Vodafone's Joint Venture Strategy in Romania: Impact on Profitability

This research project examines Vodafone's strategic use of joint ventures as an entry mode into the Romanian market and its subsequent impact on profitability. The project begins with an abstract outlining the scope of globalization's influence on business expansion, particularly emphasizing joint ventures as an effective international market entry strategy. It includes an introduction to the research topic, followed by a comprehensive literature review exploring the concepts and importance of joint ventures and their impact on profitability, as well as other entry modes. The research methodology outlines the methods used for data collection, including primary and secondary research. The data collection and interpretation chapter presents findings based on questionnaires and other data-gathering techniques. The research then analyzes the collected data, focusing on the research objectives and questions. The project also provides recommendations for Vodafone, along with a conclusion that summarizes the key findings and implications of the research. The project highlights the benefits of joint ventures, such as access to new expertise, resources, and the potential to reduce competition and costs. The research also acknowledges potential negative impacts, such as inflexibility and cultural differences, which may affect the success of the joint venture. Overall, the project aims to assess the effectiveness of joint ventures in enhancing Vodafone's profitability in the Romanian market.

Research
Project

ABSTRACT
Globalisation help an organisation in expansion of its business activities such as
marketing, human resource, operations etc. For entering into international market, there are
different number of entry modes available such as joint venture, strategic alliance, exporting,
franchising, licensing etc. All these are essential but for expanding business activity in
international market, Joint venture is considered as best and effective strategy. For completing
current research, various activities like introduction, literature review, research methodology,
data collection, analysis, recommendation and conclusion have been discussed that will help in
making whole research more successful. Along with this, the part of literature review has been
don thorough secondary research method and research methodology is includes various methods
that will be applied by investigator to gather data and information. Furthermore, data analysis
and collection is based on research objectives that includes different questionnaire asked from
respondents to understand their view points. Apart from this, recommendation and conclusion
will include necessary areas for better improvement.

Table of Contents
ABSTRACT ....................................................................................................................................3
TITLE..............................................................................................................................................1
CHAPTER 1: INTRODUCTION ...................................................................................................1
CHAPTER 2: LITERATURE REVIEW.........................................................................................3
Globalisation...............................................................................................................................6
Other entry modes.......................................................................................................................7
CHAPTER 3: RESEARCH METHODDOLOGY..........................................................................7
CHAPTER 4: DATA COLLECTION AND INTERPRETATION .............................................10
CHAPTER 4: REFLECTION, CONCLUSION AND RECOMMENDATION...........................22
REFLECTION...............................................................................................................................22
RECOMMENDATION ................................................................................................................23
CONCLUSION .............................................................................................................................24
REFERENCES .............................................................................................................................25

TITLE
“Vodafone using joint venture as entry strategy into the Romania market and impact on
its profitability”
CHAPTER 1: INTRODUCTION
Background of the research
Joint venture is considered as a new business enterprise that is developed from two or
more companies in order to enhance their business performance and expand their operation at
new market place. Business organisations are now a days emphasising on enhancing their
business by expanding it at international marketplace. Globalisation refers as an effective process
used by multinational organisation for integrating and interacting among people, governments
and companies worldwide. It is the spread of technology, goods, information and jobs across
national cultures and boundaries. This defined as an essential process because it can increase the
standard of living in less developed nations by giving job opportunity, modernization and
enhanced access to products and services (Beamish, 2013). For this, they prefer to adopt various
kind of entry mode which makes it easier for them to enter into international market scale. Some
of the common and influential entry modes are Licensing- It is an official permission, permit
something. License can be granted through one party to another as a components of agreed
among those parties. It is a kind of transfer- related market strategy. It consists firm to granting
the permission to firm in other country to use intellectual property for defined period of time.
Franchising- It is form of business through which owner of service, method and product obtain
distribution by the affiliated dealers. Joint Venture It is cooperation enterprise entered in to
through two or more than business entity for purpose of particular project and some other
business activities. The main reason of joint venture is related to attaining the specific objectives.
