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Place of Vodafone in the UK Mobile Telecommunications Sector - Case Study Example

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This study "Place of Vodafone in the UK Mobile Telecommunications Sector" reveals that Vodafone is facing an uphill climb that demands the company aggressively attack a market where conditions have not been working in its favor as a result of recent developments…
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Extract of sample "Place of Vodafone in the UK Mobile Telecommunications Sector"

A Marketing Audit of Vodafone Abstract Marketing represents the underpinning of every private sector firm and as such requires a key understanding of the forces acting upon a company in its market sector. The UK mobile telecom sector is a highly competitive environment where market share is subject to fierce pricing, customer churning, and consolidation. The heart of the service of mobile providers rests in their coverage areas within a country and the European Union as convenience and utility is the foundation of what they are offering. Network capabilities as represented by the latest connection types (3G) is a key component in attracting and retaining customers, along with the newest handsets. The analysis of the UK mobile telecommunications sector looks into these capabilities, along with an analysis of competitors as a means to determine the strategies and approaches that aid in the achievement of adding subscribers and retaining them. The fierce competition makes it a buyers market, yet the larger mobile telecoms are raking in the profits from a sector that has become as much a part of the UK lifestyle as soccer, and the flag. This study delves into these points and reveals that Vodafone is facing an uphill climb that demands the company aggressively attack a market where conditions have not been working it its favour as a result of recent developments. Contents Executive Summary 4 Market Audit 6 Market Tools 5 Market Audit 6 Marketing Recommendations 9 Conclusion 10 Conclusion 12 Analysis of Tools 13 References 16 Appendix 21 Executive Summary The joint venture of T-Mobile of Germany and Orange of France has turned the fortunes of these two companies in the UK market upward (Wray, 2009). Prior to their union, they were the third and fourth largest mobile operators in the UK market after O2 (28%), and Vodafone (23%), with a combined market share of 37% respectively (Wray, 2009). The union with T-Mobile was one that Vodafone courted as it represented the obvious corporate growth choice as a means to gain market dominance. The dynamic of their union has changed the market for Vodafone from the position of being able to see the top of the mountain, to one where it now looks up at the market leaders and is followed only by the much smaller players. With the T-Mobile, Orange union accomplished, there is only one major deal left on the table, which even if it could be arranged, the Competition Committee would be hard pressured to approve it as in that it would leave too few players at the top. Thus, Vodafone must look elsewhere for growth. As brought out in this report, there are opportunities open to the company to accomplish achieving gains through factors as uncovered in the marketing analysis tools used to dissect the market. The options open to Vodafone to gain on number three in the market (O2) are there, and owing to the position of T-Mobile and Orange, catching the market leaders anytime in the near future is a goal that does not have merit due to their commanding lead (Wray, 2009). Those strategies, along with the reasons for these approaches are a factor of the market analysis as brought forth herein whereby the fortunes of the company are not as bleak as they seem. Market Tools The mobile telecom sector is one of the few industries that have recorded growth in the current economic climate in the UK (British Telecom, 2009). An assessment by the Office of Communications (Ofcom) made the following observation “Mobile phone services are an increasingly influential commodity … (that) … are practically indistinguishable from fixed Next Generation Networks in Functionality” (British Telecom, 2009, P. 4). Ofcom rated the performance of the mobile sector as vibrant in the face of the economic downturn (British Telecom, 2009). A published report generated by ENTER (2010) of Madrid, Spain stated that the annual growth for the mobile sector globally had slowed to 4.2% in 2008, with the financial crisis contributing to a pullback in consumer spending on their mobile phones as the main reason (ENTER, 2010). In Europe, the growth rate for the sector has slowed to 2.0% in 2008, down from 3.7% in 2007 as a result of the saturation of the market (ENTER, 2010). The preceding is significant in that in the face of the current downturn the mobile telecom sector recorded positive results. The preceding analysis by Ofcom points to continued growth in the market despite the effects of the economy. In conducting an analysis of the UK mobile telecom market, three distinct tools were utilised as a means to gather information on the state of the industry as well as its competitors. The PEST Analysis is an important means to understand the environment a company is operating in as an input area for planning corporate strategies and has factors that can aid in the marketing process (Hammond, 2002). The letters in the PEST Analysis stand for Political, Economic. Sociocultural