Strategic Management of Vodafone UK

This assignment analyzes the strategic alternatives facing Vodafone UK in 2009. It delves into concepts of competitive advantage, resource allocation, and the impact of converging media and communications markets. Students are required to examine various factors influencing Vodafone's decision-making process, including industry rivalry, technological advancements, and regulatory landscape.

BUSINESS STRATEGY

CONTENTS
INTRODUCTION.........................................................................................................................................1
TASK – 1(THE EXTERNAL ENVIRONMENT)........................................................................................1
PESTEL analysis of Vodafone..................................................................................................................1
Ansoff’s Growth Matrix to analyze Vodafone’s strategic positioning......................................................3
TASK – 2 (INTERNAL ENVIORNMENT).................................................................................................5
Strategic capabilities..................................................................................................................................5
Applying VRIO model to determine the strategic capabilities of Vodafone.............................................5
Vodafone’s strength and weakness............................................................................................................6
TASK – 3 (ANALYZING THE TELECOMMUNICATION SECTOR).....................................................7
Porter’s five force analysis.........................................................................................................................7
TASK – 4.......................................................................................................................................................9
Bowman’s Strategy Clock model and strategic options for Vodafone......................................................9
Strategic direction and options.................................................................................................................10
CONCLUSION............................................................................................................................................11
REFERENCES............................................................................................................................................12

INTRODUCTION
Telecommunication sector is the most dynamic sector of the world economy, as it
incorporates large number of operations. Technology is considered as a heart for this industry.
Articulating in relation with the mobile telecommunication sector, it is growing very fast all
throughout the globe. In UK also, the trend remains the same. As per the survey conducted by
Deloitte, it was explored that around 53 percent of 16 to 75 years of age group people makes use
of smartphones in UK. In addition to this, the revenue from this industry has shown an increasing
trend. There are varieties of mobile operators flourishing in the markets of UK such EE,
Vodafone, British Telecommunication etc. Because of the presence of such giant players in the
market, the competition is obvious within this sector (Newth, 2012). Due to this intense form of
rivalry, it has become a challenge for the companies to maintain their position in the market as
well as to increase their share in the global market.
Concerning to this, the current research report will focus towards the internal and external
environmental analysis of Vodafone. The company is the telecommunication giant and leading
the whole sector in various parts of the world being formed in the year 1982. Vodafone offers
numerous services to their valuable customers such as social product, voice services, Vodafone
Live, messaging services, USB modems etc. The vision of the firm is to become the leading
mobile telecommunication provider through enriching the customer’s live and helping them to
get connected all through the world (Curwen, 2001). However, there are many factors that
influence the operation of the business in achieving the desired goals. Thus, the present study
will evaluate such factors that impact the Vodafone’s strategic decision making. Furthermore, the
internal capabilities of the company will be assessed by applying models and approaches. Other
than this, various strategic options available for Vodafone will also be discussed later in the
study.
TASK – 1(THE EXTERNAL ENVIRONMENT)
PESTEL analysis of Vodafone
PESTEL analysis influences the operations as well as power of the business to take
decisions. Seeking help through this, company can prepare their strategies earlier and can enter
into the market. Furthermore, with this framework, the firm will be able to answer varied
questions related to the business society. Thus, it becomes necessary for the business to analyze
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these factors (Barney and Wright, 2009). Further, through this the firm can achieve an advantage,
as they will be well aware about the scope as well as limitations of their business. PESTEL
analysis of Vodafone is as follows:
 Political – This factor takes into consideration various factors such as trade restrictions,
tax reforms, tariff, political stability, labor laws and environmental laws. Many problems
are being faced by the company due to political issues. Legislations and laws changes
with the change in the government and the firm are compelled to abide by these laws.
Because of the high inflation rate in some of the nations, the government of UK made
pressure to reduce the prices (Bower and Gilbert, 2005). Pertaining to this various
changes has been made in their internal and external environment of Vodafone.
