Virgin Mobile Strategic Analysis - Essay Example

Strategic Analysis of VIRGIN MOBILE” Task Macro environment analysis It is important for all managers in organizations to conduct analysis of their organization’s macro-environment. It is important for their strategic analysis of their organizations. The main aim of strategic analysis is to enable the managers to identify the opportunities and threats in the industry that the organization has no direct control (Anderson and Williams, 2004; MacInnes, et al., 2002). PEST framework facilitates the analysis of the macro-environment of a company. It enables strategists to understand the growth or the fall of a market, market potential, position of a business and the required direction of operation capable of bringing out the best results. This assignment entails analyzing the macro-environment of Virgin Mobile UK to come up with the issues affecting its strategic decisions. Political Factors: the financial performance of a country is adversely affected by the corporate tax rate. In the period between 1999 and 2007, the UK’S corporate tax rate was 30%, much higher than that recorded between 2008 and the present. (Trading Economics, 2014). This resulted into depletion of the profit margin of virgin mobile between 1997 to 2007 despite the company trying its best to remain profitable. Fig 1: UK corporate tax rate between 1999 and 2014. (Source: Trading Economics, 2014) The company targeted prepay customers who were within the age group of 18-35 years. It gained mobile phone subsidies that allocated them a payback of three months as opposed to a contract of three years. This was advantageous for the company evident through the increased profit margin that was evident for the company. There are other political factors that influenced the Telecom industry in UK that in turn affected the strategic decisions of Virgin mobile. They included: Bidding of five 3G licenses that occurred among 13 companies Government policies that in turn encouraged innovation together with technological advancement The crucial role that mobile phones in the ongoing elections that occurred in early 2000s. The political scenario existing in the country enables an environment full of deregulation. As a result, the level of competition in the UK telecom industry has increased in a significant margin. The buyers’ bargaining and negotiating power has increased due to the increased competitive environment. The UK’s mobile market is also expected to face high competition from other telecom companies in other countries within Europe due to the deregulation in the EU front. The company has made predictions that the political factors in the telecom industry in UK are expected to favor the company in the upcoming years. In turn, their customer base will increase significantly increasing the turnover of customers. Virgin company has proven to be the most formidable and dynamic company in the telecom industry in UK (BBC, 2003). Economic Factors: The increased inflation in UK led to the rise in demands for wages from staff members. As a result, the cost of Virgin Mobile increased reducing its profit margin. On the other hand, the gradual increase in demand for goods and services resulted from increasing the disposable income of most of the UK residents. This applies to Virgin Mobile and is evident from the growing sales of the company over the last decade or so. The UK’s telecom industry experienced an increased level of growth in the period between 1999 and 2010. During this period there was an increased number of mobile phone subscribers from 15 Million in 1999 to 50 million in 2003 (Ofcom, 2014). This provided the company with an opportunity to target a specific customer base. As a result, Virgin Mobile benefited from this increase in the base of customers over that specific time period (Virgin Media, 2010). Thus, over the years, Virgin Mobile had the opportunity to tap into the market of pre pay customers. This offered them with simplified tariff structures that are relatively cheaper than the ones provided by its rival companies in the same time period. Telecom industry in UK employed a large number of labor force that significantly increased the confidence of customers. This led to the growth of this industry. Therefore, Virgin mobile successfully attracted and retained most of their potential customers thus increasing their profit margin (MBD, 2011). Fig 1: UK inflation rate between 1999 and 2014. (Source: Trading Economics, 2014) Evident from the graph above, the inflation rate has increased since 1999. Thus, the cost of production and provision of services has become very expensive. This has in turn heightened the demand for pay hikes by various working officials. Therefore, the increased level of disposable income has increased the purchasing power of most residents in UK. This was mostly evident during the period between 2003 and 2010, which recorded a substantial increase in the overall number of mobile phone subscribers. This in turn provides Virgin Mobile with the opportunity to effectively market and also promote its products and services in addition to widening its target base of customers. Social Factors: The ability of organizations to evaluate their social and cultural environment enables managers to identify the trend in society beliefs, values, behavior, and norms. These enable companies to understand the impact that these factors have on their overall performance. The factors that are considered