Unit 2 Business Strategy Level 4 Regent College

TASK 1

P1. Influence of macro environment on Vodafone and its business strategies

The macro environment is analysed as an external business environment that affects an organisation's decision-making, performance and strategies. The environmental factors also involve economic factors, demographic, legal, political and social conditions along with technological changes and natural forces (Johnson, 2016). Vodafone is a leading business enterprise in the telecommunication sector across the world. As per the given scenario, there are various implications that have been provided by the external business environment on business operations and strategic decisions of Vodafone.

PESTLE analysis model is used to determine the influence of external factors such as:

• Political: These are analysed as factors relating to the political system and political instability of the country in which Vodafone desire to market its products and services. There are various factors like taxation policies, licensing and other telecommunication which have influenced the business decisions and strategies of Vodafone. The main political factors affecting the entity involve EU roaming regulation which aims to decrease the charges for mobile phone usage abroad by 70% and increase the level of consumer rights within Europe (Cascio, 2018). The increase in tax burden on organisations has also increased their cost of operations due to which they have increased their prices of products and services. This political intervention has decreased their profitability. Moreover, establishing an infrastructure to promote the network also requires permission from the government and other regulatory bodies.

• Economic: A most important factor for Vodafone is based on the fact that the more the states will develop the higher are chances of the organisation to expand and establish its newly developed zones. In the present scenario, the rise in the GDP of the UK means people have more income and will be prone to adopt the latest communication technology. This aids in increasing the overall profitability of Vodafone and it will always be in a position to expand globally (Brewster, 2017). Moreover, there are also some factors like an economic crisis as well as a decrease in growth and profitability that also affect the decision of Vodafone. Rather, the overall economic crisis which the world is presently facing also has direct impact on Vodafone. Global uncertainty has influenced the organisation to change its strategies in order to sustain in a competitive environment.
• Socio-cultural: These impacts are purely based on analysis of local beliefs and culture of people in which Vodafone is operating. In the international market, it is identified as a dynamic domain and for attaining success in business operations. Moreover, the increase in the use of smartphones among people 16-75 years of age has also increased the demand and revenue of telephone services to around £3.8bn and is also, estimated to grow by £32m in the next quarter. However, this will tend to raise opportunities for organisations to expand the business operations and enable them to introduce new services to attract more customers.
• Technological: Vodafone is recognised in the world for its innovative services because it always follows the contemporary trends in the technological and communication sector. Development and introduction of new technology in the market also increase opportunities for organisations to achieve growth by increasing their services and trying to meet customers’ requirements (Hoejmose, Brammer and Millington, 2013). Vodafone produces products which are mostly related to technology and so, it is one essential factor that the company needs to consider while carrying out policies and assessment of upcoming launch of new devices and attractive services. Moreover, Vodafone has been analysed as a technology-driven enterprise which is focused on the latest trends of technology.
• Legal: These also involve the factors that directly influence business of Vodafone such as taxation laws, data protection act, employment laws and copyrights act, etc. States have many times blamed Vodafone for legal issues pertaining towards the sphere of infrastructure (Spender, 2014). Changes in employment rights and laws have also increased the labour cost of an organisation which has directly affected its profits. Moreover, Vodafone should always abide by legal problems of the domain to raise customers and maintain a positive image in the market that will always help in gaining the trust of customers.
• Environmental: Vodafone is analysed as an organisation which is highly dynamic in nature. For maintaining and expanding of network, the company always consider the aforementioned facts and figures. Further, company has also established its recycling programme in different countries for phones in order to support environment and recycle as well as reuse materials used in mobile phones. These external and internal factors are considered as major elements in the success of Vodafone.

Ans off's growth vector matrix for analysis of strategic position

It is the most important factor that provides the road map for an organization to grow depending upon whether are launching new or entering new markets or a combination of these options. In this context, the strategic position is analysed as the positioning of the organization in the future while taking into account the continuously changing environment along with the systematic realization of that positioning. In this, Ans off is the matrix is used to determine a firm's strategic position in the market.

