Change and Continuity in Contemporary Business - Assignment Example

Change & Continuity in Contemporary Business Table of Contents Change & Continuity in Contemporary Business 1 Table of Contents 1 Introduction 3 About the Company 4 Internal Environment Analysis 4 SWOT 4 Strengths 5 Weakness 5 Opportunities 6 Threats 6 External Environment Analysis 6 Political 7 Economical 7 Sociological 8 Technological 8 Legal 9 Effect of Globalisation 9 Effectiveness of Vodafone’s Strategy 11 Areas of Improvement 12 Conclusion and Recommendations 13 References 15 Introduction The present structure of business environment has been termed as the age of consumers. This has been stated because of the large scale competition in the business markets which has put the customers in the driver’s seat. Most of the organizations are trying to get a competitive edge by applying different strategies which are mostly centred on creating a distinction by providing enhanced value to the customers. The aspect of competition has been heightened by the advent of globalisation. In the globalised world, organizations are breaching political and geographical boundaries to expand their business operations into diverse markets with growth potential. Nations are also adopting the liberalisation route to enhance FDI inflows by relaxing entry norms, abolishing licensing regimes etc. The economic growth of developing nations has enhanced the disposable income of the citizens which is perhaps the reason due to which the firms are moving beyond the traditional markets of USA and Europe. The present study would focus upon the aspect of globalisation in affecting the business strategy of organizations. The organization selected for the study is Vodafone Plc based in London, UK. The telecom industry is expected to show a growing trend in the coming years as new products and innovations are being developed. Much of this growth is in the value added services provided by the participants of the telecom industry. Widespread usage of internet coupled with other high end technologies like mobile internet, 3G services, smart phones are enhancing the demand for the products of the telecom industry participants. Mobile based search options are increasingly becoming popular with the target market audience over traditional search options. The growth of consumer markets like China and India also offers numerous prospects to the participants of the global telecom industry (Delloite, p.1-5). The following sections would cover an empirical analysis of the strategies undertaken by the telecom giant Vodafone with regards to the market opportunities initiated by the aspect of globalisation. About the Company History was created on first January 1985 when the first cell phone call was made by Vodafone Plc. Since then the company has made great strides to emerge as the largest telecom company not only in UK but in the whole world (Vodafone, “The Story So Far”). The company is based in London, UK and has operations across numerous nations all over the world. The company has a wide range of product offering that ranges from suiting the needs of the individual customers as well as large corporate clients. The organization has a highly customer centric approach with every strategy being formulated in a manner that has customer need at the centre of every approach of the organization (Vodafone-a, “Customers”). The organization also has a policy dedicated to fulfilling the social needs of the society. The future sections would contain an analysis of the internal and external environment of the organization to understand the strengths and weakness of the organization particularly in the UK market. Internal Environment Analysis SWOT SWOT is a tool that is largely used to analyse the internal environment of a firm. This tool helps an organization to identify areas of its strengths, weakness, opportunities and threats. The firm can thus use its strengths to maximise its opportunities and minimise the threats and weakness. Strengths The main strength of Vodafone lies in its strong brand image which is being valued at billions in the market. The company’s customer centric approach spread over numerous nations over a large period of time has generated a formidable brand image for the organization. The large bouquet of product offering has created a favourable positioning of the firm in the minds of the customer. The brand image of the organization has largely been attributed as one of the factors for success of the organization in the business markets. Presence in a large number of nations also helps in generating competitive advantage as customers find it convenient to find cellular network in different locations. The nation also has strategic partnerships with firms which helps it to provide uninterrupted networks to its customers. The visionary leadership and a strong human resource base apart from technological innovations also serve to enhance the competitive advantage of the organization. The firm has been quick to adopt new innovations which are very much important in the telecom industry considering the fast changing technological needs of the customers (Saplitsa, p.27). Weakness The major weakness of Vodafone lies in its area of operations. Most of Vodafone’s strategic decisions are taken from the company’s headquarters in London which reduces the organization’s ability to effectively take care of local sentiments. This is a major weakness for the organization considering the fact that its operations are spread across diverse areas of the globe. Moreover, Vodafone’s growth has largely been initiated by the route of mergers and acquisitions which has