CORPORATE STRATEGY ASSESSMENT – VODAFONE COMPANY

by [Name]

Course

Professor’s Name

Institution

Location of Institution

Date

Table of Contents

1.0 Introduction

2.0 External Environment Analysis

2.1 PESTLE Analysis

Political Factors

Economic Factors

Social Factors

Technological Factors

Legal Factors

Environmental Factors

2.2 SWOT Analysis

Strengths

Weaknesses

Opportunities

Threats

2.3 Porter’s Five Forces

3.0 Internal Environment Analysis

3.1 VIRO analysis

Network Capability

Brand equity

Weaknesses

4.0 Strategy Evaluation

4.1 Suitability

3.2 Acceptability

Risk

3.3 Feasibility

Conclusion

References

Appendices

1.0 Introduction

Vodafone Group plc is a well-known multinational company whose headquarter is located in London, UK. The company offers a wide range of communication services to both businesses and customers in various regions. In 2018, the company was ranked 4th in relation to mobile consumers. Since it operates as a multinational company, it has a significant presence in the Middle East, Africa, the Asia Pacific, and Europe. The broad range of services the company provides include but is not limited to Carrier services, Cloud and Security, Fixed broadband, Internet of Things, and lastly, mobile services (Klauer, 2014). By 2019, the company was estimated to have 92,000 employees. However, for the company to remain afloat, regular assessment of its external and internal environment is critical to identify opportunities, strengths, weaknesses, and threats. Such evaluation would allow the company to develop a realistic strategy to achieve its goals and objectives, which in turn will ensure the company remains competitive both within and outside of the UK, London (Saka-Helmhout and Ibbott, 2014). For that reason, this report seeks to examine the competitiveness of Vodafone by using SWOT and PESTLE analysis.

2.0 External Environment Analysis

2.1 PESTLE Analysis

Vodafone Group plc operates in the telecommunication industry, which is one of the key sectors as far as the economic development of a nation is concerned. However, the telecommunication industry is undergoing a massive transformation in terms of digital adoption, which seeks to improve customer experience. The change is governed by current trends such as BlockChain, Artificial Intelligence, 5G Networks, Smart Cities, and the Internet of Things, among many others (Niaz and Medina, 2018). The progression in advanced technologies is creating complexity for telecoms, especially regarding the provision of services. One of the challenges telecommunications companies are facing is lower margins as a result of increased competition, high operating and maintenance costs. In this report, the PESTLE analysis will look into the external influences, which entails political, economic, social, technological, legal, and environmental, which is what the acronym stands to represent. PESTLE analysis is a useful technique to examine the effect of external influencers on the company’s business model.

Political Factors

The Brexit Effect: the separation of Britain from the European Union is a significant shakeup in the running of any company in the UK and should be taken seriously. First, it is worth noting that the EU had compelled mobile operators to cut high roaming charges before Brexit because it wanted to build a single market in the telecoms sector (Solver, n.d). The costs were to be removed entirely by June. However, since Brexit happened, the UK may not enjoy any benefit that may come from the European Union and may even push consumers to other companies that may offer cheaper services.

Economic Factors

The tech industry is prone to have many influencers from an economic standpoint, which dictates the direction of Vodafone. This is especially true because the company has dedicated considerable resources to infrastructural upgrades. The recent rollout of the 5G network is also costly and would require much capital. Competition between rivals is another economic factor causing economic downtime in Telecom companies like Vodafone.

Social Factors

The significance of sociocultural factors in the context of promoting the business success of Vodafone as a telecom company, cannot be overstated. Most businesses know the value of sociocultural factors and how they influence profitability or sales of a given product or service in different regions. Globally, the growth in demand for internet-based services has been beneficial to Vodafone and many other telecom companies. There is evidence to show that more people are doing online shopping, which in turn has increased the essence of the internet.

Technological Factors

Technology seems to be playing a central role in enhancing the growth of Vodafone as a company. In the recent past, the company has increased the range of services. It is worth noting that the increased role of user experience has compelled Vodafone to concentrate on this aspect as a crucial thing that would make consumers loyal (Niaz and Medina, 2018). Vodafone continues to use digital technology to promote its products and acts as a platform for consumer acquisition for the brand of the company. Therefore, it is correct to argue that the development of technology or digital transformation has enabled Vodafone to improve and meet consumers’ needs.

