Business Strategy Report: Vodafone, UK Telecom Sector Analysis

This report provides a comprehensive analysis of Vodafone's business strategy within the UK telecommunications sector. It begins with an introduction to business strategy and its importance for organizational success, using Vodafone as a case study. The report then delves into the impact of macro-environmental factors through a PESTEL analysis, examining political, economic, social, technological, environmental, and legal influences on Vodafone's operations. The analysis assesses both positive and negative impacts of these factors. The report further evaluates Vodafone's internal capabilities using the VRIO model to assess its resources and competencies, including global presence and intellectual property rights. It also identifies Vodafone's strengths and weaknesses. The report then utilizes Porter's five forces model to evaluate the competitive landscape. Finally, the report applies strategic planning models to devise strategic priorities and objectives, culminating in a strategic management plan for Vodafone, incorporating tangible and tactical elements. The report concludes with a summary of findings and a list of references.

BUSINESS STRATEGY

Table of Contents
INTRODUCTION..................................................................................................................................................3
TASK 1...................................................................................................................................................................3
P1: Impact and influence of macro environmental............................................................................................3
M1: Analyse macro environment to determine strategic management decision................................................6
TASK 2...................................................................................................................................................................6
P2: Analyse internal capabilities of an organisation..........................................................................................6
M2: Critical analysis of the internal environment..............................................................................................9
TASK 3...................................................................................................................................................................9
P3: Application of Porters five force model to evaluate competitively.............................................................9
M3: Strategies to enhance competitive advantage and market position..........................................................11
TASK 4.................................................................................................................................................................11
P4: Applying a range of theories, concepts and models, interpret and devise strategic planning for a given
organisation......................................................................................................................................................11
M4: Produce a strategic management plan that has tangible and tactical strategic priorities and objectives. .14
CONCLUSION.....................................................................................................................................................15
REFERENCES......................................................................................................................................................16

INTRODUCTION
Business strategy can be understood as the course of action or set of decisions that
support the organisation to accomplish its goals. To expand the business it is essential to make
effective strategies so that business can grow and generate higher profits(Akter et al., 2016). It
helps the corporation to sustain for the long term and get the advantage of competitiveness. The
management of a firm is responsible for making proper plan, policies and action plan to
formulate an effective strategy which contributes to the growth and success of the corporation.
To better understand this concept Vodafone has been chosen which is a telecom company of the
United Kingdom. This report discusses various topics such as: to know the impact & influence of
macro environment factors, to consider an organisation's internal environment & capabilities,
Porter's five force models to analyse competitive forces. Apart from this it also discusses you
apply a range of theories and concepts which are helpful towards strategic planning (Chen,
Eshleman and Soileau, 2016).
TASK 1
P1: Impact and influence of macro environmental
A macroeconomic factor an external factor which business must access in advance before
starting their business operations to gain long term success (Evans et al., 2017). The manager of
Vodafone has conducted a PESTEL analysis to identify the impact of macro environment factors
on business.
PESTEL Analysis:
It refers to the external factors that include Political, Economic, Social, Technological,
Environmental and Legal which directly or indirectly affect the business operations of Vodafone.
Political factor: It includes various factors such as foreign trade policy, labour law,
political stability, tax policy and so on that affects the business operations. Herein, Vodafone
which operate its services worldwide due to which its primary concern is political stability for its
wireless communication. Thus,the company has gained long term profitability by diversifying its
business to increase growth and development.
Positive: As Vodafone operates worldwide due to which it gets the advantage of its brand
image to gain a vast customer base.
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Negative:As Vodafone operates in various countries which includes developing the
market as well due to which it has to bear a lot of political instability. Moreover, the
telecommunication industry needs to apply for a license for which they are dependent on
government thus incur enormous cost and time.
Economic factor: It includes macro and micro environment factors like inflation rate,
interest rate, competition rate that impact the performance of the business (Habib and Hasan,
2017). About Vodafone analyse the habit of customer and growth rate in wireless
telecommunication before serving the customer of a particular country.
Positive: Respected Company changes its policy as per the economic factor to attract the
customer and avail its services.
Negative: The cost of raw material, as well as the cost of skilled labour, is high in a
developed country which hampers the profit margin of the country. Further, up-gradation of
technology requires vast capital expenditure that affects the performance of the firm.
