Vodafone's Global Marketing Strategies: A Case Study

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Global Marketing
Global Marketing Report

EXECUTIVE SUMMARY
The report considers the Global Marketing practices of Vodafone. It explores the
reasons for seeking new markets and entering new countries. The report also
considers Germany and South Africa, the two existing markets of Vodafone and its
entry to these markets along with the present scenarios. The report examines the
entry method of Vodafone in these markets and the approach was taken by it to
establish a presence in the new markets. The report discusses the Joint Venture
approach of entering a new market that was used by Vodafone in South Africa. It
explores the method and its merits and demerits. Lastly, the report explores the two
marketing strategies namely Integrated Marketing Communications and the product
adaptation approach using EPRG framework with examples.
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Table of Contents
COMPANY OVERVIEW..............................................................................................3
REASONS FOR ENTERING NEW MARKETS...........................................................4
OPERATION OF VODAFONE IN GERMANY AND SOUTH AFRICA........................6
ENTRY METHOD OF VODAFONE IN SOUTH AFRICA............................................7
MARKETING STRATEGIES.......................................................................................9
PRODUCT ADAPTATION.......................................................................................9
INTEGRATED MARKETING COMMUNICATIONS...............................................10
CONCLUSION.......................................................................................................... 11
REFERENCES..........................................................................................................12
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GLOBAL MARKETING REPORT
COMPANY OVERVIEW
Vodafone Group PLC is a public limited company based at Newbury, Berkshire, UK.
It is a Telecommunication Multinational Enterprise with annual revenue of £39.53
billion (Vodafone, 2019). It has a customer base of over 520 million and an employee
base of over 98900 to supports a diversified product range. The products offered by
Vodafone includes Mobile services like text, data, and voice; Fixed-line services like
voice, broadband and TV offerings; Internet of Things (IoT) services like insurance
and automotive services, managed IoT connectivity, health solutions and smart
metering; Cloud and Security services like private and public cloud services, cloud-
based products and applications to secure devices and networks; Carrier Services
like international voice and IP transit; and financial and payment services like M-
Pesa (Vodafone, 2019).
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Figure 1: Vodafone – Global Operation
Source: (Vodafone, 2019)
UK is the home market for the company where it operates as Vodafone UK and it
has a subscriber base of over 17 million and is rated the third largest mobile network
after O2 and EE. Apart from the UK, the operation of Vodafone extends to 25
countries. It serves the customer in countries like UK, South Africa, India, Japan,
Kuwait, Qatar, and Japan (Vodafone, 2019).
Figure 2: Vodafone Social Media Performance
Source: (Talkwalker, 2019)
.
REASONS FOR ENTERING NEW MARKETS
There can be several reasons for a company like Vodafone to seek and enter new
markets. The factors that can become the reason for such a decision include
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focussing on enhancing the customer base, revenue generation, opportunities for
investment, economies of scale, cost reduction, and access to new talent (Gillespie,
2015).
ENHANCING THE PROFIT MARGINS
One of the primary reasons for the new market entry of businesses is the focus on
improving the profit margins. Vodafone's Ireland operation has been the most
successful and profitable. The company was able to gain a better profit margin in its
Ireland operations through its subsidiary Vodafone Ireland Limited (Gillespie, 2015;
Vodafone, 2019). It went on to become the largest operator of mobile phone in the
country. The company has benefitted from earning significant margins in the country
that's much higher than other European Country. This can be attributed to the
monopoly of Vodafone Ireland and O2 allowing them to charge their services at a
much higher rate than any other country. Currently, Vodafone Ireland has a
customer base of 2.4 million and its service revenue grew by 1.3% (Gillespie, 2015;
Vodafone, 2019).
DIVERSIFYING THE BUSINESS
The entry to a new market allows the company like Vodafone to spread the risk of
stagnating demand allowing it to gain from the suppliers of the country in terms of
raw materials and resources. Vodafone has a different product bouquet in different
regions. For example, Vodafone offers mobile and fixed-line services in 11 European
Countries out of 13 European companies while its M-Pesa services are operating
outside Europe (Gillespie, 2015; Vodafone, 2019).
ACCESSING UNTAPPED MARKETS
This is one of the major goals of companies seeking new markets and entering a
new market. The biggest customer base of Vodafone is India with over 300 million
customers. It has collaborated through a merger with Aditya Birla Group in India to
launch the largest mobile services provider with over 400 million customers
(Gillespie, 2015; Vodafone, 2019).
TAX BENEFITS
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The difference in the tax structure of different countries can also be considered to be
a motivating factor for large scale companies like Vodafone. For example, there is a
difference in corporate taxation in various European Countries. The Company tax
rate in Germany is 15%, in the UK its 19%, and in Ireland, it is 12.5%. The varying
tax structure allows the companies to gain benefit from and enhance profits. The
developing countries like India, Brazil, South Africa, Philippines, and Turkey provide
Global Businesses investing in their country additional benefits like discounted
pricing of resources or tax benefits (Gillespie, 2015; Europa, 2019).
