Analyzing the Impact of Macro Environment on Vodafone's Strategies

This report analyzes the impact of macro environment on Vodafone's strategies and the internal environment and capabilities of the organization. It also applies appropriate frameworks like PESTEL analysis and Ansoff's Growth Matrix to evaluate the competitive forces and devise strategic planning for Vodafone.

Business Strategy
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Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1: Applying appropriate frameworks analyse the impact and influence of the macro
environment on a given organisation and its strategies..........................................................3
TASK 2............................................................................................................................................7
P2: Analyse the internal environment and capabilities of a given organisation using
appropriate frameworks..........................................................................................................7
TASK 3............................................................................................................................................9
P3: Applying Porter’s Five Forces model evaluate the competitive forces of a given market
sector for an organisation.......................................................................................................9
TASK 4..........................................................................................................................................11
P4: Applying a range of theories, concepts and models, interpret and devise strategic planning
for a given organisation........................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
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INTRODUCTION
Business strategy can be stated as the competitive moves taken by business to compete in
the market successfully, attract customers, strengthening performance and attain the goals of
company. This outlines the way businesses must perform to reach the desired goals and
objectives. In an organisation, management develop several strategies and take various decision
that helps in leading the business towards growth and success. There are three levels on which
the strategies of business are developed including corporate, functional and business level.
Development of effective strategies helps in gaining competitive advantage in market (Alsoboa,
and Aldehayyat, 2013).
Vodafone Group plc is one of the leading multinational telecommunication organisation of
Britain which offer broadband, internet television, fixed line telephone, mobile phone, IPTV,
digital television and fixed line telephone products and IT services to customers. The company
was established in year 1991 by Ernest Harrison and Gerry Whent and its headquarters is located
in London, United Kingdom. This report covers analysis of impact of macro environment on
business and its strategies along with the analysis of internal environment and capabilities of
organisation. It also analyses porter's 5 forces to the given market of company. At last, different
theories and concepts are applied to device strategic planning for organisation.
TASK 1
P1: Applying appropriate frameworks analyse the impact and influence of the macro
environment on a given organisation and its strategies
External environment is referred as the combination of different factors which are present
in the surroundings where business operates and have high influence on activities and operations
of company. For running the business operations effectively, the manager of Vodafone requires
to properly analyses the external environment factors on continuous basis so as to determine the
changes that takes place in the market and appropriate strategies can be developed (Bentley,
Omer and Sharp, 2013). In order to analyze external environment, PESTEL analysis framework
is an appropriate tool. It consists of 6 factors which impacts on the operations and strategies of
Vodafone. The impact of the external factors on strategies and operations of business are
discussed below:
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Political factor: It involves the forces like changes in policies and regulations of
government, tax regulation etc. In United Kingdom, the political environment is highly stable
and is known as one of the successful nations in terms of corruption control, government
effectiveness, rule implementation and regulatory quality. The politically stable environment in
the country provides an opportunity to the company to run its business operations efficiently in
the market. However, if the political environment of country is not stable, then it may impact on
the strategies of Vodafone as it need to change its policies and practices as per the changes takes
place in laws and regulations made by government. Apart from this, increasing competition is
one of the issue faced by company, despite of this, it has maintained its organic growth with
increased service revenues by 0.3 percent, EBIT by 9.4% and EBITDA by 3.1 percent in the
following year (Cserháti, and Szabó, 2014).
Economic factor: This is a significant dimension which covers foreign exchange rates,
inflation rate, deflation rate, etc. In the developed, the chances of expansion of Vodafone are
high. Good gross domestic product of nation demonstrate that the income of individual is more
and they are more inclined to buy latest communication technology. This provides an advantage
to Vodafone to increase its profit and attain good position in market. However, the economic
crisis which organisation has been facing currently impacts on the operations and strategies of
company. From some years, United Kingdom has experienced downturn because of Brexit and
currently, due to spread of corona virus pandemic, the economy is impacted adversely and this
directly impacts on the financial health of organisation. However, the strategy of five-point plan
of Vodafone provides an advantage to it to counter the influence of covid-19 (Cacciolatti, and
Lee, 2016).
Social factor: It is the factor which is purely based on the believes and culture of people,
their perceptions, needs and differences. Changing lifestyle of people and social trends impacts
on their buying habits. The preferences of people and consumption patterns have changed a lot.
