Globalization and International Business: The of Vodafone - Case Study Example

International Business Introduction Experts have defined globalisation in quite a few ways. A few of the experts have recognised that globalization is eliminating the borders in terms of marketing or business operations. While, a few others have said that it is making the nations to come together. It has been identified by a number of experts as an opportunity while some related it with threat. Globalisation can be stated as a modern phenomenon which has tended to bind the world by a single thread. In general terms, international business is identified as a method of operation of business in which an organisation carries out its operations in other nations along with its native land. However, the scope and reach of international business is multifarious. Operations of international business demand dedication and immense management skills and with the globalisation in progress the task has become harder. Thus, a company dealing in the international market needs to have developed strong strategic planning for its international operations. Globalisation has tremendously influenced the international business operations. For instance, an American company selling goods in China has been possible because of globalisation (Milward, 2003). Globalisation has provided with the opportunity to obtain wide range of goods, in a better quality that too in much lower price than before. Globalisation has become an intense part of day-to-day life. It is the process of allowing organisation to operate internationally, providing it with the larger opportunities as well as exposing it to greater risks. Globalisation has made the market to be seen as single by the organisation and mostly encourages the large firms to operate in other nations providing them with the large number of customers. Globalisation is a traditional concept but the implementation of the concept has augmented in recent years. Globalisation has played a major part in international business operations. The paper will discuss the significance of globalisation along with its impact on international business of Vodafone. Company at a Glance Vodafone Group Plc is a British telecommunication company which operates globally. Headquarter of Vodafone is located in London, United Kingdom (UK). It is also considered as world’s biggest mobile telecommunication based organisation in accordance with its generation of revenues (London Stock Exchange, 2011). The name Vodafone was derived from the ‘voice data fone’ which meant transferring the condition of voice and data through the help of mobile phones. Vodafone is listed in the London Stock Exchange and is also included among the constituents of FTSE 100 index of UK. Its revenue earnings were recorded to be around £93 billion at the end of April in the year 2011. Based on its revenue generated in the same year, the company was remarked to be the fourth largest company amongst all the constituents of London Stock Exchange Index (London Stock Exchange, 2011). Vodafone is considered as the major player in the context of global market. The company operates in a number of European nations as well as in other emerging nations which allows it to achieve sustained growth. A few of the European nations in which the company operates include Germany, Spain, Greece and Ireland among others. And, emerging regions include Africa and Asia along with Pacific and Affiliates. The mission as well as vision of the company is to be the leader in the world with respect to mobile communications by enhancing the lives of the customers through ‘the distinctive power of mobile communications.’ Vodafone can be found in large number of nations of the world, operating its business through joint venture, collaborations or subsidiaries (Vodafone, 2011). Impact of Globalisation in Telecommunication Industry The telecommunication industry plays a major part in the world’s economy. Previously, telecommunication industry of individual nation was under the control of the native company which used to provide their services as fixed line connections. In recent times, with the increasingly changing demand of the customers and advent of globalisation, the boundary of the operations of telecommunication industry has widened, inviting the international companies to operate in the global market (EconomyWatch, 2010). The revenue earned from the telecommunication industry is considered to be one of the major contributing factors towards the world’s economic structure. Over the previous decade, this industry is going through major changes. The political condition of nations has changed from monopolies to becoming privatized and intense competition is considered to play a significant part of this industry (EconomyWatch, 2010). Technological innovation, being a major part of globalisation, this industry is going through rapid drastic changes. Thus, a company operating in this industry needs to upgrade its offerings in continuous basis with the incorporation of changing technology. Intense competition can also be experienced in this industry due to globalisation. In