OPERATION OF VODAFONE IN GERMANY AND SOUTH AFRICA
Vodafone is already present in the markets of South Africa and Germany. It is
performing well in both the countries; the following table indicates the reasons for
entry in both of these countries as well as its performance in the last year
Parameter South Africa and other
African Countries
Germany
Local subsidiary/
Partner
 ‘Vodacom Group Limited’
a joint venture in
partnership with Telkom
Group.
 Vodafone has a 64.5% of
the joint venture.
Vodafone GmbH, a subsidiary
of Vodafone Group
Reasons for entry  Vodacom provided
Vodafone with an entry
point to access a
significant customer base
in Africa, starting with the
South African market.
 Vodacom accounts for a
significant customer base
in Africa.
 Untapped market space
 Lack of competition
 The company took over by
Vodafone, Mannesmann
GmbH was the only
licence holder
 The move turned out to be
highly successful.
Products being offered Voice, messaging, Converged
services and data.
IP TV, LTE, Mobile services,
fixed-line services, Cable TV
and Cable data.
Growth/decline rate Growth of 0.1%, organic
growth of 3.8%
Growth of 0.4%, organic
growth of 0.5%
Number of subscribers 110 million 29.5 million
Revenue £5.11 billion £9.3 billion
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Table 1: Comparison of the Vodafone presence in Germany with South Africa and
other African countries
Source: (Kresak et al., 2016; Vodafone, 2019)
The entry of Vodafone to Germany which later became one of the most successful
markets for the company was promoted by the untapped potential of the German
market and limited competition. The German telecom Industry was state-owned and
the Engineering Company Mannesmann GmbH was the only private player accorded
the licence (Kresak et al., 2016; Vodafone, 2019). The hostile takeover of
Mannesmann GmbH took place in 2000. The government of Germany was against
the takeover so both Vodafone and Mannesmann had to engage in a strong
promotional campaign. At that time it was considered to be the most expensive
merger. After the merger, the company was rebranded as Vodafone D2. The
German subsidiary of Vodafone has been one of the most successful takeovers and
the promotional campaign assuring that no job will be lost turned the deal in the
favour of Vodafone. Currently, the mobile services of the company have over 29
million subscribers and generate revenue of over £9 billion (Kresak et al., 2016;
Vodafone, 2019).
In South Africa, Vodafone entered as a joint venture partner of Telkom group to form
Vodacom. The objective of the company was to access the untapped African market
starting with the developed South African Market. The company gradually increased
its stake in Vodacom to over 64% (Gillwald et al., 2012; Vodafone, 2019;
Vodacom, 2019). Currently, Vodafone has a stake of over 60% in the company.
Vodacom has a subscriber base of 110 million customers across many African
countries including Tanzania, Kenya, Mozambique, and Lesotho. Vodacom posted a
change of 4.3% with revenue of over £5 billion. Vodacom provided Vodafone to base
its operation at South Africa and access the rest of Africa with a local brand
supported by the brand value of Vodafone. During the last fiscal year, Vodacom has
seen organic growth of 3.8%. Vodacom is now focused on enhancing its African
Customer base and enhance its existing market share of over 58% (Gillwald et al.,
2012; Vodafone, 2019; Vodacom, 2019).
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ENTRY METHOD OF VODAFONE IN SOUTH AFRICA
JOINT VENTURES
A Joint Venture is a collaboration between two or more business organisations that
allows them to acquire a strategic and tactical edge in the market (Harrigan, 2017).
Usually, the joint ventures are a tool that is utilised by the businesses for specific
tasks. Vodafone has utilised this strategy as an entry method to new markets. The
joint venture is initiated with a contractual arrangement between the parties of the
joint venture and is focused on a combined project or a single project. Besides this,
other reasons for formulating a joint venture include getting better exposure, merging
of resources, to handle a bigger client, to assimilate expertise, or to cut down costs
(Harrigan, 2017).
An example of such an entry method employed successfully by Vodafone is the
entry of Vodafone to South Africa. Vodafone and Telekom, African
Telecommunication Company formed the Joint venture Vodacom in the late 1990s
(Gillwald et al., 2012; Vodafone, 2019; Vodacom, 2019). After establishing the
GSM infrastructure, the company Vodacom started its operations in the year 2000.
Vodafone increased its stake from 50% to 64.5% in 2008. Vodacom adopted the
branding of Vodafone in 2011. This joint venture allowed Vodafone to enter the
African market and gain a foothold while gaining access to local exposure and
expertise. Presently, Vodacom is a highly successful company with its operations
expanded across Africa. The presence of Vodacom has expanded to Tanzania,
Lesotho, Congo, and Mozambique while operating across 32 African nations. It
provides services to over 110 million people (Gillwald et al., 2012; Vodafone,
2019; Vodacom, 2019).
JOINT VENTURES
ADVANTAGES DISADVANTAGES
The Benefit Of Insight And Expertise Of
All The Involved Parties - The parties
involved in a JV bring their insights and
expertise allowing the JV project access to
cumulative expertise and insight enhancing
the potential of success significantly.
