Business Strategy: Telecommunication Sector - Vodafone 3G Case Study

This project examines the business strategy of Vodafone in the telecommunication sector, focusing on the launch of their 3G technology. It analyzes the external environment using PESTLE and Ansoff's growth vector matrix, and the internal environment using VRIO and McKinsey's 7s framework. The project also applies Porter's Five Forces model to evaluate the competitive landscape and Bowman's Strategy Clock to understand Vodafone's strategic direction. The research provides insights into the challenges and opportunities faced by Vodafone in the telecommunication sector.

Business Strategy: Telecommunication Sector
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Table of Contents
Introduction........................................................................................................................3
TASK 1: The external environment...................................................................................3
LO1: Analyze the impact and influence which the macro environment has on an
organization and its business strategies........................................................................3
1.1 PESTLE model for environmental analysis.............................................................3
1.2 Ansoff’s growth vector matrix to analyze the organization’s strategic positioning. .6
Task 2 – The internal environment and organization capabilities.....................................9
LO2: Assess an organisation’s internal environment and capabilities.........................9
2.1 Explain what strategic capability means..................................................................9
2.2 Apply the ‘VRIO/VRIN’ model to determine the strategic capabilities possessed by
your chosen organization.............................................................................................14
2.3 Identify the organization’s strengths and weaknesses..........................................15
TASK 3: Analyzing the telecommunications sector.........................................................17
LO3: Evaluate and apply the outcomes of an analysis using Porter’s Five Forces
model to a given market sector....................................................................................17
TASK 4: Understanding and interpreting strategic direction..........................................20
LO4: Apply models, theories and concepts to assist with the understanding and
interpretation of strategic directions available to an organization................................20
Conclusion.......................................................................................................................23
References.......................................................................................................................24
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Introduction
This project is based on the concept of developing a business strategy in the
telecommunication sector. In the present state, telecommunication sector spreads its
popularity in global scale through internet and phones in terms of communication
perspective. Digital communication has already grabbed the market and moves the
world towards upper scale. Largest companies of telecommunication sector are Internet
service providers, cable companies, satellite companies and wireless operators. There
are many telecommunication organizations such as Apple, Vodaphone, Airtel, Aircel,
and Jio hold the attention of customer through its innovation and business strategy (Jha
and Sekhar, 2018). In this project researcher, discuss the Vodaphone organization to
fulfill the objective of this project. Strategy is basically scope and direction of any
business organization to achieve the goal on a long-term basis. By developing strategy,
one organization can achieve different kinds of advantages through its resource
alignment within various kinds of challenges. A proper strategy meets the requirement
of the market as well as customers and also fulfills the expectation of stakeholder.
TASK 1: The external environment
LO1: Analyze the impact and influence which the macro environment has on an
organization and its business strategies
According to the market survey, it is stated that two types of analysis such as macro
analysis and microanalysis make an impact on telecommunication sector and its
business strategy. This section mainly focuses on the macro analysis. The macro
analysis involves the external factor that influences the business organization and
telecommunication sector. The macro environmental analysis makes an impact on
organizational decision such as business model, business strategy and organizational
objective (Norton, 2017).
1.1 PESTLE model for environmental analysis
PESTLE model (Political, Economical, Social, Technological, Legal, and Environmental)
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Political Factor:
The government of Mexico does not allow easily any telecom organization to the
telecom market because of two reasons. 1st reason is that telecom license of Mexican
market is very strictly regulated and control and 2nd reason is that this sector has a good
growth. NAFTA is also not permitted to start business or telecommunication trade in
Mexico (Norton, 2017). The Mexican government also provides strict regulation to
reduce the usage of the phone because of children has been suffering in terms of health
issue. Therefore, Vodafone Company has to take license and permission to enter the
market of Mexico and provide high-quality service.
Economic Factor:
According to the market survey, it is stated that when 3G technology launched in the
Mexican market, then local telecom provider Telmex cover the entire Mexican market by
utilizing this 3G technology. As a result, the competition was creating between
Vodafone and Telmex and that influence the economics of Vodafone. Another important
issue was noticeable in last year when market faces the recession period. That time
customer not getting interest to purchase a new product. As a result, Vodafone changed
the strategy and down the sms charge as well as call charge to attract the customer. An
inflation rate of Mexican country also influences the customer purchasing behavior.
According to the market survey, the current rate of inflation is 3.60% (Panibratov, 2017).
Again Vodafone has to change the business strategy and reduce the price of the
product to attract the customer. () commented that if the rate of inflation is high then
people can save money for future and its direct effect on the economy of the Mexican
market.
