Marketing Management on : Vodafone
- Executive Summary…………………………………………………………3
- PESTEL Analysis……………………………………………………………4
- Key drivers for change………………………………………………………6
- Porter’s five forces analysis…………………………………………………7
- Vodafone’s sustainable competitive advantage…………………………….10
- Corporate level strategy……………………………………………………..11
The purpose of this report is to provide the insights for PESTEL analysis of the UK communications strategy after over viewing the UK Vodafone’s communication strategy case of 2009. Afterward, main drivers for further transformation have been identified on the basis of analysis done. Next, report attempts to describe the three key industries of Vodafone and Porter’s five forces model have also been conducted with respect to those said industries. In this context, evaluation of the impact of these forces on future attractiveness is also a part of the report for the discussion. Next segment of the report highlights the domains of competitive advantage and their sustainability for Vodafone. At the end, on the basis of analysis, a suitable corporate level strategy has been identified and determined for Vodafone to develop in the market.
Before moving onto the PESTEL analysis of Vodafone’s UK communication strategy, it is obvious to summarize the Case of Vodafone in 2009. It articulates that Vodafone was progressively going forward in the market among its competitors. It was harried to foster a strategy with respect to internet’s high-speed’s leadership in its UK home market. On the other hand, company had a major challenge to reconsider the development and effect of such new technologies of data, voice and video communication on traditional industries. Therefore, the study of Vodafone’s case of UK in 2009 presents and explores its competitive strategy. It has discussed about its few key industries which are following (Johnson al, 2009):
- Fixed line
- Mobile telephone
- Bundled services, like combination of fixed line and dial-up broadband
Next sections will cover the PESTEL and porter’s five forces analysis on Vodafone communication strategy in UK and analyze its competitive strategy to win the market.
As far as PESTEL analysis is concerned, there are a number of macro-environmental factors which affect both the organization and the management. It consists of political, economic, social, technological, environmental and legal factors. Each factor has been discussed one by one in order to assess their effect on Vodafone’s company and its management. Following this, case of Vodafone’s strategy exploration in UK has been studied and analyzed to identify the main drivers for changes.
(Source: What makes a good leader, n.d)
Political factors: The political environment has a great impact on the performance of business in pursue its mission of achieving the strategic goals and objectives. Political factors are basically concerned with government policies and other regulatory framework. Office of communications was the regulator in UK and its main work was to ensure the competition and service delivery. The first thing it did the privatization of British telecom’s services which entailed it to provide network and internet services to other operators through a process named local loop unbundling (LLU). Through these regulatory changes, Vodafone took an advantage and shed light on its mobile services. Moreover, licenses to mobile phones are controlled strongly and use of phones and access to a range has been limited by the government in order to make its safe n right use (Bromwich, Michael & Hong, 2000).
Economic factors: These factors comprises of interest rates, changes in area of taxation, economic growth, exchange rates and inflation, etc. Moreover, these factors can affect an organization’s competitiveness. In case of Vodafone, license cost to get hold of a phone is very high in comparison to other traditional industries. There was a war of 3G license bidding at the elevation of economic explosion which resulted in intense payment for that. Apart from that cost of building and maintaining network framework was very high for every network operator organization. It required enough revenue to breakeven and if in any case it is not made possible then the standards will not be approached (Johnson al, 2009).
Socio-cultural factors: These factors include health awareness, growth rate of population, and distribution of age and safety prominence. Concerning Vodafone’s strategy exploration in UK, the population has been getting older day by day and on the other hand it also has been researched that the population of UK will grow 4 percent over the subsequent five years. Mobile phones generally are used by youths more than the old people. In the country like UK where population is ageing, demographics may have chances to swing to more aged inhabitants. It will further ending with the less use of mobile phones in UK (Johnson, 2009).
Technological factors: The industries of mobile handset have gone through a huge compact of alteration in technologies and equipments used and will also carry on doing so. 3G technology has existed and has come forward with a good arrangement of both content and additional services. This can help increasing the revenue if Vodafone with this 3G technology starts providing a wide range of content to the users (Solly, 2010).
Vodafone has encouraged customers to dispose of the handsets and accessories safely through the settlement of a recycling program.
