Business Strategy Analysis of Vodafone: PESTEL, VRIO, and More

This report provides a comprehensive analysis of Vodafone's business strategy, employing various frameworks to assess its market position and strategic capabilities. It begins with an introduction to business strategy and its application to Vodafone, followed by an analysis using the PESTEL model to evaluate the external environment. The report then examines Vodafone's growth strategies using Ansoff's matrix, exploring market penetration, product development, market development, and diversification. Furthermore, the VRIO model is applied to assess Vodafone's resources and capabilities, followed by an evaluation of the company's strengths and weaknesses. The telecommunications sector is analyzed using Porter's Five Forces model to understand the competitive landscape. Finally, the report concludes with an interpretation of strategic decisions and recommendations for Vodafone's future strategic management.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
PESTEL Model..........................................................................................................................1
Ansoff's growth matrix:..............................................................................................................3
TASK 2............................................................................................................................................4
VRIO model to analyse the strategic capabilities.......................................................................4
Strength and Weakness of Vodafone: ........................................................................................6
TASK 3............................................................................................................................................8
Analysis of telecommunication sector with help of Porter's five force model ..........................8
TASK 4..........................................................................................................................................11
Understanding and interpreting strategic decision....................................................................11
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Business strategy is a set of decisions which helps business organisations to achieve their
goals with optimum utilisation of resources. This can be referred as a master plan which
management utilise to secure their competitive position in market, carry its operations and
achieve the desired outcome of organisations. Strategy enables organisation to be ahead of their
competitors and achieve their pre set goals effectively and efficiently. It helps in achieving
effectiveness, perceiving and utilising opportunities, mobilising resources and securing an
advantageous position. There are various level strategy such as corporate strategy, business level
strategy and functional level strategy which is used at different level of management in business.
To better understand this concept, Vodafone, United Kingdom is selected for this project.
PESTLE model for environment analysis and Ansoff's growth matrix is being analysed for the
chosen organisation in this project. Apart from this, VRIO model and strength and weakness of
the chosen organisation is explained in this project. The analysis of telecommunications sector
has been done with the use of Porter's Five force model. Apart from this, the strategic
management plan is being developed in this project.
TASK 1
PESTEL Model
External environment:
The external environment factors are those which make impact on the capacity of a
business or investment in order to achieve their strategic goals and objectives. These external
factors directly make impact on the business operations. It is very important for organisation like
Vodafone to analyse these factors in order to be sustainable in the marketplace. This will help
them to identify the factors which can make effect on their operations and than accordingly plan
their strategy. There are some external factors which are discussed as below:
Political Factors:
The political factors are those which are related with the political stability, tariff and trade
policy of business and tax policy of country. As this factor make direct impact on the
organisational business. Ignorance of political laws, ordinances and regulations could lead to
heavy fines and negative publicity of company (Burlton, 2015). The Vodafone needs to maintain
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in house legal and professional departments so that they can make their plan and strategy
accordingly.
Economical factors:
The economical factors are those which are related with the economic condition of
country. It includes the GDP rate, unemployment rate, interest rate, inflation and recession etc. It
is very important for the company to evaluate this factor in order to be sustainable and
competitive in market. Economy fluctuate very frequently in all countries and this fluctuation
make direct impact on the business of company like Vodafone.
Social factors:
Social factors are those which are relates with social culture, taste, preferences, need and
want and demographics of society. The analysis of social factors assist to know the consumer
attitudes and opinions, consumer buying patterns, ethical issues and cultural taboos of a society.
According to the survey done by Deloitte, the younger consumers aged 16 – 24 use their
smartphones while walking so it shows that younger consumer of society is more attracted
towards the use of smartphone so Vodafone can attract more number of young consumer.
Technological factors:
The technology is updating day by day and it is very important for companies to adopt
new technology so that they can expand their consumer base. As in telecommunication sectors
companies are coming up with new mobile network such as 3g, 4g and in future Vodafone is
coming up with 5g. So this is how technology attract new consumers and helps in increasing
consumer base (Chang, 2016).