Market penetration: This is strategy in which a company will market its existing products in a way to increase the market share as compared to competitors (Higgins, Omer and Phillips, 2011). It is identified as a minimum-risk strategy for Vodafone because all they have to do is increase its marketing efforts and improve its market share in the telecommunication sector. In this, Vodafone needs to ensure that it leverages the current capabilities, and resources and accelerates towards growth growth-oriented strategy. For example; Vodafone always used television and media houses for promotion in order to maintain its existing features in this market.

Market development: Vodafone needs to utilize this strategy if they wants to expand into new markets with its existing products (Reich and Benbasat, 2013). It is suitable for them as they have the capabilities and resources to establish; business operations in new markets for the achievement of growth. Market development is identified as riskier than penetration because the organisation in other markets requires experience and high financial strength to adopt risk. An example of market development would be Vodafone and Nokia entering African markets where these markets are yet to be trapped.

Product development: It is also an effective strategy for Vodafone when they seek to introduce new products in market. This strategy will be successful for organisations as they have already established themselves in existing markets and all that they need to do is launch new products.

Diversification: It happens when an organisation introduce its new product in new market. This strategy of Ans off matrix contains higher risk and it is only justified for organisations when there are chance of high returns for the business enterprise (Acquaah, 2013).  In this, the differentiation strategy for Vodafone is not effective because they desire to expand their business in the existing market. A diversification strategy was previously adopted by the organisation when they started developing mobile phones but in this diversification of business, they have faced various losses due to low demand of their mobile phones in the market. Other than this, company was also facing losses due to its outdated technological service strategy

However, it is clearly analysed Product development strategy needs to be applied by Vodafone to achieve continuous growth in the market and satisfy customers' requirements.

M1

Critical analysis of the macro environment clearly determines that Vodafone is facing major challenges in business due to the rise in tax burden and implication of laws that affected its cost of operations. With the adaptation of new technology, the company has also increased its strategic position in the market and also focused on development of new products in order to meet customer requirements. The rise in the use of Smartphones between the age group of 16- 75 people, has increased the revenue of telecommunication services. Vodafone needs to decrease to prices of services in order to sustain itself in the competitive business environment (Köseoglu and et.al., 2013).  These environmental factors also provided support in the development of strategic decisions. Analysis of Ans off's matrix provides a clear understanding that organisation needs to adopt product development strategies for the achievement of strategic business objectives. Vodafone needs to focus on increasing its promotion of products through appropriate channels which reduces their cost. Thus, it can be said that an organisation will tend to achieve its objective by implementing of product development strategy.

TASK 2

P2(I) Meaning of strategic capabilities

            Strategic capabilities have been analysed as capabilities of the employees of the organisation which enable the enterprise towards formulation and deployment of strategies in pursuit if sustainable competitive advantage.  Moreover, accomplishment of operations within strategic management framework, capable employees are mainly woven within effective processes, inspired by business design construct and also compelled by purpose to create competencies of business enterprise that produce advantage (Ghezzi, 2013).  In the present context, Vodafone also possesses strategic capabilities of innovation and creativity which they have applied to promote their business operations that need to be adopted by the organisation. The corporate strategies of Vodafone do not depend upon the products or markets but depend upon business processes.  The research and development strategy of an organisation always depends upon the ability to develop new products. Vodafone has the capacity to conduct market research.  They always carry out market research for analysing issues and identification of customer requirements. With effective strategies, the organisation has also developed their business in the new market of mobile manufacturing sector with an aim to achieve growth and remain financially viable in the market (Woodard and et.al., 2012). Vodafone also track strategic capabilities not only for their own companies but also for their competitors to analyse the effective telecommunication sector.  Moreover, Vodafone has also promoted strategic thinking between managers so that they will not work to complete the job but also provide their support in the expansion of the business. Effective leadership and discipline within the organisation has also provided them with support in the expansion of business operations.

• For example- Vodafone does not have enough towers in India that allow them to increase their market share.

