is not reflecting any interest of advertisers or justifying its actions to shareholders. However, political policies do influence the BBC as the government controls the amount of the licence fee paid by the households. Furthermore, the BBC has to face pressure of the government as the licence to broadcast has never been issued for infinity and therefore conflict can certainly arise (Crisell 2002).
Considering the economic environment, it needs to be said, that the BBC does not operate on commercial grounds. As a national institution and non-profit organisation, it is funded by a licence fee, delivering over £3.5 billion a year (Sweney, M. and Robinson, J, 2010). However, due to the cost cuts in government spending, the BBC agreed to keep the licence fee at the current amount for the upcoming years and confronts now “a budget reduction in real terms of 16 percent” (Lyall, 2010). The New York Times (Lyall, 2010) calls this a “craving in to government demands”, so that a continued revenue stream is guaranteed. Nevertheless, the BBC’s notably high income is guaranteed. Comparing it to other economies, only Germany invests a higher share of GDP into broadcasting (The Economist, Jan, 2007).
Regarding the social aspect, it can be argued, that the UK has been a leader in a digital revolution and strives to enhance the quality of living by getting Britain fully connected and having people benefit from the cultural and social benefits of the BBC, not excluding anyone due to their financial circumstances (BBC, 2009).
Consumer behaviour has also changed in terms of the usage of new media. The internet is completely integrated in peoples’ everyday life. By being actively present on social network sites such as Twitter or Facebook, the BBC is reacting to this change.
Furthermore, the BBC has introduced channels for children till the age of 12, but it is challenging to attract more teenagers as the percentage of young people watching public-service programmes is decreasing drastically (The Economist, Jan, 2007).
The technological environment is changing rapidly and thus is consumer behaviour. Due to an increase in internet coverage all over the world, the BBC has enhanced its website, which is currently viewed by over 25 million people on a weekly basis (Lyall, 2010).
By integrating new technologies in internal work processes, the BBC is profiting from a major reduction in distribution costs as well advanced journalism opportunities brought by the internet. It becomes easier to identify news and stories that are worth researching (Krotoski, 2011).
Regarding the environmental issues, the BBC is following the upcoming environmental awareness and the global urge to protect the environment. Thus, environmental features have been incorporated. The BBC’s head office is supported by a rainwater harvesting system and water saving toilets. Disposable cups are not permitted in the office and they have a centralised recycling point for waste. There are many more features, such as energy saving lightning or the use of fair trade products, to name just a few. The corporation feels responsible to be aware of its environment and to provide fair and ethically correct services to the communities by respecting cultural diversity (BBC Worldwide, 2011).
The major legal issue for the BBC is the dependence on the government as the board of governors is still chosen by them and they decide on the amount of the licence fee. Critics argue that not even the whole amount of the licence fee is given to the BBC and might be held by the government for other purposes (Crisell, 2002). Furthermore, the broadcasting permission is only granted for a certain phase and never for infinity. The present Royal Charter is now in effect from January 2007 and will be renewed in 2017 (BBC, 2011 / Sweney and Robison, 2010).
3. Strategic Analysis of the BBC
Sustainability and competitive advantage are the major components in order to be successful within an industry (De Wit and Meyer, 2004). A company has to operate in a value adding manner so that competitive advantage can be achieved and sustained. Porter (1985) argues, that activities that add value to a company’s operations must be of a unique nature, outstanding the performance of the competition. Only with an extraordinary performance, imitation by competitors can be avoided or at least be held at a very low level (Armit & Zott, 2001).
3.1 Value Chain Analysis
The value chain analysis focuses on the primary and support activities of the company, which both contribute to the margin and thus value generation (Lynch, 2006). The Value Chain analysis was applied on the BBC as follows:
illustration not visible in this excerpt
Figure 1: Value Chain Analysis