Export: In this business organisation exports its products in another country for grabbing
attention of customers improvising its sales as well as profitability. All of these strategies are
highly effective and helps companies in increasing sales of products as they are able to approach
more number of customers. This directly places impact on the profitability of the company which
also contributes in improvement in market share. Along with this, Vodafone decide to expand
their business activity in Romania with Telekon Romania, joint venture is more effective and
useful strategy for them. There are different benefits for Vodafone for using joint venture such
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as new insights and expertise, better resources, not require more time and cost etc. Thus, all these
are major benefits of joint venture which will support an organisation by improving its
profitability and growth at international market such as Romania.
A joint venture introduces as a business arrangement in which there is two and more than
that companies are agree to pool resources for the motive of achieving a particular task. Joint
venture is a best entry mode strategy, in which each participants is liable for losses, profits and
cost associated with it. Along with this, parties enter into joint venture agreement in order to pool
strengths and maximise competitive benefit while reducing risk (Abd-Karim and et. al., 2014).
An international joint venture occurs when two organisations based in two or more nations from
a partnership. An enterprise which needs to explore global trade without taking any
responsibilities or duties of cross boundary business transactions has better choice of forming a
joint venture with an international partner. For this report, Vodafone is a chosen
telecommunication organisation which was founded in 1982 by Nick Jeffery. Company wants to
expand their business activity by using joint venture with Telekon Romania. It is a
telecommunication company in Romania which was founded in 1930. Joint venture is most
essential strategy because it provides a better chance for an organisation to save time and money
in marketing, operation and advertising costs.
Research Aim
“Vodafone using joint venture as entry strategy into the Romanian market and impact on
its profitability”.
Research Objectives
 To review literature on joint venture and profitability.
 To carry out primary study on joint venture and profitability To recommend how Vodafone can use joint venture to increase profitability.
Research Questions Is joint venture the right strategy to increase profitability?
Rational of the research
The main purpose of this investigation is to analyse that whether joint venture is the right
strategy for Vodafone in order to increase their profitability at international market place. For
understanding effectiveness of this strategy, both the literature review as well as primary
methodology of data collection will going to be used so that desired information can be gathered
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on the selected topic. Along with this, it will also help in acquiring feasible results on the study
too which will provide appropriate guidance to the company.
CHAPTER 2: LITERATURE REVIEW
A literature review refers as a comprehensive and detail information of previous study on
a specific topic. It is a most important part of research project which will support a researcher to
address all objectives and questions of research in more effective manner (Butković, Bošković
and Katavić, 2014). Main intent of literature review section is to investigate the conflict as well
as gaps in previous study. In this, different authors provide their view point about the topic which
will support an investigator to analyse important and issue of research.
Concept and Importance of Joint venture and profitability
According to the Johnston and Rudyak, (2017) it has been stated that joint venture
considered as the arrangement of business in which two or more than two different parties are
accept to pool their resources for aim of attaining particular objectives. Under this, each
participant is responsible for losses, costs and profits related with this. Venture is own entity that
is separated from other business interest of participants. It can be with firm of similar sector or
some other sector but with combination of both they will generate the competitive benefit as
comparison to other players at market place. In addition to this, joint venture cab be flexible that
can be in regards to needs of business. An arrangement among firms should have terms and
conditions in detailed with respect to activities which will be carried through them. In context
with Vodafone which is a UK based multinational telecommunication firm has decided to adopt
the joint venture as a strategy with the IBM in order to pursue solutions in variety of developing
technology industry. With this assistance, being a mobile phone network operator, through joint
venture strategy, Vodafone gain a number of opportunities to work in collaboration with IBM
and expand its business easily over market area of Romania, in following way –
New sights and expertise- Under this, starting joint venture in Romania gives better
opportunities to Vodafone business to gain the new insights as well as expertise. It is helpful for
company to understand the market and provide the short term partnership which have forged. As
it is also may provide support to business organization in opportunities to expand their business
activities with innovative ways. This will contribute in establishing positive and competitive
advantage from its rivals.
