Business Strategy Report: Vodafone's Macro, Internal & Sector Analysis

This report provides a comprehensive analysis of Vodafone's business strategy. It begins with an introduction to business strategy and then delves into a PESTLE analysis of the macro environment, examining political, economic, social, technological, legal, and environmental factors influencing Vo...Read More

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK1.............................................................................................................................................3
P1. Analysis of the influence and impact of macro environment...........................................3
TASK2.............................................................................................................................................7
P2. Analyses of the organisations internal environment and capabilities..............................7
TASK3...........................................................................................................................................11
P3.Analysing the telecommunication sector........................................................................11
TASK4...........................................................................................................................................15
P4. Understanding and interpreting the strategic direction..................................................15
CONCLUSION..............................................................................................................................17
REFRENCE...................................................................................................................................18

INTRODUCTION
Business strategy is the means through which it sets out to accomplish the desired and
expected results. This is the business plan which is used by the management to unafraid a
competitive position in the market, move on its operations, delight customers and accomplish the
desired goals of the business (Shuen, 2018). This is the combination of all the decisions taken
and actions performed by the business to achieve business goals and objectives so that the
company can secure a competitive position in the market. Organisation undertaken in this report
is Vodafone which was founded in 1991 in UK and deals in telecom industry and serves products
like fixed line telephone, mobile phone, broadband, digital television, TV, etc. This report will
explain the impact and influence of macro environment of the company. This will also analyse
the organisations internal environment and its capabilities. This will further evaluate the UK
telecommunication sector and will use appropriate theories and models to analyse the strategic
directions and options available.
TASK1
P1. Analysis of the influence and impact of macro environment
Pestle analysis evaluates how different aspects of the macro surrounding of a organisation
may effect the several activities of the enterprise. It has been effectively used to determine in
identifying different market opportunities and capture them in order to gain a competitive
advantage. The letter stand for political, Economic, Social, Technological, Economic and legal
which can be further elaborated below:
 Political Factors: These can have a large influence on the progress of an organisation.
The company is dependent on the political scenario of the state in which it is operating.
There are certain factors that have a direct impact on company such as peace of state and
political stability (Chen and Jermias, 2014). The chief political factor which have
impacted Vodafone includes EU roaming regulation which had aimed on diminishing
charges for nomadic phone users in abroad. Furthermore, any government intervention
through legislation or otherwise existing in the market in which Vodafone operates can
be treated as a political factor.
 Economic factor: There are different factors which affect the organisation working such
as growth of Gross Domestic Product and inflation rate. There are certain other economic

issues such as fiscal crisis that can also serve as an major factor effecting the operations
of the company. Therefore, any external alterations which have an influence on company
can be treated as external economic factors.
 Social Factor: These includes social and cultural factor's such as language, values,
religion etc. that can impact an company's decision making process. It is a very dynamic
domain and for achieving success in the market organisation must show flexibility in its
policies regarding to the local culture of the market it is operating in (Wheelen amd et.
al., 2017). It is basically an European company but it is adopting and changing it's
policies in accordance with the local social factors.
 Technological factors: The impact of these on company is because of the dynamic
nature of telecommunication industry. Due to the technological innovations in way of
communication and development of alternative means of communication it has impacted
the functioning of organisation. Vodafone is famous in world for its innovative approach.
It's mission is to always follow the trends arising in technological and communication
sphere. As the product of organisation is closely related with technology so it is one of an
essential factor which the company needs to look on to.
 Legal Factors: It is an global organisation because of which it has a large number of
rivalry existing the marketplace. It has to be aware about legal issues such as copy and
pirated issues. There are some laws which serves as basis for regulating the business of
an organisation. These are created in order to maintain regulation in particular industry
there are certain laws which have been created to serve for the betterment of the society
such as ban on mobile phones while driving organisation needs to fulfil all the legal
aspects of a market in order to avoid legal issues.
 Environment Factor: With rise of globalization, people are becoming more and more
ethically oriented. People are expecting their favourite brand to be socially responsible.
They want to be associated with a brand that contribute something in the betterment of
the society as a whole (Higgins, Omer and Phillips, 2015). It is a company which has
been dynamic in terms of nature. It has established a recycle programme for phones
which will help them to recycle and reuse the material used in the handsets and also other
programme such as they are giving incentives in monetary terms to customers for