 Economical – This factor is most important to the companies like Vodafone. The chances
of company to expand increases with the increase in the development of the state. They
get a chance to open different ventures in the developed zones. The GDP of UK is good
and this depicts that people has more income levels. Higher level income groups are more
prone to adapt the latest technology in relation with the communication. In such a
manner, the overall profits of Vodafone increases. However, due to recession and
slowdown in European and Asian countries, the company has to cut their prices and
profits (De Wit and Meyers, 2004). Due to global uncertainty, the company is bound to
change their strategies. Furthermore, the company has good customer relationship and
thus, they are ready to shift their approach from unit pricing to unit based tariffs. Through
this, they are able to render more value to their clients.
 Social – The social factors are related with the local beliefs, cultural values, society and
values of the people in which the company is operating their business. Hence, it can be
said that it is quite dynamic domain and for the organization to succeed needs flexible
policies and procedures in place. They must have developed such policies that match with
the local culture. Many of the countries have banned the mobile internet services due to
its misuse. Vodafone is a European company but they have altered their preferences as
per the demand of the social factors of a particular nation. For instance, according to
research it was found out that around 53 percent of 16 to 75 years of age group people
makes use of smartphones in UK (Krogerus and Tschäppeler, 2017).
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 Technological – The Company is world famous for its innovation. The firm has the
mission to always take into consideration the recent trends in the technological and
communication world. However, the firm now faces fierce competition in the market and
thus, to achieve a competitive edge then need to be have one step ahead of the
technology. In addition to this, the firm is successful enough in case of the wireless
technology. They are now offering 4G access and got tremendous results and
achievement of the organization.
 Environmental – Because of the rise in the level of the globalization, people are
becoming more ethical. Each and every consumer now wants their operator to follow the
ethics and become socially responsible. Since the company is operating in the global
market, it is important for Vodafone to take into consideration aforementioned facts and
analysis (Rao, Parvathiswara and Sivaramakrishna, 2009).
 Legal – Vodafone is required to be more vigilant in regards with the legal issues
pertaining to copy and pirated issues. Many a times, the company has been blamed for
the legal issues and then they have to pay penalties for the same. In addition to this, with
the rise in the competition in the market has led the company to violate certain
regulations of the government. Other than this, they are also keeps in consideration the
“sale of good act 1974” and must operate accordingly. However, Vodafone always makes
efforts to follow the legal rules and issues so as to build a positive image in the market
and can increase the customer base.
Ansoff’s Growth Matrix to analyze Vodafone’s strategic positioning
For the purpose of analyzing the strategic positioning of Vodafone, Ansoff’s growth
matrix is quite useful. Additionally, it is being regarded as the crucial model that helps in
cultivating the marketing plan and implements the same for getting success and growth. It is a
marketing planning model that renders a supportive hand to the business by identifying the
product as well as market growth strategy (Andersen, 2006). Furthermore, the model also
suggests that the growth of the business is dependent on whether the market is new or existing
and product is new or existing. The output derived from the Ansoff matrix is the growth
strategies. Vodafone has launched their 3G service in the market utilizing this matrix. The
elaboration of the model is underneath:
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 Market penetration – This is the phase where company can sell their current product in
the existing market. This can be performed by the company by doing thorough analysis
of their competitors. In this regards, Vodafone has made efforts to launch the same
product and services with the new style of marketing. Thus, it becomes challenging task
for the organization to earn revenue in the existing market. However, with this process
the company was able to determine the factors which influence the sale as well as growth
of their products and services (Rao, Parvathiswara and Sivaramakrishna, 2009). From the
last few years, Vodafone’s revenue has shown the increasing trends and in turn was
successful enough in sustaining their existing product in the current market. Furthermore,
the company has gained the attention of the customers by making use of various
promotional strategies.
