Vodafones International Strategies - Case Study Example

CASE STUDY REPORT – VODAFONE By Name Course Instructor Institution City/State Date Table of Contents Case Study Report – Vodafone 1.0 Introduction A number of strategic issues that face Vodafone has been identified in this case analysis; poor customer service, accounts/billing inaccuracy, and poor coverage. The report will further examine Vodafone’s international strategy, how it can derive increased value from its international businesses portfolio, and why it should divest some of its businesses. The number of mobile customers across the globe has increased tremendously; most of them are from the western world. Still, a high percentage growth in the number of customers is projected to surface from the emerging markets, particularly India, China, and other countries across Asia. Although Vodafone Group operates in both mature and emerging markets, the market share it has acquired in Asian markets is exceedingly small. The mobile phone market economics has affected Vodafone’s market share, and as a result, the company has come across numerous threats. A number of companies intending to become a global leader are increasingly engaging in strategic alliances because they lack sufficient resources to succeed on their own. For this reason, Vodafone utilises merger and acquisition as an expansion strategy. The telecom market is changing continuously; therefore, to enhance competitive advantage, Vodafone has ingrained merger and acquisition activity into the corporate strategies. The strategic issues facing Vodafone has been analysed and evaluated and recommendation on how to overcome these strategic issues has been identified with the goal of improving Vodafone’s competitive positioning. Even though Vodafone is well-established, Webb (2013, p.5) asserts that the company faces a number of strategic issues that create a need for radical structural reform of its business practices. The report offers a number of attainable recommendations that will enable Vodafone to mitigate the strategic issues discussed in this report. 2.0 Strategic Issues 2.1 Accounts/Billing Inaccuracy A number of customers have been complaining about incorrect billing, charged for mistaken usage and erroneously charged for terminating accounts. Such issues have been exacerbated by the inconsistency of Vodafone’s online billing and account system that has resulted in outages in late 2010. Sometimes the incorrect amounts that the customers are charged are attributed to the excess usage of data, which should not be incurred. Furthermore, network problems have resulted in extra cost since one SMS is sent multiple times and each message is charged. Although some charges are reversed, the company has failed to explain why it overcharges its customers. Furthermore, most customers are complaining that they experience dropped calls and as a result, they are charged the minimum call and flag fall charges every time they retry a call. In consequence, this has led to higher bills for numerous customers. According to Morley (2016), a combination of billing bungles and shoddy service have resulted in an increase in the number of complaints. The number of complaints in the UK made to Vodafone increased to 32 per 100,000 customers between October and November of 2015. Regrettably, the complaint attitude to charging and billing accuracy is widespread across countries where Vodafone operates. Therefore, this has become a global issue and an obstacle to strategic plan since customers are becoming unhappy. 2.2 Poor Coverage Vodafone customers have continually complained about a plethora of issues associated with the company’s service provision. The reception issues have become a major challenge, especially for the customers who depend on the Vodafone 3G and 4G networks. Most of the customers’ complaints are associated with network and reception problems. In 19th June 2014, there were major network outages across Western Australia, which made it hard for the subscribers to make or receives calls. In 2009 and 2010, service outages forced customers across the globe to jump ship. Vodafone’s present situation has been caused by the underlying network issues, which has been exacerbated by Vodafone’s failure to provide accurate information to the customers. Customers in different parts of the world continue to complain about the poor network reception, and sometimes going for hours or days without a network; therefore, making it hard for them to make calls. Poor coverage and reception have forced a number of customers to join Vodafone’s rivals so as to reduce communication problems and reduce financial loss associated with network outages. 2.3 Poor Customer service Evidently, poor customer service has a negative impact on the business; for instance, it can result in the loss of customers, poor reputation, and loss of profits. When customers call Vodafone customer service, they are forced to wait for long hours. Besides that, most of the Vodafone retail outlets are unable to offer the aftersales support, when issues such as network problems arise. Most customers complain about various problems such as phone connections, tariffs, inaccurate bills and so forth. When they call the customer service, as cited by Shannon (2015), most customers experience lengthy spells on hold in an attempt to talk to talk to the Vodafone’s customer service operatives. For those who get lucky to speak with an operator, their calls are either dropped while still communicating or are given empty promises. One customer as cited by Shannon (2015) described Vodafone’s customer service as “nightmare, demoralising, mind-numbing, a joke and very incompetent. Most customers argue that the company’s customer service is exceedingly incompetent and make customers waste a lot of hours. Therefore, poor customer service has made Vodacom an inept and inefficient company. 