Vodafone Business Strategy: A Comprehensive Analysis

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BUSINESS
STRATEGY
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Table of Contents
INTRODUCTION........................................................................................................................3
LO1........................................................................................................................................... 4
LO2........................................................................................................................................... 8
LO3......................................................................................................................................... 13
LO4......................................................................................................................................... 16
CONCLUSION.......................................................................................................................... 21
REFERENCES........................................................................................................................... 22
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INTRODUCTION
Business strategy is a set of decisions that helps the business organization to achieve its
objectives through various strategic tools. This assignment is based on the business strategy
for a telecommunication company "Vodafone". Business strategy is used by the
management to gain a competitive advantage over the rivals and new entrants. In the
beginning, this assignment will include the external environment analysis of Vodafone what
are the major influences to the operations of the Vodafone, then to analyses, the strategic
capabilities of the Vodafone VRIO model will be used, this will also help in evaluating the
own weakness and strengths of Vodafone. For analyzing the competitive edge of Vodafone
from its competitor's porters five force model will be done and strategies will be made to
improve the position of Vodafone in the consumer market.
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LO1
APPLICATION OF APPROPRIATE FRAMEWORK FOR ANALYSING THE MACRO
ENVIRONMENT FOR VODAFONE
Vodafone is a multinational brand for mobile networks or telecommunications and has
started its first mobile network on 1 January 1985, in the UK. There are now 500 million
customers of Vodafone all over the world including its presence in America, Africa, Europe,
Middle East and the Asia Pacific through different types of ventures like joint ventures,
subsidiaries, associate undertaking and percentage investments.
Business strategy includes the future and prospective plans of the company for surviving in
the competitive market and to face the challenges of the changing environment. Business
strategy is a comprehensive strategic plan that is used by the management of the company
to secure its position in the consumer market, to successfully continue its business
operations, to attract and delight the customers with its services and to achieve the
business objectives of the business.
VISION - The vision of Vodafone is to help in transforming societies, improves lives and to
contribute to sustainable development through its products and services.
MISSION - Vodafone's mission is to deliver connectivity and innovative services to 434
million customers worldwide with a contribution to sustainable development.
OBJECTIVES –
The aim of Vodafone is to enrich the lives of its customers by providing unique
communication networks for mobile and other business purposes.
PESTLE ANALYSIS
Pestle analysis of Vodafone group is done to analyze the factors affecting the business
environment of Vodafone these factors are macro-environmental factors that are the
biggest influencers to Vodafone’s operations and its management. These factors are
political, economic, social, technological, legal and environmental factors (Tepetam, 2014).
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Political-The political factor in the pestle analysis is having a great impact on the profitability
of the Vodafone group. Since Vodafone is present in more than one country and so it has to
face the political challenges of many countries at the same time. For achieving success over
Political factors of the country Vodafone wants to enter, Vodafone has to closely evaluate
the below factors –
 Risk of military invasion in the country
 Political stability and is the country developing, developed or underdeveloped and
then accordingly their technological advancement can be determined
 Level of corruption, especially in getting a license of telecom industry
 The intellectual property rights laws of the country
 The trading partners that are favoured the most or the monopoly company in the
country in the telecom sector
 Taxation policies in the telecommunication sector
 Trade and tariff related policies of the country in the telecommunication industry
 Industrial safety laws and regulations including employability laws of the country
especially for telecommunication companies (Tepetam, 2014).
Economical factor – There are various country wise economic factors that affect the
business of the company in which it operates, these factors include inflation rate, foreign
exchange rate, and economic phase of the country etc. since the telecommunication
company Vodafone would require a large capital so it has to take loans at the rates
prevailing in the country so if these rates of inflation, interest rates are favourable then only
the profits of the company can be maximized. To perform business in the country its
government intervention policy needs to analyze thoroughly. The aggregate demand and
aggregate supply of the country need to be determined, exchange rates of the host country,
employment scenario, level of skilled worked force for the telecom industry, cost of hiring
labour, productivity ratio etc. These components come under economic factor that
influences the cost and profitability of Vodafone (Tepetam, 2014).
Social factor- The cultural values, society's social behaviour affects the consumer behaviour
of every country. Social beliefs and cultural attitudes affect the business of Vodafone Group
Plc. This factor includes; skilled population level, demographics of the country, income and
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class structure of the population, education and literacy levels of the population, the culture
of gender differences and scope of entrepreneurship in the country. Vodafone has to cover
all these factors to gain the customer base in the country it wants to penetrate (Tepetam,
2014).
