Strategic Analysis of Vodafone Group - Example

STRATEGIC ANALYSIS OF VODAFONE GROUP Prepared by (Student’s Name) University Name Professor’s Name Course Date Table of Contents Executive Summary........................................................................................................3 1.0 Introduction & Company Profile.................................................................................4 2.0 External Analysis.......................................................................................................5 3.0 Internal Analysis........................................................................................................6 4.0 Porter’s Five Forces Analysis....................................................................................8 5.0 Competitive Advantage............................................................................................11 6.0 Core Competencies..................................................................................................12 7.0 Differentiation Strategy..............................................................................................12 8.0 Possible Strategic Alliances......................................................................................13 9.0 Conclusion & Recommendation for Future Strategies.............................................14 References.....................................................................................................................16 Executive Summary Vodafone Group enjoys substantial number of customers especially in the European markets. It is also fairly-positioned to exploit the already huge investments made in the markets in regards to both 3 & 4G network platforms. However, the Group is a faced with fierce levels of competition especially from other multinational companies like T-Mobile and O2, which command significant number of shares. To avoid the effects of competition like reduced revenues and higher customers churning rates; it has resorted to committing most of it resources to serving customers’ immediate needs as well as engaging in intensive innovative activities especially in areas related with application of technology. Recently, the Group is seen to have engaged in intensive partnerships with other international brands like Huawei and Conexus in order to gain even more customer base, and thus, to supplement this effort; it is recommended that it also positively emulate joint ventures while also decentralising functions to these ventures given that they understand local cultures. 10.0 Introduction & Company Profile The focus of this research papers is on strategic examination of Vodafone Group in regards to its external and internal analysis, five forces, and ability to go global as well as its immediate capacity to effectively sustain a workable and reliable competitive advantage. Vodafone Group is a telecommunication company founded in 1991 and has its headquarters in London; Newbury, Berkshire. It is considered to be the second largest multinational telecommunications company in the globe in relation to both customers-size and revenues. Considering that it is a public company; it is listed in both London Stock Exchange as well as NASDAQ. The company has operations in more than 26 countries across the globe with additional 50 additional countries (Trebling, 1995). The Group’s Vodafone Global Enterprise section offers telecommunication as well as IT-based services to business clients in more than 150 countries. For instance, in the United States of America, the Group offers similar telecommunications services as in London under the Verizon Wireless brand. Some of the most notable products offered by the Group include; fixed lines, mobile telephone services, internet and, also digital television-based services. As at 2015, the Group had more than 100,000 employees; a number that significantly indicate its expansion rates to the international markets (Trebling, 1995). It is important to note that Vodafone Group is organised and managed under two geographic regions- Europe and EMAPA; with Europe being the focal growth point of the Group given that its generates at least 79% of the overall revenues enjoyed by the entire company as a whole. 2.0 External Analysis Opportunities The fact that the company has sufficient number of customers in Europe that are sophisticated in nature and ageing, posit an opportunity to conduct successful market segmentation and exploit certain profitable from these segments. The opportunity can be improved further by ensuring to adopt different strategies like the provision of simple mobile gadgets and simplified pricing undertakings to the ageing customer-base while offer more advanced and sophisticated mobiles gadgets and applications to the younger generation of the consumers (Nardotto, Valletti, & Verboven, 2015). Of particular interest to note, Vodafone can successfully embrace the existing international growth and expansion strategy to enter into the present aggressive fixed-line services while at the same time make sure to exploit the benefits of the high investments in 3 and 4G technologies already in place in these markets (Mihăilă, 2012). In addition to this, Vodafone has undertaken initial steps to develop and grow strategic alliances for the purpose of coming up with customised solutions for all its customers. A most recent example is the partnership with major supermarkets lie ASDA to develop and launch ASDA-branded mobile service within the United Kingdom and another with the major electrical retailer DSG International to offer customised mobile solutions to corporate clients (Mihăilă, 2012). The opportunity can be further improved and enhanced in order to avoid the possibility of being a late-entrant in this new approach of distribution that seeks to extend the existing customer-size. Threats The entire European section of the market is marred with intensive levels of