Marketing Strategy of Vodafone - Research Paper Example

Marketing Strategy of Vodafone TABLE OF CONTENTS 1.0Introduction 1.1 Vodafone and the Pestle Framework 1.2 Vodafone and Porters Five Forces 2.0 Vodafone and the SWOT Analysis 2.1 Vodafone and Porters Competitive Advantage 2.2 Vodafone and Porters Value Chain Analysis 3.0 Uses of Marketing to Vodafone 4.0Conclusion and Recommendation Executive Summary The purpose of this paper is to examine the importance of marketing and the various ways through which Marketing can be of value to the management of Vodafone in terms of efficiency and effectiveness. The investigation is conducted from a theoretical point of view though using Vodafone as case study. The theoretical analysis uses certain analytical tools such as Porters Five Forces, the PESTLE model, Porter’s value chain to analyse Vodafone with respect to its competitors. 1.0 Introduction Strategies of an organization should well be able to detail themselves as per the needs of the environment while planning for the future. A framework for any program can well be preferred if it is deeply affinitive to the generalization of a venture or enterprise keeping in mind the quality of methodizing. The one concept firmly oriented towards the creation of values for its customers will conclude with excellence in the target market. Vodafone uses its familiar red logo and retains themes of togetherness, fashion joy and enjoyment throughout its marketing communications. The same uniformity is maintained and followed by Fanta, Microsoft, Nike, Sony and host of other companies. What should be the rational behind this? Is it for fun? Integrated marketing communications see the elements of the communications mix 'integrated' into a coherent whole. As the fight of market shares and quest for product success continue, marketers are employing all the necessary tactics, and methods to give their product a break through, or remain competitive (Brennan, Baines, and Garneau, 2003, Rowley J 2004). One way of doing this is through differentiation, making your product outstanding, by having your values and image (Zineldin M., and Philipson S., 2007). This is known as the marketing communications mix, and forms the basis of marketing (Pelsmacher& Kitchen., 2005) This paper examined the importance of marketing to Vodafone, it current and future market challenges using certain analytical tools and models. Part one of the paper lay emphasis on these models while part three looks at the resources and capabilities that distinguished Vodafone from its competitors. 1.1 Vodafone and the Pestle Framework LAYOUT OF THE PESTEL FRAMEWORK The PESTEL framework can only be used to look at the future impact of environmental factors and that this impact might be different from the past. Thus an understanding of how the factors in the above framework may drive change is only a starting point1.There is a need for an understanding of the key change drivers and this will be explained below. Looking at the PESTEL framework shown above one can observe that the Vodafone is affected by all the environmental factors in the framework. Under political factors, Vodafone is affected by both taxation and social welfare policies. Given the fact that consumer’s income is dependent on government taxation policies, it is evident that take home income might either increase or reduce depending on the taxation policies adopted by the government at anyone time. The management of Vodafone often price their products taking these factors into consideration. In addition, government spending is greatly affected by its taxation policy. What is the future budget situation of the countries where Vodafone has branches or its plans to operate in? Is the government striving at a surplus, deficit, or balance? The political situation of the US is currently unstable; with the present government loosing popularity because of the war in Iraq, the tit for tat with Iran, the war on terror are all going to affect Vodafone. This is because current faith of world politics depends on the US and the United Kingdom (UK) with the two countries likely to be targets of terrorism attack. Under environmental factors I consider waste disposal, energy consumption and environmental protection laws in the countries of operations to have a great impact on Vodafone. Under the legal factors I identify employment law, health and safety and product safety laws as having potential impacts on Vodafone. No wonder Vodafone emphasise green marketing and has been at the fore front of socially responsible activities. All the economic factors can be regarded to have an impact on the Vodafone. For example, high unemployment rate, high inflation rates, low GNP trends and slumps in the business cycle will imply low disposable income, more dependence by the citizens on credit facilities, borrowed funds and thus alternative sources of finance 1.2 Vodafone and Porters Five Forces “Porters five forces framework was originally developed as a way of assessing the attractiveness (Profit potential) of different industries. As such it can help in identifying the sources of competition in an industry or sector”2. The basis upon which this framework is built will serve in analyzing Vodafone Plc environmental forces. Competitive Rivalry: With many of telephone network providers and operators in the world with each of them being strategic players, Vodafone entering into a new market is not going to be taking lightly. The competition is going to be fierce, with close competitors such as T-Mobile, virgin mobile, Telenor, Tele 2, currently being the market follower. Vodafone in its operation in the market where the company is operating pay attention on the four Ps, product price, promotion, and place. Vodafone is currently using its position; fight