Marketing is the core of all business. To outperform the competition requires solid marketing knowledge and precision in marketing decision making. To market company’s product or service, it is necessary to get positioning, positioning of its products and services depend on the formulation and implementation of intelligent and aggressive strategic marketing plans.
As this assignment requires choosing an organization which fosters strategic marketing management process; therefore, Vodafone: multi-national UK-based mobile network operating company has been picked.
The Vodafone group is a mobile network operator headquartered in Newbury, England. They made their first phone call just minutes after midnight on the 1st of January in 1985. In 1987 it was already recognized as the largest mobile network in the world. Today it is the biggest telecommunications network provider in the world by turnover and has a market value of about one hundred billion pounds. It is a FTSE 100 company and is ranked 3rd overall just behind ‘Royal Dutch Shell’ and the ‘BP’ group. Vodafone currently has equity interests in twenty-five countries and has other partner networks with assets in another forty one countries. It is the second largest mobile telecom group in the world behind China Mobile and has more than ten million customers in the United Kingdom, Germany, India, Italy, Spain, Turkey, Egypt and the United States.
At a glance of Vodafone :
Type : Public Limited Company (PLC)
Industry : Telecommunications
Founded : 1984
Headquarters : Newbury, United Kingdom
Area Served : World wide
Website : www.vodafone.com
1.1 Vodafone Marketing Planning Principles
Vodafone market planning involves deciding on marketing strategies that will help the company attain its overall strategic objectives. A detailed marketing plan is needed for each business, product, or brand. It has external and internal environments where plenty of strategic elements are involved. As part of marketing planning principles, macro-environmental scanning will be conducted by analyzing significant macro factors affecting the telecom industry while Porter’s five forces, SWOT analysis (SW-for micro environment and OT-for macro environment) will be utilized to assess the micro-environment surrounding telecom industry. Later, BCG matrix as part of Vodafone portfolio analysis technique is explained.
1.2 Vodafone Plan Development Using Analytical Tools and Techniques
1.2.1 Macro-environmental factors:
To analyze the macro factors of the Vodafone Plc, PESTEL analysis, SWOT analysis (OT is detailed in macro environmental issues) is described.
1) PESTEL analysis:
Regulations- Mobile phones licenses are tightly controlled and are very expensive. In some cases tight measures are implemented by the government in order to decrease mobile phone use for children because of health issues.
Infrastructure- To build up an infrastructure to support the network usually requires permission from the government and other regulative bodies.
The recession has decreased the amount of money customers are willing to spend, therefore there is a price war between leading network providers to drive down costs of calls and SMS to attract more customers.
Cost of licensing-When the technology of 3G was introduced there was a bid war amongst leading companies which ended up in a high expenditure of acquiring this technology
Fashion- In some countries especially in Europe it is in fashion to have a mobile phone. The market in Europe is so big that all kind of phones are being sold here. These days in iphone by Apple has conquered most of the market and is the best seller in the UK at the moment
Demographics- Mobile phones tend to be used by the younger members of society. In a country where the population is ageing, which is the trend across the EU, the demographics may shift to a more aged population who may have less use for mobile phones.
3G (3rd Generation)-The introduction of this technology have helped Vodafone to interact easier through their phone and they were able to offer services like the mobile internet or famous social networking sites like facebook directly accessible from the phone.
It is now much easier for business customers to arrange meetings and get information directly on their handset. Vodafone also offers tailored price plans for business customers.
GPS (Global Positioning System) – It is now possible to get a navigation programme on the handset where supported. Instead of buying expensive navigation systems the customer can pay one off fees and use the system
The technology advancement in general will help Vodafone to cope with the growing competition all over the worked and will help them increase to attract more customers through these technology developments.
Vodafone have established a recycling programme for phones in order to help the environment and recycle and reuse the materials used in the handset. They give incentives in terms of money to customers hand in their old phone in exchange for a new one.
Law-There are some laws which regulates the actions of business e.g. The Sales of Goods Act 1974 stating all products must be fit for the purpose they are intended. A mobile phone must therefore work. These laws are created to regulate particular industries for example the ban on mobile phones while driving. This significantly increased the sale of headsets.
2) SWOT analysis (PART 1: OT under macro environment):
Emerging markets offers Vodafone to introduce their unique services to that market where the market has high rate of growth. They can become a market leader as they are the biggest network provider in the world and their experience could help them to achieve that.
At the moment having a mobile phone is a necessity for many people and the trend is going up that people are tending to have one or more mobile phone. This could turn out positive for Vodafone as the market tends to increase by size and volume in terms of sales.
Competition could be a threat organization as more different products and services are being offered by different companies. The ‘iphone’ for example introduced by o2 has significantly decreased sales of other products and services because they reserved the rights to be the only distributor of the phone in the UK.
