Vodafone UK: Business Strategy in the Telecommunications Sector

This assignment examines the business strategy of Vodafone UK within the telecommunications sector. It analyzes the company's external and internal environments, including PESTLE analysis, Ansoff's growth vector matrix, and VRIO/VRIN model. The competitiveness of the UK telecommunications sector is evaluated using Porter's Five Forces model. Finally, Bowman's Strategy Clock model is applied to understand Vodafone UK's strategic direction and options.

Business Strategy: Telecommunication Sector (UK)
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Table of Contents
Introduction................................................................................................................................3
Task 1 – The external environment............................................................................................4
Task 2 – The internal environment and organisation capabilities............................................10
Task 3 – Analysing the telecommunications sector.................................................................14
Task 4 – Understanding and interpreting strategic direction...................................................16
Conclusion................................................................................................................................19
Reference List..........................................................................................................................20
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Introduction
This assignment briefs about the various kinds of strategy adapted by an organization. These
strategies are used in operational, tactical and strategic role for an organization to increase its
standards. While dealing with the strategies, micro and macro environment has immense
impact in determining the products and services demands in relation to some external factors.
Business strategies help in creating opportunities and increases competitiveness with other
organization. Business strategy incorporates a plan taken by the organization to frame certain
objectives and estimate a period of achieving those goals with various processes. Firms and
companies apply strategy to compete with the entry of new threats and develop its own
weaknesses. Implementing strategy in a business helps in obtaining the objectives through
various actions taken by the organization. Strategies are formed to gain customer satisfaction
for the services provided by the company. Vodafone in UK occupies a brand name in UK
telecommunication sector. Vodafone with its strong communication network has led an
increase to the market share. With the help of the stakeholders and the partners, Vodafone has
been able to expand its business globally.
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Task 1 – The external environment
1.1)Analyse the impact and influence the macro environment has on your chosen
organisation and its business strategies.
UK's telecommunication networks have a major contribution to the Critical National
Infrastructure. Vodafone has contributed to UK telecommunication sector immensely in
giving shape to the wireless industry of UK. Vodafone UK is now on the verge of developing
its company and network globally. Vodafone, as a telecommunication company has acquired
the brand name of being the best networking communication. Globally the company is
aiming to expand its business. Vodafone has adapted certain strategic goals to develop its
networking sector in UK and globally.
Objectives: The Company aims at actively managing the company's portfolio to increase its
value of returns. The company is striving to reduce the cost of production in Europe. As
customers helps in increasing the demand for the company, Vodafone has an objective in
delivering the best customer’s needs in telecommunication.
Vision: The Company has created a vision with its employees to serve the customer’s needs
and be the leader in communication sector globally.
Mission: The Company’s mission is to create innovative services for the customers with the
help of the power of the mobiles. Being globally situated, the company has spread its
telecommunication sector almost in 26 countries with its marketing strategies. Through the
micro and macro strategies, the company establishes certain goals in achieving success over
the competitors.
a) PESTLE model for environmental analysis
Political  Vodafone as a multinational
telecommunication company operates
in almost 26 countries, attracting 444
million customers
 Political factors of a country affect
the customers to a great extent. The
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political crisis like the Brexit has
impacted not only the customers but
also the companies in UK. The
customer's confidence has faced a
negative jerk. Customers are less
attracted in purchasing the services
from Vodafone.
 A cordial collaboration exists
between the UK government and
telecom communication. With the
help of this collaboration, the
government has taken many several
initiatives for improving the standards
of the telecom industry. Vodafone has
taken the initiative to shift from GSM
cards to wireless communication.
Economic  UK has maintained the record of
being the 5th highest country in GDP.
Vodafone contributes largely to the
GDP of the country.
 Any changes in the economy of the
country, is the consequence of the
profit of the company. With the
provision of high standards of
income, the customers have the
opportunity to purchase the services
of Vodafone. With better economic
condition of the country comes the
increase in the profit of the
organization.
 However, recession in the year 2008
and rate of inflation has adversely
affected the profit of the company.
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Vodafone suffered a loss due to
recession has led it reducing potential
customers and employees (Linge and
Sutton, 2016).
