Vodafone Business Strategy: A Comprehensive Analysis

This assignment delves into the business strategy of Vodafone, a leading telecommunications provider in the UK. It examines the impact of the macro environment on Vodafone's operations using PESTLE analysis and Ansoff's Growth Matrix. The internal capabilities of Vodafone are assessed through VRIO analysis, highlighting its strengths and weaknesses. Porter's Five Forces Model is applied to evaluate the competitiveness of the UK telecommunications sector, and Bowman's Strategy Clock Model is used to analyze Vodafone's strategic direction and options. This comprehensive analysis provides insights into Vodafone's strategic positioning and its ability to navigate the dynamic telecommunications landscape.

B
usiness
Strategy
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Table of Contents
Introduction...........................................................................................................................................2
Task 1....................................................................................................................................................3
P1. To analyse the impact and influence the macro environment has on your chosen organisation
and its business strategies..................................................................................................................3
Task 2....................................................................................................................................................8
P2: Continuing with your chosen organisation, conduct an assessment of the organisation’s internal
environment and its capabilities.........................................................................................................8
Task 3..................................................................................................................................................11
P3: Evaluate the competitiveness of UKs telecommunication’s sector using Porter’s Five Forces
Model..............................................................................................................................................11
Task 4..................................................................................................................................................13
P4: Using Bowman’s strategy clock model, analyse the strategic direction and options available for
your chosen organisation.................................................................................................................13
Conclusion...........................................................................................................................................15
References...........................................................................................................................................16
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Introduction
Business Strategy deals with the strategic management as well as the market and resources
analysis which are required by the organisation in order to manage its services and products
and the strategy required by them to develop the plans so as to meet the organisational
objectives. It also deals with the analysis of the strong and weak points so as to make
improvements in order to stay ahead of the competitors. The following assignment is based
on the Business Strategy of Vodafone. Vodafone is the leading telecommunication service
provider of UK which is also one of the largest mobile phone organisation of the world.
Currently, the organisation is serving millions of customers in UK by providing its high
quality services and products. The organisation is currently growing by continuously
introducing innovative services and products by adopting different strategies. In the following
assignment, we will discuss the influence of the external environment on the operations of the
organisation using PESTLE analysis. Also, the various strategic directions available for
Vodafone will be discussed based on Bowman’s clock model in the following assignment.
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Task 1
P1. To analyse the impact and influence the macro environment has on your chosen
organisation and its business strategies.
PESTLE Analysis of Vodafone: The strategy as well as the market performance of an
organisation depends on many external factors. In the similar way, Vodafone, the leading
telecommunication organisation in UK, is affected by the following factors:
Political: The rules and regulations made by the government of UK have a significant impact
on the services of the Vodafone organisation. The company is dependent on the political
stability as well as the government of UK for the success of its business operations. Vodafone
requires the permission of government of UK in order to develop its infrastructure and
network in the local as well as the national areas of UK. However, the current political
instability has affected the business operations of the company in UK. In such a situation, the
development of infrastructure becomes a difficult task for the business organisation
(Dudovskiy, 2012).
Economic: Economic conditions are one of the most important dimension in the growth of
the telecommunication market. The expansion and growth of the business depends on the
development of economy of country. Among the economic conditions, inflation rates are the
most affecting factor for Vodafone as it decides the allocation of funds for the development
of various marketing activities as well as the infrastructure of the Vodafone. Besides this, the
Vodafone services are also affected by the currency exchange rates. The growth of the
company depends on the GDP of the country as well.
Social: The Company gets affected by the local beliefs and the culture of the people of UK.
However, most of the population of UK is educated which helps the company in offering the
high quality services to its customers. This helps the Vodafone in getting the competitive
advantage over its rivals. The marketing strategies as well as advertising activities of
Vodafone are in according to the social beliefs of people of UK which helps the company in
attracting more and more customers (Dunne, et. al., 2013).
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Technological: Continuous improvements and advancements in technology are leading
towards more effective telecommunication services. Therefore, it has become a challenge for
Vodafone to implement new technology in upgrading its services and infrastructure as the
new regulations regarding the radiations and utilization of resources has put restrictions on
the operations of the company. However, the company has launched various advanced
services like GPS, Wi-Fi and internet calling but in order to meet the standards,
improvements in technology are still required.
