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Strategic Management Level 3 Kensington College of Business, University of Chester

28 Pages 6954 Words 629 Downloads

Introduction

Vodafone Company is the global leader in mobile telecommunication and has a market in Europe, Africa, Asia Pacific, the Middle East and the United States.This has been made possible through various subsidiaries, joint ventures, investments and other associations. The company provides various services globally. In this project, there will be an analysis of the mobile telephony used for personal activities with the main interest in the main business of the company. Vodafone ahs various branches worldwide but for the sake of this report emphasis will be on the parent company situated in the United Kingdom. Since reference will be on mobile telephony, it can be referred to as a process that constitutes various operations such as manufacture, operation, and distribution of mobile devices. It also involves the distribution of additional services about mobile telecommunication.

  • In the current world, we are living in, mobile phones are not considered to as luxuries but are referred to as necessities. The rate at which mobile phones market is growing and their penetration are immense. The demand for mobile telecommunication is ever growing especially in the developing world like Africa and India. Vodafone has already identified this gap and enlarged its portfolio since the market potential is growing exponentially (BBC 2012).
  • According to evidence, the retail of mobile phones has grown to 15.4bn in the year 2008 which translates to approximately 2.7% increase in comparison to the year 2007. When it is compared to the amount in 2004, it is a 29.4% increase. Despite these facts, revenue has since stalled and this can be owed to the recession and market saturation. There are also reasons brought by immense competition with Vodafone competitors.
  • The competition is from network providers such as O2 and Orange and handset brands such as Apple, Samsung, and Nokia. The report will deal with the evaluation of the Vodafone's operating environment. Through this evaluation, it will be possible to point out key capabilities and resources, strengths, weaknesses, opportunities and threats. Through the knowledge gained, the appropriate recommendation will be proposed for strategic opportunities identified from the case study.

Vodafone's External Environmental Analysis

Macro-Economic Analysis

The project uses PESTLE analysis in the evaluation of the macro-environment. External factors have influenced how Vodafone operates. They usually include political/legal, economic, social, technological and environmental factors in the external environment of the company. All these usually have an impact on the way the company operates and ultimately the revenue.

Political Factors:

These usually include factors affecting the operation of the company such as tax policy, labor law, trade restrictions, and law on the environment, trade tariffs and the political stability of the environment of operation. Vodafone Company values the relationship it has with its clients and owing to this fact; the company has no problem shifting from unit pricing and tariffs units. It has gone ahead and adopted strategies that deliver the highest value to the consumers which in turn earns the company commitment, more balanced commercial expense or incremental penetration into the target market (MarketLine 2012).

Economic Factors:

Factors that constitute economic factors include interest rates, economic growth, inflation and exchange rates. Vodafone uses a pricing factor which ensures that customers get products and services at an affordable cost.

Social Factors: 

These factors include cultural factors especially due to health consciousness of the consumers. Other factors include the rate of population growth, the distribution of the customer age, career attitudes and focus on safety. Vodafone tries to generate products that are good and suitable for all age limits.

Technologic Factors: 

Technological factors are essential especially due to the technological orientation of the company's operations. They include automation, technology incentives and the rate of the dynamism of technology. The development of technology helps the Vodafone create more trust with the consumers due to the provision of high-quality services and products (MarketLine 2012).

Legal factor: 

There are different set of laws that are followed at diverse countries. It is important for Vodafone to make sure that they follow them sot that they will be able to develop positive perception among customers mind.

Environmental factors: 

When services are provided by the firm, then management of the organization should make sure that they do not perform any type of changes that might affect the environment negatively.

Key drivers:

Among all these the key drivers that has high impact over the firm is changes in technology. With time improvement in technology take place. There are similar organization like Vodafone which provide their customers with same products and services. When services provided by other firm is effective, then people make use of the services that are provided by them. In this context, it is important that cited firm make changes in technology as per the requirement.

Competitive Analysis

About Mexican Telmex which covers the entire landline and mobile sector market, Vodafone has done really good. Other competitors include AT &T and WorldCom. To sustain the competition, Vodafone deals with both mobile handset and service sector. Now Vodafone is leading in the mobile telecommunication sector. For any industry and market, customers are always a key factor, and due to the high competition, customers may choose any products from the competitors. This has prompted Vodafone to develop various products such as Broadband and 3G. Due to the diversification of the products, the company can penetrate the market and earn revenue.

