Strategic Recommendations to Vodafone Company - Essay Example

Strategic analysis of Vodafone Introduction The aim of this report is to provide strategic recommendations to Vodafone as an effort to sustain their existing position in the market. The report is also aimed at recommending the potential strategies that the business unit can pursue in the near future. Therefore, for better understanding and relating to the actual scenario, a brief overview of the company is presented below. Company Overview: Vodafone Vodafone Group plc commonly known as Vodafone is Telecommunication Company based in the UK. The company was founded in the year 1983, but at that time, it used to operate by the name of Racal Telecom. However, in 1991, Racal Telecom was renamed as Vodafone (Vodafone, 2013). Currently, it is the second largest telecommunication company of the world in terms of revenue as well as the total number of subscribers. As of June 2013, the company had a total subscriber base of 453 million (Vodafone, 2013). The company operates in more than 60 countries of the world. In the financial year 2012-13, Vodafone earned £44.445 billion as the total revenue and the profit was £429 million (Vodafone, 2013). The figures above clearly represent the stable market position of the company. The success of Vodafone can be attributed to the diversified business portfolio. Vodafone not only offers telecom services, but also offer internet services, direct to home (DTH) services and various other physical telecom devices such as USB modem, Vodafone Eurotraveller, Amobee Media System and financial services in the form of money transfer (Vodafone, 2013). Despite strong market position, there are numerous growth opportunities for the firm. In this turbulent phase of business, it is extremely important for a firm to pursue innovative strategies so as to maintain their existing market position (Stacey, Griffin and Shaw, 2000). In the similar way, it is important to continue with innovative approaches so as to ensure long term sustainability and better future. Therefore, in order to recommended strategies for the future, it is important to analyse the current market trends and scenario of the telecommunication industry. Industry Analysis According to reports, managing the rapid changes taking place in the industry is one of the keys to success for a company (Deloitte, 2013). The telecommunication industry of Europe is growing at a rate of 6.7% per annum and has been the highest in comparison to other service sectors (Government of UK, 2014). In this segment, the study seeks to analyse the industry from the European context and to do this strategic management tools such as Porter’ 5 forces and direct competitor analysis will be carried out. The analysis will help to get in-depth insights into the market and that will ultimately help in making strategic recommendation to the company. PORTER’s 5 Forces Analysis With this strategic management tool, the telecommunication industry in the UK can be evaluated and it will consider the 5 forces as stated by Michael E. Porter. The analysis of the five forces will help in underpinning the attractiveness of the industry. Threat of New Entrants: - The start up cost is usually very high for a telecommunication business in Europe. In addition, the legal regulation and restriction in Europe is strong for the purpose of protecting the domestic industries. Hence, the threat of new entrant is assessed to be low. Threat of Substitutes: - The threat of substitutes in this industry is also high. This is because with the development of technology and emergence of new applications such as Google talk, Skype etc, often mobile communication is being threatened and that has direct impact on the revenue of telecommunication firms. Bargaining power of suppliers: - The suppliers of a telecommunication company are diverse owing to the fact that they offer various products and services. The suppliers of a telecommunication firm include suppliers of SIM manufacturing materials, wires, network servicing companies etc. Owing to the fact that such companies are large in numbers; the bargaining power of suppliers is considerably low. Bargaining power of the buyers: - The buyers of telecommunication services are the general consumers and the business consumers. The bargaining power of this industry in the context of Europe is assessed to be high. This is because there are large numbers of providers of similar service in Europe and the switching cost is also negligible. Threat of Existing Rivalry: - The threat of existing rivalry in the telecommunication sector of UK is very high. A number of established players are operating in this market each one of them is having significant share of market. Another major of intense rivalry in the industry is due to the fact that most of the players are well established have succeeded in generating a sense of trust among the consumers. Figure 1 – Market Share of Telecom Operators (Source: Turnbull, 2011) Business Level Analysis The fast paced technological advancement has continued to remain one of the key drivers of the industry. Apart from that, constant investment in the field of research and development has also allowed companies to come up with new and innovative products. The constant demand of new products and services by the consumer is another vital industry driver. It has been observed that a rise in the levels of inflation and sudden economic crisis, affects the revenue. In the similar way, the increasing awareness among consumers about the health perils associated with mobile phones is affecting the company’s growth. Another cause of apprehension is that mobile phone market is heading towards saturation and there is hardly any differentiation among the competitors (Vodafone, 2013a). As a result of that the switching tendency among the customers are very high. The tightening of the rules and regulation in the telecommunication sector also affects the operations and revenue of the company. Therefore, a company needs to have enough resources and capabilities to deal with the challenges of the market. Despite the presence of a number of potential market challenges, it is necessary for Vodafone that they focus on the emerging opportunities of the market. The biggest opportunity for company lies in market development. The telecommunication industry is yet to flourish in some parts of the world and hence venturing into those places can be beneficial for the firm (Svensson and Wagner, 2011). Vodafone is best known for offering telecommunication services and hence it has the opportunity to further diversify the business in areas such as mobile phone manufacturing or getting into technology business. The strategic analysis carried out above clearly showed the situation of the industry. It has been observed that the telecommunication industry of Europe is fiercely competitive but still Vodafone has managed to a hold a strong position. However, according to the trends, it is obvious that the