In United Kingdom, over half of the population is aged between 16 years to 75 years which
means around 53% of people are using smartphones and need a high speed internet (E. Dobbs,
2014). This is an advantage for Vodafone as it provides high speed internet to the people over
low frequency rate. However, if company is not able to analyse needs and demands of customers
and offering them services accordingly, then it impacts on operations and strategies of company
in an adverse way and may lead to decline its profits.
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Technological factor: technological advancements, innovation etc. are the factors which
include in this aspect. United Kingdom is considered as the most technologically advanced
nation and there are many competitors available in the telecommunication market which brings
new technologies for satisfying the needs of customers. Vodafone stay active in using technology
rendered by the country and provide 5G network services to the customers which provided it
with an advantage to attract large group of consumers by offering them with high speed data
services (Eason, 2014). However, it is very much necessary for the company to constantly bring
new technology in order to ensure its long-term survival in market. If company fail to do so, then
it highly impacts on its strategies and operations.
Environmental factor: this consists of forces like natural disaster, climate change, seasonal
changes etc. Which influence operations of company. Increased globalisation impact on the
society and people and they become more ethical. The expect from the company to be socially
responsible and contribute in development of society as whole. Vodafone is highly committed
towards environment and run its activities and operations in such a manner that those do not
harm the environment. However, climatic conditions may be a barrier for company as if the
climatic conditions are not good, then it impact on the network of Vodafone. So, it is significant
for company to bring new technology so that the network barrier can be overcome and customers
are provided with high speed network services (Firnkorn, and Müller, 2012). Apart from this, if
company do not compliance with the environmental laws, then it impacts on the operations and
strategies of Vodafone and may result into hefty fines.
Legal factor: it is associated with standards, laws and regulations made by government
requires to follow by all the organisations. There are some laws which needs to be followed by
organisation like Consumer Rights Act 2015, Data Protection Act 1998 etc. Vodafone follow all
the laws and regulations made by government which assist it in running its business operation
smoothly and effectively in the market. However, noncompliance with laws may leads to impact
on operations and strategies of company. It may result into legal consequences that will be face
by Vodafone (Grover, and Kohli, 2013).
Ansoff’s Growth Matrix:
Ansoff matrix is referred as a tool which organisation use to plan and analyse its growth
strategies. The matrix consists of four strategies which help Vodafone to grow and analyse risk
related to each strategy. The strategies are mentioned below:
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Market penetration strategy: this strategy emphasizes on maximizing sales of existing
production services in market. The main aim of using the strategy by the company is to
maximize its market share. This can be done by maximizing promotion as well as distribution
effort and decline the prices to attract more number of customers. Currently, Vodafone is using
market penetration strategy to cater the similar market by increasing promotion efforts and
offering introductory prices (Johnson, 2016). This renders an opportunity to firm to increase its
market share.
Product development strategy: the main focus of this strategy is to introduce new products
and services into existing market. This involves extensive research expansion of product range.
When the company have strong understanding regarding its current market, then this strategy is
employed. This strategy provides an advantage to attract more customers. It is a risky strategy as
new product come with an uncertainty.
Market development strategy: the emphasis of the strategy is on entering into new market
by using existing product. It can be done through entering into foreign market, catering to
distinct customer segment and by entering into new domestic market. If company using this
strategy, then it can gain advantage of attracting new customers and maximize its revenues and
growth. However, the main disadvantage of using this strategy for company is that it requires
capital investment either to expand marketing efforts or to develop new locations (Kernbach,
Eppler, and Bresciani, 2015).
Market diversification: the focus of this strategy is to enter into new market with new
product. Two types of diversification can be employed by company, i.e., related and unrelated
diversification. Use of this strategy can provide an advantage to company to increase its sales
and revenue. However, it is the riskiest strategy as both the product and market is new.
From the above mentioned strategies, product development strategy is the most appropriate
strategy for Vodafone as it provides several opportunities to company to attain growth and
success in telecommunication market of United Kingdom (Li, Zhou, and Si, 2010). It helps
company in mitigating the needs of customers by offering them with the product and services
which they want. It also assists in gaining competitive advantage over rivals and maximizing
profit earning possibilities.
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TASK 2
P2: Analyse the internal environment and capabilities of a given organisation using appropriate
frameworks
To analysis the internal environment and capabilities of Vodafone use of SWOT and VRIO
analysis is made a discussion of which is provided below:
SWOT analysis
Strengths Weaknesses
 Brand equity and Word-wide presence
is the biggest strength of Vodafone that
leads to higher trust and reliability in
customers to enhance its productivity
and success level (Vodafone SWOT
Analysis, 2020).