A law regarding the use of phone while driving any private vehicle was introduced in 2003. Moreover, certain laws were also there such as the sales of goods act 1974 stating that the product should be fit for the intended aim or purpose.
On the basis of PESTEL analysis, a few key drivers can be recognized for change to be made by Vodafone:
Key Drivers for change:
- 3G mobile phone is regarded as one of the key products of telecommunication industry because it entails the quicker and higher quality of data transmission. Telecommunication companies can improve the quality subject to third generation technology facilitating the internet on mobile at same broadband speed and developed multimedia messaging (Report Linker, 2012).
- Moreover companies can change its fundamental infrastructure in order to switch to alternative technologies defining the devices best and flexible. Further it can develop its mobile data services and other broadband services including small and medium enterprises or home offices.
- It can improve upon the market size specially emerging with the selective new market in UK and globally.
- Company can fall short of cash-flow because cash spent by it in last five years on preset substantial assets which went beyond the downgrading indict by 58%. Therefore, Vodafone can work in the area of net cash-flow of the company (Sitsi verticals a PAC research program, n.d).
Porter’s five forces analysis:
With the help of porter’s five forces analysis, Vodafone strategic competitiveness can be evaluated for fixed line, mobile and broadband.
(Source: Harvard Business Review, 2008)
- 1. Competitive Rivalry: In case of fixed line there were Virgin media, Talk Talk, orange and sky as the main competitors. But major competition came from British telecom fixed line. With respect to mobile phone, competition was strong from orange, T-mobile, Tesco mobile. Next the competitors of broadband were ‘the cloud broadband connection, BT open zone and T-mobile. Virgin also offered the broadband service to the customers with 50mbps speed across its network in 2009. Most probably rivalry seems to be high when there is less or no brand loyalty for a specific product, little discrimination other than cost/price (Datamonitor research store, 2011 ).
- 2. Buying Power: It includes buyer volume, information, brand identity, price sensitivity and product differentiation, etc. After the price cut and other operating alterations which were forced on BT made Vodafone and other operators capable to buy and install network equipments in case of fixed line service. Concerning mobile phone service, Vodafone purchased handsets under some worldwide contract and then discounted their retail price to attract more new subscribers. Therefore, in recent years it has strong power to buy and negotiate own branded mobile sets from a number of suppliers.
As far as broadband connection is concerned, all major operators in UK provided 3G card service for laptops and won the competitive advantage of overall UK market. It buying power can be justified on the data presented that around 263,000 customers reported for broadband connection through 3G cards offered by the operators. In UK, five largest network providers had almost 91% of all the connections available with them (Report Linker, 2012).
Power of Suppliers: Through price increases by companies, suppliers were attracted to deal with telecommunication industry in UK. Power of suppliers in UK market for network operators and telecommunication industry is too strong which affect the negotiation and other contracts. Local loop unbundling and BT had a strong approach as a supplier and service provider in fixed line industry. In case of mobile phone industry major suppliers was Nokia having the global contract with most of the largest operators of UK telecommunication industry. Nokia had almost 40% of the UK market for smart handsets and on the other hand Samsung could capture only 21% percent of all. Apple was one of the strong suppliers of the UK industry having over 2 million sold in the first year of its existence in the UK market. For broadband service in UK leader supplier was BT with its 26% of the retail broadband connection followed by Virgin media with 23%, BSkyB with 12% and lastly orange home with only 5% (Solly, 2010).
- Threat of substitutes: On the basis of analysis of three of the industries, it can be noticed out that among all Vodafone faces the least threat for substitutes. The focused strategy subject to leadership in cost system that Vodafone functions under makes it relatively complex for a parallel alternate to be made available at a lower price by their economies of scale’s use, their purchasing power, and moreover their utilization of provisional elevation in price that arrive from suppliers that generally don’t required to be approved to the consumer. Other operators providing mobile phone has the threat of other substitutes as in case of Samsung and apple providing the same features. Next, in broadband connections, threat has been less because a very few companies have started providing the connections through 3G card or DSL services in UK (Managment paradise.com, 2010).