and Technological factors that provide an understanding of the macro environmental make up of a market (Hammond, 2002). This tool was used in conjunction with Michael Porter’s Five Forces Model. The purpose of the Model is to gain insight regarding the external factors working on and in an industry as a way to gain an enhanced understanding of the environment a company operates in (Orndoff, 2002). The Model is used to make an assessment of the attractiveness and/or value of the structure of an industry by looking at the difficulty, along with ease of entry by competitors through looking at the barriers or lack of, to entry (Orndoff, 2002). The preceding includes the threat of substitutes, which means the ease or difficulty of substituting the product or service, along with the bargaining power of suppliers and buyers that represents their impact or influence in the sector (Orndoff, 2002). The last area is represented by the rivalry of competitors in the market (Orndoff, 2002). The preceding analysis points aid in drawing a picture of the opportunities and threats as represented by the external environment of the organisation (Orndoff, 2002). The last analysis tool used is Ansoff’s Product – Growth Matrix that analyzes Vodafone as a means to look at areas for growth. The Matrix represents a tool aid in evaluating areas for the product as well as market growth strategies (Moreno and Casillas, 2008). It, the Ansoff’s Product – Growth Matrix has four different growth strategy areas starting with market penetration, whereby a company seeks to attain growth from its existing products, with the objective to increase market share. The second segment of the Matrix is represented by Market Development that is included as a means to aid a firm in targeting growth by looking at its present products as applied against new market segments. Product Development represents looking into the development of new products for a company’s markets, with the fourth Matrix represented by Diversification into new businesses through new products for new markets. These three analysis tools represented the foundation of the market audit. Market Audit In the PEST Analysis of the industry, the political factors uncovered that the mobile sector operates in a stable environment. It was also found under this category that there are regulatory issues that have recently presented themselves under Table 2 in the Appendix that related to call termination charges, however this is an area that affects all of the participants in the market, thus meaning is does not play a factor in impacting Vodafone to any degree more or less than its rivals. In examining the Economic context, the downturn in the economy caused a pullback in revenues and growth, thus exacerbating price competition to retain and attract customers. The preceding has also caused companies to increase the content of offers and handset offers from a marketing and promotional perspective. The heated competition in the market continues to be spearheaded by pricing as the main selling component, along with new phones offers and a wide variety of usage plans. Social Factors revealed insight as to the reason why the mobile services segment has continued to grow in the present economic climate, although at a lower rate than in prior years in the UK. The utility of mobile services provide multiple connectivity conveniences and communication through calls, text messaging, Internet access, streaming movies and television, banking, bill paying as well as other conveniences that have made mobile services indispensable. There is approximately one mobile handset for each person in the UK (61 million). Technological innovations in handsets have been a boon to telecoms in that the new phones enable them to bundle attractive offers for phone upgrades that keep existing customers in their pipeline, and in promotions crafted to attract new customers. The new 3G networks that provide for clearer calls and faster packet carriage for text messaging, Internet access and other areas is a selling point in enhanced convenience and utility for subscribers. In terms of Porter’s Five Forces Model as contained in Table 3 in the Appendix, the Threat of Substitute products, meaning another type of communication medium to replace mobile services, is one that does not exist at this time. With regard to Threats from Established Rivals, the recent joint venture by T-Mobile and Orange that vaulted these two companies into the leadership position in the UK market represented a blow to Vodafone’s market position and relative strength in the market. Coverage and transportability are two highly important factors in mobile phone services. This is in terms of coverage in the market (UK) where subscribers pick up calls in remote areas, and more importantly in coverage when traveling. The more a subscriber is on the primary network, the lower the connection charges in that travel in noncoverage areas requires switching to another carrier that charge higher access rates. The proximity of Orange’s coverage in France, as well as T-Mobile, provides them with expanded coverage capabilities throughout the European Union that represents an important feature in potentially attracting subscribers to their network. This also means that both companies, as a result of the joint venture, have a lower infrastructure investment than if they were separate entities, thus increasing their respective profit margins. Duplication in their