Questions- This assessment will cover the following questions:
- Provide in-depth understanding on the key elements of the internal environment of Vodafone company and the interaction with the external environment.
- Evaluate how a market economy functions and the role of government within it.
Contemporary means belonging to same time period and it refers to present time. Therefore, contemporary business brings up the current circumstances and ideas which are establishing in present market. Nature of contemporary business environment is dynamic, competitive due to reducing trade barriers and increasing liberalization. Also, contemporary business environment is very challenging for the existing businesses as they have to put lot more efforts and work harder to keep up with the changing market condition. Various factors are present in external environment of business which has its impacts on the operations and internal situations of it. These factors holds huge importance in day to day business and for long term survival of company and its operations. For studying the impacts and other aspects of contemporary business environment Vodafone is chosen, which is a mobile phone company of UK. Vodafone is a telecommunication service provider, established in UK and worlds second largest mobile phone company(Boone and et. al., 2019). Vodafone was founded in 1991 by Ernest Harrison and Gerry Whent and headquartered in London, Newbury and Berkshire. In 2010 Vodafone launches it new mobile phones which are cheapest in the whole world and known as Vodafone 150. The company is listed on LSE (London Stock Exchange) and FTSE (Financial Times Stock Exchange). Vodafone servers to worldwide consumers having its operations in over 25 countries along with huge customer base and great market share in the industry. Due to its geographical diversification company also have very big employee base which is mixture of expertise and best talents in workforce, performing their duties on company's behalf.
External Environment and its Importance and Need for its Analysis for Vodafone
External environment is composition of those factors which exist outside the company but impacts organisation either directly or indirectly. This external environment can be bifurcated into two dimensions micro and macro environment (Lingeberzins, 2017). Micro factors are those which affects the business directly in both negative or positive form depending on the situations. On the other hand macro elements are some general factors which impacts organisation indirectly and they are either advantageous or harms operations of entity.
The micro influencing elements of Vodafone are first and foremost customers, than comes the suppliers from which company buys it's supplies to produce ultimate products and serve to customers. Then comes the financier, as businesses activities involve huge cost and capital for conducting operations are arranged by loan or other business relations. Finances are the most important resource for every company as growth is dependent on it, because no functions can work without funds (Namada, 2018). The next micro component which is important for business to flourish is the marketing intermediaries, also known as middlemen, they connect the entity and end users or customers. They help companies to reach to more people and spread its activities, making their products available for wider customer base. The last micro factor which impacts Vodafone is market perception, what people think about the organisation and its reputation in market.
Macro factors which are affecting Vodafone's business in positive or negative form are general factors which have its impacts on the whole industry. These elements are general for everyone and every entity which are dealing in same industry. Their effects are different from company to company, depending upon the business situations and methods they use to conduct their activities. Macro elements affects the whole economy along with the businesses who are operating in that particular economy, the only difference is the impacts they have on it.
Need for Auditing External and Internal Environment
Several factors are there which generates the need for Vodafone to audit its internal and external environment which are discussed below:
- 1. Understanding the market- Internal and external factors enables entities to understand the market in which company is doing business. Its necessary for Vodafone to know the market in which it is having its operations (È˜tefÄƒnescu, 2018). Due to regular changing market and its dynamic nature company keeps its knowledge updated.
- 2. Exploring opportunities and mitigating threats- After analysing and studying market now the need for company is to know all the opportunities they can explore and which are suitable for it. Also, its required for organisations to mitigate the effects of danger exist in external atmosphere. Vodafone is having its operation in several countries which automatically raise the requirement for company to audit its internal an external environment. It is indulged in many economy which opens many new doors for organisation along with the threats too.
- Assess feasibility of business- The next component which explains the needs and importance for firms to audit the internal and external environment is the practicality of operations. Vodafone has to check the feasibility of its operations in economies it is having them. For instance, if Vodafone plans to start its dealings in some rural area which is full of resources but people there do not know what is a mobile phone and how to even use it (Amankwah-Amoah, Osabutey and Egbetokun, 2018). This will works as an opportunity for Vodafone to serve in that segment, but it can also result in opposite manner. That's were the need for company to asses all the factors arise, by which company make its judgement that starting its operations in rural area is beneficial or not. If yes then, what are the related benefits or losses if any.