Vodafone is a recognized brand nationally and the largest mobile service provider in the United Kingdom. This makes it possible for the company to enter new markets which are promoted by the brand reputation.

In order to conduct competitive analysis for the company. This is possible with the help of Porter's five forces. In this context, below given are the Porters analysis done for Vodafone:

Bargaining power of customers: 

The bargaining power of customers is very high as there high competition. Further, the is not much differentiation among the services provided. The cost of switching to other firm is also low.

Bargaining power of suppliers:

Power of suppliers is medium as there few suppliers. Further, there are no substitutes. Moreover, the switching cost of suppliers is very high.

Threats of substitutes: 

There is high threat from substitutes as there are many firms that provide similar services. Moreover, there are few organizations that provide 4G cards to their customers.

Threats of new entrants: 

New entrants to this sector is low as there is huge license fee. Further, the initial capital required is also high. In addition to this, the infrastructure cost is also high.

Industry rivalry: 

The rate industrial rivalry is high. This is because customers are not loyal towards signal brand. They sift on to other depending upon the services that are provided by the firm. Further, there is open market for competition.

Internal Analysis: Strategic Capabilities

Resources and Capabilities 

Vodafone is considered to have strong resources which can be divided into tangible and intangible.  Company financial reports have shown that the company has strong resources regarding finance with considerably high profits generated from its operations. This has made the company be able to do investments in R&D and extension of the company portfolio using M&As. Over time, this has allowed to company to have a larger market share in comparison to the competitors. The way the company has reorganized its assets makes it possible for the company to invest more and this increases the revenue generation (Mobile Network Providers, 2012). The successful extension of the company portfolio shows the strength of the company's reporting structure, formal planning, controlling and coordinating strategies. This success can also be outlined through the high rate of company innovation and low-cost base. The company has operations in a large size of the mobile telephony network and also claims ownership of the license for many mobile telephony markets.  

It can also be seen that Vodafone was responsible for the development of UMTS a next generation wireless standard which has made it possible to access voice and data in a common wireless network. This shows the company innovative nature and its strong intellectual property. The company can enhance their resources and their duty in the market through its emphasis on mobile telephony (Financial Times 2012).

Vodafone is a strong employer brand, and its human resources are great. For example, the company was awarded the award for the best customer care. The company employed 85000 people globally in 2010. Through this, the company brand is enhanced both as a network operator and an employer. Its workforce is diversified in that it has approximately 26 nationalities occupying the senior management positions. The organizational culture is also great with the provision of open communication channels. It evidenced by the 76% employee engagement score in 2010.

Vodafone has control over its resources, and this has made it hard for competitors to prosper. The company resources are linked to its competitive advantage. The local competitors lack strong intangible resources in comparison to Vodafone, and this has guaranteed the competitive advantage. The company has also implemented a low-cost strategy which despite low revenue margins and is compensation from other operations (BBC 2012).

VRIO analysis: 

This can be determined as an analytical technique in order to evaluate the resources of organization and to identify the competitive advantage. Below given are the dimensions of VRIO:

Value: 

The cost resources is very high as Vodafone needs to develop their tower so that people can be provided with high quality services.

Rareness:

The services provided by Vodafone is rare but there are firms that provide similar services. This makes the organization to focus on their quality of services so that more and more customers can be attracted.

Imitability:

It is difficult to imitate the resources as there are no other substitutes.

Organization: 

The firm is supported by many other services and these are helpful for the firm to grow.

Value analysis:

This a type of analysis that enables to identify the best value for the alternatives for process, design and system. This is generally done in order to reduce the cost and to make it use for other activities.

SWOT Analysis for Vodafone:

Strength:

· They have diversified geographical portfolio

· They make use of promotional tools to raise their brand awareness

· Their network is infra structured

Weakness:

· The present of US is very weaknesses

· Most of the business in Europe is soley

Opportunities:

· Making innovations

· Emerging market

· New technology

Threats:

· High competition

· Growth of monetized mobile data

Strategic Choice 

There are various strategic options for Vodafone. They include:

Marketing Strategy

From the evaluation, it is evident that the company has a weak marketing strategy. The company has mostly used generational marketing theory and demographics to appeal to its consumer section. It would be recommended that the company use a campaign where they would endorse a celebrity. This is line with ‘Power to You' which is the company's motto. The motto will be improved through the endorsement of a global persona participation in the advertisement campaign. It is essential to note that this strategy will, however, go against the company's aim of remaining simple in its business undertakings. The cons to this option are that the campaign may fail thereby wasting a lot of financial resources.