coverages can be weeded out in favour of joint development of wider coverage areas as well as reducing their costs for 3G network upgrades, along with internal operating costs and a host of other areas afforded by economies of scale. In terms of the third Five Forces Area, New Entrants / Barriers to Entry, the threat is not from new companies entering the field is minimal as the costs of infrastructure investment is too high. The combining of forces as represented by the T-Mobile / Orange union represents the only consolidation available in terms of entry by buying into an existing network. Supplier power is not a factor impacting the market in that the same handsets are basically offered by all of the providers. The number and similar types of offers by mobile telecoms mean that subscribers (Buyer Power) favours them. Switching providers is an option for subscribers with price as the lure, however, that is combined with considerations on coverage. Subscriber retention as a result of the similarity of services thus represents a critical priority. Efforts aimed at attracting customer have to be usually adept in that the number of offers in the marketplace is staggering. The last tool utilised in the audit of the UK mobile telecom sector was Ansoff’s Product – Growth Matrix. It looks into four distinct areas, all designed to increase sales and growth for the company. Market Penetration was the first area, which entails concentration on securing new subscribers as a result of the T-Mobile / Orange deal as well as the business practice of growth as a consistent part of marketing focus. The mature status of the UK market means such growth has few options as represented by obtaining subscribers from other networks, the youth market entering the workforce, the immigrant market that has language barriers, sporadic lower-income users, monthly plan minute purchases for the youth market, and plans that benefit families and young adults. Market Development represents enacting all or some of the above plans, along with current activities that are focused on increasing subscribers, plan usage, minimising defections, and courting ties with other market operators in terms of acquisition or joint ventures for mutual benefit. A family and friends plan with special rates for four numbers that receive free call charges if they are on the Vodafone network, and the married with children plan that has one plan charge for four phones for families and children only. The preceding represents a market development plan across all business and marketing lines, new subscribers, attracting customers from rival companies, the immigrant, and sporadic user market. In terms of Product Development, Vodafone has blanketed the UK in terms of 3G coverage upgrades in keeping with its major competition. There were no plans noted by the company with regard to the fourth and last areas, Diversification. Marketing Recommendations The preceding audit of the UK mobile sector provides an interesting picture of the environment that Vodafone operates in. The joint venture by T-Mobile and Orange have created a tough marketing problem in that there is just 12% of the market outside of the big three, with O2 as the only viable option. In looking at the market from that perspective, it is highly unlikely that the Competition Committee would permit any type of union, joint venture or other measure to be engaged in by O2 and Vodafone as combined they represent 53% of the market. Thus, the options lie in Vodafone gaining subscribers through marketing efforts to increase its position. The present marketing by the company are set forth under the following Table as a means of understanding its approach and efforts in varied areas: Table 1 – Vodafone’s Marketing Marketing Area Current Activity New Areas New Subscribers The marketing slogan “Make the most of it Now” is the present marketing theme being promoted by the company (freelanceuk.com, 2010). The mobile phone penetration percentage in the UK stands at 84.89% thus representing a saturated and mature market, but one with areas for niche growth (Srinivasan, 2010). See Immigrants, Sporadic users and families Youth Market Vodafone has made a deal with Groove Mobile, the world’s largest mobile music provider, to provide its users with lower access rate costs for purchasing songs Young adults graduating from school and bundled services specifically for this market Immigrants The immigrant population of the UK stands at 10.2% (Centre for Economic Performance, 2009). This represents a substantial market for new subscribers and turnover as the income levels range in the lower demographic profile. Vodafone offers pre-paid cards to service this category. Smaller call plans to fit their budgets as well as a multi language website and promotions in their neighborhoods. Sporadic Users Lower income groups represent sporadic users that do not maintain a monthly contract and refill their phones with a pre/paid card. Lower plan structures Families An important market as families need to stay connected, but there are no programs from Vodafone aimed at this group The Family bundle plan that provides for four lines, a main phone and three other lesser phones (or upgrades) that permit up to five free call usage options to predetermined numbers. Other Mobile Operators Vodafone courted a merger with T-Mobile that the company rejected in favour of its deal with Orange. There are a host of smaller players in the market as represented by 