Legal: Vodafone is a leading provider of telecom services in UK and therefore there exists
many competitors of this global company. Therefore, Vodafone needs to be very careful
about legal issues like piracy and copying issues. In the past also, Vodafone has faced several
complaints regarding the legal issues and therefore, has amounted to several penalties for the
same. There is a risk of leakage of information when some employee of Vodafone leaves the
company and joins the competitive firm. Therefore, in order to gain the trust of its customers
and maintain a strong reputation, Vodafone needs to abide by the legal rules (Dudovskiy,
2012).
Environmental: The increasing globalization has made people more ethical. Therefore,
present customers have become environment conscious and expect their favourite brands also
to be equally socially responsible and environmental friendly. In order to gain the trust of
their customers, Vodafone should play a crucial role for the betterment of the society. In
addition to this, the environment of the company should be good enough to attract the
individuals to become a part of their organisation.
Strategic Positioning of Vodafone- Ansoff’s Growth Vector Matrix
Ansoff Growth Vector Matrix helps in identifying the opportunities of corporate growth by
analysing the other companies, products with the best possible opportunities which can be set
by modifying current and producing new products.
The four generic growth strategies are identified by Ansoff which are:
Market Penetration: It is a tool which is used by the organisation in order to increase its
market share with the existing product line.
Market Development: It is tool which is used to look for new markets for the organisation’s
already existing products.
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Product Development: It is a tool used by the organisation so as to introduce new products in
the already existing market.
Diversification: It is tool which is used by the organisation in order to introduce new products
in the new markets (Mind Tools, 2018).
Strategic Development of Vodafone using Ansoff’s Growth Vector Matrix
Market Penetration Strategies:
 Making even wider coverage of high speed capability networks and further develop its
network in other networks which are existing.
 Encouraging the data adoption and adjusting its price for the consumption of data by
existing customers.
 Improving its services like customer care support, online services as well as retail
services.
 Marketing with the collaboration of devices of all the leading brands of UK.
 Promoting its own Vodafone Smart Phones by setting attracting prices (Vodafone Group,
2017).
Product Development Strategies:
 Introduction of new 4G/LTE technology.
 Providing other smart services/devices. For e.g. Wi-Fi Devices
 Introduction of Vodafone TV
 Introduction of new and modernised bill payment system
 Providing various application services like Vodafone PC Backup
Market Development Strategies:
 Providing mobile voice services, SMS services and data services at affordable prices in
attractive markets.
 Introduction of M-pesa for Vodafone.
 Introduction of Vodafone web box.
 Introduction of customised opera browser (Vodafone Group, 2017).
Diversification Strategies:
 Providing various new services like machine to machine facility, 3rd party billing etc.
 Partnerships with other leading brands such as Microsoft or Samsung.
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(Source: https://ghanatalksbusiness.com/pursuing-strategic-growth-through-the-ansoff-
matrix/)
M1: Political: Vodafone requires the permission of government of UK in order to develop its
infrastructure and network in the local as well as the national areas of UK. However, the
current political instability has affected the business operations of the company in UK.
Economic: Among the economic conditions, inflation rates are the most affecting factor for
Vodafone as it decides the allocation of funds for the development of various marketing
activities as well as the infrastructure of the Vodafone.
Social: Vodafone has modified their services according to the demands of the customers of
UK which demand high quality services as most of them are educated.
Technological: The most important part of growth of Vodafone is the technological
innovation. With advanced technology, Vodafone now offers 2G, 3G as well as 4G services.
Environmental: In order to become environmental friendly, Vodafone has adopted
technologies which results in less emissions of carbon into the atmosphere as a result of its
business operations.
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Legal: Like other organisations, Vodafone also needs to abide by the legal rules and
regulations like environmental policies, employment rules, taxation rules etc (Johnson, et. al.,
2014).
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Task 2
P2: Continuing with your chosen organisation, conduct an assessment of the organisation’s
internal environment and its capabilities.
Strategic Capability may be defined as the ability of the business to adopt successful and
competitive strategies so as to survive in the competitive market as well as to increase its
value. It usually focuses on the assets of the organisation, its resources as well as its market
position so as to have the knowledge of the possibilities of success of the future strategies
(Hartman, 2018).
In order to assess the internal capabilities of Vodafone, we will use the VRIO analysis which
is as follows:
Capital Access:
Vodafone UK, accesses its capital from its parent company which is Vodafone Group.