Health and Safety RJVs

The company can collaborate with Research Joint Ventures with other associations and independent organizations in the development of handsets which are safer. Vodafone has been known to use some of its revenue for the Vodafone Foundation. The company can join hands with RJVs which would improve its brand image. This strategy is in line with the sociological factors, and this will be a global brand which shows concern for local issues and cultural and legal requirements (Financial Times 2012). The strategy will also improve the company's corporate social responsibility. The disadvantage of this strategy is that the population may think that the company is recognizing the link of mobile products to cancer and this would consequently ruin the brand image.

Bottom of Pyramid Strategy in the emerging markets

Mobile Products Companies have recognized that most of the future customers will emerge from the rural area. Vodafone can adopt this strategy in that they develop an Internet-based phone service. It should have advanced Wi-Fi technology which will prompt demand from the developing country, especially in the rural areas. This will rhyme with the vision of the company which is to keep people better connected. This will sell the low-cost smartphones (Financial Times 2012).

Merge between 3Mobile and Vodafone

There is a proposition for the two companies to merge and this would allow customers of both companies to enjoy great value.

Ansoff matrix: 

This can be determined as road-map that enables the organization make their firm grow. There are four type of strategies that are included in this which are as follows:

Market penetration:

This is type of strategy in which improvement are made in their existing products and services.

Product development:

In this strategy, organization will launch a new services that are not been provided by them before.

Diversification:

New product is delivered at new location.

Market development:

In this strategy, firm will provide their services at new location.

Among all these strategies, cited firm can make use of Market development as there are many potential markets in which business can be established. Moreover, they can also make use of product development in which improvement can be made in the services provided by Vodafone.

Strategy Evaluation and Selection

Evaluation of Options 

This is a vital part of the strategic process irrespective of being incremental, implicit or an explicit stage within the process of planning. The evaluation of the strategies can apply the SAF module. Use the model that evaluates the strategic options against three major success criteria. These are:

  • Suitability which answers the question would make it function
  • Feasibility which answers the questions can it be made to work
  • Acceptability which answers the question will they work it
  • Selected option: Merge between 3Mobile and Vodafone

Suitability

Is the strategy viable? Yes

Is the strategy achievable? Yes

Does the strategy create competitive advantage? Yes

Feasibility

Are there resources and capabilities for development of this strategy? Yes

Does the company have previous experience in such a strategy? Yes

Acceptability

  • Would there be financial returns? Yes
  • Will the strategy be supported by the management? Yes
  • Will the strategy be supported by the staff? Yes
  • Will the strategy satisfy customer needs? Yes
  • Will there be non-compliance with the law? No
  • The strategy would bring returns and hence be selected.

Conclusion

There has been continued growth in turnover for the Vodafone Company of the years in addition to it being the largest mobile network dealer globally. The company has continued to innovate and develop new products and services. To be in line with the company's competitive advantage, there need be a continuous update of company products and services. This is consideration of the dynamic change in technology. The update will ensure that the company survives in the long-term.

The intangibles resources can be described as Vodafone's strongest resource. These intangible resources include human resource and help the company stay ahead of other market competitors. The company's managerial objectives have been aligned with the organizational goals. It has been possible for the firm to create awareness of the market and technology which it operates in. Due to the reputation of the brand, the company can still foster a better relationship with the consumers. The most important resources of the company are the huge knowledge and the knowledge it has in the mobile telecommunication industry.

Bibliography

  • BBC, 2012. Vodafone agrees takeover of C&W Worldwide.
  • Financial Times, 2012. Vodafone confirms talks with C&WW. obile Network Providers, 2012. Mintel.
  • MarketLine, 2012. Vodafone Group Public Limited Company, SWOT Analysis.    