this context, increased rate of competitive rivalry can be observed as the industry performs boundary less operations. Profitability of a leading company in any nation can be threatened by the new entrances as a result of increasing scope of operations due to globalisation. Therefore, leading companies such as Vodafone needs to be always cautious of the impacts of globalisation and should attempt to be not only abreast but also ahead of the competitors in order to remain in the leading position (EconomyWatch, 2010). Impacts of Globalisation on Vodafone Technology and innovation are two of the major factors of globalisation that create impact on the international market. Thus, it is very necessary for the organisations to be accommodated with new technologies and new services. With the growth of globalisation, the demand for the innovating products has increased tremendously, thus making it necessary for technology to be included as a contributing factor in the operations of the organisations. Demand for technological advancement has significantly stood out as an impact of globalisation on the telecom industry. This has made an impact on the operations of the telecom related companies and their organising skills (Harris, 2011). Globalisation has compelled to change the nature of competition as it invites maximum players (marketers) from different parts of the world. The large companies like Vodafone have been driven to operate beyond its traditional markets i.e. local market. The globalisation has major impact on the telecom sector, as the market needed to be covered by the companies are far beyond just covering the local region, and technology is their fundamental tool in this endeavour. Information technology being its driving force plays a vital part tending this industry to emerge vigorously compared to other industries. Previously telephone used to represent only the transfer of voice but now-a-days the use and the demand for telephone have changed (Harris, 2011). The impacts of globalisation are that it tends to change the business practice and the communication practices as well. Vodafone has adopted differ measures of globalisation such as outsourcing and off shoring. The company has about more than 80% of employment outside its parent country. Moreover, it has been observed that the company generates about 80% of its sales from outside Britain (Stuart & Stuart, 2007). Vodafone is highly benefitted as a result of globalisation. Vodafone operates in Europe and in several emerging countries markets throughout the world. The company has highest portion of market share in the Asia Pacific and Middle East regions which tend to be its strongest performing regions, with around 4.7% of positive organic percentage change, although other regions obtained negative figures as the results in their organic percentage change calculations. The company had obtained total revenue of about £10,645 million around the end of the years 2008 and 2009, major contribution of revenue coming from European countries of about £7,607 million. The other portion of revenue produced from Asia Pacific and Middle East region was of £1,648 million followed by the revenue of about £1,357 million which was obtained from Africa and Central Europe region. The European countries are considered to be the major region including the main mobile subsidiaries of the company situated in Spain, Germany and the UK. One of the main joint ventures of the company is in Italy and the company deals in fixed line telecommunications as well. The subsidiary operating in fixed line telecommunications is located in Germany. The company’s businesses operating in the other places in the European region includes Greece, Malta, Albania, Ireland, Netherlands as well as Portugal and it also undertakes its operations in France (Vodafone, 2011). All the mobile subsidiaries operated by the company in European countries along with the joint venture which is functioning in Italy are operated under the same brand name ‘Vodafone’. The group’s fixed line subsidiary operates as Arcor and the group’s associated undertaking in France operates as SFR and Neuf Cegetel29 (Vodafone, 2011). The emerging markets which is the also a result of globalisation covers most part of Eastern Europe, Middle East, major part of Africa and Asia, Pacific and Affiliates, and the company plays a significant part in this regions experiencing major market shares. The political condition which is also referred as regulatory environment of various countries where the company is operating its business has high impact on the company and continues to be influencing the business operation. Political environment of different countries is different by nature and formulation, so it becomes very essential for the company and its subsidiaries to operate in accordance with the environment to assure sustainability of the business firm (Vodafone, 2011). SWOT Analysis of Vodafone SWOT analysis of a company is a very essential tool used to determine the strengths, the weaknesses, the opportunities and the threats, which can be effectively used by the management. In relation to Vodafone, it