Business strategy report of Vodafone Group PLC - Dissertation Example

? Business strategy report of Vodafone Group PLC Contents Contents 2 Strategy Analysis 4 Industry Analysis 4 Profile of the Company 4 d Organizational Purpose 5 External and Internal Analysis 6 Strategy Development 8 Existing Business Strategies 8 Strategy Toolbox 10 Strategic Business Units 11 Strategies for the Next Five Years 12 Recommend Strategy Toolbox 13 Strategic Options in the SBU Level 14 Strategic Direction Matrix 15 BCG Matrix 15 Primary Strategies 16 Difference of the Strategies 17 Strategy Implementation 17 Outline Plan 17 Actions Needed for Strategy Implementation 17 Reference List 19 Strategy Analysis In the contemporary world, the multinational business forms face cut throat competition with each other either for generating revenues or economic surplus. Strategic management refers to a bunch of policies and decisions that can be undertaken by a business firm for the sake of its development in the market. On the basis of strategic management principles, the mission as well as vision of a business firm is formulated. On the further extent, various types of business strategies are formulated, evaluated and implemented on the basis of the principles of strategic management. This dissertation will concentrate on the strategic management of Vodafone Group PLC. The framework of the paper would not only discuss the various types of business strategies incorporated by the company, but would also focus on the new strategies that can be implemented by the firm in the next five years. The learnt from the paper would help the researcher to analyze the business strategies of the company in details. Industry Analysis The industry in which Vodafone PLC is situated is the telecommunications industry. This industry deals with providing long distance communication services through technological means. Till 1982, the telecommunication sector in United Kingdom was in the form of a public owned company named Post Office Telecommunication. The market structure of the broadcasting sector was duopoly in its nature. The two companies that had formed this duopoly were BBC and the Independent Broadcasting Authority. At this point of time, the mobile or internet services did not exist in the market. With time and development of science and technology, the telecommunication sector in U.K. had expanded. At present, this industry is highly competitive in nature. Its retail sector is much bigger than that of many other industrial sectors. Companies in this sector in U.K. not only earns substantial amount of profit in terms of billion dollars, but also invest a considerable part of their revenue in research and development for new innovations (Papadopoulos, 2011). Profile of the Company Vodafone Group plc, also recognized as Vodafone, is a UK based global company which is involved in the commerce of providing telecommunication services. The corporation was founded in 1991 in Newbury, Berkshire, United Kingdom. However, the concern shifted its headquarters to London, United Kingdom. The ancestor of Vodafone was Racal Telecom (1983-1991). In stipulations of the total financial proceeds spawned as well as the strength of subscribers, the organization is considered as the second largest telecommunication company in the globe, following China Mobile. The company is present in almost 30 economies of the world and carries its business operations in 40 other nations with the help of its business partners. At present, the company is headed by Vittorio Colao (CEO) and Gerard Kleisterlee (Chairman) (Vodafone, 2012a). It provides employment opportunities to around 87,000 citizens across the globe and also, generates income opportunities to numerous business acquaintances of the company. Some of the commodities of the company include mobile telephony, digital television, fixed line and internet services. As of 2012, the net revenue of the organization was ?46.417 billion and had operating earnings of ?11.187 billion (The World Bank, 2012). Although, the company has a hefty position in the marketplace, it still has to deal with numerous issues. These issues materialize from both internal and external surroundings of the association. In order to realize the challenges of a company, it is indispensable to have an idea of the executive structure and supervision style of a corporation. Stated Organizational Purpose Vodafone Plc Group is primarily known to provide fixed landline as well as mobile telecommunication services. The company also engages in providing internet services and manufacturing digital televisions in the recent years. The primary vision of the company is to provide services and products with excellent quality to all its worldwide consumers. By doing the same, the company aims to improve the living standards of people. It attempts to enhance the lifestyle of its 68% consumers living in the emerging economies of the world. As a part of its business mission, the company desires to achieve sustainable development and offer a safe and secure manner of smart living to its 403 million consumers all over the world (Agar, 2013). External and Internal Analysis External Analysis of Vodafone PLC Group This analysis would help to analyze the external factors that affect the functioning of Vodafone in the market of U.K. Political: The public regulating authorities impose a lot of restrictions on the mobile phone companies of U.K. in terms licensing as well as access to spectrum. There are also political pressures on these companies due to the health issues associated with the usage of mobile phones. Thus, a strong control of the government of U.K. which is exercised on the telecommunication industry affects the business of Vodafone. Economical: U.K is a rich and developed nation in the world. The gross domestic product of the country is US$2.43 trillion as recorded in 2012 and the per capita income level of the country is US$ 39,038 (2012). Thus, the disposable income thresholds of the consumers in U.K are high and their demand for comfort or luxuries is relatively inelastic in nature. Thus, launch of any new product by Vodafone can be assumed to be popular among the rich affluent consumers in U.K (Vodafone, 