- Threat of Entry: Threat of Entrant can be less in fixed line service’s context because BT is already a leader of this industry providing the higher level of services and generating higher revenue as compare to others. It is very high level of threat as far as mobile phone industry is concerned. There can be other companies who may have the price influence on the population of UK. Threat of new entrants is also high for broadband industry because new companies are entering with offer of high speed. Like Airtel has made a great impact by offering a 3G card with its tremendous and high speed quality which may further make a lead in the UK market (Guardian.co.uk, 2012).
On the basis of Porter’s five forces analysis, industries’ situation in following years can be estimated and supposed with its impact on future attractiveness. Competition is on a height at this point of time. New enterprises along with their high-class services are entering into the market that may adversely affect the UK market service providers. It is expected that merger between orange and T-mobile in UK states that they will be generating approximately 32.2 million new subscribers for their mobile service in 2015. On an average forecast done by UK telecom industry, it articulates that by 2015 it will grasp around 26.9% market share globally. From 2012 onwards UK has started providing high class broadband connection to the customers with reasonable price (Telecoms market research, 2011).
Its future attractiveness can be seen that already 263,000 customers are getting registered for UK internet and other mobile services. The high-quality services, data transmission, 3G service, data card service, product according to the customer’s taste will make the people appeal to go with such services in UK (Ernst & Young, 2012)
3. Vodafone’s sustainable competitive advantage:
Vodafone has the capability to compete in opposition to its competitors through a highlighted strategy which entails it to construct services that overhaul the complete mobile phone segments. Moreover, the reproduction cost concerned for the technologies by the less significant enterprises will indirectly make it firm for them to replicate the framework of service that Vodafone proposes. Vodafone’s competitive strategy works in their competitive configuration but requires to be continuously updated to remain at the forefront of the technology camber and on the other hand not fall at the back to its competitors who will be endeavoring to persistently progress on their services and technologies offered recently. Due to Vodafone’s determined resources such as human resources, innovation and knowledge/competency which are mainly imperative for them to stay at the forefront of their competitors, it takes benefits of the competitive advantage (Vodafone.co.uk, 2012).
Furthermore, Vodafone holds a very exhaustive and practiced market’s knowledge and technology that it is concerned with. They have utilized this knowledge to the several markets it has penetrated and has proven victorious. On the other hand, Vodafone’s most important vague resource referred to their competencies and experience in the industry and their global presence and these things describe the company as a grand asset and a name anyone can trust upon (Cambini & Jiang, 2009).
4. Corporate level strategy:
Corporate level strategy has to be fit in the corporation’s business unit. Corporate or business level strategy basically helps directing and leading the company toward enhancement, stability and curtail. The foremost thing telecommunication industries can do is to making a decision on what kind and level of additional services they want to acquire in their business. Further, it can act as a network operator, a service proposer providing several fields of services and activities. Mainly for telecommunication industry to remain and win the market, an overall strategy including reporting of production and all other services, analysis, workflow involving status monitoring, actions should included. It has been recommended in order to adjust the business or corporate model with the help of performance management (Borrmann, 2001).
(Source: Strategy expert.com, 2009
Afterward, it should drive its operational performance by offering the additional values along with the existing ones and the cost reduction. A part of this strategy for telecommunication industry should be delivery of mobile services and an appropriate and suitable selection for expansion into a new market. Many of the companies fall short because of the less cash-flow system. In this context, companies can reinforce their capital discipline seeking the enhancement of mobile phone service, data transmission and broadband connection services (Paula, 2006).
The success of a telecommunication company or entire industry comes from their advanced and consistent investments, continuous innovation and its main focus on the customers. On the basis of overall sturdy of this report, some decisive points have come forward in the light that UK’ economy played a vital role in company’s offerings and services. Industries have taken various strategies such as branding, value addition to the service, customer’s preferences and changing environment regarding the use of mobile and other connection services. In this framework fixed line industry presented British telecom a leader among the market and therefore following it with other operators. In case of mobile phone service, it was notices that the competition was strong and apple won the leadership in the market. On the other hand Nokia and Samsung followed it at a lower rate of usage by UK people. When broadband was concerned and analyzed, it did not present a strong bargaining power of suppliers and buyers because both were handling the market equally with 3G card services for internet connection.
However, completion has been witnessed hard for Vodafone in terms of fierce competition in European market Vodafone has a good market share and advanced customer bases in UK and other developed countries but they require to focus more on developing marketing framework to remain stable and winner of the market.
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