can be inferred that the strength of the company is its geographically diversified telecommunications operation. Vodafone operates in maximum parts of Europe, the US, the Middle East, Asia Pacific and Africa. The company has been able to be marked as the leading company operating in emerging markets and these are the regions where the company generates its maximum revenue. The weaknesses of the company are that maximum channels of the company operate in European regions. The company needs to be actively involved in the technological development which further can be difficult as well as cost incurring task. Opportunities for the company are the markets (emerging markets) which are to be explored. This is one of the opportunities provided by globalisation. As the company operates in various nations, it enjoys the opportunity of providing its customers with adequate tariff packages according to the customers’ needs. Vodafone can enhance its operations by incorporating development of new technologies related to mobiles and its core services i.e. transferring voice and data. Threat for the company is that markets in which it operates are highly competitive and it has not been able to entirely capture one of the major markets i.e. the US (Khan, 2011). PESTEL Analysis PESTEL (Political, Economic, Social, Technological, Environment and Legal) analysis is one of the most effective and popular tools used for determining the external environment of the organization. PESTEL helps in identifying the demands of the products and the services the company produces which further helps the management as a guide in the process. These factors play a vital role in the progress and the operation of the company. Vodafone, as an international telecommunication service provider needs to comply with all the sets of rules as introduced by the political forces of each different country. Economic factors are involved with the economic policies as followed in the particular nation. It has significant impact on the operations of Vodafone as the economical factors tend to influence the power related to the supply and demand. Social factors have a vital role to play in the progress of the company (Khan, 2011). Social factors include the demand for the products along with the availability of the sufficient labour forces. The company is required to go through all the forces related to social issues to achieve its objective of sustainability. In the UK, in an issue that Vodafone needs to deal with it has been observed that the labours that are of elder aged are demanding the aged pension from the company. This does add extra expenses to the company but Vodafone has paid due attention to it. Advanced technology is highly in demand. Vodafone has accommodated various advanced technologies in its products and services to meet the increased demand of the customers. This is very essential because telecom industry highly deals with the technological changes (Khan, 2011). Advancement of technology performed by the companies operating in this industry is done on regular basis. Thus, to cope up with the competitors and also to sustain its existing customers Vodafone has incorporated advanced technologies. In terms of environmental aspects, the company has paid due attention towards environment related issues such as preserving the environment. Recycling and producing the products which are environmental friendly is a major concern for the company. The operations of the company and its subsidiaries operating in various nations necessarily need to comply with the legal obligations and rules to function well. Vodafone has always considered this aspect and has followed the legal obligations as set by the nations in which they are operating their business (Khan, 2011). Strategies Adopted by Vodafone The environment that the company, Vodafone operates its business is composed of different dimensions in broader society that has great influences in the telecom industry. The company has taken initiatives to deal with globalisation. Vodafone has expanded its business in South Africa and Ghana as well as in other developing countries and also is taking steps towards selling the company’s controlling stake in its branch of Egypt. An Egyptian telecom company named ‘Telecom Egypt’ is the fixed line monopoly operating in Egypt. This company owns 45% of the Egypt market share leaving rest of 55% which is owned by Vodafone. The revenue generated from this market is about £1.35 billion. This is a major achievement of the company which is again an impact of the globalisation. Diversification is another impact of globalisation. The company has adopted strategies related to diversification which helps the company to adjust with the globalisation. As Vodafone operates internationally, the company needs to develop diversification strategies (Vodafone, 2011). Diversification of products is also another attempt of the company to cope up with the changing and competitive environment of business. Initially, the company only concentrated on producing the services related to the transferring of voices to communicate. However, due to globalisation, innovation