 Market Development – With this strategy, Vodafone has launched their existing product
in the new market. This is also considered as the key method for the firm. The company
has propelled their wireless technology and service in various parts of Asia with a novel
strategy. In addition, the company has also flung Wi-Fi technology in various parts of
India. Since, the firm is being operating in various parts of the world; they need to adapt
their strategy related to marketing with the changes in geographical location. In addition
to this, company has launched Vodafone M-pesa, Web Box, Opera Mini browser etc.
 Product Development – Through this, new product can be launched in the existing
market. Pertaining to this, they have launched the Wi-Fi services in UK. Thus, through
this the company was able to achieve a competitive edge over the other firms operating in
the same market (Yussof and Ismail, 2002). In addition to this, Vodafone has also started
their broadband services in various parts of Europe by making use of this type of
technique. Further, they have introduced many new products such as Vodafone 4G/LTE,
Vodafone TV, Vodafone One Net etc.
 Diversification – Seeking help through the diversification strategy, the company has
launched their 3G services in the new market. It was a great challenge for Vodafone to
create status, brand image and attracting the customers towards the new product and
service. With this, the firm gets an idea to develop their strong marketing strategy in
order to attract the pool of customers. They have also adopted this strategy and had done
partnership with Samsung, HTC and Microsoft.
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TASK – 2 (INTERNAL ENVIORNMENT)
Strategic capabilities
The term strategic capabilities mean the ability of the firm to engage competitive
strategies which in turn helps the firm to maintain their sustainability and also, increases its value
over a period of time. However, strategic capability does not considers the strategies being used
by the business; in fact it pays attention towards the assets, market position as well as resources
and then projects the employability of the strategies in the new future (Chumacher, 1987). The
resources and capabilities of the Vodafone can be determined by making use of VRIO analysis.
Applying VRIO model to determine the strategic capabilities of Vodafone
Throwing light towards the VRIO framework, it is being defined as a tool used to
measure and determines the internal capabilities of the organization. This is done so as to
ascertain that whether they can become source of sustained competitive advantage or not. This
model states that the resources of the firm must possess four attributes in order to become a
source of competitive advantage i.e. Valuable, rare, imperfectly imitable and non-substitutable.
The resource and capabilities of Vodafone are as follows:
 Capital access – Vodafone UK can have access to capital from its parent company i.e.
Vodafone Group. The cash flow of the company is £5.6 Billion. In addition the group is
able to offer its subsidiary extra capital so as to enhance its own operating capabilities
(Newbery, 1999). However, there are many giants in the market that too have such
capital access and thus, it lands the company in a situation of competitive parity with
their rivalries.
 Network capability – The Company has made too much investment on network and
because of this, the firm is easily offering high speed network with exceptional coverage.
Furthermore, Vodafone also proposes that they have most spectrums in place as
compared to their competitors in UK and that their low frequency 4G signals are allowing
the firm to have fast indoor peed of internet. Hence, it can be said that this capability
related to technology is undeniably valuable and helps the company to go one step ahead
then their competitors.
 Brand equity – Many researches and publishers have explored and concluded that the
company owns fifth position in the brand raking worldwide. They have brand equity
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worth $ 31 billion (The Strategic Alternatives of Vodafone UK, 2009). The subsidiary of
the company such as Vodafone UK is able to get benefits from the brand name being
created by its parent group. Since, the firm is operating in almost every part of the world;
the whole world is quite familiar with the brand and tends to become a part of this group
because of their familiarity. Thus, the brand equity of Vodafone is valuable, too costly to
imitate and thus, it reaps out sustainable competitive advantage to the firm.
Figure 1: VRIO Model analysis of Vodafone
Vodafone’s strength and weakness
Strength
Vodafone has strong research and development and thus, the firm is able to achieve a
sustained competitive advantage in the telecommunication market. Because of this, the firm is
able to gain the market leadership in new technology and low differentiation amid the
competitors (Wirtz, 2001). In addition to this, the company is also well aware of the fact that no
other telecom operator is offering better services to the customers as compared to Vodafone and
therefore, the firm has occupied the stable position in past five years. The major strength of the
organization lies in its reputation and strong brand image. Furthermore, the firm has also made
alliances with large mobile technology company i.e. Apple. Other than this, 4G and 3G services
of Vodafone has played pivotal role in attracting the customers of Europe and Asia. Lastly,
innovation of the company in terms of wireless technology has also helped them in sustaining a
competitive position in the telecommunication sector (Krogerus and Tschäppeler, 2017).
