Vodafone Business Strategy: External & Internal Analysis Report

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 Vodafone. The report then delves into the external environment using the PESTLE model, examining political, economic, social, technological, legal, and environmental factors impacting Vodafone. Ansoff's growth vector matrix is utilized to analyze Vodafone's strategic positioning, exploring market penetration, product development, market development, and diversification strategies. The internal environment is assessed by defining strategic capabilities and applying the VRIO/VRIN model to determine Vodafone's strengths and weaknesses, including its network capability and brand equity. Furthermore, the competitiveness of the UK telecommunications sector is evaluated using Porter's five forces model. Finally, Bowman's strategy clock model is applied to analyze the strategic direction and options available for Vodafone, offering a well-rounded understanding of its business strategy.

Business strategy of Vodafone
1

Table of Contents
Introduction......................................................................................................................................4
Task 1 the external environment......................................................................................................4
1.1 PESTLE model for environmental analysis...........................................................................4
Task 1.2 Ansoff’s growth vector matrix to analyze the organization’s strategic positioning.....5
Task 2 The internal environment and organisation capabilities......................................................6
Explain what strategic capability means......................................................................................6
2.2 Apply the ‘VRIO/VRIN’ model to determine the strategic capabilities possessed by
Vodafone......................................................................................................................................7
2.3 Identify the organization’s strengths and weaknesses...........................................................8
Task 3 evaluate the competitiveness of UK’s telecommunications sector using Porter’s five
forces model.....................................................................................................................................9
Task 4 Using Bowman’s strategy clock model, analyses the strategic direction and options
available for Vodafone..................................................................................................................10
Conclusion.....................................................................................................................................12
References......................................................................................................................................14
2

Introduction
Business strategy can be defined as the summary of how the firm will attain the goals followed
by meeting up the expectations of consumers so that competitive advantage can be gained in the
market place (Oates, 2017). In this respect, it is very essential to define the business strategy in a
clear manner else it will be impossible for the firm to attain growth followed by inability to
achieve personal goals as set by the entrepreneur (Rashidirad and et.al., 2017). The present study
has thus laid emphasis on the business strategy of Vodafone which is a part of
telecommunication sector within UK. Focus of the study will thus be on assessing the external as
well as internal environment followed by the organizational capabilities. There will further be an
application of Porters five forces model followed by devising appropriate strategies to improve
the competitive position of the firm.
Task 1 the external environment
1.1 PESTLE model for environmental analysis
Political Factors – The operations of Vodafone within UK has been affected by large number of
political factors. One such is the brexit crisis which may put an impact if UK leaves European
Union. Its international employees at UK based headquarters may plan to leave the company as
well. A recent policy reform by UK telecoms regulator being Ofcom announced a three times
hike in license fees paid by mobile operators which may impact the overall costing of Vodafone
in a negative manner (Martin, 2015). The government has also placed stringent regulations on
account of limitations in frequency and usage of spectrum. The policies with respect to network
access facilities like Base Transmitter Stations (BTS) is also required to be taken care by the
company (Arora and et.al., 2017).
Economic - Statistics suggest that in terms of GDP growth, UK has grown at a faster rate in last
three months of 2017 in spite of Brexit crisis. Hence it is a win situation for the company as there
will be no decrease in sales figures. However the disposable income in the hands of people is the
lowest since 1970s which is not a positive sign for Vodafone (Bruce, 2017). The economic
factors of UK such as recession, tax and interest rate etc. also affect the operation of Vodafone as
it is a high investment business and a large amount of resource is required to be dedicated for
upgrading of infrastructure.
3