According to the factsheet of Vodafone, the company has a free cash flow of 5.6 billion
pound through which it is able to provide capital to its subsidiary in order to enhance its
operating capabilities. Capital Access is a very valuable capability which is possessed by the
other major competitors of Vodafone as well (Al-Atiqi & Mumen, 2014).
Network Capability
Much amount has been invested by the Vodafone in order to enhance services and as a result
of this, Vodafone has been able to provide high speed internet data with excellent network
coverage both indoor as well as outdoor. As compared to its major competitors in UK,
Vodafone has got the most spectrum. This means that their low frequency 4G signals is the
reason behind their high speed data indoors. This makes the Vodafone ahead of its
competitors in terms of technological capability.
Brand Equity
According to the reports of the British National Newspaper, Vodafone brand equity is
estimated to be around 31 $ billion and it has been ranked as the 5th in the worldwide ranking.
Being a part of the huge brand, Vodafone UK has also benefitted from this. They have a huge
subsidiary and continuously increasing customers in UK as well as in the rest of the world.
The persons travelling to UK also tend to use the services of Vodafone due to its brand
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image. Therefore, it can be said that the brand equity of Vodafone is highly valuable which
provides it a competitive advantage over its rivalries (Al-Atiqi & Mumen, 2014).
(Source: www.researchgate.net)
The above analysis shows that Vodafone is facing several weaknesses. High churn rate is
among the major weaknesses. Vodafone has been not able to lock its customers in long term
commitments. In addition to this, high prices of services are another weakness of Vodafone.
This is due to the fact that most of the services are bought from BT by Vodafone and
therefore profit margin needs to be added.
(M2)Analysis of Strengths and Weaknesses of Vodafone:
Strengths:
 The size of the company is its major strength. The global presence of Vodafone as well as
its network makes it a market leader and provides competitive advantage to it.
 The reputation of the company and the brand image of Vodafone is very strong which
helps it in increasing its sales.
 One of the most important feature of Vodafone is its standardised customer relation
management. This helps the company in increasing the sales of its newly developed
services and provides advantage.
 Vodafone has successfully expanded its services in more than 90 countries of the world
which is a great advantage for it with a customer base of more than 42 billion customers.
 Lebara mobile in UK uses the network provided by Vodafone only which is its strong
strength (Bhasin, 2018).
Weaknesses:
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 One of the major weaknesses of Vodafone is the expensive technologies. New technology
development requires huge investments which could result in loss if the technology fails.
 Legal issues faced by Vodafone in UK is another weakness of the company.
 Low research and development is another weakness of the company (Bhasin, 2018).
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Task 3
P3: Evaluate the competitiveness of UKs telecommunication’s sector using Porter’s Five
Forces Model.
Porter’s five force analysis is very essential for Vodafone in order to analyse the effectiveness
of business as well as the competitiveness of Vodafone. Following is the Vodafone’s five
force analysis:
Bargaining Power of Buyers: Because of the high competition within the telecommunications
industry of UK, the bargaining power of customers in this sector is very high. This is due to
the fact that similar services are also being offered by others as well at competitive prices.
This in turn leads to the reduction in costs of services of Vodafone. Therefore, Vodafone
needs to keep the profit margin in accordance with the other competitors in the market. In
addition to quality services, additional benefits should also be offered so as to stay ahead of
competitors (Hill, et. al., 2014).
Bargaining Power of Suppliers: The bargaining power of suppliers of Vodafone in UK
market is also high as Vodafone is one of the leading and high profit margin company within
the telecommunication sector of UK. Being a leading brand in its sector, the market share of
Vodafone is also huge and therefore it can easily adjust the high bargaining power of
suppliers. However, the increasing demands and bargaining power of suppliers are affecting
the overall profits for the company as they are demanding the high prices for the maintenance
of the services to Vodafone (Rodrigo, 2012).
Threat of new Entrants: The threat of new entrants in the telecommunications industry is
usually low as there are various barriers to entry in this industry. The investment required by
the new entrants for getting license, for the development of infrastructure as well as for the
management of services is very high. Therefore, this results in low threat of new entrants.
The continuous developments in the technology are yet another major challenge for the new
entrants (Hill, et. al., 2014).
