Pestel Analysis and Business Strategy

The provided document is an excerpt from various sources that discuss the Pestel analysis model and its application in business strategy. It covers topics such as macro-environmental analysis, influence on firm performance, and importance-performance analysis based on SWOT analysis. Real-world examples are drawn from companies like Vodafone, JKUAT-COHRED, and KSB Pumps Company Limited. The document provides a detailed understanding of the Pestel model's role in business strategy and its impact on firms' performances.

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Analyse the impact and influence of macro environment on the organisation. ....................1
TASK 2 ..........................................................................................................................................4
P2 Analysis of the organisation's internal environment and its capabilities...............................4
TASK 3 ...........................................................................................................................................6
P3 Evaluate the competitiveness of UK telecommunication sector............................................6
TASK 4 ...........................................................................................................................................8
P4 understanding and interpreting strategic direction ................................................................8
CONCLUSION..............................................................................................................................10
.......................................................................................................................................................10
REFERENCES .............................................................................................................................11

INTRODUCTION
Business strategy is the action plan or decisions which help the managers in achieving the
desired goals and objectives of the organisation. It involves the long term plans which
organisations use to achieve its objectives (Akter and et. al., 2016). If these plans become
successful than it directly lead to the growth of the business, high competitive advantage, and
increase profitability and performance of the organisation. And if these strategies fail than the
organisation must try to change its approach or plans for the future course of action. The
company taken in this project report is Vodafone. It is a British telecommunication company. In
2018 the company ranked fourth among the number of mobile customers. Vodafone owns and
operates in 25 countries with the partner network in 47 countries (Company History, 2019). This
project report will cover the following topics PESTEL analysis, Ansoff's matrix, virin model,
porters five force model and bowman's model. All these models will help Vodafone in planning
the strategies for the future course of action in a effective and efficient manner because it will
directly lead to the growth and increase in profitability of the company .
TASK 1
P1 Analyse the impact and influence of macro environment on the organisation.
Macro environment has a huge impact on the performance of the any organisation. Any
change in the external environment will directly lead to the change in the working, growth and
profitability of the organisation. For analysing the macro environment of Vodafone PESTEL
analysis can be used. PESTEL analysis is basically a method which is used to analyse the
various external factors which affects the business of the company. As Vodafone is considered as
one of the world's best telecom company(Bull and et. al, 2016). So there are many challenges
and external factors which affects the working of the company. All the external factors are inter-
related to each other because change in any one factor will directly affect the growth of
Vodafone. The PESTEL analysis for Vodafone is discussed below:
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Source: PESTEL Analysis, 2018.
Political factor plays a major role in evaluating the various factors which may affect the
profitability of the company in the market in which it is operating. The major political factor
which is affecting Vodafone performance is EU Roaming Regulation (EU has no major
concerns over Vodafone, 2019). Under this factor the major focus was to decrease the charges of
mobile phones by 70 percent. This regulation was imposed by the government and it resulted as
a negative point for Vodafone because due to this the company suffered loss from the
international market. Before entering into a new market Vodafone can analyse certain things
which include- political stability, risk of military invasion, level of corruption, etc. As these may
affect the business to a great extend. Brexit has created great impact on the firm as economic
instabilities of currencies and frequent change in rules and regulations in import duties and
tariffs is creating trouble for the companies growth and expansion. Whereas the new export and
import duties are negatively affecting the cost of production,sales and profits which results to
negative outcomes.
The economic factors such as inflation rate, foreign exchange rate, economic cycle, etc.
can affect the working of Vodafone because the demand of the company's product will decrease
due to change in the external factors. Recession in the telecommunication also affected the
market of Vodafone(Chiang,Chen and Ho, 2016). As the customers were not buying the new
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Illustration 1: Pestel analysis

products. Due to this Vodafone had to change their policy according to the situation to survive in
the market for longer period of time. After the Brexit are accelerative the prices of grocery items
and food are increasing and purchasing power of customers are decreasing respectively. As
Company is mostly operating in UK it leads to decrease in sales volume and profit margins.
Although the government of UK is stable even after Brexit, company has amended opportunities
to grow and flourish in the market as impact of Brexit will drop-off with time which will bring
positive impact on sales volume.
