Strategic recommendations to the Vodafone Group Plc

3585 words (14 pages) Essay

1st Jan 1970 Marketing Reference this

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This report has been created to provide strategic recommendations to the Vodafone Group Plc, in order to maintain its position as market leader in the markets in which it operates. Through the analysis of the external and internal environment and the resources and capabilities of Vodafone, recommendations were made for strategy potentials for the future. The report focuses on the personal-use mobile telephony sector of the group, with a main focus on the UK parent company of the group.

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Through the analysis of the macroeconomic environment, the industry and the business level analysis, the industry driving forces and key success factors were identified, and the external opportunities and threats were listed. The main opportunities identified were its focus on emerging markets, Vodafone’s market leadership, its global footprint and reputation, and the low threat of new competition through the highly regulated industry. While the external threats were its low revenue potential through its focus on emerging markets, the continual emergence of new technology and the difficulty and cost of keeping up, emergence of new companies extending their product line such as Apple and Microsoft, its global footprint which can lead to exposure of unpredictable risks, the highly regulated Industry which has an effect on revenue as reported, and the saturation of the market.

The resources and capabilities of Vodafone were identified and analysed through the use of Value Chain and VRIO analysis to identify its internal strengths and weaknesses. The identified strengths of Vodafone were its strong R&D, its exclusivities, its strong corporate culture, its strong financial base, its own brand handsets and keeping it simple in terms of its operation; while the weaknesses were the low differentiation between competitors, its short term advantage through exclusivities, its scarce managerial resources due to constant expansion, its low market power in Europe, the risks of hanging their own brand handsets and its poor marketing.

The external and internal analyses were then brought together in a TOWS matrix to establish potential strategies to further develop and sustain Vodafone’s market position. The strategies recommended are a marketing strategy, a health and safety research joint venture and a Bottom of the Pyramid strategy in the newly acquired emerging markets.

2. Introduction

Vodafone Group Plc is the world’s leading mobile telecommunications company, with a significant presence in Europe, the Middle East, Africa, Asia Pacific and the United States through the Company’s subsidiary undertakings, joint ventures, associated undertakings and investments. The organization offers a range of services worldwide, however for the purpose of this report, the mobile telephony personal-use sector of the group will be analysed, focusing on the main operating areas of the group, with a greater focus on the parent company in the UK.

Mobile telephony has been defined as ‘the manufacture, operation and distribution of mobile phones and any additional services that are directly facilitated by mobile telecommunications’ (McWilliams, Mitchell, & Walley, 2004). Mobile phones are now seen as necessities rather than luxuries and market penetration is very high and growing. In addition there is an explosion of demand in the developing world, something which Vodafone had identified and has expanded its portfolio to African countries, India and Turkey where the market potential is promising.

Mobile phones retail revenue reached ‘15.4bn in 2008, representing a 2.7% increase compared with 2007, and a 29.4% rise on the 2004 figure. However, revenue is no longer growing as fast as it once did, partly due to the recession and market saturation, but also because of the intense competition between a growing number of networks, led by O2, Vodafone and Orange, and handset brands led by Nokia, Samsung and Apple. Of these major players, only Vodafone has a UK parent company (Key Note, 2010).

The purpose of this report is to analyse the environment in which Vodafone operates in, identify its core capabilities and resources and its strengths, weaknesses, opportunities and threats. By analysing the environment we will then be able to propose recommendations for strategic opportunities, as identified from the analysis.

3. External Environment Analysis

3.1 Macro Level Analysis

To analyse the macro-environment, a PESTLE framework was used. Vodafone has been affected in terms of its operations by the external forces. Figure 1 illustrates a summarised version of the main effects the external macroeconomic environment has on Vodafone.

As indicated by Figure 1, the political/ legal, economical, sociological, technological and environmental factors of the external environment all have an effect on the organization’s operations. It has an effect on their day to day operations, in addition to an effect on their revenue.

3.2 Industry Level Analysis

The industry analysis was done with the help of the Porter’s Five Forces Model. The analysis showed that the industry has a large effect on the way in which the company operates, in terms of competition, suppliers, their customers and new entrants in the market. The mobile telephony industry is highly competitive. A summary of the Five Forces Industry Level Analysis is illustrated in Figure 2. Appendix 1 offers a more detailed analysis.

