Promoting Efficient Competition in Telecommunications - Essay Example

Introduction When organisations are faced with the possibility of complying with industry norms, they can choose from a variety of contradictory and competing approaches to the feat. Before doing so, it is important that they consider a number of factors and perform a critical analysis of theories that are related to their situation. Then, a reasonable conclusion should be reached. Discussion The company in question in this research is Vodafone. According to their website: Vodafone Group Plc is the world's leading mobile telecommunications company, with a significant presence in Europe, the Middle East, Africa, Asia Pacific and the United States through the Company's subsidiary undertakings, joint ventures, associated undertakings and investments. The Group's mobile subsidiaries operate under the brand name 'Vodafone'. In the United States the Group's associated undertaking operates as Verizon Wireless. During the last two financial years, the Group has also entered into arrangements with network operators in countries where the Group does not hold an equity stake. Under the terms of these Partner Network Agreements, the Group and its partner networks co-operate in the development and marketing of global services under dual brand logos. At 30 September 2007, based on the registered customers of mobile telecommunications ventures in which it had ownership interests at that date, the Group had 241 million customers, excluding paging customers, calculated on a proportionate basis in accordance with the Company's percentage interest in these ventures. (Vodafone 2008) Vodafone seeks to be the worldwide communications leader in over the period of the next 2-5 years. In order to accomplish this, they will first and foremost have to deal with telecommunication industry regulations (Damien & Kerf 2003). Vodafone also consistently has to address customer complaints that stem from their competitors. International trends also play a factor, including "the liberalization of the terminal equipment market and the market for value-added services" (Bauer 1994). In order to stay ahead of the game, they will have to stay abreast of the latest innovations in technoloty and continue to offer business intelligence, including "automated savings, tracking against global sourcing decisions across companie, and provid[ing] compliance measurement reports," as well as perfect the use of cellular phones for "tracking persons through the global positioning system" (Bauer 1994). According to Balsinde et al.: Multiple opportunities are open for Vodafone. One, cheaper UK-US phone calls would divert traffic from Europe to be routed via London to the US, turning Britain into a vital telecommunications hub. Two, There is still a huge market which is still untapped for mobile services. About 78 out of a hundred UK residents still do not have mobile phone services; this is a potential market that Vodafone needs to address. Three, Vodafone can create a strong market niche in the 3G telephone systems set-up since it has the technological advantage, financial expertise and marketing network to compete with other major players. The fourth strength is the full liberalization of the telecommunications market will enable Vodafone to make its presence felt in the new member countries of the European Union (EU). The fifth strength is that once the benefits of EU industry regulation outweigh their potential costs, Vodafone can operate unhampered in the EU. The efficient allocation of regulatory resources will result in consistent regulatory decisions across EU member-states. The sixth strength is that the UK economy offers low business taxes, low real interest rates, robust growth in demand, substantial falls in equipment prices and the effect of a strong stock market in reducing the cost of capital. These positive factors favor business growth in areas which require the installation of substantial new capital such as the mobile phone business. The seventh strength is that the overall picture of telecommunications in the UK is one of low penetration levels and relatively low prices. Hence, Vodafone can still expand its market share in the short term and gain profits from the stable prices it offers. (2000) In order to ensure that the journey is both efficient and effective, managers need to develop frameworks. They have to analyse and comprehend the environments in which they are making decisions and operating. There are two environments that they must deal with during the course of this process: internal and external. The internal environment includes issues like organisation structure, decision-making, systems, production processes and costs, the relationships between different people in the organisation and communication and information flows. The external environment has to do with product markets, relationships with customers and suppliers, distribution networks, relationships with competitors and others in the same industry, financial markets, international markets and relationships with government, and the related. In order to properly analyze the above, we need to take a look at the organization's strengths and weaknesses. Vodafone's strengths have already been listed above. Their weaknesses include, "Vodafone has to address its weaknesses. The first weakness is that the merger of British Telecom and MCI makes Vodafone's key competitor less susceptible to tight control by UK regulators. The new group, Concert, is an alliance that brings together the economic clout of an enlarged British Telecom and the political clout of Rupert Murdoch which can have the potential to overtake Vodafone in the short term. The second weakness is that the merged company, Concert will be able to carry calls from the UK to the US and vice versa on its own network. This presents a direct competition to Vodafone" (Dixon 1996). Vodafone can build upon their strengths and improve their weaknesses. The external environment offers both opportunities and threats. Considering them together gives the basis of SWOT analysis: Strengths, Weaknesses, Opportunities and Threats. The weaknesses and opportunities have been described above. The threats include, "Vodafone faces three threats. First, the merged British Telecom and MCI showed the resilience, financial strength and functionality to overtake its major competitors in the short term. Second, the implementation of EU policies and advances in harmonizing and implementing EU regulatory frameworks may have adverse impacts on the company operations of Vodafone. Third, the 3G system has not brought in the expected profits for many telecom players. There is a need for Vodafone to study the marketing system for this system in order to generate profits from operations. Fourth, a new market player with strong technological development can enter the 3G system market and overtake the major players. Vodafone must continue working with suppliers who can provide state-of-the-art technology with mobile phone applications to maintain its market share" (Doyle 1997). It is indeed to follow the prescriptive school and Vodafone does have the required resources to do so. In order to accomplish this, they can