Social factor is mostly based on beliefs and values of people where the company
operates. Vodafone is changing its plans and strategies according to the local social factors of the
market in which the company is operating. One of the major social factor which affected the
business of Vodafone is the changing work patterns. After the introduction of work from home
Vodafone had to increase the communication networks and change its technology. As people
were more dependent on this mode of communication(Echchakoui,2018)As the Poor network
connection would directly lead to the loss of customers for Vodafone. After the Brexit occurred
the purchasing power of the customers is reduced and the prices of the commodities are raising
day by day. Due to which customers are unsatisfied with the immense inflation rate in the
commodity and is directly affecting the brand image and goodwill of the company.
Telecommunication network industry requires latest technology to survive in the market
for longer period of time. The latest and alternative means of communication such as online
chatting and messenger has affected the plans and strategies of Vodafone. So to overcome this
factor the company has to form strategic alliance with other companies or make some necessary
changes in the strategies to compete with other competitors in the market. When Brexit took
place it directly affected the profit margins of the company. Yet in many stores updated
technology is not enforced due to which customers are dissatisfied.
Different environmental conditions in different market directly affects the profitability of
Vodafone. Major environmental problem for Vodafone is the change in climate or weather. Any
natural disaster can disturb the working of Vodafone because the network connectivity will be
lost in such conditions and company might suffer huge loss (Annual report, 2010).
Different country has different legal rules and regulations. Before entering into the new
market Vodafone must do proper analysis of the market. So that business can be done in a
effective manner and the market share can be increased. For example: Vodafone was fined
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heavily after the breach of data protection act (Vodafone fined £4.6m for serious breaches of
consumer protection rules, 2017).
Ansoff's model for analysing the organisation's strategic positioning
Ansoff's model is the marketing tool used by Vodafone to link company's marketing
strategy with general strategy formed by the management of the company. This approach consist
of four growth strategies which are discussed as: market penetration, market development,
diversification and product development.
Market penetration is done Vodafone for the growth of existing product in the market.
With the change in technology and change in the demand of customers Vodafone is making
some growth changes in its existing product like the company is trying to increase the speed of
this network so that the existing product can help in the growth of the company(Grünig and
Kühn, 2015.)
Market development is the strategy which can be used by Vodafone for entering into the
new market with the help of existing product. The existing products can be introduced in the
international market after analysing the market conditions of that area. The existing mobile
network plans can be introduced in the new market to attract more and more customers.
Product development is introducing the new product in the existing product. After the
analysis of the market Vodafone decided to launch its new product which was for increasing the
mobile data speed. This product was initially launched in the existing market because there
market was already established and the customers were already aware about the various
products of Vodafone(Maia and Graeml, 2015.).
In diversification new product is launched in the new market. Vodafone launched its
new data plans and new product in the market after analysing the need and demand of the
market. This strategy must be implemented after proper analysis because it requires high
investment for entering into a new market.
TASK 2
P2 Analysis of the organisation's internal environment and its capabilities
Strategic capabilities is the combination of various capacities , skills, resources which
help in creating the long term competitive advantage for the organisation. It is the capabilities of
the employees which help in the strategy formation and implementation. Employees of Vodafone
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can help in the strategy formulation can by providing new and innovative ideas. This will help
the management in achieving organisational and individual goals. The internal environment of
Vodafone can be managed by planning the future course of action in a efficient manner. The
VRIO model can be used to analyse the strategic capabilities of Vodafone. As it is necessary for
Vodafone to analysis and evaluate the resources that can help as a assets and liabilities of the
company. Because this can help the company in making the strategies in a effective and efficient
manner. If Vodafone will know about the capabilities and competencies than the company will
not be able to gain maximum utilization of its resources. So to achieve the targets VRIO
framework can be used by Vodafone.
Valuable is the exact value which can be generated by the capabilities of Vodafone in
return of the money generated by its customers. If there is any resource which is not valuable for
the company than it will not help in creating the competitive advantage for Vodafone. The
management must try to motivate its employees to perform better. So that the skills and
capabilities can be used in a appropriate manner and demands of the customers of Vodafone is
fulfilled.
Rare is a unique capabilities of Vodafone which make it different from its competitors.
The marketing activities of Vodafone is unique and rare as it help in creating the market
awayness among the customers (Malik, 2018.). And this directly leads in increasing the sale of
the company. The financial resources of Vodafone is also rare and unique as the company has lot
of funds which help them in increasing the sales by introducing new ideas to attract more and
more customers.
Imitate refers how easily the products of Vodafone can be copied by the other
companies. The financial resources of Vodafone is imitate by other companies which means
other companies can easily attract funds by increasing the sales. The technology used by
Vodafone can also be copied by other competitors. So the strategies can be made by Vodafone to
increase the sale by attracting new customers and introducing the products which are different
from its customers.