Legal factors:
Legal factor is an external factor which make impact on the operations of business. There
are various laws which are formulated and governed by the government and it needs to be
followed by related industry. The Vodafone needs to follow the laws which are related with
telecommunication such as UK communication Act 2003. The act protect the rights of
consumers.
Environmental factors:
Environmental factors includes all those which are related with environment of a country.
It related to the ecological and environmental aspects which will effect the demand for
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company's products and how business operates. The Vodafone need to follow the environmental
legislation in order to prevent environment from harm.
Ansoff's growth matrix:
This matrix is tool which is used by the business to evaluate and plan their strategies of
organisation for their growth. The matrix shows four strategies which can be used to help a
business to grow and also evaluate risk associated with each strategy. In the Ansoff's growth
matrix there are four strategies which are used by the organisation in order to grow their market.
These are discussed as below:
Market Penetration:
The market penetration is a strategy which is used by the organisation in order to increase
their sales of existing product and services in an existing market. Under this strategy the firm use
its products in old market with aiming to increase their market share with help of penetration
strategy. The Vodafone can use this strategy by decreasing their prices in order to attract new or
existing customers, by increasing promotion and distribution efforts and by acquiring a
competitor in the same market (Chu, KrishnaKumar and Khosla, 2014).
Product Development:
The product development is strategy in which company come up with the new product to
an existing market. The firms brings new product to the existing market. In order to develop new
product, it required the extensive research and development and expansion of product range.
This strategy is developed when a firm have strong awareness about its local market and able to
provide the innovative solutions to their customers so that needs of existing market can be fulfil.
The Vodafone can come up with the new 5g network for its customers. This strategy is
considered as low riskier than other strategy of this growth matrix. The product development
strategy can be done in various ways such as:
 Investment in research and development
 By acquiring the product of competitors product and merging the resources so that
customer needs can be met.
 The strategic partnership with the other firms so that distribution channel can be
accessed.
Market development:
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Under this strategy, the business enters in a new market with the same products which
they are offering in old market. Expansion into new market is the expanding into totally new
geographies, customer segments and region etc. The Vodafone has been trying to develop new
market from last many years in various countries like India. Recently Vodafone had merged with
the local height of India named Idea in order to expand their customer base and be competitive in
market. This development strategy can be done in various ways such as:
 By entering into new domestic market
 The company can set up their foots in the new foreign market.
 By catering to a different customer segment.
The Vodafone is planning to launch the 5g for those customers who are using handsets
which are compatible with the latest technology.
Diversification:
Under the diversification the firm enter in the new market with new product. It is
considered as most riskier strategy for the business. The diversification is of two types which is
discussed as below:
Related diversification:
Related diversification is that, there will be synergies in the between existing business
and new product or market. For example, Vodafone is entering into providing the broadband
services which is related with telecommunication sector (Galbraith, 2014).
Unrelated diversification:
The unrelated diversification is means there is no synergy between the existing business
and new product.
TASK 2
VRIO model to analyse the strategic capabilities
VRIO is an analytical tool for the analysing company's resources. The model has four
dimension framework which states about the resources or capacities to in order to determine its
competitive potential. If resource can not meet this condition than it leads to competitive
disadvantage or loss for the company. These dimensions are discussed as below:
Valuable:
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This is the framework if a resources adds value by allowing business to exploit
opportunities or protect from the threats. Resource are valuable if these are helpful in perceiving
value from customers. And it can be done by the launching new products or decreasing the prices
of products. It is crucial for Vodafone to review the value of resources in order to value the
resources so that continuous changing in internal and external conditions can not make less
valuable these resources.
Rare:
Resource which is adopted by very few companies are considered as rare. These rare and
valuable resources helps companies to take competitive advantage for short span of time.
Costly to imitate:
A firm which has valuable, rare and costly to imitate resources can achieve the sustained
competitive advantage. If Vodafone has the resources which are hard to imitate than it can attain
competitive advantage in marketplace. There are various reasons due to which resources can not
be copied easily. These are as follows:
Historical conditions:
The resources which were produced or developed due to historical events are usually
costly to imitate.
