Influence of Macro Environment on Vodafone's Business Strategies

This report examines the impact of the macro environment on Vodafone's business strategies. It analyzes Vodafone's internal environment, capabilities, and competitive analysis in the telecom sector. The report also discusses the strategic planning models and theories used by Vodafone.

BUSINESS STRATEGY

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
LO 1.................................................................................................................................................3
Influence of Macro Environment on Vodafone and its business strategies.................................3
LO 2.................................................................................................................................................7
Vodafone’s internal environment and capabilities......................................................................7
LO 3...............................................................................................................................................10
Competitive Analysis of telecom sector of Vodafone using Porter’s Five forces.....................10
LO 4...............................................................................................................................................13
Devising strategic plan using various models and theories.......................................................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Business strategy refers to a long-term plan created for a company to meet the desired
mission and vision, and includes all objectives and goals of the company, the product/service,
processes, marketing and consumers. Strategic management is conducted to plan, monitor, assess
and analyse the application of business strategy in the organisation (Yuan and et.al, 2020). The
aim of this report is to understand different strategies that could be used in tactical, operational
and strategic role of the British telecommunication company Vodafone group plc. The company
was established in 1991 and is headquartered in London, England. The multinational corporation
operates across various regions, i.e. Africa, Europe, Asia and Oceania, in 24 countries and
partner networks in 41 further countries. The market capitalisation of Vodafone is more than £53
billion and is the eighth largest company listed on London Stock Exchange. This report will
analyse the influence of macro environment on Vodafone and its business strategies along with
assessing its capabilities and internal environment. The report will also highlight the competitive
analysis of the company and devise strategic plan using a range of models and theories.
LO 1
Influence of Macro Environment on Vodafone and its business strategies
Business strategy is the course of action or a set of business decisions which assist
companies in achievement of particular goals and objectives with a strategic intent. There are
primarily three types of strategies, operational, tactical and corporate (Soltanizadeh and et.al.,
2016). The purpose of devising strategies is to achieve effectiveness, perceive and utilise
business opportunities, mobilisation of resources, getting competitive advantage, countering the
challenges and threats, direction of behaviour and efforts and most prominently, gaining
command over the situations in business. This is how strategies help in achieving objectives,
strategic intent and providing alternative to move in different strategic directions.
The mission of Vodafone is to enrich the lives of its customers by the unique power of
communication via mobile. The vision of the company is to become a leader in communication
and operate in an increasingly connected world. The objectives of the company leading in the
telecommunication industry for response to public concerns regarding mobile masts, devices and
3

health through demonstration of leading-edge practices and motivating others to follow
(Vodafone,2020)
Strategic planning is the procedure of establishment and documentation of direction of
the company and aligning the long-term goals, mission and vision with action plans to reach the
targets and foster the growth of the business. Various strategic planning techniques, theories and
models like Pestle, SWOT, stakeholder Analysis, Balanced Scorecard, Porters' Five forces,
Ansoff growth vector Matrix, McKinsey’s 7S, VRIN framework, Value chain Analysis, Hybrid
strategy, Vertical/horizontal integration, Bowmans strategy clock, Porter’s generic strategies etc.
will be evaluated in brief for devising Vodafone’s business strategies (Yuliansyah, Gurd and
Mohamed, 2017).
Stakeholder analysis
Stakeholders are all the parties, individuals and organisations that are affected by the
operations of the company. An analysis helps in enlisting key stakeholders, addressing conflicts
and issues early on and to align all stakeholders on plans and goals. The following are the
stakeholders of Vodafone:
 Customers: They are central to Vodafone’s sustainability and building trust is important
for management of operational risks for privacy and performance of network.
 Employees: The involvement, competencies and skills of employees of Vodafone
determine the ability for provision of best network.
 Government and regulators: The relation impacts ability of contribution towards social,
economic and environmental objectives.
 Shareholders and investors: Providers of capital, who are necessary for supporting growth
are kept updated regarding sustainability and performance.
 Business partners are important ways for interaction with customers and help in
delivering service and customer service across multiple touch points.
 Suppliers: Contractors impact provision of services, operational efficiency, business
continuity.
 Community: Building local economies builds trust adding to long term viability of the
markets in socio-economic context.
4