3UK, Virgin Media, Asda Mobile, Tesco Mobile, Kcom Mobile, BT Mobile, Family Mobile, Giffgaff, LycaMobile, Lebara Mobile, Nomi Mobile, and others (UK Mobile Phones, 2009). At present, the company is has not announced any plans in this area. Courting of 3UK and Virgin to add subscribers as well as with deals with other players to bring them into Vodafone’s network. Vodafone Marketing The company is using its “Make the most of now” adveritising campaing, along with the measures indicated above in the marketing of its services More targeted and niche marketing campaigns. The present marketing campaign of the company is traditional in its approach and does not address the targeted areas as brought forth under Ansoff’s Product – Growth Matrix that recommends targeted niche market campaigns to place focus on smaller market segments through specialised pricing plans and offers as a means to increase subscriber sign-ups. The marketing strategy needs to provide consumers with a distinct incentive as brought forth under the Family bundle that could be expanded to include a Friends Plan for singles. Conclusion The analysis of the UK mobile telecom sector has revealed less than desirable conditions and prospects for Vodafone as a result of the recent joint venture of T-Mobile and Orange. There are however opportunities in the market for Vodafone to exploit as brought forth under the Ansoff’s Product – Growth Matrix analysis that recommends niche marketing, plans and pricing do exist. The mobile phone market is a price conscious segment, thus addressing and attacking marketing in this manner provides the consumer with a reason to act, a key outcome desired. The limitations of a saturated marketplace means brand switching is the marketing concept that dominates the future of mobile operators, along with gaining a high percentage of new high school and university students before they settle into a preferred provider. The foregoing has been expanded to include immigrants, sporadic users and attack the family and single adult market with specially bundled limited free call plans to Vodafone subscribers. Analysis of Tools The assessment and analysis measures used in the report contributed benefits in looking into Vodafone as well as the mobile market in the UK. The PEST Analysis provided insights on the Political, Economic, Sociocultural as well as Technological factors of the sector that had its advantages as well as shortcomings. The Political Factors were useful in uncovering facets acting upon the industry sector, areas that are common to and impact all of the companies in the same fashion. As a market analysis tool, it has its merits, but the arena it looks at has limited application, applicability or use in terms of a consumer-directed marketing plan. Limited marketing input applicability is also the case for Economic Factors. The financial crisis that has impacted the UK is a known development that provides a basis for marketing adjustment, however, its use as an area for distinct marketing plan preparations is minimal in that it simply provides an overview of the economic climate. Information that its available to all the participants in the business sector has basically no value in terms of crafting marketing approaches to gain an edge on competitors. It, economic, represents the status of the economy and thus aids in deducing the mood and spending capacities of the consumer market. It is also an aid in understanding the types of strategies that should be employed that are in keeping with the direction of the marketplace as well as the consumer mood, a fact that all mobile companies would be aware of. Social Factors under the PEST Analysis represented an important contribution in that it looks at the socioeconomic aspects of the market. This represented the singular most important input of the PEST Analysis contribution to the analysis of Vodafone’s marketing approach in the UK. It delved into the usage mode of consumers with regard to how mobile phones fit into their lifestyles, along with the manner by which it has been inculcated into society as a necessity. The PEST Analysis under the Social Factors provided the opportunity to look at consumer factors in terms of traits, and characteristics, both of which provide insights for crafting service features and package bundles to satisfy different market segments. The manner in which a product and or service fits into the lifestyles of its users, along with how widespread certain facets are provides information as to the positioning in consumer’s order of importance concerning all of the other variables in their lifestyles. Food, shelter, and clothing are at the top of the list at the lower end of the socioeconomic scale, as these are the predominant items people in these income groups need to pay attention to. The higher the income, the less important these factors are, as the available funds are either sufficient or in large enough denominations so that these concerns are a matter of fact and easily handled. The important thing a company has as an advantage is for its product or service to be one that people feel they cannot live without. The more reasons attached to the preceding, the more marketing points can be developed to work on these areas. Technological Factors are common to all companies within this industry sector. In the instance of manufacturing concerns, this could represent an advantage, but in the case of a service sector, their offerings are the same, unless one