P2 (ii) Application of VRIN model for determination of strategic capabilities.

VRIN model is analysed an important tool that is used to analyse an organisation's internal resources and important capabilities to identify if they are sources of sustained competitive advantage.  It is also based on the assumption that business differs depending upon the analysis of these resources and how these resources are combined with each other.  Moreover, resources include effective processes, capabilities, assets, attributes, information and knowledge.  Moreover, this analysis is used to focus on the competitive advantage or weaknesses of Vodafone in the market as compared to the telecommunication sector. This model demonstrates the strategic capabilities of the organisation to identify measures that need to be taken for the achievement of success in business operations and its competitive edge to the company on the basis of four important elements which are mentioned above:

• Value: Vodafone is a global business enterprise which provides values to economies of scale because they have a large infrastructure in the market. The availability of valuable resources also determines the strategic capabilities of the organization to achieve growth in business operations. Vodafone has achieved high financial resources and wide coverage of the network along with a wide range of customers' values and intentions which provide them with the ability to increase the perceived customer value (Ghezzi, Cortimiglia and Frank, 2015). It is also accomplished by increasing differentiation and also aims at decreasing the prices of products. Vodafone has also achieved its perceived customer value by decreasing the prices of its telecommunication services in the market as compared to competitors.
• Rareness: It implies to the resources that can only be hired by in the industry. Vodafone has also signalled the growth and promised a turnaround in its struggling UK businesses, boosting its shares at ending of a mixed year at home and abroad. They have also set up premium cost for their products by differentiating their services regularly. Only due to effective marketing and communication user will already consider that Vodafone is different from other competitors in the market. Thus, the company has achieved the ability to get some premium from their customers and achieve high margins whereas other telecom operators are struggling in order to maintain positive margins. The increase in the global presence of the organisation also makes new entrants to the UK-recognised brand Vodafone instantly, highly specialised stuff for the unified mobile services.
• Immutability: It implies to brand that easily provides access to market segments. Moreover, Vodafone also accesses the culture of being a market leader within the telecom sector but this culture does not promote the ceasing opportunities as they occur.
• Non sustainable: it implies the resources which are not easily sustainable by the organization (A. Harris and P. Patten, 2014). There are no such resources available before enterprise which claims their competency in the market. It also posses the competencies of understanding of businesses mobility needs and services that allows them to secure customer's loyalty.
• For example- Vodafone is not have enough towers in India that allows them to increase their market share.

P2 (iii)Strength and weaknesses of Vodafone

Strengths are identified as capabilities of an organisation which they have achieved after accomplishment of business operations from last several years. Vodafone is identified as second-largest mobile service provider by subscribers. Vodafone possesses strong financial strength and position in the market as it achieved a customer base of 435 million in different parts of the world is its biggest asset.  Such a strong business position implies financial leverage, and a high capacity to adopt risks and to steer the market direction. Further geographically diversified business in European countries is also identified as a major opportunity for organisations to achieve success in the market. Findings provide information that Vodafone has a strong presence in the market in all kinds of mobile markets (Gershon, 2013). It also achieved its highest revenue from developed markets like Germany and the UK.  Therefore, a decline in business in one region will be compensated by an increase in growth in another country. Another strength of the organisation is its developed and advanced network. Vodafone has also deployed LTE and its high-speed wireless networks in most of its markets.

Strong brand recognition in the market and creative advertisement have also provided support to Vodafone in cementing its place among the most successful telecommunication brands in the world.

This makes it easy for them to attract new customers and retain existing base.

Apart from this, the sluggish economic situation in Europe has also decreased the capabilities of organisations to earn profitability in the market. Lower disposable earnings and major unemployment in the country have influenced their customers to cut down their mobile phone expenses. The increase in competition has also affected their sales and growth in the telecommunication sector. This tends to reduce the competencies of the organisation to sustain its competitive position in the market. Less effective strategies are also identified as major weaknesses of organisations which has increased competition in the market.