other mobile network providers to close down. It is the largest mobile telecommunications network company in the world by turnover and has a market value of about £75 billion (August 2008). This is a big threat to close competitors such as T-Mobile, Virgin mobile and other niche players in the market. New competitors will have to spend more on price competition if they should have a say in the market. With a relatively high profit margin, in the sector to attract potential competitors or new entrants, the situation is however difficult for new entrants to enter the line of business, because huge capital, and capabilities to support after sales services, in terms of technical expertise to get up overnight and open a mobile telephone company that will be able to compete with Vodafone in large scale is not easy. More so, mobile phone operators often strived at having an exclusive right with their suppliers. Thus Suppliers turn to have a very high bargaining power. Each mobile operator often strived at having unique items; others offer almost the same thing making customers and potential customers to base their attention on price, quality and after sales benefit. 2.0 Vodafone and the SWOT Analysis Strengths Better Value, in the form of lower prices. Superior Locations Better physical appearance of the their offices and store locations Good will, exclusive rights with some of their suppliers. Maximization of the four Ps of Marketing at all front. High capital and a pool of reserves, and cheap credit facility offered to some items. The Employees, 500 stores Around the world. cheaper, better products and providing more choice 2,000 own-brand primary suppliers in more than 15 countries Best overall benefits package in the industry charitable giving and community-based education programmes Opportunities A pool of cheap credit facilities The US is an open economy welcoming all sorts of businesses. Is still the land of opportunity? China is a big trading partner of the US, an alternative and better source of cheaper items. The impact of Vodafone been felt in all the states. Many small network operators are closing down The growing pool of technology. The heavy investment on Research and Development (R&D) by the US UK government Fall of the US Dollars, will mean cheaper operational cost within the US. Threats Anti environmental campaign Loyalty of some consumers to old established old network operators The likelihood of terror attack of some Vodafone locations the US. Natural disaster such as the hurricanes, tornadoes, tsunamis, are now on the rise Exclusive rights enjoyed by T and Virgin mobile to some customers and suppliers Difficulties finding their own suppliers, or owning their own Current market follower, T-mobile had rising revenue in the last five years Weaknesses Some dissatisfied customers Sole right to some products by competitors Key Niche players The lack and absence of unique product with total differentiation from those of competitors. The lack of ownership of exclusive patents. Dropped and sold of many products that have not delivered reasonable profits 2.1 Vodafone and Porters Competitive Advantage Competitive advantage can be referred to as a situation whereby a firm is able to provide a particular service in an industry better than its competitors will do thereby increasing its market share and profit potential3. Competitive advantage is determined by the core competencies of the firm, which are the particular skills and techniques as well as staff and suppliers achieved by the firm which are otherwise not available to other firms in the industry4. In discussing Vodafone competitive advantage, I have analyzed it with respect to Porters competitive advantage framework. Considering the strategic capabilities of Vodafone, its competitive advantage will be analysed with respect to its strength. This is based upon Porters argument that, a firms position itself by leveraging it strength. Lower Cost Differentiation Cost leadership Low product system Low life cycle cost for Vodafone products High reliability of Vodafone product and non intrusive serviceability for Vodafone electronics. Vodafone unique resources, trademarks, proprietary know-how, uninstalled and installed customer base Differentiation Adequate advanced functionality Aesthetic product features Integration capabilities and upgradeability, convenient product availability in terms of quantity, location acquisition and installation. Confidence in the product Equity of the Vodafone brand Cost focus Differentiation focus Looking at the overall strategy of Vodafone, one will not hesitate to conclude that Vodafone has a broad target. Here Vodafone is able to bring its product faster to the market than some of the competitors. Thus the company is focused on cost leadership and differentiation. Unlike the manufacturing industry where product advantage has been found to be the most important factor in determining the competitive position of a firm in the industry, the case of a mobile telephone operator is different. The competitors in the former industry can easily replicate the important elements of a firm’s new service5. It is against this backdrop that Vodafone’s managers in order find the key to new service success must look to factors other than sustainable product advantage6. Storey and Easing wood7 assert that the totality of the service offering must be understood from the perspective of the customer. Thus, I will recommend Vodafone to pay greater attention on this. The ASO model is made up of three elements which include: the service product; the service augmentation; and marketing support8. Vodafone should incorporate and carry these three models out together in order for its product to meet the overall expectations of the customer. The impact of the service