When analysing the mobile telephony industry it is important to look at both aspects of the industry, as they are inextricably interlinked together ‘ the mobile handset manufacturers and the network operators. In both cases the industry is oligopolistic. The main competitors are Nokia, Apple and Samsung in terms of handsets and O2 and Orange in terms of their network competitors in the UK.

The industry analysis shows that there is intense competition within the industry, both in terms of manufacturers and network operators. The threat of new entrants to the industry is low as it is highly regulated. Buyer and supplier power are both moderate, as the industry is fairly oligopolistic. The threat of substitutes in terms of a substitute to mobile phones is weak; however a substitute to Vodafone handsets is stronger.

Figure 2: Porter’s Five Forces Analysis of the Mobile Telephony Industry

3.3 Business Level Analysis

The External analysis previously carried out allows us to identify the key driving forces and key success factors of Vodafone and relate them to the opportunities and threats that Vodafone face. Table 1 below gives a brief description of what these are.

Table 1: Industry Driving Forces and Vodafone’s KSFs

INDUSTRY DRIVING FORCES EXPLANATION AND IMPLICATIONS KEY SUCCESS FACTORS EXPLANATION AND IMPLICATIONS

Fast paced technological advances to remain competitive Constant investment in R&D. Need to remain innovative and up-to-date with trends, i.e. Smart phones Strong brand value The Vodafone brand is ranked as the 7th most valuable brand, gives them a competitive advantage

Rise in regulations and regulatory bodies Important to follow regulations which vary from country to country, can have an effect on revenue and operations Strong resources Vodafone has a large portfolio, strong resources and market know-how which is one of their greatest strengths

Economic crisis Has an effect on revenue, need to adopt low-cost strategies to e able to compete Vodafone own brand Vodafone’s own brand handsets allows them to adjust to customer demands for safer handsets and maintain a competitive advantage

Rising consumer awareness in cancer link to mobile phones and environmental issues Important to be sustainable and need for R&D in ‘greener’ handsets and safer handsets Vodafone sustainability Vodafone have shown awareness to environmental and ethical issues which enhances their brand image

From Table 1 we can now identify the threats and opportunities of Vodafone. These will be described in Table 2 below.

Table 2: Vodafone’s Opportunities and Threats

OPPORTUNITIES EXPLANATION THREATS EXPLANATION

Focus on emerging markets Vodafone has identified the opportunities in the emerging markets such as India and African countries, which gives them great potential for increased revenue and larger market share Focus on emerging markets Highly competitive as most competitors have realised the potential in the emerging markets.

Market leaders Vodafone have been able to become market leaders in the majority of the markets in which they operate as they have an extensive portfolio and market know-how Continual emergence of new technology Continual innovations in the industry make it difficult for Vodafone to remain innovative, and very costly in terms of resources to stay up-to-date. Smart phones such as Apple’s i-Phone make it difficult to compete with their own brand.

Global footprint Vodafone’s global footprint makes it a more powerful brand and gives them larger market share Emergence of new companies Companies such as Apple, Microsoft and Blackberry who are newcomers to the mobile industry have become a threat to the Vodafone handset brand in terms of competition

Highly regulated industry Makes the threat of new entries low, therefore controls competition Global footprint Vodafone’s global footprint may present exposure to unpredictable economic, political, regulatory and legal risks

Highly regulated industry New regulations can affect Vodafone’s revenue and threaten new services

Saturated market

The mobile telephony market is saturated with little differentiation between competitors. Hard to stand out from competition and be innovative.

Although the threats identified are greater than the opportunities within the groups’ external environment, they have still managed to remain market leaders in most countries in which they operate and maintain a large portfolio.

The above concludes the external environment analysis. From the above findings Vodafone is operating in an oligopolistic, saturated market, characterised by low differentiation, and few competitors. The industry is highly regulated which can present both a threat and opportunity. Vodafone however have a great global presence, with a focus on emerging markets which allows great revenue potential and greater market share. The external environment of the mobile telephony industry however is competitive, technologically advanced and risky.

