Vodafone through the Years - Case Study Example

Report Key purpose of this paper is to design an e-business proposal for Vodafone, which is one of telecommunication giants in the world. In the first part of this essay, the paper will present brief overview of the selected organization, in the second part; the study will use academic theories to understand the depth of the research problem and in the last part, the study will propose a coherent e-business proposal for Vodafone which can reduce their cost of operation. Critical review of the proposed e-business model will also be an integrated part of the study. Vodafone group Plc. is a UK based multinational telecommunication organization. The British telecommunications company offers various services such as mobile internet, business transactions through mobile, SIM cards, coverage tracking, prepaid and post paid voice services, land-lines and digital television, mobile data services and many others to its customers (Vodafone, 2013). The company is headquartered at London, United Kingdom. The telecommunication giant started its operation as Racial Telecom in the year 1983 but the British telecommunication company changed their name to Vodafone in the year 1991 (Vodafone, 2012). The company has established its presence in continents like Asia, Europe, USA, Oceania and Africa. Total employee base of the company is more than 80,000. Global subscriber base for the company is over 350 millions (Vodafone, 2010). Vodafone focuses on developing its product portfolio in periodic manner in order to meet multidimensionality of ever changing consumer demand. For example, the company has implemented new facilities such as shopping order tracking from mobile phone in order to attract attention of online shoppers. The British telecommunication company faces competition from companies like BT Mobile, One Tel, Virgin and many others. Vodafone has earned sales revenue of $71.81billion in the year 2012 and market capitalization of the company is $ 127.18 billion (Yahoo Finance, 2013). Telecommunication industry in the world is going through a transitional phases, telecom companies are slowly moving towards synchronizing internet service with telecom services altogether in order to meet customer demand. Three key trends of the industry have forced telecom companies to rethink about adopting e-business model in order to reduce the cost of providing service. Evolution of Internet Entrust (2001) has reported that, internet usage in B2C & B2B transactions will increase threefold in next 15 years, which means by 2015, e-business will contribute more than half of the global transaction. Demand for Data BBC (2011) had reported that global data demand will rise to more than 400 exabytes within 2013 and companies need to use online business model in order to store such huge databases. Social networking, web browsing and online shopping produce huge amount of data, companies need to use the online platform in order to channelize these data properly for generating revenue. Demand for Convenient Service In modern world, both B2B and B2C customers prefer faster and convenient transactions in order perform strategic and non-strategic functions. These customers want to be empowered with faster internet access and real time data monitoring, telecom companies need to implement e-business model in order to fulfil increased demand for convenience among mobile users. The essay will propose a holistic e-business model for Vodafone. Next part of the essay will discuss theoretical framework of the proposed e-business model. Research scholars such as Dierickx & Cool (1989), Rumelt (1986), Grant (1991) and Barney (1986) have argued that, firms need to increase their resource capability such as technological integration capability, developing tangible assets etc in order to achieve sustainable competitive advantage over competitors. Porter (1980, 1985) had stated that, companies need to use competitive advantage as a source for ensuring sustainability of business operation. It is evident from the scholarly works of various research scholars, telecom companies have the opportunity to use e-business model for achieving sustainable competitive advantage. Research scholars such as Chiu and Yu (2007) have stated that, implementing e-business system offers both short term and long term benefits to telecom companies. According to Henderson and Clark (1990), companies need to design multistage e-business system in order to use the implemented technology up to its highest potential. Theoretical framework such as “Resource Based View (RBV)” can be used in understanding the relationship between competitive advantage and e-business model. Academic researchers have tried to define the relationship between resource based view and competitive advantage achieved with the help of e-business model but unfortunately very few of them were able to identify the significance of the relationship. Research scholars such as Mukhopadhyay and Kekre (2002) have pointed out that e-business can help a firm to increase its operational efficiency, which in turn can help the firm to achieve competitive advantage. These scholars have also pointed out that, organizations should use its e-business model as sustainable but intangible resources for achieving competitive advantage. Phillips and Piotrowicz (2006) have given following model in order to align relationship between e-business model and competitive advantage. (Source: Phillips and Piotrowicz, 2006) Research scholars have tried to gauge competitive advantage, proposed by resource based view in terms of VRIO framework. Lin et al. (2012) has given following model in order to understand the impact e-business as intangible resource for a firm planning to achieve competitive advantage. (Source: Lin et al., 2012) [Note: U(Xij) is utility function with a value range of 0 to 1, Xij represents value of jth factor for ith organizational activity, where i= 1, 2......9 and j=1, 2,...n. Value of Rij represents extent of rareness of the application and βij represents level exploitation of the application.] Research scholars Lin et al. (2012) have found that, e-business model is a valuable resource for any telecommunication company and this resource is heterogeneously distributed in the industry, the resource is also imperfectly mobile. All these factors are indicating that telecom companies can achieve sustainable competitive advantage by implementing e-business model. Vodafone needs to develop new strategy prior to implementing e-business model. The company needs to test existing e-business models in order to choose the right one to implement in the existing business process of the company. Any telecom company must feel confident during the transition phase of converting traditional business model into an e-business model. Vodafone need to restrict the access of important IP address and other intellectual property to authenticated customers, partners and employees in order to decrease the security threat. The British telecom company needs design authorization access for the e-business model in specific and individualistic manner; such approach will ensure confidentiality and integrity of e-business model. Vodafone needs to create an audit trail for every online transaction in order to ensure transparency. Entrust (2001) has