Business Strategy of Vodafone in the UK Telecommunication Sector

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Business Strategy: Telecommunication Sector in UK
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Contents
Introduction...................................................................................................................... 3
Task 1.............................................................................................................................. 3
i) PESTLE model for environmental analysis...............................................................3
ii) Application of Ansoff’s growth vector matrix to analyze the strategic positioning of
Vodafone...................................................................................................................... 5
Task 2.............................................................................................................................. 7
i) Application of VRIO/ VRIN model to analyze the strategic capabilities of Vodafone. 7
ii) Evaluation of the strength and weakness of Vodafone.............................................9
Task 3............................................................................................................................ 10
Task 4............................................................................................................................ 18
Conclusion..................................................................................................................... 21
References.....................................................................................................................23
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Introduction
The significance of mobile phones in daily life of individuals is undeniably unending.
This is due to the tremendous transformation in the mobile network and communication
technology (Keskin and Kennedy 2015). UK is considered as one of the growing
countries in terms of mobile technology. EE, Three, Vodafone, and O2 are the major
mobile network operators in UK. Statistics show that about 22 million people in UK use
their mobile phone when they walk. However, the rate of mobile phone usage is greater
among young consumers compared to aging people. Vodafone is a global mobile
network company based on UK and considered as the second largest mobile network
company in the world. Nowadays, it becomes a major challenge for mobile operators to
retain their position in a highly competitive market. The rising mobile companies are
offering alternative service that creates a big threat for Vodafone in the both domestic
and global market.
Task 1
i) PESTLE model for environmental analysis
Political
The political condition of UK is stable that influences the foreign direct investment.
However, the main political factor of UK affecting the growth of Vodafone is the
Roaming Regulation policy of UK government (Chen and Yang 2015). This policy
decreases the charges of mobile phone usage as a result; the mobile network operators
have been facing challenges in the domestic market. On the other hand, the tax policy
is not beneficial for mobile network operators, which also affects the business of
Vodafone.
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Economic
The growth of GDP and the rate of inflation in UK market affect the business of
Vodafone. High GDP of UK market adds value to the business of Vodafone however;
the global financial crisis of 2008 is a major economic factor that affects the profitability
of this mobile network provider (Ghezzi et al. 2015). Apart from these economic ups and
down in the global market also affects the business of Vodafone. Vodafone provides a
justified price to its consumers that allows them to purchase more services and
products. The flawless wireless access providing by Vodafone allows people to travel
the world on a special rate on the same network.
Social
The changing work pattern in UK influences people to grab the opportunity to work from
home. This leads them to rely and depend on communication technology (Rychalski
and Hudson 2017). Such an incident brings a great scope for Vodafone to make
innovation in its communication technology. However, Vodafone meets the need for a
handset that can be used as the fine gadget for every age group. Besides these positive
aspects, there are some major social issues like the aging population in UK and
tendency to going green affects the Vodafone service directly or indirectly.
Technological
UK is a technology-oriented country. By incorporating the emerging technology in the
communication process Vodafone is trying to meet an extensive demand for wireless
data service in the future. However, growing technology in UK gives rise the alternative
services like online chatting and Yahoo Messengers, which are going to affect the
Vodafone services. It is important for the mobile network providers to give their concern
on research and development to introduce innovative services and products in both
domestic and international markets (Valdez-de-Leon 2016). Hence, it can be said that
technological innovation should be done wisely in the context of Vodafone.
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Legal
Legal factors highlight the legal norms that an organization needs to consider while
operating in a specific country (Rychalski and Hudson 2017). In the context of
Vodafone, it needs to protect the consumer right while operating in UK otherwise it may
face legal challenges in this country.
Environmental
Environmental factors mean environmental norms to protect the environment from being
destroyed (Uhl and Gollenia 2016). Today, rising mobile networks are creating a threat
to wildlife. For this reason, Vodafone needs to reduce its business effect from the
environment by developing an environmentally friendly business.
ii) Application of Ansoff’s growth vector matrix to analyze the strategic
positioning of Vodafone
Ansoff's matrix is applied by the business organizations to launch a new product or to
penetrate in a new market (Dawes 2018). This matrix contains four components include
market penetration, product development, market development, and diversification.