Casual ambiguity:
As companies can not recognise the particular resources which are cause of competitive
advantage.
Social complexity:
Those resources and capacities which are produced on the basis of company's culture are
hard enough to imitate.
Organise to capture the value:
It is very important for the organisation to organise resources in effective way in order to
capture value from these resources. This organise form of resources would lead to achieve in
competitive advantage (Hart, Sharma and Halme, 2016).
The VRIO model analysis in respect to Vodafone is discussed and analysed as under:
Access to capital:
The capability of Vodafone UK to access the capital is very strong as it can access fund
from its parent company like Vodafone Group. This fund will enable the organisation to
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capitalise their resources and also enhance operating capabilities. As accessing to huge capital
will be helpful for the organisation to achieve competitive advantage.
Network capability:
The company has invested much amount for enhancing their network so that customer
can enjoy a seamless experience. This help Vodafone to provide the fast speed internet with
excellent coverage. The technological capacity is indeed valuable and keep the company
Vodafone ahead of their competitors. However, this technology can be copy easily so this does
not give long term competitive advantage.
Brand equity:
The Vodafone has its name worldwide and serving to billions of customers across the
boundary of nation. The consumers are familiar with this brand name therefore various number
of people who migrate to UK may tend to become customers of Vodafone due to familiarity of
brand. Hence, Vodafone brand equity is very valuable, costly to imitate and organise to exploit.
Therefore it helps company to be sustainable in this competitive market (JocovicMelovic, Vatin
and Murgul, 2014).
Capabilities analysis through VRIO model
Resource and
capabilities
Valuable Rare Costly to
imitate
Organise to
exploit
Impact on
competitive
advantage
Access to the
capital
Yes No No No Realized
competitive
parity
Network
capability
Yes Yes No No Realised short
span of
competitive
gain.
Brand Equity Yes Yes Yes Yes Helpful in
realising
sustainable
competitive
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advantage.
Strength and Weakness of Vodafone:
Strength:
Strength is an internal capacity or capabilities of company which needs to be assessed by
the organisations so that business can take the competitive advantage in the market. The various
strength of company which enables organisation to thrive in the market is discussed as below:
High customer satisfaction:
The customers are king of market and satisfied customers are considered as the biggest
strength for company. Vodafone has a dedicated customers relationship management department
which solve the customers grievances and also satisfy their need and wants. This helps company
in maintaining their brand equity worldwide.
High skilled workforce:
Employees are the most valuable assets of the organisation and a high skill workforce can
helps company to take competitive advantage and maximise their profits. The Vodafone has
ample number of workforce across the world who work towards achieving company's goals and
objectives. These workforce comes with innovative ideas on everyday and helps company to
grow in substantial manner.
Extensive global reach and diversified revenues:
The Vodafone has operating its business at global level and expanding it to various
countries strategically. It was world's leading international telecommunication company for the
several years. As company has significant mobile operation in Europe, Middle east, Africa, Asia
Pacific and in the US. Apart from this, it has diverse based revenues out of which UK market has
contributed 15.2% to the total revenues of company. As this group's global reach and different
revenues has been reducing enterprise risk and providing synergies which is related with the
multinational telecom operations like roaming facilities and worldwide call charges (Klettner,
Clarke and Boersma, 2014).
Weaknesses:
Weakness is an aspect of company where organisation is lacking in compare to there
other competitors. The weakness of organisation is discussed as below:
Lack of access to rural wireless network:
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The Vodafone has been expanding its network worldwide but company is not able to
provide its wireless network access to the rural areas of various countries. This is a major
weakness of company and by providing strong wireless network access in rural areas it can
overcome this weakness. There are various competitors of company like Talk Talk and O2 which
are providing its network to rural as well as urban areas of country. So it is important for
organisation to overcome this weakness as soon as possible so that it can take competitive
advantage.