 Media: Keeps Vodafone informed regarding new developments, products, factors
affecting business performance (Kull, Mena and Korschun, 2016)
High
POWER
High power Low interest
Keep Satisfied
 Employees
 Shareholders and investors
 Business partners
High power high interest
Manage Closely
 Customers
Low power Low interest
Monitor
 Media
 Community
High interest low power
Keep informed
 Government and regulators
 Suppliers & contractors
INTEREST
Low High
PESTLE
Pestle analysis is used to evaluate the external macro environment which has direct influence
upon Vodafone's operations, sales and profitability in the international market: Political factors: In context to global markets, telecommunication businesses face a lot of
tariffs, duties and taxes influenced by political decisions of the countries where Vodafone
operates. In developing Asian countries, the interventional level of government is high
and Vodafone is pressurised by government policies. Economic factors: Macro economic factors like inflation rate, unemployment level,
income level, demand and supply factors directly impact the sale of Vodafone services.
Although the demand for telecom services has been increasing, the consumer demand is
dynamic when it comes to major countries of operations like UK, India, Italy and Spain.
The economic strength of the country also affects purchasing power of consumers and
5

busines strategy has to consider economic restraints and device policies accordingly
(Perera, 2017). Social factors: Socio-cultural factors such as values, traditions, beliefs, tastes, latest
trends, changing preferences and lifestyle directly affect the procurement of telecom
services. A growth in the demand for internet services and social media trends have
increased the demand for low cost data plans and benefitted Vodafone. Technological factors: Technology is an important part of telecom business and focuses
on increasing user experience through upgradation of digital technological infrastructure.
It involves provision of mobile based applications and higher consumer engagement and
providing better and latest networking and connectivity to sustain in the market (Auton,
2020). Legal factors: Legalities, policies, rules and regulations in context to employee
legislation, labour laws and taxes affect the business strategy employed by Vodafone in
various countries. There has been an increase in level of control by law enforcements
globally and legal practices are emphasised in international business. Non adherence can
result in hefty fines and penalties.
 Environmental factors: Sustainable business practices are notably focussed in present
times due to increase in environmental awareness. Vodafone has to increase eco-friendly
practices like reduction of carbon footprint and environmental impact.
SWOT
SWOT analysis is used to analyse situation of the company in the present international
business environment. It analyses internal and external factors and how Vodafone has to
manoeuvre strategy and maintain position in the telecom industry. Strengths: Vodafone has maintained a strong brand equity and recognition across its
areas of operations and offers diverse range of services such as SMS for Life in Tanzania
and M-pesa in Kenya. It has a global presence across Africa, Europe, Asia and Oceania,
in 24 countries and partner networks in 41 further countries. The market capitalisation of
Vodafone is more than £53 billion and is the eighth largest company listed on London
Stock Exchange. The subscriber base is fourth largest in the world and a strong
impression by marketing campaigns of Zoo-Zoos (Bismark and et.al.,2018).
6

 Weaknesses: Vodafone has a limited presence in the rural areas as the price and services
are mostly targeted to urban segment. Outside its core business Vodafone has limited
success, unlike its competitors. The brand valuation is dropping in present times due to
sluggish growth, economic and market saturation and intense competition from
international and local telecom companies. Opportunities: Vodafone can aim to penetrate in the rural market apart from urban
markets like its competitors Airtel and Jio. Apart from that, emerging markets in
developing countries as the users of internet are increasing exponentially, better network
structures, high disposable incomes and affordable smartphones. Vodafone can provide
better network coverage and attractive pricing or value-added services to increase its
market share (Kerr and Moloney, 2018).
 Threats: Vodafone faces high competition from both internal and local telecom
companies such as China Mobile, Reliance Jio, Airtel AT&T which are a major threat.
Few companies face a low tariff which impacts the revenue and number of subscribers
for Vodafone.
LO 2
Vodafone’s internal environment and capabilities
Strategic capabilities refer to the ability of Vodafone to harness all resources,
capabilities and skills for gaining competitive advantage and survive by increasing the value over
time. As competition for market share, customers and revenue increases, Vodafone has to
develop deliberate strategies and tactics. A resource-based strategy determines resources, assets
of the business, competencies way of effectively employing assets and competitive advantage
and superior performance is a part of distinctive capabilities.
VRIN determines the values of strategic capabilities in the telecom market and identifies
how Vodafone will achieve competitive advantage. Value of strategic capabilities is high when
they offer potential advantages and edge over other rivals in the market. Rarity are the
capabilities possessed uniquely by Vodafone in meeting customer needs. Inimitability that
competitors cannot obtain such as linked competence or performance and Non-substitutability is
the competence or service substitution (Geraldes, da Costa and Geraldes, 2018).
7