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Figure 1: Ansoff’s Matrix of Vodafone
(Source: Dawes 2018)
Market penetration
The business organizations try to penetrate in a market by marketed their existing
products in a way that can increase their market share (Ang 2016). As argued by Chen
and Yang (2015), it is a big challenge for the mobile network operators to market their
existing service in a new way as many competitors are present in the similar market
with alternative products. In order to deal with the high competition, Vodafone has
adopted a customer-focused strategy. This allows them to bring innovation in their
existing service by utilizing the advanced technology. At present Vodafone is offering
wireless connection and high-speed data at a competitive price. This allows them to
enter a market easily.
Market development
Market development strategy is taken by a firm when it wants to enter a new market
with its existing product or service. As criticized by Ang (2016), for market development
the firms need to arrange proper resources otherwise it will be a great challenge for
them. To develop a new market Vodafone has used a specific targeting strategy. The
Vodafone brand is targeting different sections in a market instead of focusing on a
single segment. It is important for Vodafone to align its competencies with the products
rather than a market as the market development includes high risk than market
penetration.
Product development
The product development happens when a firm seeks to introduce a new product in a
market (Cachin et al. 2015). The Vodafone is continuously trying to develop its product,
which will utilize the changing technology. Nowadays, Vodafone is trying to offer high-
speed data at a reasonable rate as like the competitors offer and they are trying to
introduce 5G internet service in the near future. However, it is important for Vodafone to
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launch a new product, which leverages the brand image otherwise the product will lose
its value in the customer domain.
Diversification
After launching a new product in a new market an organization needs to diversify its
products (Amin et al. 2016). Such a product diversification strategy is the most risky
quadrant in the Ansoff’s Matrix. As argued by Ang, (2016), often organization losses
resources to shape its product diversification strategy. Vodafone has launched cloud
service in the both the domestic and international market, which highlights its
diversification strategy. This strategy boosts business dealing and makes Vodafone
popular in the global business industry. However, O2 is the major competitor of
Vodafone in the UK market. The O2 network will be available in beta mobile in a few
days. This innovation will bring a challenge for Vodafone in both national and
international market. Hence, it can be said that the product diversification strategy of
Vodafone is good for meeting the present demand but they need to update their service
for meeting the future demand.
Task 2
i) Application of VRIO/ VRIN model to analyze the strategic capabilities of
Vodafone
The VRIO analysis of Vodafone has been done to understand its strategic capabilities.
The term VRIO stands for Value, Rare, Imitation and Organization (Lopes et al. 2018).
Resource
and
capabilities
Valuable Rare Expensive
to Imitate
Organized Effect on
competitive
advantage
Ability to
attract
skilled
Yes No Yes Yes Temporary
competitive
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employees advantage
Network
capacity
Yes Yes No No
Brand
strength
Yes Yes No Yes
Access to
capital
Yes Yes Yes Yes
Pricing
strategy
No Yes No No
Table 1: VRIO analysis of Vodafone
(Source: Vodafone.com)
Analysis: From the above VRIO model it has been received that Vodafone has
valuable resources that allow this organization to invest more and grab the opportunity
in the market. This organization has the capacity to attract talents and organize them in
a proper way. However, the pricing strategy of Vodafone is not a valuable resource as it
includes the high price of the service, which may affect the customer base. However,
the financial resources of Vodafone are observed to be rare as per the VRIO analysis.
In the global market, the strong financial resources are found only into some specific
company. According to the VRIO analysis, the financial resources and human resources
of Vodafone are costly to imitate as such resources are gained by this organization
from huge labor and prolonged profits over the years (Kumar 2019).
The financial and human resources of Vodafone are well organized to capture the value
of this business (Öztürk and Marşap 2018). These resources are organized in a proper
way to use it strategically and invest in in the right place. However, the pricing strategy
and network accessibility are not well organized in Vodafone, which create discomfort in
the customer domain. The competitors are providing high-speed network at a pocket-
friendly rate while Vodafone charges high than its competitors. Hence, Vodafone needs
to work out in this area to boost its strategic capabilities.
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ii) Evaluation of the strength and weakness of Vodafone
In order to understand the market value and market positioning, an organization needs
to identify its current strength and weakness based on which it can develop a suitable
solution (Vodafone.co.uk 2019). In the context of Vodafone the major strengths and
weaknesses of this organization are as follow:
Strengths
Large market coverage: Vodafone has massive market coverage and it is ranked 395th
among the top 2000 brands in the world. This organization is popular for its worldwide
distribution. As commented by Kumar (2019), large market share makes a brand global
and trustworthy in the consumer domain. By providing a wireless network in the globe
Vodafone has gained a strong position in the global telecommunication industry.
