This report includes the business strategy of Vodafone company which includes all the external and internal factors that affects the strategic decision capability of the organization. Along with it the company has various strategies for growth such as product development and market development. It depicts the significance of strategic capability in a company. One can know about the Vrio analysis of Vodafone along with the acknowledgement of organisation's strength and weaknesses. The analysis of telecommunication sector has also been done through Porter's five forces model. For understanding and interpreting strategic direction Bowman's strategy
1. PESTLE analysis of Vodafone
Vodafone is the largest telecommunication network in world. It has expanded its business in Europe. There are certain factors which should be considered for evaluating its success and all are discussed as below:
Political factors influence the path of success of this company which includes developing infrastructures and getting operated in a state. Vodafone depends upon political scenario of the country where it has decided to operate (Flander, 2014). Also, aspects like peace in the state and instability in political area creates a direct impact on the working of a company because state which has unstable political conditions are most prone to wars and establishing good infrastructure for the betterment of network becomes very tiresome.
It is considered as a crucial dimension for Vodafone. Fast development of a state provides higher chances for getting better economic conditions which facilitate the chances of company for expansion and opening up of new units in developed areas. It results in increasing GDP of the country which means that income of its people become more and can be able to adapt new technologies in the field of communication. These aspects will lead to increase overall profit of the organisation due to which it would be able to expand globally. Certainties in global scenarios lead to change its various strategies every time.
This impacts can be arouse through beliefs and culture of local people where company is operating. This factor is very dynamic and to achieve success, organisation have to make their strategies flexible in accordance with culture of that particular area. Vodafone is known to be a pure European company which has also changed its preferences and policies with respect to social factors.
They are known for coming up with new innovation. It always follow trends in the areas of technologies and communication (Abraham, 2012). As in the telecommunication sector there are many rivals, Vodafone has to come up with new technologies and ideas because they are the essential factors will lead to sustain in market. All the products which they are producing are related to technology only. Therefore, launching of new devices along with unique features has made them to focus on the latest trends so that they can deliver something which is new to the market.
Every global company faces many rivals. So, Vodafone should be aware of various legal issues such as copying and piracy. Many a times, state has blamed them for the infrastructure due to which company has paid penalties. Their employees have accused them that they not pay well, so the result is shifting of these employees in rival companies which has increased risk for the leakage of their innovative ideas. Vodafone should try to avoid legal issues as it affects their positive image among customers.
As the globalisation has risen, in the present time people are ethically oriented. . They always want that company they chose should be socially responsible and play a vital role for making society better in every aspect.
2. Ansoff’s growth vector matrix
It is also known as Product/Market grid or matrix. It provides four options for growth by matching up with new and existing products in the market that is plotted on a matrix. It identifies and provide acknowledgement regarding risk which a particular strategy of growth may possess when one moves from one section of the matrix to other one. These approaches provide four types of growth strategies which are market penetration, market development, product development and diversification.
Business development direction can be better described as they are using six various directions to develop their business.
They have focused on their current market which has led them to increase their quality and range of services they are providing and increasing their market share against those competitors who are not developing so fast as compared to them. Their are various services which requires adoption of new technologies such as LTE networks, 4G services to provide a competitive edge to the company to sustain in the market and compete with rivals. (Ferrell and Hartline, 2010).
. Market penetration is a selling of product and services in the market successfully. They mainly use horizontal integration strategies for entering in market which has helped them in erasing their competitors in various markets who have their main operations in mobile communication. They have also merged with Mannesmann who brought fixed land line networks. They require some new market penetration strategies in order to increase their shares from the present competitors who are already well established.
These steps has not only made Vodafone a leading company in Europe, but also internationally. Company is doubling its size and is getting extreme portion of experience from themselves as well as from Mannesmann. After having first international experience, they are growing bigger and following path which is quick and active in development which other companies have to adopt as they are lacking that experience. Also, company has to respond to various changes in the market for which new strategies have to be developed. Vodafone need to develop market for increasing their customer base and also growing globally in the market of telecommunication. They should enter the markets of other continents and should form various strategies to compete with their locally established competitors by forming some mergers with them.
