Vodafone UK: Strategic Analysis using PESTLE, Ansoff, and Porter's

This assignment provides a comprehensive analysis of Vodafone's business strategy in the UK telecommunications market, utilizing various strategic management tools. It begins with a PESTLE analysis to evaluate the macro-environmental factors influencing Vodafone, followed by Ansoff's growth vector matrix to assess the company's strategic positioning. The report then delves into Vodafone's strategic capabilities using the VRIO/VRIN model, identifying its strengths and weaknesses. Porter's five forces model is applied to understand the competitive landscape, and Bowman's strategy clock model analyzes Vodafone's strategic direction and available options. The analysis covers aspects such as political stability, economic factors, social trends, technological advancements, legal considerations, and environmental concerns. Ultimately, the report offers insights into Vodafone's strategic choices and potential pathways for sustainable growth in the dynamic telecommunications industry.

Business strategy
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Table of Contents
Introduction................................................................................................................................3
Task 1.........................................................................................................................................3
PESTLE model for environmental analysis...............................................................................3
Ansoff’s growth vector matrix to analyse the organisation’s strategic positioning...................6
Task 2.........................................................................................................................................7
Explain what strategic capability means....................................................................................7
Apply the ‘VRIO/VRIN’ model to determine the strategic capabilities possessed by your
chosen organisation....................................................................................................................9
Identify the organisation’s strengths and weaknesses..............................................................10
Task 3.......................................................................................................................................11
Porter’s five forces model........................................................................................................11
Task 4.......................................................................................................................................14
Using Bowman’s strategy clock model, analyse the strategic direction and options available
for your chosen organisation....................................................................................................14
Conclusion (100)......................................................................................................................18
Reference List..........................................................................................................................19
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Introduction
Business strategy is an organizations plan of working in order to achieve its vision,
competing in the market, prioritizing the objectives, and optimizing the financial performance
of the firm with various business models. In this assignment, various business models have
been utilized in order to analyze the environment and develop suitable strategies for
Telecommunication Company in UK. The models that will be used in this assignment for
developing effective business strategy and analyzing the environment are PESTLE, Ansoff
Matrix, VRIO/VRIN, Porter’s Five Forces Model, and Bowman’s Clock Model. The tools
that are going to be used will be analyzing the strategic capabilities of the organization. The
chosen telecommunication company in this assignment is Vodafone.
Task 1
PESTLE model for environmental analysis
The macro environment generally entails the business environment and influences the
organization in long-term. Macro environment is analyzed utilizing the PESTLE (Cipd.co.uk,
2018) analysis to paint a picture of several ways in which macro environment can influence
Vodafone and its business strategies.
Vodafone is one of the largest telecommunication companies in the world and UK. As a
multinational firm Vodafone has more than 9800, retail stores all over the world are
influenced by several global factors. The PESTLE analysis specified is related to United
Kingdom in order to provide efficient details of their activities in the country.
Political
Political structure and stability
The political environment of UK is stable,
which attracts the companies to invest in the
country. Due to stable political environment,
UK has good relation with other countries
that is attractive to the telecom industry of
UK. In terms of political factors, Vodafone
will be able to outsource its processes to
other countries. There will be less fluctuation
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in the policies and it would provide the
company with scope of expansion.
Economic Economical factors consisting of taxes, inflation
and interests rates affect the telecommunication
industry immensely. In terms of economical
aspects, GDP per capita of UK is very high.
Since people have GDP per capita of around
38846 GBP it shows, the standard of living in UK
is quite high. UK is one of the leading nations in
GDP ranking globally. Since the standard of
living is high in UK, it will efficiently increase
the aggregate demands resulting in enhancing the
sales figure and profits of the company. As the
competitors try to cut down the prices of
Vodafone, the company is able to benefit as most
of the services provided by Vodafone are of high
quality and satisfy the needs and wants of
customer in more efficient manner. Therefore,
this kind of macroeconomic circumstance is
beneficial for the company in the form of better
scope and higher demands at profitability of the
company.
Social Social factors generally have a positive impact on
the company and its business operations. The
telecommunication sector is growing rapidly in
UK and the people of country are oriented
towards the use of internet. As per the research
conducted, there has been a increase in usage of
internet in UK, year 2016 witnessed 82.61% and
in year 2018 the percentage increased to 82.73%.
The positivity showed by the people of the
country gives Vodafone an advantage to provide
the customers to increase the sales of the
company to make better profits.
Technological Technological factors have immense impact on
the telecommunication sector of UK. The
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advancing technologies play a vital role for
telecommunication companies to grow
effectively. In terms of technological factors,
technologies of UK are advancing and the use of
Smartphone is increasing day by day. It provides
the company with a strong platform to grow their
business and increase their productivity level.
Vodafone being a telecommunication company
utilizes the technologies and use of Smartphone
effectively to come up with innovative products
and services for the customers. Currently,
Vodafone is working to develop 5G network to
increase their sales and profits. Thus,
technological factors have positive impact on the
company.