4. Internal Environment Analysis

4.1 Resources and Capabilities

Figure 3 below gives a brief overview of Vodafone’s tangible and intangible resources.

Figure 3: Vodafone’s Tangible and Intangible Resources

As Figure 3 shows, Vodafone has strong resources, both tangible and intangible. They have very strong financial resources with profits exceeding hundreds of millions pounds per year. This allows them to reinvest in R&D and extending their portfolio through M&As, which allows for a larger market share. Vodafone secures vast investment through their reorganisation of assets which further increases their profits. The company’s formal reporting structure and formal planning, controlling, and coordinating systems are strong, as evident by their successful M&As, high innovation and low cost base. They also operate a significant amount of mobile telephony network base stations and own the spectrum licences of many mobile telephony markets.

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Vodafone developed the next generation wireless standard, UMTS, which allows for voice and data on the same wireless network. This provides evidence on their innovative nature and strong intellectual property. As they focus exclusively on mobile telephony it allows them to strengthen their resources and their role in the market.

Their human resources are strong and they have a great employer brand. In 2010 Vodafone won the ‘Best Customer Care Award 2010’ in Greece. This further enhances their brand image both as an employer and as a network operator. In 2010 alone Vodafone employed around 85000 people worldwide. Vodafone employ a diverse workforce, with over 26 nationalities in their top senior management, and have a strong corporate culture with open channels of communication. In 2010 Vodafone achieved a 76% employee engagement score.

Their resources link to their competitive advantage as their strong R&D, exclusivities and own brand products allow Vodafone to have control over their resources, which in turn makes it harder for their competitors to gain access to. Their strong intangible resources, such as their strong global brand offers advantages that local competitors do not have. In addition Vodafone implement a low-cost strategy, which though it leads to lower margins, can be subsidised by its other operations. Their annual profits allow them to reinvest in R&D which gains them more intellectual resources and therefore more resource control.

4.2 VRIO Analysis

Figure 4: VRIO Analysis of Mobile Telephony Market

Figure 4 illustrates a VRIO Analysis. From the analysis we can determine that Vodafone, as well as their competitors have a temporary competitive advantage. This advantage could be lost if competitors bring out more advanced products which Vodafone cannot imitate immediately or if exclusivities run out or gained by competitors.

4.3 Strengths & Weaknesses

Table 3: Vodafone’s Strengths and Weaknesses

STRENGTHS EXPLANATION WEAKNESSES EXPLANATION

Strong R&D Enables Vodafone to gain competitive advantage by becoming market leaders in new technology Low differentiation between competitors The saturated market makes it hard for Vodafone to stand out from its competitors

Exclusivities Vodafone have gained exclusivities of Blackberry in 11 different markets worldwide Exclusivities Exclusivities only offer the company temporary advantages as they are only short-term as is the product life cycle of mobile handsets

Strong Corporate Culture Has allowed Vodafone in becoming successful with M&A and JVs. Managerial resources thin due to rapid growth Due to Vodafone’s continual expansion managerial resources are thin and hard to find, which leads to constant reorganizations within the group

Strong financial base Gives Vodafone room for error without the company becoming bankrupt, and ability in reinvest Low market power in Europe Due to extensive competition in Europe, Vodafone do not have much influence in the markets in which it operates

Own brand handsets Own brand handsets gives Vodafone the flexibility of providing cheaper handsets and more control over cost. Allows them to design according to their consumer’s demand Own brand handsets As Vodafone is the only name on the handsets, anything that goes wrong can cause great brand damage ‘ i.e. lawsuit over claims of cancerous handsets. Additionally, as Vodafone subcontracts the manufacturers of their handsets, that can create a potential risk as contracts can be withdrawn.