Technological factor- As Vodafone is technology-based, Service Company so it has to
determine the technological level of the company, whether the country uses 4Gebneration
or 5th generation network services is the company fully advanced or is a developing country.
What is the impact of technology on the product that is offered by the company, like online
payment system has been advanced in some countries and in some countries is not so
where the online payment system is used more than there will be required of a large range
of network towers in the country to regulate the smooth flow of network traffic ( Tepetam,
2014).
Legal factor- this the most crucial factor that affects the operations and survival of the
company in the country, the legal framework of the country to protect the intellectual
property rights, the decimation laws, antitrust laws for the telecom industry, consumer
protection laws and e-commerce policies. The country has its own FDI policies that will
decide the business model of Vodafone in that country (Tepetam, 2014).
Environmental factor- These factors are the natural uncontrollable factors that are caused
by nature and for these only preparations can be done, these factors should be considered
at the time of doing business in different countries. Vodafone should consider factors like-
weather, climate change, air and water pollution laws of the country, recycling waste
management technology etc. , in some countries, there are different laws for environment
and liability laws which are also to be considered (Tepetam, 2014).
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CRITICAL ANALYSIS OF THE MACRO ENVIRONMENT TO DETERMINE AND INFORM
STRATEGIC MANAGEMENT DECISIONS
If Vodafone needs to identify the strategic direction it needs to perform strategic tool of
Ansoff matrix-
PRODUCT
EXISTING NEW
Market penetration Product development
Market development Diversification
Market penetration- market penetration is done to launch an existing product in the existing
market but in a different way to attract the customers and to increase the market share.
This can be done by reducing the prices of services offered or changing the promotion
technique. Vodafone's zo-zo advertisement has helped them in gaining customer attention.
This strategy is the least risky and best for the telecommunication sector (Zeschky et al.,
2014).
Product development- This means using the existing market but modifying the product or
launching a new product. Vodafone is planning to launch its 5th generation network services
in the UK; it has been planning and preparing for high-speed network data in the UK market.
Vodafone is planning to use optic fibre for providing high-speed data services and hence this
is a whole new product in Vodafone's list of the portfolio (Zeschky et al., 2014).
Market development – This segment involves launching the existing product in the new
market. Vodafone has launched its 4G services in the Indian market as the services of 4G are
common but Vodafone hasn't launched the same in India (Zeschky et al., 2014).
Diversification- This strategic direction is based on launching a new product in the new
market. This strategy is used to bring diversification in the portfolio of Vodafone. This
strategy involves high risk as the market is new and the product is also new. If Vodafone
expands in say mobile phones or in airlines than it will be called diversification (Zeschky et
al., 2014).
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EXISTING
NEW
M
A
R
K
E
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LO2
USING APPROPRIATE FRAMEWORK ANALYSIS OF INTERNAL ENVIRONMENT AND
CAPABILITIES OF VODAFONE
The business strategies of organizations are made from the combination of both external
environmental factors and internal factors. The external factors are analyzed through
PESTLE analysis but to gain the knowledge of internal analysis the tool used is strategic
capabilities. Strategic capabilities are the Vodafone’s resources including human and non-
human capital resources in order to survive in the market and to increase its market value.
Strategic capabilities of the company can be assessed by specific tools like benchmarking,
SWOT analysis, and value chain analysis.
The physical assets include the plant, machinery, furniture people all the tangible assets
including the non-tangible assets like intellectual property, knowledge, information etc. The
physical assets of Vodafone have been majorly the towers and big plants that provide the
network. Vodafone has huge capital investment in the intellectual property which is also
included in its physical goods. Vodafone’s physical property is good as compared to its
competitors (Sparrow et al., 2010)
Financial assets of the company include the balance sheets, cash flow statements and
income statements. On the basis of these financial statements the ratios of Vodafone will be
calculated, these ratios help in analyzing the financial health of the company. The financial
health of Vodafone is above satisfactory as it has generated high profits this year and these
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profits are much higher than the previous year profits. This shows the growth of the
company. Vodafone’s assets are capable to fulfil the liabilities of the company (Sparrow et
al., 2010).
Human capital includes skilled and experienced workforce that is motivated to work for the
organization in a productive and efficient way. The workforce of Vodafone is very
experienced and qualified and Vodafone's workforce is dedicated and committed to the
organization. They have been performing excellently in terms of innovation and creativity.
Vodafone has low employee turnover which creates a competitive advantage for Vodafone
(Sparrow et al., 2010).