given considerably high power to the subsidiaries of the organizations in the respective nations. Saturation in the traditional markets of Western Europe has compounded the issues for the organization with churn rates of consumers in an ever increasing mode (Saplitsa, p.28). Opportunities The main opportunities of Vodafone lies in the growing demand for mobile communications especially in developing nations where the markets are still in their growing stage. Large scale opportunities are also available in the saturated markets with continuous innovations and technological advancements like 3G. Telecommunication has become one of the necessities of the individuals of the modern day. Hence this leaves potential opportunities for the organization. Moreover, with the popularity of value added services; the saturated markets have also started showing opportunities for the organization. Strategic tie-ups with handset manufacturers coupled with large scale internet usage on the mobile are emerging as potential areas of growth for firms like Vodafone (Saplitsa, p.28, 29). Threats Saturation in the markets represents the most potential threat apart from the large scale competition in the market especially in the developed markets of Europe. High degree of competition in these markets has created a price war which has severely affected the bottom line profitability of organizations like Vodafone. Government legislations have also affected the profit margins of the telecom industry players in Europe. Finally, alternate modes of communication especially those related to internet like Skype and applications from Google have emerged as major threats for the participants of the telecom industry mark players. External Environment Analysis The external market environment for a firm is affected by Political, Economical, Sociological, Technological and legal aspects. The analysis of these aspects would help a firm to analyze the external factors influencing its business decisions. Political United Kingdom consists of England, Scotland, Wales and Northern Ireland. The nation is among the pioneers of modern civilisations. The nation has a democratic form of government and is headed by the queen who is closely assisted in the decision making process by the Prime minister and his council of ministers. The prime minister along with his council of ministers is elected democratically for a certain period of years. The administration of the nation is divided into administrative, judiciary and legislative branches. The executive branch is headed by the queen who acts on the decisions of the Prime minster who has administrative powers. The legislative branch consists of the parliament comprised of the House of Lords and the House of Commons. The judiciary is comprised of the Supreme Court which is the highest court of appeal. Lower courts are also existent in the nation and are placed under the jurisdiction of the Supreme Court (CIA, “Europe: United Kingdom”). Economical UK is one of the most economically advanced nations of the world with the capital London being one of the major financial hubs of the world. The economic strength of the nation can be realised from the trillion dollar GDP level of the nation which is valued at approximately 2.189 trillion dollars as of 2010. The GDP in terms of official exchange rates stand at 2.259 trillion US dollars as of 2010. The economic recession had widespread impacts on the GDP growth rate of the nation which fell down to 1.6 percent in 2010. The nation’s purchasing power could be analysed from its GDP in terms of purchasing power parity which stands at approximately 35100 dollars as of 2010. This represents a good opportunity for firms like Vodafone whose value added services largely depend upon the disposable income of the individuals. The saturation of traditional services in the consumer market accentuates the importance of these value added services for maintaining the bottom line profitability of the organization. The nation also has a strong labour force comprising of approximately 31.45 million talented individuals which are the ultimate assets of any organization. The rate of unemployment is 7.9 percent as of the year 2010 (CIA, “Europe: United Kingdom”). The well developed nature of the economy represents a healthy indicator for Vodafone so as to pursue its business interests in the nation. Sociological Sociological conditions define the demographic trends of the individuals of a nation. This factor play an important role for the business prospects of business organizations as these trends have a major role in influencing the consumer behaviour of the target market audience. UK has a largely cosmopolitan culture with people living in the nation having their backgrounds from diverse nations across the globe. UK also has a large number of migrant populations especially from Asian nations like the Middle East, Pakistan and Bangladesh. Data collected from CIA shows the population of UK at 62698362 as of July 2010. The median age of the population is about 40 years with a population growth rate of approximately 0.557 percent as of the year 2011. The migration rate stands at 2.63 individuals per thousand of the total population. A good feature in the sociological trend of the nation is that approximately 80 percent of the total population is urbanised. English is the main language of the nation. Literacy levels of the nation stands at an impressive 99 percent which ensures a good supply of talented labour for the business organizations like Vodafone (CIA, “Europe: United Kingdom”). Technological UK has a well developed network of communication with over 80.375 million