competition. The impact of such notable brands as O2 and T-Mobile have continued to capitalise on the existing price elasticity within the market to develop and grow a much stronger brand image and higher presence within the market (Mihăilă, 2012). There has been an increase in the level of indirect competition especially with the launching of new applications meant to reduce costs of communication like Skype. The existing restrictions posed in most part of the globe posit a threat in regards to the company’s expansion strategy. These restrictions are likely to put a limit on the capacity to increase tariffs for the provider; a factor that will likely prevent price cuts that could harm the bottom line profitability objective of the entity (Mihăilă, 2012). This threat can be eliminated by the company engaging different government agencies to come up with user-friendly tariff operations. 3.0 Internal Analysis Strengths The fundamental strength of the company in relation to its telecommunication services rests with its brand image and reputation within the industry as a whole. Considering that it has successfully established a global presence while at the same having ensured to have invested widely in its current marketing strategy that promotes a Vodafone-lifestyle; sets it way ahead of competition (Nardotto, Valletti, & Verboven, 2015). The fact that Vodafone has a significant presence in countries cutting across Europe, America and Asia has fostered its brand image. Customers are able to travel even abroad and still enjoy services offered by the operator in these different sections- a mechanism that ensures to protect its revenue sources (Nardotto, Valletti, & Verboven, 2015). The opportunity can be profitably-adopted especially in countries where the company does not enjoy a presence like in Norway; where it can make sure to establish a strategic alliance with local operators to provide better services for its mobile customers. Consequently, the fact that the company enjoys massive growth in both home and international markets has made it possible to attract newer customer base. Presently, it is ascertained that the company is one of the leading telecommunications entity across the globe in terms of both customer-base and revenues hence the ability to develop new infrastructure continues to attract the better services being offered. Notwithstanding, sufficient revenues posted each year has made it certain for the company to engage in product development and research-related activities – a component that has worked effectively to retain existing customers while attracting others into using the services offered only by the firm. A perfect example lies in the company’s ability to transform and replicate one of its paramount developments in Kenya-M-Pesa, a mobile money operational feature that has been redeveloped and transformed into the Afghanistan market under the M-Paisa brand. Weaknesses The underlying expansion strategy of the company into a global leader has been executed at the expense of direct control for most of its operations. This has resulted to a localised control mechanism that has resulted to inflexibility of operations. In fact, the expansion strategy focused on growth and development through acquisition of other national telecommunications companies like Cesky Mobile in Czech Republic (Nardotto, Valletti, & Verboven, 2015). The strategy resulted to increase in the level of customers-base and provision of exceptional direct marketing knowledge but the expense of direct and effective control of these internationally-placed subsidiaries. Subsequently, given that the UK headquarters is tasked with the responsibility of determining the sole vision, mission and marketing strategies to be followed by all of its subsidiaries resulted to a centralised control that failed to note and take care of the local markets differences- a feature that resulted to the dwindling of the market shares by local small competitors that understood the ever-changing tastes and preferences of local customers (Nardotto, Valletti, & Verboven, 2015). The current high level of saturation of the company’s operations in Western Europe market has fostered in intensive price elasticity, which has lead to high customer turnover rates especially within the United Kingdom. To eliminate its overreliance on a centralised control model- it should allow autonomy of these markets where tastes and preferences for local markets are captured and nurtured well for the purpose of meeting customer’s needs. Different market niches have a liking for different preferences for products and services thus; the firm should make sure to accommodate customer’s expectations in their respective marketing strategies to reduce possible pressure to make profits at the expense of customer’s needs. 4.0 Porter’s Five Forces Analysis Threat of Buyers It is important to understand that the recent developments witnessed within the mobile service sector lies in the enormous enlargement of subscribers especially in the developed and developing economies; this despite the high degree of penetration. There have been significant improvements in the percentage of buyers from 21% to 26% in the period between 2002 and 2006 while 2007 earmarked a 3B plus customers across the globe (McGee, Thomas, & Wilson, 2005). In mature telecommunication markets, operators are exposed to intensive level of competition especially since consumer demand is high for different features. This has resulted to most of the companies cutting down on costs while transferring accrued benefits in the form of price cuts to end users; customers. In the recent years, customers have continued to portray great deal of sophistication hence need a broader array of services that telecommunications companies are required to offer that includes; broadband, data availability and 4G network platforms Rivalry amongst Companies Considering the fact that the European telecommunications market is highly saturated and regulated, there exists intensive levels of competition as the emerging markets presents a viable platform for the big giants including Telefonica O2, Orange and T-Mobile; which are also the most viable competitors for Vodafone (Sutherland, 2014). 