PESTEL Analysis of Vodafone
PESTEL analysis is a framework used by marketers for conducting analysis and monitoring the macro-environment of company. As discussed in earlier sections the need for knowing the external factors of organisations which impacts them, PESTEL analysis tool helps them to do so. PESTEL is an acronym for Political, Economical, Social, Technological, Environmental and Legal, these six components enables organisations to increase overall picture of its external market condition about the economy it is working in. This tool is utilised for Vodafone and explained below:
- Political- This dimension talks about the degree of intervenes system have on the economy(Yassin and Guindy, 2017). Political cause have their impacts on organisations, their style of working and running operations in the given economy. Recently, political instability and state peace impacted Vodafone directly. The conflicts in Europe have causing great impacts on the working of company and operations as a whole.
- Economical- The significance of economical factors is directly on the methods of organisation by which they are doing business and its profitability (Nikitina and LapiÅ†a, 2019). These factors are economic growth, interest rates, exchange rates, inflation, purchasing power of people and many other related factors. These elements will decide or influence the demand and supply of the economy. According to the ways people spend their money or earned income, what is their purchasing power and how they manages themselves and their lives. The global uncertainties in world economies has great impacts on the organisations like Vodafone (Rosenbach, 2018). The overall profits and productivity of entity is affected and the main reason behind it is BREXIT.
- Social- This element is also known as socio-cultural factors, which are divided demographically and on the basis of shared beliefs or attitudes of people. Some of the social factors which has impacts on the company and its business are age distribution, population growth in respective economy, career attitudes people have in mind. These components of social economy hold direct impacts on the businesses of different sectors. It is a very dynamic domain and Vodafone has to make its policies and according to the culture of economy in which it has its operations (Rudawska and Zhanna Belyaeva, 2018). Vodafone is a European entity still it made changes in its policies in accordance with the local social factors in which they operate.
- Technological- This refers to the new engineering coming in marketplace, as the fast changes are occurring in the technological landscape. Technological factors affects the way company promotes and projects its products in front of public. Technological elements have influence on the marketing, which can be distinct as new ways of producing, distributing goods and services along with fresh methods of communicating those to the target market. Vodafone's strength and goodwill is because of its innovative products and services it offers. They have very clear mission of always following contemporary business environment in technological and communication field. The goods Vodafone produce are always with updated technology, therefore, its an essential factors which is importance for entity to analysis and keep their knowledge updated about.
- Environmental- This dimensions just came into lime light, due to fast reduction in raw material availability and over exploitation of natural resources by organisations. The companies has to do business with ethical practices and by keeping in mind what they are taking from environment. Consumers demands and preferences are changing and they are in favour of environment friendly goods which are made by sustainable sources and by ethical means. Vodafone always aims to play a very important role in betterment of society and the world. By making it better place to live for present and future generations. Vodafone is very responsible socially, they perform its CSR (Corporate Social Responsibility), to pay back in small amount what they take from the world.
- Legal- These factors concentrate on health and safety, consumer rights, advertising standards, laws and product safety. These are the specific laws and regulation which are there in economy to keep the quality of products high and ensure its safety. If these laws are not followed by organisations, they can face huge penalties and charges from government (Smith, El-Anis and Farrands, 2017). That makes it necessary for company to be updated about the laws which are there in economy. Vodafone is a global brand which shows the importance for marketers to know all the legal laws and make policies accordingly. Vodafone has faced problems because of the legal laws as they have this blame on them that they do not pay their employees well. Therefore, legal factors have affected Vodafone in negative manner and they incurred lot of penalties due to this.