The capabilities of Vodafone can also be assessed by VRIO model; this model is a tool to
analyze the internal capabilities of the company. This model was initiated by Jay Barney, this
framework model is a combination of 4 factors i.e. Valuable, rare, costly to imitate and
organized to capture value (Sparrow et al., 2010).
Valuable – This means that Vodafone has to create the valuable opportunities for itself and
creates values for its customers and simultaneously minimizing the threats, Vodafone have
valuable coverage of 4G networks and they have been into creating high-end technologies
for 5G.Vodafone has its valuable resources of patents, its employees as they are retained by
Vodafone, they are very trained and are qualitatively important for Vodafone (Sparrow et
al., 2010).
Rare- The model and framework strategies of the Vodafone are rare as the financial
statement is so strong and is rare to achieve these higher profits in the world. The patents
Possessed by the Vodafone are not available with the new entrants (Sparrow et al., 2010).
Imitable- The resources of Vodafone should be so tough to be imitated by the other
competitors or new entrants. The research projects and the innovative models by Vodafone
are very complex and highly unique (Sparrow et al., 2010).
Organized to capture the value- The healthy financial resources are the proof that Vodafone
has a good organizational structure that has created value for its employees, the high
dividend ratios depict that the company has also created value for all its shareholders
(Sparrow et al., 2010).
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CRITICAL ANALYSIS OF THE INTERNAL ENVIRONMENT TO ASSES STRENGTHS AND
WEAKNESSES OF VODAFONE'S INTERNAL CAPABILITIES STRUCTURE AND SKILL SET
Every company has some inner strengths and weakness that affects its decision making so
Vodafone also has some strengths and weakness.
Strengths and weakness
Strengths
Large market coverage
Huge revenues and profits
Good brand image
Large subscriber base
Highly skilled workforce
Sustainability development
WEAKNESS
Losing market share
Poor quality of service performance
Decreasing brand valuation
Limited success outside the core business
No brand diversification
Strengths –
 Vodafone has a huge market share in the world with a presence in almost every part
of the world. As defined by Forbes magazine Vodafone is performing very well in the
world top 2000 brands. The subscriber base in India is the 2nd largest of Vodafone
and also is the world's second largest telecommunication company.
 Vodafone group has huge profits and recurring increasing revenues around the
world. The rate of profits has been increased in every quarter.
 Vodafone's brand image and goodwill are very positive and this is because Vodafone
is less focused on profits and is more focused on the customer satisfaction, providing
low priced services to the customers, also aims at changing lives of people for a
better tomorrow and also providing them various facilities through network
communications.
 Vodafone has a very large and significant subscriber base in the world and has 343
billion loyal consumers all over the world.
 Vodafone is in this business since 1985 and so it has highly qualified personnel and
highly experienced human force that are loyal and efficient in their performances,
these employees are creative and great innovators. These employees are
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trustworthy and committed to Vodafone, they are self-motivated as they get proper
appreciation and rewards from the company.
 Vodafone ensures sustainable development in the environment and simultaneously
preserving the natural resources in both mediums of contributing to special groups
through CSR and increasing technological levels and minimizing the carbon emission
in the environment, this increases the goodwill of the company and its brand value
in the eyes of its customer (Sammut Bonnici, 2015)‐ .
Weakness-
 The company is losing its market share, especially in the Asian market because of big
competitors who have managed to create a monopoly in their region.
 Vodafone is not highly successful in integrating with other companies of a different
culture, as large companies Vodafone tried to merge or acquire the small companies
but failed in maintain those mergers.
 Decreasing brand valuation of Vodafone in some countries due to its low customer
satisfaction and network issues is observed as a big weakness of Vodafone since the
company aims at providing high-quality services to the customers and lacking in the
same department so this can create negative goodwill of the company.
 Vodafone has limited or slow growth outside the UK, it is performing good in some
countries but is unable to achieve the best company recognition or the largest share
in the different countries.
 Vodafone have no brand diversification i.e. its investment in other industries is nil,
although it has an expanded portfolio of business network, mobile networks,
broadband etc. but it hasn't diversified itself in the new product category apart from
telecommunications (Sammut Bonnici, 2015)‐ .
The strengths are to be further developed in order to grab the external opportunities of the
company and these strengths can also be used to overcome the weaknesses of the
company. The company has to gain an innovative approach to gain a competitive advantage
and to survive in a highly competitive market with big rivalries and innovative new entrants.
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FIGURE 1 INCOME STATEMENT OF VODAFONE GROUP
Source- Vodafone, 2019
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