independently develops a new delivery system that qualifies for a patent. As a common factor that is equally used by all mobile companies, there is no advantage to this category in the devising of a marketing plan. The innovations and other factors that are a product of this segment are useful in understanding the overall environment the company operates in. As a tool to aid in the understanding of the external environment of a company the PEST Analysis covers important factors, yet has a shortcoming in its application as a tool for providing marketing input. The activities of one’s rivals are a highly important information input in understanding the market as their activities can reveal views and or visions of an approach that may be of benefit in forging successful marketing campaign that yields results. The combined activities of one’s competitors are valuable in that looking at all of the actions and approaches being utilised could potentially reveal opportunities or weak spots as a result of omission or through common actions. The devising of marketing strategies seeks to look for consumer approaches that provide a difference or unique selling proposition to stand out (Robinson, 2000). The Unique selling proposition is a company’s attempt to utilise a consumer need as the interest and or motivational factor to cause a reaction or action on their part as a result of connecting to the company (Robinson, 2000). As the words indicate, it is a point that is different from competitors in terms of what a product or service will do. In using the categories as provided by the PEST Analysis the environment was made clear, but unique points of difference were missing in most cases. The preceding is a shortcoming that renders a PEST Analysis as being a less than a stellar exercise in uncovering a unique marketing point as it is more attuned to general issues and areas. In and of itself, a PEST Analysis falls short of delivering enough information to be useful in the formulation of a marketing plan. As such, it needs to be utilised in conjunction with other tools that bring forth other points. References Alarcon, C. 2009. Will Vodafone's marketing strategy work? Retreived on 1 May 2010 from http://www.marketingweek.co.uk/news/will-vodafones-marketing-strategy-work?/3004969.article Alexander, D. 2005. WE'RE AT WAR WITH THE MOBILE MUGGERS; around 700, 000 of the Estimated 61million Mobile Phones in the UK Are Stolen Each Year. the Robberies Now Account for Up to15 per Cent of All Crime. DEREK ALEXANDER Talks to the Man Who Is Leading the Battle against Phone Theft Gangs. Scottish Daily Record & Sunday. 14 April. 4. P. 8 Bhatnagar, S., Tan., J. 2006. Big Five Set to Squeeze Minnows out of Mobile Handset Market. The Birmingham Post. 7 March. P. 22 British Telecom. 2009. Mostly Mobile. 16 September. British Telecom. London, United Kingdom Centre for Economic Performance. 2009. Immigration and the UK Labour Market: The Evidence from Economic Research. Centre for Economic Performance. London, United Kingdom, P. 1 Consumer Policy Review. 2007. Current Developments. Association for Consumers Research. July / August. Vol. 17 (4). Pp. 115-116 Deal, W. 2008. Communication Technology: The Magic of Touch These Innovations in Display Technology May Very Well Influence the Way That We Use and Interact with Computers and Information Technology and Other Media in the Future. The Technology Teacher. 68 (2). Pp. 11-12 Duncan, H. 2006. Broadband Wars Signal a Cheaper Deal for Customers. The Birmingham Post. 13 June. P. 22 ENTER . 2010. Mobile 2009. Madrid, Spain Emmitt, A. 2008. Handheld Headlines; News Organizations Are Embracing Content Aimed at Cell Phones and Other Mobile Devices as Part of Their Survival Strategy in the Digital Age. Journalism Review. 30 (4). Pp. 24-25 Fluendy, S. 2005. Networks Crisis Puts 3G on Hold; MOBILE FIRMS MISS CHRISTMAS DEADLINE AGAIN. The Mail on Sunday. 19 September. P. 6 freelanceuk.com. 2010. Breaking the Mould of Branding. Retrieved on 1 May 2010 from http://www.freelanceuk.com/news/1421.shtml Goodway, N. 2007. [Pounds Sterling]5bn Virgin Media Auction Put on Hold; Brand Leader: Virgin Media Lost Almost 47,000 Customers in the First Quarter of This Year despite a [Pounds Sterling]20 Million Launch Campaign Featuring Sultry Pulp Fiction and Kill Bill Star Uma Thurman. The Evening Standard. 7 August. P. 26 Goodwin-Jones, R. 2008. Emerging Technologies Mobile-Computing Trends: Lighter, Faster, Smarter. Language, Learning & Technology. 12 (3). Pp. 3-4 Ghemawat, P. 2002. Competition and Business Strategy in Historical Perspective. Business History Review. 76 (1). Pp. 37-40 Griffen, J. 2002. Customer Loyalty: How to Earn It, How to Keep It. Jossey-Bass. San Francisco, CA, United States. Pp. 5-8 Hammond, A. 2002. Using off the Peg Market Research Reports. Teaching Business & Economics. 6 (2). Pp. 30-33 Hosking, P. 1999. Merger Mania and Short Memories. New Statesman. 128 (4450), P. 10 Kellner, M. 2007. Mobile Phone Employs Wi-Fi. The Washington Times. 3 July. P. CO8 Kirby, S., Barrell, R., Pillonca, V. 2009. Prospects for the UK Economy. National Institute Economic Review. 207 (24). Pp. 51-52 Manning, C. 2005. TARIFF WARS; Cut-Price Calls Launched by Mobile Phone Firms. Daily Record. 11 March. P. 9 McDonald, C. 2007. MARY, 102 IS OLDEST RINGER IN UK; EXCLUSIVE OAP Loves Her Mobile Phone. Daily Record. 3 September. P. 23 Moreno, A., Casillas, J. 2008. Entrepreneurial Orientation and Growth of SMEs: A Causal Model. entrepreneurship: Theory and Practice. 