V Economies of scale, brand recognition, marketing, global presence, large network and
communication infrastructure.
R Global presence, diversified services, specialised staff and unified mobile services
I Marketing impression, brand value, and culture of market leadership
N None
Value chain Analysis is used to identify the primary support activities that add value to
the final product for taking decisions on either increasing differentiation or reduction of costs
(Cambini and Lorrai, 2020).
Firm’s Structure: Vodafone has sophisticated and extensive IT infrastructure
Human Resource management: Highly competent and skilled employees
Technological development: Hyper connection, ultra-dense coverage, secure exchange of
data, high speed network, IoT, 5G technology, innovative protocols
Procurement: Tier 1- Direct suppliers (10,800), Tier 2 Sub Assemblers & Electronics
manufacturers, Tier 3 Component suppliers, Procure central advertising
Inbound
Logistics
The
warehousing
is centralised
Operations
Huge centralised
servers for easy
switching-
economies of scale.
Outbound
Logistics
Home
delivery
Sales and marketing
Online and database
marketing and sales,
omnichannel sales
Service
Online support
services and
aftersales
McKinsey’s 7S model: This model was developed by Robert Waterman & Tom peters in
1970s and identifies seven elements that Vodafone can align for being successful. There are
three hard elements, structures, strategy and systems, while four soft elements i.e., skills, shared
values, staff and style which are interrelated factors and impact Vodafone’s ability to change. Structure: It is the skeleton of Vodafone which forms the shape of the company and
dictates the way of performance and operation of the company. It determines the
arrangement of various levels and departments in the company, hierarchy, positioning
and assignment and accountability of tasks. Stability in structure ensures effective
implementation of changes and even determines the type of taxes Vodafone has to pay.
8

The company follows a matrix organisational structure and ensures effective flow of
communication and delegation of work. Strategy: This is the approach made for the maintenance of standing point of Vodafone
and involves risk-taking and performing out of the comfort zone of business. While
designing strategy, other six elements have to be aligned. Vodafone has to allocate
resources appropriately and plan the course of action to achieve its goals (Kalam, 2020). Systems: This refers to the conventional process of implementing the procedures that are
followed in the strategy and daily activities and functions. Vodafone has to develop the
systems so that the processes can be performed efficiently and reap maximum benefits.
Vodafone can implement innovation and upgrade its marketing ideas and technology.
Apart from that, systems like logistics, shipping, customer support have to be developed.
 Staff: The strength, diversity, competencies and skills of the workforce of Vodafone
determines how the activities will be performed and strategy will be implemented. All the
engineers, marketers, sales people, customer service staff have to be given proper training
and incentives to motivate the talented employees. The collectiveness and overall
performance have to be good and tasks have to performed efficiently.
 Skills: Skills are the competencies, attributes and abilities of the workforce of Vodafone.
It results in how the organisation will perform, efficiency of task completion, customer
satisfaction and quality of work. Whenever a new strategy and plan will be implemented,
there should be no gap in the skills of workers for successful implementation. Styles: This symbolises the fashion or technique in which the company is operated and
handled and involves management and leadership qualities and types. It revolves around
power, politics and culture of the company (Correani and et.al.,2020).
 Shared values: This encapsulates the purpose, vision, mission and societal mandate of
Vodafone which has to remain constant over time. It also shapes the values and guiding
ideology of the organisation.
LO 3
Competitive Analysis of telecom sector of Vodafone using Porter’s Five forces
Porter’s Five Forces model
9