exchanging their old phones with new ones. Through fulfilling their responsibility
towards society they are creating a positive impact in the minds of customers.
Source : PESTLE analyses. 2019
Ans off Matrix
This model is essential for strategic marketing planning where it can be used to co-relate
different opportunities of growth through development of new product and services or in
entering into a new market segment (Chang, 2016). It is one of the most widely used marketing
model which helps an organisation to evaluate market opportunities which it can tap on to in
order to increase their sales which can be done by offering alternative combinations for new
market. It consists of four strategies that can be discussed below:
 Market penetration: It consist of selling more of the existing product in the existing
market. In order to adopt this organisation needs to find new ways to increase their
customer loyalty and grow their lifetime value. As Vodafone is still focussing on it's
current Zoo-zoo advertisement run, it can capitalise it in a greater extent which will help
them to increase their presence in the market.
Illustration 1: PESTLE analyses. 2019

 Market Development: It comprises of expansion into new market with their existing
product. It is suitable for the firm that have capabilities and resources to enter new market
segment. In order to establish this organisation have to align their core competencies
more with the product instead of market. As Vodafone is already a well established brand
and it has access to resources it has the capacity to take risk of entering into a new market
segment which have not been yet taped by other market competitors.
 Product development: It comprises of a firm launching new products in the existing
market. This is suitable for those brands who have already established themselves in the
existing market. As the customers needs are changing according to the changing world
organisation needs to launch new product in order to satisfy these needs. Vodafone can
supply new services in order to set up a stronger bridgehead in the current subscriber
base. As there are large number of competitors in the market focussed on increasing their
market share (Pisano, 2015). This strategy will help the organisation to attract more
customers by promoting attractive feature of their new product and services.
 Diversification:This comprises of selling new products into new market, increasing
organisational sales with the existing customer base as well as from acquisition. This is
the most risky of all of the above strategies. As firms are not only testing the water in the
uncharted territory must are also launching new products which mat or may be well
received by new customer market segment.
From the above strategies Vodafone can adopt market development strategy which
comprise of a brand entering into a new market segment which have not been taped by some
other competitor yet. As there are large number of competitors existing in the telecom industry
entering into new market segment can help them to increase their market share. Entering into
new market segment requires a Hugh amount of investment as Vodafone is a well established
brand already this issue will not stand in their path. Before entering into new market segment
firms are required to perform their due diligence so that they can launch their product with ease
in that particular areas.

Source : Ans-off matrix. 2019
TASK2
P2. Analyses of the organisations internal environment and capabilities.
Strategic capabilities are concerned with the potential or capabilities of the members of
the organisation which allows the formation and deployment of strategy in pursuant of the
sustainable advantage. As business competes with one another for customers, market share and
revenue, it employs tactics to deliberate strategies (Klettner, Clarke and Boersma, 2014). The
process of constructive strategies and putting them into action is the accountability a business
owner. It is the set of capacities, resources and skills which creates a long term competitive
advantage for an organisation. It is supported by the cognitive content that internal resources and
core competencies are traced from characteristic capabilities which furnishes a strategic platform
that underlies a firms long term profitability. This allows the company to perform at a higher
level in a differentiated ways. This further helps in understanding the strategic position of the
company and environmental changes which affects the organisation. It also has a influence on
Illustration 2: Ans-off matrix. 2019

