Vodafone Group PLC: Business Strategy Analysis and Recommendations

This report provides a comprehensive analysis of Vodafone's business strategy in the telecommunications sector. It begins with an introduction to business strategy and focuses on Vodafone Group PLC. The report utilizes the PESTLE model to analyze the external environment, considering political, economic, sociological, technological, legal, and environmental factors impacting Vodafone. Ansoff's growth vector matrix is applied to explore market penetration, development, product development, and diversification strategies. The VRIO model assesses Vodafone's internal capabilities, including value, rarity, imitability, and organization. Porter's five forces model evaluates the competitive landscape. Finally, the report concludes with a strategic management plan based on Bowman's strategy clock model, offering recommendations for Vodafone's future direction. The report also highlights the strengths and weaknesses of the organization.

Business Strategy
Telecommunication Sector

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1. Pestle model for environment analysis...................................................................................1
2. Ansoff's growth vector matrix.................................................................................................3
TASK 2............................................................................................................................................4
3. VRIO model............................................................................................................................4
4. Strengths and weakness of organisation.................................................................................6
TASK 3............................................................................................................................................7
5. Porters five forces model........................................................................................................7
TASK 4............................................................................................................................................8
6. Strategic management plan with Bowman's strategy clock model.........................................8
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
.......................................................................................................................................................14

INTRODUCTION
Business strategy refers to step by step actions planned by the organisation according to
external environment and their strengths & capabilities with the aim of attaining competitive
advantage over others (Definition of Business Strategy, 2018). For this report, Vodafone group
plc is taken for consideration which is one of the largest telecommunication company whose
headquarter is in London, UK. In this report, company's external environment would be analysed
with the help of Pestle framework. Beside this, Ansoff matrix will also implement on the
company so that they can make their business strategy accordingly. To analyse the company’s
strengths VRIO model would be discussed by considering industry analysis as well. At last
strategic plan would be elaborated with the help of bowman clock model.
TASK 1
1. Pestle model for environment analysis
It is essential for every company to analyse the environment in which they are working as
company have to modify their strategies accordingly. There are two different types of
environment in which Vodafone works i.e., external and internal environment. Internal can be
modified and controlled by the company but it does not work in the external environment as it
cannot be controlled by organisations and based on demand and supply of the industry (Scholes,
2015). To analyse Vodafone external environment, Pestle analysis would be use with the aim of
finding the opportunity and threats of the market which is described below:
 Political environment: This factor is related with the environment made in the country
due to political parties like political stability, tax rates, dumping duties etc. In the current
time, Vodafone has been negatively affected by the government decision as roaming
charges in EU act has been abolished due to which chances of decrease in business and
revenue is higher. As according to ETNO, Euro telecommunication group would have
lost their 7 billion by 2020 (European telecoms brace for losses as roaming charges end,
2019) But on the other side, Vodafone relationship with the government is been
favourable since starting as company assist UK country to grow due to large amount of
corporate taxes. So it can be said that current situation of UK has not been favourable for
telecommunication industry specially for Vodafone due to increase in complex
legislations and Brexit.
1

 Economic environment: It includes all the factors which is related with the economy of
the country like inflation rate, currency fluctuations, unemployment etc. As recently,
inflation rate of UK is 2.1% which is on its low from past many years and has positive
impact on telecommunication as disposable income of people is increasing thus higher
revenue in the future (Inflation falls to lowest level in nearly two years, 2019). On the
other hand, increase demand of UK spectrum of 5G has been negatively affected
Vodafone revenue as government has increased the cost of spectrum due to which they
have to pay more to use and buy the frequency level (Strong demand in UK spectrum,
2019).
 Sociological environment: It includes elements which is related to society where
company is operating their business like attitude of people, norms and beliefs of the
society, knowledge etc. According to survey, number of users of telecommunication in
UK is increasing with a significant rate as 82 billion SMS or messages has been sent
within UK in 2017 which shows the usage of mobile phone (Mobile Phone Usage
Statistics in the UK, 2019). So increasing demand of telecommunication operator in the
market is a positive sign of Vodafone growth. But other than this, existed customers are
not satisfied with the services provided by the company as according to Root-metrics
report, Vodafone has secured last position in network reliability, mobile speed, call
clarity etc. (Vodafone UK hits out at poor network, 2019). Poor image in the market will
affect their business operations in a negative way.
 Technology environment: In the telecommunication sector, advanced technology is a
current trend in UK, which negatively effected Vodafone business operation in terms of
quality of products as well as it impacted on their productivity. . However, to tackle this
effect Vodafone adopted effective strategy i.e. to improve their technology so that high
speed internet would be used by customer for which Vodafone is spending millions of
money to acquire 5G spectrum. Like recently Vodafone has grabbed 50MHZ of 5G
network in 378.2 million Euro (Vodafone beats O2 to take biggest share of 5G, 2019)
which could assist them to provide higher quality of services.
 Legal environment: Vodafone could face rules and regulation obstacles after the Brexit
as immigrants workers act would be change due to which company have to modify their
past rules. Besides this after exit of UK, The UK TV and Telecom regulator act 2003
2