Social Factor:
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Panibratov, (2017) stated that the education level is very high in Mexico. As a result, a
person knows very well for which company and product are good for them. Researcher
assumed that new service of 3G of Vodafone might be grabbing the market through its
better service. Norton, (2017) commented that whenever any new technology is
launched in the market, it is very tough for the organization to convince the consumer.
In a competitive market, every organization wants to provide better service than other
does. As a result, it is very tough for Vodafone to convince people about the new
technology 3G. If any organization provides better style, feature and service then people
always move to that organization to grab the best service.
Technological Factors:
According to the market survey, it is noticeable that Mexican industry is always well-
established and growing market. Many organizations want to come into this Mexican
market to establish their organization and earn the money. Therefore, Vodafone has to
upgrade technological function and has to do something innovative than other local
organization. The new launching of 3G and Wi-Max has made an impact on Vodafone.
Another technological factor of Vodafone navigate the customer is GPS. People always
prefer GPS support phone not prefer GPS support system with a high price.
Legal Factors:
As per the market survey, it is observed that Vodafone faces many legal issues in terms
of the pirated problem and copy related issue (Satyanarayana et al, 2017). States has
blamed this company for many legal issues involving the domain of infrastructure. As a
result, Vodafone faces many penalties as well. Another statement also notified that
salary issue of the employee. For that reason, many workers leave the Vodafone
Company and join other competitive company. As a result, there is a high chance of
leakage the many secrets and innovative ideas.
Environmental Factors
Globalization factor affects the Vodafone Company. People now very concerned about
the brand image and its ethical value. Every customer has own preferable brand that
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creates a positive image in Vodafone environment. Vodafone still now proves its
flexibility and adaptability power by developing new technology like 3G. Vodafone
always realizes the market need and upgrade its technology according to this.
1.2 Ansoff’s growth vector matrix to analyze the organization’s strategic
positioning
Satyanarayana et al, (2017) stated that Ansoff’s growth vector matrix is known as
Ansoff Product-Market Growth Matrix. Ansoff’s growth vector matrix is the four ways
model framework. The main objective of this matrix helps to focus on the important
factor for the growth of the business.
Figure 1: Ansoff’s growth vector matrix
[Source: Nandi and Nandi, 2017 ]
As shown in the figure, Ansoff’s growth vector matrix is categorized into four growth
strategies (Nandi and Nandi, 2017)-
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a. Market Penetration: This tool utilized to improve the share of the organization in
the industry with its recent or new product line
b. Market Development: This tool utilized to seek a current market for old and
existing products
c. Product Development: This tool utilized to launch new products in existing
market
d. Diversification: This tool utilized to develop a newly launched product, which is
produced in the new market.
A case study on Vodafone 3G
1.2.1 Market Penetration: It involves convincing the customer to buy 3G support
system from Vodafone instead of other telecommunication organization. Nandi and
Nandi, ( 2017) stated that there is some reason that Vodafone Company seeking the
market penetration can face two types of restraints- Legal constraints and Competitors
retaliation. According to the market survey, it is observed that Vodafone is the third
biggest company in Britain and its grab the popularity of a largest mobile network all
over the world. After launching 3G in the market, this organization generated the
revenue near about £ 45.74bn and value of the market in the UK was £ 81.3bn, which
lead the market with market share of 22.95%.
1.2.2 Market development: 3G service and m-Pesa has already developed the market
value of Vodafone. This technological aspect is responsible for developing management
of merchant network and ecosystem (Bonelli, 2017). Different themes for advertisement
such as a magic box, stock alerts, international roaming, and recharge anywhere helps
to develop the market.
1.2.3 Product Development: The following figure shows the different product has
already grabbed the attention of the customer.
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Figure 2: Products of Vodafone
[Source: Bonelli, 2017]
1.2.4 Diversification: Modernize the recent network and expansion of 3G network can
diversify the Vodafone industry. As a result, investors were enjoying the dividend
percentage while the company Vodafone diversifies the market.
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Task 2 – The internal environment and organization capabilities
LO2: Assess an organisation’s internal environment and capabilities
This section mainly focuses on the Vodafone Company’s internal environment and
capabilities. Internal analysis is based on the determination of the internal factor and
evaluates the core competencies, capabilities, and resources. The internal
environmental analysis is required to know the organization’s strength and weakness
and it helps to take better decision-making steps (Bonelli, 2017). The organizational
capabilities are basically based on the ability to manage efficiently internal as well as an
external resource to attract the customer and also get advantage or facility over
competitors of the present market environment. The main objective of organizational
capabilities is to meet market as well as customer demand.
2.1 Explain what strategic capability means
Strategic capability is the combination of resources, capacities, and skill of organization
that make competitive advantages on a long-term basis.