Strong brand equity: Vodafone has a strong brand recognition, which allows it to
create confidence among the consumer domain. It is important for a brand to create a
good image in the customer mind before selling a product (Cachin et al. 2015). Despite
having premium price Vodafone owns a valuable position in UK as well as the global
market due to its strong brand image.
High Revenue: Vodafone is popular in the telecommunication industry due to its high
revenue generation. Statistics show that Vodafone has generated 87.3 billion dollars in
2016, which highlights its great contribution in UK economy (Vodafone.com 2019). This
figure boosts the ranking and expectations of customers from Vodafone.
Strong marketing: The marketing strategy generated by Vodafone is legendary. Their
logo is always unique and creates a positive impression in the user's mind. However,
the Vodafone ZooZoo’s is an endearing and brilliant campaign that makes many users
to die-hard fans of Vodafone (Vodafone.com 2019). Vodafone follows a customer-
focused strategy while marketing a product, which makes them unique in the consumer
domain.
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Weakness
Poor performance in the European market: Due to the economic recession in 2008
and Brexit the performance of Vodafone becomes dropped in its home market. This
company failed to generate high revenue. According to the statistical data, 40% of
revenue comes from UK, US or India (Vodafone.co.uk 2019). In UK market, Vodafone
did not generate much revenue during the economic recession, which left a great
impact on the profit margin of this organization.
Decreasing market share
The Vodafone has market share in various countries however, in USA market it did not
have much demand as many premium mobile network operators already exist in this
market (Vodafone.co.uk 2019). As a result, this telecommunication provider has lost its
market share in US market, which needs to consider while taking a new strategy.
Dropping the customer base
The dropping subscriber base of Vodafone is the major reason for dropping its brand
valuation (Kumar 2019). The customer base of this brand decreased in the last 1 year is
phenomenal, which highlights that Vodafone has lost its brand valuation. In order to
improve this situation, such an organization needs to offer some unique service, which
can help them compete in the UK market. This strategy will help such an organization to
gain its brand valuation in the both domestic and global market.
Task 3
Vodafone Group Plc improved its strategy by adopting Porter's Five Forces of
Competitive Position Analysis which was developed in 1979 by Michael E Porter of
Harvard Business School. It is a simple framework for evaluating and assessing the
strength in a competitive way and position of Vodafone's business in UK (Adi, 2015).
This theory consists of five forces that determine the competitive intensity and
attractiveness of the UK market.
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Porter’s five forces
Figure 1: Porter’s Five Forces model
(Source: Lüttgens, and Diener, 2016)
The strategic position of the communication sector has explode a profitable opportunity
in whole Technology Sector.
The five forces analysis for Vodafone are:
Bargaining Power of Suppliers: Vodafone has focused on the raw materials from the
different suppliers and has increased the position in to the entire world. In UK Vodafone
has dominated every other communication like EE etc with the powerful suppliers in
technology and negotiating the power. This has impact on the higher supplier
bargaining power. However, Vodafone has tackled the bargaining power of the
suppliers with proper strategy.
● The organisation has focused on a proper supply chain and logistics department
with multiple suppliers (Boateng, et al. 2016).
● It has also focused on product design by using different materials.
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● It has developed dedicated supplier for the business and has collaborated with
Walmart and Nike.
● The organisation has adopted third party manufacturers for significant less
bargaining power.
Bargaining power of buyers: In this type of scenario, the buyers are often demanding.
The buyers wants the best offerings which is available is the minimum price. The
minimum price criteria has creative a pressure on Vodafone group which has affected in
the profitability for the long run. By understanding the issues, Vodafone has focused on
high customer base strategy for higher bargaining power.
● The company has also reduced the bargaining power of the buyers with an
opportunity to the telecommunication sector for streamlining the sales and
production process.
● The rapid innovation of the new products has created a good discount and
offerings Vodafone group (Gans, and Ryall, 2017).
● The introduction of different new products have increased more customer base
and has limited the bargaining power of buyers.
● Introduction of new products have helped the organisation for reducing the
defection of existing customers of Vodafone group with its competitor.
Threats of substitute products or services: Introduction of new product or service
have increased the threat of substitutes for the products which offers a Value
proposition that can be different from the present offering of the industry.
● The service oriented system of Vodafone has improved the product in the market
(Fabbri, and Klapper, 2016).
● The core need of the customer has helped the organisation to meet the buying
power.
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