employees and aims to create a view of the key factors which will have an impact on the present
and future performance of the company.
VRIO model
This is a framework or tool which is applied by the organisation to determine the
companies internal capabilities and resources to identifying that they can be a source of
competitive advantages.This is designed to uncover and protect the resources and capabilities
which enhances the organisation in long term competitive advantage. It further helps in
identifying and evaluating the companies resources. It was developed was Jay B. Barney and it
stands for value, resources, imitability and organisations. This is an outstanding manner to
determine the benefits that the company may have over the competitors (The VRIO Framework,
2019).
Vodafone will apply this model because it is a resource oriented analyses by using details
provided by the company. It will also help in assessing the situations inside the organisation. The
following is the VRIO model of the Vodafone explained below :
 Valuable : When looking at a resource within the organization, the most crucial element
the the individual will determine is whether or not that expected resource actually has any
value to the company as a whole. So, if something within the company can help to
accomplish a gap in the marketplace, it can normally be considered valuable. On the
other hand, if it can help to grasp turned a threat that could potentially alter the operation,
it can be valuable as well. However, if a resource does nothing to either help in taking
benefits of the market or rationalize a market threat then it must be considered as
weakness. For instance, Vodafone has a strong brand awareness which is of primary
value for the operations of the company. Vodafone also have strong financial stability
with various strong resources of availability of funds, it enhances the flexibility in supply
chain management, it has strong digital strategy without which it cannot attain a
competitive advantage.
 Rare : the elements and resources that are applied and adopt by one or few firms are
known as rare. Few and reliable resources subsidisation temporary competitive
advantage. Where as, the condition when there are more than few organisations have the
same resources essential elements in the similar way then it will leads to competitive

parity (Scholes, 2015). This is because firms can use same resources to utilise the similar
plan of action and no organization can accomplish high quality in their performance. Loss
of valuable resources and capabilities will diminishes an organization because they are
necessary for staying in the market. For instance, Vodafone is one of the leading brand in
the telecom industry and it makes itself rare and unique. Therefore, they are costly and
rare to attain.
 Costly to imitate : If the other organisation does not have needed resources, the element
can be costly ton imitate. It can not imitate if buy and purchase it at affordable price.
This can happen in two ways that is either by directly imitating the resource which means
duplicating or supplying the comparable product or service which means alternatives
(Lawton, 2017). A firm that has valuable, rare and costly to imitate resources can
accomplish sustained competitive benefit. For instance, Vodafone has a strong visibility
and liquidity of market is available to all the nearest competitors. Apart from this,
Vodafone also have flexibility in their supply chain and shares some of their suppliers.
Therefore, Vodafone can be easily imitated by its competitors. The pricing and
promotional strategies are also matched with its competitors.
 Organised to capture value : It is the last and final stage of this analysis. It is concerned
with monitoring the value, imitability and uniqueness. If the resource has attained each of
the three necessities than the company has to be organized. Otherwise, the benefits may
blunder away. This is where the company is organized in such a manner that it is capable
to achieve any or all the benefits that have been discovered within the first three points.
For instance, Vodafone has utilised its leading brand position in numerous segments. It
has a sustainable financial position and Vodafone is one of the leading player in the
market. The company is also involved in leveraging its in house expertise and has a
strong present in not only domestic but also in international market.

Source : VRIO Analyses. 2019
The VRIO model fully complements other plan of action investigation methods to supply
the administration with broad sliced competitive advantages. This analysis can be theoretical or
practical and can be applicable to company wide or to individual departments for a well rounded
prospect of how each aspect of the business must position itself in the marketplace (Eaton, and
Kilby, 2015). It is essential to regularly review this model which help in analysing the
capabilities change over time and competitors adapt.
Strength
Vodafone is a brand known for its deep telecom roots which it has established in different
countries and across different nations. It has created very good brand image in the customers
perception. Different strength of the same can be enlisted below:
 High level of customer satisfaction : The company with use of its dedicated customer
relationship management department have attain a high level of customer satisfaction
among the existing customers as well as good brand equity among the potential
customers.
 Highly skilled workforce : Through successful training and development programme.
Vodafone have invested huge resources in training and development of its employees
which have resulted in increasing the motivation level among its employees.
Ill
ustration 3: VRIO Analyses. 2019