while analyzing this segment are population growth rate, age distribution, and career attitudes among others. The sales of GSM Mobile handsets sales have been rapidly growing over the last ten years. This has had a direct impact on the usage and overall prevalence of mobile phones in the area. UK recorded an increased focus on convergence of technology in its telecommunication sector. This was influenced significantly by the increased usage of mobile phones. The Popularity of mobile phones increased especially within the younger population in UK. This is the reason why Virgin Mobile opted to implement a niche marketing strategy for all its telecom offering and thereafter targeting the young customer population segment. This strategy adopted by Virgin Mobile differed with the strategies adopted by other competing companies within the same industry. Their advertisements were designed to attract the attention of the youth. They also implemented innovative ideas aiming at aim of sharing common thoughts and beliefs. Technological Factors: Technological factors are the key determinants of a company’s success precisely because they form a major part of the business mainframe. Virgin mobile experienced this thus their technological factors were important. In the UK’s telecom industry, technological advancements have enabled an unprecedented level of development. Such advancements have benefited both service providers and the consumers. Virgin Mobile focused more on enhancing and improving its service offering instead of making technological advancements (Virgin Media, 2008). The reason is that Virgin Mobile shared T-Mobile’s technical infrastructure in order to keep itself upgraded in terms of technological advancement (Virgin Media, 2007). The two signed a contract where T-Mobile was required to upgrade its telephony services to 3G networks. This was an appropriate strategy adopted by Virgin Mobile (Virgin Media, 2006). Whilst T-Mobile was assigned with the responsibility of ensuring technological advancements in Virgin Mobile, the latter could allocate all resources towards improving the quality of its service offerings. Task 2: Internal environment analysis Key resources Physical presence: As far as the key resources of Virgin group are concerned, its physical presence has proven to be a crucial resource. The reason is that it can be regarded as a crucial determinant of the success of the company throughout the world. Operating in more than 40,000 stores in the US and in its home country (the UK) as well, Virgin Mobile has been successful in catering for needs and requirements of large base of its targeted customers (Reuters, 2014). Apart from providing service to customers in the UK and the US, Virgin Mobile also provides its products and services to other emerging economies such Latin America, India, Mexico among others. Given that, one primary objective of the company is to provide high quality services to the customers, Virgin Mobile has consistently emphasized on increasing its physical presence in order to ensure that they reached out to all their customers (Virgin Media, 2013). The company believes in conducting face-to-face interaction with its customers often to understand their preferences thus tailor their products and services towards those preferences (Virgin Media, 2012). This goal of virgin Mobile has come to pass because of the extensive physical presence that the company has been maintaining over approximately past ten years Brand image: Virgin Mobile is famous for its enhanced brand image. This has increased the quality of services that has been provided to their customers. The company enjoys extensive brand awareness owing to its wide networks throughout the world (Virgin Media, 2009). Known for mainly targeting the younger population segment, the company’s logo as well as its advertisements is strictly meant for the customers between the age group 18 to 35 (Niche Media, 2013; Virgin Mobile Australia, 2013). Structured products combined quality services for customers, has enabled Virgin Mobile to grow as a brand. This has significantly contributed towards the growth of the customer base of the company (Virgin Media, 2011). That is why the brand image of Virgin Mobile, although intangible, is considered as an important resource in ensuring that the company succeeds in achieving its objectives. Human Resource: As mentioned above customer satisfaction and customer retention has been the primary objective of Virgin Mobile throughout its operations. The company has been successful in maintaining the same over the past ten years. This is attributed to the highly trained and committed workforce of the company. The products and services they offer are in complete alignment. Not only does the company design products according to the needs of the customer but compliments the same by providing appropriate services with the help of highly skilled workforce (Kainazarova, 2014). The workforce is responsible for the technological advancements that the company has gone through over the past few years. They have also contributed to the increased customer base. The company offers appropriate training and development programs in place directed towards preparing employees to provide appropriate customer service (UK Essays, 2014). Key capabilities Marketing: Virgin Mobile as a brand is known to be very stylish and original for its young population targeted. The fundamental belief of the conglomerate is that no business is