in technology development has accelerated. The company has changed the operations of its business from just producing the usual phone services to offering the customers with facilities of: emailing through mobile by providing the service of GPRS and Wi-Fi internet service by offering reliable internet facility from remote areas voice as well as messaging services by allowing its customers to connect with the help of instant messaging i.e. through voice messages or Short Message Service (SMS) internet access through the mobile phone Vodafone is concentrating upon providing its customers with the above mentioned services with an intention to obtain satisfactory result i.e. increase in numbers of customer. This has proved to be of great help for the company to increase its profitability. They have been concerned about the need of their customer from different regions and accordingly the product is designed for the different regional customer needs. For instance, with an intention to acquire the new market the company has also adopted collaboration strategy with the existing company of that market. The strategy of the company varies from country to country. For instances, the company follows different strategies in the UK, like it focuses mainly on internet based services in the UK whereas in India services related to free short message services or minimum recharge is operated (Vodafone, 2011). Vodafone is actively involved in conducting surveys to study the changing needs of the customers. Outsourcing is one of the strategies used by the company which is also an impact of globalisation. This strategy has proved to be effective for the company as it has helped in reducing the extra expenses of the company (Vodafone, 2011). Challenges and Possible Strategies Ahead For Vodafone The telecom industry is the sector where intense competition can be observed. Every player (companies) is introducing new products with new technologies to survive in the market. Thus, this stands as a major challenge for the company as it needs to come up with innovative products regularly which also demands huge capital investment. Due to the impact of globalisation, the market is experiencing large numbers of companies from different parts of the world pushing the competition to another level. Managing the necessities of the company to be more efficient and flexible stands as one of the challenges of the globalisation (Gupta, 2008). Therefore, the company needs to manage complex product portfolios to sustain in the market. Technology adopted by the organisation is adequate but looking at the rate of the growing globalisation rate, the company needs to be actively involved in the process in order to keep pace with the globalisation rate. The telecom industry is facing deregulation related challenges as well as introduction of disruptive technologies have made the competition level higher. This industry is also experiencing numerous competitors though the barrier to entrance is high. One of the major challenges faced by the company is the rapid innovation of technology. The company needs to be very active technologically as the demand of innovative products is high with respect to the customers’ needs (Gupta, 2008). Vodafone has stated clearly in their annual report about their objectives for European as well as the emerging markets of developing countries. As the European market tends to be saturated for the company, so it has focused on enhancing their revenue which can be generated from their existing customer base. The company is also emphasising on reducing service costs to encourage the average revenue per user also referred as APRU. This ultimately signifies in reducing customer mix and increasing the EBOTA margin for the European region (Stelzer, n.d.). The subsequent section of the paper will provide recommendations on tools and techniques that can be used to execute Vodafone’s strategies most effectively in keeping with the changing impacts of globalisation. The strategy for the emerging market region is focused on continuingly delivering high growth. The region involved with the emerging market considerably has lot of potential which is yet to be discovered. Emerging markets include those nations which were not considered to be the part of international markets are targeted by the company and it is also observed that the market still needs to be explored. For instance, nations like India and China are considered to have large rural populations that have not been targeted yet by any international company but can prove to be very strong markets of business. These two nations can prove to be strong support as the strategic choices for the company, Vodafone helping it to obtain good position within the current business environment. Global telecommunication industry is highly affected because the operations of the organisations are involved with connecting people residing locally as well as abroad. One of the latest developments in consumer demand is ‘Next Generation Networking’ by using latest technology. Networking is considered to be the main idea behind the operations of telecommunication companies and as