 Superb performance in new markets : It has built expertise in entering into new market
segments which have helped them to build new revenue system and it has also helped in
diversification of economic cycle risk in the market segment it is operating in.
 Marketing : The organisation is already known in the market for using the Vodafone pug
in it's marketing promotional activities (Chu, KrishnaKumar and Khosla, 2014). Similarly
Vodafone ZooZoo's has served as an brilliant and endearing campaign and have helped to
create a strong brand image in the minds of it's customers.
 Subscription : It has a massive subscription base which they are retaining efficiently in
the market. The total number of Vodafone subscription across the world has crossed the
mark of 350 million. Such massive base has helped the organisation to gain a larger
market share as compared to other competitors.
 Brand value : Vodafone is one of the leading brand in the telecom industry beside that
other factors such as brand valuation, equity and brand recall of the organisation is also
high.
Weaknesses
 Drop in the subscription base : As there are large number of competitors existing in the
industry their focus is to increase their market share through the use of aggressive
promotional activities (Jocovic and et. al., 2014). In order to survive in this competitive
market it needs to develop innovative products in order to attract large number of
customers and also to retain them.
 Lack of clearly in vision : As the brand is finding difficulty in finding the target market
Trent which are existing in the society they lack clarity in terms of vision.
 Less success outside core product : Although Vodafone is an well established brand it
has faced different challenges while moving in the other product segments which are
present in present culture.
 High rate of attrition : There is high rate of attrition existing among the workforce due
to which company have to spend more in comparison to the other competitors existing in
the industry (Mi, 2015). This increase the overall cost which a company spends on
training and development programme.
 Not good at product demand forecasting : This has resulted in higher number of
missed opportunities that could have been captured by the organisation in the market. It

also have resulted in higher inventory storage by the company both in terms of in house
and in channel.
TASK3
P3.Analysing the telecommunication sector.
Telecommunication system has become very important in the present business scenario
and it is the most important element in the business organisation. Without exchange of ideas,
thoughts, materials and information, no business can run its operations smoothly and efficiently.
Every department of the organisation needs effective communication channel.
In previous days, telecommunications assorted with the exercise of illustrated signals,
like beacons, smoke signals, semaphore telegraphs and signal flag or optical heliography. It also
used for audio messages such as in from of loud whistles, coded drumbeats and lung blown
horn(Veit and et. al., 2014). In present business scenario, telecommunications prosecuted the
work out of electronic instruments like telegraphs, telephone and Teleprompter and radio also
used for it. These instruments and fibre optics connected electronics to utilize the obtaining
satellites and internet.
Communication is a vastly important feature which is necessary for people as well as all
world, but also for minute and huge businesses. With the transition of time, method acting such
as horns became a way of communication. But with the increasing time there has been a package
of enlargement and with that came the more fantastic technologies such as radio, phone,
television and the Internet.
The UK’s telecommunication market remains one of the largest in Europe, defined by
furious competition which has impacted in decreasing the pricing for the customers (Bansal and
DesJardine, 2014). UK telecom sector not only focusses on rendering telephone services to the
user but is also concerned about providing access to various other services like internet,
locations, etc. Recently the UK telecommunication sector has experienced an intense
competition in the market which has forced competitors to emphasis on monitory and non
monitory competition. Apart from this, the Europe regulatory has also brought alternations and
modifications in the telecom industry. But still there are various factors which has restricted the