Keeping it simple Vodafone’s aim is to keep its services simple yet innovative; therefore resources are focused on its R&D rather than extravagant marketing campaigns. Their strong brand enables them to do so without it becoming a risk to their business Poor marketing Vodafone is not known for its marketing activities, despite the demographics they target, mainly Generation Y users, in terms of generational marketing are characterised by their interests in celebrity endorsements

Table 3 indicates Vodafone’s strengths and weaknesses. As it suggests, some strengths can also become weaknesses and vice versa, such are exclusivities and Vodafone’s own brand handsets. Vodafone overall have an equal amount of strengths and weaknesses. Some of its strengths can become potential risk factors for the group if conditions in the market change. Equally some its weaknesses can become strengths, for example if Vodafone invest some of its resources in manufacturing its own handsets, or through research joint ventures (RJVs) strengthening their own brand handsets by making them safer, greener or working along one of its competitor handset manufacturers to join their know-how and become more innovative.

4.4 Summarised Value Chain

Figure 5 shows a brief description of Vodafone’s Value Chain. From the figure we can see the group has especially strong support activities and a strong corporate social responsibility. This gives them a good public image, which is another of the company’s strengths. Additionally the primary activities allow Vodafone to have greater control over their resources and an ability to adopt a low-cost strategy in order to be able to compete whilst there is still a recession.

Figure 5: Vodafone Value Chain

5. Recommendations

The above analysis of the internal and external environment has revealed Vodafone’s opportunities and strengths, in addition to its main threats and weaknesses. Vodafone’s greatest potential lies in its control over its resources and great market knowledge and global footprint. However increasing competition and pressures from regulatory bodies provide its greatest threats and weaknesses. Figure 6 uses a TOWS Matrix to illustrate the strategic choices available to Vodafone, from the analysis of its strengths, weaknesses, opportunities and threats that arise from its external and internal environment.

Figure 6: TOWS Strategic Alternatives Matrix

From the TOWS Matrix, we can now identify the best strategic options for Vodafone as identified by the analysis.

5.1 Recommendation 1: Marketing Strategy

The analysis has shown that Vodafone currently have a weak marketing strategy, mostly in terms of its advertising. Based on generational marketing theory and the demographics which Vodafone target as its main customers, the recommendation is that they invest in a celebrity endorsed campaign. This will fit in with Vodafone’s motto ‘Power to you!’ which will be enhanced by a global persona advertising their services, in addition to making their own brand handsets better known. This however will counteract with their aim of remaining simple in their operations. Potential risks to this can be that financial resources can be wasted in an unsuccessful campaign, risks of celebrity scandals or choice of the wrong celebrity that does not fit in with the company’s image.

5.2 Recommendation 2: Health and Safety RJVs

Research Joint Ventures with associations such as Cancer Research and other independent associations to join knowledge for R&D in safer handsets. Vodafone uses part of its resources for the Vodafone Foundation, therefore a proportion can be used in such RJVs as it enhances brand image, it fits in with the sociological factors of the external analysis and by doing so they would implement a global strategy which recognises the significance of local concerns and cultural and legal requirements. This will further enhance the group’s corporate social responsibility. Potential risks could be that it could be perceived as Vodafone admitting to the link of mobile phones and cancer and instead damage the brand image.

5.3 Recommendation 3: BoP Strategy in emerging markets:

‘Mobile companies everywhere in the developing world are coming to grips with the fact that virtually all of their future customer growth will come from rural areas’ (Hammond, A. 2008). The recommendation is that Vodafone implement a Bottom of the Pyramid strategy by providing an internet-based phone service with advanced Wi-Fi technology so that rural areas in developing countries can be connected. This fits in with the group’s vision of ‘Keeping people better connected’. This way Vodafone can use their own-brand, low cost smart phones. This strategy could lower the investment required, lower operating costs and would increase the number of users. This strategy can be implemented by providing solar panels to provide the WiFi networks and offer a chance to make the mobile build out ‘green’, which also fits in with Vodafone’s sustainability goals. Potential risks are large amounts spent in the network build-up with low revenue as a result.

Based on all the aforementioned it is safe to say that Vodafone are one of the more important players in the mobile telephony industry. However, there are still areas in which they can improve and strategies which they can implement to further increase their revenue; enhance their brand and public image and further launch and make their own-brand handsets a threat to their competition. It is clear from the analysis that even though Vodafone are technologically forward in terms of the services they provide, they however lack innovation in their handset manufacturing. By implementing the above recommendations there is potential for them to promote their hand-sets and become more competitive overall.