would be implemented which could spread the fear of data exchange and privacy control
of the millions of customers. Moreover, elimination of roaming charges would also affect
users in a negative way if it is implemented again (Brexit Impact The Telecoms Industry,
2016). So it can be said that Vodafone have to make strategies according to the rules and
regulations as then only it would be possible for them to avoid any legal issues. Along
with this, Vodafone gets support from its government because of UK government is
stable in nature which enable them to attain maximisation of profit.
 Environmental environment: In current scenario of UK, different markets have their
own norms or environmental standard which negatively impact the profitability of
Vodafone business operation in developing impressive and effective CSR activity or
launching environment friendly products. However, Vodafone handled this negative
impact in an efficient manner as they are been active in the field of CSR as one of their
aim of to connect 50 million women by 2025 as connectivity is essential for growth of the
country. Moreover, Vodafone has also pledged to reduce their GHG emissions by 40%
which is positive sign for environment sustainability (Global transformation areas,
2018).
2. Ansoff's growth vector matrix
It is important for companies to have pre planned future business strategies as then only
they would be able to perform better in the market by tackling the uncertainty of external market.
Ansoff matrix is an effective communication tool as it enable the company to foresee or
anticipate the possible growth strategies in order to enrich their business operation effectively
and efficiently. To attain the position, Ansoff matrix assist company to make the strategies
according to market which is explained below with functional example of it,
 Market penetration: It refers to a way of attracting customers to use their existing
products and services so that customer share would increase to a certain level. To attain
this, it is important for company to make their strategies according to customer
preferences or market demand as chances of getting success becomes automatically high
(Thompson, Strickland and Gamble, 2015). For instance, to attract more customer share,
Vodafone can lower down their tariff cost as customers are price sensitive in nature.
 Market development: It refers to a way of creating new market for the existing product
and services so that more profitability and revenue would be produced for company.
3

Main aim of company adopting this strategy is to enhance market share so that
institutional risk would be reduced to certain level. For instance, Vodafone could enter in
to new market where connectivity is not available so that new customers would get
attracted towards Vodafone.
 Product development: It states that, company could attract customers in the competitive
market by producing new product for them so that customer can satisfy their needs and
demands from it. For instance, Vodafone can launch their new services of providing free
calling in 200 pounds. By launching it, Vodafone would be able to hold their existing
customer and connect with new people so that profitability would be increase (Akter and
et. al., 2016).
 Diversification: It is one of the risky strategies which company could opt as they have
the produce a new product by developing the market of it. It requires high amount of
funds as company have to launch their product or services for the first time in the market.
Foe eg: Vodafone wants to switch from telecom industrious to IT industry and mobile
payments in order to drive growth for business. By this they can improve their brand
image and add value to its customer.
Therefore, it can be concluded that the above mentioned strategies helped Vodafone to
opt diversification strategy as it assist them to increase their customer and market share which
leads to competitive advantage over others. Moreover, it also enabled them to reduce
institutional risk of the company due to which burden of financial decreases to a level.
TASK 2
3. VRIO model
VRIO is an effective strategic analysis tool which help company to uncover and protect
the resources and capabilities that give them long term competitive advantage. Along with this, it
enable company to assess their internal strengths and capabilities as strategies of the company is
made on the basis of it thus assist company to gain competitive advantage over others. So it is
the responsibility of management to continuously assess internal environment so that weakness
of an organisation would be identified and removed. There are four resources which must be
analysed to identify the internal capabilities i.e., financial, human, material and non material
4