Legal Factors

Even though most of the regulations impacting the company’s operations were introduced in the past, and an excellent example is the Sale of Goods Act, many other new Acts are affecting Vodafone, which are being introduced: Anwar, Wintrynsm. An excellent example is a prohibition against the use of mobile phones while driving, which may not only lower the usability of the company’s network but also contribute to reducing its revenue.

Environmental Factors

Vodafone deals with synthetic materials, and with the need to recycle such materials, it has always been a challenge to all companies whose operations involve synthetic materials. However, the company has incorporated into its operation a phone recycling program whereby it supports the collection of disposable handsets (Păvăloaia, 2013).

2.2 SWOT Analysis

The SWOT analysis is an evaluation method used to examine the external and internal factors of any company from a micro and macro environment perspective. In particular, the evaluation looks at factors like weaknesses and strengths, and then there are threats and opportunities (Sammut-Bonnici and Galea, 2015).

Strengths

The company operates in 25 countries and has entered a partnership with many other companies to increase its market share, which has established the company as one of the dominant leaders in telecom throughout the world. Also, the company has been strengthened by other aspects, such as marketing strategies and a high employee base, all of which enable the company to be competitive (Ang, 2016). Innovative advertising strategies, which is evident from the fact that the company was the first to enter into a partnership with Yahoo back in 2006. In 2017, the company launched a youth brand in the United Kingdom, which provides unlimited data on social apps. The other strategy they have used previously as evidence of their innovation strategy is the famous tagline, “wherever you go, our network follows,” which the company used during the launch of Zoozoos in the Indian market (Kumar, 2012).

The success of M-Pesa, which remains the world’s most successful mobile service as far as money transfer, is concerned has enabled many people without a bank account to make bill payments and receive or send money. It is worth noting that Vodafone provides M-Pesa services in many countries of Eastern Europe, Asia, as well as Africa (Lott and Sinha, 2019). For instance, in 2016 alone, the amount of money processed using the mobile platform was estimated to be 614 million (Lott and Sinha, 2019). Despite the many strengths of the company, it also has several weaknesses which hinder or may affect its ability to achieve set objectives and goals.

Weaknesses

A report prepared in 2018 shows that the company has been dropping its base of a subscriber in the past four years, which is a significant problem when taking into consideration the global market scenario (Bhasin, 2018). This is a significant weakness since the company needs to strengthen its primary values and implement strategies that would enable it to gain more consumers. Also, the company is losing its market share in the USA. This is because the rise in popularity of AT&T and Verizon wireless has seen most consumers opt for the two companies and not Vodafone (Dodourova, 2003). Also, the company’s performance in Europe has gone down partly due to Brexit as well as other economic conditions. In 2018, about 40 per cent of the company’s revenue came from India and not either from the UK or even the US.

Figure 1. The weaknesses of the company (Bhasin, 2018)

Opportunities

There are many opportunities the company can utilise to improve its market share. The first opportunity is the rural markets, which is particularly critical since the company seems to be having most of its activities in urban markets. However, Vodafone competitors such as Reliance Communications and Airtel have a concrete base in rural areas, which in turn presents a stumbling block for Vodafone’s future potential (Kwenin, Muathe, and Nzulwa, 2013). For that reason, the company needs to explore the rural market now before its competitors build loyal customers. The other opportunity of the company is in the emerging markets, especially in African countries. The new emerging markets contain disposable income, and as the network keeps growing, communication would be critical. Therefore, besides the rural markets, the company may concentrate on emerging markets throughout the world.

Threats

The first threat to the company is competition, which is useful wherever it is operating. In India, there is Reliance Jio and Airtel, while in the US, Vodafone will have to compete with AT&T and Verizon Wireless (Dodourova, 2003). Vodafone is operating in a sector with a stiff competition, which is a threat to its survival. The other threat to the company is mobile number portability, which makes it easy for customers to move between different telecom operators.

2.3 Porter’s Five Forces

Communication companies are known to face high barriers when trying to enter the sector. However, for a company like Vodafone, which is in the communication sector, it is easy to introduce a new industry within the communication industry (Al-Atiqi and Mumen, 2014). However, with the introduction of mobile number portability, the number of threats has significantly reduced.