Diversification is to expand their business by a new product or existing product potential in the market . As now many telecommunication companies are providing routers and broadband, Vodafone should come up with new ideas. This organisation has also decided for consolidating their own IT activities and outsourcing big international IT companies which would not only decrease the cost but also increase their quality and consistency. They need to diversify their product line and should make their portfolio much wider by entering into different fields such as banking, aviations, films, food , entertainment, health care etc.
TASK 21. Strategic capability
As business includes competing with other rivals for customers, market shares and revenue, they apply certain tactics which are made after deliberating strategies. Business leadership includes the process of shaping all strategies and putting them in action. Every business has to make different strategies for gaining advantages. Better strategy depends upon the strategic capability. It is known as the ability of a company who can successfully imply competitive strategies which enable it for a better survival and increase in the value over particular phase of time. It has a focus on the aspects such as their assets, resources and position in the market and presenting how well it can employ various strategies in the future.
To remain financially viable and grow endlessly in the market along with the presence of competitors, business strategic capability is considered as a major components. There are numerous groups which consist of interested parties that attempts to measure and track all strategic capabilities. These interested groups includes investors , who are seeking an opportunity for putting their money into businesses for getting a chance to grow and succeed in future. Employees has also an relevance with the strategic capabilities as it reflects the stability of a business. Various business leaders keeps a check on strategic capability as not only to focus on their company but also on the rivals to understand the market completely in which they want to enter or operating already.
There are many elements which contribute to business strategic capability. There are assets like cash, property and patents which all contributes for formulating and employing various strategies that provides many benefits to business. Other elements of it such as human resources and structure of organisation , skills , they all contribute to strategic capabilities and influences every tactics implied after making different strategies. It includes various phases such as strategic analysis which helps to understand company's strategies with respect to the change in environment. It can further include internal and external factors that influences their strategies. Secondly it include strategic choice which includes the selection of best strategy for the goal from the available options and the final element which is implementing those strategy into an action(Henriques and Richardson, 2013).It includes carefully planning and properly deploying the resources of company and effectively handling those possible changes with respect to the organisational structure(Hyde,2014).
It is known as business analysis framework. VRIO is considered as an internal analysis but is used as a framework for the evaluation of all resources and capabilities of a company. It has four components which includes Value,Rarity, Imitability and Organisation.
There are certain questions of every components which one has to answer which are whether the firm is able to grab the opportunities or can neutralize the threat which is external along with the available resources. The question of second aspect includes is the control of all resources are in the few hands or not. Question regarding imitability includes whether it can be easily imitated or not there will be significantly disadvantages related to cost when other firms try to copy and develop the same idea alike them and lastly question which is related to organisation whether it is ready for exploiting the resource or capabilities or not.
Question of value defines whether available resources or capabilities can work for exploiting the opportunity to eliminate or compete with the threats available in the market. It these two factors are not fulfilled by the company then it is proven to be the strength of a company. It is does not work in vision to exploit available opportunities then it is considered as a weakness.
Question of Rarity defines the having a quality of rareness in the company can lead it for competitive advantage. It is a unique resource which is considered to be the breaking point of every company. These valuable resources are not present in any other competitor.
Question of imitability questions such factors such as whether company is able to face the disadvantages related to cost when other competitors imitate or copies or obtain that particular resources available only to them(Jones and Ratnatunga, 2012).
Features of Vodafone
Diversified Revenue Base
Temporary competitive advantage
Leading Market Position
Sustained competitive advantage
From the above analysis it has been determined that Vodafone has a temporary competitive advantage and this advantage can be lost if competitors comes up with more advanced products which are non imitating and the advantage in the market would be gained by other rivals in the telecommunication market.
