How effective can Financial Performance Analysis be?
With heightened competition, market concentration and regulation, British Telecom (BT) has employed a number of tactics to maintain profitability, market share and overall financial performance. As leaders of info-communications and worldwide ventures, BT have been contracting part of their operations, services and transferring responsibility to specialist branches, thereby achieving economic efficiency.
Manoj Kumar, a supply chain consultant claimed, "Most of the outsourcing that's happening has been triggered by cost, and if you want to minimize cost, it's mainly going offshore" (www.industryweek.com). For example, in India the IT workforce is estimated to rise to 2.2 million worker by 2008 from a mere 280,000 today (McKinsey Report, Ethicalcorp Magazine, www.ethicalcorp.com). BT have been fortunate to benefit from economies of scale in terms of purchasing, financial, marketing, technical and managerial improvements. Reducing costs simultaneously reduce risks helping to free financial resources. Instead of tying up resources in non-core areas they can be contracted at operational expenses. Contracting part of BTs services has been a viable choice rather than building functions from scratch. In doing so, BT have increased their customer base and re-attracted customers who left in the first place due to inherent inefficiencies. BT have benefited from 25% increase in its most recent financial quarter (www.cbronline.com/article_news). Likewise, many banking services from Barclays to HSBC as well as I.T. companies including Microsoft have followed the same suit indicating a rising market trend. In 2005, BT derived 91% of its revenue in the UK by providing communication solutions for homes and business helped by rising demand for broadband internet services. Financial statistics reveal: profits up by 32% in 2005 - a clear indication of improved market performance. In the Global market BT have experienced immense growth and promises to continue ‘develop[ing) our acquisition strategy, invest in our people, our skills and our global capabilities and unlock the value of our acquisitions and partnerships’. BT remains one of the market leaders in telecommunications. It started its journey as a state-owned enterprise. Following its privatisation in the 1990s shows a gradual shift in restructuring operations and management in achieving economic efficiency thereby improving financial profitability and performance with an entrepreneurial flair. It seems that BT have found their ground transforming its unstable performance to an innovative and booming market performer.
BT’s quarterly newsletter for industry analysts, Issue 4, June 2006
McKinsey Report Ethicalcorp Magazine, www.ethicalcorp.com
Papers For You (2006) " P/F/461. Operating and Financial Review", Available from http://www.coursework4you.co.uk/sprtfina45.htm [22/06/2006]
Papers For You (2006) "P/F/455. Report on business and financial performance of BT", Available from Papers4you.com [21/06/2006]
About the Author: Copyright © 2006 Verena Veneeva. Professional Writer working for http://www.coursework4you.co.uk