Vodafone PLC: A Strategic Analysis - Case Study Example

I. Introduction The mobile telecommunication is one of the most dynamic industries in the world. It has evolved from a luxury to a major necessity. The mobile industry has become powerful pillars of the society. At present, it serves as an instrument that bridges the world. Moreover, mobile communication has developed into a viable medium of information dissemination. Gradually, the services provided by mobile network operators have expanded. It dynamics suggest that the industry will continue to exhibit exponential growth in the coming years. Hence the presence of wireless providers will become more evident. In addition, the demand for wireless and mobile services appears to reach all-time highs. In United Kingdom, Vodafone PLC is one of the most prominent mobile firms. The market value of Vodafone is over 84.7 billion (Vodafone PLC, 2007). By far, this is the biggest in the world among mobile telecommunication operators. As proof to its dominance, Vodafone is partnered with firms in 39 countries worldwide. The firm has been a picture of success in the mobile industry. There were several companies which have tried but failed to penetrate a diverse market. Vodafone's success is often attributed to its strategies and the commitment to make a difference in the industry. Further, Vodafone has dedicated all of its resources to ensure that its customers are provided with top-notch service and solutions. Vodafone understands the need to change because of competition. Changes in consumer preference also affect Vodafone's current direction. To ensure success, the firm amassed high quality resources from the technology used to the personnel delivering the services. Vodafone also assess its current strategies and reviews the performance of these techniques. The company follows a meticulous process to arrive at the best possible decisions for given circumstances. II. Company Background Vodafone PLC caters to approximately 200 million clients. These consumers are based in 25 locations and scattered in 5 continents (. At the end of 2006, Vodafone has recorded a net loss more than 14 billion. The company has shattered the record for the highest net loss in the history of UK. There are certain reasons as to why Vodafone recorded this high loss. The continuing operations loss and bottom line loss were the main contributors to this setback. In addition, the firm has to settle impairment charges and losses from discontinued operations. But Vodafone's operating revenues was positive in 2006. In fact, the firm has amassed sales of 29 billion during the said year. Of these revenues, 9.4 billion was recorded as operating profit before the mentioned costs and losses. In UK, Vodafone competes against O2, T-Mobile, Virgin Media, 3, and Orange. At present the firm controls 21% of the actual market share. It ranks second in terms of controlled market in UK. Vodafone is known as a partner to several other wireless companies operating across the world. It is affiliated with providers that are market leaders. Vodafone continues to transact with other mobile operators to further expand its presence (Sheth, 2006). III. SWOT Analysis SWOT analysis is defined as the scrutiny of the strengths, weaknesses, opportunities, and threats of an organisation (QuickMBA, 2007). This serves as an assessment of the firm's current market position. The primary strength of the company centres on innovation. The products developed by Vodafone identify the company. Another important strength of Vodafone PLC is linked to its reputation. The firm's links with other mobile providers in the world is a major strength. Instead of establishing a mobile network, Vodafone uses already established wireless firms in various markets. This save the company costs and allows Vodafone to make minimal investments with high returns. The brands developed by the firm are known to be of high quality. But Vodafone PLC has some obvious weaknesses. These include the weak performance of its partners. At times, Vodafone is dependent in the manner in which its partner firms operate. The firm's lack of total control in the operations of its partners is a barrier. In addition, most of the costs incurred by the company are attributed to losses from continuing operations. It is important for its partners to become more efficient. Moreover, Vodafone still controls a measly portion in its domestic market. The firm needs to dominate the local market before moving overseas. The global demand for wireless mobile service continues to increase. Mobile communications has become the preferred instrument of communications. Several consumers are attracted to the benefits provided by such mode of information distribution. The increase in demand means Vodafone has to extend its services in other areas. There are also emerging markets outside its domestic realm. Markets such as China and the rest of Asia-Pacific are demand hubs. A region where economic boom is undergoing requires mobile telecommunications coverage. In this location the local wireless service provider are lack the technology to deliver consumer requirements. The growth of wireless technologies is also a major plus. Innovations such as 3G and WiMax are becoming prominent among wireless service clients. On the other hand, Vodafone is threatened by competition in the market. There are several players in the market competing for limited market. Aside from the major competitors, there are other small players catering niche markets. Moreover, Vodafone has to compete with foreign firms which are favoured in their respective countries. Moreover, the firm's innovations are prone to be imitated. There