M2

Critical analysis of the strengths and weaknesses of the organisation also provides an understanding company has a strong financial position in the market which provides them capabilities to achieve its business objectives. Vodafone has strong brand equity among customers in different as it developed a strong customer's customer base within its market segment (Webb, 2013). The increase in the market share of competitors in the industry has also increased challenges for organisations to attract customers and carry out business operations effectively. Moreover, it is identified that the brand needs to increase its core values and also apply effective strategies to acquire more and more customers. Moreover, due to Brexit and other major economic situations in Europe, the performance of Vodafone in its home market is also decreased and its revenue in the market has also decreased. In order to achieve the previous position, they need to develop new and attractive products and services to meet the requirements of customers. 

For example- Vodafone can provide offers during festive seasons to attract people. This will help in retaining customers and increasing market share.

Task 3

P3 Evaluating the competitiveness of the UK’s telecommunications sector using Porter’s five Forces model.

UK's telecommunication sector went through a process of privatisation and vertical unbundling in the 1980s and 1990s. Competition in the telecom industry in the UK are largely healthy and it is directly affected by the underlying network infrastructure. The changing nature of technology is well well-observed feature of the telecommunication industry. Market structure in the UK can facilitate effective competition in the telecommunication industry (Adi, 2015). It underpins the customer's demand and expectation and offers communication services to their customers. The UK telecommunication sector operates within the legal framework set by the Communication Act 2003.

Porter's five forces model applying in UK's telecommunication sector

THREAT OF NEW ENTRANT

Threat of new entrant in UK's telecommunication sector is not easy. It affects the market of telecommunication and if the entry barriers are low then its difficult for existing companies to maintain their prices. The barriers to entry in the UK market are high licence fees which affect the new entrant in the market because some times these fees are not affordable for new entrants. The setup cost of infrastructure is also high it's difficult to set up a business in the telecommunication sector in the UK. New entrants face the problem of rapid changes in technology and techniques used in the telecommunication sector always changed with the demand of the market. So it affects the new entrants in the telecommunication industry (Roos and Von Krogh, 2016). Customer switching cost is very low so barriers to new entrants in the telecommunication market of the UK and easy access to the distribution channels are the barriers to the new entrant to set there business in the telecommunication sector.

BARGAINING POWER OF BUYERS

The bargaining power of buyers can affect the market when power of buyers are high then the competition are also high, buyers can down the prices of product or services cost to the buyers of switching from one supplier to another and it creates competition in market. For the telecommunication sector in the UK, buyers can influence the business by asking for lower prices because buyers have full knowledge and information about the telecom market in the UK. They are enhancing the services and improving the quality of products and services of telecom companies in the UK, It creates a competitive environment. The bargaining power of buyers can switch the cost at a low level, especially after introducing the concept of mobile number portability. It is important for each individual buyer to the organization because their expectation and satisfaction are important to every business as well as the UK telecommunication sector (Buil, Catalán and Martínez, 2016). In the UK the customer is aware and has knowledge about prices and quality so it is the power of customers to create competition in the UK market.

BARGAINING POWER OF SUPPLIERS

This force of Porter's model has an important role in the telecommunication sector in the UK. Bargaining power of suppliers to drive up the prices of products and services. They can be driven by the prices by the uniqueness of the product and the quality of their services. It's important for the supplier can maintain their prices for the success of the company. The cost of switching from one supplier to another are important for the power of suppliers.  A Higher number of suppliers in the telecommunication industry can make a low level of profitability while a lower number of suppliers easily achieve success. It can affect the industry by increasing the price and reducing the quality of products and services which increases the competitive environment. The availability of many telecommunication suppliers affects the power of suppliers at low. Lack of differentiation among suppliers has a negative impact on prices. Low switching costs affect the power of the supplier. Suppliers can increase their power to maintain the standardization of services and products. They should have given preference to the demand of customers and given proper network facilities in the UK. When the telecom services are good then the power of suppliers is also good because it is the distribution channel of services and products.