operation of this sector like variations between the real and anticipated demand of telecom
services.
Porter's five forces model
It is competitive analysis model which is developed in 1979 by Michael Porter. It is an
analytical way and uses five forces to determine the intensity of competition in an industry and
its profitability level. It is a framework which is used to determine the industry construction of an
institution and the corporate strategy of it. Porter identified five undeniable forces which play a
part in developing every market and industry in the world. The forces are often used to measure
competition intensity, attractiveness and profitableness of an industry or market. The following
are the five forces model of Vodafone discussed below :
 Competition in the industry : This force is very crucial because it determines the
number of competitors and their potency to threat a company. If the number of
competitors are large and products produced in the industry are also large in quantity then
this will give low power to the company. And when there are less number of competitors
in the market place then the company will have greater power which will enhance them
to do whatever they are desired to do so that they can accomplish higher level of sales
and profitability (Rugman and Verbeke, 2017). Vodafone faces extremely high level of
rivalry from its competitors because of the low call rate prices which are charged by the
competitors. Apart from this, competitors also provide new and innovative products like
schemes, benefits, etc. which means that the Vodafone will also have to assure the same
products to its customers so that they can retain their customers. Its main competitors are
Virgin, orange, sky, talk talk, BT, etc. They also have little discrimination and open
market for competition.
 Threat of new entrant : A companies power is affected by the new entrant into the same
market and industry. In this, when the restrictions to enter into an industry is high then it
will be difficult for new businesses to enter into the market because of the heavy
investment requirements and competition. On the other hand when restrictions are low
then new businesses can take a benefit of entering easily and utilising economies of scale
and key technologies. Therefore, Vodafone faces a low threat of new entrant because by
by keeping high levels of efficiency, Vodafone can help make the entryway into the
mobile telephony industry unattractive to its potential competitors (Noe and at. al., 2017).

Apart from this, the new entrant will have to invest high capital requirements, complexity
in regulatory issues, cost of infrastructure is very high, etc.
 Bargaining power of suppliers : This force is concerned with the ability of the suppliers
to increase the prices of goods and services. This factor is affected by various number of
aspects of goods and services, their uniqueness, switching cost, etc. If there are less
number of suppliers then the company will depend more on them and supplier will hold
greater power. On the others, if there are large number of suppliers for a product in a
market then the bargaining power of their will be less as they will not hold power because
of various alternative options available. Vodafone faces high bargaining power of
suppliers because by being a cost leader it operates with margins greater than its
competitors, which in turn, enables them to assimilate price maximisation from its
provider easier than its competitors (Jeston, 2014). As being a large, good and focused
player of mobile industry, this organisation can hold suppliers costs down and it can gain
and earn profit if the competitors of the company make only average returns.
 Bargaining power of buyers : This is concerned with the potential of the customers to
cut the prices of the products and services. It is affected by the number of customers that
the company has, significance of each customers, switching cost, etc. If the customer
base of the company is small then they will hold more power and vice versa. Therefore,
Vodafone has high bargaining power of customers due to the cut throat competition and
lack of differentiated products. Apart from this, customers are demanding in nature and
wants to purchase best available options at minimum best possible price. The brawny
power of buyer efficaciously minimises the expenditure prices in the industry and could
not reach up to their competitors. As such, Vodafone will keep making reasonable profits
compared to its competitors (Porter's Five Forces, 2019).
 Threat of substitutes : This force is threatening in nature because when buyer can easily
find an alternative product or option with affordable prices and superior quality with low
switching cost then customer will shift to the substitute product which will eventually
minimise the sales and profitability of the company. In this, a customer can choose from
varied options and the threat is also defined by the brand dependability of the customers,
switching cost for customers, relative price for performance of substitute, updated and
innovative trends, etc. Therefore, Vodafone faces low threat of substitutes because the

landlines and CDMA services are decreasing at a rapid rate and broadband services are
becoming common. For instance, video conferencing, Skype talk, google talk, yahoo
messengers, etc. Also, Vodafone directs the cost leadership strategies which makes it
tough for the competitors to produce a product at considerable lower prices with superior
quality.
Source : Porter's Five Forces. 2019
TASK4
P4. Understanding and interpreting the strategic direction.
Bowman’s strategy clock model
This business strategy was developed by Cliff Bowman and David Faulkner and their
main emphasis model is to make the companies known about their position in the market
compared to their competitors (Rugman and Verbeke, 2017). Vodafone will use this strategy
because it will be useful in gathering information on the market position in relation to its
competitors. It will use this strategy by exploring the two main dimensions namely price value
and perceived value. In this model there are eight strategies which will be analysed and used by
Vodafone so that they can align themselves in strategic directions and they are discussed below :
 Low price and low value added : This position is the first in the model and is not
regarded as the most competitive position for the company because there is less
Illustration 4: Porter's Five Forces. 2019

