Strategic Analysis of Vodafone: Evaluating Market Position and Growth

This report provides a comprehensive analysis of Vodafone's business strategy in the UK telecommunications market. It employs various strategic tools, including PESTEL, Ansoff Matrix, SWOT, and VRIO, to evaluate Vodafone's external environment, internal capabilities, and competitive positioning. The PESTEL analysis examines political, economic, social, technological, environmental, and legal factors impacting Vodafone. The Ansoff Matrix explores growth strategies such as market penetration, product development, market development, and diversification. The SWOT analysis identifies Vodafone's strengths, weaknesses, opportunities, and threats, while the VRIO model assesses its strategic capabilities based on value, rarity, imitability, and organization. Furthermore, the report evaluates the competitiveness of the UK telecommunications sector using Porter's Five Forces model and interprets Vodafone's strategic direction based on the analysis. This student-contributed assignment is available on Desklib, a platform offering study tools and resources for students.

BUSINESS STRATEGY
Vodafone

Table of Contents
INTRODUCTION...............................................................................................................2
TASK 1 (P1).......................................................................................................................3
1.1 PESTEL MODEL......................................................................................................3
1.2 ANSOFF GROWTH VECTOR MATRIX..................................................................6
TASK 2 (P2).......................................................................................................................7
2.1 EXPLAINING STRATEGIC CAPABILITY................................................................7
2.2 APPLYING VRIO MODEL FOR DETERMINATION OF STRATEGIC
CAPABILITIES OF VODAFONE....................................................................................7
2.3 IDENTIFYING FIRM’S STRENGTHS AND WEAKNESSES.................................10
TASK 3 (P3).....................................................................................................................12
EVALUATION OF COMPETITIVENESS OF TELECOMMUNICATION SECTOR OF
UK WITH THE HELP OF PORTERS 5 FORCES MODEL..........................................12
TASK 4 (P4).....................................................................................................................15
UNDERSTANDING AND INTERPRETATION OF STRATEGIC DIRECTION...........15
CONCLUSION.................................................................................................................18
REFERENCES................................................................................................................19
1

INTRODUCTION
The telecommunication sector involves the organizations that provide the provision for
communication at the global level. The firms operating in this sector are the satellite
companies, the wireless operators, the cable companies and the Internet Service
Providers. In the growing mobile telecommunication market in the UK, it is a
challenging task for the firms to uphold the current position and enhance the market
share in the global and national markets. Vodafone, which is among top mobile
telecommunication company in the UK, is taken here. The external environment of
Vodafone will be analyzed for its impact with the help of PESTLE for the environmental
analysis and the Ansoff matrix for the analysis of the strategic position of the firm.
Further, the internal environment of the firm along with its capabilities will be assessed
with the help of SWOT and VRIO framework. Furthermore, the analysis of
telecommunication sector will be done with the help of Porters five forces. Lastly, with
the help of the model, the strategic direction of the firm will be interpreted.
2

TASK 1 (P1)
Vodafone UK Limited is a subsidiary of Vodafone Group PLC established in 1982. It is
ranked the 2nd largest firm in the world. The firm in the UK has 17.5 million users (March
2018) and is ranked 3rd largest in the UK. The firm is planning strategies for achieving
the first position in both national and international markets (Vodafone Limited, 2018). To
facilitate this, the external and internal environment of the firm needs to be analyzed for
the strategic planning.
1.1 PESTEL MODEL
It is a framework used by the marketing individuals for analyzing and monitoring the
external marketing environment that impacts the companies. For this, the PESTLE
analysis of Vodafone is done.
Political Economic
European Union roaming regulations
Phone licensing
Impact of Brexit
High costs of spectrum
Trade barriers
Higher costs of labour in the United
Kingdom
Social Technological
High level of social acceptance
Demand increased for the mobile
telecommunication services
Change in work patterns
Increase use of social media
The advent of 5G technology
The emergence of alternative
communication platforms on Web
Environmental Legal
Social responsibility
Recycling events
Request for settlement of tax row by
government
Low rates of interest
Vodafone faced penalties
3