This report has been created to provide strategic recommendations to the Vodafone Group Plc, in order to maintain its position as market leader in the markets in which it operates. Through the analysis of the external and internal environment and the resources and capabilities of Vodafone, recommendations were made for strategy potentials for the future. The report focuses on the personal-use mobile telephony sector of the group, with a main focus on the UK parent company of the group.

Through the analysis of the macroeconomic environment, the industry and the business level analysis, the industry driving forces and key success factors were identified, and the external opportunities and threats were listed. The main opportunities identified were its focus on emerging markets, Vodafone’s market leadership, its global footprint and reputation, and the low threat of new competition through the highly regulated industry. While the external threats were its low revenue potential through its focus on emerging markets, the continual emergence of new technology and the difficulty and cost of keeping up, emergence of new companies extending their product line such as Apple and Microsoft, its global footprint which can lead to exposure of unpredictable risks, the highly regulated Industry which has an effect on revenue as reported, and the saturation of the market.

The resources and capabilities of Vodafone were identified and analysed through the use of Value Chain and VRIO analysis to identify its internal strengths and weaknesses. The identified strengths of Vodafone were its strong R&D, its exclusivities, its strong corporate culture, its strong financial base, its own brand handsets and keeping it simple in terms of its operation; while the weaknesses were the low differentiation between competitors, its short term advantage through exclusivities, its scarce managerial resources due to constant expansion, its low market power in Europe, the risks of hanging their own brand handsets and its poor marketing.

The external and internal analyses were then brought together in a TOWS matrix to establish potential strategies to further develop and sustain Vodafone’s market position. The strategies recommended are a marketing strategy, a health and safety research joint venture and a Bottom of the Pyramid strategy in the newly acquired emerging markets.

2. Introduction

Vodafone Group Plc is the world’s leading mobile telecommunications company, with a significant presence in Europe, the Middle East, Africa, Asia Pacific and the United States through the Company’s subsidiary undertakings, joint ventures, associated undertakings and investments. The organization offers a range of services worldwide, however for the purpose of this report, the mobile telephony personal-use sector of the group will be analysed, focusing on the main operating areas of the group, with a greater focus on the parent company in the UK.

Mobile telephony has been defined as ‘the manufacture, operation and distribution of mobile phones and any additional services that are directly facilitated by mobile telecommunications’ (McWilliams, Mitchell, & Walley, 2004). Mobile phones are now seen as necessities rather than luxuries and market penetration is very high and growing. In addition there is an explosion of demand in the developing world, something which Vodafone had identified and has expanded its portfolio to African countries, India and Turkey where the market potential is promising.

Mobile phones retail revenue reached ‘15.4bn in 2008, representing a 2.7% increase compared with 2007, and a 29.4% rise on the 2004 figure. However, revenue is no longer growing as fast as it once did, partly due to the recession and market saturation, but also because of the intense competition between a growing number of networks, led by O2, Vodafone and Orange, and handset brands led by Nokia, Samsung and Apple. Of these major players, only Vodafone has a UK parent company (Key Note, 2010).

The purpose of this report is to analyse the environment in which Vodafone operates in, identify its core capabilities and resources and its strengths, weaknesses, opportunities and threats. By analysing the environment we will then be able to propose recommendations for strategic opportunities, as identified from the analysis.

3. External Environment Analysis

3.1 Macro Level Analysis

To analyse the macro-environment, a PESTLE framework was used. Vodafone has been affected in terms of its operations by the external forces. Figure 1 illustrates a summarised version of the main effects the external macroeconomic environment has on Vodafone.

As indicated by Figure 1, the political/ legal, economical, sociological, technological and environmental factors of the external environment all have an effect on the organization’s operations. It has an effect on their day to day operations, in addition to an effect on their revenue.

3.2 Industry Level Analysis

The industry analysis was done with the help of the Porter’s Five Forces Model. The analysis showed that the industry has a large effect on the way in which the company operates, in terms of competition, suppliers, their customers and new entrants in the market. The mobile telephony industry is highly competitive. A summary of the Five Forces Industry Level Analysis is illustrated in Figure 2. Appendix 1 offers a more detailed analysis.