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Weakness
Comprehending the weakness of the Vodafone, it was revealed out that the wireless
technology being launched by the firm is not successful enough and strong in comparison with
the other network providers such as Three and EE telecommunication. Furthermore, the
organization also recognized that in order to have rapid innovation in new technology, the
experts, technicians and engineers of the company are not too much expert. Furthermore, the
saturated market makes it difficult for the firm to stand out from their rivalries (The Strategic
Alternatives of Vodafone UK, 2009). Finally, in Europe the company has strong base of
customers, but in case of Asia, the amount is little because of the high cost involved.
TASK – 3 (ANALYZING THE TELECOMMUNICATION SECTOR)
Porter’s five force analysis
Porter’s five force model is very useful for almost every organization. This is because of
the fact that when the firm comprehends the forces in their working environment that influences
their performance than the firm can easily alter their strategies as per the identified impacts.
Thus, it can be well apprehend that this model supports the firm in contrasting the competitive
environment of the company. It is being regarded as the most influential analytical tool for
evaluating up to which extent the firm is competitive in the telecommunication sector
(Brugmann and Prahalad, 2007). Porter’s five force model has five forces i.e. threats from the
substitutes, threats from entrants, bargaining power of the buyers, bargaining power of the
suppliers and competitive rivalries. The telecommunication industry of UK is also influenced by
all these five forces. Explanation of each factors are described as below:
 Bargaining power of the suppliers – In the telecommunication sector, the suppliers
enjoys high power. This is pertaining to the fact that in business related to mobile phone
parts, suppliers highly influences the prices of the products. They place high conditions in
turn for making a deal with the providers. For instance, when Apple has propelled their
new phone in the market, they have made an exclusive deal with the AT&T so as to make
sure that they have elite rights to be the service provider to their phones in Unites States
of America (Schröder, 2006). Thus, it can be said that the suppliers enjoys high
bargaining power in this industry.
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 Bargaining power of the buyers – Buyers related to the telecommunication industry have
more power to influence the prices of the products and services. However, the individual
buyer does not possess potential to influence the prices being offered by the Vodafone for
their products and services. They have high power because of several reasons. Firstly,
there is no differentiation among the service providers. In simple words, the services
being offered to the customers by companies are almost similar. Secondly, there is stiff
competition among the giant players in the market like EE, Three, British Telecom etc.
the next reasons is the lower switching costs (Damodaran, 2002). Customers can switch
towards the other brand by no cost involved. Finally, the phone number portability
service being launched by the firm may have negative impact on the firm.
 Threats from new entrants – For a new service provider it is very difficult to enter into
market of telecommunication sector. Further, the threat of the new entry is highly
influenced by the economies of scale of the exiting firms operating in the market. Due to
high brand name and reputation of the existing companies, the costs for entering into the
market will be quite high. Other than this, huge licensee fees, changing technology,
changing trends and regulatory issues are some of the factors that restraint the new
companies to enter into the market (Porter and Kramer, 2006). However, irrespective of
more costs involved, several numbers of firms are still stepping into this market. But
these larger firms have control over the market and are significantly exerting pressure on
new entries.
 Threats from substitutes – Talking in references with the threat from the substitute
products, it is relatively moderate. However, for the Vodafone and other mobile
communication service provider it is quite high. Because of the improved markets in
relation with the broad band services such as G-Talk, Video-conferencing and Skype, the
threat of substitutes became more intense and high.