2012b). Social: U.K. is a global business hub which is why individuals of diverse caste, creed and religion visit the nation throughout the year. Therefore, while marketing products and services in U.K., companies need to suffice the tastes and preferences of consumers of different social, cultural and religious backgrounds. Moreover, the high fashion oriented culture of the country considers mobile usage as a necessity. Technological: Technology is perhaps the most imperative constraint for a telecom company. Nevertheless in UK, Vodafone does not face any issues regarding technology. Due to an urbanized infrastructure, the corporation has been able to develop physically powerful networks and provide clientele with quality services. With the development of technology, Vodafone has been able to offer quicker data access and additional services, thereby increasing their revenue. Environmental: The atmosphere is affected by the growing telecommunication industry. The weather pattern and climatic conditions plays a major role in the network strength of telecommunication business firms. Legal factor: The players from the telecom industry have to abide by certain laws for carrying out their operations. In UK, the telecom operators has to follow The Sales of Goods Act 1974, which states that products which are sold must serve the purpose for which they are intended. In UK, there is a law which prohibits the usage of mobile phones while driving. Hence, the legal factors are well framed by considering the health and safety of users. In addition, the legal factors also have negligible impact on the companies. Internal Analysis of Vodafone PLC Group The researcher would use the SWOT analysis for the purpose of internal analysis of the business of the company. Strengths It is the biggest company in the world in terms of revenue and profit generation. Provides quality services to a large household as well as corporate customer base. The company has a robust brand image and reputation. Since the company is an established business firm, it enjoys a large learning curve. Weaknesses The company has to deal with infinite number of legal formalities when it operates in different nations. This disturbs the smooth operation of the firm. As the company conducts business in different nations, its business is often subjected to market problems like, currency risks. Opportunities The company can enter in the market of base phones and expand its revenue. It can expand its business in the emerging nations of the world. Its huge financial reserves can be used for the purpose of productive brand stretching programs. Threats The biggest threat of the company is the extensive market competition in the telecommunication industry. The corruption and political problems in the emerging nations often threatens the possibility of business expansion for the company (Porter, 1998). Strategy Development It would be easier to frame efficient business strategies for the company if the existing strategies of business that are followed are first analyzed. Existing Business Strategies There are various types of business strategies that Vodafone has employed in its system. They are: The company believes that for the long-term growth, the most important criteria that must be maintained is the profitability of the firm. Thus, profit generation is one of the primary business strategies adopted by the company. The company realizes that an increase in the level of gross productivity would help it to grow in future. Thus, the company is never satisfied with a singular case of success. It always tries to improve its overall level of productivity. For instance, the “One Vodafone” program has attempted to acquire a target of ?2.5 billion as operating income in order to make further improvements in the organization. The e-auction has helped Vodafone Turkey to introduce a 42% of price reduction that can be used in development of new networks. Another strategy of the firm is to develop the skills and capabilities of its labourers. The company has introduced many labour development programs which will help it to enhance its annual productivity and profitability. Surveys show that about 71% of the employees of the company realize that their skills have developed primarily through the training sessions organized by the company. The company also tries to maintain good employee relations within the organizational framework. This is an efficient business development strategy. With the help of a well-coordinated labour force, the company can maximize its economic surplus in the competitive marketplaces. The company never discriminates among its employees on the grounds of caste, creed, gender or religion (Hitt, Ireland and Hoskisson, 2009). Improving the state of business technology is also another strategy adopted by the company for a better market growth. It has realized that through efficient and innovative technological changes in the products and services of the company, it can act as a natural monopolist in the market. The company also tries to undertake a large number of corporate social responsibility schemes. It has realized that the modern consumers are highly conscious about protecting and preserving the ecological balance. Thus, the company sponsors various eco-development projects. It also publishes its activities towards environment improvement in its official website under the context of its sustainability report (Cakir and De Pablos, 2011). Differentiation Strategy is the best generic strategy adopted by the company for sufficing its short and long term objectives. It can be stated that the company tries to differentiate its products and services from the ones produced by its rivals in the industry. This is done by the company by introducing several value added services in its business operations. As a part of its grand strategies, the company has adopted methods like, horizontal integration, strategic alliances and joint ventures, in the course of its business operations. These strategies have been adopted by the firm for marketing its products in different markets that are located in different geographical locations. These grand strategies of the firm help to establish a broad base of