 Efficient marketing and focus on
customer convenience is also a strength
of Vodafone company which consists
of use of efficient marketing and
promotion strategy.
 Technological innovation and rapid
modification and improvement in its
services and network is also a viable
strength of Vodafone that attracts larger
number of customers for this
organisation.
 Fight for market share due to presence
of large number of competitors is the
biggest weakness of Vodafone that
hampers its productivity in
international market (Porter, 2011).
Opportunities Threats
 Rapidly growing cellular market and
enhancement in e-commerce business
along with low cast technology is
presenting enhanced expansion
opportunity for Vodafone company.
 Being a multinational brand, the
political complicities and constant
vigilance from global authorities is a
major threat faced by the Vodafone
company (Morton, Wilson, and Cooke,
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2015).
VRIO analysis
Use of VRIO analysis provides an effective formwork and model for Vodafone Company to
evaluate and analysis its internal capabilities and resources in order to gain and achieve higher
and sustainable level of competitive advantage in its business environment (Rasula, Vuksic, and
Stemberger, 2012).
Resources Valuable Rarity Inimitable Organized What is the
result?
Market presence Yes No No No Competitive
Disadvantage
Distribution
channel
Yes Yes No No Partially
competitive
Technological
resource
Yes Yes Yes No Temporary
competitive
advantage
Human
resource
Yes Yes Yes Yes High
Competitive
advantage
Analysis of VIRO model:
Valuable Resources
It represents a set of internal capabilities which enables Vodafone company to exploit
present opportunity and defend current threats in an effective manner. The valuable resources of
Vodafone comprise of effective market presence along with efficient and viable distribution
channel which enhance scope and connectivity level of Vodafone in international market
(Scholes, 2015). Further, use of viable technological resources along with regular modification
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and innovation in its operation is also valuable capability of Vodafone tighter with a well skilled
and talented human resource.
Rarity resources
These are the strengths and abilities which are rare in business environment and can only
be acquired by only a few number of companies therefore provide a level of temporary
competitive advantage to Vodafone. The rarity capabilities of Vodafone consist of effective
distribution channel which enhance its productivity level in international market through
providing efficient services to larger number of customers. Further, technological and human
resource of Vodafone are also rare that cannot be copied or adopted by other competitors
therefore provided temporary strength to Vodafone (Su, Yang, and Yang, 2012).
Inimitable resources
These resources are costly in nature thus, cannot be acquired or used by other
organisation without among a sustainable amount of expense thus ensures a sustainable level of
competitive strength for Vodafone. Use of latest and most efficient technology is an inimitable
capability of Vodafone which is quite expensive for other competitors to obtain along with
highly efficient and creative workforce that lead sustainable competitive strength to Vodafone.
Organized resources
It comprises of internal strength that leads high competitive strategies and helps to
maintain sustainable growth in business environment through leading an upper hand in its
competitors. The well organised and highly co-ordinated manpower of Vodafone is its best
strength that leads suitable level of competitive strength. Further, regular training and
development of skills and capabilities of employees along with providing regular incentives
represent the organised polices of Vodafone to maintain its competitive strength and sustainable
performance (Tavitiyaman, Qu, and Zhang, 2011).
TASK 3
P3: Applying Porter’s Five Forces model evaluate the competitive forces of a given market
sector for an organisation
Currently, telecommunication industry is one of the fastest growing sector which provides
many opportunities to organisation for earning high profits and revenues. The scope of industry
is wide in United Kingdom and it has been found that people who are aged between 16 to 24
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years are using smartphones very much. This ratio has been rise to 74% and covers over half of
the population. There are many competitors operate in the similar market which gives tough
competition to Vodafone. So, for ensuring its survival in the industry, it is necessary for
management to perform industry analysis so as to enhance marketing strategies and accomplish
competitive advantage in market (Williams, and Figueiredo, 2011). The competitive position in
the industry can be analysed through porter's five force model that includes five forces which are
mentioned below:
Bargaining power of buyers: this power is very high in telecommunication industry as
there are number of telecommunication operators operating in the country and buyers have the
choice to choose. Thus, customers compare among the available operators and select the
provider which gives more benefit at lower price. Due to this, telecom firms have to reduce
prices of their services which in turn reduce their profit. So, for Vodafone, the bargaining power
of customers is high which is a threat for company and may lead to reduce its customer base. So,
for overcoming this threat, company needs to ensure that it provide high quality services to
customers at competitive prices.