Lack Of Equality - The JV partners handles
different aspects of the project hence there is
a lack of equality in terms of responsibilities
and roles.
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Pooling Up Of Resources - The companies
involved in the joint venture pool up their
resources hence the burden of the new
project is shared and easily borne.
Imbalance Of Investment, Assets And
Expertise - There's a potential of imbalance
in the investment, assets and expertise of
the JV partners enhancing the potential of
failure.
Sharing Of Costs And Risks - The cost of
the project is shared among the JV partners
and the potential risks associated with the
project us also shared this safeguards the
interests of the JV partners.
Cultural Differences - The JV partner may
not have to align mission and vision. This
incompatibility may impact the success
potential of the JV.
High Potential For Success - The presence
of above-mentioned aspects enhances the
potential of success of the JV.
Communication Issues - The potential
communication issues may arise from
differing goals of the JV partners.
Reduction Of Operational Cost - Various
costs like marketing and promotion costs will
be shared by the JV partners.
Joint Brand Equity - The JV benefits from
the cumulative brand equities of the JV
partners allowing it the benefit of brand
equity in spite of it being a new venture.
Table 2: Advantages and Disadvantages of Joint Ventures
Source: (Harrigan, 2017)
Examples of Joint Ventures
Some examples of joint ventures are as follows (Harrigan, 2017)
 Ford and Toyota formed a joint venture for producing hybrid trucks in 2011
 Vodafone and IBM formed a joint venture in 2019 to work on cloud products.
 Stagecoach and Virgin Rail formed a joint venture West Coast.
 NASA and Google worked together to create Google Earth.
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MARKETING STRATEGIES
PRODUCT ADAPTATION
The EPRG framework was proposed by Wind, Douglas, and Perlmutter. It focuses
on strategic decision making of a company and building and managing the
relationship between its subsidiaries and headquarters (Richter, 2012). The
companies with Ethnocentric Orientation hardly adapt their products and believe in
the superiority of their home country. Their focus remains on seeking market familiar
to their home country and the head office remains superior to other subsidiaries. An
example of such a company is Nissan in its early years of operation in the US. The
company failed to consider the local weather conditions in designing their cars and
trucks (Richter, 2012). The companies with Regiocentric Orientation design and use
strategies after analysing the differences and similarities between the home market
and other markets thereby developing strategies focused on regions. For example,
Coca Cola utilises a similar approach in India, Bangladesh and Pakistan (Richter,
2012). A company with Geocentric Orientation work towards developing global
strategies for every market including the home market. For example, Microsoft
produces global products that are marketed across the globe (Richter, 2012). A
company with Polycentric Orientation consider every market unique and try to
replicate the local approach of doing business. For example, McDonald's avoid beef
products in India (Richter, 2012).
Nissan in its first year of operation in the US was using the Ethnocentric Orientation
(Lundskow et al., 2019). As per this approach, the company was focusing on their
home country and did not consider the local US condition and factors like
environmental, economic and political. The weather condition of the US and Japan,
the home country of Nissan was entirely different. The weather became extremely
cold in the US whereas Japan did not get this cold. Due to this, the company
exported its vehicles to the US without any changes that led to starting issues during
the cold weather. The vehicles were unable to start in the cold climate of the US.
This led to financial loss and the Nissan Brand suffered (Lundskow et al., 2019).
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INTEGRATED MARKETING COMMUNICATIONS
IMC - the IMC or Integrated Marketing Communication can be defined as a
promotional, collaborative, and strategic marketing function that focuses on
combining various communication disciplines to generate clear, consistent, and
maximum communication impact (Yeshin, 2012). It involves identification of the
different methods of marketing communication such as social media marketing and
content marketing; development of a marketing communication program on the basis
of audience, content, and cadence; comprehending the buyer decision making the
process of the target customers; and lastly the implementation of the devised
communication plan of marketing (Yeshin, 2012). This step allows the development
of customer-focused marketing communications that influence the buyer decision-
making process and provides a competitive advantage to the company. The
AnyWare campaign of Dominos, a chain of pizza restaurants is an effective example
of IMC strategy (Shaw, 2015). This allows the customers of Dominos to order
through a variety of methods such as tweets, smart watches, text, smart TVs, etc.
For this, the company created pizza profiles for two years that included details like
easy order, payment information and address of its customers. Easy order is the
name of the most ordered food orders of the customer. The marketing campaign
involved the use of print media, TV and social media to promote the AnyWare
campaign contributing to its success.
CONCLUSION
It can be surmised that Vodafone sought new markets to overcome the stagnation of
its existing markets and access new customers while benefitting from the tax
differences and gaining profitability. The entry approach utilised by Vodafone,
takeover in Germany and Joint Venture in South Africa were both successful in
establishing it strongly while allowing it to fulfil its strategic goals. The joint venture
approach has both its merits and demerits but it turned out to be beneficial for
Vodafone due to its study of the target market and seeking partners with similar
vision. Product adaptation and IMC are both effective global marketing strategies
that allow companies to gain a customer base and market share (Shaw, 2015).
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