customers which is largely different in terms of demographic factors. For instance, 70% of the stake of Ghana Telecom is acquired by Vodafone. The company has also merged its Australian division with Hutchison 3G Australia with a 50:50 percentage of stake ownership. The company has also entered in various types of strategic alliances with other companies like, HP, Dell and Acer (Johnson and Scholes, 1993). Under the regime of its turnaround business program, the company has increased its debt ratio as it has expanded its business in further geographical locations. By analyzing its financial accounts, it can be stated that the company has decided to lower its intensions to earn high economic surpluses in the short term. Rather, the company has increased its gross investment levels to tap the increasing demand in the budding economies of the world. Strategy Toolbox The Strategy toolbox would give the summarized format that would help to precisely explain the various business strategies undertaken by the company. Strategy Purpose Augment business profitability To mobilize more finances that can be used for the purpose for further improvement. Make continuous improvements in the level of business productivity To achieve higher profits in future and create a better brand value in the market. Employee skill development This is important to augment the productivity and profitability of the firm. It involves skill development of the employees. Enhancing the employee relations For appropriate skill development of the employees, it is important to maintain good employee relations. Thus, the company discourages any type of discrimination in the workplaces. Make technological improvement By improving the state of technology, the firm would be able to enhance its overall business productivity. Upgrading the corporate socially responsible schemes This would help to augment the brand value and goodwill of the company in the market. Differentiation strategy (generic in nature) Would make the firm a natural monopolist in the market. Increasing the involvement in various business joint ventures, strategic alliances and acquisitions (grand strategy in nature) To expand the scale and scope of business operations. Using the turnaround strategy in business To expand in the emerging economies of the world. Strategic Business Units The Strategic Business Unit (SBU) is basically a type of profit centre for a company that explains its various market segments and product offerings. It may be a smaller business unit that operates in the actual larger business corporation or it can also be a separate business branch of the concerned company. It can be stated that Vodafone PLC Group has three main SBU’s. They are: Mobile Services Telecom and Broadband Services Enterprise Services DTH service The SBU of mobile services for the company engages in providing GSM services to the clients. The broadband services related to telecom are provided by the telecom and broadband service department. The enterprise SBU of the company is further divided into two subdivisions. These are: Carriers, the branch that deals with providing services for the long distances. The other branch deals with providing services to the other corporate clients. Although these services of the company are operated by SBUs, yet the services or the products are actually supplied in the market under the brand name of Vodafone (Oxford Business Group, 2008). Strategies for the Next Five Years The main strategies that can be incorporated by the firm are: Business Strategies The company should try to market its products through the strategy of market segmentation. It should focus on the demographic factors of market segmentation. The company should try to organize new product development programs as a stronger attraction for the young generations. This is because young individuals have a greater interest in the technological gadgets and services in general (Mallin, 2012). The company should try to expand its business operations in the emerging economies of the world to a greater extent. Countries like, Brazil, India, China and Russia, resemble the booming economies of the world. If the company can expand its business in these economies, then it would be able to tap a broader customer base. It should reduce its business manufacturing defects by using technological tools like, Lean and 6 Sigma (Janczak, 2005). Corporate Strategies It should base its business internationalization decisions on the economic theories like, transaction cost economics. It should expand its business in only those nations where the cost of its asset specificity is low. The company should ensure that its technological improvements are eco-friendly in nature by using renewable sources of energy. In the recent years, the disposable income levels of the individuals in the developed countries are declining due to the recessionary traces in the market. The company should also try to provide services and products at lower selling prices to make them affordable to the consumers in a crisis. The company should introduce new brand stretching programs to improve its market value (McCubbrey, 2010). Operational Strategies It should introduce several incentives and compensation programs for the employees. An efficient human resource management team can help the company to motivate its workers. The company should introduce new programs and events to integrate its various business branches in different economies to facilitate greater resource mobility in future (Davis, 2008). Recommend Strategy Toolbox Business Strategy Purpose Applying technical tools to reduce business defects To reduce the cost of production Expanding business in emerging economies To increase revenue Using demographic factors for implementing new marketing programs To introduce proper positioning and targeting strategies Corporate Strategy Purpose Using green technologies Augmenting brand value Making decisions for internationalization on the basis of economic theories Allocating resources efficiently Launch low priced products and services Parking more loyal consumers Introduce new brand stretching programs Improving brand value Operational Strategy Purpose Adopting ways to motivate the workers Improving workforce productivity Maximizing integrity of its different working branches Facilitating greater labour mobility Strategic Options in the SBU Level The strategic options in the SBU level would actually recommend few strategies for the company to enhance the revenue of each of its SBU. Mobile Services 1. The company should try to use more innovative technologies to incorporate better features in its mobile phones. 