3 is a recently newly incorporated competitor within the European market especially since it pursues a marketing strategy of low product and services pricing while still sustaining intensive innovation features like the Dual Download (McGee, Thomas, & Wilson, 2005). In consequence, there has also been intensive levels of tariff rate competition especially with the emergence of mobile virtual network operator; a model that seeks to explore market saturation while being enhanced by increased efforts of suppliers to locate alternative solutions to a remnant of unexplored potential end users. The European market has experienced intensive competition, which can be noted with a high degree of mergers and acquisitions of large companies. Threat of Substitutes The fact that the telecommunications sector does not enjoy a stable market boundary has resulted to entrance of new operators that offer similar products like in the case of fixed-mobile line conversion. Sutherland (2014, p.10-13) notes that there has been increased growth of fixed lines and at least 15% of the European countries’ households are already covered. Such internet calling alternatives like Skype continue to offer viable alternative solutions and especially because it is cheaper in compared to mobile services. Threat of New Entrants According to Sutherland (2014, p.5), the telecommunications industry is highly protected and regulated by an enormous level of barriers to entry as well as high initial capital requirements. however, with the recent interdependence that exists between mobile network operators as well as online entertainment service industries has resulted to a complete overhaul of the industry altogether. It is expected that in the long run, communication service will be conducted with those of other digital goods. For instance, there has been easier entrance into the market by VoIP as well as internet access service providers that have taken over the conventional voice market and are now even involved in mobile voice segments as MVNOs (Sutherland, 2014). Of particular interest to note, retailers have also taken significant strides to penetrate and enter the industry in the form of virtual operator networks; taking advantage of their already developed distribution channels while at the same time competing on similar products and service features. Threat of Suppliers In regards to mobile network operators, suppliers vary in number especially because they provide network infrastructure, software-related products as well as additional digital services. However, recently there has been an interdependent shift in the relationship between network operators and device suppliers. Considering the fact that Vodafone has a global presence, it has an enormous purchasing power that allows it secure top notch deals with mobile phone distributors. In fact, there are now Vodafone branded phones in the market; which has been steered by management in order to reduce the industry power exerted by Nokia in the market. 5.0 Competitive Advantage Vodafone achieves efficiency in its operations through the provision of a reliable, secured and highly-accessible enterprise service-based on ITIL platforms in order to support the business into the future while at the same maintaining a cost-effective activity as a whole. Being a global company with a worldwide presence; Vodafone seeks to always sustain a top notch network quality and, also optimum network resilience that is not affected by the ever-changing weather patterns. The ability to transform from a second to third generation value-added services indicate that Vodafone has embraced a wider service diversification strategy that has ensued even further as a result of cutting-edge technological development. These value-added services have continued to be offered to both business and household customers. Markedly, the Group has ensured to conduct extensive research and development-related activities in order to incorporate applicable technologies in such other sectors as marine and space navigation into executing tasks related to telecommunication. The size and responsiveness capability of the existing customer base is considered to be the most viable source of competitive advantage for all telecommunication operators including Vodafone. Despite the fact that there has increased level of competition, Vodafone second generation value-added services like fixed lines still help to maximise on annual returns mainly since there has been a global increase in the level of demand. In fact, the Group make sure to incorporate customer responsiveness capacity with the immediate control of its capital structure, organisation and cooperation capacities that allows a superior position to gain substantial market shares. 6.0 Core Competencies Vodafone relies heavily on research analysis to execute its top notch value-added services to both individual household and corporate customers. The Group also makes sure to engage in a continuous improvement mode whereby newer plans that involves creation of international partnership and acquisitions of existing companies in order to meet its overall objective related to expanding into overseas markets. Subsequently, the company has ensured to focus strongly to meeting the immediate customer’s needs. This has been achieved through providing a workable and reliable customer feedback initiative where responses from customers are analysed and used to develop even more relevant solutions to these challenges. It is also important to note that Vodafone is also committed to the aspect of quality where intensive resources have always been invested in activities set in sustain it above everything else. It has put much emphasis on coming up with innovative ways of providing customers world class services hence remaining way above most of closest competitors. In consequence, the effective core competencies portrayed by the company can be seen in its significant overall market share that far supersedes most of closest rivals. 