consider the Pestle Model, Porters Five Forces, the 7S Framework, and the Value Chain. Political Economical Social Technology Technology Industry Regulations Stay Within Their Budget Continue to Meet Customer Social Requirements Latest in Technological Innovations It was rather easy to determine how many factors to consider, and the writer is judging from a customer's perspective. There are about 10 factors to consider, which are listed above. Perhaps the most relevant factor to consider in this industry is technology. The shareholders for the organization include anyone with a vested interest, including managers, employees, owners and customers. The customers are the most important. According to Chaffey, prescriptive strategy can be defined as, "The three core areas of strategic analysis, strategic development and strategy implementation are linked together sequentially" (2008). In order to ensure growth within the organization and be able to reach into that huge, untapped market, Vodafone absolutely must strategically analyze their current situation. Then, they must develop a strong plan to follow in order to get them to the size and profitability that they would like to reach. The most important part of all is strategic implementation; analysis and planning does absolutely no good if Vodafone does not follow through. It is entirely possible for them to follow this school of thought as it is clear that they have already done the necessary research through discovering the markets that exist. According to MindTools, "Five Forces Analysis assumes that there are five important forces that determine competitive power in a situation. These are: Supplier Power, Buyer Power, Competitive Rivalry, Threat of Substitution, and Threat of New Entry" (2008). If Vodafone's suppliers drive up their own prices, that not only drives up their costs, but also drives up the costs for their customers which can put them in quite a predicament. Buyers also have the power to drive Vodafone's prices down. The right number of important buyers can force Vodafone to have to lower their prices or risk losing those customers. Competitive rivalry is particularly threatening to Vodafone. Competitors that are large in number and/or that are highly capable can cause Vodafone to lose customers if they can not offer attractive prices and value. If Vodafone offers a unique process or piece of equipment, the threat of substitution can come into play if customers find a different way of doing the same thing. The threat of new entry always exists, as there is always a chance that a new competitor that offers the same or similar products and services as Vodafone will pop into the picture and attract away their customers (MindTools 2008). The 7s framework can increase value of Vodafone by providing a powerful tool for them to analyze their current situation and plan for the future. According to BuildingBrands, the 7s framework consists of the following, "Strategy: The direction and scope of the company over the long term, Structure: The basic organization of the company, its departments, reporting lines, areas of expertise, and responsibility (and how they inter-relate), Systems: Formal and informal procedures that govern everyday activity, covering everything from management information systems, through to the systems at the point of contact with the customer (retail systems, call centre systems, online systems, etc), Skills: The capabilities and competencies that exist within the company. What it does best, Shared values: The values and beliefs of the company. Ultimately they guide employees towards 'valued' behavior, Staff: The company's people resources and how they are developed, trained, and motivated, and Style: The leadership approach of top management and the company's overall operating approach" (2008). The value chain can also have a profound impact on Vodafone through adding value to their strategic planning process and increasing its effectiveness. According to QuickMBA, the value chain consists of five processes: inbound logistics, operations, outbound logistics, marketing and sales, and service. Vodafone could also experience success using the PESTLE model. According to RapidBI, "PESTLE analysis is a useful tool for understanding the "big picture" of the environment in which you are operating, and the opportunities and threats that lie within it. By understanding the environment in which you operate (external to your company or department), you can take advantage of the opportunities and minimize the threats. Specifically the PEST or PESTLE analysis is a useful tool for understanding risks associated with market growth or decline, and as such the position, potential and direction for a business or organization" (2008). Vodafone can build on their strengths and weaknesses through seizing their opportunities. They can turn Britain into a telecommunications hub. They can power their way into the untapped market for mobile services in the UK. They can create a strong niche in 3G telephone systems. They can branch out into new member countries of the EU. They can take advantage of the strong UK economy to grow through offering low, yet stable prices. Conclusion In this project, we have taken a look at different models of strategic planning that organizations can use in order to approach the process of complying with industry norms. The company we have examined is Vodafone. They are following the prescriptive strategy, which can indeed work for them, but there are other approaches that they should consider because they are more in-depth. The 7s, Value Chain, Porter's Five Forces, and the Pestle Model would all be good choices for them to look at. It is important that they consider a number of factors and perform a critical analysis of theories that are related to their situation in order to reach a reasonable conclusion. References Bauer, Johannes. Journal of Economic Issues. 29(2): 391. The Emergence of Global Networks in Telecommunications: Transcending National Regulation and Market Constraints. Balsinde, Rolando Christoph Bohmer, Tomas Calleja, Harri-Pekka Kaukonen, Risto Perttunen. 2000. National Institute Economic Review. 159: 82. Value on the Line. The McKinsey Quarterly. 2000. Page 20. Chaffey, Dave. 2008. Prescriptive Strategy Definition. DaveChaffey.com. http://www.davechaffey.com/E-marketing-Glossary/Prescriptive-strategy.htm Damien Geradin & Michel Kerf. (2003). Oxford: Oxford University Press. Sector-Specific Regulation. Doyle, Chris. (1997). Promoting Efficient Competition in Telecommunications. Britain's Regulators Must Be Alert to the Links between BT and BSkyB. Dixon, Hugo. New Statesman. 1996. 125(4309): 12. Murdoch and the Mega-Merger. PEST/PESTLE Analysis and Template. 2008. RapidBI. http://www.rapidbi.com/created/the-PESTLE-analysis-tool.html Porter's Five Forces: Assessing the Balance of Power in a Business Situation. 2008. Mindtools. http://www.mindtools.com/pages/article/newTMC_08.htm The Seven S McKinsey Model. 2008. BuildingBrands. http://www.buildingbrands.com/didyouknow/14_7s_mckinsey_model.php The Value Chain. 2008. QuickMBA. http://www.quickmba.com/strategy/value-chain/ Vodafone. 2008. http://www.vodafone.com/hub_page.html (accessed 2008). Read More