mobile connections with developed technologies like 3G already in place in the nation. The nation also has about 51.444 million active internet users which represent wide opportunities for organizations like Vodafone whose future strategies with regard to product offering in the saturated markets like UK, would largely depend upon internet based value added services. The nation also has a dedicated network of 7.03 million internet hosts which reflects the technological expertise of the nation (CIA, “Europe: United Kingdom”). Legal UK has a fair and impartial judiciary system which is headed by the Supreme Court. The legal system of the nation is based on the traditions of the common law and is also influenced by the early Roman laws. The laws of the nations are amended on the basis of requirements. The nation has also accepted the jurisdiction of the International Court of Justice with certain exceptions (CIA, “Europe: United Kingdom”). Effect of Globalisation The present age of business markets is rightly being stated as the age of globalisation. Globalisation is defined as a phenomenon in which nations try to integrate themselves as a single common unit (Berghman, p.6). Globalisation has created numerous business opportunities for business organizations as they breach geographical boundaries to reach out to new markets across the globe. This has resulted in large scale competition among the market players with each player trying to grab a share of the market. Large scale developments in information technology and liberalisation policies of nations have led to the upsurge in the levels of Transnational Corporations operating out of the world. These transnational nations are those that have operations into multiple nations. Vodafone is one the firms that has been quick to enact on the opportunities of globalisation. The extent of the success of the organization could be analysed from the fact that it was named as the top Transnational Corporation in a report published by the United Nations in 2002 (United Nations, “Top 20 Non Financial TNC’s 2002”). Vodafone’s globalisation strategy is based on establishing a presence in nations with good potential. Most of the nations are outside the traditional markets of Western Europe which are largely saturated as the industry has attained a stage of maturity in these nations. Vodafone has used a strategy of mergers and acquisitions to enter into new markets. Vodafone has successfully applied this route in many markets like India and Germany. The merger of Vodafone and the Germany based firm Mannesmann resulted in the formation of the world’s largest wireless telecom company (Harris, p.1). Vodafone also adopted the route of mergers and acquisitions to enter the lucrative Indian market which is considered to be still in its growth stage with large scale potential considering the population and the economic growth of the nation. Vodafone acquired the Indian subsidiary of Hutchison Whampoa to enter the Indian market. Globalisation has also been largely possible due to the aspect of liberalisation policy adopted by different nations. Nations like India and China have adopted the route of liberalisation to pave the way for transnational corporations to enter the markets. They have also abolished the licensing regimes which were earlier meant to protect the indigenous domestic industries. FDI norms have also been relaxed so as to allow greater participation of the transnational corporations. The aspect of globalisation has also increased the nature of competition in the markets. Traditional markets of Western Europe and USA have already entered the stage of maturity. The large number of players in the market also compounds the problems of the organizations. In the absence of any distinctive differentiation strategy, firms are forced to offer price cuts to the consumers. This has initiated a price war which has eroded the bottom line profit margins of the participants of the telecom industry participants. Vodafone has responded to this strategy by expanding into nations like India which are presently in a growth stage and have considerable market potential. In case of mature markets, the firm has used value added services as a means to distinguish itself from its competitors. Internet usage is another area that has been capitalised by the firm to gain profitability. Using a strategy of mergers and acquisitions has helped the firm to expand into new markets with a readily available customer base such as the case of Vodafone’s acquisition of Hutchinson Whampoa’s operations in India. Presence of a ready customer base helps the firm to gain an early breakeven point so as to maintain profitability and sustainability. However, the main strategy of Vodafone is to provide the best quality service to the customers with a unique product offering designed to cater to different demographic and price based market segments along with an effective combination of excellent value added services so as to maintain a formidable brand image of the firm in the minds of the customer in a bid to maintain long term sustainability. Effectiveness of Vodafone’s Strategy Vodafone’s globalisation strategy is mainly based on an international expansion drive which is backed by a strategy of mergers and acquisitions. The company’s acquisition of Hutchison Whampoa’s business operations in India and Mannesmann in Germany is an example in this regard. The firm has effectively banked on the opportunities of globalisation to enter into new markets. This assumes importance considering the maturity levels of the markets in the traditional markets. The strategy of merger and acquisitions has