The effect of rules and regulation by the government can also be threat to Vodafone as they could ban or set price regulations.
3) Marketing Mix
Vodafone uses its advantage as being a large global organization and implements differentiation and cost leadership strategy as they benefit from economies of scale. This allows them to have a competitive advantage and adding more value to their range of services to the customers compared to other competitors.
The marketing mix consists of many different factors, which are grouped together into four main categories: product, place, price and promotion.
Product-Vodafone offers different type of products to different type of customers and so can segment their market in this field. Since the introduction of 3g services they can offer more than just voice calls and messaging. Customers are able to access he internet and other multimedia applications on the go and can benefit from the unique quality of Vodafone.
Price-They are able to offer different services for different customers like pre pay phones, pay monthly contracts and business solutions for businesses. This allows them structure their pricing method towards different needs of the customer.
Place-Vodafone operates mainly through their retail stores all over the UK. There are over 300 retail outlets and they also offer their services through independent retailer like ‘Phones4u’.
Promotion-Vodafone affectively operated a solid marketing structure which includes advertising poster on the street, TV campaign and also use famous celebrities like David Beckham to advertise their products. This ensures people are aware of their special offers and discounts.
1.2.2 Micro environmental factors:
1) SWOT analysis (PART 2: SW under micro-environment):
The size of the organization plays an important factor when we are speaking about their strength. Their global presence and network makes it easy for them to be more competitive even on a global scale.
Vodafone is reputable company and there are famous for being the best in their field. Their brand image is very important when it comes to sales and increasing them.
Standardized customer relation management is also a feature of Vodafone. The company is developing a group-wide standard in customer relation management to ensure an awareness of its customer base and their preferences in order to help the efficient sales of its new services and products.
Developing new technologies can turn out very expensive. If these technologies fail to succeed in the market this could end up in a huge loss which would be hard to recover from.
They can not introduce new technologies where it is not possible this could be because they are facing the legal issues within that country.
2) Porter’s 5 forces:
By using the five forces model of completion, competitor analysis network by understanding how the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitutes and the competition of other firms and how they affect the company directly.
Competitive Rivalry – The competition in the UK for example is very much intense and big organizations like O2, Orange and T-Mobile have a significant impact on revenues.
Bargaining power of buyers – Customers have the choice of many different type of product at present time due to the high level of competition. In terms of different type of packages and different prices people tend to go for other companies and buy their product.
Bargaining power of suppliers – Vodafone is one of the largest network providers in the world and therefore they are able to use the benefits of economies of scale and reduce their production costs. This allows them to increase their profit margin compared to other companies and offer better a price to value ratio to the customer.
Threat of substitutes – There is a low risk of substitutes for Vodafone as they have established a good brand image. Apart from that as they benefit from economies of scale they can sell their services at the same price like their competitors.
Threat of new entry – As there is no threat for other companies to enter the market because of rules and regulations and the high cost of licenses required to operate a network, Vodafone has to continue being efficient and reducing costs in order to price match their competitors.
(O2, Orange, 3 mobile, T-mobile)
Figure 01: Porter’s 5 forces of Vodafone
[Figure Source: http://www.mindtools.com/pages/article/newTMC_08.htm]
4) BCG (Boston Consultancy Group) Matrix:
Cash Cows High
Low Market Share High
Figure 02: BCG (Boston Consultancy Group) Matrix of Vodafone
Stars – The star of their products which is the main product they offer are the monthly contracts they offer as these are very popular amongst the customers.
Cash Cows – this is the product which generated revenue but is at a stage where it does not grow. The messaging services they offer generate good revenue for them and as there is no opportunity to expand as that this service is their cash cow.
Dogs – This would be their analogue services as they do not really generate revenue because of too much competition.
Question Mark – This product is the one with high growth potential and low market share. In this case it would be the 3g serves they offer. As there are other companies offering the same services it hard to gain a higher market share.
2.1 Strategic Marketing Options for Vodafone
Marketing strategy always considers options where it can be applied. In Vodafone, the following marketing strategy options can be applied though both matrixes have got some advantages and disadvantages as well.
General Electric/McKinsey (GE) Matrix:
GE matrix is used mainly for market attractiveness. The examination and understanding of market attractiveness is very important in determining investment strategies in a country of operation. The advantages and disadvantages of GE matrix are given as follows:
Thorough competitive analysis provides a basis for ranking relative strength of business units in their particular environment.
Formal definition of components is not clear or simple (Johnson 1985)
Analysis is difficult for outsiders to reproduce (Johnson 1985).
Determinants: Industry attractiveness and business strength.
The following figure shows the concept of GE Matrix.