Legal Legal factors frequently influence the
telecommunication industry. The legislation of
UK widely affects the telecommunication
companies by incorporating and changing the
rules and regulations frequently. The companies
involved in the telecom industry have to cope up
and follow the rules and regulations implemented
in order to survive in the country. This rules and
regulation composes of data protection act that
includes regarding the safety of peoples data. The
telecom companies must ensure that the
confidential data of the people using their service
must not be breached, as it would have a negative
impact on the company.
Environmental Environmental factors are one of the most vital
aspects that must be considered by the telecom
companies in order to sustain in the market. In
terms of environmental factors, the governmental
policies of UK focus on using renewable
resources rather than non-renewable resources.
The telecom companies must utilize the
renewable resources to save the non-renewable
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resources of the country. Utilization of renewable
resources by Vodafone would create a positive
impact on the company and help them to
maintain the flow of business.
Table 1: PESTLE analysis
Source: (created by learner)
Figure 1: PESTLE analysis
Source: (Encrypted-tbn0.gstatic.com, 2018)
Ansoff’s growth vector matrix to analyse the organisation’s strategic positioning
Ansoff’s growth vector matrix is used by Vodafone to plan the marketing model that helps
the company to determine its market growth strategy and products. It is strategic market
planning tool that helps the company to penetrate in the market (Loredana, 2016). Ansoff’s
matrix consists of four alternative growth strategies that are mentioned below:
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Market Penetration: In this market growth strategy, the firm looks forward to sell the
existing products in existing markets. The marketers of the firm use this marketing strategy to
strengthen their client base by making the use of same products in the same market by
mitigating the price of the product (Bocken et al., 2016). In case of Vodafone, the firm
utilizes this market growth strategy to retain their clients.
Product Development: In this growth strategy, the marketer focuses on the development of
the product that is previously presented to the targeted customer. This growth strategy is
applied to increase the demand for the existing product within the customers.
Market Development: This market growth strategy involves the development of business
firms in a brand new market and it can be done with existing products. In this segment, the
companies develop fresh strategies to target new clients for the same services and this is done
by identifying the needs and wants of the clients in the new market. This growth strategy is
used by Vodafone to enter into a new market in order to expand their business operation.
Diversification: in this market growth strategy, the companies enter a new market as well as
produce new products to catch the eye of the customers in the new market. This market
growth strategy includes the analysis of the scope in the market and requirements of the
customers regarding the products and services (Simmonds, 2015). Although, Vodafone does
not utilizes this growth strategy it has the chance of using this strategy in future for the
purpose of expanding its business.
Task 2
Explain what strategic capability means
Strategic capability refers to the competences and resources of a company required for the
company to sustain and prosper in the market full of competition. Strategic capability defines
the ability of a company to develop effective competitive strategies that assist the company to
sustain and increase their value in long term. Though, strategic capability does not takes into
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consideration the strategies used by a company, it concentrates on the resources, assets and
market position of the company and projecting how good it is going to be to develop
strategies in the future. The core concepts of strategic capability consist of Foundations,
Sustainability, Analysis, Cost efficiency, Organizational knowledge, and development. The
resources that are taken in account by strategic capability are tangible resources and
intangible resources. Tangible resources are the physical assets of a company and include
labour and finance. Intangible resources are the non-physical assets and include reputation,
information, and knowledge (Calle et al., 2015).
The resources of an organization can further categorized under 4 different categories like
physical resources, financial resources, human resources and intellectual resources. Physical
resources are the resources that are used by the company in order to develop its products and
services. Financial resources are the resources that are utilized by the company in order to
plan the investment required for the business to run effectively, the cost it takes to develop
new products and services. This resource is used to judge the flow of cash in the organization
as it helps the company to operate effectively and adequately to achieve its goals and
objectives. Human resources are used by the organization to describe the employees within
the organization and the department accountable for managing the resources linked to the
employees. The intellectual capital is the intangible value of a company coating the human
capital, and relational capital. It is considered as an asset by the organization and is defined as
the accumulation of informational resources that an organization has and can be used in order
to increase the sales and profits, gain new clients, and manufacture new products to ensure
the improvement of business (Kashan and Mohannak, 2014).
The competences are the abilities and skills through which resources are organized by the
activities of the organization and the processes in order to gain the competitive advantage in
the market in such a way that the rival companies will not be able to imitate and acquire.
Competence leads to competitive advantage at the point when it relates to the activity of an
organization, which underpins the value in the features of the product. It gives the
organization lead to such levels of performances that are considerably better than the rivals
are. It is becomes difficult for the rivals to imitate and obtain the strategies of the company.
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Apply the ‘VRIO/VRIN’ model to determine the strategic capabilities possessed by your
chosen organisation
In the year of 1984, Birger Wernerfelt created the Resource Based View model the concept
that competitive advantage of an organization based on its ability to apply valuable tangible
and intangible resources. Relating to this model, the VRIO model has been developed. The
model is utilized for assessing the value of the resources of a company (Seddon, 2014).
