The Theory of the Growth of the Vodafone - Essay Example

? Vodafone Market Structure and Economic Positioning s Submitted by s: According to Dodourova, (2003), the popularityof wireless communication has grown since the 1990s and has been driven by a variety of network providers as well as an improvement of the mobile networks, better hand held devices, internet based services and personalised services on mobile devices. This has brought up the need for every mobile service provider company to strategically place itself in the industry in order to have a competitive edge in the provision of the necessary services to its clients. The statistics currently stand at over 300 million people over the world owning personal computers that need to subscribe to mobile telephones and until the year 2000, cellular operators have kept growth rates just high by cutting prices and adding subscribers that have been lured from fixed line phone companies. The communications industry has been primarily driven by upspring of new technology developments day in day out and this has enabled the expansion of the market potential. The volatility of the telecommunication market has seen the fluctuating fortunes of Vodafone, a company that has for some time been recovering after a torrid couple of years but it is now the biggest wireless operator and one of the largest companies by market capitalisation. It is a multi-national company with influence extending all over the world having stakes in Europe, Japan, Germany, United Kingdom, America, and Asia/Pacific region, Africa as well as the Middle East. It has not been a smooth sailing for the company as the industry is suffering from the collapse of the dot-com collapse and Vodafone has been seen to pair investments in order to survive. Further, the overall slump in the value of technology stocks has deteriorated bigger players in the industry such as Deutsche Telekom and British Telecom each seeing nearly half of their market value disappear. This imposed pressure to the firms for cost reduction that was further reinforced by increasing debt levels, slashed credit ratings and uncertain revenue projections. Fierce competition in the industry has lead to high drops in revenue collections and the rapid technological developments from the traditional voice telecommunications are decreasing at an increasing rate. It is though anticipated that an increased revenue collection will result from the growth of data traffic through computer files, video, graphics and even voice that has been converted to digital computer language as most of the business to consumer internet services would eventually be sold over mobile phones as opposed to personal computers or television sets. At present, this data traffic is estimated to be most driven by the use of Short Messaging Service and soon it is expected to overtake voice traffic in being the contributor of revenue to the mobile operators (Dodourova, 2003). The industry has further been seeing the convergence of media and wireless communication through the internet that allows the bundling of a variety of new services and the enlargement of the mobile communications market. Of much more concern is the developing competition emerging between internet service providers and mobile operators in exploiting distinct advantages such as brand and experience developed on the World Wide Web. The companies in this industry face the challenge of developing multiple strategies in order to compete in the market segments as players are force to stretch beyond their main businesses and existing capacities. Thus they take actions to form relationships that are derived at taking advantage of the available resources, improving as well as developing capacities and ensuring extension of their boundaries and taking the shortest time possible to market. In the rapidly changing telecommunication environment, Vodafone has collaborative relationships and strategic behaviour in ensuring further growth. Major changes such as the globalisation of markets, development of regional trading blocs or technological change that shape the long-term industry dynamics has not hindered Vodafone in defining its scope by has rather challenged the company to develop new strategies to fit into these new environmental conditions. Much of its resources have been channelled at support of the existing successful strategies as the value of these resources may be eroded over time by external challenges such as legislative or regulatory changes or internal changes, (Bovaird & Loffler, 2003). A new phase for the telecommunication industry has been brought about by technological and market changes as well as the consequences of liberalisation that has challenged the logic of the existing competitive strategies and requires development or accumulation of new resources. According to Penrose, (1959), the resource dependence theory conceptualises firms as holders of a set of resources and in other words this is to say that a firm is equivalent to the resources it owns as considerable emphasis is given to a firm’s competitive environment as well as its competitive position. The motivation for collaboration in such an environment will be reflected in the complexity and dynamism of the social and strategic context in which the relationships of the firms are embedded and hence it is thus important to see collaboration as a function of a firm’s overall