3.0 Analysis and Evaluation Basically, the discussed strategic issues at Vodafone are attributed mainly to communication issues. The company normally experience network issues that normally result in outages, and are experienced in different countries where the company operates. Besides that, communication between the company’s management with its dealers, customer service and retail staff members about the network problems and inaccurate billing seems to be inadequate and this has consequently exacerbated the problems that the company faces. The number of complaints from Vodafone customers is very high, and this exhibits that the company’s customer service department is ill-equipped to manage the high number of inquiries and complaints. During network outages, customers are always offered unhelpful and perennial suggestions by the customer service to either replace their SIM card or restart their handsets. Besides that, when customers call the company to either inquire or complain, they are forced to wait for long hours and sometimes their calls are not answered. Some customers have also complained that the accents used by customer service operatives are hard to understand, especially for the non-English speakers. A number of this issues started cropping up when Vodafone started expanding its businesses through mergers and acquisitions. For instance, Vodafone together with Hutchison networks has for many years depended on the network sharing agreements with Telstra as well as Optus for both their 2G and 3G services. Vodafone and Optus jointly built their 3G network from 2004. According to Ibrahim et al. (2014, p.7), poor quality of customer service can result in low level of customer satisfaction, which consequently lead to increased expenses, low profits and loss of customers. Vodafone poor coverage and customer service have resulted in demotivation, which has been exhibited by the decline in the number of customers and low purchases. Basically, the growth in voice traffic has forced Vodafone to look for ways of increasing the traffic volume through its networks so as to increase profits. This has been made possible through acquisitions with the objective of increasing the number of the customers as well as improving the service usage by the existing customers. Still, the company’s poor reputation in terms of network reception and customer service has made it challenging for the company to attract new customers from its competing operators (Peppard & Rylander, 2006, p.129). Customer satisfaction and quality service are widely recognised for the important role they play in the survival and success in today's global markets, which are exceedingly competitive. Poor service exhibited by Vodafone has led to the failure of service process and reduced satisfaction amongst the customers. Given that customer satisfaction at Vodafone is below the threshold, the purchasing loyalty has been declining rapidly; therefore, it seems the company overlook the correlation that exists between loyalty and satisfaction. Essentially, the relationship between customer’s loyalty and satisfaction relies on the quality of the services and product. Vodafone has failed to promote customer satisfaction, and as a result, there is a negative relationship between customer loyalty and customer satisfaction. Poor service has forced a number of customers to desert Vodafone; for instance, the company lost approximately 140,000 customers between 2013 and 2014 mainly due to poor services and billing inaccuracy (Bodkin, 2014). In the UK, the number of complaints has increased tremendously as shown in the figure below. Fig 1: Number of Complaints to mobile service providers (Palmer, 2016) 4.0 Recommendations Vodafone should create a sustainable value for its shareholders. The following recommendations can help Vodafone overcome the aforementioned strategic issues and problems. 4.1 Venturing into Untapped Markets Vodafone can improve its value by venturing into up-and-coming markets through the creation of strategic alliances. Some of these markets are less penetrated; therefore, the likelihood of customer growth is very high. In view of this, Vodafone should start connecting the rural areas in the developing countries by providing advanced internet services. Besides that, for the company to improve coverage in the untapped markets, Vodafone must look for ways of selling mobile plans cheaply and how to broaden its network. The company should concentrate on expanding its retail base through the addition of agents as well as subscribers devoid of building and maintaining the distribution infrastructures, which are normally costly. Without a doubt, the emerging markets are growing exponentially, and for Vodafone to become successful in such markets, they have to partner with established service providers. Some of the emerging markets that Vodafone should focus on include China and India since there is huge opportunity for the company to increase its customer base. 4.2 Increase Revenue and Reduce Cost For Vodafone to remain competitive, the company must reduce its expenses by integrating further, exploiting the economies of scale and increasing the outsourcing efforts. The poor customer service and inaccurate billing have dented Vodafone’s reputation and as a result, most of its customers are moving to its main competitors. To overcome this challenge, Vodafone must shift from acquisition of customers to customer retention. Imperatively, the company should introduce new products/services so as to improve revenue as well as customer value. 