Social: It refers to the shared belief, culture and attitude of the population. As most of the
community is educated in the UK due to which they have active aware about the service offered
by the company. Like Vodafone provide high-quality services at reasonable rates to cater to the
new demand of the customer.
Positive: Selected company have successfully targeted to the working and business class
audience by appeal their interest through advertisement activity.
Negative: With the change, in working pattern people of the developed country are going
green while can directly or indirectly affect the sales of Vodafone.
Technological factor: Vodafone is known for its innovation as it has not only adopted
but keeps on upgrading its modern technology with the time.
Positive: Innovation in internet calling, GPS as well as improvement of existing wifi
technology in both national and international market has helped the company to gain a vast
customer base.
Contrary: With the innovation in communication lead to the emergence of various
alternatives for online chatting. Due to which Vodafone is only left with the option to form a
strategic alliance to decrease competition.
Environmental factor: Each country has its environmental law which directly or
indirectly affects the profitability of the company (Lehmann, 2016). In context to Vodafone
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before starting their business in new market company has evaluated the standard of environment
carefully like its weather or laws related to pollution.
Positive: Selected company reduces the business risk by minimising the negative of
business on society as well as on the environment.
Negative: Vodafone is dynamic in term of market expansion due to which company
highly faces the competition.
Legal: Vodafone has considered various factors such as intellectual property right,
discrimination and employment law before starting their operations to gain a competitive
advantage over competitors.
Positive: Though it has always tried to maintain its image in front of its customer by
providing them with a best-suited offer.
Negative: Vodafone in its growth phase has faced legal pressure for not paying much
remuneration to its employees. This increased the turnover and absenteeism rate of the company.
M1: Analyse macro environment to determine strategic management decision
Based on the macro environment factor such as PESTLE analysis there is some negative
factor that adversely affects the business process(Orna, 2017). Telecommunication industry bears
enormous cost as well as time to get the license from the government of various countries to start
operation which is a part of the political factor. It further involves huge expenditure while
acquiring raw material also due to high competitive pressure company needs to adopt the latest
technology so that they can sustain the competition. Along with that company faced the
implication of not abiding by the legal factor like providing less salary to its employees. This
lead to the switching of an employee from Vodafone to its competitor leads to a decrease in
profitability for the company. Moreover, modifications are brought in the operation based on the
preferences and convenience of customer which is a part of economic factor. Based on the
social factors respected company target the audience based on their cultural and accordingly
they appeal the interest of their prospectus. Furthermore, company take the actions to safeguard
the interest of environment on which it run its operation by participating in CSR activities.
Thus, Vodafone must prepare a proper strategic decision should be made by considering all the
essential criteria.
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TASK 2
P2: Analyse internal capabilities of an organisation
Strategic capability: It refers to the existing resources, skill as well as as-as the ability of
an organisation to gain an overall competitive advantage over rivalries(Pisano, 2015). Further,
the business identifies the need or demand of customer to emphasise on business capabilities.
VRIO model: To achieve long term sustainable development Vodafone company uses
VRIO analysis which is elaborated below:
Factors Valuable Rarity Imitable Organised What is the
result?
Global
presence
Yes Yes Yes Yes Competitive
Advantage
Intellectual
property right
Yes Yes low Yes Strong
competitive
advantage
Financial
resources
Yes No Yes Yes The temporary
or short term
competitive
advantage
Valuable:
It refers to the precious or useful resources of an organisation that helps an organisation
to attain its objectives. Thus, the valuable factors of Vodafone company are defined below:
Global presence: As Vodafone company operate in more than twenty country due to
which they have gained strong presence and recognition by customer.
Intellectual property right: It is valuable for the company to enjoy the monopoly rights
of the product.
Financial resources: Financial resources are valuable for the respective company as it
provides them with an advantage to expand their business.
Rare:
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Rare as the named suggest includes the resources or capabilities of an organisation which
are limited as compared to organisation competitors. About Vodafone, the financial resources are
not limited because the primary telecom industry has plenty of financial resources. Hence,
precious resources of an organisation are defined below:
Global presence: Though Vodafone has vast competitors such as BT, Virgin and so on.
But each of them does not have a substantial worldwide presence as the respective company has
due to which the company gets an advantage.
Intellectual property right: Vodafone experience its rare intellectual property right and
also minimise the chances of competition.
Financial resources: This is not the rare factor as other major or existing competitors are
also financially capable of carrying out their businesses effectively.
