Strategic Analysis of Vodafone UK in the UK Telecommunications Market

Desklib provides past papers and solved assignments for students. This report analyzes Vodafone UK's business strategies.

Business Strategy: Telecommunication Sector (UK)
1

Table of Contents
Introduction......................................................................................................................................3
Task 1 – The external environment.................................................................................................4
i. PESTLE model for environmental analysis.............................................................................4
ii. Ansoff’s growth vector matrix to analyse the organisation’s strategic positioning ...............5
Task 2 – The internal environment and organisation capabilities...................................................8
i. Applying the ‘VRIO/VRIN’ model to analyse the strategic capabilities possessed by your
chosen organisation.....................................................................................................................8
ii. Strengths and weaknesses of the organisation.........................................................................9
Task 3 – Analysing the telecommunications sector......................................................................11
Task 4 – Understanding and interpreting strategic direction.........................................................13
Conclusion.....................................................................................................................................18
Reference List................................................................................................................................19
2

Introduction
Vodafone UK, is a part of the Vodafone Group, the second largest mobile phone company in the
world, and is one of the largest telecommunications providers in UK. Over the years, it has
earned enormous popularity and success among customers in UK and has more than 17.0 million
users. It has grown to be the third largest mobile telecommunications network. It was founded in
1982 and has its headquarters in Newbury, England, UK. It has above 480 stores across various
locations in UK and specialises in Home and Business landline along with broadband services,
SIM offers, Vodafone contracts and a huge variety of mobile phone handsets. The aim of this
report is to gain a wider perspective about the various business strategies of Vodafone UK within
the telecommunication sector that helps it to gain a better competitive advantage in the market
among customers. It will analyse the various external and internal factors that influences its
business operations along with assessing its strategic capabilities and positioning. It will examine
the telecommunication sector in UK to formulate suitable strategies using different analytical
tools and models along with developing a strategic management plan for the company.
3

Task 1 – The external environment.
i. PESTLE model for environmental analysis
There are a number of macro environmental factors that influence the functioning and success of
Vodafone UK. Even minor changes in these factors have a huge direct impact on the
organisation and affect its competitive advantage and overall productivity.
PESTLE Analysis for Vodafone UK.
Political: Political factors have a huge role to play in determining the organisation’s long-term
profitability and success. Political stability has a huge positive impact on the smooth functioning
of the company in UK. The wireless communications sector of the country is huge and well
developed and this facilities efficient functioning of the organisation. The infrastructure of the
country influences it too as developing an efficient infrastructure support it needs to acquire
permission from various regulative bodies and the government (Ammar, 2017). Apart from that,
the mobile phone licenses are expensive and strictly controlled. These strict measures are often
by the government to control the use of mobile phones among children. Apart from that,
different intellectual property protection and trade regulations related to technology affect its
operations. The taxation policies, pricing regulations and wage legislations significantly
influence the smooth functioning and success of Vodafone UK (Hamilton, 2018).
Economic: Because of the stiff competition in the UK market, there exists a price war among the
various network providers to reduce the costs involved in using their services as this helps to
attract new customers apart from retaining the existing ones. Government intervention in the free
market, exchange rates and the stability of currency ensures proper functioning of the
organisation. The infrastructure quality and effectiveness of the financial markets are other
factors that the company needs to consider. The economic growth rate of the nation, and its
labour costs and productivity effects its business operations. Apart from these, other important
economic factors that affect Vodafone UK are its unemployment rate, interest and inflation rates
(Cachin et al., 2015).
Social: Mobile phones have become increasingly popular in today’s world. The UK market is
huge and all kinds of mobile phones are in high demand here. The young population make an
4

extensive use of mobile phones. Apart from that, other social factors that affect Vodafone UK’s
business operations are the health and environmental consciousness among its users.
Technological factors: Technological developments like 3G services and GPS has boosted the
smooth functioning of the organisation in UK. 3G services has facilitated users to interact among
themselves in a better and more efficient manner. Mobile internet and a variety of social
networking sites such as Facebook and Twitter have increased the demand of mobile phones in
UK. The technological developments by its competitors challenge them to work harder for
attracting a wider market.
Legal factors: Various laws regulate the business activities of Vodafone UK. For example, The
Sales of Goods Act 1974 states that the products and services that a company offers must be fit
for the intended purpose. The anti-trust law within the communications industry and
discrimination law effects it’s functioning. These laws regulate the functioning of Vodafone UK.
For example, the ban on mobile phones during driving has greatly raised the demand for
headsets. Apart from that, other laws that it has to adhere while conducting their business
operations in UK are the various employment laws, health and safety law and data protection
(Kazan et al., 2018).
Environmental factors: Vodafone UK takes into consideration the environmental issues and have
launched a recycling programme for phones aimed at considering the health of the environment
as well as recycle and reuse all the materials that were used in the phone. It takes proactive steps
to support renewable energy and ecological products. Apart from that, different environmental
factors such as the extreme weather conditions, climate change and the laws concerning
environmental pollution influence its functioning within the country (Niaz et al., 2018).
ii. Ansoff’s growth vector matrix to analyse the organisation’s strategic positioning 500
Ansoff’s growth matrix reflects the attempts of an organisation to grow depending on different
factors such as whether it wants to market existing or new products in existing or new markets.
This helps an organisation in planning its business strategies and identifying its growth
opportunities and analysing whether it needs to create new products or merge existing and new
products. The four generic growth strategies identified by it are as follows:
5