Bargaining power of suppliers: in telecommunication industry, this power is low as there
are many suppliers available in the market from which we can get network equipment, fibre optic
cables etc. Apart from this, lack of differentiation in services provided by telecom companies is
the another reason of low bargaining power. This provides an opportunity to Vodafone to acquire
materials at relatively low price as it has the power to bargain with suppliers on the prices of
materials (Alsoboa, and Aldehayyat, 2013).
Threat of new entrants: in telecom industry, there are several barriers which restrict entry
of new players in the market. Apart from this, it requires huge investment for a new company to
position itself in market and develop network infrastructure. So, threat of new entrants is low for
Vodafone which provide it with the opportunity to accomplish growth and success in the market
and ensure its survival for long term.
Threat of substitute products: in telecommunication industry, competition is increasing
due to technological advancements and there are many substitute available in the market. Hence,
the threat of substitute product for Vodafone is high. However, although the use of CDMA and
landlines are declining, the broadband services which company offer to its customers is an
alternative that gives tough competition to existing rivals of Vodafone. Apart from this, the 5G
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services of company also provide it with an advantage to attract more number of customers
towards it.
Rivalry in the industry: Although, there are many competitors of Vodafone available in the
market including BT, EE, O2 etc., Vodafone is the cost leader in market of United Kingdom as it
provides high quality Services at competitive prices in the market which provides an opportunity
to company to ensure its survival. The clever pricing strategies of Vodafone assist in gaining
competitive advantage in market (Morton, Wilson, and Cooke, 2015)
TASK 4
P4: Applying a range of theories, concepts and models, interpret and devise strategic planning
for a given organisation
Bowman’s strategy clock model:
The bowman's strategic clock depicts the way an organisation can position a service or
product in the market based on two dimensions, that is, price and perceived value. It consists of 8
positions which can help Vodafone in improving its position into market. It positions of the
model are provided underneath:
 Low price and low added value: in this, company keep its prices relatively low and the
service or product is not distinguishable. Despite of low prices, customer perceives little
value of products and services of company.
 Low price: in this position, firm produce at large quantities and their products are valued
and sold at low prices that leads to lower margins of profit, however high output volume
can generate the overall high profits (Alsoboa, and Aldehayyat, 2013).
 Hybrid: this position involves low price element and product differentiation. It can be an
effective strategy for company if the added value is provided consistently.
 Differentiation: the main aim of this position is to offer customers with high-level
perceived value. In this strategy, branding play a significant role as does product quality.
Strong brand awareness with loyalty and high quality product is required in this position.
 Focused differentiation: this position is mainly adopted by luxury brands whose purpose
is to accomplish premium prices through highly targeted promotion, distribution and
segmentation. This position aims to sold products at high price levels where the perceived
value of customer is high for product.
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 Risky high margins: this position is used by those organisations which charge high price
for product or service for which the perceived value of customers is mediocre. It is a
short term strategy and risky to adopt.
 Monopoly pricing: in this position, firm position itself as monopoly leader as it is the
only one who is offering particular type of product in market. So, there is no fear of
competition and consumer had left with two choices, buy or not to buy.
 Loss of market share: it is not a desirable position for the organisation as it means firm is
not able to provide products and services which is valued by customers. Moreover, the
prices are very high and resulted to this customer stay away (Morton, Wilson, and Cooke,
2015).
Among all these strategies, hybrid strategy is the most appropriate one for Vodafone as by
the use of this strategy, company can position itself effectively in the market and its products and
services will be highly valued by customers. In this, the main focus of the company will be on
product differentiation which makes its product highly valued and customer can be easily
convinced due to low price of products. This will help the firm in attaining growth and
sustainability in the market for long term.
CONCLUSION
As per the above mentioned report, it has been concluded that analysis of external
environment of business on continuous basis is very necessary so as to assess the impact of
extrinsic factors on the operations and activities of business along with the strategies developed
by management. Product development strategy appropriate for company as it helps in improving
the profit and sales of company and attracting customers towards it. With the help of VRIO, the
resources and capabilities of the company are analysed. SWOT tool helps in determining the
strengths and weaknesses of company along with threats and opportunities. By the help of
porter's five force analysis, company will be able to determine its competitive position in the
market. Bowman strategic clock model assist in determining the appropriate strategic direction
for company.
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Online:
Vodafone SWOT Analysis. 2020. [Online] Available Through:
<https://www.mbaskool.com/brandguide/telecom-service-providers/502-vodafone.html>.
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