Political - The major aspect affecting the firm at the political level is the roaming
regulations by European Union. These are aimed towards minimizing the rates for the
use of phones in abroad by 70%. Also, it aims to enhance the rates of consumer rights
in Europe. Also, the phone licensing norms in the UK are supported by the government
which provides aid to the mobile telecommunication firms to operate smoothly (Hulme
and Sifaki, 2018).
Economic- The economic situation in the UK is well sound but is impacted by Brexit to
some extent. Due to Brexit, the business models may need to be changed and risks
may arise in the area of telecommunication business. The sales of cross-border
services may also get impacted and the free movement of staff among European Union
and the United Kingdom (Blackaby, 2018). The increase in the costs of spectrum and
the trade barriers formed can influence the company operations. Also, the costs of the
labour in the UK have risen which will increase the expense for the firm to the
employees.
Social- In UK, the demand for the telecommunication services has increased in the
recent times. This is due to the change in perspectives of the people and their change
in the living styles. The change in the work patterns of the people has increased the
demand for the mobile phone services in the UK. However, the rise in the usage of
social media services by the people has posed some threat to the mobile
telecommunication services.
Technological- The advent of 5G technology in the telecommunication sector has a
great impact on the services offered by Vodafone (Reynolds, 2018). This technology
has a great impact as it will be able to handle many Internet of Things (IoT) devices
connected by the same 5G network. But the advent of the alternates of the
communication medium can pose a danger to the smooth functioning and popularity of
the mobile telecommunication industry adopting the latest technology (Gillespie and
Goddard, 2017).
4

Legal- In the legal aspects, the firm has faced penalties regarding not paying to the
employees as per the norms. The impact of the taxation policies on Vodafone in the UK
is higher and the lower interest rates encourage the firm to increase their business
spending.
Environmental- the firm, Vodafone is being impacted by the campaigns launched for
social responsibility and the company is expected to follow and adopt the CSR activities
in order to contribute to the environment.
5

1.2 ANSOFF GROWTH VECTOR MATRIX
It is also known as the product/ market expansion grid which assists the businesses to
get knowledge about in which dimension to expand their business.
Market penetration- In this strategy, the existing market is being penetrated by the
standing products. The strategies can be lead in the European network and
development of the data networks in the current network for making the coverage wider
and deeper. The prices can be adjusted for the loyal customers related to data usage
along with improvement in customer care and online support services and improving the
retail presence (Golding and Tennant, 2017). In the existing markets, the smartphones
can be marketed with a balanced portfolio and all the connected devices along with the
leading brands.
Product development- The product development in the existing market can be done
by the introduction of the 5G and advanced technology, provisioning the Vodafone 3G
stations and mobile Wi-Fi etc. Also, it can be done by combining the fixed services and
the mobile ones e.g. the Vodafone DSL route (Garri, et al. 2017). The application
services can be provided along with introducing the easy to use methods of payment
like the application of NRFC. One of the new product developments is the advent of
Vodafone TV.
Market development- The strategies for introducing the current products in new
markets or the new regions of the current market involve the introduction of SMS, voice
and data services in the markets of India and Africa. The other strategies involve the
introduction of Vodafone web box, M- Pesa and the Opera mini browser in other places.
Diversification- the diversification strategy involves some risks which comprise the
introduction of the new services and products by Vodafone in entirely new markets. It
includes provisioning of new services like M2M (machine to machine facility), three
NFC, third-party billing, smart metering, service for push mobile advertising and
tracking care telematics etc (Sutherland, 2017). the firm has also collaborated with
Microsoft, HTC and Samsung for offering several services.
6