SWOT or TWO'S of Vodafone
SWOT analysis is a framework used to evaluate a technique to evaluate the organisations competitive position and to develop strategic planning. SWOT is an acronym of Strengths, Weaknesses, Opportunities and Threat which are the four factors by which company analyse its position in market. Two elements are internal the organisation and other two are external, by these components it becomes easy for entities to understand its strong points and to mitigate the effects of existing or emerging threats (Young and Pagliari, 2017). It is best suited for those organisations who deals in diverse products or services and have its operations in various locations and regions. Four elements of SWOT are explained below:
- 1. Strengths are those areas of an organisation in which they excel and what makes them separate from the other competitors and brands. Its in hand of company how they make full utilization of its strengths and gain more profits.
- 2. Weaknesses are the factors which stops the company from reaching to its goals and work as barriers. These are the sections in which businesses needs to improve for competing and surviving in marketplace.
- 3. Opportunities are the external factors which are favourable for the entity and opens new doors for the company to explore them and earn better profits. These elements also helps company is to attain better position in market and increase its market share.
- Threats refers to the factors which can potentially harm the entity and become a danger for it. They work as an harmful element and its important for entity to mitigate the effects of these threats.
Porter's Five Forces model
This is a model that identifies and analyse five competitive forces which are internal and external both and helps in shaping every company. It enables the organisation to acknowledge its strengths and weaknesses and helps in determining corporate strategies. Porter's five forces model can be used and applicable to all segments of the economy, for increasing knowledge about the competition within the industry. This model has five components which are elaborated in next section in context of Vodafone.
- Rivalry with existing Competitors- The first factor refers to the number of competitors present in market and their power over the company. The larger the number of competitors the lesser power organisation have over market and its customers. Vodafone have high power over its competitors due to its cost leadership strategy. Others face a really hard time in competing with Vodafone and reaching to its level of price strategy.
- Bargaining power of Buyers- Then comes the power of customers, here the ability of consumers over company is evaluated (Schaltegger and Burritt, 2017). This power is related to the prices of products and the ability of buyers to drive prices according to them. This element is affected by the concentration of customers and how significant each consumer is. The buyers hold high power in mobile phone industry and therefore, Vodafone hold really low power over its consumers.
- Bargaining power of Suppliers- The third factor is the power suppliers have over market and how easily they can drive up the costs of inputs. This factor depends upon the number of suppliers present in market and who holds potential power over prices of inputs (Sergi, 2019). Vodafone has moderate power over its suppliers, due its cost leadership strategy company can easily manage any hype in prices and earn profits easily.
- New Entrant- This factors evaluates the new competitors coming in market and their abilities along with the impacts they have on organisation. This factor is affected by the barriers and restriction exiting in the market for new businesses (Bogdan and Beata, 2018). If these barriers are moderate it becomes easy for everyone to enter the industry. This threat is high for Vodafone as the market is increasing effectively and aggressively and finances are available easily in market which increased this threat and implications of this threat for Vodafone.
- Availability of Substitutes- Another, element which can affect the company and potion in market is the number of substitutes present. These are those goods or services which can be used by customers to fulfil their needs in place of products of company. These substitutes have great impact on the business of the entity and its market share (Aksenov, 2017). For Vodafone its not a threat as it is focused on cost leadership strategy which makes its difficult its competitors to produce any comparable substitute in such low cost. And that increases the power of Vodafone over its competition and its position in market.
The above report is based on the contemporary business environment, which refers to the current market conditions, the challenges and aggressively increasing competition. A thorough study is conducted about the importance and need company's has to analyse and understand the external forces which impacts their business functions. These factors like increasing competition and introduction of new innovative products have great influence on businesses which enables them to explore new opportunities and make plans accordingly. Also, it assist organisations to be aware about respective threats in market and mitigate its effects to an extent. Company has used various tools to gain knowledge about its external and internal environment by which they can attain better operation practices and ultimately more profits. PESTLE analysis in context of the firm is done to study the macro environment along with knowing its benefits and shortcomings for entity. SWOT analysis is also used to know the capability and imperfection which are associated with the organisation along with learning about the new opportunities which exist in market and explore them for benefit of company. Another model which is useful for organisation to know its potentials internally and externally is Porter's Five Forces model. This tool studies the impacts new emerging business and existing competitors have on company. It also helps the brand to know its market position by knowing its power over prices of goods or services their ability to shift to other brands and their loyalty towards the entity.
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