Social  Customers behaviour and belonging
to different cultures determines the
service type and pricing of the
products. Vodafone has the young
generation as the customer segment.
As the younger generation does not
have a high earning as they lack in the
source of earning, they are unable to
purchase high price commodities.
Vodafone to overcome this barrier
should implement cheap cost
available products or reduce in the
cost of the product.
 Due to globalization, the customers’
demands vary with the choice of the
products. Vodafone to avoid
customers being bored of the service
has developed wireless
communications and latest features in
the mobile. Vodafone has adapted this
strategy of implementing latest
technology has helped to attract the
targeted customers.
Technology  Vodafone being one of the biggest
telecommunication companies
definitely depends on the
technological advancement.
 However, telecommunication
company are in itself are a gift of
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technology. As a consequence of
technological advancement, Vodafone
has the ability to provide its
customers with latest features. From
GSM to wireless communication, the
telecom industry has made a vast
change.
 With this advancement, competition
has also increased in the market (SHI,
2015). Competition is increasing with
the increase in the demands of the
product with variance. Competitors of
Vodafone are using advanced tool to
occupy their position in the market
too.
Environmental  UK has made many laws for the
companies to abide by in order to
maintain their position n UK. UK
Communication Act 2003 has been
followed by Vodafone in the market
of UK. Even certain employment
regulations are also implemented to
protect the employee’s rights. The
Employee Act 2010 has helped the
employees in UK. Any prohibition to
the acts is subject to penalty.
Legal  Organizations, in order to maintain its
position in any country has to ensure
the environmental standards.
Vodafone has invented many CSR
programs to reduce the negative
impact of the company on the society
and the country.
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Threats Opportunity
Changes of the taxation policies in UK and
imposition of VAT has made Vodafone to
implement certain changes. Following the
governmental decisions, Vodafone has made
a reduction in the pricing strategy. As a
consequence of the rate of inflation
adversely affecting the country, the
government of UK has made it compulsory
for all the organizations to abide by it. As a
result of recession, Vodafone has reduced its
employment structure in terms of quantity.
The marketing criteria of Vodafone have
been affected due to economic crisis.
Vodafone has also been accused of not
paying the employees according to their
standards when compared with its
competitors. Due to salary issues, many
employees often leave the company and have
joined hands with the competitors increasing
the risk of sharing the innovative ideas with
them. The uncertainty due to Brexit,
environmentally has led a stop to the pace of
innovation
A high rate of GDP characterizes the income
standards of the residents of the state. The
more the income level of the residents, they
are more contracted to buy latest
technologies for their comforts. This affects
the profits of the company and helps in
expanding beyond its boundaries. Vodafone
was successful in meeting the customers
demand by innovating latest technologies.
Vodafone being a European centred company
has made changes like adapting flexibility in
the business styles. Vodafone has
recommended changes in its preferences
considering the local culture of the state. The
innovative advertisement of zoo zoo’s
attracted many customers. With
environmental changes, Vodafone has shifted
from GSM cards to wireless communication.
Table 1: PESTLE of Vodafone Company
(Source: Created by author)
b) Ansoff’s growth vector matrix to analyse the organisation’s strategic positioning
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Market Development: This process includes the launching of existing services in new markets
(Loredana, 2016).
Market Penetration: When existing products are sold in the existing markets, the purpose of
increasing the market share becomes successful. This strategy is called market penetration.
This process involves reduction in the cost and low chances of risk. Having less chances of
risk in applying the strategy helps to increase competition.
Product Development: This strategy includes applying technological advancement in the
products to attract customers. Introducing new products will help in expanding the market for
the company. Vodafone has shifted from GSM card facility to wireless and many latest
features in internet to retain customers and their purchasing interests. Being already
established in the market, Vodafone involves less risk factor. Due to globalization, the
demands of the customers are changing.
Diversification: When any newly launched product is introduced in the new market, it is
called diversification. Launching new products involves high risks as whether the customers
will have positive or negative impacts which will affect their purchasing interest. This
strategy is also highly expensive (Johnson, 2016).