32 (3), Pp. 507-509 Orndoff, K. 2002. Strategic Tools for Rim Professionals. Information Management Journal. 36 (6). P. 65-67 Reading, A. 2008. The Mobile Family Gallery? Gender, Memory and the Cameraphone. Trames. 12 (3). P. 255 Rees, J. 2009. Prices 'Will Fall' after Mobile Phone Merger; ORANGE BOSS PROMISES BETTER DEAL FOR CUSTOMERS. The Mail on Sunday. 13 September. P. 62 Ray, B. 2008. Ofcom considers termination charges. The Register. London, United Kingdom. 29 August. P. 14 Robinson, C. 2000. Reality in Advertising. Library Administrator's Digest. 35 (10). P. 77 Slack, J. 2009. Don't Phone 999, Simply Send Police a Text Message! Daily Mail. 4 March. P. 4 slideshare.net. 2009. Vodafone Marketing Mix. Retrieved on 1 May 2010 from http://www.slideshare.net/pranita.jain24/vodafone-marketing-mix Srinivasan, A, 2010. Mobile Phone Penetration : Country Rankings. Retrieved on 1 May 2010 from http://gorumors.com/crunchies/mobile-phone-penetration-country-rankings/ The Birmingham Post. 2007. T-Mobile and 3UK to Combine Access Networks for 3G Phones. 19 December. P. 22 The Birmingham Post. 2008. Vodafone Rings Up Cost-Cutting Drive; in Association with WWW.Rbs.Co.UK TELECOMS Telecoms Giant Cutting Its Cloth despite Profits. The Birmingham Post . 12 November. P. 8 The Daily Mail (2008) Locking iPhone Deal in Was Key to Success of 02; Matthew Key Is Concentrating on Keeping the Customer Satisfied. The Daily Mail. 14 August. P. 11 The Evening Standard. 2007. 3G Price War as Cost of Mobile Web Access Is Slashed. 11 April. P. 8 The Evening Standard. 2009. Are Mobile Users Paying the Price for Competition? 28 July. P. 36 Telecoms Market Research. 2009. UK Mobile Operator Subscriber Data, Statistics and Market Share. Retrieved on 1 May 2010 from http://www.telecomsmarketresearch.com/resources/UK_Mobile_Operator_Subscriber_Statistics.shtml UK Mobile Phones. 2009. Mobile Phone Companies in the UK. Retrieved on 1 May 2010 from http://www.mobilephones101.co.uk/finchley.html Western Mail. 2008. Editorial Comment Mobile Phone Coverage Inquiry Is Long Overdue. Western Mail. 5 January. P. 22 Western Mail. 2009. Vodafone 'Considering' Move for T-Mobile UK. 30 June. P. 24 Wray, R. 2009. UK mobile phone market rankings. 8 September. The Guardian Appendix Table 2 – PEST Analysis / UK Mobile Communications Sector Political The EU has brought forth call termination by mobile telecom companies as a service area that impacts this sector in the UK (Ray, 2008). The method being utilised by mobile telecom companies in rounding up call termination charges as well as the charging policies utilised for calls incoming and outgoing from mobile phones is a regulatory inquiry being spearheaded throughout the European Union (Western Mail, 2008). In the UK this inquiry is being coordinated by Ofcom, the UK telecom regulations agency (Consumer Policy Review, 2007). Economic The financial crisis has impacted consumer spending across the board in the UK, causing revenue revisions in all consumer sales industries (Kirby et al, 2009). Heated competition in the sector as a result of mobile companies responding to the economic impact and offers by rival firms has resulted in new offers and deals designed to lure customers to their networks with free phone offers and usage deals that have attractive lower call utilisation monthly charges (Rees, 2009). Social Mobile communications is a definitive part of the modern lifestyle with over 61 million mobile phones is use in the UK (Alexander, 2005). The mobile phone is an accepted and necessary part of the modern UK lifestyle that keeps people in touch (McDonald, 2007). Mobile phone text use as well as surfing the Internet and the use of the built in camera have made mobile phones an integral part of UK lifestyles (Reading, 2008). Text messaging has become a favourite use of mobile phones and created a new advertising and marketing medium (Slack, 2009). Mobile phones are also used for banking, bill paying as well as other functions thus increasing their utility (Yang, 2009) Technological Innovations in the mobile phone sector as brought on by smaller and more powerful processing power represents an ongoing process that results in newer and better phones (Goodwin-Jones, 2008). Better displays, interfaces and features have brought mobile phones to the position of being quasi computers that receive and make telephone calls (Deal, 2008). The utility, features and related factors of mobile phone use as represented by touch displays, and other areas have users changing their mobile phones on a continual basis to keep abreast of the latest technology improvements (Emmett, 2008). Improvements and innovations along with delivery systems and infrastructure changes along with a host of areas in terms of carrying capacity are important factors in mobile operators being competitive (Kellner, 2007). Table 3 – Porter’s Five Forces Analysis / UK Mobile Communications Sector Threat of Substitutes The switching power in the industry is high as a result of the multiple choices open to consumers in terms of other providers whereby the quality of service, features, benefits, price, and related factors are basically the same. The threat of substitute products to replace handsets is not a factor (Telecoms Market Research, 2009). Brand switching by consumers between providers is high die to the similarities in service plans. Threat from Established Rivals Brand identity is moderate in this industry and