Technology - Vodafone is required to be in tune with technology by improving infrastructure
facilities as well as tackling the issues related to poor signal and coverage. This is likely to add
huge cost for the company in the coming times. On a positive front, Vodafone has always
followed the latest trends in technology and has been able to woo people towards its services
which are a good sign (Al-Debei, Al-Lozi and Al-Hujran, 2015). Other than this, technology is
also being followed in mobile for instance invention of iPhone, android as well as Symbian
architectures has put an impact on the use of older generation phones thereby prompting the
manufacturers to adapt with new technology.
Social – the operations of Vodafone within UK are most likely to get benefit in the coming years.
This is as 92 percent of the adults will have a smartphone in the next five years (Beynon‐Davies,
Jones and White, 2016).
Environmental – Consumers in present times favor those brands that are socially responsible and
work for overall betterment of society. This is required to be adhered by Vodafone in all possible
accords.
Legal – Vodafone has been facing many legal issues that have affected the overall image of the
company. These are in form of fine of 4.6 million pounds by Ofcom for not handling consumer
complaints and providing poor services; providing inaccurate bills to consumers; issue of
disconnected phone call as well as overcharging for upgrades. These are required to be rectified
by the company soon if it is able to maintain its overall sustainability in UK telecom market
(Clarke, Li, and Xu, 2016). There is also a regulation with respect to prohibiting the use of
mobile phones will driving which puts an impact on network usage thereby affecting the revenue
figures of Vodafone within UK.
Environment – Vodafone is required to adhere with recycling aspect during the process of
product manufacturing. The company has thus adopted phone recycling program by which it
collects used handsets (Menychtas and et.al., 2014).
Task 1.2 Ansoff’s growth vector matrix to analyze the organization’s strategic positioning
The overall strategic positioning of Vodafone in UK market can be analyzed through use of
Ansoff matrix.
4

Market penetration
Making wider and deeper mobile network
coverage within UK.
Encouraging data adoption and making
pricing adjustments for the consumers
(Rashidirad and et.al., 2017).
Enhancing consumer support; online
services as well as increased retail
presence.
Marketing of a balanced portfolio that is
inclusive of smart phones and connected
devices with all the leading brands present
in UK market (Sujata, Jayendran and
Rohit, 2015).
Promotion of Vodafone smart phones that
have attractive pricing feature.
Product development
Introduction of 4g technology.
Providing consumers with integrated
communication solutions such as SoHo;
Vodafone One net among others.
Introduction of modern and easy payment
methods.
Launch of microsite (Vodafone labs) to
depict the technological innovations and
acting as a platform to attract new talent
(Zhang, Zhou and Zu, 2015).
Market development
Establishment of a new hub in London for
its product/service innovation and
development activity.
Diversification
Provision of new services in the form of
machine to machine facility; smart
metering; push mobile advertising and 3rd
party billing.
Entering into partnership with Microsoft;
Samsung and HTC
Task 2 The internal environment and organization capabilities
2.1 Explain what strategic capability means
Strategic capability is all about the ability of business to employ competitive strategies for its
survival and bringing an increasing in its value over the course of time. Emphasis here is on the
assets, resources, position in market among others. It has further been regarded as an essential
component to remain financially competent in spite of the presence of many competitors all over
5

the market (Kehoe and Mateer, 2015). Vodafone can make an attempt to improve the overall
track record by paying increased attention on the capabilities needed by them in order to
successfully implement the strategy. Vodafone can track not only its own strategic capabilities
but also of its competitors so as to gain a better understanding about the market in which the
company operates.
2.2 Apply the ‘VRIO/VRIN’ model to determine the strategic capabilities possessed by
Vodafone
VRIO analysis can be regarded as an analytical tool for carrying out an evaluation about the
resources possessed by the firm that give it a source of competitive advantage (Rashidirad and
et.al., 2017). There is a usage of VRIO model in order to determine the strategic capabilities
possessed by Vodafone.
 Access to capital- Vodafone has a good access to capital from its parent company being
Vodafone group which provides enough finances by which the company is able to
maintain its operational efficiency (Sharma and Sonwalkar, 2016). This is thus a valuable
capability however its competitors also have access to capital from different sources
which makes it a common one rather than rare.
 Network Capability - A lot amount of money has been invested by Vodafone in the
network thereby resulting in the creation of high speed internet and excellent coverage. It
is also true that the company has more spectrum than its competitors in UK followed by a
presence of low frequency 4G signal that assists in fast indoor internet speed
(Nevalainen, 2017). These set of capabilities are valuable for Vodafone and has put the
company much ahead of the rival firms within UK market. However it is also true that
technology can be easily imitated by the competitors which give only a temporary
competitive advantage to the company.
 Brand Equity – as per reports, the brand equity of Vodafone for the year 2018 stands out
to be 18.74 billion US dollars. Vodafone in UK is also able to benefit from the equity
which makes a lot of travelers coming to UK prefer the telecom network of Vodafone.
This makes its equity a highly valuable one, costly to imitate as well as organized to
exploit (Quinn and Kristandl, 2014).
V R (Rare) I (Costly to O(Organized
6