Appendix

Appendix 1

2007 Financial Year Compared to 2006 Financial Year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Group

Group

 

 

 

 

Europe

EMAPA

Common

Elimina‐

2007

2006

% change

 

 

 

 

Functions

tions

 

 

 

 

 

 

£m

£m

£m

£m

£m

£m

£

organic

Voice revenue

 

17357

5089

 

‐70

22376

21405

 

 

Messaging revenue

 

2925

667

 

‐5

3587

3289

 

 

Data revenue

 

1300

138

 

‐10

1428

1098

 

 

Fixed line operators revenue

1397

75

 

 

1472

1290

 

 

Other service revenue

8

‐8

 

 

 

 

 

 

Total service revenue

22987

5969

 

‐85

28871

27082

6.6

4.7

Acquisition revenue

 

1004

381

 

 

1385

1295

 

 

Retention revenue

 

354

21

 

 

375

448

 

 

Other revenue

 

247

70

168

‐12

473

525

 

 

Total revenue

 

24592

6441

168

‐97

31104

29350

6.0

4.3

Interconnect costs

 

‐3668

‐1045

 

85

‐4628

‐4463

 

 

Other direct costs

 

‐1914

‐784

‐66

3

‐2761

‐2096

 

 

Acquisition costs

 

‐2604

‐677

 

 

‐3281

‐2968

 

 

Retention costs

 

‐1543

‐212

 

 

‐1755

‐1891

 

 

Operating expenses

 

‐5462

‐1472

206

9

‐6719

‐6166

 

 

Acquired intangibles

 

 

 

 

 

 

 

 

 

amortisation

 

‐22

‐392

 

 

‐414

‐157

 

 

Purchased licence amortisation

‐849

‐43

 

 

‐892

‐947

 

 

Depreciation and other

 

 

 

 

 

 

 

 

amortisation

 

‐2888

‐779

‐181

 

‐3848

‐3674

 

 

Share of result in associates

5

2719

1

 

2725

‐2411

 

 

Adjusted operating profit

5647

3756

128

 

9531

9399

1.4

4.2

Adjustments for:

 

 

 

 

 

 

 

 

 

– Non‐operating income of

 

 

 

 

 

 

 

 

associates

 

 

3

 

 

3

17

 

 

– Impairment losses

 

‐11600

 

 

 

‐11600

‐23515

 

 

– Other income and expense

1

508

‐7

 

502

15

 

 

Operating loss

 

‐5952

4267

121

 

‐1564

‐14084

 

 

Non‐operating income and

 

 

 

 

 

 

 

 

expense

 

 

 

 

 

4

‐2

 

 

Investment income

 

 

 

 

 

756

353

 

 

Financing costs

 

 

 

 

 

‐1579

‐1120

 

 

Loss before taxation

 

 

 

 

 

‐2383

‐14853

 

 

Income tax expense

 

 

 

 

 

‐2423

‐2380

 

 

Loss for the financial year

 

 

 

 

‐4806

‐17233

 

 

Loss for the financial year from

 

 

 

 

 

 

 

 

discontinued operations

 

 

 

 

‐491

‐4588

 

 

Loss for the financial year

 

 

 

 

‐5297

‐21821

 

 

 

Appendix 2

PEST factors, examples

 

 

 

 

 

 

 

 

 

 

Political (incl. Legal)

Economic

 

Social

 

Technological

 

Environmental

Economic

 

 

 

Government

 

regulations and

 

Income distribution

 

 

growth

 

 

research spending

 

protection

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rates &

 

Demographics,

 

 

 

 

 

 

 

 

 

 

 

 

Population growth

 

Industry focus on

 

Tax policies

 

monetary

 

 

 

 

 

rates, Age

 

technological effort

 

 

 

policies

 

 

 

 

 

 

distribution

 

 

 

 

 

 

 

 

 

 

International trade

Government

 

Labor / social

 

New inventions and

 

 

 

 

regulations and

 

 

 

spending

 

mobility

 

development

 

restrictions

 

 

 

 

 

 

 

 

 

 

 

Contract enforcement

 

 

 

 

 

Unemployment

 

Lifestyle changes

 

Rate of technology

 

law

 

policy

 

 

transfer

 

Consumer protection

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Work/career and

 

 

 

 

 

 

 

Life cycle and speed

 

Employment laws

Taxation

 

leisure attitudes

 

of technological

 

 

 

 

 

Entrepreneurial spirit

 

obsolescence

 

Government

 

Exchange rates

 

Education

 

Energy use and

 

organization / attitude

 

 

costs

 

Competition

 

 

 

 

 

(Changes in)

 

 

Inflation rates

 

Fashion, hypes

 

Information

 

regulation

 

 

 

 

 

 

 

 

 

Technology

 

 

 

 

 

 

 

 

 

 

Stage of the

 

Health consciousness

 

(Changes in)

 

Political Stability

 

& welfare, feelings on

 

 

business cycle

 

 

Internet

 

 

 

 

 

safety

 

 

 

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