3.Strength and Weakness of Vodafone
- Strong research and development has enabled Vodafone fro gaining an competitive advantage as they have become the market leaders providing new technology which creates low differentiation between competitors.
- Strong corporate culture has also allowed Vodafone to become successful in the telecommunication market.
- Financially strong base is giving Vodafone an ability for reinvesting in low power market in Europe due to extensive competition.
- It is regarded as the most popular provider of cellular service around the world.
- It has a huge employee strength which is about 1000,000+ globally.
- Company has huge diversified product such as landlines, mobile telephony , digital services etc.
- There is a strong brand visibility of Vodafone and effective brand recall.
- Promotional activities are very effective such as advertising with the concept of ZooZoo has made them very popular among audiences and publicity through huge boarding around the highway grabs the eyes of the people.
- They have also tied up with many international sports such as Formula one race and other sports events which are very popular.
- It is widespread globally as it has a presence in about more than 150 countries and a customer strength of 470 million which they used to serve.
- It is also provide some other services such as payment options, health services, foundation etc.
- Websites are highly efficient designed which ensures and facilitate easy online payments, recharges and service activations.
- Apps of Vodafone are very popular among youth as it provides movies, music etc. which can be accessed very easily.
- It is a global brand but it comes constantly under the consideration from various global authorities.
- They have to fight for every market share with rivals mainly because of wars based on prices.
- Market is very saturated which makes it hard for them to compete with competitors.
- Product life cycle of their product has a short time span which provides only temporary advantages(Kiptoo and Mwirigi, 2014).
- Vodafone does not create much influence in the market where it operates as every other competitor is providing similar kind of services.
- As they have the subcontracts with the manufacturers of their handsets and they only provide their name on the handset which posses a potential risk because if any thing goes wrong in mobile handset , their goodwill would be damaged among the customers.
- There are also excessive phone radiation complaints have been filed which are very hazardous for health which can also lead to cancer.
- Not being able to completely exploit the market consisting of mobile wallet market.
- There are often complaints for the negligence of channel's sales manager as he visits the retail stores minimally.
- It is most prone to become a follower in the market instead of becoming a leader or to follow a lead in the market.
- I t has a lack of clarity in vision which is resulting in difficulty to identify current market trends
a. Bargaining power of buyers
Buyers in telecommunication market has lots of demand. They wants the best offer which can get by paying less. This creates a pressure on the profitability of the company on a long run. The bargaining power of customers is very high as they seek for increase in discounts and related offers.
Vodafone can tackle these situations by implementing following steps
- By building a customer base which is very large. This can be helpful in two ways. It would help to reduce the bargaining power of customers and company would get an opportunity to streamline the sales and process of production.
- By introducing new products very rapidly as customers seek more offers on established products so they should come up with new products in the market.
- New product will lead to decrease the defection in the existing products(Njeru, Stephen and Wambui, 2014).
b. Bargaining power of suppliers
As all the companies of wireless communication industry gets their raw material from various suppliers. Suppliers for earning profit can have dominant position which can result in decreasing their margins. Suppliers which are powerfully established negotiates to extract possibly higher prices from the company. The impact is created on the overall profitability of Vodafone.
Following steps are implemented by them to tackle suppliers
- They can build efficient supply chain consisting multiple suppliers.
- One can do experiments with designs of product by using different materials.
- Developing suppliers which are dedicating whose business is dependent on the company.
c. Threats of new entrants
It is the most effective threat a rivals comes up with new innovative ideas and introduces new ways for dong different things and also applies lower pricing strategy which puts a lot of pressure on Vodafone to reduce the cost and to provide new value propositions. It has to manage all these kinds of challenges to compete with them and sustain in markets.
It can apply following strategies to compete with competitors
- Introducing innovative products which would help to bring new customers and give reasons to existing one to why to keep continuing with them.