generated a readily available customer base for the organization. However, certain issues have also emerged following the international expansion strategies undertaken by the company. The most prominent of this is that the control of operations and management has largely been done through its headquarters at London, which has created certain issues in terms of effectiveness of management. The large number of market covered by the firm leaves large scale gaps in its ability to undertake faster decision making. Issues have also emerged in aligning management cultures of the two organizations in case of mergers and acquisitions which have left considerable threats to the organization. Finally, a unique set of product offering and quality standards in service offering have been the most important drivers for the organization. Areas of Improvement The analysis of the previous section reveals the potential weaknesses in the strategies of the organization. The most important area of improvement lies in the decentralisation in the management function and operations which would provide greater flexibilities to the organization to manage the changes in the business environment. Moreover, the firm has operations in diverse areas of the globe with customer have varying tastes and preferences which makes it even more important to have a decentralised structure at the organization. The firm must also take steps to ensure that cultural and differences in management culture do not hamper the business prospects during mergers and acquisitions. Vodafone must also include a strategy of thinking globally and acting locally especially in international markets. Under this strategy, a firm expanding internationally takes care of the local sentiments and culture of the individuals of the target market segment. This enhances the acceptability of the product or brand in the minds of the customers in a chosen market segment. This would also promote brand awareness and also enhance the brand image of the organization. This can be achieved by modifying the product mix including the promotional strategy to include elements of local culture and sentiments in its business strategy. Conclusion and Recommendations Telecommunications have become a necessity for individuals in the modern world. The basic nature of essentiality of the product automatically generates large scale business opportunities for business organizations engaged in the telecom industry. The analysis of the internal and external environment of Vodafone reveals considerable potential for the organization. Globalisation offers a unique advantage to the organization to expand internationally so as to capture markets which are still in their infancy or growth. Globalisation has enabled the firm to diversify its business operations so as to reduce the risk in its business operations. Internationalisation and international expansion has enabled the organization to enter into new and potential markets. This is important considering the fact that the traditional markets of the organization in Europe are already saturated and are characterised by enhanced levels of competition with firms playing a price war that has eroded the bottom line profitability of most of the organizations. The business markets resemble a scenario of red oceans in which market player’s act as sharks which fight amongst each other for the limited resources needed for survival. The situation in the European markets is highly analogous to this scenario with sharks being represented by business organizations. An effective red ocean strategy for Vodafone would be to expand into new market areas so as to diversify its area of business operations. Finally, even in the saturated markets an effective strategy making with focus on innovation and quality aspects should be made so as to establish a better brand image in the minds of the customers. However, the key to success lies in undertaking and formulating a strategy that has the customer at the centre of focus so as to provide greater value to the customers. A decentralised structure of operations would certainly provide better efficiency of the decision making process and would provide more flexibility to the organization to cater to the ever changing and turbulent nature of business markets across the world. In case of new markets, a strategy of thinking globally and acting locally would reap advantages for the organization. References Berghman, J. Social protection globalised. Leuven University Press, 2005. CIA. Europe: United Kingdom. 2011. The World Factbook. March 18, 2011 < https://www.cia.gov/library/publications/the-world-factbook/geos/uk.html>. Delloite. The smartphone becomes a search phone. 2010. Telecommunications Predictions 2010. March 14, 2011 < http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/TMT_us_tmt/us_tmt_telecompredictions2010.pdf>. Harris, J. INFO TECH MERGERS AND GLOBALIZATION. No date. March 14, 2011 < http://www.net4dem.org/cyrev/archive/Misc.%20Articles/Vodaphone/Vodaphone.pdf>. Saplitsa, I. SWOT Analysis. 2008. Business Analysis and Valuation of Vodafone Group. March 17, 2011 < http://bora.nhh.no/bitstream/2330/1919/1/Saplitsa%202008.pdf>. United Nations. Top 20 Non Financial TNC’s 2002. 2003. Globalisation and Transnational Corporations. March 17, 2011 < http://www.eclac.cl/ddpe/agenda/4/15304/Globa-trans-corp.pdf>. Vodafone. The Story So Far. 2011. Company History. March 17, 2011 < http://www.vodafone.co.uk/vodafone-uk/about-us/company-history/index.htm>. Vodafone-a. Customers. 2011. About Vodafone. March 17, 2011 < http://www.vodafone.com/content/index/about/sustainability/customers.html>. Read More