product on competitive advantage is determined by five factors which include: product quality which is measured by the reliability, accuracy and consistency of the product, product distinctiveness, perceived risk, physical evidence and product adaptability9. The impact of service augmentation is determined by distribution strength, effective communication, staff/customer interaction and customer experience while the impact of marketing support is determined by marketing knowledge, staff training and skills, investment in systems and the launch strategy10. The more unique and distinct the product is the more attractive it will be to customers and thus the higher will be the competitive advantage of the firm in the industry. Perceived risk measures customers’ expectations on how the product will meet their needs, that is, whether the product will perform above or below expectations. The higher the perceived risk, the lower will be the customer’s purchase intentions and thus the competitiveness of the product. If customers perceive a lower risk, the higher will be their purchase intentions and thus the competitive advantage of the firm. Perceive risk is highly dependent on the reputation of the firm. A firm with a high reputation is likely to witness a low perceived risk than a firm with a low reputation. The firm must therefore try to maintain a high reputation so that its products will not be perceived as high risk products by consumers. The management of Vodafone must be able to maintain this within it strategic fit in the US market. 3.0 Uses of Marketing to Vodafone Marketing provides equity to Vodafone. These equities, in some sense, refer to the guiding and directing principles which depict the intentions and likelihood of the company. Intentions may include the company’s policies and actions to be taken. Equities may comprise of values which are inclusive of the importance of customers and services offered to them, a commitment to quality and novelty along with rendering significance to integrity and honest behavior. It may also be inclusive of corporate citizenship so as to depict respect to all employees as duty to the association and keeping in consideration the safety measures and protection of the surroundings as a whole (Kotler & Zaltman 1971, Kotler 1979). Through marketing Vodafone, Analyzes the current state of their activities and assessed the crucial issues and the key result areas such as strengths, weaknesses, opportunities and threats. This is described further below. It is preferable to analyze around ten areas in order to accomplish a target, chiefly based on customer’s expectations. This would result in the knowledge of the key areas where the association can be successful in. Moreover, customers may be inclusive of members, suppliers and other employees and their expectations can well be adjudicated if the expectancies are grouped into five to ten key result areas. Through marketing, Vodafone create a clear, consistent and compelling message about the company’s product and services. The effect of which will be glaringly reflected on the sales record subsequently (Kotler. 2005). Through this, the company’s management can avoid confusion and disaffection in the minds of consumers and buyers, offering a comfortable identity to customers and staff (Kotler. 2005). According Kortler (2005), the marketing communication mix or promotional mix involves specific mix of advertising, personal selling, sales promotion and public relations a company uses to achieve it advertising and marketing objectives. The five major types of promotion are:- Advertising Personal selling Sales promotion Public relations Direct Marketing To put it in Kotler’s words …Their professionalism is a blind spot that keeps them from acting to achieve their goals………Their position grow more precarious as a few of their competitors begin to learn and apply modern marketing techniques. ” Kotler & Connor (1977) further contend that, it is unfortunate for some professionals not to understand marketing in a strong market where no one does; and it can be fatal in a down market when competitors do (Kotler & Connor 1977:3). All businesses today are faced with the communication challenges. Vodafone must continuously employ the marketing functions into its operations if the relationship between the supplier and consumer must be consistently maintained, developed and improved upon (Kotler & Connors 1977). Thus marketing does will not only help Vodafone, understand it stakeholders, but their needs values and priorities. Through social marketing with stakeholders (e.g. marketing committee, consultants, the community) as a join force health protection will be emphasized, the burden of infectious diseases will be reduced, chemical and poison first aid emergency will be easily handled, the youths will receive oral health and teenage pregnancy counseling. Through social marketing (Community counseling) with stakeholders, as a join force green marketing is carried out. For example, counseling on old phone disposal, recycling will reduce environmental pollution. In terms of efficiency, this is quite efficient. Economists worry about external costs because these may push an industry into a position of economic inefficiency. In their work of “Economics: Private and Public Choice, Sobel et al (2006) argue that in a situation where competition is promoted into irrelevant areas (e.g. the public service) resources may however be diverted in the production of goods that are valued less than their production cost including the costs imposed on non-consenting parties. Thanks to technological breakthrough marketers can now communicate and pass over messages through traditional media, fax machines and mobile phones, pagers and computers. These are however confused and impotent