7

TASK 2 (P2)
2.1 EXPLAINING STRATEGIC CAPABILITY
The capability of the businesses for successful employment of the competitive
strategies is known as the strategic capability. It permits the businesses to survive
successfully and increase the value of the same over the period of time. It holds
immense significance as it assists the firms to remain economically viable and gain
growth regardless of the presence of the competitors in the market. The elements such
as the patents, property and cash in businesses contribute towards the strategic
capability of the business (Chao, 2017). The other elements like the human resources,
the structure of the firm, pricing techniques etc are also a part of the strategic capability.
The assessment of strategic value is a complicated process due to the presence of
many factors to address. This process is known as strategic value analysis. It is
dependent on the data obtained from the surveys, reports and the market trends that
analyses which of the business in the particular industries have the capability that other
business lag behind (Zhou, et al. 2015). Thus the analysis of the strategic capability
helps in assessing the firm's resources, the market position assets along with
estimating how well the firm will be able to implement the strategies for future prospects.
2.2 APPLYING VRIO MODEL FOR DETERMINATION OF STRATEGIC
CAPABILITIES OF VODAFONE
The tool of VRIO analysis here is used for determination of the strategic capabilities of
Vodafone. It helps in questioning the imitability, the rarity, value of each of the
capability.
Capital access- the Vodafone UK has the accessibility to the capital of Vodafone
Group PLC. The firm has a free cash flow of £5.6billion, therefore, providing Vodafone
UK enough of financial aid for improvement in the operating abilities and also
enhancement of the marketing strategies. It is valuable whereas the competitor firms
8

also can access the capital through other sources and hence it is common which has
led the company in competitive parity with the rivals (Chatzoglou, et al. 2017).
Network capability- the firm has put a lot of investment in the network operations
which has helped in providing the fats intent services with outstanding inside and
outside coverage. The firm claims that they possess the largest spectrum compared to
the competitors in the UK and the 4G signals at lower frequencies permit the speedy
indoor internet services. This capability related to technology possessed by Vodafone
is valuable which makes the company ahead of the competitor firms (Vodafone Limited,
2015). On the contrary, these technologies are easy to imitate and this will help the firm
in gaining competitive advantage for a short span of time.
Brand equity- The firm is ranked on 3rd position worldwide and on 2nd place in the UK
among the telecommunication service industry with brand equity estimated around
18.74 billion dollars. The firm has its operations in 26 nations and serves millions of
customers (Statista, 2018).
Figure 1: the Brand value of Vodafone 2014-2018
9

Source: [Statista, 2018]
The operation of the firm worldwide has familiarized the brand to all the customers and
hence the travellers or the immigrants will prefer Vodafone over other
telecommunication brands. Therefore, its brand equity is exceedingly valuable,
expensive to imitate and organised for exploitation. Therefore, due to its presence
globally, the firm has gained a continued competitive advantage.
Resources/
capabilities
Valuable Rare Expensive
to imitate
Organised Influence
on
competitive
advantage
Capital
access
Yes No No No Realization
of
Competitive
parity
Brand
equity
Yes Yes Yes Yes Sustained
competitive
benefit
Network
capability
Yes Yes No No Temporary
competitive
benefit
10

2.3 IDENTIFYING FIRM’S STRENGTHS AND WEAKNESSES
The strengths and the weaknesses of Vodafone can be effectively determined by
conducting the SWOT analysis.
Strengths Weakness
 Good brand image
 2nd in UK
 The company has generated 1
billion pounds in the cost-cutting
initiative in last 3 years
 High levels of the network
infrastructure
 Innovative strategies for advertising
 Decline in performance in the
European markets
 Decline in the subscriber base
 Lacks the wireless access in rural
networks
 Poor performance in fixed network
area
Opportunities Threats
 Expand the 4G network and launch
5G
 Offer better prices by increasing
efficiency
 Make investment in research and
development
 Diversify in new location and
develop new products
 The saturation of market in Europe
 The uncertainty of the regulatory
climate
 Increase in popularity of social
media platforms
Strengths- the firm has over the years established a good brand image and is ranked
on the second position in the UK in providing the mobile telecommunication services.
The firm has new concepts and ideas for effective marketing along with possessing the
higher levels of the infrastructure of the network (Linge and Sutton, 2016).
Weaknesses- The performance of the firm in European markets has declined over
some time which has resulted in falling customer base. In the rural areas, the firm lags
the wireless access and performs poorly in the fixed network area.
11

Opportunities- Vodafone can expand its 4G coverage and also launch the 5G at
earliest. It can form new strategies for offering better prices at the enhanced efficiency
of services along with investing more in the areas of research and development and
enable diversification (Hu, 2016).
Threats- the firm has a danger caused due to the saturation of market in Europe and
some parts of UK. The climate in unregulated and therefore leads to uncertainty which
degrades the quality of the network and other services provided by Vodafone (Klauer,
2015). The rise in the popularity of the social media poses a threat to the
telecommunication network which may lead to fading the brand reputation and financial
loses to the firm.
12

