Business Strategy of Vodafone UK: A PESTEL and VRIO Analysis

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Business Strategy

BUSINESS STRATEGY
Contents
Introduction.................................................................................................................................................... 3
Task 1 – The external environment.......................................................................................................4
Provide a critical analysis of the macro environment and how it determine your
chosen organisation’s strategic management decisions using..........................................4
i. PESTEL model for environmental analysis.........................................................................4
ii. Ansoff’s growth vector matrix to analyse the organisation’s strategic
positioning.................................................................................................................................................. 6
Task 2 – The internal environment and organisation capabilities...........................................8
Critically evaluate the organisation’s internal environment and its 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..............................................................10
Task 3 – Analysing the telecommunications sector....................................................................12
Devise appropriate strategies to improve the organisation’s competitive edge in the
market using suitable analytical tools and model of analysis...........................................12
Task 4 – Understanding and interpreting strategic direction..................................................16
Produce a strategic management plan for the organisation showing clear strategic
direction options available to the organisation........................................................................16
Conclusion.................................................................................................................................................... 20
References.................................................................................................................................................... 21
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Introduction
There are many telecommunication providers in UK like Vodafone, O2, Virgin, EE,
BT and many more. The basic role of these companies is to provide excellent
networking services to its users. It is very important for these organisations to
examine their external environment so that they may know their position in the
competitive market. There are many strategies and models used by management of
these organisations to analyse their macro environment. Along with this, there must
be analysis of internal environment that highlights the major capabilities and abilities
of the organisation. The internal environment helps to know what an organisation do
during different situations. Vodafone has been taken as an example for this
assignment.
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Task 1 – The external environment
Provide a critical analysis of the macro environment and how it determine your
chosen organisation’s strategic management decisions using
i. PESTEL model for environmental analysis
PESTEL analysis helps to understand the changes that are occurring and
creates awareness among management of the organisation that can
impact their decision making. There are many external forces that impact
the organisation in one way or the other. PESTEL analysis helps to
analyse the macro environment of Vodafone and how it impact Vodafone
in taking various decisions (Dockalikova and Klozikova, 2014). Here given
below is the detailed analysis-
Political- Due to wide use of telecommunications, government has applied
hard regulations on tele-companies. It has been observed that due to strict
regulations, the service provider with huge range of subscribers suffer with
low service. In addition to this, there are many other network enhance
facilities like Base Transmitter Stations that impact Vodafone.
Economic- Vodafone has to invest huge money on the resources it need
and for further up-gradation too. Introduction of 4G has also impacted
Vodafone’ strategic management decision. One of the attempts shown by
Vodafone is that it has merged its national grid with O2 in order to reduce
expenses on infrastructure. It has also seen that because of economic
factors, remote areas have suffered a lot.
Social-cultural- there has been constant change in the social trends.
Nowadays, people show more interest in instant messaging, chatting, and
other communication services provided over social media networking
sites.
Technological- there has been many technological changes done n
telecommunication market. The latest and widely technology upgraded is
use of android, Symbian to which Vodafone has responded very quickly
and easily and is becoming a successful factor for the organisation in the
future.
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Environmental- Vodafone has taken important step in regard to save its
environment. For example, it has started used phone recycling program in
which disposable handsets are collected.
Legal- all the telecommunication laws like Sale of Goods Act and many
other have affected Vodafone. But with the advancement of new laws like
prohibition of using mobile phones while driving has affected Vodafone as
there has been reduction in revenue and less use of network.
Thus, it is seen that PESTEL analysis of Vodafone helps to monitor all the
external forces that can affect its decision making power. All these
considerations put positive or negative effect on the organisation.
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ii. Ansoff’s growth vector matrix to analyse the organisation’s strategic
positioning
Ansoff’s growth vector matrix is generally used by the senior managers to do
strategic planning for future growth of the organisation. This model also helps to
determine the products and to check market growth strategy. It can be regarded as
Vodafone uses this matrix to use best strategy to increase its sale in the market. This
model is described as below-
Figure 1: Ansoff’s growth vector matrix (Hussan et al, 2014)
The four strategies in it are-
Market penetration- in this strategy, Vodafone sell same products in the existing
market. The main purpose of using this strategy is that it can be used to maintain
long term relations with customers. Efforts done by Vodafone under this strategy are
like giving more offers to its customers to maintain good trust among them.
Market development- under this strategy, new market is proposed to make by
offering them with same products. For example, many times Vodafone offer special
packages for students. So to develop a new market, it offers the same packages to
different group of people like those who use Vodafone network during late night
hours. Before going for market development, it is necessary to see by the
management structure of Vodafone if it is able to handle such huge demand with this
strategy.
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Product development- through this strategy, new product is created within the
existing market. It helps to offer services of new products to the existing customers.
For example, Vodafone launches a new offer for its existing customers. It is
important to seek customers’ feedback with the introduction of new product.
Diversification- it is the highest risk taking strategy as it involves introduction of new
product within new market. It is very important for the marketing manager of
Vodafone to see if the new geographical area is suitable for Vodafone or not. It
sometimes becomes very difficult to achieve diversification.
Thus, the strategic decisions to be taken by Vodafone depend largely upon these
external factors. The market manager has to seek all the above mentioned factors
and then decides what strategy should be adopted and in what way. The study of
macro environment helps to know in advance what possible solutions could be made
for upcoming situation. It also helps Vodafone to understand customer trends and
see where it stands in the competitive market.