Organisation refers to the utilisation of the resources to its full potential. The brand
image and goodwill of Vodafone helps the company in attracting the customers. As the brand
image is valuable in nature and it help in increasing the profit margin. So Vodafone is properly
using its brand image resulting in creating the competitive advantage for them.
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Vodafone has some strength and weakness which make it different from the other companies.
The strength and weakness of Vodafone are discussed below-
STRENGTH
Massive market coverage is one of the top brands in the telecommunication industry. The
company Vodafone has wide distribution network in almost 25 countries around the world. So it
is one of the biggest strength of Vodafone as it is a well known brand. Marketing strategy of
Vodafone is very much different from its competitors. Company uses new and innovative
methods to attract new customers. As the Vodafone Pug and Vodafone Zoozoo was one of the
best marketing strategy of Vodafone. The revenue generation of a company is high and
maximize profit from its customers. The revenue of the company is continuously increasing year
by year. So this directly resulted in increasing the rank and brand value of the company. The
customers also helped the company in increasing the revenue.
WEAKNESS
The subscriber base of the company is continuously decreasing. It is seen that there was a
drastic change in the subscriber base from the past four years. It is one of the biggest weaknesses
of the company which needs to be overcome(Morelli, 2018). The company is continuously
fighting for its market share. Due to high competition in the telecommunication sector. The
market share of the company is decreasing because the customers are shifting from one brand to
another due to the price wars. The company needs to increase its market share by making new
plans. It is seen that the company is a market follower and not a leader which means the
company is not introducing new ideas and strategies in the market rather than it is just following
the market. Due to this the company is suffering huge loss as the market is uncertain. The
company needs to make new and innovative plans for the same.
TASK 3
P3 Evaluate the competitiveness of UK telecommunication sector
The rate of competition in the telecommunication sector is very high. There are large
number of competitors present in the market. Due to this the business of Vodafone gets affected
as there are changes of shifting of customers from one brand to another. The competitive
environment of Vodafone can be analysed with the help of Porters five force model.
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Porter's Five Force Model – this method is used to analyses the competitive position of the
organisation. It is very much useful for Vodafone to know its competitive position so that
strategies can be made according to that.
Threat of new entrants - Telecommunication industry is the fast-growing industry. The
threat of new entrants in this industry is low because of the barriers to entry in this type of
industry. The company who wants to enter in such type of market are required to pay high
licensing fees and faces many regulatory issues before entering in the market. Also the cost of
installing the network infrastructure is also very high. The rapid change in technology is very
much difficult for the new entrants to cope up with. So Vodafone can easily cope up with this
situation by maintaining its high level efficiency of its services (Njagi,2018). The strategies
which can be used by Vodafone to overcome the threat of new entrants are decreasing their
prices of offering for attracting large number of customers. Additionally the efficiencies of
services provided by the company along with the network connectivity and data speed are
increasing.
Threat of substitutes- There is a huge threat for Vodafone because of the various
substitutes available in the market. The land-line and CDMA services are decreasing day by day
and the broadband services are becoming common. And the video conferencing, google talk,
messenger, email, etc. are the substitutes to the mobile services. The strategy which can be used
by the company is decreasing the prices of their products by cutting the cost of production. Also
the company can use the new and innovative ideas for attracting customers. The company can
also analyse the needs of their customers before launching the new product.
Industry rivalry- It means the competition level among the various firms producing the
same variety of products in the market. The company faces very high rivalry from the
competitors because of the low prices of the call rates. The competitors of Vodafone are
continuously providing new and innovative products and services to the customers. Due to this
the company is suffering huge loss as the customers are shifting from one brand to another.
Strategy for this can be taken by firm is to provide better options to its customers so that their
needs and demands are satisfied which will also increase the market share of firm. The company
can also plan for retaining their customers through innovative thinking. For e.g. EE was the first
who have started 4G services in UK because of which Vodafone have faced a huge loss in terms
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of customer base and sales figures but for overcoming this loss company have started advertising
that their 4G services is six times faster than others (EE mobile vs Vodafone mobile, 2019).