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Task 2 – The internal environment and organisation capabilities
2.1 Conduct an assessment of the organisation’s internal environment and its
capabilities.
a) Explain what strategic capability means
'Strategic capabilities', the term itself indicates an organization ability t use the strategic
plans successfully to improve its efficiency and standards in the markets. Having the strategic
capability helps in keeping the financial stability of an organization. If a company possess the
strategic capability, investors are keen in investing money in the company as there are high
chances of profits. Maintaining strategic capability helps to reduce the fear from layoffs for
the employees. Possessing these kinds of capability helps to understand the position of the
company along with its competitors in the market. Strategic capability on the other hand
determines the innovative techniques a company can implement to retain its position in the
market along with the threats. Vodafone has shown its strategic capability by providing
telecommunication services in UK at a minimum price without compromising the quality of
the service. In respect to technological capability, Vodafone has been successful in
employing skilled employees.
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Core Concepts in
Strategic Capability
Foundations Analysis Development Cost efficiency Organisational
knowledge Sustainability

Figure 1: Concepts of Strategic Capability
(Source: Pdfs.semanticscholar.org, 2018)
b) Apply the ‘VRIO/VRIN’ model to determine the strategic capabilities possessed by
your chosen organisation
In the year of 1984, Birger Wernerfelt developed the Resource Based View propagates the
concept that competitive advantage of an organization depends on its ability to apply valuable
tangible and intangible resources. Relating to this model, the VRIO model has been
developed. This model is used for analysing the value of the resources of an organization.
Resource or
capability
Valuable Rare Inimitable and
non sustainable
Organized to
exploit
Network
infrastructure
Yes No No Yes
Diversified
Revenue Base
Yes Yes No Yes
Employees Yes No No Yes
Leading market
position
Yes Yes Yes Yes
Table 2: VRIO Model
(Source: Created by the learner)
Network infrastructure – Customer data of Vodafone is most valuable resource as most of
the strategies of the company are dependent on it. Vodafone currently is upgrading the
national transport network among all its subsidiaries. This includes usage of all services like
IP as strategic technology. Vodafone has made it possible with the advanced networking
facilities access transmissions through fixed broadband networks, 2G/3G mobile networks
and private corporate networks. The core network of Vodafone comprises of packet switched,
circuit switched, IMS, service platform.
Diversified Revenue Base - By the year 2017, Vodafone has a record of generating 10.55
billion Euros in revenue. The Company has expanded its market with the help of strategic
decisions and partnership. By the end of 2008, Vodafone acquired almost about 289 million
customers globally. Vdafne contributed about 15.2% of the total revenue globally.
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Figure 2: Revenue of Vodafone
(Source: Vodafone.com, 2018)
c) Identify the organisation’s strengths and weaknesses
Revenues: Vodafone has made an immense record in generating revenue of billions of
dollars per year. In 2016, Vodafone has generated about 87.3 billion dollars. This has
definitely boosted the rankings in numbers with its competitors. Vodafone with the help of
revenue has also increased its expectations from the customer’s ends. In sales, Vodafone has
ranked in 104 globally out of 2000 and 84 in figures in market value.
Premium cost: Vodafone in the competitive market to maintain its position is bringing
diversification in its products. Vodafone among the customers has acquired the reputation of
being a notch above the rest of the companies. Customers have shown high rate of
satisfaction and is proud to be its users. As a consequence, Vodafone is able to receive some
premium from the customers and be in the margins. While other telecom companies are still
struggling to achieve the position and maintain positive margin.
Brand value: The brand value of Vodafone is 28 billion dollars by the year of 2016. Both the
brand value and equity are high in the market. Vodafone is the most satisfied company
preferred by majority of the customers (Paicu, 2015).
Extensive market coverage: Vodafone globally enjoys a significant customer base.
Globally, this telecom company operates in more than 30 countries and even includes
partnership with other countries. Vodafone has its strength in having an increase in the share
of the company in the market. By the year of 2017, Vodafone Group occupies about 22.7%,
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22.6%, and 33.9% of the market share in many countries like India, UK, and Italy. In ranking
this company has being in the 6th position in global telecom brand.
Innovating promotion strategy: Vodafone has been the first to develop its partnership with
Yahoo in mobile advertising. Innovation has taken a shift from the keywords “Wherever you
go, our network follows" and again with the innovative idea of Zoo zoos using IPL 2 as a
platform in the Indian markets.