When analysing the mobile telephony industry it is important to look at both aspects of the industry, as they are inextricably interlinked together ‘ the mobile handset manufacturers and the network operators. In both cases the industry is oligopolistic. The main competitors are Nokia, Apple and Samsung in terms of handsets and O2 and Orange in terms of their network competitors in the UK.

The industry analysis shows that there is intense competition within the industry, both in terms of manufacturers and network operators. The threat of new entrants to the industry is low as it is highly regulated. Buyer and supplier power are both moderate, as the industry is fairly oligopolistic. The threat of substitutes in terms of a substitute to mobile phones is weak; however a substitute to Vodafone handsets is stronger.

Figure 2: Porter’s Five Forces Analysis of the Mobile Telephony Industry

3.3 Business Level Analysis

The External analysis previously carried out allows us to identify the key driving forces and key success factors of Vodafone and relate them to the opportunities and threats that Vodafone face. Table 1 below gives a brief description of what these are.

Table 1: Industry Driving Forces and Vodafone’s KSFs

INDUSTRY DRIVING FORCES EXPLANATION AND IMPLICATIONS KEY SUCCESS FACTORS EXPLANATION AND IMPLICATIONS

Fast paced technological advances to remain competitive Constant investment in R&D. Need to remain innovative and up-to-date with trends, i.e. Smart phones Strong brand value The Vodafone brand is ranked as the 7th most valuable brand, gives them a competitive advantage

Rise in regulations and regulatory bodies Important to follow regulations which vary from country to country, can have an effect on revenue and operations Strong resources Vodafone has a large portfolio, strong resources and market know-how which is one of their greatest strengths

Economic crisis Has an effect on revenue, need to adopt low-cost strategies to e able to compete Vodafone own brand Vodafone’s own brand handsets allows them to adjust to customer demands for safer handsets and maintain a competitive advantage

Rising consumer awareness in cancer link to mobile phones and environmental issues Important to be sustainable and need for R&D in ‘greener’ handsets and safer handsets Vodafone sustainability Vodafone have shown awareness to environmental and ethical issues which enhances their brand image

From Table 1 we can now identify the threats and opportunities of Vodafone. These will be described in Table 2 below.

Table 2: Vodafone’s Opportunities and Threats

OPPORTUNITIES EXPLANATION THREATS EXPLANATION

Focus on emerging markets Vodafone has identified the opportunities in the emerging markets such as India and African countries, which gives them great potential for increased revenue and larger market share Focus on emerging markets Highly competitive as most competitors have realised the potential in the emerging markets.

Market leaders Vodafone have been able to become market leaders in the majority of the markets in which they operate as they have an extensive portfolio and market know-how Continual emergence of new technology Continual innovations in the industry make it difficult for Vodafone to remain innovative, and very costly in terms of resources to stay up-to-date. Smart phones such as Apple’s i-Phone make it difficult to compete with their own brand.

Global footprint Vodafone’s global footprint makes it a more powerful brand and gives them larger market share Emergence of new companies Companies such as Apple, Microsoft and Blackberry who are newcomers to the mobile industry have become a threat to the Vodafone handset brand in terms of competition

Highly regulated industry Makes the threat of new entries low, therefore controls competition Global footprint Vodafone’s global footprint may present exposure to unpredictable economic, political, regulatory and legal risks

Highly regulated industry New regulations can affect Vodafone’s revenue and threaten new services

Saturated market

The mobile telephony market is saturated with little differentiation between competitors. Hard to stand out from competition and be innovative.

Although the threats identified are greater than the opportunities within the groups’ external environment, they have still managed to remain market leaders in most countries in which they operate and maintain a large portfolio.

The above concludes the external environment analysis. From the above findings Vodafone is operating in an oligopolistic, saturated market, characterised by low differentiation, and few competitors. The industry is highly regulated which can present both a threat and opportunity. Vodafone however have a great global presence, with a focus on emerging markets which allows great revenue potential and greater market share. The external environment of the mobile telephony industry however is competitive, technologically advanced and risky.

