Strategic Management of Vodafone - Case Study Example

Strategic Choice: Strategic management is a set of decisions and processes that lead to the development of a successful approach to achieve the organizations goals. Once the fundamentals such as mission and vision statements, are drawn, those processes that follow “undergo analysis, choice, implementation and evaluation”. The framework by which strategic management is known, and can be applied to business corporations, is based on processes. As opposed to organizational effectiveness, there is more universal consensus regarding the foundations of strategic management in both the process methodology and the nature of the processes. In this context, an analysis of the conflict an organization faces while designing strategies is essential (Tseng, 223). The corporation chosen for this case study is Vodafone Group Plc. Vodafone has been a leading player in the telecommunications industry in the United Kingdom. Its success here had prompted plans for expansion across the globe. So Vodafone is in an important stage of its evolution as a multinational company. The decisions that the Vodafone management takes in any independent unit can have implications for the organization as a whole. Any corporation’s strategic management goes beyond process planning. Though planning receives much attention, it is just one of a number of processes that must be implemented if a corporation is going to participate in a strategic management framework. This paper presents an empirical study of Vodafone Plc. and explicates reasons for success or failure in its implementation of strategic decisions (Krebs, 532). As one management guru put it: “to complete implementation, achieve everything which is intended, and do all of this in a way which is acceptable to organization members - that is, to attain comprehensive success - there needs to be support (especially from influential persons, and those implementing the decision), clarity about what the objectives are and how to reach them, a favourable climate within the organization and a little bit of luck--or at least no bad luck.” (Tseng, 223) At Vodafone there was complete support from both decision makers and those acting on those decisions. This is evident from the way CoreMedia’s comprehensive digital rights management (DRM) infrastructure was installed in a streamlined fashion during 2004. Overhauling the technology upon which an organization runs is no easy task. Vodafone would not have pulled this off without proper co-ordination across all levels. The successful integration of cutting-edge technology helped reduce costs significantly and made operations more efficient. In this case, all the criteria for success, as drawn up by Vodafone’s strategic framework, were executed flawlessly (Krebs, 534). However, Vodafone’s decision to acquire Tele2’s business units in Italy and Spain has proved to be a challenging operation so far. The decision to acquire was made in October of 2007, so it is early days yet. But if industry analysts’ predictions come true the balance sheet at the end of this financial quarter will show negative results. The reason for this probable glitch in Vodafone’s impressive strategic management record is this: “Though senior managers were in favour, those directly affected by the acquisition are suspicious and unlikely to give wholehearted support. What the acquisition was to achieve was never made explicit, so what had to be done was unclear. The two divisions operated in completely different ways; a sharper cultural contrast could hardly be found, with each division having different values and ways of working. It is now believed that no propitious factors could help to overcome this daunting combination” (Krebs, 535). For successful implementation of strategies, planning should be meticulous and resources should be sufficient. Also, the right climate should prevail within the industry. These factors work in a synergistic way to help achieve the highest level of success. The pattern of these disparate factors acting in coordinated synchrony is most important. The strength of any strategic initiative lies in this seamless integration (Wilton, 904). Formulation of business strategies depend on the Chief Executive’s assessment of future trends in the industry. If the top leadership’s reading of the opportunities and competition is not up to mark, the result may be disastrous. When these assumptions flounder, the company’s investments in these initiatives will go down the drain. Vodafone is fortunate in having Arun Sarin as its Chief Executive Officer since the December of 2002. Sarin took over the reigns when the company was in crossroads. It is to his credit that the company has seen healthy consolidation and expansion over the last few years (Wilton, 904). Eventually, the success of a business corporation would depend on the strategic decisions that it takes. But, there is no blue-print or framework that can lead to definite success. Even choosing between the commonly used strategic frameworks -transformational and operational – is never straightforward. The context in which the decisions are made should be accorded careful consideration. An