4.3 Divest Vodafone should sell some of its unprofitable businesses bearing the mind that the company’s main goal is to produce higher incomes. Therefore, Vodafone must divest in transactions, which are yielding a return below the cost of capital and has generally failed to generate substantial value for shareholders. Furthermore, the company should sell businesses that have failed to meet the performance requirements. For instance, the company’s Australian operations have been struggling for years and are plagued with network outages and consumer dissatisfaction. The company has lost over 2 million users in Australia, especially after major network failures in 2011 (Heber, 2014; Ramli, 2014). The rate of decline in Australia is shocking, and the only solution is to sell off all the assets in Australia. 4.4 Improve Communication Regular network outages or deplorable services have left many customers devastated; therefore, the company should learn how to communicate with its customers in an efficient and timely manner. To improve customer satisfaction, the company should notify the customers when there are scheduled outages before they take place. Furthermore, the company should implement customer service systems that can help improve service delivery to the customers. Summary In conclusion, the report has identified a number of strategic issues that face Vodafone; poor customer service, accounts/billing inaccuracy, and poor coverage. The level of completion in telecommunication industry has increased tremendously over the last years because of internationalisation, deregulation as well as technological innovation. The strategic issues that Vodafone faces have resulted in the loss of customers and profits; therefore, there is a need for the company to strategically renew its processes as well as develop new competencies. Vodafone has found it challenging to focus on its strategic goals because of the various issues. For this reason, it has been suggested that the company should restructure its business by divesting in unprofitable businesses and venturing into untapped markets such. For Vodafone to remain competitive, it must forecast the market economics and ensure customers are satisfied. References Bodkin, P., 2014. Lots of Irish mobile phone users have been ditching Vodafone. [Online] Available at: HYPERLINK "http://www.thejournal.ie/vodafone-ireland-mobile-phone-users-1773397-Nov2014/" http://www.thejournal.ie/vodafone-ireland-mobile-phone-users-1773397-Nov2014/ [Accessed 2 June 2016]. Heber, A., 2014. Here's Why Vodafone Probably Should Sell Off Its Australian Assets But Probably Won't. [Online] Available at: HYPERLINK "http://www.businessinsider.com.au/heres-why-vodafone-probably-should-sell-off-its-australian-assets-but-probably-wont-2014-11" http://www.businessinsider.com.au/heres-why-vodafone-probably-should-sell-off-its-australian-assets-but-probably-wont-2014-11 [Accessed 2 June 2016]. Ibrahim, M., Nyame, R.K. & Kumah, A., 2014. Quality Service Delivery Among Telecommunication Service Operators In Ghana: A Case Of Vodafone-Ghana. International Journal of Economics, Commerce and Management, vol. II, no. 5, pp.1-18. Morley, K., 2016. Exposed: How Vodafone is messing up customers' bills. [Online] Available at: HYPERLINK "http://www.telegraph.co.uk/finance/personalfinance/household-bills/12082821/Exposed-How-Vodafone-is-messing-up-customers-bills.html" http://www.telegraph.co.uk/finance/personalfinance/household-bills/12082821/Exposed-How-Vodafone-is-messing-up-customers-bills.html [Accessed 2 June 2016]. Palmer, K., 2016. Vodafone mobile complaints double despite spending £2bn on better service. [Online] Available at: HYPERLINK "http://www.telegraph.co.uk/business/2016/03/30/vodafone-mobile-complaints-double-despite-spending-2bn-on-better/" http://www.telegraph.co.uk/business/2016/03/30/vodafone-mobile-complaints-double-despite-spending-2bn-on-better/ [Accessed 2 June 2016]. Peppard, J. & Rylander, A., 2006. From Value Chain to Value Network: Insights for Mobile Operators. European Management Journal, vol. 24, no. 2-3, pp.128-141. Ramli, D., 2014. Vodafone should sell out of Australia: UBS. [Online] Available at: HYPERLINK "http://www.smh.com.au/business/vodafone-should-sell-out-of-australia-ubs-20141107-11iqgt.html" http://www.smh.com.au/business/vodafone-should-sell-out-of-australia-ubs-20141107-11iqgt.html [Accessed 2 June 2016]. Shannon, L., 2015. Vodafone's Christmas turkey: Following our 'Vodapest' exclusive the floodgates opened with your tales of despair at the operator. [Online] Available at: HYPERLINK "http://www.thisismoney.co.uk/money/bills/article-3374636/Readers-complain-experiences-Vodafone.html" http://www.thisismoney.co.uk/money/bills/article-3374636/Readers-complain-experiences-Vodafone.html [Accessed 2 June 2016]. Webb, N., 2013. Vodafone puts mobility at the heart of business strategy. Human Resource Management International Digest, vol. 21, no. 1, pp.5-8. Read More