the technology is advancing vigorously, the pressure on company such as Vodafone increases to provide the customer with latest technology (Gupta, 2008). Conclusion Globalisation has become a very vital part of the international market. Conversely, it can be said that international market is the result of globalisation. Vodafone is one of the leading companies dealing in telecom industry which is renowned globally. The company is UK based and operates its business internationally. The boom in the telecom industry is considered to be a major impact of globalisation. It has been observed that in comparison to other industries, telecom industry is marked to be emerging vigorously. The major contribution of globalisation is the technological growth and increased demand of innovative products. As the telecom industry is innovating, the companies dealing in this industry needs to be actively involved with the technological innovation. Vodafone has proved itself to be a leading company with respect to its operations in the multinational context. The emerging markets of the developing countries are the major targets of this company. The company is a leading name in the telecom industry of the UK but it also generates its major share of revenue from the European countries as well as other developing countries. The company has been highly benefited by globalisation and the strategy developed by the company to deal with is quite well-planned. However, the company needs to incorporate certain advanced technological facilities such as ‘Next Generation Networking’ along with it spread its operations in certain unexplored areas in the emerging nations in order to embrace positive impacts of globalisation. References EconomyWatch, 2010. World Telecom Industry. Follow the Money. [Online] Available at: http://www.economywatch.com/world-industries/telecommunications/world-telecom-industry.html [Accessed November 20, 2011]. Gupta, A., 2008. Pursuit of the Perfect Order: Telecommunications Industry Perspectives. Pursuit of the Perfect Order. [Online] Available at: http://www.bptrends.com/publicationfiles/11-08-ART Pursuit%20of%20the%20Perfect%20Order-Gupta-cap1028.doc.pdf [Accessed November 20, 2011]. Harris, J., 2011. Info Tech Mergers and Globalization. Home. [Online] Available at: http://www.net4dem.org/cyrev/archive/Misc.%20Articles/Vodaphone/Vodaphone.pdf [Accessed November 20, 2011]. Khan, M., I., 2011. Vodafone Plc. PESTEL Analysis of Vodafone. [Online] Available at: http://www.scribd.com/doc/56093289/CMA-ok [Accessed November 20, 2011]. London Stock Exchange, 2011. International Markets. Home. [Online] Available at: http://www.londonstockexchange.com/prices-and-markets/markets/prices.htm [Accessed November 20, 2011]. Milward, B., 2003. Globalisation?: Internationalisation And Monopoly Capitalism : Historical Processes And Capitalist Dynamism. Edward Elgar Publishing. Stuart, B. E. & Stuart, L., 2007. Integrated Business Communication: In A Global Marketplace. Wiley-India. Stelzer, P., No Date. International Business Environment. The Telecommunications Industry Individual Report on Vodafone. [Online] Available at: http://www.google.co.in/url?sa=t&rct=j&q=ebota%20%2B%20telecom%20industry&source=web&cd=2&ved=0CDoQFjAB&url=http%3A%2F%2Fwww.studyguider.co.uk%2Fcomponent%2Fdocman%2Fdoc_download%2F82-international-business-environment-assignment-patrick-stelzer&ei=nlPKTvGsJMnorAeDkKWdDg&usg=AFQjCNGQuLADghi_E_5K5l0tV1U6NcHADQ&sig2=1uGGd_MZzROTy-F1JjebqQ&cad=rja [Accessed November 20, 2011]. Vodafone, 2011. Annual Report 2009. Home. [Online] Available at: http://www.vodafone.com/content/annualreport/annual_report09/index.html [Accessed November 20, 2011]. Vodafone, 2011. Global Support. Discover Global Enterprise. [Online] Available at: http://enterprise.vodafone.com/discover_global_enterprise/vodafone_and_you/global_support.jsp [Accessed November 20, 2011]. Vodafone, 2011. Prepaid. Home. [Online] Available at: https://myvodafone.vodafone.in/myvodafoneselfcare/jsp/commons/login.jsp [Accessed November 20, 2011]. Vodafone, 2011. Views of Vodafone. Views of Vodafone. [Online] Available at: http://www.w3.org/2010/api-privacy-ws/papers/privacy-ws-15.pdf [Accessed November 20, 2011]. Bibliography Amoore, L., 2002. Globalisation Contested: An International Political Economy Of Work. Manchester University Press. Gavin, B., 2001. The European Union And Globalisation: Towards Global Democratic Governance. Edward Elgar Publishing. Ibbott, C. J., 2007. Global Networks: The Vodafone-Ericsson Journey To Globalization And The Inception Of A Requisite Organization. Palgrave Macmillan. Kang, N. H. & Sakai, K., 2001. New Patterns Of Industrial Globalisation: Cross-Border Mergers And Acquisitions And Strategic Alliances. OECD Publishing. Lister, M., 2003. New Media: A Critical Introduction. Routledge. O'Donohue, J., 1994. Globalisation of Telecommunications: BT as a Case Study. Whurr Publishers. Organisation for Economic Co-operation and Development, 2001. OECD Communications Outlook 2001. OECD Publishing. Prasad, R. & Et. Al., 2010. Globalisation of Mobile and Wireless Communications: Today and in 2020. Springer. Read More