company needs to make continuous evaluation of their strategies and make amendments as and when required. Furthermore, the analysis revealed that the sector has a large impact on the way a firm is operating in relation to the suppliers, competition, new entrants, customers and substitutes. It is obvious that the telecommunication industry is highly attractive but to capitalize on the opportunities, a company needs to have the required resources and competency. Although, Vodafone is the market leader but to maintain this leadership position, they need to put in extra efforts for managing their existing position. Strategic Position of Vodafone In order to cope up with the challenges of the market and also capitalize on the opportunities, the company has undertaken various strategic initiatives and that reflects in almost all the departments of the company. Starting from the marketing strategies, operations strategies to the financial investments, innovation can be seen in every business domain of Vodafone. The concept of brand positioning can be characterized by the creation of an image which is understood by the public about the intentions of a brand or its purpose of existence. The company positions itself as a company that offers diverse products at an affordable range. The aim of the company is to promote communication and Vodafone positions itself as the medium through which users can communicate with each other. Affordability is another major factor that allows the company to target mass segment of customers. The schemes of the services have been designed in such a manner that it gets the opportunity to service the lower end of the society as well as the premium segment. The company tried to differentiate itself from the competitors by offering wide range of services. The company also intelligently uses the advertisement strategy with the aim of communicating the offerings and the messages of the company to the target audiences. For example, the company sponsors a number of football clubs and cricket teams in Europe so as to enhance their visibility rate. In the similar way, use of social media advertisements and television advertisements allow the firm to target customers from the rural places of Europe. The slogan of the company “wherever you go, our network follows” reflects the strong network signals and this allow the company to position itself as a firm with strong network signal and this is one of the fundamental requirements towards being a successful telecommunication firm. In the next segment of the study, potential options for the company pertaining to strengthening of market position in the future will be presented and the one which is feasible will be recommended to the company for the purpose of implementation. Analysis of the Potential Strategies The analysis of the telecommunication industry of Europe and Vodafone’s internal business, it has been found that there are numerous places in the world where telecommunication services are yet to flourish. Hence, the company is suggested to evaluate the opportunities in the virgin markets. In addition, focus on the emerging markets such as Brazil; African nations etc can be a great option for the company to ensure future sustainability. Nazarko (2004) states that a company should continuously seek development of new markets in order to ensure long term sustainability. Hence, suggestion of entering into a new geographic destination is justified. Apart from that it has been also found that the industry is driven by continuous innovation and to achieve it the company is recommended to focus strongly on the research and development. This is because research and development is the only option by which a company can come up with trendy and innovative service. According to Verma (2007), strong R&D enables a company to achieve competitive advantage by differentiating from the competitors. Hence, the company should invest in its research and development division and come up with innovative products which can offer sustainable competitive advantage to the firm. Currently the company offers telecom products and services, internet services and also DTH services. The company therefore has the option of diversifying the business and it can be achieved through introduction of new products such as electronic gadgets, smart phones or can be any computing product. According to Weinberg (2009), technology based product will revolutionize human life and its demand will remain steady over the next few years. Hence, this option is also viable. Recommendation for the Best Considering the aforementioned alternatives, the company is recommended to consider expansion in emerging economies. This step will not only offer new revenue streams but will also strengthen the company’s position. On the contrary, the application of the other two strategies may need re-branding of the company and there is obviously a concern on whether re-branding will help the company or not. Hence, the decision of global expansion is justified and can be a source of sustainable competitive advantage for the firm in the future. Conclusion The study tried to analyse the attractiveness of the European telecommunication industry. The analysis revealed that the industry is highly attractive for the marketers. In this context, Vodafone, being the market leader is dealing with various challenges. The report was also aimed to offering strategic recommendation to the firm which will offer the company with long term sustainability. The available options were expansion into emerging markets, new product development. However, the best option recommended to the company is to consider expansion in new markets. Based on the evidences, it is concludes that expansion into new markets will allow the company to gain competitive advantage. References List Deloitte, 2013. Telecommunications. [online] Available at: [Accessed 27 March 2014]. Government of UK, 2014. Growth Dashboard. [online] Available at: [Accessed 27 March 2014]. Nazarko, L., 2004. Managing a Quality Service. Oxford: Heinemann. Stacey, R. D., Griffin, D. and Shaw, P., 2000. Complexity and Management – Fad or Radical Challenge to Systems Thinking. London: Routledge. Svensson, G. and Wagner, B., 2011. A process directed towards sustainable business operations and a model for improving the GWP-footprint (CO2e) on earth. Management of Environmental Quality, 22 (4), pp. 451-462. Turnbull, J., 2011. How to find a new mobile phone. [online] Available at: [Accessed 27 March 2014]. Verma, H. V., 2007. Services Marketing: Text and Cases. New Jersey: Pearson Education Inc. Vodafone, 2013. Vodafone Group Plc: The Way Ahead. [pdf] Available at: [Accessed 27 March 2014]. Vodafone, 2013a. Footprints: Making a difference one step at a time. [pdf] Available at: < http://microsite.vodafone.in/sustainability/pdfs/sustainability_report2013.pdf> [Accessed 27 March 2014]. Weinberg, T., 2009. The New Community Rules: Marketing on the Social Web. California: OReilly Media, Inc. Read More