Poor performance in Europe:
The company has constantly falling its business performance in the European continent
due to certain reason like BREXIT and other economical conditions. As it has not generated
much revenue from its home market in some recent years. Due to these reasons company has
also facing problem of devaluation in their brand value.
It can be evaluated that the company has some strong points or strengths which helps
company to be ahead of its competitors. The skilled labour workforce enables organisation to
bring new innovation in their products or services so that more number of customers can be
attracted. Apart from this, its bad performance in the European market is a threat for company
itself so it needs to be taken care by the company as soon as possible (Kossyva, Sarri and
Georgolpoulos, 2015).
TASK 3
Analysis of telecommunication sector with help of Porter's five force model
The competition is in every industry whether it is automotive sector or it is
telecommunication industry. However companies are looking for every best possible way to
sustain in this competitive edge by hook or crook. There are various marketing strategies and
approaches uses by the company in order to be sustainable in market for long time period.
Similarly Vodafone, UK has its many competitors such as EE, BT, O2 and Virgin etc. Due to
this competition it has become a great challenge for companies to maintain their current position
in local market and increase their market share in national or international market. In order to
analyse the competitors of Vodafone UK, the porter's five force analysis is being discussed The
competition is in every industry irrespective of telecommunication below:
Porter's five force model:
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Porter five force is strategic framework which helps in taking strategic decisions by
analysing the present competition. This five force model helps in understanding the competitive
forces and reasons for these forces. With help of this model, organisations can come to know
regarding the roots of an industry's current profitability. According to Porter, both competitive
forces and overall industry structure plays an important role in the effective decision making. In
this model, there are five forces which shapes competition in industry these are as follows:
(Source: Porter Five Force, 2019)
Competitive rivalry:
Competitive rivalry is a force which evaluate and examine the competitiveness in the
marketplace and this competitiveness is determined by the number of existing competitors and
what is the ability of each competitors for performing the task at marketplace. For example,
Vodafone has its various competitors in UK market such O2, EE, Virgin and Talk Talk etc. So
this force helps company to identify their competitors and asses their strength so that
organisation can formulate their strategy according to their competition (LaiMelloni and
Stacchezzini, 2016). This rivalry competition is considered high when there are some business
which are selling the identical product and services to customers such Vodafone has the O2 and
Talk Talk etc. Beside this, rivalry is also considered as high when consumers can easily switch to
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other company who offers same products and services a lower cost. The company can tackle this
rivalry in various ways such as:
 Sustainable differentiation Merger with competitors in order to enhance market share.
Bargaining power of suppliers:
This force evaluate regarding the power of business's supplier has and the control which
they have over potential to increase its price which would lower down the business profitability.
Businesses are considered as in better position while there are more number of suppliers
(Torrent-Sellens, 2015). There are various ways which are as follows:
 With help of efficient supply chain
 Develop those supplier whose business depend upon the firm.
Bargaining power of buyers:
Buyers are those who always demand more in less price. They always expect to buy best
services in low cost. This create pressure on company like Vodafone and decrease the
profitability in long run. There are different ways in which Vodafone can tackle the bargaining
power of buyers which are as follows:
 Customers look for discounts on pre set products so if Vodafone come up with new
innovative services and products than it can limit bargaining power of buyers. Building a large customer base will be helpful in the reducing bargaining power of buyers
and provide an opportunity to maximise their sales.
Threat of new entrants:
This analysis helps in knowing that how easy or difficult for the competitors in order to
join the marketplace in industry being examined. If its easy to enter in the market than there
would be more competition and risk in the market. The Vodafone can lower the fixed cost per
unit by the help of economies of scale. Beside this by launching new products and services for
customers can help to expand their market share and threat of new entrants could also be reduced
(Lehmann, 2016).
Threat of substitute products:
A new or similar kinds of product or services started meeting customers needs in various
ways than it make impact on the overall profitability of industry. It shows that how easy for the
customers to switch from business's product to other competitors. Vodafone can be service
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