difficult and that the company has the ability of gaining a competitive advantage. This was through implementing effective marketing strategies as well as by incorporating value added elements within the service offerings. Due to this, the company has heightened the reputation of its brand (Souppouris, 2013). The company has heavily invested on their advertisement campaign from the company’s generated revenue and sales. (Virgin Mobile, 2012). The company believes in designing ads specific and attractive to its customer segment and that is why the advertisements are designed in an innovative and creative manner (Chapman, 2013). Another major capability of the company is to utilize its finances in order to sponsor high profile events (both sports and music) so as to achieve its marketing objectives. Their TV commercials were rated among the top best advertisements until 2004. The company also signs famous personalities to star in their advertisements in order to connect with their targeted customers instantly (Campaign brief, 2014; DMG Radio Australia, 2014). Therefore, the marketing team plays an important role to ensure appropriate representation of the company in its targeted audience. Product innovation: Virgin mobile has always been on the frontline in innovation of new products and services. It was the first company to offer tariff at a considerable and affordable rate without any concealed costs. The company was also the first to offer free voice mail service to its subscribers. The service provided by Virgin mobile enabled customers to carry forward their pre-paid airtime bundle on to the next month if it remained unused in the current month (Virgin Media, 2014). The information technology mainframe incorporated by the company enabled customers to make payments through cash, debit, and credit cards as well as engage in Internet banking. The range of mobile phones sold by Virgin Mobile was wider than any other service providers during the time period between 2001 and 2010. The company also offered separate pay-monthly financing schemes to those customers who did not want to sign contracts. Virgin Mobile also on the packaging of their products to ensure that their customers had a hassle free buying experience. Sales and Distribution Channel: Virgin Mobile has successfully handled the sales and distribution of its products in an effective and efficient manner through its broad network of retail outlets (Virgin Mobile, n.d.). The company utilized its megastores in order to setup stores within stores to promote its services and products appropriately. Moreover, it employed dedicated specialists and recruited them as sales representatives (Sawhney, Wolcott, and Arroniz, 2011). The distribution and selling points were designed in such a way that they appealed to the customers and made them feel relaxed whenever they visited any of the outlets. The in-store representatives were provided with adequate training in order for them to be able to appease to their customers. This in turn added to the experience of the company. Task 3: Challenges faced while analyzing the internal and external environment One of the major challenges faced while conducting the PEST analysis was unavailability of data. The data was available in a fragmented manner and it was difficult for the researcher to correlate the data with case study of the company. In addition, another challenge that the researcher faced while conducting the microenvironment analysis was the limitations of components that could be included for analysis. The reason is that a company’s strategic decisions and financial performance is not only affected by political, economical, social, and technological factors but also by other market wide factors such as environmental and legal. The restriction of word count also prevented the researcher from carrying out an extensive analysis of the factors, which were actually included within the PEST framework. Moreover, the researcher was also not able to include other market wide factors have had a significant impact on the financial performance of the case study company. The market fluctuations were also not explained because of word count constraint within the analysis. As far as the challenges faced while conducting the internal environment analysis are concerned, word count proved to be the most restricting factor in this case. The research failed to explain the key resources of the company in depth and in detail. In addition, other tangible assets that are part of company’s key resources could not be incorporated within the analysis. Furthermore, there was no scope of conducting any comparative analysis. A comparative analysis with a competing company could have induced robustness within the research, but the scarcity of data prevented the researcher from conducting such analysis. The financial performance of the company was also not evaluated properly. This was necessary in order to ensure that having appropriate resources and capabilities did benefit the company as had been mentioned within the case study analysis. Reference List Anderson, J. and Williams, B., 2004. Unbundling the mobile value chain. Business Strategy Review, 15(3), pp. 51-57. BBC, 2003. Virgin Mobile reports strong sales. [online] Available at: [Accessed 30 July 2014]. Campaign brief, 2014. Virgin Mobile Australia enlists Glee star Jane Lynch to front new Make Mobile Better campaign via Havas Worldwide Australia + One Green Bean. [online] Available at: Read More