Threat of Substitutes: The threat of substitutes for the Vodafone organisation is considerably
high as the similar products and services are offered by many other organisations at
considerably low prices. The various services like broadband; CDMA and landline have
become common. However, the quality of the services offered by the other organisations is
not of the level as that offered by Vodafone but that does not make much of the difference
and therefore affects the market share of the Vodafone. Various services and products like
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Skype, Google Talk, and Social Networking have become popular as the substitute of the
mobile services. Therefore, Vodafone needs to focus on this.
Rivalry within the market: According to the reports, Vodafone organisation is currently
facing high rivalry from its local competitors as its competitors are offering the high quality
services at the low cost in the telecommunication sector of UK. One of the major rivalry
organisations of Vodafone is BT which is offering high quality and low cost internet services
in UK which is helping it in staying in the telecommunication market of UK. Therefore, in
order to remain competitive, Vodafone also needs to provide similar high quality and
innovative services at low cost to its customers (Johnson, et. al., 2014).
M3: In order to gain competitive advantage, Vodafone can use Porter’s generic strategies to
position itself which is as follows:
Cost Leadership: Following this strategy, the company who offers the lowest cost becomes
the highest profit earning company.
Differentiation: Differentiation strategy states that when a company brings differentiation in
its product, then it might charge premium charges for its services in the market. It consists of
better services and better quality products as compared to others.
Focus: Focus strategy mainly focuses on particular niche market and develops services
specifically for them.
Stuck In the Middle: If a company is not able to decide which strategy to choose between
cost leadership and differentiation, then it is said to be following stuck in the middle strategy.
Vodafone Competitive strategies Include:
 Competition by offering low cost
 Uniqueness in its services
 Broader Target
 Narrow Target (Rodrigo, 2012).
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Task 4
P4: Using Bowman’s strategy clock model, analyse the strategic direction and options
available for your chosen organisation.
Bowman’s Strategy Clock is a marketing model which helps the organisation in analysing its
market position as compared to its competitors in the market. This model gives more
preference to competitive advantage as compared to cost advantage and is concerned about
the strategic position as well as the positioning of the organisation in the market.
Two Dimensions of Bowman’s clock Model:
Bowman’s strategy Clock shows how an organisation position its services in the market
based on two dimensions that are perceived value and the price. The different combinations
of these two dimensions make 8 possible strategies. According to its situation, the company
can choose any of the position from the clock which will provide it the competitive advantage
and will help in improving (Ahmed, 2014).
(Source: https://www.tutor2u.net/business/reference/strategic-positioning-bowmans-strategy-
clock)
The above figure shows the 8 different positions which is made out of the different
combinations of the two dimensions of the clock i.e. price and the perceived value.
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Thus, from the analysis of the Bowman’s clock model, Vodafone needs to consider three
main factors for measuring its position in the clock which are:
 Increasing access to communication: The network of the Vodafone Company is growing
as the company already has more than 250 million customers in the emerging markets.
 Price: In the emerging markets, price is the main concern for Vodafone. Therefore, to
overcome this issue, the company is reducing the prices of its services so as to attract
more customers. In addition to this, the company has cut down the prices of its new
innovative services “Web Box” and have introduced low price handsets in the market.
Thus, it can be said that the company is focussing on the low-priced strategy to cover the
markets which are price sensitive by providing services there with perceived value.
 Innovating New Software: Vodafone is also focussing on continuously innovating
software’s so as to meet the needs of the emerging markets. In this regard, the company
has also introduced M-pesa so as to help its customers in sending small amounts of
money to their friends and family with the help of the mobile phones. More than 20
million customers of Vodafone are currently using this service to send money
(Rothaermel, 2014).
From the above it can be concluded that the strategy followed by Vodafone is low cost plus
highly perceived value strategy and it occupies the Hybrid Strategy Zone in the Bowman’s
clock.
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Conclusion
The above assignment has discussed the various aspects of the Business Strategy with
reference to the leading telecommunication service provider of UK i.e. Vodafone. In the
assignment we have discussed the external environment analysis of Vodafone using PESTLE
analysis and Ansoff’s Growth Matrix. We have also analysed the internal capabilities of the
Vodafone using VRIO model and have analysed the strengths and weaknesses of Vodafone.
The five force analysis of Vodafone has also been carried out in order to analyse the
competitive ability of Vodafone and in the last we have discussed the various strategic
position and options available for Vodafone using Bowman’s Strategy Clock Model.
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References
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