4. Internal Environment Analysis

4.1 Resources and Capabilities

Figure 3 below gives a brief overview of Vodafone’s tangible and intangible resources.

Figure 3: Vodafone’s Tangible and Intangible Resources

As Figure 3 shows, Vodafone has strong resources, both tangible and intangible. They have very strong financial resources with profits exceeding hundreds of millions pounds per year. This allows them to reinvest in R&D and extending their portfolio through M&As, which allows for a larger market share. Vodafone secures vast investment through their reorganisation of assets which further increases their profits. The company’s formal reporting structure and formal planning, controlling, and coordinating systems are strong, as evident by their successful M&As, high innovation and low cost base. They also operate a significant amount of mobile telephony network base stations and own the spectrum licences of many mobile telephony markets.

Vodafone developed the next generation wireless standard, UMTS, which allows for voice and data on the same wireless network. This provides evidence on their innovative nature and strong intellectual property. As they focus exclusively on mobile telephony it allows them to strengthen their resources and their role in the market.

Their human resources are strong and they have a great employer brand. In 2010 Vodafone won the ‘Best Customer Care Award 2010’ in Greece. This further enhances their brand image both as an employer and as a network operator. In 2010 alone Vodafone employed around 85000 people worldwide. Vodafone employ a diverse workforce, with over 26 nationalities in their top senior management, and have a strong corporate culture with open channels of communication. In 2010 Vodafone achieved a 76% employee engagement score.

Their resources link to their competitive advantage as their strong R&D, exclusivities and own brand products allow Vodafone to have control over their resources, which in turn makes it harder for their competitors to gain access to. Their strong intangible resources, such as their strong global brand offers advantages that local competitors do not have. In addition Vodafone implement a low-cost strategy, which though it leads to lower margins, can be subsidised by its other operations. Their annual profits allow them to reinvest in R&D which gains them more intellectual resources and therefore more resource control.

4.2 VRIO Analysis

Figure 4: VRIO Analysis of Mobile Telephony Market

Figure 4 illustrates a VRIO Analysis. From the analysis we can determine that Vodafone, as well as their competitors have a temporary competitive advantage. This advantage could be lost if competitors bring out more advanced products which Vodafone cannot imitate immediately or if exclusivities run out or gained by competitors.

4.3 Strengths & Weaknesses

Table 3: Vodafone’s Strengths and Weaknesses

STRENGTHS EXPLANATION WEAKNESSES EXPLANATION

Strong R&D Enables Vodafone to gain competitive advantage by becoming market leaders in new technology Low differentiation between competitors The saturated market makes it hard for Vodafone to stand out from its competitors

Exclusivities Vodafone have gained exclusivities of Blackberry in 11 different markets worldwide Exclusivities Exclusivities only offer the company temporary advantages as they are only short-term as is the product life cycle of mobile handsets

Strong Corporate Culture Has allowed Vodafone in becoming successful with M&A and JVs. Managerial resources thin due to rapid growth Due to Vodafone’s continual expansion managerial resources are thin and hard to find, which leads to constant reorganizations within the group

Strong financial base Gives Vodafone room for error without the company becoming bankrupt, and ability in reinvest Low market power in Europe Due to extensive competition in Europe, Vodafone do not have much influence in the markets in which it operates

Own brand handsets Own brand handsets gives Vodafone the flexibility of providing cheaper handsets and more control over cost. Allows them to design according to their consumer’s demand Own brand handsets As Vodafone is the only name on the handsets, anything that goes wrong can cause great brand damage ‘ i.e. lawsuit over claims of cancerous handsets. Additionally, as Vodafone subcontracts the manufacturers of their handsets, that can create a potential risk as contracts can be withdrawn.