in their profusion and inconsistency (Varey J. R., 2001). None of the above marketing communication is independent as the five are interrelated and supplement each other. Marketing communications has mix elements of the mixes as they are blended in different quantities in a campaign (Rowley J., (2004). Marketing communications mix includes different elements, not limited to the following list. An examination will show there is some cross over between individual elements (e.g. Is donating computers to schools, by asking shoppers to collect vouchers, public relations or sales promotion?) Here are the key of the marketing communications mix Schultz D. E., and Schultz H F., 1998). Sobel et al (2006) further argue that, through marketing, Vodafone achieve economic efficiency in most cases is attain through competition. Like other goods, information is scarce. In the absence of marketing, consumers of Vodafone services will be poorly informed about the price, quality, durability, and side effects of the products, and poisonous substances. Imperfect knowledge is not the fault of the market. In the market there is a strong incentive to acquire information and through social marketing these information are provided and prevention is emphasized. Kotler (1979) argue that, the absence of marketing will push consumer into a situation where they are unable to distinguish between high quality products and low quality products and firms will take advantage and cut down cost through lower quality. Vodafone do have challenges and marketing apart from being a minor negligible function in managing a services firm, is one of the most important function to help Vodafone meet up with unprecedented challenges (Bennet & Barkensjo2005). According to Anderson & Naurus (1995, 1998) the understanding of these challenges mark the beginning for capturing customer’s value. This same position was echoed earlier by Kotler (1979) when he contends that “all organisation has marketing problems and all needs to understand marketing” (Kotler 1979:37).Thus marketing can be link with stakeholders relationship management, because through it Corporate Social Responsibility in social marketing becomes the order. Marketing in Vodafone can successfully help the organisation management compete in the recruitment of higher trained specialist who are in short supply. Good marketing programs can help attract not only other specialist, but will diversify the skills of the personnel, build community goodwill, attract more government funding and more contribution and support from individuals (Kotler 1979:6, Bennet & Barkensjo 2005). This will be possible through emphasizing the soft side of its activities which here I consider as social marketing. In addition, the functions and importance of marketing become imperatively necessary when one look at it at the level of market research through which new products are launched. Marketing is one aspect of an organisational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. As such, e-Marketing has its own approaches and tools that contribute to the achievement of marketing goals and objectives (Simmons, G.J. 2007). Though, the primary role of e-marketing communications in integrated marketing communication is to give integrated marketing a strategic fit to embrace the ever increasing challenges in today’s global environment, it should be implemented with caution. Kortler (2002) argued that as marketers and marketing companies move and adopt richer but more fragmented media and promotional mixes to reach diverse markets, they risk creating a communication hodgepodge for consumers. One way of preventing this from happening is by adopting the concept of integrated marketing communication which calls for integrating sources and features of a company’s communication in one shot. E-communication also pave the way of integrating positive emotional appeals as love, pride, joy, and humour. Advocates for humourous messages claim that by doing so consumers develop more liking and belief in the products (Mark. J., 2000) 4.0Conclusion This study examined the importance of incorporating marketing in Vodafone. For the greatest communication impact, Kotler (2002) argued that the entire marketing mix (promotion, product, price, and place) must be carefully coordinated for greatest success. This is so because, the product designs, the price, the shape and colour of its package and others within the chain communicate something to buyers. Thus, for consistency and uniformity all these aspects of marketing should be integrated. The higher the accessibility the higher will be the customer base and thus the competitive advantage of the firm. Effective communication plays an important role in that it explains the product as well as positions the company and the product11. Staff/customer interaction is a measure of service quality as opposed to product quality12. As well as assessing the quality of the service product, customers also tend to evaluate how the service was delivered by the staff. The customers look in particular at the welcoming nature of the staff, their physical appearance or outlook, consciousness, promptness and efficiency13. As far as experience is concerned, customers tend to purchase from a firm were they have had a positive experience with. Suitable actions may include offering special promotional prices, rebates and making premium sales. The organisation sales department may call or write to selected customers inviting them to visit their dealership for special showing and display (Kortler.P, 2002). Integration of marketing communication activities can avoid confusion and disaffection in the minds of consumers and buyers, offering a comfortable identity to customers and staff. 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