The threat of substitutes is another major problem that is likely to affect Vodafone operations and other telecom companies. Vodafone provides high Quality of Service while data services and mobile for voice, and thus consumers can use telecom’s data. It is worth noting that new technology like Municipal WiFi can offer comparable QoS, similar to the one provided by telecoms (Klauer, 2014). This is a significant threat posed to Vodafone and other telecom companies.

The bargaining power of suppliers is a bit complex in the telecoms industry since the sector is highly converged, which implies that there are many suppliers. However, more giant mobile corporations, such as Vodafone, tend to have high bargaining power. In regards to the bargaining power of buyers, the introduction of MNP gives customers the ability to move from Vodafone to another service provider (Al-Atiqi and Mumen, 2014). Also, the telecom sector continues to be more competitive, which means that consumers have more options to choose from, which translates to more bargaining power.

The last force is rivalry, which stems from competition from existing companies operating in the communication sector. For instance, price cuts would create price wars. For Vodafone to remain afloat, it has to develop a differentiation strategy by embracing the latest technologies such as 5G instead of lowering its prices (Klauer, 2015).

3.0 Internal Environment Analysis

3.1 VIRO analysis

Vodafone’s internal capabilities can be assessed by the use of VIRO analysis, which considers the imitability, rarity, value, and whether each capacity is organised well for exploitation. Firstly, there is the capital access, which Vodafone can easily access from Vodafone Group, which is its parent corporation (Al-Atiqi and Mumen, 2014). The group provides its various subsidiaries with the capital they need to operate. However, it is worth noting that this does not give Vodafone an edge over its competitors since it can also access capital.

Network Capability

The company has invested many resources in improving its network, which has seen it able to provide its consumers with a relatively fast speed internet, which has excellent outdoor and indoor coverage. The technological capacity of the company is valuable and gives it a competitive edge but can easily be imitated by competitors, which implies that the company would only enjoy the advantage for a short while (Vodafone, 2014).

Brand equity

Based on a study carried out by British National Newspaper in 2011, the company was ranked fifth in a ranking that compared all major brands throughout the world. For that reason, the company can benefit from its brand name. Also, the fact that the company operates in different countries makes it possible for many customers to become familiar with its brand name, which makes it easier for new consumers because they are familiar with the company’s brand name (Vodafone, 2013).

Weaknesses

The company seems to be experiencing a high churn rate, which may be as a result of the inability of the company to create loyal consumers. Therefore, the company must develop long-term plans with their consumers so they would have customers who can still be around for a long time.

Figure 2. Brand value (Bhasin, 2018)

4.0 Strategy Evaluation

The current business strategy of Vodaphone is to expand geographically, gain new customers, retain the existing customers and create a usage increment through sustainable innovations and technology (Khan and Suhaib, 2019). The geographic expansion targets rural Europe and potential markets within Africa. This strategy will be analysed using the SAFe model (appendix 1).

4.1 Suitability

The suitability of this proposed strategy can be analysed based on the SWOT and TOWS outcome.

SWOT Vodaphone Analysis

TOWS analysis for Strategic Evaluation of Vodafone

Since the company has a vast customer base (S4), totalling to about 625 million, it should use the broad support for its mobile payment bank services (O2). This scenario will ensure that they retain their customers. The company should aggressively expand the rural data market (T1), which will help it reduce consumer perception (O1), especially in rural areas of offers being presented by Vodafone’s competitors. This decision will also help in the customer retention strategy as well as the expansion strategy. Further, since the company is currently rolling out 5G (S1); thus, it should ensure the network is competitive (T2), and they should plan how the rollout will be done in rural Europe and the projected Africam market.

4.2 Acceptability

Acceptability of the proposed strategy is useful to demonstrate stakeholders expectations regarding the outcome based on the risks, returns, and stakeholders’ reaction (Johnson et al., 2017).

Risk

The report outlines the result of the liquidity and gearing ratios for the set of data between 2018 and 2020.  The analysis helps establish the predictability of the strategic outcome as in the table that follows. The gearing ratio under 50% is considered optimal. The values indicate that Vodafone would leverage debts to boost shareholders profits. The liquidity ratio shows improvements from the previous years and currently represents current assets within Vodafone is 102% of the current liabilities. This revelation is an indicator of desirable ROI in the event of geographical expansion.