configuration of strategic choices and objectives. Vodafone’s collaboration in the last three years has shown the company moving from being a purely wireless voice transporting company towards becoming a mobile multimedia company as it establishes itself as a global leader in multiple markets. It is equally concerned with the restructuring of its core capabilities and a rapid expansion of its international network as its growth strategy aims at accelerating customer growth, aggressive geographic expansion and provides a wide range of new services. As well the portfolio of Vodafone has forced it to diversify into internet communication and other related communication services due to the changing technological, industrial and demand of the relationships its engaging in. Vodafone has partnered with computer companies in the development of various wireless devices, on building its internet data infrastructure and its internet portal for wireless devices and on providing a range of infrastructure and communications software products for its global network of wireless carriers as it launched its first European multi-access portal through an alliance with the media company Vivendi. It has also developed a strong relationship with handset manufacturers such as Nokia, Siemens, Ericsson, Motorola, and Casio in a bid to ensure the delivery of next generation wireless high speed data services ahead of competitors. It also participates in Open Mobile Architecture initiative that joins some of these handset manufacturers that fosters an environment to facilitate faster development of mobile internet, supports an open, non-fragmented architecture base on non-proprietary technology. Vodafone has also gone into intra-industry relationships in various countries such as USA, Japan and china to increase its geographical coverage. It paid millions to acquire wireless carrier AirTouch as well as team up with Bell Atlantis in the US market in achieving competitive scope while avoiding the expense of building an East Coast network hence creating the largest wireless business, (Curwen, 2002). Japan, the world third largest wireless market just falling behind USA and China, proves to offer Vodafone lessons to learn and through a series of transactions, Vodafone became a major participant as it became a partner with J-Phone Group as its sole telecommunication partner. This collaboration has made the two companies compete effectively with the opportunity to generate significant revenue and cost benefits through leveraging Vodafone’s global products, services, service innovation networks and distribution, supply chain and procurement improvements. Vodafone has grown into a highly-internationalise operator of mobile telecommunications network as friendly mergers and acquisitions have contributed to the transformation of the company. At the end of the year 2011, Vodafone is estimated to have been operating in over 24 countries and through Vodacom, majority-owned South Africa based business, in other African countries. Vodafone group owns 65 per cent of the South African based Vodacom which in turn owns stakes in mobile operators located in South Africa and other four African countries and there also exists a holding company that play a leading role in the structure of Vodafone are Vodafone International Holdings B.V based in Netherlands that has stakes in mobile operators in Eastern Europe, Middle East and Asia Pacific as Vodafone Investments Luxembourg S.a.r.l has a smaller geographical footprint, Vodafone Ireland which owns Vodafone Holding GmbH which in turn owns Vodafone D2 Gmbh in Germany. Combining these holding companies, a tentative structure emerges but this structure does not include mobile operators that are located in Italy, the Netherlands, The US and UK as operators in Italy and the US are joint ventures with Verizon Communications and in the case of Italy, Vodafone Omnitel N.V. is based in The Netherlands but operates in Italy, while Verizon Wireless operates primarily within the US as Verizon Wireless was formed through the merger of wireless operations within the US, a reasonable assumption to make is that the relevant assets of the Vodafone Group are held through Vodafone Americas Inc. and, in turn, Cellco Partnership. Nevertheless, it is not clear from publicly available documents how Vodafone Group owns Vodafone Omnitel, though Vodafone AirTouch does suggest that the stake was, at least at the time of the acquisition of Mannesmann, held through Mannesmann AG and if this has not changed in the intervening period, then Vodafone Holding also owns Vodafone Omnitel, (Curwen & Whalley, 2013). References Bovaird, A. G. & Lo?ffler. E. (2003) Public Management and Governance. London: Routledge. Curwen, P & Whalley, J. (2013). Unravelling complex organisational structures among mobile operators. Department of Management Science, University of Strathclyde, Glasgow, UK Curwen, P. (2002). Impacts of the Vodafone AirTouch-Mannesmann Take-over: The journal for policy, regulation and strategy for telecommunications information and media. Sheffield Hallam University. Doduorova, M. (2003). Indusrty dynamics and strategic positioning in the wireless telecommunications industry: the case of Vodaphone plc. Corporate Strategy Division, South Bank University Business School, London, UK. Penrose, E. (1959). The Theory of the Growth of the Firm. Oxford University Press, Oxford. Read More