empirical study of decision making in Vodafone would indicate the unconventional nature of its decisions. Right from its inception, and particularly since Arun Sarin took over as CEO, decision making has grown much bolder. Let us take the area of advertising and public relations in particular. In December 2004, Vodafone’s followed its sponsorship deal with Ferrari with a donation of one million pounds to the victims of Asian Tsunami. Most companies would have chosen proven methods to gain public recognition and boost their brand image. But going by the financial results of all its competitors that year, the strategy adopted by Vodafone proves to be more successful. The adoption of two widely different public relations exercises demonstrates its broad and flexible strategic framework (Wilton, 902). Vodafone’s success in finding the right business strategy more often than not is attributable to its management’s understanding of such general considerations as its “competitive situation, the latent needs of customers, capital markets, the regulatory environment, and new technology, the structure of its industry, and the strengths and weaknesses of its rivals”. Yet this is only the first step. The organization’s ability to execute the strategy is of equal import too. Where Vodafone outclasses most of its competitors is 1. in its emphasis on the execution aspect of strategies and 2. seeing all decisions in the context of broader goals and objectives. A careful study of Vodafone’s decision making pattern reveals that a "second-best" strategy that they can execute well has always superseded an ideal strategy that may demand capabilities beyond their reach. Vodafone strategy was to acquire greater market-share saw them “target bigger, high profile clients while retaining and recruiting a quality workforce”. “Its challenge was to communicate a profound transformation in strategic direction throughout the organization in a manner that would elicit the support of the entire workforce” (Carr , 673). Throughout its existence, Vodafone executives were confronted with conflicting choices. For example, there was always pressure to adhere to regulatory and industry norms from the government. On the other side, there was pressure from stock-holders to gain greater competitive advantage. Growing existing market bases or venturing into potential emerging markets. These were some of the choices that Vodafone has had to deal with. The sustained growth of Vodafone’s net asset value over the last seven years suggests that their choices have been correct. For example, Vodafone AirTouch’s division collaborated with Cisco Systems, Hyundai Electronics and TELOS Technology during trial implementations of a new Internet Protocol for a wireless communications network. Some of the partners in this venture were Vodafone’s direct competitors. Yet, the leadership took the prudent decision in laying the foundation for the technology of the future even at the potential cost of losing revenues in the immediate future (Theodorou , 112). Any business organization, when it expand and innovates, its alliances too expand. And the choice of an alliance partner can be very crucial. The Maidique & Patch topology is a useful framework of guidance in arriving at a decision. Statistical information from a pool of 110 large-sized corporations indicate that “first movers may focus on home government relationships but do not rely on foreign government ones” (Theodorou, 110). Moreover, most alliances happen between organizations that are structurally similar and whose strategic focus is convergent. We see a clear manifestation of this phenomenon in Vodafone’s overseas collaborations. For example, Vodafone has been looking for sometime now, to gain a foothold in the Indian telecommunications market. The management is confronted with a strategic choice. It could expand its own operations to this region, or, it can acquire a similarly structured regional corporation. Vodafone chose the latter option. This led to the acquisition of Hutch Essar India quite recently. It would be premature to comment on the success of this development. But, given the empirical data on Vodafone’s strategic choices and the validity of Maidique & Patch topology, this is likely to be another right decision (Dasgupta, 395) . James Brian Quinn makes the following observation about the outcomes of strategic development: "A sustainable pattern of response to market needs, consciously selected in light of probable shifts in the environment, relative competencies of the firm, and the anticipated moves of intelligent competitors. Such patterns initially develop through superior business insight and are maintained through entrepreneurial instinct. Sooner or later, though - and increasingly sooner - it becomes necessary to formalize the call for insight and instinct.” (Shipilov, 18) Quinn also asserts that any business that is committed to principles of Corporate Social Responsibility automatically marks itself as a sustainable enterprise. According to Quinn, by upholding a socially responsible code of operations, the firm is also securing the availability of a healthy consumer base for the future. There is also