represents consumer preference. Pricing, features, connectivity and service area coverage are the issues that can cause customer switching. Product differences are minimal, with handset availability representing a somewhat distinguishing feature. The merger of T-Mobile and Orange provides that union with a slight advantage in area coverage and a good advantage in size. Financial power represents the threat in the sector as consumer markets have reached the saturation point thus consolidation represents a new means of growth and market share (Goodway, 2007). The subscriber base as well as liquidity of a mobile phone provider have seen Virgin Media suffer through take over offers (Western Mail, 2009). Consolidation in the industry is a real threat in that the smaller operators buy connection services from their larger rivals that increase their operating costs (The Birmingham Post, 2008). The high level of competition within the sector is bringing infrastructure investments into the fray as a key reason behind considering takeover actions in that fragmentation is actually more costly for consumers as the larger players all have their own delivery systems that consumers pay for as part of their access fees (The Evening Standard, 2009). Thus, in the mobile telecom sector, more competition is not as efficient as theory would have one believe due to operating costs. Vodafone’s takeover offer of T-Mobile is evidence of this dynamic in that the former has not been able to match network upgrades by its rivals to 3G capabilities (Fluendy, 2005). The importance of having a 3G network represents the next step in mobile delivery infrastructure and firms lacking this capability are subject to takeover. New Entrants / Barriers to Entry In terms of consumers, the ease of switching to another operator network is extremely high. The high cost of entry is a barrier warding off new firms coming into the mobile phone arena except by takeover. The expenditures in building network capacity and cell towers is highly prohibitive, thus the capital requirements to enter the sector are prohibitive (Bhatnagar and Tan, 2006). The largest operators can engage in price wars as well as new handset deals to squeeze potential new entrants along with current competition, making up the money lost on longer term subscriber deals and other services (The Evening Standard, 2007). Buying into an existing network as was the strategy of Virgin Mobile means paying higher access costs that translates into passing this onto subscribers in higher fees, a tough sell in a price conscious market segment. Supplier Power The high number of firms manufacturing handsets puts supplier power firmly in the hands of the UK mobile operators as a result of the deals they can strike due to the number of competitors in the manufacturing sector (The Daily Mail, 2008). Buyer Power Consumers represent buyer power in this equation as a result of the large number of suppliers (Duncan, 2006). Consumers have bargaining leverage that even after signing on as a subscriber, they can either leave at the end of their contract period, or in some cases, switch in mid stream, paying a penalty (Manning, 2005). The high penetration rate of mobile phones in the UK is further proof of this problem as the UK has there are 61 million plus handsets in use (Alexander, 2005). Table 4 - Ansoff’s Product – Growth Matrix / Vodafone Present New Market Penetration The market share for the company needs to be increased in the face of competitive developments. As the products offered are similar to rivals, smaller players in the market represent a potential means for growth through acquiring and or striking deals with smaller players. Traditional efforts in pricing do not represent the solution, except in holding the line with competitors, however advertising, sales promotion and more customer relationship management techniques are areas for attention (Telecoms Market Research, 2009). Usage patterns need to be addressed to create more reasons for customer’s to rely on the network and services that include loyalty schemes (slideshare.net, 2009). New markets are represented by young adults graduating from school. The youth market needs to be developed as a growth area through more awareness and involvement in sports, youth activities and sponsorships to make the brand name more dominatant as well as service packages for their budgets and usage styles (Alarcon, 2009). Plans that bundle mobile services and Internet broadband need to looked at for better pricing and utility. Market Development The market maturity and saturation of the UK leaves little room for market development. Niche markets and sporadic users do however represent areas where additional customers might be acquired (Telecoms Market Research, 2009). Special language units for better access and communication, along with different pricing plans marketed to fit budgets need development. The budget crunch has caused a pull back in normal usage and is inhibiting growth. A friends and family plan to develop markets whereby the rates are cut to the five most called numbers on the Vodafone line represents a marketing and new market approach for immigrants as well as the one line two phone plan. Product Development The company has blanketed the UK with 3G coverage. No Plans Diversification No plans No plans Read More
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CHECK THESE SAMPLES OF Place of Vodafone in the UK Mobile Telecommunications Sector