resources. To assess capabilities of Vodafone, VRIO model would be used which is mentioned
below with functional example,
 Value: Human resources refers to number of employees working in the firm to operate
their business so that company's goals and objectives would be attained within deadline.
Vodafone has more than 100,000 employees in their operating countries which assist
company to create value for the customers (Chang, 2016). For instance, from NPD to
customer service, all the work is handle by the human resources only. So it can be said
that HR creates values for the Vodafone. Financial resources also creates value for the
customer as strong financial conditions of the company motivates them to spend in R&D
and marketing activities which directly creates value for the Vodafone customers. As
Vodafone revenue in 2018 is approximately 46 billion Euro which shows the position of
company in the market. Other resources are brand name, it is valuable for company as
well as for customers. As Vodafone can charge extra amount of money or premium
pricing due to high brand image in the market and in the mind of customer. Besides this,
customers feel motivated at the time of using product and services who has good image
in the market. Last resource is global footprint, Vodafone has been operating in more
than 40 countries in the world other than 100 partners countries. So due to high customer
and market share, they have been able to perform better in the market. All these factors
assist Vodafone to create value for the customers so that their needs and demands would
be satisfied. So valuable resources assist Vodafone to gain competitive equality as
compare to other competitors. However, Vodafone's value resources are its brand
awareness, operating in e-commerce space using IT capabilities, strong financial
resources and they have effective sales force and channel management. BY this company
is attaining high productivity and profitability.
 Rare: It refers to how the product or service is rare in the market. For instance, if
Vodafone is launching 3G services in the part of UK then it would not add any value to
the market as competitors is already planning to launch 5g services. So according to
above point, Financial resources is rare for Vodafone as they have strong position in the
market which other company does not have due to revenue and profitability generated by
Vodafone in a single financial year. Other is Brand name which is rare in nature as no
single company has same brand value or image in the market. Global footprint is also rare
5

for Vodafone as there are only few companies in the telecommunication industry which
are operating in more than one country (Eaton and Kilby, 2015). Last is human resources,
which is not rare in nature as competitors also has high human resources and perform
same kind of work. So it can be said that human resources is not rare in nature. Resources
which are rare in nature helps Vodafone to gain temporary competitive advantage over
others. However, Vodafone storm is one of the leading brand in industry and they keep
track record of project execution.
 Imitability: It means that how easy it is for other company to copy the product or
services provided by the company. For instance, brand name of Vodafone in UK is
unmatchable and unimitable as no other company has high brand name as compare to
Vodafone. It can be said that brand image or goodwill of Vodafone in the competitive
market is not imitable is nature. Financial resources is imitable by other company as there
are many ways through which company can attract high amount of the funds in the
business. Like selling of equity in exchange of money or taking high amount of loans
from different banks. Last is global footprint which is not imitable as it is hard for any
company to operate in different countries at the same time by maintaining quality of
product and services so that higher profitability would be attain. Moreover, Vodafone's
unique channel management, and its track record of project execution as well as its
potentiality in adapting business opportunity skill cannot be imitate by its competitors.
 Organisation : Last is organisation which states that how much resources is exploited by
the company to perform better in the market. For instance, Brand image is full exploited
by Vodafone as due to high brand image in the market, it is easy for company to charge
premium or extra price from the customers. So it can be said that brand image assist
company to gain long term competitive advantage over other competitors. On the other
hand, global footprint is not being fully utilised by the Vodafone as number of customers
they have in the market is not growing with the significant rate. Due to this, Vodafone
would get the unused competitive advantage. However, Vodafone storm has utilized its
leading brand position in various segments as well as it has sustainable financial position
which enable them to gain competitive advantage effectively.
6