 Threat of new Entrants: The entry of new companies in telecom industry can lead to
innovation in the existing companies but at the same time put pressure on Vodafone into
lowering the prices or provide new value propositions. Vodafone can tackle them by
innovating new services and marketing strategies. However, the degree of this threat is
low as due to economies of scale Vodafone can counter new entrants effectively
(Pehrsson, 2020). Bargaining power of buyers: The today’s customers demand a lot and Vodafone has to
offer the best services at minimum prices. This puts a lot of pressure on the cost-benefit
of the company and its profitability as consumers tend to seek higher discounts. This
level of threat is high. Vodafone has to increase its existing economies of skill and
compete the new low-price offering companies like Reliance Jio. It has to streamline its
production and sales processes, diversify and market attractive value-added services
without creating a gap in profit margin.
 Threat of substitute products: The substitutes for telecom companies can be either cloud
operated services like Google drive, WhatsApp calling etc. But the strength of these
threats is quite low due to the massive need of internet, therefore, no complete
substitutions available (Lewis, 2017).
10

Figure 1:Porters Five Forces
Source: Oxford College of procurement and supply, 2020
 Bargaining power of suppliers: Almost all organisations operating in the wireless
communications and telecom industry purchase raw materials from numerous suppliers.
If the suppliers have high negotiation power, they can extract higher prices from
Vodafone. To counter this Vodafone has built efficient and reliable supply chain with
numerous suppliers such as 10,800 Tier 1- Direct suppliers, Tier 2 Sub-Assemblers &
Electronics manufacturers, Tier 3 Component suppliers. This threat is moderate for the
company.
 Industrial rivalry: The overall competitive rivalry is intense in context to telecom
industry as major markets have firmly established national and regional corporations in
developing countries which offer low price services unlike Vodafone which is an
international brand. This threat level is high. Major competitors of Vodafone are China
mobile, Bharti Airtel, Jio etc. to counter this Vodafone can collaborate with other
competitors to increase its market share or by building sustainable differentiation (Alves,
2020).
11

Ansoff matrix to product/market strategy
This tool is used to analyse and evaluate strategies for growth and the risk associated with
each strategy. There are four strategies, product development, market development, market
penetration and diversification. Most companies in the telecommunication sector employ market
penetration strategy by offering discounts and increasing promotions.
 Market penetration: In this strategy company promotes its existing products intensively
in existing markets. It aims at gaining a larger market share and is the least risky
strategies. Vodafone already implements this by decreasing prices to attract new
customer, intensive marketing and offering discounts and acquire competitor in the same
market.
Figure 2: Ansoff's Growth Vector Matrix
Source: CFI, 2020
 Product development: Using this strategy Vodafone can develop new services and cater
to the present market, it consists of more research and development as the range of
services of the company would increase. Market development: By application of this strategy Vodaphone would enter into new
markets using existing products and is used for growth and expansion of the company.
There are other countries where Vodafone can operate and leverage its technology into
new markets by catering to new customer segment.
12

 Diversification: This is the riskiest strategy and the firm is to enter new markets with
new products or services. It basically involves both product development and market
development. It can provide higher profit margin and open up a new stream for revenue if
implemented successfully. This would be the best strategy for Vodafone as it already has
economies of scale and global presence. It can use innovation to develop new value-
added services and enter into the new markets. Although risky, but the brand equity and
other strengths of the company can handle contingencies (Loredana, 2017).
LO 4
Devising strategic plan using various models and theories
There are various models and methods which can be used by Vodafone in order to be
able to operate effectively in the market. The following report would consist of models and
theories applying to the organization.
The application of Porter’s generic strategies
There are four strategies which are involved in this theory which are given by porter
which are as follows.
 Cost leadership
The products are going to be low producers who use all kind of sources in order to be
able to operate effectively with low costing methods.
 Differentiation
Getting unique identity in the market is the aim of the organization so that the value of
the buyers can be higher. There are going to be uniqueness for which rewards will be given out
to promote this behaviour.
 Cost focus
Cost advantage is going to be found in these type of businesses in the market so that there
is going to be good target segment which would be present (Eker and Eker, 2019).
 Differentiation focus
13