Keeping it simple Vodafone’s aim is to keep its services simple yet innovative; therefore resources are focused on its R&D rather than extravagant marketing campaigns. Their strong brand enables them to do so without it becoming a risk to their business Poor marketing Vodafone is not known for its marketing activities, despite the demographics they target, mainly Generation Y users, in terms of generational marketing are characterised by their interests in celebrity endorsements

Table 3 indicates Vodafone’s strengths and weaknesses. As it suggests, some strengths can also become weaknesses and vice versa, such are exclusivities and Vodafone’s own brand handsets. Vodafone overall have an equal amount of strengths and weaknesses. Some of its strengths can become potential risk factors for the group if conditions in the market change. Equally some its weaknesses can become strengths, for example if Vodafone invest some of its resources in manufacturing its own handsets, or through research joint ventures (RJVs) strengthening their own brand handsets by making them safer, greener or working along one of its competitor handset manufacturers to join their know-how and become more innovative.

4.4 Summarised Value Chain

Figure 5 shows a brief description of Vodafone’s Value Chain. From the figure we can see the group has especially strong support activities and a strong corporate social responsibility. This gives them a good public image, which is another of the company’s strengths. Additionally the primary activities allow Vodafone to have greater control over their resources and an ability to adopt a low-cost strategy in order to be able to compete whilst there is still a recession.

Figure 5: Vodafone Value Chain

5. Recommendations

The above analysis of the internal and external environment has revealed Vodafone’s opportunities and strengths, in addition to its main threats and weaknesses. Vodafone’s greatest potential lies in its control over its resources and great market knowledge and global footprint. However increasing competition and pressures from regulatory bodies provide its greatest threats and weaknesses. Figure 6 uses a TOWS Matrix to illustrate the strategic choices available to Vodafone, from the analysis of its strengths, weaknesses, opportunities and threats that arise from its external and internal environment.

Figure 6: TOWS Strategic Alternatives Matrix

From the TOWS Matrix, we can now identify the best strategic options for Vodafone as identified by the analysis.

5.1 Recommendation 1: Marketing Strategy

The analysis has shown that Vodafone currently have a weak marketing strategy, mostly in terms of its advertising. Based on generational marketing theory and the demographics which Vodafone target as its main customers, the recommendation is that they invest in a celebrity endorsed campaign. This will fit in with Vodafone’s motto ‘Power to you!’ which will be enhanced by a global persona advertising their services, in addition to making their own brand handsets better known. This however will counteract with their aim of remaining simple in their operations. Potential risks to this can be that financial resources can be wasted in an unsuccessful campaign, risks of celebrity scandals or choice of the wrong celebrity that does not fit in with the company’s image.

5.2 Recommendation 2: Health and Safety RJVs

Research Joint Ventures with associations such as Cancer Research and other independent associations to join knowledge for R&D in safer handsets. Vodafone uses part of its resources for the Vodafone Foundation, therefore a proportion can be used in such RJVs as it enhances brand image, it fits in with the sociological factors of the external analysis and by doing so they would implement a global strategy which recognises the significance of local concerns and cultural and legal requirements. This will further enhance the group’s corporate social responsibility. Potential risks could be that it could be perceived as Vodafone admitting to the link of mobile phones and cancer and instead damage the brand image.

5.3 Recommendation 3: BoP Strategy in emerging markets:

‘Mobile companies everywhere in the developing world are coming to grips with the fact that virtually all of their future customer growth will come from rural areas’ (Hammond, A. 2008). The recommendation is that Vodafone implement a Bottom of the Pyramid strategy by providing an internet-based phone service with advanced Wi-Fi technology so that rural areas in developing countries can be connected. This fits in with the group’s vision of ‘Keeping people better connected’. This way Vodafone can use their own-brand, low cost smart phones. This strategy could lower the investment required, lower operating costs and would increase the number of users. This strategy can be implemented by providing solar panels to provide the WiFi networks and offer a chance to make the mobile build out ‘green’, which also fits in with Vodafone’s sustainability goals. Potential risks are large amounts spent in the network build-up with low revenue as a result.

Based on all the aforementioned it is safe to say that Vodafone are one of the more important players in the mobile telephony industry. However, there are still areas in which they can improve and strategies which they can implement to further increase their revenue; enhance their brand and public image and further launch and make their own-brand handsets a threat to their competition. It is clear from the analysis that even though Vodafone are technologically forward in terms of the services they provide, they however lack innovation in their handset manufacturing. By implementing the above recommendations there is potential for them to promote their hand-sets and become more competitive overall.

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