- Building economies of scale to lower down the fixed cost per unit
- Spending more on research and development and building up of capacities.
d. Threats of substitutes
When a new product in the market meets the similar kind of needs in another way it leads to suffer the industrial profitability. For example dropbox and google drives are known as substitute of each other to store hardware drives. The threat of introduction of substitute is very high as it provides a value proposition which is completely unique and different from the present offerings ion the particular industry.
Following step should be taken to tackle this situation
Be service oriented along with being product oriented.
Understand the core needs of every targeted customers rather than keeping focus on what customer is buying.
Increase the cost of switching to the customers.
e. Rivalry within the market
The competition in the telecommunication industry s very intense as it lead to down the prices which results in decreasing the overall profitability of the particular industry. It operates in a industry market which is very competitive..
Here are some steps that can help to overcome such situations
- They should build a sustainable kind of differentiation
- A scale should be develop to measure the competitive areas.
- Try to collaborate with other competitors which would result in the increase of the size rather than just competing for small segments of marketing(Parnell, 2010).
Bowman’s strategy clock model
It is considered to be a model which Vodafone uses to design its marketing strategies for analysing its competitive positions in comparison with other competitors. It is a representation which shows the relation between customer value and price.
Following are the eight strategic positions of Bowman's Strategy Clock
Position 1. Low price/ Low added value
This is the segment under which company does not want to compete. this is considered as the bargain basement and many company does not wants to opt this option. This position is chosen when the product lacks differentiated values. One can imply this by selling volumes which are cost effective and also by attracting new and potential customers. These are adopted by those companies who are about to liquidate or planning for retrenchment.
Position 2. Low Price
Company choose this position when they are potentially low cost leaders. When the firm will operate in this category it will lead to generate less profit margin and there will be a need to sell high volumes of services and products. For this one needs a good strategy so that they can sell the high volumes of their offerings at a good price thus maintaining a good amount of profit.This strategy is adopted by those firms who are weak competitors, this strategy is used by local network operator of the country who have less customers.
Position 3. Hybrid
Hybrid position uses moderate pricing as well as differentiation. These are the companies which provides product or services to the customers at a lower price but the offerings are of high perceived value as compared to the low cost rivals. In this the company mainly builds their reputation and offers a fair price(Rumelt, 2010). This strategy is implemented by Vodafone who has a more concern on the aspects such as brand building as well as increasing the customer base and also earning a great profit.
Position 4. Differentiation
In this kind of position company builds that type of product or services which has unique features and that are valued by customers. Company that provides differentiated products always gets competitive edge in the market. Here branding plays a major role. This strategy is also used by this firm to create a different image in the minds of the customers so that they can effectively differentiate their services from other competitors.
Position 5. Focused Differentiation
In this position the company sells products which has highly perceived value and has high prices. This kind of strategy is adopted by those companies whose targeted customers prefer to buy product or services which has high perceived value where it is not necessary that the product also have any real value. This strategy mostly followed by the companies ho are in apparels like Gucci or Armani who have very high prices as well as the loyalty of the customers.
Position 6. Increased Price and Standard Product
It is that kind of a strategy in which company puts a higher price on the product or services and does not increase any value of the product. It is a risky position if customers accepts the pricing then company earns a great profit whereas if not then they face a fall in their market share which can be corrected by adjusting the price of the product. This strategy is implemented by those whose customer base becomes very high but not implemented by many.
Position 7. High price/Low Value
This strategy is implemented where there is no availability of competition and choices to customer to buy that product. As being a monopolist company doesn't gets concern on the value of the product.
Position 8. Low Value/ Standard prices
This is the worst strategy which can make the company to loose the market share as they would not provide quality products to the customers.
It has been concluded that there many external factors such as political, social, economical, technological, legal and environmental aspects influence the functioning of Vodafone. Strategically capability of any company includes the strategic analysis, strategic choice and its implementation which is a set of process in which strategies are analysed and among the options choose an appropriate one and imply the strategy in action. There are certain forces such as bargaining power of buyers and supply, threats of substitute and new entrant along with the competition with rivals.
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