There is going to be differentiation in the target segment as well which is going to be
present and the focus of the business is going to be on this factor over all.
Vodafone is having a stable functioning and is having focus cost method for themselves
so that they can have higher customer base and profitability in the market. The competition in the
market is increasing which is why the organization will have to select the right measures in order
to be able to do this factor right.
Extended model of Bowman’s strategy clock
For positioning the product in the market this is a very effective strategy which can be
used by Vodafone so that there are going to be higher performance.
 Low price & low added value
The pricing of the product is going to be low and so is the value of the product in the
market.
 Low price
The profits which the products can have in the business are going to be low but the
overall production and sales of the product is going to get in profits in the business.
 Hybrid
There are going to be low pricing for loyal customers but there are going to be
differentiation which is going to be present for the others and from product to product.
 Differentiation
There are going to be high product value making the brand recognition in the market
higher which is a great factor for the organization to be able to achieve their objectives.
 Focused differentiation
The products are going to be priced at a high value level so that the customers can
purchase them at that cost and trust can be gained from there (Liu and et.al., 2020). Lot of
promotions, distributions and targeted segmentation is required for this strategy.
 Risky high margins
14

There are high risky positioning strategies which are going to be used in the business so
that there are going to be good value in the organization. The portfolio and brand image ion the
market is also going to improve.
 Monopoly pricing
Only one business is going to be offering the products and services therefore the pricing
of the product is going to be in the hands of the organization. There are going to be no
alternatives as well which are going to be present.
 Loss of market share
This is a disastrous measure which any business can take to get competitive advantage in
the market. The product will not be able to have the right customers and survival of the products
is going to be lower.
Vodafone is going to go for differentiation which is going to make the value of the
product increase and the difference which the product is having is also going to be present.
Loyalty and awareness of the products is going to be present of the business in the market which
makes the organization have better functioning.
Hybrid strategy
Due to the raise in the competitors in market Vodafone will have to use this strategies in
a lot of countries in order to be able to operate effectively. Customers needs and wants are high
but they want the services for low pricing which needs to be provided to them so that there are
going to be higher results and the profitability is going to be present as well.
Diversification
Vodafone is having a strong place for themselves in the market which is why the business
will be able to have diversification in the business. The portfolio is strong of the organization as
well so that there are right investment which the business can have for themselves and will be
able to gain higher profitability. Risks are going to be taken by the organization because they can
make the stability for their products and services effectively in the market.
Vertical/horizontal integration
 Horizontal integration
15

Horizontal integration is acquiring similar company in the same industry which is from
the same supply chain as well. This is going to make the experience of the business be used and
company will be able to operate effectively (Adámek and et.al., 2017).
 Vertical integration
Acquiring another company which is operating before or after the supply chain is vertical
integration which is a very good factor for the company to have in the market.
Vodafone is using vertical integration in the market so that they can capture more
businesses in the market in order to be able to operate effectively. Vodafone has already merged
with Idea cellular which has made the organization gain a lot of advantages.
CONCLUSION
From the above report it can be concluded that business strategies can help on the growth
and expansion of Vodafone and effective implementation would help in achieving business goals
and objectives. The Pestle determined the riskiest macro factors for Vodafone which were
political and technological factors. Swot analysis determined the major strengths of the company
which were high brand awareness and can be used for creation of opportunities and minimising
threats of competition. Strategic capabilities of Vodafone were analysed by VRIN framework
and value-chain analysis. The Mckinsey’s 7S model was applied to understand the hard and soft
elements of Vodafone such as staff, skills, structures, systems, staff, style and strategy.
Competitive analysis was conducted using Porter’s five force model which determined threat of
industrial rivalry and bargaining power of buyers as high-level threats. Growth strategies were
evaluated where diversification was observed to be the most appropriate. Strategic was devised
using models and theories like Porter’s generic strategies, Bowman’s strategy clock, Hybrid
strategy.
16