evidence that consumption volumes are higher in markets with more pleasant climatic conditions. So, by endeavouring to preserve the environment, the business corporation is also laying the foundation for sustained consumption (Dasgupta, 401) . The absence of a comprehensive database of empirical information can keep an organization stagnant and would ultimately lead to decline. Gaining new knowledge by analyzing empirical databases is essential to develop competitive advantage. At its most advanced level, this fact-gathering goes well beyond the “collective experience of customers, suppliers, distributors, and internal process managers” (Shipilov, 16) . It is also not possible to departmentalize research on strategic planning. Hence, it is imperative that everyone should be involved in gathering primary data outside the range of their normal experience so that their individual objectives are synchronous with the broader strategic objectives. Developing a robust database for such purposes can be a daunting task, as researchers try to extend the boundaries of inquiry. In this light, the launch of Vodafone India Foundation is relevant. Though it comes under the purview of the corporate social responsibility program, a record of the Foundation’s activities will provide the necessary market data about one of the important emerging markets – India. An investment of ten million dollars, in a high potential emerging market is very prudent indeed (Gietzmann , 602). In the words of Henry Mintzberg, “All organizations are perfectly designed to achieve the results they are getting. While management texts argue that "form follows function," once cast, form invariably limits function. A three-business-unit design, for example, will often impede cross-selling, geographic focus, or the achievement of enterprise-wide synergies. Deliberations on strategy that dont consider design barriers to new behaviour unwittingly accept the limits imposed by reporting relationships, work flows, and other elements of organizational architecture.” (Gietzmann , 600) In fact many negative consequences could be traced to organization design, going beyond a general criticism, to a specific taxonomy of design decisions - structure, reward systems, information flows, and decision protocols. The design also affects strategic choices regarding participation, organization of data, and the expression of strategy itself. So ideally, while it is generally agreed that a strong structural framework gives any organization a head-start, contingency measures will have to be laid out alongside. This is essential if the organization does not want to lose focus on the broader objectives of growth and development in a maze of details. The early years of Vodafone’s history reveal this undesirable rigidity. But under the leadership of Arun Sarin, some concrete measures were taken to address this deficiency. As a result, the business model of Vodafone is now recognized by analysts as very robust and sustainable (Carr, 672). Hence, strategic decision making is a complex process that has elements of art and science attached to it. Hence the following key elements represent the key qualities of a sound decision making model - unconventionality, innovation, risk and empirical investigation. This may not result in a fool-proof model, but it will go a long way toward reaping maximum rewards for the organization. Works Cited: Cost of Capital, Strategic Disclosures and Accounting Choice.M. Gietzmann and J. Ireland. Journal of Business Finance and Accounting 32.3-4 (April-May 2005): p.599(634). Globalization and strategic choice: how multinational and local company perspectives differ: a Spanish case study.Chris Carr and Clara-Eugenia Garcia. European Management Journal 21.6 (Dec 2003): p.671(15).  Managerial risk-taking incentives, product market competition and welfare. Sudipto Dasgupta and Jhinyoung Shin. European Economic Review 48.2 (April 2004): p.391(11).  Manufacturing strategies and financial performance--the effect of advanced information technology: CAD/CAM systems . (General Papers).Petros Theodorou and Giannoula Florou. Omega 36.1 (Feb 2008): p.107(15).  On the choice between strategic alliance and merger in the airline sector: the role of strategic effects.Philippe Barla and Christos Constantos. Journal of Transport Economics and Policy 40.3 (Sept 2006): p.409(16).  Planning under pressure: The Strategic Choice Approach.(Book review).J. Friend and A. Hickling. European Journal of Operational Research 170.3 (May 1, 2006): p.1017(2).  Rational expectations equilibrium and the strategic choice of costly information. Tom Krebs. The Journal of Mathematical Economics 43.5 (June 2007): p.532(17).  Strategic choice and organisational context in HRM in the UK hotel sector.(human resource management).Nick Wilton. The Service Industries Journal 26.8 (Dec 2006): p.903(17).  Strategic choice of flexible manufacturing technologies. Mei-Chiun Tseng. International Journal of Production Economics 91.3 (Oct 18, 2004): p.223(5).  TMG social capital, strategic choice and firm performance.(top management groups).Andrew Shipilov and Wade Danis. European Management Journal 24.1 (Feb 2006): p.16(12).  Read More