The key component of strategic capabilities of the organization
Key Components Resources
Physical Resource A computer system, database system,
patents, products, raw materials, buildings,
and machines
Financial Resource Fund suppliers, cash flow, and balance
sheet
Human Resource Customers, suppliers, partners,
employees, managers
Table 1: a key component of strategic capabilities of the organization
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[Source: Created By Author]
Strategic Capabilities key issues:
Figure 3: Strategic Capabilities key issues
[Source: Created By Author]
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What are strategic Capabilities?
How do strategic capabilities contribute to
competitive advantage and superior performance?
How do diagnosis strategic capabilities?
How do manage the development of strategic
capabilities?

RBV- Resource-Based View:
RBV is the managerial structure used to identify the resources of strategy with the
potentiality to contribute advantage over competitors.
Figure 4: Resource-Based View
[Source: KIMALEL, 2017]
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Vodafone’s McKinsey 7s Structure:
Figure 5: Vodafone’s McKinsey 7s Structure
[Source: KIMALEL, 2017]
McKinsey 7s Structure is VBM (Value Based Management) model which defines how
one firm effectively and holistically manage an organization (KIMALEL, 2017).
Strategy:
Vodafone has already spread its popularity with the branding image. Competition
among telecommunication sector is increasing day by day. Therefore, to sustain in
competitive market Vodafone has to launch an innovative product and has to renovate
the existing product.
Structure:
Organizational structure can relate and connect every department of one organization.
There are many types of an organizational structure such as decentralized, function
division, centralized, holding, network, and matrix etc (KIMALEL, 2017). Vodafone
utilizes matrix organizational structure but according to the market survey, it is
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noticeable that matrix organizational structure is not effective to take fast decision-
making activity due to the huge number of departmental hierarchy.
System:
Vodafone financial system involves the performance appraisal system, promotion, and
hiring system. Information system provides the necessary information to the
departmental level. According to the market survey, it is noticed that Vodafone follows
a normal and formal process that monitor the daily basis activity. MIS department and
marketing communication management system identify and analyze the customer
response. Present research stated that Vodafone now strictly monitor and control over
the bottom level employee to supervise the system.
Shared Value:
The centralized structure of this framework is a shared value. As its position is a centre
that means it controls the entire system of organization. In Vodafone Company, shared
value is communication (Nandi and Nandi, 2017). With proper communication and
behavior, this company connects the employees and maintains the organizational
policy.
Staffs:
Vodafone has already hired people from various sociological groups based on the
capability and skill. Vodafone already starts giving incentives to motivate the
employees.
Style:
It involves the cultural as well as managerial style to achieve the goal of the
organization. The higher authority management of Vodafone has followed disciplinary
atmosphere. Vodafone has to make sure that they can provide the best service within a
particular period but service should include risk avoiding factor.
Skill:
Vodafone has already hired people from various sociological groups based on the
capability and skill. The employee of Vodafone is a well-trained and highly skilled
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person. Vodafone has already launched a trained the employee program to bring the
proper balance between executing skill and knowledge.
2.2 Apply the ‘VRIO/VRIN’ model to determine the strategic capabilities
possessed by your chosen organization
VRIO Framework of Vodafone
Figure 6: VRIO Framework
[Source: Created By Author]
Valuable:
Firm infrastructure, human resource management, technological development and
procurement of Vodafone have increased the market value.
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V
Valuable
R
Rare
I
Inimitable
O
Organized

Figure 7: Value Chain Analysis
[Source: KIMALEL, 2017]
Rare: Global presence creates newcomers in UK market popularized the brand of
Vodafone instantly and advanced technology, 3G also has counted in rare quality of
Vodafone (Pandit et al, 2017).
Inimitable: 3G network and brand image of Vodafone develop the opportunity in UK
market
Organized: Vodafone utilizes matrix organizational structure but according to the
market survey it is noticeable that matrix organizational structure is not effective to take
fast decision-making activity due to the huge number of departmental hierarchy.
2.3 Identify the organization’s strengths and weaknesses
The strength of Vodafone telecommunication:
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 Broad coverage of the network
 Good experience in telecommunication field
 It has around 150000km powerful backbone coverage of optical fiber
 Advanced technology (3G) and art architecture utilized in network architecture
 The high value of brand visibility
 The private operator has the facility of the internal submarine cable
 Massive subscriber
 Premium cost availability
 Vodafone zoo zoo's high marketing value
 Live with 3G
The weakness of Vodafone telecommunication:
 Drop the base of subscriber
 Drop the brand value
 Losing share of the market in the USA
 Bad performance and not producing revenue in Europe
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TASK 3: Analyzing the telecommunications sector
LO3: Evaluate and apply the outcomes of an analysis using Porter’s Five Forces
model to a given market sector
External (Five forces model) analysis is very important for Vodafone Company to
identify its strengths and weaknesses (Pandit et al, 2017). These five models are known
as Porter’s five-force model. These five forces are- Rivalry within the market,
Bargaining power of buyers, Threat of new entrants, Bargaining power of
suppliers, Threat of substitute
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Figure 8: Porter’s five-force model of Vodafone
[Source: Created By Author]
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Threat of New
Entrants:
 Experiences
and scale
 Government
action and
legislation
Buyer Power
 Low cost of
switching
Power of Supplier
 High cost of
switching
 No threat of
supplier
Substitutes
 Cost to the
ratio of
performanc
e: Land line
phones and
Internet
Rivalry
 Competitive
Balance
 Growth
rate of
Industry

A. Rivalry within the market: The position of Vodafone as competitors and cost
leader have a tough time to compete in terms of cost because the competitors of
the present market will fall their face value if any position of operation and
logistics are inferior.