4. Strengths and weakness of organisation
So with the help of above mentioned framework like VRIO, pestle and ansoff matrix,
strengths and weakness of Vodafone is identified which is mentioned below,
 Strengths
◦ Vodafone is one of the largest telecommunication in the world as organisation is
operating their business in more than 40 countries and have partners in approximately
140 countries. So reach of customer and market share of Vodafone is high which
becomes the strengths of it.
◦ Vodafone has more than 100,000 employees worldwide which shows the capabilities
of company in surviving in different type of circumstances.
◦ Brand value plays an important role in the success of organisation as it enhances
knowledge of product and services in the mind of customers. According to survey,
Vodafone is at the top of highly branded company in UK with the brand value of
31,602 million (VODAFONE UK’S MOST VALUABLE BRAND, 2019)
◦ Marketing – The Marketing by Vodafone is legendary. Company is well known for
marketing of its products and services. The Vodafone is known in all over the world
to follow Vodafone consumers everywhere. Likewise, the Vodafone zoozoo’s was an
endearing and brilliant campaign which converted different number of customers to
die hard fans of company. Time and time again, company comes out with superb or
brilliant campaigns at the correct time.
 Weakness
◦ Vodafone's sometime provide low quality product and services, due to which
customers are not happy with the services and prefers to switch to other company.
◦ Due to price war between competitors in the UK, Vodafone profit margin is
decreasing due to which company profitability is decreasing which leads to increase
in burden on financial conditions of company (SWOT analysis of Vodafone, 2019).
◦ Losing market share in USA – United States of America is a nation where
Vodafone could have requested or demanded the premium it requires to keep itself
afloat. Still, company fast losing market share in the United States of America to
Verizon wireless and AT&T, both of whom are playing far above Vodafone if we
reckon the US market only.
7

▪ Poor performance in Europe – Due to Brexit and many other economical
circumstances in Europe, performance of Vodafones in its home market has been
miserable and it has not created much more revenue from its national market. In
fact, if company look at revenues, around 40% of the income is coming from
India and not from United States or United Kingdom.
TASK 3
5. Porters five forces model
Industry in which company is working is crucial to analyse and evaluate as it helps
organisation to perform their task with full potential. To assess the external environment or
industry, Porters five forces model is used which is mentioned below with functional example,
 Bargaining power of supplier: Supplier role in the industry is to provide the raw
materials to the manufacturer so that they can make and provide product and services to
the potential customers. Bargaining power is based on the number of suppliers in the
market as high number of suppliers means low power to them. There are high number of
suppliers in the market but still Vodafone has few suppliers which they deal with due to
high quality of raw materials like Huawei, Siae Microelettronica etc. So it can be said
that power with the supplier is moderate in nature (Huawei confirmed as Vodafone’s
Supplier of VPC’s Decade, 2019).
 Bargaining power of buyer: Telecommunication sector has high number of buyer as
mobile phone has become the essential and permanent part of the human life. Due to high
number of buyers, they hold the high power as compare to company. So it can be said
that buyer or customer has high bargaining power.
 Competitive rivalry: Competitors are those parties, who provide same product and
services to the same customer which organisation is dealing with. In UK, there are large
number of competitors of Vodafone like EE, BT, giff-gaff, Virgin etc. Besides this,
whole competition is driven by the cost of the services as customer are highly price
sensitive in nature. So it can be said that competitive rivalry is high in nature.
 Threat of substitute: It refers to a way of doing the same thing by using different
product or services. Though there is no direct substitute of the services as there is no
other way of communicating with other people who is living in the different territory.
8

But still mail or call through online is the substitute of Vodafone. So overall it can be said
that threat of substitute is low in nature.
 Threat of new entrants: It means that chances of new competition entering in to
industry in which Vodafone is working i.e., telecommunication. There are few
competitors in the market but all has large number of market share in UK resulting in no
scope of new entrants. Apart from this, there are various rules and regulations which
every company must be comply with if they want to enter into telecommunication
industry. So overall it can be said that threat of new entrants is low in nature as no wants
to enter into a market which has less chances of getting success.
TASK 4
6. Strategic management plan with Bowman's strategy clock model
Strategic management plan comprises of a document which is used in order to
communicate within the organisation. Various factors such as organisation's goals, focus,
strength and resources. The plan will use the present activities and processes of the business in
order to respond to changing environmental situations by aligning them in systematic manner
with resources and action, vision and strategy of the businesses. Vodafone will use Bowman's
strategy clock model in order to find out about the strategic direction of the s business.
Bowman's strategic model
Bowman's strategic clock is a model which is used by businesses to examine their
competitive position in relation with the other competitors. It was developed by Cliff Bowman
and David Faulkner as a further elaboration to the porter three generic strategies. Bowman clock
represents eight possible strategies which are presented in four quadrants and are being defined
by axes of price and perceived added value (Razak and et. al., 2016). It depicts how an
organisation can position their product and service offering in the market which is based on two
different dimensions. The first dimension is related with price and the other is related with
perceived value of the product or services by analysing both the dimension Vodafone can adopt
eight strategies. The eight strategies can be further elaborated below-
9