Market penetration: This is the tool used by organisations to increase its share in the market
with the existing products. This is achieved primarily by combining competitive pricing
strategies, advertising, personal selling and sales promotion. This also helps in outshining the
competitors in the market and creating customer loyalty and retention.
Market development: This implies exploring new markets for existing products. Products may
be introduced in new geographical markets. Apart from that, new distribution channels may be
introduced such as developing from retail selling to mail order and e-commerce. Different
policies of pricing are created to attract new customers and create new market segments
(Vatharkar et al., 2018).
Product development: This refers to the process in which a company introduces new products
for existing markets. Appropriate research and development along innovation needs to be
considered before introducing a new product. They must be developed keeping the customer
needs and preferences in mind (Nandi, 2017)
Diversification: This implies development of new products for new markets. This involves a
huge amount of risk as the products enter new markets where they have no prior experience.
Keeping the business operations of Vodafone UK and the other competing telecommunication
providers in mind, it can be assessed that the most appropriate growth strategy for the company
would be market penetration. This would persuade the current users to avail the services of
Vodafone instead of its competitors in the market. A new marketing strategy will help the
company in attaining this end and will encourage more people to avail their services. Other
telecommunication providers like Virgin, 02 and EE offer a huge variety of attractive features
and discounts to their customers and therefore, it becomes important for Vodafone to follow
competitive pricing strategy to sustain in the market and attract new customers while retaining
the current users (Shrestha, 2017). It needs to research about the pricing techniques followed in
its rival companies and develop its own service prices accordingly. Vodafone will follow
different strategies to penetrate the emerging markets. It will try to reduce the cost of its different
services to make the customers attracted towards availing them. It will effectively use
promotional campaigns and advertisements to let the customers know about their new pricing
strategies and the attractive offers that are to be provided to the customers. It will make an
6

extensive use of social media to reach out to more people. This would help the organisation to
gain a greater competitive advantage over its rivals in the market and ensure effective growth
and success.
7

Task 2 – The internal environment and organisation capabilities.
i. Applying the ‘VRIO/VRIN’ model to analyse the strategic capabilities possessed
by your chosen organisation
The VRIO model helps an organisation to realise if its possessed resources are sustainable and
appropriate for meeting the needs of the customers and has the ability to let the company
achieve a greater competitive advantage in the market. The VRIN for Vodafone UK has been
conducted below:
Resources Valuable Rare Imitable Organized to
Exploit
Network
infrastructure
YES NO NO YES Competitive
parity
Diversified
revenue base
YES YES NO YES Temporary
competitive
advantage
in the
market
Leading
market
position
YES YES YES YES Sustained
competitive
advantage
Figure 1: VRIO Analysis of Vodafone UK
Source: Created by the learner
Network Infrastructure: Vodafone UK has a strong network infrastructure, which supports all its
operations. In order to offer mobile services, it is important that it has a strong network
infrastructure. Vodafone offers 2G and 3G networks with voice, text messaging and various data
services. It offers its customers access to mobile broadband data with great speeds. This strong
network infrastructure is one of the most valuable resources and helps it to meet the growing
customer needs. This is however not a rarity among the wireless telecommunication sector and is
not too expensive for its rivals to imitate. It is well organised to exploit the network’s
competitive potential by ensuring that the employees get a safe and productive working
environment with lucrative incentives and rewards based on their performances. This is one of
the greatest strength of the organisation and helps to create a competitive parity.
8

Diversified revenue base: Vodafone has expanded its global presence by various acquisitions,
partner networks and stakes in companies. Its global reach and diverse revenue base can be
considered its precious resource. This hugely diverse revenue base is a rarity among the sector.
Their chief strategy is to manage proactively the portfolio by investments into markets, which
have strong local position. Its rival firms would not face much cost disadvantage if they try to
imitate this resource. The company is well organised for exploiting the full competitive potential
of this rare and precious resource. The employees are made aware of the company’s goals and
obligations. This resource can be considered an organisational strength that helps in generating a
temporary competitive advantage.
Leading market position: Over the years, Vodafone has established itself as one of the leading
telecommunications company in the world. It has a huge market share in UK and this is a rare as
well as a valuable resource that helps in boosting its brand image and provides a foundation for it
to penetrate into new markets that have huge potentials. Its rivals would face a great amount of
cost disadvantage to develop or obtain this resource. The company is well organised to
effectively direct and manage all its employees to help them towards giving their best for the
company. This resource can be considered to be an organisational strength as well as a
sustainable distinctive competence that helps in generating a sustained competitive advantage in
the market.
ii. Strengths and weaknesses of the organisation
For the smooth functioning of a huge and varied organisation like Vodafone UK, it is important
that its strengths and weaknesses be cautiously examined. This helps in providing opportunities
to develop the strengths and control the inherent weaknesses and ensures its efficient functioning
and productivity in the market. The strengths and weaknesses of Vodafone UK can be assessed
as the following:
Strengths:
Innovative advertising strategies: Vodafone formulates various innovative advertising strategies
to attract its customers. In 2006, it collaborated with Yahoo in the field of mobile advertising. In
2017, it collaborated with Ogilvy to introduce its youth brand called VOXI that was aimed at
9