differentiated products or service and value perceived by customers are very low. Apart
from this, the prices are also low and company can compete with its competitors or
suppliers only by minimising the prices. For instance, the Vodafone cannot sell the old
products and services at the new and fresh prices because customer wants new products
for new prices.
 Low price : This is the second position which is required by the company and in this
Vodafone will reduce cost in order to be successful. Apart from this, the profit margins
on each products are low but the higher level of output will generate higher level of
profits.
 Hybrid : This is the third position which includes low prices but differentiated products.
The motive of this strategy is to encourage customers that the products provided by the
company are valuable because of the collection of the satisfactory product differentiation
and a sensible pricing.
 Differentiation : The primary motive of this strategy is to provide customers with
highest level of perceived added value. This strategy is concerned with maintaining the
quality of the products and branding plays a crucial role in this. Therefore, the superior
quality products with strong brand recognition and customer loyalty is concerned while
adding value to the differentiation strategy. For instance, Vodafone used differentiated
strategies when it initiated the services for I phone users and were more charging more
than their competitors but they were having the potential to provide strength of the
powerful network, call rate, etc.
 Focussed differentiation : The motive of this strategy is to position a product at the
highest price level so that customer will purchase the product because of the high
perceived value (Grant, 2016). This strategy is normally adopted by expensive and luxury
brands where the goal is to attain premium prices by targeting, segmenting, promoting
and distribution. For instance, Vodafone introduced the One Net services for small and
medium enterprise and this has charged per person per month.
 Risky high margins : This strategy is based on charging high prices for the products,
which are though of medium prices by the customers. In short run it may be successful
but in long run, this strategy carries a significant risk with it because customers will tend
to cut look for same products at minimum price range and better quality.

 Monopoly pricing : This kind of strategy can be followed in a monopoly market only
where there is only one business. In this, the customers are not concerned about the price
of the product, they will tend to buy the product offered by the monopoly company at any
price because there are no substitutes or alternatives in the market.
 Loss of market share : In this position, the company fails to offer the products and
services which are required by the customers which gives them value. Customer tends to
move away from such organisations because of the high prices offered.
Therefore, the best market strategy for Vodafone in UK will be low cost and loss of
market share. Low cost will give tremendous benefit to the Vodafone because it will enable the
company to sell the higher volume of products at lower margins while loss of market share is
also best because those customer who wants extra services will get the products at higher price
comparatively and may adopt standard price in order to maintain competitiveness in the market.
They will also adopt loss of market share strategy in which they can set the prices of their
products high compared to the competitors which will move customer away from the companies
products but the Vodafone may have stronger network compared to other competitors which will
enhance them in adopting this strategy and maximising profitability.

Source : Bowman’s Strategy Clock. 2019
CONCLUSION
It can be concluded from the above information which is defined in the assignment that
business strategies are most essential tool for the successfully attainment of business goals and
objectives. There are various strategies and models which the organisation must keep into focus.
Effective business strategy also identifies the current position of the business and sets out the
best way by rendering the tools from which the performance can be measured. The analyses of
external environment has been done before devising business strategies with the help of PESTLE
analyses which is useful to monitor the macro environmental factors which can affect the
performance of the company. The internal environment of the business is analysed by using
VRIO model and various strength and weakness of the company so that the company can use its
strength and overcome the weakness by devising business strategies. Furthermore, the Porter's
five forces model is explained which has helped in defining the intensity of competition and
level of profitability in the industry.

REFRENCE
Books and Journals