7.0 Differentiation Strategy Vodafone Group embraces differentiation strategy as an important factor in enhancing its overall competitive advantage. Differentiation strategy embraces more than single criteria in the process of selecting buyers within a given market. Vodafone Group embraces a differentiation strategy through its commitment to effecting investments in both its network and value added services. The differentiation strategy focuses on customers; where a new strategic technique relating to consumer pricing and bundling in the European market so that it can avail its existing customers with flexibility in the consumption and thereafter stabilisation of ARPU (Camillus, 2014). For instance, the firm launched the I Phone services at a premium price but still managed to sustain competition given that it ensured to offer free Vodafone to Vodafone calls amongst the costumers. The Group ascertains that it is still making enough efforts to strengthen and position the enterprise in a manner that enhances product offering to extensive and medium-sized entities and thereby formulate committed operational structures. Differentiation strategy is also portrayed by the Group’s commitment to supporting a high speed data services while at the same time providing a consistent excellent data services. 8.0 Possible Strategic Alliances Recently, Monlouis (1998, p.638) notes that Vodafone has been engaged extensively in formulating and implementing successful partnerships with other companies. For instance, in 2011, the Group formed a strategic partnership with Conexus Mobile Alliance in order to significant improve on Vodafone’s presence in Asia and thereafter avail Conexus with intensive levels of access to the Group’s international footprint. The move was set to increase the customer base to 600 million through penetration of markets in Asia, Fiji, and New Zealand (Monlouis, 1998). Other companies for which the company has formed strategic partnership include; SFR and Huawei. Vodafone Group can increase its revenues base even more when it engages a joint venture strategic approach especially with mobile device vendors in order to cut down on manufacturing of costs as well as licensing fees in international markets. Considering the fact that the Group enjoys a massive amount of market capitalisation then it can successfully engage in the course and thereafter post improved sales revenues. 9.0 Conclusion & Recommendation for Future Strategies To sum the discussion above, it can be noted that Vodafone Group enjoys a substantial percentage of the telecommunication market share as well as a global presence. The Group has managed to form strategic alliances across the globe in order to maintain a competitive advantage over its dominance in some markets while at the same time keeping up a recommendable profit revenues all the same. It enjoys a positive and world class brand reputation that is recognised in the global market; a feature that has ensured easier penetration in these markets. However, it is facing stiff competition especially in the European market segment hence prompted the management team to focus on redirecting their mission and vision to align with the ever-changing customers’ needs, taste and preferences. Vodafone Group should ensure to develop new ways of curbing down on the current high levels of competition by reducing its present operational cost framework through such crucial processess as outsourcing and exploitation of the economies of scale feature to a much fuller extent. The capacity to integrate the companies to most of its European operations might set a way through global challenges attributed to understanding local communication cultures. The Group should make efforts to decentralise its operational functions and delegate it to its partners and subsidiaries in the international markets since they clearly comprehend the challenges associated with local customers. Another important recommendation lies in Vodafone commit to not only production and provision of services but also engage extensively in coming up with new products especially that conforms to the ever-challenging technological advancements. Current technologies presents a shift of consumer preference to non-voice services hence the Group should redirect their efforts towards this advancement in order to maintain a competitive edge over the rest. Most of telecommunications are now shifting non-voice service provision like internet and cable over 4G networks platforms; which prompts Vodafone to follow suit in case it seeks to remain relevant in the market. References Camillus, J.C., 2014. The Business Case for Humanity in Strategic Decision Making. Vilakshan: The XIMB Journal of Management, 11(2). Monlouis, J. 1998. “The Future of Telecommunications Operator Alliances” Telecommunication Policy vol. 22, no. 8; p.635-641 McGee, J., Thomas, H., & Wilson, D. 2005. Strategy Analysis & Practice. McGraw‐Hill Maidenhead, UK Mihăilă, C.N., 2012. VODAFONE'S POSITION ON THE UK MARKET. Bulletin of the'Carol I'National Defence University/Buletinul Universitatii Nationale de Aparare'Carol I', (2) Nardotto, M., Valletti, T. & Verboven, F., 2015. Unbundling the incumbent: Evidence from UK broadband. Journal of the European Economic Association, 13(2), pp.330-362 Sutherland, E., 2014. Lobbying and litigation in telecommunications markets–reapplying Porter’s five forces. Info, 16(5), pp.1-18. Trebling, H. E., M.1995. “The Globalisation of Telecommunications: A Study in the Struggle to Control Markets and Technology.” Journal of Economic Issues vol. XXIX, no. 2 Read More