Resources Valuable Rare Imitable and
Non-
substitutable
Organized to
exploit
Network
infrastructure
Yes No No Yes
Diversified
revenue base
Yes Yes No Yes
Leading market
position
Yes No No yes
Employees Yes Yes Yes Yes
Table 2: ‘VRIO/VRIN’ model
Network infrastructure:
Client data of Vodafone is most precious resource as the maximum numbers of strategies
developed by the company are dependent on it. Currently, Vodafone is upgrading the national
transport network within all of its subsidiaries. It consists of utilization of services like IP as a
strategic technology. Vodafone made it possible with the advanced networking facilities
access transmissions through fixed broadband networks, 3G/4G Smartphone networks, and
private corporate networks. The centre network of Vodafone includes of packet switched,
circuit switched, IMS, service platform.
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Diversified Revenue Base: In the year 2018, Vodafone has created a record of generating
11.50 billion Euros in revenue. Vodafone was able to expand its market with the proper
utilization strategies. At the end of 2008, Vodafone obtained around 289 million customers
worldwide and contributed almost 15.2% of the total global revenue.
Identify the organisation’s strengths and weaknesses
Strengths of Vodafone are discussed below:
Revenues: Vodafone has created a huge record by generating revenue of billions per year. In
2017, Vodafone generated almost 47.63 Euros (pounds/euros)**, 2018). This boosted the
company to be the largest and leading telecom company in the world market and UK.
Vodafone with the assistance of revenue also increased its predictions from the consumer
ends. In sales, Vodafone had ranked in 104 globally out of 2000 and 84 in figures in market
value.
Brand Image: Vodafone has a significant brand image in the current telecom market of the
country. Vodafone has a brand value of 19 billion dollars by year 2018 (dollars), 2018).
Brand equity and brand value of Vodafone are high in the market. Vodafone is one of the
recognized and preferred companies by the people in the country as well as the world.
Premium cost: Vodafone in the market full of competition brings distinctive products in
order to retain and maintain its position in the market. Vodafone is the most renowned
company among the people of the country and is above all other companies involved in the
telecom industry. Vodafone is able to satisfy their customers by meeting the requirements of
the customers. As a result, Vodafone received premium from their clients and be in the
margins. While other telecom companies are still struggling to accomplish this feat in the
market and maintain positive margin.
Weaknesses of Vodafone are discussed below:
Centralized management system: This is the chief weakness behind Vodafone as a telecom
company. This causes inflexibility at a higher rate. Vodafone has the disadvantage of having
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the higher rate of consumer churn rate. This has also caused negative impact on many
subscriber-based service models.
Mitigating subscription base: As per the researches, it has been observed that subscription
base of Vodafone has decreased and dropped immensely. The company must focus on
strengthening its subscription base to keep the sales of the company increased and in a
rhythm. The fall in subscription base has reduced the brand value of the company in recent
years that must be taken into consideration by the company.
Competition in the market: The telecom market of the country is full of competition and
saturated which results in immense competition (Kazan et al., 2018). Major competitors of
Vodafone are in the telecom industry of UK are EE, British telecom, Giff-Gaff, Virgin, and
02. Any of these competitors of Vodafone can turn out to be dangerous at any moment and
can put Vodafone in risky circumstances.
Task 3
Porter’s five forces model
Porter’s five forces are used to analyze the five external forces that influence the business
circumstances and its operations. The five forces (CGMA, 2018) are mentioned and
discussed in details below:
Threat of New Entrants (Low) The telecom market of UK has huge barriers for
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new entrants. Due to the fact, that it is one of the
growing sectors of the country it was saturated by
the existing competitors. It would be very
difficult for a company to enter in the market and
create an image in the marketplace by providing
quality services and products at a lower price.
Thus, in this case Vodafone will not face danger
and risk regarding the threat of new entries in the
telecom industry.
Bargaining Power of Suppliers (Low) It has been noted that the bargaining power of the
suppliers of Vodafone is quite low providing the
company with a slight advantage that resulted in
reducing the costs and weakening the power of
the suppliers. This helps the external suppliers to
gain power over the organization. Since there are
only few telecom companies in the market of
UK, the suppliers would not shift their
preferences from Vodafone to other telecom
companies due to its popularity and brand image
in the world market.
Bargaining Power of Buyers (High) The bargaining powers of the buyers are very
high since there are several telecom organizations
that provide similar products and services at
similar prices. Due to this fact, the customers
acquire the option of selecting the best
organization for purchasing. If the competitors of
Vodafone starts providing the customers with
same products and services at a cheaper rate the
customers of Vodafone might think of shifting
their preference from Vodafone to other telecom
companies.
Threat from Substitute Products (Medium) It is significant for Vodafone to keep on
innovating new products and services in order to
retain their brand image and position in the
marketplace. The innovations permit the
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