Business Environment of Vodafone - Case Study Example

? Business Environment Report 9th August Business Environment Report Introduction It is factual that global business does not work in isolation but within a complex global environment (GIBS, 2013, p. 1). Businesses relate with other environments that include political, public sector, economic, demographic, socio-cultural, technological, legal, ecological, and ethical environments. These environment affect the performance of any business and hence the need for evaluation of the company performance to analyze the success of the business within the reference environments. An evaluation of the company’s performance requires a detailed analysis to represent the profitability and risk levels of the company (Clipici & Gadoiu 2009, p. 331). In evaluating the performance of a company, we analyze the economic and financial consequences of the decisions made by the management as applied in the organizational activities of the company (Clipici & Gadoiu 2009, p. 331). As such, organizations value evaluations since they manifest the extent to which systems, people, and company activities relate to the principles of business excellence. This paper evaluates the performance of Vodafone from an inter-disciplinary perspective. To achieve this, the paper will use the above named measures to evaluate the performance of Vodafone. However, the paper will not address employee satisfaction in the evaluation since data on employee satisfaction is not available. The evaluation of the company’s performance derives a clear understanding of the present business position and its overall performance. This assessment equally creates a general market perception, derives the value of the company, and helps the management to make future business decisions. Increasing revenues and profits are good measures of the company’s performance although evaluation also involves variance analysis, key performance indicators, customer satisfaction measurement, and employee satisfaction (Hill, 2013, p.1). It also involves the calculation of financial ratios like ROE, IRR, and CFROI (Hagel, Brown & Davison, 2010, p. 1) community development, sustainability, and comparing the company with entire industry. Development Vodafone Group Plc. (Vodafone) is a mobile communications company that offers a range of communications services in over 30 countries and over 40 partner markets across the globe. Its headquarters are in Newbury, United Kingdom, its business operations include voice, messaging, data and fixed-line solutions, and all devices related to satisfying communications needs (Vodafone, 2013, p. 1). Ethical Behavior and Code of Conduct Vodafone Company has a code of conduct that sets out the business principles of the company, which consequently define how every person at the company should behave. Indeed, the company is committed to a strong ethical conduct where the code of conduct mandates all employees to uphold high ethical standards. This complies with Section 406 of the US Sarbanes-Oxley Act of 2002 and the rules issued by the US Securities and Exchange Commission. This mandates all registered companies to adopt a written code of ethics applicable to all stakeholders of a reference company (U.S Securities And Exchange Commission, 2003, p. 1). Vodafone Group Plc. strictly abides with these provisions and do not intend to waive the requirements of this code of conduct to any employee (Vodafone, 2010, p 1-6). As a result, all employees of Vodafone Company seek to promote honesty and ethical conduct in the articulation of their duties. Moreover, the company promotes complete, accurate, true, and timely disclosure of the Company's financial results to all stakeholders as required by the law. The company promotes compliance to relevant laws, rules, and regulations as well as condemning illegalities. More so, the company abhors high standards of business ethics and prevents its employees from seeking competitive advantage through unlawful or unethical business practices (Vodafone, 2010, p 1-6). It advocates for integrity and condemns conflicts of interest in business. Furthermore, the code of conducts mandates all employees to observe commercial confidentiality and communicate to all stakeholders with transparency and openness. The company equally respects human rights and disregards child labor (Vodafone, 2010, p 1-6).The code of conduct advocates for equal opportunities, and condemns discrimination and harassment in the work place. Nevertheless, confirmed data on ethical performance in the company reveal that there has been an increase in the number of confirmed cases of internal fraud and number of employees and contractors dismissed or given a final warning (Vodafone, 2013, p 1). Customer Satisfaction Vodafone guarantees customer satisfaction through designing products that offer business and personal solutions. Indeed, the company produces simpler and more powerful communication tools for business solutions. The total communications, which is a wide range of the range of integrated office and mobile voice and data services, enables businesspersons to access network files, emails, employees, customers, and suppliers with ease. This enhances effectiveness, flexibility, customer response, freedom and saves time in the business environment. Worth noting is the fact that Vodafone continue to innovates its products and services to ensure that customers continue to enjoy more business opportunities (Vodafone, 2013, p 1).On the other hand, Vodafone offers personal solutions to customer’s needs by enabling them to connect to the most relevant people and things. Indeed, the company allows people to share emails, photos, and music through its products. For example, the company offers Vodafone 360, which allows customers to use one address book for mobile, Email, chat, and social networking (Vodafone, 2013, p 1). Vodafone allows customers to choose mobile broadband services for secure, reliable emails and internet access when one is roaming. As such, the latest Vodafone handsets offer a variety of personal and business solutions, which significantly satisfies the customers (Vodafone, 2013, p 1). In addition, the company seeks to meet customers’ needs and deliver relevance to each customer at various stages in the company. As a result, the company established a Global Customer Value Management team to enhance customer engagement and ensure the delivery of valuable services to the customers in all levels. Additionally, the company uses “customer delight” to monitor and promote customer satisfaction in all branches of the company. Because of these interventions, the company enjoys a customer base of about 302.6 million mobile customers across the globe (Vodafone, 2013, p 1). Sustainability and Communal Responsibility Vodafone involves itself in sustainable development and participates in communal responsibilities. For example, through the M2M business, the company helps its enterprise customers to reduce carbon emissions, improve efficiency, and