Stakeholder Reaction

The evaluation of stakeholders acceptance of the expansion to Vodaphone’s operations to more regions within Africa and rural Europe is done using the stakeholders’ map to assess their level of attention and power (Johnson et al., 2017). The evaluation shows Vidaphone management as the sole players with a high level of attention and power.

Further, the geographic expansion of Vodafone would mean that new offices would be created, which would require employees to play both managerial and operational roles (Faull, 2016). This strategy would mean financial burden on Vodaphone.

4.3 Feasibility

Feasibility evaluation is necessary during strategic evaluation. According to Johnson (2017), the outcome of such evaluation is useful in the capability ad resources in order to predict the performance of a firm in practice. In the case of Vodaphone, feasibility evaluation will help establish whether the company has enough financial and human resource required for the proposed geographic expansion to either rural Europe or other potential markets within Africa.

Workforce and Skill

Expansion is possible because Vodafone has the capacity to adapt its operations in the new regions of expansion through leveraging the practical staff skills and through training. The projected expansions will require about 300 managerial positions and about 3000 new non-managerial jobs within a three- years period. The company can also leverage on the millennial populations within Africa as well as Europe who can be trained by the company for higher productivity.

Financial capability

According to the report, effective gearing management makes the company attain reduced equity financing indicating efficient use of the company’s deployed capital. Therefore investment through expansion would be viable for the Vodafone and the stakeholders. Further, the Vodafone’s flexible and robust financial position makes the possibility of organic growth tenable. Therefore, the report establishes that expansion to rural Europe and potential African regions can be a success.

Vodafone uses a smart financing strategy by strengthening the company’s cash position. Therefore,  the strengthened cash position of Vodafone can be utilised to spur both organic and proposed inorganic growth. In 2020, Vodafone generated revenue of 44.97 billion euros with an annual growth rate of 31% in 2019.

4.4 Other Strategies that can Help Vodafone

Market Penetration

Vodafone needs to acknowledge the fact that penetrating new markets is dependent upon its ability to provide a fast network, satisfy its customers, and the pricing of its services and products. Other factors that may affect penetration include tariffs and network coverage. It is worth noting that as the penetration rate of telecoms increases, the competition will also increase because existing telecom operators will increase their investment in retail for their customers (Ang, 2016). Since Vodafone wishes to penetrate the rural market, it should consider using new products and leverage the company’s scope and scale as an added advantage to persuade new consumers and retain the existing ones.

Market Development

Vodafone, like many large telecoms, continues to pursue selective opportunities to increase its geographic reach. However, the main focus of the company has always been Eastern and Central Europe. This strategy would not be useful going forward as it needs to shift to an emerging market where many untapped opportunities exist (Khan and Suhaib, 2019). For that reason, the company needs to retain its financial flexibility so it can pursue incremental opportunities in emerging markets, which in turn increases the shareholder value.

Product Development

Vodafone continues to be one of the most innovative telecoms, and this is evident through its M-Pesa innovation, a mobile money transfer service that has become very successful, especially in the East African market. For that reason, the company should continue with innovations, which may include introducing new mobile TV technologies, new handsets, new services that solve consumer pressing problems, and many other innovations that would increase the competitiveness of the Company (Anwar, 2003).

Diversification Strategies

Vodafone may either use horizontal or concentric diversification techniques to create more value as well as increase revenue. In regards to concentric diversification, the company may consider going into other ICT related businesses such as the media. The media is ideal since the company would have the opportunity not only to increase revenue but also to have a platform to introduce a variety of services to the market (Wilkinson, 2013).

In regards to horizontal diversification, it is critical for the company to appreciate the fact that the mobile-only approach is slowly but surely fading aware throughout the world. In particular, most telecoms companies have started integrating their mobile and fixed networks, thus providing other services and deals to consumers who are given the option of buying the two services together (Al-Atiqi and Mumen, 2014). Also, Vodafone competitors have begun offering quadruple play as bundles, which include a fixed package of television, broadband, and mobile telephony. This is an approach that Vodafone needs to adopt to ensure it remains competitive in the telecom industry.

