International business strategy report Vodafone - Essay Example

? International business strategy (Vodafone) Table of Content Introduction 3 Background of the company 3 Identification of strategic issues through analysis 3 Generating Future Strategic Options 6 Strategy Evaluation and Selection 7 Future Strategic Recommendations 8 Reference 9 Appendix 10 Introduction This is a business report about international business strategy of Vodafone. This report or case solution has been made by in depth analysis of a case study based on strategic business issues of Vodafone based on the information from company’s performance report on 31st March, 2009. The report contains five critical stages of strategic analysis. The past and present strategies of the company have been analysed to find out the current strategic issues the company has. Then suitable future strategic options are generated and evaluated to select the most appropriate strategies for the company. Apart from the selected strategies some effective recommendations have been made regarding future strategy adoption and implementation. Background of the company Vodafone is a British multinational telecommunication company headquartered in London. The company was formed 1984 named as Recal telecommunication Company which was a subsidiary of Rach Electronics Plc. In 1991 the company was fully demerged from Recal and named as Vodafone Group. According company’s disclosed data in 2009; it has a direct market presence in 52 countries with over 302 million of mobile customers. It is the world’s largest telecommunication company in terms of revenue and second largest in terms of customers behind China Mobile. Identification of strategic issues through analysis To analyse the current strategies that the company has been following, there need to analyse the different area of its business like external environment, internal resources and internality operations of the company. There are some important tools which need to be analysed with respect to the company’s business for analysis of market base values of the company’s external business environment. Past key successful factor of the company was its global networks. Since the early 1990s, after the demerge form the Recal, Vodafone started international expansion in the European countries. In 1995, it earned 20 % of its total turnover of billion from its international business only. The company’s expansion strategy was opportunistic and aggressive and it started acquisition of the leading foreign companies or some stake of those to start operation in different countries including Germany, Spain, Italy, France etc. The current key successful factors of the company are highlight by the company’s CEO Vittorio Colao’s on his interview to Financial Times on November, 2008. The company has emphasised on its shift from expansions growth to consolidation in the existing market. Due to the increased competition in the domestic market of UK, it has taken strategy to buy the rival companies in UK to stay in leading position. The most tangible element of the company’s current strategies is improving its bottom line performance i.e. is the local autonomy through effective regional coverage in the existing market. It also has concentrated on the packaged services i.e. fixed and wireless services for individuals as well as for the business customers. It has started development of its stores by collaboration with Softbank. Five forces analysis is the most important tool to analyse the company’s external environments. Capital intensiveness of the new companies, new advanced wireless technology and new regulations of the different government in foreign markets have been acting as moderate threat of new entrants for the company. Vodafone has emphasised on the internet services for mobile users which is facing a strong threat of its substitute, Wi-Fi services. The company has been facing moderate bargaining power of its supplier due to the influence of distinctive mobile phone producers like Apple and Samsung. Google has also integrated its supply chain which also has an influence in the company’s BPS. Vodafone is has market presence in the wide market and apart from the individuals it has subsequent numbers of business customers. So these buyers always have desire to get the quality of an international service of Vodafone. So, bargaining power of buyers is low. All these parameters of five forces have major impacts on the company’s rivalry with its competitors. In every foreign market it has facing high competition with local dominators. Orange has introduced new wireless technology with differentiating cost of operation with respect to Vodafone. But the company has not been able to differentiate its services compared to the unique features and high technology of Apple and Google (Lima, 2006). From the market based values analysis of the company, three main issues can be highlighted. The c company has facing difficulties in the regional expansion in its different existing market. It does not have adequate added value services so that it might different its service from the competitors. Efficient availability and high acceptability of Wi-Fi service especially in the developed market has become the major threat to the company’s new internet service. To get the resource base view, the internal resources of the company needs to be analysed which includes resources and capabilities, competencies and value chain of the company. The company has been leading in terms of few resources like brand and reputation, global market presence in 52 countries, huge customer base of 3202 million. In infrastructure, financial and marketing resources it has same strength with its competitors. In terms of competencies, it is leading in economies of scale by its global presence and has same strengths in quality and customer care to its competitors. By the VRIO frame work analysis some competitive implications has been found. One of the major competitive disadvantages is the