 Competitive rivalry – Speaking in regards with the telecommunication sector United
Kingdom, large companies are facing intense competition from each other. Furthermore,
all throughout the globe, large firms are few in numbers that are fighting for the larger
market share and this in turn lowers down the threat of rivalry (Barney and Hesterly,
2010). However, the companies which exist in the market compete with each other
intensely. The market growth in this sector is very slow and hence, the organizations fight
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for gaining larger market share and thus, increases the threats. In addition to all this, the
switching cost is also very low due to which brings the level of this threat relatively up.
Further, differentiation in the product is low and thus, threat of rivalry is fairly high.
TASK – 4
Bowman’s Strategy Clock model and strategic options for Vodafone
Comprehending about the bowman’s strategy clock model, it is being defined as the
model that helps the firm in exploring the options for the purpose of strategic positioning. In
simple words, it renders a supportive hand to the organizations in determining various ways
through which the new merchandise of the firm can easily be developed and placed in the market
so as to secure a competitive position in the market (Damodaran, 2002). Therefore, the main
purpose of strategic clock is to depict that the business will have numerous options for
positioning their product on the basis of two main dimensions i.e. price and the perceived value.
Figure 2: Bowman's strategy clock model
Position – 1
This is not being regarded as a competitive position for the business. Further, the products are
almost similar and are not different from the crowd. In addition, the perceived value is very little.
However, the prices are very low.
Position – 2
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Business in this stage position themselves as the low cost leaders. Profit margins are quite low,
but the sales volume is high (Garcia-Murillo, 2003).
Position – 3
It is the hybrid position which consist low prices and some sort of differentiation in product. This
strategy is very effective as it offers added value to the customers.
Position – 4
The differentiation strategy offers high value to the customers. Further, branding as well as the
product quality also plays key role here.
Position – 5
Focused differentiation is inclined towards offering products which are too costly and in return
customers get high level of value.
Position – 6
Seeking help of this strategy, businesses sets high prices of their products and services and does
not offer anything extra in relation with the perceived value. This is a collegial strategy, under
which the goods and services are being sold at higher prices.
Position – 7
This strategy is useful for the firms who enjoy monopoly in the market and deals with only
particular products and services. Further, they can also set prices as per their wish.
Position – 8
This is the position of disaster. In simple words, setting the prices of the products low and giving
no perceived value in turn is not a win-win situation.
Strategic direction and options
Based on the Bowman’s strategy clock model, the Vodafone has the options to diversify
their market. The firm should adopt the strategy of diversification and should enter into
electronic equipment market. As per the model, Vodafone will be offering high level of
perceived value to the customers with relatively priced products. The company will be exploring
the new market with new products. However, this strategy involves high risk as the business is
stepping towards the market wherein they have no experience. Vodafone can enter into
electronic equipment market such as Vodafone TV, washing machines, Microwaves etc. Seeking
help through this diversification strategy, company can get success, as they can create brand
awareness and loyalty towards the firm.
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CONCLUSION
As a consequence, it can be well comprehended that the report has examined the internal
and external environmental factors that impacts the decisions of Vodafone strategically.
Vodafone has made too much investment on network and thus, they offering high speed network
with outstanding coverage. The major strength of the organization lies in its reputation and
strong brand image. However, to maintain this position, it is indispensable for the company to
keep rationalized with the newest technology and inclinations in the market and applying the
same within the firm strategically.
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REFERENCES
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Chumacher, E.F., 1987. Small is Beautiful: a Study of Economics as if People Mattered. SAGE.
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Porter, M. and Kramer, M., 2006. Strategy and Society: The Link between Competitive
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Rao, C.A., Parvathiswara R.B. and Sivaramakrishna, K., 2009. Strategic Management and
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Online references
The Strategic Alternatives of Vodafone UK. 2009. [Online]. Available through:
<
https://www.researchgate.net/publication/283579555_The_Strategic_Alternatives_of_Vodaf
one_UK_in_2009 >. [Accessed on 3rdApril 2018].
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