Imitate:
Imitate refer to the resources which can get duplicated or copied by the various
competitor of the company(Prajogo, 2016). Herein, the financial resources of Vodafone are
imitable as there are other firms which also operates worldwide and have surplus capital.
Global presence: It can be imitated by other companies as they can always maker the
advantage of their economies of scale.
Intellectual property right: The risk of imitating intellectual property right is shallow.
This helps the company to leverage all its capital and resources in its favour.
Financial resources: As the close competitor of Vodafone are also financially sound due
to which such factor is an imitable factor.
Organisation competencies and capabilities:
Skills of organisation help to attain success by expanding its capacity with time. About
Vodafone, its global presence, as well as an intellectual property right, helps the company to
overpower competitors by achieving long term sustainable development.
Global presence: As the selected company has systematically arranged in operations in
more than twenty countries due to which it gets long term competitive advantage.
Intellectual property right: These right give the advantage to the company to provide a
competitive advantage over competitors.
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Financial resources: Though Respective company's financial position is sustainable, but
it does not give a competitive advantage to the company as it is not rare and imitable by
competitors.
Therefore, global presence, as well as an intellectual property right, gives the company
the advantage of long term sustainable development to reduce the competitive pressure.
Strength and weakness of Vodafone:
It's an internal factor of the company that helps it to analyse
Strength Weakness
Market coverage: The biggest strength of the
selected company is that it operates in the
global market due to which it has gained a
considerable customer base.
Source of revenue: Diversification of brand
has helped the company to make portfolio
investment which increases the chances of
profit by compensating the chances of risk.
Recall value of the brand: Vodafone comes
up with various plans as well as they have
adopted innovative promotional strategy due
to which their recall value is very high.
Losing market share: There are some
countries such as the USA, Europe where the
market share of the company is declining.
This has lead to a decrease in the customer
base of the company.
Fewer profit margins: As the company is
into price wars with competitors due to which
it gets less revenue(Schaltegger, Hansen and
Lüdeke-Freund, 2016).
M2: Critical analysis of the internal environment
The internal environment of Vodafone includes strategy after analysing the strength,
weakness, capability as well as a core competency of the firm. Thus, the major strength of the
company is that in term of the telecommunication industry of UK respective company is the
market leader that has always enhanced its plans by satisfying the requirement of customers.
Whereas, the pressure of existing competition and changing need of customer negatively affect
the business process(Teece, 2018). Furthermore, Vodafone does not only remain confined in its
existing technology but with the changing needs and requirement of people company upgrade its
technology. Like, earlier people used to depend more on phone call but with the change in trend
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the dependency has shifted from phone calls to use of mobile data. Accordingly, company has
enhanced its internal capabilities and skill by modifying their technology and provide training to
internal staff. Thus, the company makes the advantage of its strength to ensure a manner by
which they gain core competency that will help to achieve long term advantage of increased
productivity as well as profitability.
TASK 3
P3: Application of Porters five force model to evaluate competitively
Porter's five force model:
It is an analysis tool which uses five industry forces to assess the intensity of competition
in a sector and its profitability level By using this tool, Vodafone can analyse its strength and
weakness and take corrective actions for further improvement. This model will help the
organisation to make effective strategies so that the business of the company can sustain for the
long run and it can earn higher profits. Therefore, the external factor in context to Vodafone that
can affect its business processes defined below:
The threat of new Entrant: Vodafone experience low pressure of the risk of the new
entrant as telecommunications industry requires massive investment in the promotional tool,
licensing, service management as well as developing infrastructure for the company. Along
with that to match, the pace of competitors companies need to rapidly adopt the innovation (Uhl
and Gollenia, 2016). Hence, the respective company has not only adopted technology but also
maintained its regulation to provide a maximum use level of efficiency.
The threat of substitute: The risk of substitution for Vodafone is high as there are other
companies which comparatively sell services at a low price in comparison to the selected
company. Though the Vodafone serves high-quality services but still a significant number of
substitution affects the market share of the company.
Competitive rivalries: Recently, within UK Vodafone is experiencing high neck to
competitive neck pressure due to which it is continuously making an effort to provide low-cost
services. If Vodafone offers a high price in comparison to another competitor such as B, then
they can lose its market. On the other side if they offer a low cost in comparison to its
competitors, then the company will experience loss. Thus, the competitor analyses each different
strategy to operate smoothly.