TASK 3 (P3)
EVALUATION OF COMPETITIVENESS OF TELECOMMUNICATION SECTOR
OF UK WITH THE HELP OF PORTERS 5 FORCES MODEL
The Porters five force’s analysis of Vodafone is done here to comprehend the
competitiveness of the telecommunication industry in the UK.
Bargaining power of consumers (HIGH)
The advent of MNP (Mobile Number Portability) has given the customers the provision
to migrate from one mobile operator to the other one. The industry of telecommunication
has gained competitive spirit with an increase in MVNO (Mobile Virtual Network
Operator). This has led the customers not confined to select from the major operators
and avail the option to become the customer of MVNOs. This shows the high
bargaining power of the customers. Along with this, the presence of Ofcom in the form
of a regulator that has the job to control and monitor the actions of the various operators
gives rise to the competition and therefore it augments the bargaining power of the
customers (Evens and Donders, 2016).
Apart from these factors, there is a lack of differentiation among the various service
providers in the UK which gives more power to the consumers to bargain more for the
services they avail from the mobile telecommunication companies.
Bargaining power of suppliers (HIGH)
In the highly converged industry, a number of suppliers persist. The mobile virtual
network operators are being supplied by the big telecoms having great network
infrastructure where they utilize the infrastructure for running the services. Due to the
fact that MVNO do not possess their own infrastructure, the bug telecom operator
companies have high bargaining power. As per the norms standardized by Ofcom, the
firm BT provisions the other mobile operator the permission to use their network. This
gives BT a high power of bargaining (Alshurideh, 2017). Also, the firms like Samsung
and Apple also act as suppliers as they are bundling their devices with data and voice
13

services, offering packages committing for a long time span for reducing the churn
rates. The exclusive right of O2 to sell the iPhones is a good example showing the way
mobile companies are considered as the impacting suppliers having high bargaining
power.
The threat of substitutes (MEDIUM)
The major focus of the telecommunication industry was to provide the voice
communication facility at its initiation. With the advent of mobile internet, the
applications have emerged that makes use of VoIP rather than the GSM services. The
applications like Skype and Viber etc operate on the VoIP technology have caused the
reduction in voice revenues from the telecommunication operators (Gerbaudo, 2018).
Also, the instant messaging (IM) applications like Whatsapp have replaced the Short
Messaging services (SMS) that telecom operators provide and hence reduced their
revenues. Nevertheless, the telecom operator in today’s times provide the data
services which enable the use of these applications which despite causing the decrease
in voice revenues definitely increases the data revenues (Thelwall and Vis, 2017). The
telecommunication companies provide good quality of services for the voice and data
services. This encourages the customers to avail their services. The adoption of new
technologies like Municipal Wi-Fi helps in delivering good quality of services (QoS) as
compared to the services provided by the telecom companies. This will help the
customers to avail citywide wireless services which will allow them to run their VoIP
applications without using any of the telecom services like 4G or 3G or EDGE.
The threat of new entrants (LOW- MEDIUM)
The companies operating in the telecom sector have high barriers to entry which is
majorly due to the widespread upfront costs. On the other hand, it is convenient for the
firms in the communication field sector to enter another sector, it is an aspect of
conjunction in the industry of communication as a whole. For instance, the mobile
telecommunication industry in the previous time needed high-end network infrastructure
expenses (Telecommunication sector report, 2017). This has changed in the recent
times due to the advent of MVNO which allows the firms to enter the market without
14

having any network infrastructure. The mobile shops such as the Carphone Warehouse
are provisioning the data and voice services for mobiles in the form of packages
bundled with their mobile devices. Also, the advent of MNP has reduced the barriers of
the switching of the operators for the customers and thus this has decreased the threat
of new entrants.
Industry rivalry (HIGH)
The telecommunication companies are giving a tough competition in the market. The
cost-cutting has only led to price wars. So, for gaining the competitive advantage the
companies need to adopt the differentiation strategy by adopting the implementation of
the latest technologies like 5G and 4G LTE services. But, this will only help in getting a
competitive edge on a temporary basis as these are easy to imitate by the competitor
firms. The convergence has strengthened the competition thus leading to many
companies enter into the new communication sector (Telecommunication sector report,
2017). The high amounts of financial resources are incurred in the terms of marketing
and advertising which is caused due to the aggressive competition by the rivals. The
regulating environment in the industry has also led to the growth in competition between
the companies providing telecommunication services.
15