(Valuable) imitate) to exploit )
Resources
and
capabilities
Network
capability
Yes Yes No No
Brand equity YES Yes Yes Yes
Access to
capital
Yes No No
No
2.3 Identify the organization’s strengths and weaknesses
Strengths
On the basis of Vrio analysis for Vodafone done above, the strengths of Vodafone are those
resources and capabilities that act as a source of competitive advantage for the company. In
present case these are inclusive of high quality telecom network as well as brand value. The
company has equity interests in around 27 nations which makes it as the largest telecom provider
in the world. It has more than 50 partners in the market which ensures that the consumers enjoy
travelling in even when they are not in the home nation (Arora and et.al., 2017). This is on
account of easy access to services provided by Vodafone. Due to a diversified presence in the
word the company does not have to depend on one specific region or market for its success. It
has also holds a prominent position in the nations where its operations. For example, Vodafone
has been regarded as the most valuable brand in UK and had a brand value of 31,602 million
dollars in 2017.
Weaknesses
There has been a huge drop in the subscriber base of Vodafone all over the world including UK
market. The drop in UK market in the last four years has seen a decreasing trend.
7

The performance of Vodafone in UK has also been poor on account of brexit issue. The
presence of low disposable income as well as increasing unemployment rates in UK has made
the consumer cut on their overall mobile spending. The company is also facing high competition
from prominent operators like EE, Giff-gaff, O2, Virgin, Three and BT within the UK market
(Bruce, 2017).
Task 3 evaluate the competitiveness of UK’s telecommunications sector using Porter’s five
forces model
Porter's five force model has been regarded as a very essential technique to assess the
competitive positioning of any firm within the market. It aids in gaining an idea about the
competitive forces followed by the underlying causes by which strategies can be formulated by
the firms for the coming future (Rashidirad and et.al., 2017).
 Bargaining power of buyers- The buyers within Telecom market of UK usually follow in
two categories being individual and enterprise firms like the ones belonging to IT and
banking industry. There is a presence of increasing bargaining power of buyers due to
presence of many firms that are offering telecom services at similar rates. Moreover,
there is further a presence of alternative products such as internet based communication
which has been acting as a big threat for company. This factor has influenced the telecom
8

operators in the market as they are required to provide increased consumer choices and
reduce tariff cost followed by providing competitive offers.
 Bargaining power of suppliers- The suppliers of Vodafone in UK are inclusive of
Morpho, HMY group, Nortel etc. These have a presence of low bargaining power in
UK market as the company operates with low margins in comparison to the competitors.
As it is the leader in UK market hence the price increments can be easily absorbed by the
company from the suppliers on an easier manner than the competitors (Arora and et.al.,
2017). It has influenced the operations of Vodafone as due to low bargaining power of
suppliers the company can get a chance to increase their overall margins in the telecom
market.
 Threats of new entrants- this threat is quite low for the company on account of high
barriers to entry. Recently UK government has increased the license fee for telecom firms
by three times which cannot be afforded by new operators. Further a substantial amount
of investment is required to be done setting up the infrastructure followed by maintaining
it which is not an easy task. However it is also true that existing competition faced by
Vodafone is not less than a threat from new entrant. If a new entrant enters the market
then operations of Vodafone are influenced on account of the pricing and innovation
strategy undertaken by the firm. This may thus put a pressure on Vodafone to lower
prices and increase the cost of research and development department.
Threats of substitutes- there is a presence of good amount of substitute threat for the
company in UK market. Although there has been a decline in landline and CDMA
services but an increased presence of broad band services. There is also a presence of
their applications such as Skype; Google talk, Facebook messenger etc. that has emerged
as substitutes to mobile services offered by Vodafone. However the company has strong
buyer presence as well as effective economies of scale, hence the company does not
possesses additional cost to the consumers (Bruce, 2017). There is also an issue with
respect to spectrum availability and regulations that are there in the industry. Further
telecom industry has a rapid change in technology which is difficult for the new entrants
to cope with. The operations are influenced as the substitutes decrease the sales and profit
figures. The company is needed to increase its research and development activities so as
to meet the demand of consumers in novel ways.
9