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Intellectual property gains- For business, advanced technology is complex for business
in order to develop in- house. The companies enter in to the joint ventures with advanced
technologies for gain access to assets without having spent money and time to create assets for
themselves in- house. As Vodafone is a large size organisation and with better access to
financing that may be contribute working capital strength of the joint venture with company that
has limited financing capabilities but it gives key technology fort sales as well as development of
services or products.
Better resources: It is also an effective that forming a joint venture in Romania will
provide access to better resources like specialised staff and technology as well. In this regards,
all the equipment and capital is also helpful in providing better access to establishing their
competitive brand image at market place. Furthermore, better consumption of resources also
contribute in enhancing the positive brand image at global market place by operating their
business.
Barriers to competition- The main importance of joint venture is to avoid competition
and the costing pressure. With the help of collaborating with some other companies in Romania,
Vodafone can reduce erect barriers for rivals that can make this complex for them to penetrate
marketplace.
Synergy benefits- Under this, joint venture can provide similar kind of synergy
advantages which organisations look for in the mergers and acquisitions. It can be financial
synergy and operational synergy. The financial synergy minimizes cost of capital and on the
other hand in operational synergy, two organisations working together and enhance efficiency of
business operations.
In joint venture, as new company is to be formed to attain particular aim of partnership
such as temporary arrangement among two or more than two forms (MARKET ENTRY
STRATEGIES, 2018). Therefore, joint venture is beneficial as risk minimizing mechanism in the
new- market penetration, pooling of the resource for big project. It may be investing in new
business operations or include sharing the assets for combined advantages to both involved
parties. In addition to this, most common joint ventures consist use of assets in a proper and
effective manner. According to the Majocchi, Mayrhofer and Camps, (2013) Joint venture refers
to business arrangement under which two or more than two different parties agree to be pool
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resources for an objective of attaining particular activities in a better manner. In this regard,
adopting the joint venture for expanding business in Romania market, can impact directly on
profitability and growth of Vodafone both in negative and positive way, as described below -
Positive impact
Under this, starting joint venture gives opportunities to Vodafone for gaining new
insights as well as experience. In this regard, it is easy for this company to realize the short-term
partnership that you have beat. Forming joint venture with provide access to better resources for
an instance specialized staff members and technology. On the other, equipment’s as well as
capital which business needed for project can be used in a better manner.
Negative impact of Joint Venture
In this, there are many times when the flexibility is respected in joint venture when it
happens. So, Vodafone has to emphasis on joint ventures and single business which can go
through in process. Due to the different forms are working together there is a great imbalance of
assets investment as well as expertise. It can have negative effect on effectiveness of joint
venture. Under this, place of culture as well as management styles may result in the poor
integration and cooperation. People within respective organization have different taste
differences and bliss which can get in big time if they can check. Opportunity which is limited id
common for the joint venture contract to restrict the all outside activities of companies while
working on joint venture project. On the other hand, business needs to make sure that it should
understand getting into if it does not want to negative impact on its business.
According to Mary, (2018), forming a joint venture is one of the important and common
business strategy that used by company with the aim of attaining all the set goals and objectives
in specific consumer market. By entering into a joint venture includes two or more business
comes together in a contractual agreement to work together for a specified period of time. It
positively impacts on the organizational activities by increasing its profitability level. Mainly it is
also considered as an attractive option for business in which they share their resources and
responsibilities that may help them in enhancing the chances of attaining positive and higher
growth level. Along with this, it also increased flexibility among both companies through which
company easily enter into new market and established their competitive image as well. One the
other hand, sharing business risk is also considered as a benefit associated with joint venture.
With the help of this, company easily improve their profitability level at global market place.
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Some ways through which negative impact of joint venture can be overcome
As per the point of view of Valerie Demont and Soumya Sharma (2016), it has been
analyzed that as organisations are rightly concerned on enhancing their performance within the
market place through rendering suitable products and services to the customers, so they are going
to adopt the concept of joint venture for expansion of business in other market. But apart from
various benefits, as it includes a number of risks therefore, companies like Vodafone need to
concern on reducing the same as well (How to Reduce International Joint Venture Risk. 2016).