Figure 03: General Electric (GE) Matrix
Shell Directional Policy Matrix :
The Shell Directional Policy Matrix is another refinement upon the Boston Matrix. Along the horizontal axis are prospects for business sector profitability, and along the vertical axis is a company’s competitive capability. As with the GE Business Screen the location of a Strategic Business Unit (SBU) in any cell of the matrix implies different strategic decisions. However decisions often span options and in practice the zones are an irregular shape and do not tend to be accommodated by box shapes. Instead they blend into each other.
Considers both, international capabilities of the company and competitors’ capabilities.
Market Position is restricted to market share. Assumes countries have stable political, social and economic environments. Only regulatory aspects pertaining to Shell’s products have been addressed.
Determinants: Company’s competitive capabilities and business sector prospects.
The following figure shows the concept of SDP Matrix.
Figure 04: Shell Directional Policy Matrix
2.2 Evaluation of Marketing Strategy Options for Vodafone
Despite the shortcomings of previous studies and models, attempts at reaching an understandable model for determining international business strategy have been ongoing. The marketing literature presents a number of models designed to guide managers in making strategic investment decisions for Vodafone Plc. Included in that number are matrix approaches such as Shell directional policy matrix (Robinson, Hichens, and Wade 1978), and GE/McKinsey (Taylor 1976). These models have each provided a unique contribution to the strategy process but each also has distinct disadvantages. The advantages and disadvantages of each are, particularly; concerned for firms interested in the international market is the fact that these models do not take into consideration the international environment. Many multinational companies still confront the problem of integrating environmental assessments into decision making in a systematic and objective manner. The task facing them is how to translate recognition of the business situation into action. Previous models are limited in their generalizability across different types of industries and actual environments worldwide.
3.1 Current Changes in the Marketing Environment in Vodafone
As Vodafone is a worldwide company and operates in over 27 different countries, this makes analyzing the external environment fairly difficult using a PEST analysis. The PEST analysis in this report is mainly directed at Vodafone’s UK external environment in terms of strategic marketing management policy.
Political factors can have a direct impact on the way businesses operate. Decisions made by the government affect our everyday lives and can come in the form of policy or legislation. The Government’s introduction of a statutory minimum wage affects all businesses, as do consumer, Health & Safety laws and so on. The current increase in global petrol prices is having a profound impact on major economies, it is estimated that £200bn has been added to the global fuel bill since the price increases started.
Another political factor is OFTEL, the telecommunications regulator in the UK whose purpose is to ensure phone companies, meet their obligations under telecoms and competition laws and regulations. The UK government regulates this industry through OFTEL.
All businesses are affected by economical factors nationwide and globally. Interest rate policy and fiscal policy will have to be set accordingly. Within the UK the climate of the economy dictates how consumer may behave within society. Whether an economy is in a boom, recession or recovery will also affect consumer confidence and activities.
Economies internationally also have an impact on UK businesses, cheaper labor abroad affects the competitiveness of UK products nationally and globally. An increase in interest rates in the USA will influence the share price of UK stocks.
A truly global player like Vodafone has to be aware of economic conditions across all borders and ensure they employ strategies and tactics that guard their business and marketing investment.
Within society forces such as family, friends, and media affect our attitude, interest and opinions. These forces shape who we are as people and the way we behave and what we ultimately purchase. The end users of wireless products are becoming increasingly aware of quality and expect a product that is reliable during use. GSM has been an unqualified success because it works, offers definite advantages over first generation and is at a price where everyone can access the technology. One problem that has been apparent over recent years is the high market exposure given to new features and technologies, which are not well proven and tested before launch. WAP was a prime example of this. A great deal of effort has been injected into WAP to make sure the early teething problems have been overcome, but the public can sometimes demonstrate memory akin to an elephant and changing opinions is a much harder marketing nut to crack. The market expectation for Bluetoothâ„¢ and 3G has been raised considerably so now we are at a critical stage in fulfilling the advertised dream.
Advanced technology is changing the way businesses operate. The Internet is having a profound impact on the marketing mix strategy of organizations. Consumers can now shop 24 hours a day, comfortably from their homes. Vodafone has been using the Internet for advertising like a lot of other organizations trying to sell their business.
There is renewed interest by many governments to encourage investment in research and development and to develop technology that will give their country the competitive edge. The ‘one-stop-shop’ customer need, and the manufacturers’ success in integrating cellular, cordless and internet user applications into a single unit has meant that a wireless test company has to consider all major technologies and review each for their commercial benefits. In some instances some technology advancements will not create a profitable business in isolation. Vodafone has introduced new technology such as Vodafone Live, and now the introduction of the new 3G mobile phones means Vodafone will implement the new technology into their system to bring the service to the customer.
3.2 Analyzing Vodafone’s Potential Responses to the Strategic Marketing Changes
3.3 Recommendation and Conclusion
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