providing unlimited data in various social apps. It undertakes various promotional and
advertising strategies to reach out to more customers worldwide (Medudula et al., 2016).
Extensive market coverage: Vodafone enjoys huge market coverage and has a great share of
UK’s telecom market. In 2017, it ranked the sixth most valuable global telecom company.
Superior customer service: Over the years, Vodafone UK has been successful in retaining its
flourishing position in the market through its advanced customer service. The company takes
into consideration the needs and preferences of its customers and provides services accordingly.
It ensures that the best possible service is provided to the customers so that it can achieve
customer satisfaction and retention.
Brand value: Vodafone UK has been successful in establishing a strong brand name and value,
which helps in retaining the existing customers and attracts new customers to avail its services. It
strives to maintain its superior quality of service so that its brand value is not tarnished and to
ensure that it remains in high demand among the potential customers in the market
(Lewandowski, 2016 ).
Weaknesses:
Stiff competition: Vodafone UK faces intense competition from its business rivals like BT, EE,
Giff-gaff, Virgin, O2, Three and several other telecommunication providers. They provide a host
of attractive services and offers for their customers and hence makes it difficult for Vodafone to
increase its market share.
Declining subscriber base: Due to the huge offers provided by other telecommunications
provider, users are attracted to their services and hence Vodafone experiences a declining
subscriber base (Uhl, 2016).
Unfavourable acquisitions: Unfavourable acquisitions adversely affect Vodafone UK as it
increases the costs and reduces the value of combined businesses. These acquisitions may also
distract it from the primary business and try to merge different cultures that do not complement
each other.
10

Task 3 – Analysing the telecommunications sector.
Porter’s Five Forces Model:
Porter’s Five Forces Model examines the five major forces that influence the profitability and
success of an organisation. The five forces that influence Vodafone UK have been discussed as
the following:
Threat of new entrants: When the new entrants penetrate the wireless communication sector in
UK, they bring in innovation, and new ways of conducting the business practices. These put an
enormous amount of pressure on Vodafone as the new entrants implement lower pricing strategy
and offers new value propositions to its customers. Vodafone has to manage these challenges and
strive to maintain its competitive advantage in the market. It can face these challenges by
developing new and innovative products and services, building economies of scale that reduces
the fixed costs and allocating resources for effective research and development (Khan et al.,
2019).
Bargaining power of suppliers: There are powerful suppliers in the UK telecommunication sector
that utilises their high negotiating power in order to extort high prices from the companies. When
there is higher supplier bargaining power, it lowers the profitability of Vodafone UK. The
company can build an efficient supply chain having multiple suppliers and developing and
maintaining a chain of dedicated suppliers whose business is dependent on the company.
Bargaining power of buyers: The bargaining power of buyers put pressure on the company’s
profitability and success in the long-run. When the customer base is small and strong, it has a
higher bargaining power. Vodafone can tackle this situation by creating a large customer base
and producing innovative products (Whalley, 2018).
Threats of substitute: The threat of a substitute good is high when it provides a different value
proposition from what is provided by others in the industry. Vodafone should strive to be service
oriented, must understand the basic needs of the customers, and act accordingly.
Stakeholders Analysis:
11

The stakeholders of an organisation are one of the most important factors that contribute to its
productivity and success. Mendelow’s matrix is one of the most effective procedures for
mapping the stakeholders according to their power of effecting the company. It is important that
all the stakeholders are effectively satisfied to retain their loyalty and achieve competitive
advantage in the market. A number of actions can achieve this. It is important for Vodafone UK
to consider the opinion of its powerful stakeholders. This ensures that they support the
organisation. The input of the stakeholders has the power to boost the quality of services that are
provided by Vodafone UK (Reddy, 2016). When it achieves the support of the strong
stakeholders, it is able to gain more resources. This ensures that its different projects attain great
success. It must communicate effectively with its stakeholders on a regular basis as it helps in
understanding the advantages of the different projects. This ensures that they support the
company during emergencies (Whittington, 2017).
Vodafone can effectively anticipate their customer’s reaction and build on their future projects. It
is important for them to identify the various conflicts of interest and potential conflicts and
manage them tactfully. It must identify the relationships between all the stakeholders as this
helps in coalition and partnership. An effective analysis of all these factors ensure that the
company is able to achieve its long and short-term goals and is able to achieve profit
maximisation at the market.
12