Since, Vodafone is the large business organisation which operates in telecommunication phone
and supplies its services at global level for attainment of better company has decided to make
joint venture with IBM to expand business in Romania market. In this regard, respective
company needs to analyse factors that may cause joint venture business to fail. It includes lack of
common vision on exit or entry strategy, cultural difference, complex regulations and more. But
apart from these, the major factor that may cause the failure of Vodafone strategy i.e. expanding
business in Romania market by joint venture is complex business environment of this nation.
Therefore, it is essential to understand the external factors that help in developing better
strategies like make entry in business via IP licensing agreement, in order to facilitate the
exclusive use of joint venture.
PESTLE Analysis
PESTLE analysis is considered as an effective framework that helps in understanding
macro environment deeply so that its influence over the business can be profound. With
reference to the current given study, Pestle analysis has been conducted in order to understand
that whether Vodafone should enter into Romania with joint venture strategy or not for
enhancing their profitability. All factors of PESTLE are described in context of Vodafone as
below:
Political factors: The political state of Romania is acknowledged to be stable as it is
governed by the European Directives. This will aid the respective entity to expand by making use
of Joint Venture strategy to feasibly gain access to Romanian markets and facilitate increment of
sales and profitability.
Economic factors: The economic conditions of Romania are strong enough to support
the growth of Vodafone. The economy of this country is equipped with excellent infrastructural
facilities, communication, electricity supplies, logistics, delivery channels.
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Social factors: Romania is home to a number of languages, traditions and practices. This
will aid Vodafone to carry out expansion in its confines and conduct business operations in an
effective manner.
Technological factors: Romania is a country that is equipped with latest and emerging
technological resources. These are effective enough to provide aid to Vodafone in making use of
Joint Venture to expand within Romania.
Legal factors: It is essential for Vodafone to abide by the legislations of IP Licensing
Agreement so as to effectively carry out expansion within the confines of Romania.
Environmental factor: Acting in the interest of nature or environment has become
essential for all the companies operating across the globe. This is so because customers have now
become aware and prefer organisation which adopt eco-friendly practices. Vodafone is required
to take this into account while expanding its operations in the new country.
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CHAPTER 3: RESEARCH METHODDOLOGY
Research methodology is more significant and essential process used by researcher to
collect right data and information of the study. There are different methods of primary and
secondary research, some of them are analysed as under:
Research philosophy: This area of research is basically classified into two parts such as
interpretivism and positivism. In the current investigation, researcher have used positivism
research philosophy has been used by investigator as it helps them in interpreting overall
information with appropriate reasons and logic gathered from all sources.
Research Approach: in this two approach of research namely, inductive and deductive.
Those approaches are known as the best method but according to the topic, deductive approach is
used. This is because, deductive research approach follows logic and reason which are developed
on the basis of existing theories and information. Usage of this approach helps them in
developing new hypothesis which is further tested with the help of research strategy so that risk
can be avoided.
Research Choice: For selecting research, there are basic two choices for researcher such a
qualitative and quantitative. Both type of research are important bur according to the study,
quantitative research is considered as the good choice for researcher (Gatejel, 2017). As it assist
a researcher to accumulate accurate and quality information about the topic. On the other side,
there is quantitative research which is not appropriate according to the topic. As it required
information in form of facts and numbers.
Time Horizon: It is most important part of research which will support to an investigator
to analyse starting and ending period of time for completion of each tasks or activities of study.
For this Gantt chart is consider most important bar chart which will also help a researcher to
complete research in more systematic and effective manner.
Research design: Descriptive, experimental and exploratory are introduces as a main
type of research design. All these types of research design are important because entire activities
of research is depend on them. According to the study, exploratory design is more essential
because it will assist a researcher in driving valid conclusion about the topic.
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