is a chance that Vodafone's marquee services will be copied without the company knowing it. In other countries, for instance, laws on piracy and antitrust have yet to be established. Therefore Vodafone is incapacitated in terms of its strategy of innovation protection. IV. Five Forces Model The concept of five forces seeks to analyse the competition in an industry (Marketing Teacher, 2000). This will serve as an effective tool to carve a picture of the food retail industry. Based on the model, there are four forces that have to be assessed to determine the condition of the fifth force (Recklies, 2007). The threat of new entrants underlines the openness of the industry. Because mobile communications is a necessity, the industry allows competitors to penetrate. The dynamics of the industry makes allows new entrants to participate in the competition. The threat of substitutes is one of the most important aspects that Vodafone considers in formulating its strategies. The emergence of substitutes can affect the entire mobile communications industry. Internet based products such as electronic mails are the noticeable substitute in the market. In addition, traditional methods for communications are still being supported by a significant portion of the population. The bargaining power of the consumers highlights the capacity of customers to spend. The increasing demand for mobile services suggests that spending power of consumers is still high. Change is preference is another gauge of buyer power. Recent figures qualify Vodafone as second in UK in terms of market share. Shifts in consumer necessities have to be monitored by the company. The buying power of the suppliers is also a critical aspect for the firm. In reference to Vodafone, this aspect deals with the company's partners. Mobile firms affiliated with Vodafone can affect its performance. For instance, a Vodafone partner that decides to close its operations will impact Vodafone's revenues. An efficient partner will positively affect Vodafone's performance. It is evident that the mobile service industry is a highly competitive. This means that sound strategies are highly important. Moreover, Vodafone has to create a system that will ensure fast paced decision making. The capacity of Vodafone to succeed is dependent of the dynamics of these factors. V. PEST Analysis The political setup can serve as a driving in facilitating the success of a company venturing in different markets (VBM, 2007). The government is tasked to provide policies that will further expand mobile communications. Politics in UK has been stable and has provided Vodafone PLC more stability. The infrastructures developed by the government have allowed the firm to operate efficiently. Moreover, the laws that the government created are conducive for Vodafone to expand. The economic conditions preview the possible benefits that Vodafone PLC will gain from expanding. Economic conditions are vital in the growth of Vodafone PLC (Mind Tools, 2007) These include the market forces that drive the mobile telecommunication industry. The economies in Europe have provided more opportunities for the company is expand. In addition, emerging markets in Asia are possible sources of demand. These markets require mobile connection to be at par with the world. The demand for mobile networks is highly dependent on the development of mobile phones. At present, demand for mobile gadgets has increased immensely. The tie-up between Vodafone and mobile phone manufacturers is critical. Social aspects are determinants of tastes and preferences (Proven Models, 2007). Moreover, social necessities are also part of the global strategy. Most of the societies these days are driven by technology. Hence preference on mobile technology is high. It provides comfort and lessens cost of communications. Trends at present show that individuals need mobile phones to effectively function. Technology is a dynamic creation (Biz Hubz.com, 2007). It is expected that changes in technology will define its quality. This is the most challenging aspect that Vodafone PLC faces. The firm needs to sustain its initiative are especially in developing products. VI. Resource Analysis The resources of the company are its primary strengths. These consist of the tangible and intangible resources. The tangible resources are inputs used to make the company succeed. Tangible resources refer to the financial, physical, technological, and organizational inputs of the company (Investopedia, 2007). The financial resources of Vodafone PLC are robust. It was presented earlier that Vodafone has been recording consecutive years of net income. Vodafone PLC is a listed firm in UK. Its stocks have been a lucrative option for outside investors in the market. It is one of the most after sought companies for investors. Hence it can easily raise capital for its operations. The intangible resources of Vodafone PLC are based on several unseen capabilities (Daum, 2003). The knowledge possessed by its employees is valuable. Their skills and capabilities are also valuable to the operations. Innovation is known as a quality of Vodafone PLC. Its creativity in making solutions is established in the industry. Most important, Vodafone PLC has a top-notch reputation. The company has developed a name that is well recognized by the consumers in the market. In addition, Vodafone has a strong research and development team. It serves as the cornerstone of the company's future operations. Moreover, research and development is a vital cog to sustain Vodafone's inherent competitiveness. VII. Recommended Strategies The marketing strategies of Vodafone PLC have to successfully promote the