Vodafone: An Analysis of the Marketing Mix

In such conditions, claiming to be the best business in any sector is no small feat but Vodafone, British's top most mobile network service provider and the world's second biggest brand by both revenue and subscribers (intangible business, 2008, pg 10) has managed to attain and maintain this position for quite some time.... Over the past two decades, the telecommunications giant has pursued an aggressive expansion strategy combined with emotional and relatable marketing campaigns to cement their brand; “Its brand is the most geographically spread and is the second most valuable telecoms brand in the world, worth $22....
11 Pages (2750 words) Essay

Vodafone and the Use of Internet

Vodafone's major e-Business achievements include launching the first prepaid analogue package in the uk in 1996, acquiring the largest 3G license available in the uk by 2000 and launching their 3G service in 2004.... This paper under the headline "Vodafone and the Use of Internet" focuses on the fact that Vodafone Group Plc, the UK based multinational telecommunications company, is currently the world's largest mobile telecommunications firm on the basis of revenues....
9 Pages (2250 words) Case Study

Vodafone Plc: Its Future As a Network Operator

This report analysis has been developed to analyse related to the further growth of vodafone which is now targeting developing nations like India for future expansion.... It uses its experiences of several other markets especially that of Europe in developing new markets through joint ventures Vodafone Plc is the world's largest mobile operator with over 198.... million subscribers spread over 61 nations being serviced through 25 owned network and 36 partner mobile networks....
12 Pages (3000 words) Research Paper

Evaluating Vodafone's competitive position

In fact, it is the "largest mobile telecommunications network company in the world.... In fact, it is the "largest mobile telecommunications network company in the world.... Vodafone is a competitive force in the mobile technology market.... Vodafone is a competitive force in the mobile technology market.... (Wikipedia, May, 2006) Looking through the eyes of Porter's generic strategy framework this paper will discover vodafone's competitive position in the market today....
2 Pages (500 words) Essay

Introduction to Business: Vodafone Group Plc

Vodafone has been a leading player in the telecommunications industry in the United Kingdom presently and looking to expand operations across the globe.... T-mobile has lately run a very expensive advertisement campaign for its Flext tariff and has also initiated measures to revamp its stores.... Orange's parent company France Telecom, in the mean time, has adopted the mobile operators name as an umbrella brand for many of its subsidiaries, “including fixed-line and ISP services” (Foroohar, 2004)....
11 Pages (2750 words) Essay

Vodafone Marketing Issues

The present assignment "Vodafone Marketing Issues" is focused on the one of the world's leader in the telecommunications sector specializing in mobiles, our presence is now felt in many places viz.... nbsp;… Although mobile business is the core activity of our organization, we are slowly entering into its integration services with PC to provide better connectivity to our customers.... Out of the total revenues generated by the advertising companies, a 9% increase is attributed to the vodafone advertising campaigns (Eaton....
4 Pages (1000 words) Assignment

Performance of the Vodafone Company for the Last Two Years

n the case of vodafone, there has been a substantial decline in ROI by nearly 5 percentage points, which would affect the psyches of investors who would want to invest in shares of this company.... The consistency factor in revenues and profits, which are critical elements for investment decisions, seen to be missing in the context of vodafone.... nbsp;  It is also seen that another reason for the loss in profitability could be attributed to the need to reduce termination fees for mobile subscribers, as well as respond to competitive overtures by reducing fees for different services which could impact its bottom line....
12 Pages (3000 words) Assignment

Globalization and International Business: The Case of Vodafone

The paper "Globalization and International Business: The Case of vodafone" will discuss the significance of globalization along with its impact on the international business of vodafone.... The paper will discuss the significance of globalization along with its impact on the international business of vodafone.... Headquarter of vodafone is located in London, United Kingdom (UK).... It is also considered as the world's biggest mobile telecommunication based organization in accordance with its generation of revenues (London Stock Exchange, 2011)....
14 Pages (3500 words) Case Study
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