technology development of the company. The global presence has become its temporary advantage in terms of achieving positive economies of scale. The company has been able to retain its brand reputation which is a sustainable commutative advantage. By the value chain analysis of Vodafone two major threats of the company has been found. Current penetration of the wireless services in the developed market would be increasingly commodities. So, the introduction of wireless services initially in the national market might contribute smaller value creation by a global company like and it also might not influence its brand value. So the highlighted issues are inefficient wireless network technology and lack value added services of the company (Peppard & Raylander, 2006, p.6). To analyse organization base view, current mission of the company need to be analysed. Unsophisticated targeting has been seen for general customers segment. The position strategy is not clear for this segment of customers and this is why it is facing tough competition in the regional level business operation. Shareholders get more values than the customers who are the main stakeholders. Value creation is not clear by the company (Boulton, 2001). Generating Future Strategic Options Strategic options refer to the strategic opportunities lies for the company. Based on the strategic external environment analysis of Vodafone, it can be stated that there are some important strategic options that the company can adopt in its three different levels of strategy formation and implementation. These are business level, corporate level and international level. In business level, the company can turnaround its regional level business in each country including the national market. It can increase its scope of the region where comparatively low influences of local competitors are there or it can develop strategic alliance with the regional level companies through acquisition of those companies. In corporate level, the company needs to concentrate on the product development by effecting value creation and it need be highlighted through its services. To minimize the supplier bargaining power like Google, the company needs to collaborate with social networking sites like Facebook, Twitter etc (Wernerfelt, 1989, p.2). In international perspective Vodafone need to emphasize on the market development especially the emerging market across the world by developing joint venture with its major international competitors like China mobile. This might help the company to dominate the local players in the new market by effective business operation of joint venture of top two global leaders rather than starting its own operation (Johnson & Scholes, 1997, p.35). Strategy Evaluation and Selection For business strategy option, Vodafone need to increase the scope of regions by developing strategic alliances with the regional players through acquisition. This is suitable, acceptable and also feasible for all the stakeholders of the company. Company can get a domestic client base and distribution network. Customers will get global quality and other advantages in terms different services. Shareholders will welcome this risk reduction strategy through diversification (Vodafone Group, 2012). Corporate strategy in terms of collaboration with Facebook, Twitter, is also suitable and feasible but there might be risk in terms of acceptability of the shareholders and also the customers. So, this strategy can be accepted considering this risk involved. International strategy in terms of developing joint venture with its international competitor China Mobile will also suitable and fusible for the company’s international business but might not be acceptable by the stakeholders of the company. So, this strategy might not acceptable by the company. Future Strategic Recommendations So based on the evaluation of prospective strategies of the company it can be recommend in the few areas of the two accepted strategies; these are strategic alliance for expansion of network and strategic alliance for collaboration with Facebook and Twitter etc. First strategy needs to be adopted for three to five years with an aim to global expansion in terms of regional expansion. It need to alliances with the business customers in those prospective regional markets to achieve sustainable economies of scale. Second strategy needs to be adopted for one to three years with an aim to enhance the added value in the stores in terms providing value added services to the customer and make the value creation differentiable to the customers. It might be possible through the collaboration with Facebook, Twitter, and Android etc. But there are some risks involved into this strategy in terms of future uncertainties. Reference Boulton, W. R. (2001). Strategic Analysis Model. [Online]. Available at: http://www.auburn.edu/~boultwr/html/strategic_analysis_model.htm. [Accessed on April 30, 2012]. Johnson, G. & Scholes, K. (1997). Exploring Corporate Strategy. Prentice Hall, New York. Lima, T. (2006). Michael Porter’s “Five Forces” Model. [Online]. Available at: http://www.cbe.csueastbay.edu/~alima/courses/3551/murdercleaners/fiveforcesporter.htm. [Accessed on April 30, 2012]. Peppard, J. & Raylander, A. (2006). From Value Chain to Value Network: Insights for Mobile Operators. [Online]. Available at: http://gu-se.academia.edu/AnnaRylander/Papers/1135178/From_Value_Chain_to_Value_Network_Insights_for_Mobile_Operators. [Accessed on April 30, 2012]. Vodafone Group. (2012). Investor relation. [Online]. Available at: http://www.vodafone.com/content/index/investors.html. [Accessed on April 28, 2012]. Wernerfelt, B. (1989). From critical resources to corporate strategy. [Pdf]. Available at: http://web.mit.edu/bwerner/www/papers/Fromcriticalresourcestocorporatestrategy.PDF. [Accessed on April 30, 2012]. Appendix Appendix 1: Value chain analysis of Vodafone Appendix 2: VRIO framework analysis of Vodafone Appendix 3: Strategy Evaluation and Selection Read More