products. In the marketing process, marketing audit has to be present. The initial stage in undertaking managerial initiatives in marketing requires auditing. The focal point of the marketing audit is its design which ultimately determines the process in performing such method. Marketing audit is a systematic and comprehensive approach that evaluates the initiatives of the company (Britannica Online Encyclopaedia, 2007). This is manifested to identify possible problems in the organization, personnel, and marketing activities. It suggested for Vodafone PLC to resort to Internet advertising. This method is important to capture other market exposed to information online. It is vital for Vodafone PLC to determine the progress showed by competitors. There several process that will provide the firm market intelligence. Benchmarking is emerging in leading-edge companies as an information tool to support continuous improvement and to gain competitive advantage (Reh, 2007). In order to benchmark effectively, a company needs a strong strategic focus and some flexibility in achieving management's goals. It provides cost savings in executing operations and its support of the organisation's budgeting and strategic planning process. Vodafone PLC can compare its initiatives with leaders in both the domestic and international markets. Strategic planning is the first step towards the formation of sound global strategy. This process underlines the valuable aspects that the company needs to emphasise (Tutor2u, 2007). It is observed that strategy is linked to plans and the behaviour patterns within organizations. The technical process of realizing strategic management covers several aspects relevant to the government. The initial phase regard planning as course for intended strategy and the patterned actions are the realized strategies. This is one of the important segments of creating strategies. Vodafone needs to tackle this with meticulous processes Using the generic strategy will simplify the strategy that Vodafone PLC maintains. The company needs to address the efficiency of its processes (Porter, 1980). This can be done by creating solid programs to cut cost and get more value from resources. Logistics is another major issue for the firm. Better location of stores will improve this deficiency. Finally, Vodafone PLC needs to differentiate. Confining its operations to some core products will stall Vodafone PLC's growth. Products have to change and need to follow current trends. The products need to adapt to certain periods when demand is difficult to predict. Conclusion Wireless service providers continue to make huge strides in competing in a growing market. Vodafone PLC is on its way to maintain its position as the largest provider in the world. The company has all the necessary resources to sustain the current growth. Its financial standing is healthy despite recording profit loss in 2006. The assets are top notch and the intangibles continue to provide competitive advantage. There are also developments in the industry that will serve as opportunity. The demand for wireless service continues to increase. This growth is driven by two important events. First, mobile communications has been widely accepted as the most viable method of dissemination information. Second, the increasing demand for mobile phones requires providers to make the phones functional. Sustaining the position of Vodafone PLC requires formulation of successful strategies. This initiative starts with strategic planning. It allows Vodafone to assess its current structure and determine its capacity to meet the goals. Strategic planning is important because it combines technical and social aspects to create the direction of the company. Strong marketing plans is also necessary. At present, Vodafone's marketing strategies are delivered using conventional outlets. It has to extend to other methods especially the use of the Internet as an advertising medium. Another strategy that Vodafone can use is benchmarking. It will provide a brief picture of the competition. Vodafone needs to recognise its impact in the market and its level when compared with other mobile communications provider. Aside from the positive aspects, Vodafone has to address the factors that caused its setbacks. It has to cut losses generated from continuing and discontinuing activities. Vodafone has to closely work with its partners to ensure that efficiency is maintained. The company also has to continually spend on research and development. It has to be the industry frontrunner when it comes to innovation. Vodafone PLC needs to continue its strategy of gaining more partners. The company can save its resources and improve its competency. In addition, Vodafone will rely on the partner's marketing power to promote its services. Changes in the wireless industry will continue to happen. Hence Vodafone has to evolve into a flexible firm. The industry rewards firms that make these changes part of their strengths. References "About Vodafone UK," Date accessed: 14 December 2007, from: BizHubz.com, (2007), "Pest Analysis," Date accessed: 14 December 2007, from: Britannica Online Encyclopaedia, (2007), "Strategic marketing evaluation," Date accessed: 14 December 2007, from: < http://www.britannica.com> Daum, J., (2003), "Value drivers, intangible assets, and intellectual capital," Date accessed: 14 December 2007, from: Marketing Teacher, (2000), "Analysing the environment - Five forces analysis," Date accessed: 14 December 2007, from: < http://www.marketingteacher.com> Mind Tools, (2007), "Pest Analysis," Date accessed: 14 December 2007, from: Porter, M. 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