REFERENCES
Books and Journals
Adámek, P and et.al., 2017. THE BUSINESS EXCELLENCE MODELS IN CZECH
ENTERPRISES: THE EFFECTS OF BUSINESS STRATEGY ON
PERFORMANCE. Central European Business Review. 6(4).
Alves, Â.D.T.D.S., 2020. Uplift modeling: telemarketing campaigns cost optimisation for
Vodafone (Doctoral dissertation).
Auton, N., INTERNET OF THINGS AS A BUSINESS STRATEGY.
Bismark, O., and et.al.,2018. Utilizing Mckinsey 7s model, SWOT analysis, PESTLE and
Balance Scorecard to foster efficient implementation of organizational strategy.
Evidence from the community hospital group-Ghana Limited. International Journal of
Research in Business, Economics and Management, 2(3), pp.94-113.
Cambini, C. and Lorrai, A., 2020. Behavioural economics in telecoms: an analysis from a
Vodafone store’s sales.
Caron, V., 2020. From traditional system toward agile methods: Digital transformation challenge
in Vodafone (Bachelor's thesis, Università Ca'Foscari Venezia).
Correani, A., and et.al.,2020. Implementing a digital strategy: Learning from the experience of
three digital transformation projects. California Management Review, 62(4), pp.37-56.
Eker, M. and Eker, S., 2019. Exploring the relationships between environmental uncertainty,
business strategy and management control system on firm performance. Business and
Economics Research Journal. 10(1). pp.115-130.
Geraldes, R., da Costa, R.L. and Geraldes, J., 2018. VRIO FRAMEWORK-STATIC OR
DYNAMIC?.
Kadam, A.N., 2020. Research Paper on Corporate Social responsibility With Special Reference
To Telecommunication Industry Airtel And Vodafone Literature review. Studies in
Indian Place Names, 40(27), pp.1170-1179.
Kalam, K.K., Market Segmentation, Targeting and Positioning Strategy Adaptation for the
Global Business of Vodafone Telecommunication Company.
Kerr, W.R. and Moloney, E., 2018. Vodafone: Managing advanced technologies and artificial
intelligence. Harvard business school.
Kresak, M., Corvington, L. and Williamson, P., 2016. Vodafone answers call to
transformation. Business Transformation Essentials: Case Studies and Articles, p.127.
Kull, A.J., Mena, J.A. and Korschun, D., 2016. A resource-based view of stakeholder
marketing. Journal of Business Research, 69(12), pp.5553-5560.
Lewis, R., 2017. Porter's Five Forces of competitive advantage.
Liu, C.H and et.al., 2020. Co-competition, learning, and business strategy for new service
development. The Service Industries Journal. 40(7-8). pp.585-609.
17

Loredana, E.M., 2017. The use of Ansoff matrix in the field of business. Annals-Economy
Series, 2, pp.141-149.
Pehrsson, A. ed., 2020. Competitive International Strategy: Key Implementation Issues.
Routledge.
Perera, R., 2017. The PESTLE analysis. Nerdynaut.
Raju, R. and Madhuri, G., 2020. Vodafone and Idea Merger: A Shareholder’s Dilemma. Global
Business Review, p.0972150920934256.
Soltanizadeh, S., and et.al.,2016. Business strategy, enterprise risk management and
organizational performance. Management Research Review.
Yuan, Y., and et.al.,2020. Business strategy and corporate social responsibility. Journal of
Business Ethics, 162(2), pp.359-377.
Yuliansyah, Y., Gurd, B. and Mohamed, N., 2017. The significant of business strategy in
improving organizational performance. Humanomics.
Online
Ansoff Matrix, CFI, 2020, Available through:
<https://corporatefinanceinstitute.com/resources/knowledge/strategy/ansoff-matrix/>
Our Strategy, Vodafone official website, 2020, Available through:
<https://www.vodafone.com/what-we-do/our-strategy>
Porter’s Five Forces Revisited, Oxford College of procurement and supply, 2020, Available
through: https://www.oxfordcollegeofprocurementandsupply.com/porters-five-forces-
revisited-are-there-really-five-forces/
18