stated that, telecom companies need to increase transparency in the transaction for increasing value of the transaction. (Source: Entrust, 2001) It is evident from the diagram that Vodafone needs to increase self provisioning for complex e-services in order to increase transaction value. Benefit aspects of proposed e-business model can be explained in the following manner. Vodafone needs to create a three layers e-business model such as Procurement, Customer Care and Billing in order to reduce the cost associated with offline activities. E-procurement E-procurement system will provide following benefits to Vodafone. Decrease the length of procurement cycle for new communications contracts Increase the efficiency for implementation of new contracts Increase the level of visibility in communications usage Increase the level of system automation to reconciling, verifying and paying communication invoices Vodafone needs to collect information regarding data network, voice and wireless in order to issue request for information with the help of e-procurement system. E-procurement system will decrease length of the process cycle. Efficiency of the e-procurement system for Vodafone is dependent on two factors such as SLA (Service Level Agreements) and MARC (Minimum Average Revenue Commitment). Entrust (2001) has stated that moving to e-procurement system can help a telecom company to save more than 80% of its transactions cost. Customer Care Vodafone needs to use customized auto responders according to the nature of customer request, this strategy will help the company to engage more customers with offered services. The company needs to use the individual data of customers for designing the elements of customer service. FAQ page of the company should incorporate a two way communication mode such as video calling in order to increase customer engagement level. Integrating customer relationship management (CRM) software with e-business model will definitely help Vodafone increase efficiency of its customer care service. Entrust (2001) has pointed out that telecom companies can decrease more than 60% of cost related to customer service by using e-business model. Billing Vodafone needs to use EBS (E-Billing Solutions) as a part of in order to offer flexibility and convenience to its customers regarding payment of bill. Vodafone is already using e-billing systems, which helps customers to view their bills online. The British telecom company needs to increase detailing in the e-billing system for helping the customers to analyze and control monthly spending on Vodafone subscription. The company should take help of data analytics software while preparing the e-bill in order to analyze consumption pattern of subscribers in statistical manner. According to Entrust (2001), telecom companies can save $1 on every online bill payment of customers. The essay will consider UK based operation of Vodafone in order to calculate cost and return associated with implementing e-business model. Suppose, Vodafone has 20 million subscribers in UK and cost base of the company is $10 billion. Expenditure on various e-business activities can be explained in the following manner. E-Business activities Year 1 Year 2 Year 3 Implementing e-procurement system needs purchasing various equipments. Vodafone needs to spend $20-$30 million for adopting e-procurement system. E-enablement of all operational activities. Vodafone needs to spend $100-$150 on e-enablement activities E-enablement of customer care activities. Vodafone needs to spend $2-$5 million e-enablement of customer activities. E-enablement of billing activities Vodafone needs to spend $1- $2 million on data analytics software integration with the e-enablement activities. (Source: Entrust, 2001) It is expected that Vodafone will recover its expenditure on e-business transformation in less than three year. Next portion of the study will discuss saving benefit of e-business transformation of Vodafone. Activities Cost Saving in percentage Cost Saving in Monetary amount Implementing e-procurement system 10-15% $400-$600 millions E-enablement of all operational activities 25% $200 millions E-enablement of customer care activities 20% $40 millions E-enablement of billing activities 15% $150 million Total Savings $790 to $990 (Source: Entrust, 2001) Next section of the study will discuss two advantages and disadvantages for proposed e-business model for Vodafone. Low Costs It is evident from the above cost benefit analysis that moving to online business model can help Vodafone to save almost $1 billion from its business operation. Research scholars such as Mukhopadhyay and Kekre (2002) have stated that moving to e-business model helps companies to control individual cost element of the business operation. For example, integrating e-business model will help Vodafone to decrease cost related to individual activities like procurement of data, customer care management, billing activities etc. Flexibility Telecom companies can conduct their business operation in 24*7 manners by using e-business model. For example, customers can provide their feedback or gather information regarding bill payment in 24*7 manners by using online services offered by Vodafone. Using data analytics software integrated with online platform will provide the flexibility to customers to analyze their monthly subscription in measurable and quantifiable manner. Proposed e-business model in the study has few disadvantages such as maintaining virtual data warehouse, security threat etc. Vodafone needs to use huge amount of virtual database in order to speed up the e-procurement process but maintain virtual database is not free from security risks such as hacking, fishing etc. There is possibility that online hackers might get access to the personal information of customers by infiltrating in the virtual data base of Vodafone. The British telecommunication company can decrease the extent of such kind of security threat by protecting its cloud computing activities by using secured server network. Vodafone needs to change its security codes in periodic in order to decrease the scope for hackers to infiltrate in the server system of the e-business model. Reference Barney, J. B., 1986. Strategic factor markets: Expectations, luck, and business strategy. Management Science, 32, pp. 1231-1241. Chiu, R. and Yu, S., 2007. A study on building of a common gateway for secure exchange and transmission of electronic business message. Benchmarking: An International Journal, 14(3), pp. 306-19. Dierickx, I. and Cool, K., 1989. Asset stock accumulation and sustainability of competitive advantage. Management Science, 35(12), pp. 1504-1511. Entrust., 2001. e-Business Solutions for the Telecommunications Industry. [online] Available at: [Accessed 22 January 2013]. Grant, R. M., 1991. A resource based perspective of competitive advantage. California Management Review, 33, pp. 114-135. Henderson, R. M. and Clark, K.B., 1990. Architectural innovation: the reconfiguration of existing product technologies and the failure of established firms. Administrative Science Quarterly, 35(1), pp. 9-30. Lin, C., Tsai, H. L., Wu, Y. J. and Kiang, M., 2012. A fuzzy quantitative VRIO-based framework for evaluating organizational activities. 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