B. Bargaining power of buyers: The purchaser of telecommunication sector
especially mobile phone industry is very strong. The demand for a mobile phone
is increasing day by day. According to the market statistics, it is stated that strong
purchaser can decrease the price leader cost. Vodafone has to make sure they
can maintain their profits than the closest competitors.
C. The threat of new entrants: When potential entrants of the market are weak,
the company of Vodafone is continuing to decrease the price than the closest
competitors (Akhta et al, 2017). The entrance of Vodafone into the telecom
industry is an example that this company can maintain the efficiency.
D. Bargaining power of suppliers: The supplier of telecommunication sector
especially mobile phone industry is very strong. The demand for a mobile phone
is increasing day by day. According to the market statistics, it is stated that strong
purchaser can decrease the price leader cost (Akhta et al, 2017).
E. The threat of substitute: Substitute cannot be replacing the entire existing
products it introduces innovation or technology or it can decrease the price of the
same product. This substitution limits the profits and changes the trends.
Vodafone launched many products such as advanced 3G technology. The
focused price strategy of leadership, which is operated by Vodafone, is very
tough to produce substitute product at a low rate. Vodafone has to ensure the
quality of substitute product should not be compromised and increase the sales
of products.
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TASK 4: Understanding and interpreting strategic direction
LO4: Apply models, theories, and concepts to assist with the understanding and
interpretation of strategic directions available to an organization
This section mainly focuses on the Bowman’s Strategy Clock, which is a help to
understand the strategic direction of Vodafone Communication. This strategic clock
utilized to analyse the market in terms of the competitive position of this organization.
Figure 9: Bowman’s Strategy Clock
[Source: Chen et al, 2017]
Position 1: Low Price and Low Added Value
This strategy is based on the basement of the bargain. The products of Vodafone like
3G technology, m-Pesa is not differentiated and consciousness of customer has very
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low worth despite the low cost. Vodafone has to remain competitive in this dynamic
market by the policy is “cheap as chips” (Chen et al, 2017).
Position 2: Low Price
The cost reduction strategy is required in Vodafone Company to achieve the success in
business. The positioning of business has pointed to the low-cost leader in this dynamic
market. Vodafone has kept the price low of each own technological product and service
but as per the market statistics, it is noticed that large selling number can generate the
high-level profits.
Position 3: Hybrid
The position of hybrid involves the low price element of Vodafone compares to the
closest competitors. The main objective of this position is to add good value to the set of
Vodafone product differentiation and reasonable price (Alexy et al, 2017).
Position 4: Differentiation
The main objective of this position is to add good value to the set of Vodafone product
differentiation and reasonable price. In this case, Vodafone branding image plays an
important role to maintain the good quality product (3G technology) and service. High
brand image, quality of product and Vodafone loyalty achieve the good value-added
service.
Position 5: Focused Differentiation
The main objective is to position the Vodafone products and service at the high levels of
price where the customer can purchase the products. High brand image, quality of
product and Vodafone loyalty, good promotion strategy and distribution method helps to
focus on differentiation product strategy (Chen et al, 2017).
Position 6: Risky High Margins
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In this position, Vodafone Company sets the high cost. This strategy could not offer any
extra things in terms of the value of perceived. Risky High Margins is the strategy of
uncompetitive (Alexy et al, 2017).
Position 7: Monopoly Pricing
Market monopoly is the concept of business where only one business or trade can offer
the product. Monopoly Pricing did not aware the perceived cost of the product. In this
strategy, only one term is applicable they purchase the product or not.
Position 8: Loss of Market Share
This position has defined the disaster of a competitive market. Set the standard price of
the product of Vodafone with the low perceived worth is the ultimate goal of winning the
customer attraction.
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Conclusion
This project analysis is mainly based on the Vodafone 3G technology. This research
project highlights many aspects to fulfill the case study of Vodafone 3G technology.
Each section of this research has own importance. Each section is very important to
analyze the ultimate purpose of Vodafone 3G technology.
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