2. The mobile phones should have wide-ranging prices so that it is affordable for customers of various age groups. Telecom and Broadband Services. 1. The company should allocate higher finances to develop its 3G services. 2. It should try to improve the infrastructure of its network connections in all of its business branches. Enterprise Services. 1. The company should introduce attractive service and product packages for the corporate clients. 2. It should appoint an efficient sales team who would only cater to the complaints of the corporate clients of the company. DTH service. 1. The company should try to improve its DTH services and prevent it from being easily affected by natural calamities. 2. It should also try to expand its DTH services in more countries like, India. Strategic Direction Matrix This matrix would help to analyze the new and existing markets and products of Vodafone PLC Group. Existing Products and Services New Products and Services Existing Markets Mobile services, internet services, telecom and enterprise services DTH services, M-pesa mobile payment products and mobile phones. New Markets Mobile services, internet services, telecom and enterprise services M-pesa mobile payment products and mobile phones. BCG Matrix This would help to analyze the position and popularity of different SBU of the company. BCG Matrix Stars Mobile Services Question Marks Enterprise Services Cash Cow Telecom and Broadband Services Dogs DTH Services Primary Strategies Considering the above BCG matrix for the four main SBU units of Vodafone, the primary, corporate and operational strategies of the firm are: After the global financial crisis, supplies of money in the economies available for investments had become lower. Thus, as a part of its corporate strategy, the company should pioneer lucrative and credible business projects to grab financial support from the lending institutions in different markets. Without proper finances, the company would not be able to execute any of its desired tasks. During the course of its operation, the company should allocate the factor services in such a way that its productivity increases at the same cost (David, 1986). Difference of the Strategies As an earlier strategy, the company intends to use new technology, but according to the researcher, the company needs to introduce new environment friendly technologies. The company tries to enhance the skills and corporate relations of its employees but according to the researcher, the company must try to initiate methods to motivate its employees at the first instance. Strategy Implementation Outline Plan Allocating Fund for Research and Development Appointing a team of Efficient Business Analysts Adopting the technique of KPI Appointing a team of Market Researchers Forecasting the future business risks and opportunities Actions Needed for Strategy Implementation The various types of actions which are needed by the firm for the purpose of the implementation program are: Allocate about 7% of the company’s total revenue for the purpose of research and development. Appoint a team of statistical analysts who would technically analyze the productive and unproductive factors of the business of the company. The company can introduce the tool of Key Performance Indicator (KPI) to evaluate the success of the implementation program. Appoint a team of good market researchers who would provide knowledge to the company about the changing tastes and preferences of the consumers in its different marketplaces. The company can introduce various types of technical measures in order to forecast the upcoming business risks and opportunities (Alkhafaji, 2003). By following the above actions the company would be able to implement the desired strategies with the help of which it can expand its business in future. Reference List Agar, J., 2013. Constant Touch: A Global History of the Mobile Phone. London: Icon Books. Alkhafaji, A. F., 2003. Strategic Management: Formulation, Implementation, and Control in a Dynamic Environment. 21st ed. London: Routledge. Cakir, A., and De Pablos, P. O., 2011. Social Development and High Technology Industries: Strategies and Applications. Pennsylvania: Idea Group Inc (IGI). David, F. R., 1986. Fundamentals of Strategic Management. Columbus: Merrill Pub. Co. Davis, J. R., 2008. Does Environmental Scanning by Systems Integration Firms Improve Their Business Development Performance? Michigan: ProQuest. Hitt, M. A., Ireland, R. D., and Hoskisson, R. E., 2009. Strategic Management: Competitiveness and Globalization : Cases. 8th ed. Connecticut: Cengage Learning, Janczak, S., 2005. The Strategic Decision-Making Process in Organizations. Problems and Perspectives in Management, 3 (2005), pp. 58-70. Johnson, G., and Scholes, K., 1993. Exploring Corporate Strategy. 3rd ed. New Jersey: Prentice-Hall. Mallin, C., 2012. Corporate Governance. Oxford: Oxford University Press. McCubbrey, D. J., 2010. Using Information Technology Competitively. [online] Available at: [Accessed 14 November 2013]. Oxford Business Group, 2008. The Report: Romania 2008. London: Oxford Business Group. Papadopoulos, P., 2011. Investment Report - Fundamental Analysis/ Ratio Analysis: Comparative Approach between two FTSE 100 corporations Vodafone plc and British Telecom Group. Munich: GRIN Verlag. Porter, M. E., 1998. Competitive Advantage: Creating and Sustaining Superior Performance. New York: Simon and Schuster. The World Bank, 2012. GDP per capita (current US$). [online] Available at: [Accessed 14 November 2013]. Vodafone, 2012a. Our Company History: Vodafone through the Years. [online] Available at: [Accessed 14 November 2013]. Vodafone, 2012b. Welcome to the Responsibility Store: Old phones help WWF. [online] Available at: [Accessed 14 November 2013]. Read More