Success of M-Pesa: M-Pesa has been globally reputed for its successful money transfer
service. It gives the opportunity to millions of customers to have an access to online
transaction, send and receive money, bill payments (Sammut‐Bonnici et al., 2015).
Weakness of Vodafone:
Sluggish economy: The era when the European economy faced a crisis, Vodafone suffered
major loss. Increase in the number of unemployment led the customers to reduce the mobile
bills. The company in spite of having global reference, it is mainly concentrated in Europe
and Asia.
Low R & D: Vodafone has the weakness of having low R$D in UK. Apart from having low
R $D, the company has also weak management style. One f the major crisis is its having rural
network access which is absence from its infrastructure (Kyengo, et al., 2016).
Loss of brand: Vodafone ha a weak brand as the Company does not have the scope to charge
same price for offering its goods like their competitors.
Subscription base fallen: In the last 4 years, it is observed that the subscriber base of
Vodafone has dropped. The brand requires strengthening its core values and applying
strategies to lure customers on a huge proportion. As a result of fall in the subscription, the
brand value has also decreased.
Competitors: Vodafone faces a huge competition in the domestic market from its
competitors like O2, Orange, and T-mobile.
Centralized management system: This is the main weakness behind Vodafone as a telecom
industry. This causes inflexibility at a higher rate. Vodafone has the disadvantage of having
the higher rate of consumer churn rate. This has also caused negative impact on many
subscriber-based service models.
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Task 3 – Analysing the telecommunications sector
3.1 evaluate the competitiveness of UK’s telecommunications sector using Porter’s five
forces model.
Porter's 5 Forces was developed by Harvard Business School professor Michael Porter. He
created this model to analyse an industry’s attractiveness and likely profitability. This model
was published in 1979 and is highly used as a business strategy tool.
a) Bargaining power of buyers: Customers are the king of this industry as they have a
superior position in bargaining services. A cut throat competition exists in the market due to
the nature of the telecom industry. Customers who are offered different products have the
advantage of this cut throat competition in the market. The power of the buyers is usually low
due to the existence of strong market in UK. Complexity also of the mobile market structure
and services has hindered customers to put backward integration (Best, 2012).
b. Bargaining power of suppliers: Suppliers constitutes of those firms which provides
technological infrastructure to the telecom industry. Mobile manufacturers also form the
suppliers of the industry. Bargaining power of suppliers is moderate as there is a high number
of suppliers present in the market.
c. Threats of new entrants: Threats of new entrants in UK telecom sector is important in the
market. It is observed that there is still some potential growth needed in this industry.
However, huge capital investment is required to overcome the threats to an extent. If
customers have a trust in the present brand then the threats can be lower.
d. Threats of substitutes: This threat is very high because of the existence of similar
services, having the ease of success to the information and switching cost in the market.
However, telecom industry makes use of innovative technology to overcome threats and
advantage over the rivalries. As the concept of globalization is spreading rapidly affecting the
markets, lot of alternatives have come up in replacement of mobiles. VOIP services have
been adapted by many customers, which is recently launched. VOIP, like Skype, Yahoo, and
Messenger has benefited the customers with low cost of communication thereby alluring
many customers.
e. Rivalry within the market: This looks at the quantity and strength of the competitors. In
markets, where the rivalry is intense, companies can lure the customers by making aggressive
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price cuts and marketing campaigns. UK's telecommunication sector has more than 15
companies in the market. Mobile retail is considered as the leading factor in generating
industry's revenue stream. Implementation of new technologies like 3G has increased the
level of competition. Vodafone has a record of generating 16.5 million subscriptions in UK.
Rivalry has been tough with the introduction of O2 in the market for Vodafone.
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Task 4 – Understanding and interpreting strategic direction
4.1 Using Bowman’s strategy clock model, analyse the strategic direction and options
available for your chosen organisation
The Bowman’s strategy clock model is an elaborated version of the Porter generic
strategies, which different companies make use of as a marketing strategy to analyse its
competitive position in contrast to its competitors. The model represents 8 potential strategies
in 4 quadrants which are classified by the axes of apparent added value and price. The key
function of Bowman's Strategic clock is to demonstrate that a business organization will have
a number of options for positioning its product depending on two dimensions,
namely, perceived value and price (Tassabehji and Isherwood, 2014).