minimize cut costs by enabling them to manage their energy needs. Indeed, the company has won two awards, which include first runner up for Best carbon disclosure in 2012 and Best carbon disclosure in 2011 (Vodafone, 2013, p 1). This manifests good performance in this respect. Moreover, the company’s products and services transform people’s lives and boost sustainable development. Through the company’s mobile technology, Vodafone improves the livelihoods, economic life, and quality of life of the immediate society. Notably, about 68% of the company’s customers who are in the emerging markets enjoy extended networks, which derive socio-economic benefits to the customers (Vodafone, 2013, p 1). Notably, the company’s mobile payment service, M-PESA, contributes to economic development in emerging markets by facilitating access to financial services for people without bank accounts. More so, access to mobile technology also boosts the security of the customers. At the same time, Vodafone engages in corporate giving through its “World of Difference” initiative, which mobilizes the employees to engage in charity work. This initiative operates in about 22 countries around the globe (Vodafone, 2013, p 1). We also have the Vodafone Foundation, which provides assistance in the area of disaster relief through the Vodafone Instant Network Programme that offers free communication to the affected areas (Vodafone, 2013, p 1). In addition, the Vodafone Foundation and Swiss Re Foundation imitated a joint initiative to mobilize maternal health Programme in Tanzania where there are many maternal deaths (Vodafone, 2013, p 1). As such, the performance of Vodafone in terms of sustainability and communal responsibility is very good. Financial Analysis Vodafone seemingly relies on its stake in Verizon Wireless, which continues to grow (Williams, 2013, p. 1). Indeed, when the company announced a ?2.1bn dividend from its stake in Verizon Wireless, the announcement caused a spur. The company faces pressure to sell its stake in Verizon Wireless, which amounted to 42pc of Vodafone profits last year. This confirms the company’s good performance in remitting dividends to the shareholders and the financial strength of Verizon Wireless. Furthermore, Vodafone is trading at a price–earnings ratio of 12.7, which financial analysts expect it to fall to 11.8 in 2014 (BLOOMBERG L.P, 2013, p. 1). This shows that the market perception of the company is falling and the company’s growth potential is uncertain. This depicts poor performance for the company. Indeed, as the uncertainty rises the Yield will rise from 5.3 pc to 5.6pc. At the same time, the earnings per share ratio will rise from 0.0087 in 2013 to 0.1610 next year (BLOOMBERG L.P, 2013, p. 1). This relates to the fall of 3.5 % in the company’s revenue by July 2013. Indeed, the revenues from Verizon Wireless complimented the falling revenues of Vodafone. This depicts a financial performance where Vodafone largely relies on its stake in Verizon Wireless. Indeed, the business environment in Europe is challenging for Vodafone at this time. The company had to write down the value of its businesses in Spain and Italy last year by ?5.9bn due to high competition and reined spending by consumers (White, 2013, p. 1). Actually, the company quoted the tough economic conditions in the Italian market as the causes for the intense price competition in the mobile industry. Moreover, the changes on the rules that define how much operators can charge each other to connect and disconnect calls also led to increased price competition, which crippled Vodafone. Similarly, the European markets have also hit Vodafone Company where it recorded reduced market intensity in Germany and U.K. In fact, the company experienced caused 5.1pc fall in revenues in Germany and a 4.5pc fall in the UK (White, 2013, p. 1). Subject to these challenges, customers of Vodafone pay-as-you-go in UK will have to pay more as the company results to charging their calls per second to charging per minute. This affects calls to UK and international landlines and mobiles. Nevertheless, the company experienced huge returns in emerging markets and its stake at Verizon Wireless where revenues rose by 7.2pc (Vodafone Group, 2013, p. 1). Indeed, the company’s shares rose by a third this year due to the ownership speculation over its stake in Verizon Wireless. The company had 5.2 million customers from Vodafone Red and 4 G is live in 10 markets by July 2013, which manifests immense strength in its customer (Vodafone Group, 2013, p. 1). Indeed, even after the various challenges that the company faces, the management continues to lay a strong foundations for the future as they propose to acquire longer Kabel Deutschland that will improve the company’s market presence and competitive advantage. Conclusion Vodafone has a code of conduct. However, data from the company show that employees continue to ignore the stipulated ethics where they engage in internal fraud. As such, I would recommend for close monitoring, random audits, and stiffer penalties for the stakeholders who do not comply with the company’s code of conduct. The company guarantees customer satisfaction through designing products that offer business and personal solutions. Moreover, it establishes a Global Customer Value Management team and uses “customer delight” to enhance customer engagement and ensure the delivery of valuable services to the customers and thus its performance in this context is recommendable. Furthermore, the company participates in sustainable development and communal responsibilities like the use of M2M business, which reduces carbon emissions and improves efficiency. It also uses M-PESA to enhance economic development in emerging markets. It also initiated the World of Difference initiative, which mobilizes the employees to engage in charity work. In fact, it also has the Vodafone Foundation, which provides assistance in the area of disaster relief. Hence, its performance in this context is equally recommendable. However, the company seemingly relies on its stake in Verizon Wireless to survive. Indeed, it even faces pressure to sell its stake in Verizon Wireless. Notably, the company is trading at a price–earnings ratio of 12.7, which financial analysts expect it to fall to 11.8 in 2014. This manifests poor market performance. Indeed, the company also encountered a 5.1pc fall in revenues in Germany and a 4.5pc fall in the UK this year. The company’s management is also under siege. Nevertheless, the company has a good performance in remitting dividends to the shareholders and enjoys huge returns in emerging markets and its stake at Verizon Wireless. I thus recommend that the company focus on emerging markets and the success of Verizon Wireless. Indeed, Vodafone should not lose ownership of Verizon Wireless and should actualize the proposal of acquiring Kabel Deutschland to improve the company’s market presence and competitive advantage. 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