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Task 2 – The internal environment and organisation capabilities
Critically evaluate the organisation’s internal environment and its capabilities
i. Applying the VRIO/VRIN model to analyse the strategic capabilities
possessed by your chosen organisation
VRIO analysis helps to know the organisation’s resources and how they could be
used in highly competitive world. It is important of Vodafone to analyse all its internal
strategic capabilities so that necessary steps could be taken to meet the business
objectives. To evaluate internal capabilities of Vodafone, VRIO model is used with its
different attributes of Value, Rareness, Imitability and its organised way for
exploitation (Al-Atiqi and Mumen, 2014). The results of VRIO model on Vodafone are
described as below-
Economics (capital access)-
All the monetary issues and cash flow within Vodafone UK are accessed by
Vodafone Group as it is their parent company. Easy cash flow facilities are provided
by the group to all of its subsidiaries organisations to perform all their operational
functions with accuracy and to further advertise for their brand for competitive
advantage. There exists tough competition of Vodafone with other
telecommunication companies as they also get easy cash flow from their resources
and thus giving a tough competition.
Capability in terms of networking-
There is no doubt that Vodafone has spent a huge money on improving their network
capabilities as in the current stage they are providing excellent access to internet
without area limitations of internal or external coverage. Vodafone is much at a
higher place among its competitors. It provides an excellent speed indoor as
compared with other telecom companies. This is really valuable success on the part
of Vodafone. But at the same time it can be said that it can be considered as a
temporary success for Vodafone, as this fast speed technology could easily be
imitated by the competitors (Gunnarsson and Ljungwaldh, 2015)
Brand quality-
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Vodafone has been ranked 5th in terms of worldwide brand ranking in 2011 with an
estimation of $31 billion, published by The Independent newspaper of UK. Vodafone
UK has been advantaged with its brand name of the group. The group has been
spreading in many of the countries and the count of customers it serves, is
increasing day by day. With the huge list of customers, it becomes easy for
Vodafone UK to reach to the new customers due to the wide popularity of the brand.
The brand equity of Vodafone is highly valuable, not cheap to imitate, and has been
organised to exploit. Thus, because of brand equity, it is able to maintain a sustained
competitive advantage.
The results of VRIO mode analysis on Vodafone has been summarised through the
following table-
Resources
and
capabilities
of
Vodafone
Valuable Rare Imitation
in terms of
cost
Organised
for
exploitatio
n
Impact on
competitive
advantage
Economics
(capital
access)
Yes No No No Realized
competitive
uniformity
Network
capability
Yes Yes No No Realized
temporary
competitive
advantage
Brand
quality
Yes Yes Yes Yes Sustained
competitive
advantage
Table 1: VRIO model analysis on Vodafone (Klauer, 2015)
Thus, it can be concluded that VRIO model helps to analyse the inner capabilities of
Vodafone in terms of its resources and other needs in terms of sustained competitive
advantage.
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ii. Strengths and weaknesses of the organisation
It is considered highly important and valuable for the management of Vodafone to
know their strengths and weaknesses so that business could be run smoothly. There
is another advantage of knowing the strengths that they could be used in the future
for extra profit. In the same way, knowing of weaknesses about Vodafone would help
the management to find possible ways to deal with them in the future. Strengths of
Vodafone are given as below-
 Vodafone was the first mobile networking unit in UK.
 It is very popular here.
 It is well known for its excellent service being given to its customers.
 It has high market segment.
 It has an extra advantage of being present globally.
 It gives good competition in the market.
 It was recalled that Vodafone acquainted £46.4 billion revenue in the year 2012
with another profit of £11.5 billion (Ang, 2016).
Thus, it can be said that Vodafone has become a profitable organisation that gives
good competition in the market.
Weaknesses of Vodafone as an internal analysis are given as below-
 Because of merging between Orange and T-mobile telecoms, Vodafone has
been dropped down to third rank in the terms of market share.
 This has impacted its market control as well.
 It had faced certain loss in product development from its customers side, as it
had abolished unlimited Data Tariffs in the year 2012.
 Weak performance has been shown by it in some of the areas (Miravitlles et al,
2017).
In the nutshell, it can be stated that knowing strengths and weaknesses in advance
give the organisation ample time to develop strategies and they can be implemented
with more effectiveness. There are certain chances that weaknesses can be
changed to strengths and vice versa. It is the functioning of the management of
Vodafone to keep review on these factors so that weaknesses should be converted
into strengths and effective strategies could be made for weaknesses. All these
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factors also help the organisation to maintain a good marketing competition. Thus, all
it shows the importance of analysis of internal environment.
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Task 3 – Analysing the telecommunications sector
Devise appropriate strategies to improve the organisation’s competitive edge
in the market using suitable analytical tools and model of analysis
It is very important for Vodafone to understand the nature of the market in which it
works and operates. To improve Vodafone’s competitive edge in the market and to
devise appropriate strategies for it, it makes use of Porter’s five forces model. This
model helps to understand the level of competition. The five forces of this model are
described as below-
Force 1- Rivalry among existing competitors-
With no doubt, there exists tough rivalry in the telecommunication sector. It is this
rivalry only that influences Vodafone to bring something new in it so that it could
maintain its position.
Force 2- Threat of new entrants
There always exists the threat of new entrant in the market. The new entrants could
possibly affect Vodafone in many ways. The economy of Vodafone could be
affected, for example, the new entrant could invest huge in technology and thus can
gain advantage (Williams and Figueiredo, 2014).
Force 3- Threat of substitutes
There is high risk that other organisation may bring same product given by Vodafone
in the market to attract the customers at a relatable price. But it highly depends upon
the performance of the substitute in satisfying the needs of the customer.
Force 4- Bargaining power of buyers
It is the size and concentration of the customers that decide the buyer power in the
industry. Differentiation among competitors also impacts it a lot. The bargaining
power of buyer becomes extremely high when there are many similar products
available in the market provided by different organisations. Such condition becomes
a tough place for competition.
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