Conclusion

Overall, the discussion has evaluated Vodafone based on SWOT, VIRO, TOWS, and PESTLE analysis. First, the separation of Britain from the European Union shook up the company’s operations in the UK. However, it operates in 25 different countries, which has established itself as a significant leader in the telecom sector. In the recent past, the company has been dropping its base of subscribers. For instance, in 2018, about 40 per cent of the company’s revenue came from India and not from the UK or even the US as it would have been expected. For that reason, the company can utilise the rural markets as an opportunity to expand its base, mainly, since it seems the company is having most of its activities in urban markets. Also, the company should continue innovating like introducing new mobile TV technologies, new handsets, new services that solve consumers’ pressing issues, and many other developments that would increase the competitiveness of the company. Therefore, it is clear that even though Vodafone is doing well and has many features that make it competitive, it also faces various challenges which it can address by adopting appropriate strategies.

References

Al-Atiqi, A. and Mumen, F., 2014. The Strategic Alternatives of Vodafone UK in 2009.

Ang, R., 2016. Vodafone global telecommunications: Optimizing operations. IUP Journal of Operations Management, 15(4), p.46.

Anwar, S.T., 2003. CASES Vodafone and the wireless industry: A case in market expansion and global strategy. Journal of Business & Industrial Marketing.

Bhasin, H., 2018. SWOT analysis of Vodafone. [Online] Available at https://www.marketing91.com/swot-analysis-vodafone/. [Accessed 21/06/2020].

Dodourova, M., 2003. Industry dynamics and strategic positioning in the wireless telecommunications industry: The case of Vodafone Group plc. Management Decision

Johnson, G., Whittington, R., Scholes, K., Angwin, D. and Regner, P. (2017) Exploring Strategy: Text and Cases (11^th ed.). Harlow: Pearson.

Khan, S.S. and Suhaib, M., 2019. Evaluating an international human resource management strategy for new telecommunication group in developing countries, concentrating on Pakistan (A case study of Vodafone). Science International-Lahore, 31(3), pp.457-461.

Klauer, T., 2014. Valuation of Vodafone Group. [Online] Available at: https://studenttheses.cbs.dk/bitstream/handle/10417/5534/thomas_klauer.pdf?sequence=1 [Accessed 21/06/2020].

Kumar, N.N., 2012. Vodafone marketing communications. Emerald Emerging Markets Case Studies.

Kwenin, D.O., Muathe, S. and Nzulwa, R., 2013. The influence of employee rewards, human resource policies and job satisfaction on the retention of employees in Vodafone Ghana Limited. European Journal of Business and Management, 5(12), pp.13-20.

Lott, J. and Sinha, M., 2019. M-Pesa’s failure in India: Why couldn’t Vodafone replicate its Kenyan success? An international marketing case study. The Kennesaw Journal of Undergraduate Research, 6(2), p.2.

Maggiore, G., Mataluni, A., Matarazzo, M. and Resciniti, R., 2015. Diversification strategies in the information and communication industry through acquisitions: The case Vodafone-Cobra. In XVIII Toulon-Verona Conference Excellence in Services (pp. 277-289). EuroMed Press.

Niaz, H.M. and Medina, I.G., 2018. Vodafone: The relationship between brand image and online marketing strategies. IROCAMM-International Review of Communication and Marketing Mix, 1, pp.7-31.

Păvăloaia, L., 2013. Business valuation in terms of indicators of sustainable development. CES Working Papers, 5(1), pp.66-76.

Saka-Helmhout, A. and Ibbott, C.J., 2014. Network orchestration: Vodafone’s journey to globalisation. In Orchestration of the Global Network Organization. Emerald Group Publishing Limited.

Sammut-Bonnici, T. and Galea, D., 2015. SWOT analysis. Wiley Encyclopedia of Management, pp.1-8.

Solver, M., n.d. Post-Brexit and The Changing Global Trade Landscape Sample Assignment.

Stuer, C., Husig, S. and Biala, S., 2010. How to create and sustain an open and radical innovation capability in the fuzzy front end: The case of Vodafone Group R&D Germany and selected ongoing radical innovation projects. International Journal of Product Development, 11(3-4), pp.196-219.

Vodafone, 2014. What makes Vodafone a great mobile network. [Online] Available at: Vodafone.co.uk [Accessed 21/06/2020].

Vodafone, 2013. Vodafone Group PLC fact sheet. [Online] Available at: http://www.vodafone.com/content/dam/vodafone/investors/factsheet/group_factshee [Accessed 21/06/2020].

Wilkinson, J. (2013) Intensity of Rivalry. The Strategic CFO. Available at: https://strategiccfo.com/ (accessed 02.12.2019).

Appendices

Appendix 1: SAFe model