 Rivalry within the market- Vodafone faces intense competition from the competitors
within UK such as Giff-gaff, O2, Virgin, Three and BT. This is all on account of low call
pricing charged by the rivals. This is also followed by bringing a constant innovation in
product and services that are provided to the consumers. In this regard, the best technique
to win loyalty of consumers is through creating good consumer service; focusing on
product development as well as loyalty points. This has put an influence on Vodafone as
it is needed to lower the prices which lead to decrease in profit.
Task 4 Using Bowman’s strategy clock model, analyses the strategic direction and options
available for Vodafone
Cliff Bowman has been known to develop Bowman's Strategy Clock in the year 1996. It was
based on Porter’s Generic Strategies and expands the idea given by Porter into 8 strategic options
that are available in front of the company while they try to gain an edge over the competitors
(Rashidirad and et.al., 2017).
Position 1: Low Price / Low Added Value
This is an option which can only be chosen by any company when there is no differentiated
value for the product. The consumers further perceive the product to be of low value despite
having low price. this strategy is not valuable for any company.
Position 2: Low Price
This option is available when the companies want to sell its services at low price and thus
become low cost leader. However this strategy may lead to a decreased profit margin for the
company and the need will be to generate a high sales volume. But generating good sales volume
will not be possible for company due to immense competition in the market yet it can garner the
same as consumers in UK these days are quite price sensitive on account of decrease in
bargaining power.
Position 3: Hybrid
Hybrids can be defined as those firms that choose an intermediate path and offer low priced
offerings to consumers that are perceived to be of high value. If any company adopts this
strategy then it can gain a reputation of fair price products and services (Arora and et.al., 2017).
This strategy can also aid the firm to garner increased consumer loyalty.
Position 4: Differentiation
10

By this approach, a company is required to develop those products and services that offer unique
attributes to the consumers. By this it is most likely to gain a competitive advantage over the
rival firms. This strategy should lay emphasis on branding in order to assist the company in
becoming synonymous with quality as well as pricing. This will further help to generate a high
quality product that also has strong brand awareness and loyalty.
Position 5: Focused Differentiation
In this strategy, the company offers products that are perceived to be high in terms of value
against high prices. It can be adopted by those firms whose consumers are ready to buy the
offering on the basis of perceived value alone. In this regard, the products may not have real
value but consumer perception is enough to charge high prices. This strategy cannot be applied
in those markets where there is presence of intense competition in market followed by similar
kinds of product offerings (Arora and et.al., 2017). This can aid in generating high margins but
will demand for huge investment and maintenance as well.
Position 6: Increased Price and Standard Product
In this strategy a company takes a chance and simply brings an increment in the prices of product
or services. It may however not bring any increase in the value with respect to added features or
innovation. The company then enters into a win win situation if the increased price is accepted
by the consumers (Bruce, 2017). This strategy is however quite risky of the consumers are quite
informed when it comes to industry and also have a price sensitive attitude in this sector. Any
form of increase in price and that too without added benefit will led to a simple loss of market
share which cannot be afforded by the company at any cost.
Position 7: High Price / Low Value
The given strategy is best suitable in that market which has a presence of only one company that
offers products and services. This is as the monopolist firm is not required to be highly
concerned about adding value to product or services (de Reuver, Sørensen and Basole, 2017). As
if the consumer is in need of what is offered by the company then they are most likely to pay a
high price for the same. It may not apply in highly competitive sectors as there can be an
absolute loss for the company.
Position 8: Low Value / Standard Price
This strategy cannot be pursued by Vodafone as it is most likely to lose the market share.
11

Conclusion
From the above report it can be concluded that external environment of UK has been supporting
the growth of telecommunication sector of UK only up to a certain extent. This is as there is an
increase in licensing fee by the government followed by a decrease in purchasing power of the
employees which is somewhere affecting the overall working. As per the VRIO model the
internal capabilities of the firm are in form of good access to sources of capital; brand equity as
well as network capability.
12