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Bargaining power of buyer: In term of telecommunications industry within the UK the
purchasing power of the customer is excellent. Along with that, they have various options for the
company who provide a similar type of services and at very reasonable rates. This depicts that
the trend of switching from one company to another is high. Thus, Vodafone understands the
need for people and provide them with premium quality services at nominal rates. Further, as the
bargaining power of the buyer is relatively high, the selected company motive is not only to
attract new buyer but also to retain existing ones to gain a competitive edge over others.
Bargaining power of supplier: The big competitors of the telecommunications industry
within the UK such as Virgin, BT etc. experience high profit this lead to the high bargaining
power of supplier. Moreover, the company is left with no option rather than compromising their
profit margin. Furthermore, due to high bargaining power or demand of suppliers, the additional
profit of the company is at stake. This lead in top cost services of customer care, network
maintainer, marketing and so on.
Balanced Scorecard:
It is a strategy followed by the company under this focus is on high-level organisational
goal, measures help the company to understand if they are achieving the objectives strategically.
Initiatives are taken to achieve those goals of the organisation under this. Balanced Scorecard
can be prepared by using excel, Google sheets or PowerPoint(Wirtz et al., 2016). So, balance
Scorecard is a useful tool to keep the team on the same page while forming a strategy.
Ansoff's model:
In the year 1957, this model has been developed by H. Igor Ansoff and its emphasis on
the corporation's present & potential products and market. For strategic marketing planning, it is
useful to identify opportunities for business to grow and develop new products so that the
company can expand. Therefore, it includes the best-suited strategy adopted by the company to
experience long term growth. Thus, explanations of all four approaches are defined
below(Ansoff matrix, 2019):
Market Penetration: At this stage, the company offer the existing product at the current
market to enhance the market share of the company. For instance, Vodafone has adopted this
strategy by setting the price strategy based on its competitors. Thus, the respective
telecommunication industry makes sure they leverage their existing resources ore capabilities to
attain long term growth.
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Market Development: It refers to the situation when the firm enters a new market to sell
its existing product (Meckling, 2015). In term of Vodafone, has made the use of economies of
scale to expand into the various untapped market such as Asia market, African market etc. Thus,
the company has experienced massive revenue due to diversification.
Product Development: When a firm offers new product or services in the existing market
to expand the market share of the company. In context to Vodafone company has always come
up with new plan related to calling or internet connection. Like, initially people use to look for
ideas to make phone calls but now with a change in technology and innovation people are more
keen to get an offer on internet services.
Diversification: Here, the company launch a new product at a new market due to which it
is the riskiest strategy. Vodafone has operated around twenty-five countries for which they have
adopted a significant approach to the established global image.
Thus, as per the above four described strategies, Vodafone should adopt Product
development strategy. As the company experienced immense competition pressure due to which
it is significant for them to bring new offers to fulfil the current requirement of the customer.
This further help the company to maintain a long term relationship with their existing customer.
M3: Strategies to enhance competitive advantage and market position
Though Vodafone has adopted several strategies such as the use of social media and
traditional media to appeal the interest of the customer, build global dominance as well as a
competitive advantage over others. Further, the company experience fluctuation in market share
so to deal with rivalries and cope up with their pressure company should differentiate started.
Within this focus on product differentiation, that helps the company to enhance its position and
leaves less alternative for the brand. Along with that company can go for Product development
strategy where selected company enhances the attribute of product and bring additional offers
based on the changing preferences of customer. For instance, Vodafone offer various offers
related to data pack that can be based on monthly usage or yearly usage depending on the
requirement of customer. Thus, this strategy can also help the company in setting up high prices
which will enhance revenue for the company.
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TASK 4
P4: Applying a range of theories, concepts and models, interpret and devise strategic planning
for a given organisation
Bowman's Strategic Clock model is helpful in strategic planning and emphasis on how a
product should be positioned in the market which provides value to the consumers and helps the
company to gain a competitive position. This model is mainly based on two parameters which
are price & perceived value. It is a marketing model which is used by Vodafone to analyse its
position about what its competitors have to offer. An organisation can achieve competitive
advantage through this model, and it is based on eight factors which are described below:
Low price and low value added: For the Vodafone, this strategy is not beneficial
because this product is not differentiated & consumers perceive minimal cost, despite a low
price. By this strategic planning needs of clients does not satisfy product will not provide to
value to the consumers.
Low price: As per this strategy, if Vodafone wants to take advantage of competitiveness
than it has to reduce the number of its products and to emphasis on economies of scale so that
company can generate higher profits.
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