Bargaining power of the buyer- In the telecommunication industry the bargaining
power of the buyer is high because of the tough competition in the market and also because of
the lack of differentiated products. The buyer has the option to bargain about the prices with
Vodafone. The products in this type of industry is more or more less same. The high bargaining
power directly leads in reducing the cost price of the products. So Vodafone can easily make
high profits due to high bargaining power of the buyer (Pan,Chen and Zhan,2018). If the
customers are not happy with the tariff given, or other services, then they can switch to other
competitors such as EE and O2. The strategies which can be used by Vodafone for the
bargaining power of the buyer is to introduce innovative products and giving discounts to the
customers on them. The company can also build large customer base for tacking the bargaining
power of customers. Also the company can plan for the future activities so that the customers can
be retained.
Bargaining power of supplier- The supplier of Vodafone has high bargaining power
because the company is operating in high margins as compared to its competitors. Vodafone is
the leader in the market, so the market share is large and due to this company can easily bare the
price increments from its suppliers. The best strategy Vodafone can adopt is to maintain the low
prices of its products from the suppliers and can make high profits (Phadermrod, Crowder, and
Wills,2019). The strategies which can be used by Vodafone for the bargaining power of supplier
is through decreasing prices of offerings and enhancing network connectivity through which
company can build its strong brand image in market. In addition, through forming several kind of
plans needs of customers would be satisfied effectively. Also the company can stay in touch with
several suppliers so that of any suppliers does not provide the products properly then company
can switch to another.
TASK 4
P4 understanding and interpreting strategic direction
Strategic management plan is the long-term plan which us used by the managers of the
organisation to communicate the plans and objectives with the employees. Strategic management
is the most essential function for the organisation as it helps the managers in increasing the
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growth of the company and maintaining sustainability in the market place. The manager of
Vodafone can achieve the desired objectives in the effective and efficient manner.
To use effective plans and strategies it is very much essential for the manager of
Vodafone to Bowman strategy. As this will be beneficial in implementing proper strategy plan-
Bowman strategy model - Bowman strategy model is used to select the best suitable
path or plan through which organisation will achieve the competitive advantage. With the help of
this manager of Vodafone can easily formulate the plans and policies of the organisation and can
achieve the competitive advantage. As this model aims at the options for strategic positioning.
This means the new ways in which the positioning of the products can be done to achieve the
competitive advantage (Reinhardt and et. al., 2017) . The main purpose of this model is to know
the various options which can be used for positioning the product. The bowman strategy clock is
discussed below:
Hybrid strategies- this strategy include the elements of low price and product
differentiation. The focus of this type of strategy is to motive the customers to buy the products
and services. This is because their products are valuable, and the products are also available at
low prices. This will be very much beneficial for Vodafone because there will be new customers
of the company and they will be getting the products and services at the low prices as compared
to the competitors. By using this strategy the customers will get the products at affordable price
and the products will satisfy their needs and wants (Scholes, 2015)
Differentiation- The major aim of this strategy is to give such products to the customers
which are different from its competitors. This means introducing such product in the market
which is adding value to the company. Good quality products are being offered to the customers
at the low price. In this strategy Vodafone will not only focus on good quality product but will
also try to increase the brand image of the company. This can only be done by retaining its
customers.
Focussed differentiation- under this strategy the group of customers are focused. As
they will help in achieving the organisational goal. In this the strategy is formed according to the
type of customers and their demand. If the customers of Vodafone belong from high income
class group than the company must make plans according to that. This strategy helps in
increasing the sale of the company because in this the product or service of Vodafone will be
designed and planned to keep in mind the needs and demands of this available customer.
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Low price- under this strategy Vodafone will produce the products with large quantities
and then the price of these products will be set low (Shepherd and Toms, 2017). This means the
cost in making such products will be less as the products are being manufactured in large
quantities. And the products will also be sold at the least price so that more and more customers
are being attracted to it and the company can gain maximum profit. Cheap quality products are
being offered to the customers at low price. But in this the products are made after analysing the
need of the customers. So that the customers can easily buy it and satisfy their need.
CONCLUSION
From the above report it has been concluded that if the company wants to increase its
business and profit than it must use some strategies in a appropriate manner. There are various
internal and external factors which can affect the working of the business. So the company must
first try to analysis these factors than take the best possible decision. There are various models
which can help the company in doing so which include porters five force model, bowman
strategy clock, Pestel analysis, etc. all these can help in achieving the goals of the organisation in
the effective and efficient manner. As in the telecommunication industry the competition level is
very high so the company must decide the future course of action keeping in mind the present
and past situation. This type of market also involve high level of risk and uncertainty so the
company must be capable to overcome these in the best possible manner.
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REFERENCES
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Grünig, R. and Kühn, R., 2015. Global Environmental Analysis. In The Strategy Planning
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