Figure 1: Bowman’s strategy clock model
(Source : Li, 2016)
The strategic options and direction of company, Vodafone UK in context to, Bowman’s
strategy clock model is explained below:
Position 1: Low Price and Low Value Added
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This position is considered the least competitive position for the company. Here, the product
is not distinguished or discriminated and the consumers take in extremely diminutive value,
regardless of the low price. This position is termed as a bargain basement strategy. The only
possible way for the company to survive in such a situation is to provide the consumers with
products at the most cheapest price as possible and ensure that no other company is able to
undercut its price.
Position 2: Low Price
The business organization which positions its business in this position of the model looks for
being a low-cost leader in the market. The company requires cost minimization strategy in
order to become successful in this position. Under this position despite having a low profit
margin, the company can generate high profits owing to high volume of outputs (Reeves et
al., 2015).
Position 3: Hybrid
This position involves some element of low price, but also some product differentiation. The
aim is to convince the customers that there is an excellent added value by means of the
permutation of a satisfactory product differentiation and rational price. This can prove to be
an effective positioning strategy for the company, predominantly if the added value
concerned is offered constantly.
Position 4: Differentiation
The company can adopt this strategy with the aim to offer the consumers with the highest
level of apparent added value. Branding as well as the quality of the product or service plays
a vital role in this strategy. A good quality service or product with strong brand loyalty and
brand awareness is possibly the best means to attain the comparatively added-value and
prices, which a differentiation strategy needs.
Position 5: Focused Differentiation
In this strategy, the company aims at positioning a product or service at the highest cost
levels. Here, the consumers purchase the products owing to the high apparent value. This
strategy is mainly adopted by the luxury brands who mainly aim the premium segment of the
market who are ready to spend a higher price for premium goods and services. If
implemented productively, this strategy can help the company to generate extremely high
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profit margins. However, it is difficult for any business organization to maintain such a
strategy for long-term (Karinkanta, 2016).
Position 6: Risky High Margins
This strategy is considered being one of the most highly risked positioning strategies. In this
strategy, the company needs to set higher prices devoid of providing anything extra in terms
of apparent value. It is a huge risk that the company takes as this strategy completely depends
upon the customers. If they customers continue to purchase the products or services at a
higher price, it can gain high profits. However, it is a very rare case as generally customers do
not stick to such products and tend to shift to other products that are better-positioned and
low priced.
Position 7: Monopoly Pricing
As the name suggests, this strategy is applicable for the business organizations that function
in a monopoly market. In this type of business positioning strategy the company does not
need to be concerned about what values the consumers see in a service or product. The
consumers of such market do not have any choice but to purchase the product. In such a
strategy, the company can price their services or products as per their choice.
Position 8: Loss of Market Share
This position is a technique for catastrophe in any economical and competitive market.
Positioning a standard or middle-range price for a service or product with a low apparent
value is improbable to succeed over several customers who will encompass much better and
enhanced options (Du, 2018).
The telecommunication company, Vodafone UK mainly makes use of the hybrid and
differentiation positioning strategy in order to sustain its position in the market. Both the
strategies allow the organization to offer its products and services at a reasonably lower price
with added value as well as product differentiation. This further helps the company in
retaining its customer base as the customers always prefer to purchase products or services
which are of good quality and of low price with added values. As the company ensures to
continuously provide the added value offers with its products and services, its customer base
is huge and is expected to increase rapidly.
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Conclusion
The above assignment has discussed the influence and impact of the external or macro
environment upon the chosen telecommunication company, Vodafone UK. The project has
also discussed the impact of the internal environment upon the company. The porter’s five
forces model has been used in order to analyse the competitiveness of telecommunication
sector of the United Kingdom. Besides, the project has also shed lights upon the Bowman’s
strategic model in order to interpret the strategic decision of Vodafone UK. It has been
witnessed that the company, out of all the eight strategies of the above-mentioned model,
makes use of the hybrid and differentiation positioning strategy for maintaining its position in
the market.
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