THREAT OF SUBSTITUTE

This force says that when close substitutes are available in the market then it is barriers to achieve success in the market, by this availability of substitute company can not drive their prices according to them because customers switch the services and give chance to alternatives, this affects the profit the telecom company and increase the competition among UK telecommunication industry (Gould and Desjardins, 2015). It affects the power of suppliers and the attractiveness of the market. When a substitute telecom company are present to give their services at a low price then the customer is attracted to the offers and moves to that substitute. It is one of the important powers that is forgotten by most of the companies in the telecom industry. This is the treat of substitute products and services where the substitute provides the same quality and functions as an alternative for the origin product and services of the telecom company. The customer's willingness to change and move the product are threat to substitute. Prices of substitute products and services affect the business of existing companies when prices of substitutes are lower than the existing company then it is a loss for the company because customer moves to alternatives with low prices at great satisfaction. Substitute offers the same services at a reasonable cost so it is a barrier to the success of the existing product.

For example- people may prefer to use multi-net instead of mobile internet to meet their needs.

COMPETITIVE RIVALRY

Competitive rivalry is the situation where the many competitors in the market offer undifferentiated products and services and they will reduce the attractiveness of a market. The main driver is the large number and capabilities of competitors in the market. In the telecommunication of UK, this is at a high level because many competitors are there. For the success of a telecom company, it should be aware of its competitor's marketing strategy, pricing and quality or update the changes made. For any business, its compulsory to innovate their product and differentiate the service to others. Telecom companies in the UK are too highly expensive for marketing and advertising to promote their services and products. It can help to resolve the rivalry problem in the market. They have maintained the level of advertising expenses. The telecommunication sector should make a powerful strategy and maintain a degree of transparency (Sutherland, 2014).

M3

There are various important methods and strategies which must be involved by Vodafone to make continuous improvement in a competitive edge and market position of business enterprise but some major strategies involve the application of positioning strategy by enterprise which provides support in identification and analysis of the actual position.  It is also essential for organisations to reduce their prices in the market which has provided them support in increasing profits. It is also important for organisations to target local middle-class customers for selling their products in different geographical segments.  Moreover, a product development strategy also needs to be adopted by management in which they will introduce new products and services to meet the current changing requirements of customers.

TASK 4

P4 Bowman's strategy model for analysing strategic direction and options for Vodafone

In order to analyse the strategic business position of an enterprise, Bowman's strategy clock is the most which is used by the organisation at the time of developing and designing marketing strategy in order to analyse its competitive position in comparison to the offering of rival brands. This model is also based on the competitive strategies of Porter's model which are further expanded by the author in Eight Strategic Options. These options need to be followed by the company when comparing its competitive edge against its competitors in market (Reich and Benbasat,  2013). In this context, Vodafone also needs to use the Bowman strategy clock as a framework for the creation of an edge against the competition.