TASK 4 (P4)
UNDERSTANDING AND INTERPRETATION OF STRATEGIC DIRECTION
The bowman’s strategic clock and Porter’s generic strategies are used for exploration of
various options for strategic positioning.
Figure 2: Bowman’s Strategic Clock
Source: [Bowman’s Strategic Clock, 2018]
There are 2 options that determine the strategic options- price and perceived value.
There is a total of 8 strategic positions in Bowman’s strategic clock.
1) Low cost and low value-added- In this position, the products will not be
differentiated by Vodafone while the consumers distinguishing little value
regardless of the lower prices. The method of remaining competitive is to adopt
a cheap strategy and avoid undercut.
2) Low price- for this, Vodafone needs to adopt cost minimization which will lead to
lower margins on profits. This can lead the firm to price wars among other
competitors (Eyvrigh, 2016).
This is also one of the strategies adopted in porter’s generic strategies known as
cost leadership where the firm can seek for becoming the low-cost producer in
the telecommunication sector.
16

3) Hybrid- It is an effective strategy in which Vodafone can include the low pricing
strategy along with product differentiation. The value added if provided for a
longer time can prove to be beneficial for the firm.
4) Differentiation- In this, the firm can place itself as a highly valued brand with the
strong brand awareness. This will provide the customers high levels of added
values that they perceive.
This is also one of the strategies adopted in the porter’s generic strategy model.
The products in this will have good functionality, features, support, durability and
brand image
5) Focused differentiation- In this strategy, Vodafone can place its product on the
highest cost levels which will attract the consumers to buy the products due to
their high perceived value. This can be done with the premium services offered
by Vodafone to a targeted segment of consumers (Eyvrigh, 2016).
In the porter’s generic strategies, there is 2 differentiation. One of them is
focused differentiation which is discussed above. The other one is cost focus
where the company may seek to attain a cost advantage in the targeted segment
of customers.
6) Risky high margins- This strategy is highly uncompetitive where the products
are placed on the market at very high prices without any additional benefits. This
involves a lot of risk for Vodafone as if consumers fail to buy them, the company
can incur great loses (Shakhshir, 2014).
7) Monopoly pricing- this involves introducing a product or service by Vodafone
that no other competitor firm is offering in the market. The monopoly pricing is
tightly regulated. This can be an effective competitive strategy for the firm.
8) Loss of market share- this strategy cannot prove to be beneficial for Vodafone
as the products and services offered here will be at standard prices with low
perceived value.
The strategic positions numbered 6, 7 and 8 do not offer any competitive advantage to
the firm. Rests of the strategic positions are likely to offer some competitive advantage
to the firm, so these can be adopted. It can be assumed that in a highly competitive
17

environment, there will always be competitor companies who are ready to offer greater
perceived value for the standard prices or at comparatively lower prices than the rivals.
18

CONCLUSION
The major telecommunication companies in the UK were analyzed out of which
Vodafone was taken for the report as it is the 2nd largest mobile telecommunication
service provider in the UK. It has become highly significant for the firm to maintain a
competitive edge over its competitors. Also, it aims at maintaining a good strategic
position and enhances its market share at the national and global level.
Keeping all the aspects in mind, firstly in the report, the external environment of the firm
has been analyzed with the help PESTLE analysis and Ansoff matrix for its impact on
the company. Moreover, the strategic capability has been explained along with
analyzing the internal environments of the firm with the help of SWOT and VRIO
framework. The competitiveness of Vodafone has been evaluated with the help of
Porter’s five forces model. Lastly, the strategic direction of the firm has been
comprehended with the help of Bowman’s strategic clock and Porters generic model.
19

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