• Low price/ added value: It is not analysed as effective competitive position within the strategy of Bowman. Company arrives in this position when its product does not have any differentiated value. Vodafone can also implement this by cost-appropriately selling volume and by continually targeting and attracting new consumers.
• Low price: Companies having this position in the market tend to produce large qualities and their products are valued in the market by customers. They also tend to sell their products at low prices due to which they will achieve less profit margin on the individual products. Moreover, the High volume of outputs will tend to generate higher profitability in market, moreover, this position in market regards for cheaper market leaders which usually concentrates on cost minimization. Vodafone has also adopted this strategy in which they selling their products and services at low prices to attract more customers as compared to competitors.
• Hybrid: The study provides a clear understanding that is option involves some elements of low prices but also possesses some important elements of differentiation. In this, Vodafone will aim to determine to consumers that there is effective and good added value through the combination of various reasonable prices and adaptable differentiation of products. It also analyses effective strategies for organisations which provide them with support in the expansion of business operations. Moreover, low prices and differentiated products will also help Vodafone to attract more customers.
• Differentiation: The main objective differentiation strategy is to provide the highest level of perceived value to the customers. Moreover, the branding of the company also plays an important role in the application of this strategy rather than the quality of the product. 'Moreover, high-quality of products with strong brand awareness in the market also aid the company in attracting more and increasing sales of products. Moreover, loyalty is effectively placed by the company in this to achieve relatively high prices and added value which a strategy of differentiation requires.  Vodafone has also adopted this strategy and introduced their mobile phone in the market to achieve a high competitive edge over competitors.  However, differentiation strategy contains high risk and it was only adopted by organisations when there is a chance of attaining high profitability.
• Focused differentiation: in this strategy, the company will need to position their service at the highest cost levels in order to attain or target those customers who are pursuing it due to the highest perceived value (Köseoglus and et.al., 2013). This strategy is mainly adoptable by some successful brands to attain premium pricing strategies by adopting the concept segmentation, targeting and positioning of business marketing.  Hence, Vodafone will use this strategy for their most effective and high-priced services.
• Increased cost and standard product: This strategy is highly effective for enterprises in setting prices of products without providing any benefit to customers in the market. This strategy is effective for this enterprise which has different products and services as compared to rivals. If the customers are mainly used to purchasing services at similar prices then they will achieve better service or objectives in a target market. In addition to this, the organisation also needs to squire some major productive tasks to get the best possible action plans and goals.
• High price and lowest value: An increase in the cost of business operations often tends to increase the price of products and services of an organisation in the market. It is also considered a monopoly pricing strategy which is suitable when there is no or fewer competitors in the market (Ghezzi, 2013).  It is also identified as the process of setting the prices. This strategy only when the company provide high-quality and differentiated products to customers which are not provided by competitors in the market. In the present scenario, the services and products which are sold by Vodafone are common and also provided by various competitors therefore, it can be said that their strong competition in the market.  Therefore, the company is not able to apply this strategy to increase their sales and profitability.
• Low market share: This will clearly provide adverse impacts on the company in a competitive market. Setting up the most common and effective areas. Cost for the goods and service it has been very productive and effective. Moreover, it also be a great and influential factor that supports to grow the business activities.

M4

Strategic management plan is identified as an important element that aids the management in fulfilling the overall business strategy and business plan. It will be properly designed and executed in order to achieve effective outcomes (Woodard and et.al., 2012). It also has a negative influence on the behaviour of consumers.

Vision: Finding provides clear understanding that  Vodafone has the vision of being market leader in the telecommunication sector and attaining high number of customers as compared to competitors.

Gather information: In this stage, information about current trends and developments will be gathered to identify changes in the requirements of customers (Webb, 2013).

Strategy formulation: Effective strategy will be followed to meet the requirements of customers and accomplishment of organisational objectives. In this context, a product development strategy will be adopted which implies to development of new product service for achievement of growth in the existing market.

Implementation At this, new products and services are introduced by organisations to attract customers at competitive prices.

Evaluation: Monitoring the performance and progress of business is an important aspect that enables organisations to achieve objectives.

CONCLUSION

In this report, it is analysed that the development of an effective business strategy involves analysis of various important aspects that influence of business operations. Analysis of macro environment factors provides a clear understanding that Vodafone is highly affected by the political and economic condition of the country. Strategic capabilities have been analysed as capabilities of the employees of the organisation which enable the enterprise towards formulation and deployment of strategies in pursuit if sustainable competitive advantage. The most effective business segment for Vodafone is identified as geographical segments where they will also find potential customers.  Low price and product development strategy will be effective for the organisation to sustain its position in a competitive market.

REFERENCES

• Adi, B., 2015. An Evaluation of the Nigerian Telecommunication Industry Competitiveness: Application of Porter’s Five Forces Model. World. 5(3).
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• Gershon, R.A., 2013. Media, telecommunications, and business strategy. Routledge.
• Webb, N., 2013. Vodafone puts mobility at the heart of its business strategy: Transformation improves the performance of employees and the organization as a whole. Human Resource Management International Digest, 21(1), pp.5-8.

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