Vodafone Company, Assessment Example

Introduction

Mobile communications is probably one of the most successful industries in the whole world. Its growth has affected not just the economy but the entire society as well. As a matter of fact, it helped developed markets and the entire information technology. One of the leading communications company is Vodafone Group. The company is one of the big wigs in the phone industry not just in England but in a global arena. Its presence is felt not just in the mature markets but as well as in the new and emerging markets. Records have shown that the company’s operations extend to 25 countries worldwide and its customers are now over 260 million. In 2007 alone, its profitability has soared to an estimated amount of £31 billion with a partnership to 38 networks. The main goal of the company is to be the leading communications provider in the whole world. In order to achieve this, the company is offering various services such as SMS, Vodafone at Home and Office, Vodafone Passport, Live, 3G and Mobile Connect data Cards and Mobile Applications.

Vodafone is mainly focused on Europe and the Eastern Europe, Middle East, Africa, Pacific and Affiliates (EMAPA). The concentration of the company’s growth is from Europe with an estimated 79% of generated revenue. In this regard, it cannot be denied that the company has established its name and its competency while allowing for market maturity and growth. However, there are also instances wherein the level of market penetration might cause slow growth in some areas. Hence, this paper aims to analyze the company to determine what the strengths are and the weakness as well as to provide recommendations to better its operations, market dominance and presence. Analytical tools such as PESTEL, SWOT, Porter’s Five Forces and Value Chain will be utilized herein.

In order to analyze the external macro-environment where Vodafone operates, the PESTEL analysis tool is utilized. The following are the PESTEL influences affecting the value of the company (Harrington, 1991):

Political Factors

Vodafone, just like any other mobile and telecommunications company, is subjected to various government regulations in order to ensure proper management and operations of the business. However, specific laws and regulations that are implemented impacts the company greatly. In 2002, Europe has implemented the EU Regulatory Framework that should be followed by all communications company. This framework encourages competition in the industry that will lead to more benefits for the consumers than the companies. Since the implementation of the EU Framework, Vodafone has reduced the termination rates on its mobile phones. In Germany, alone, there is a recorded 23% drop of termination fee rates. Italy and Spain has 15% and 11% reduction rates respectively.

Economic Factors

Although there is a steady growth in the profitability of the company, it is being predicted that the status of the global and international financial markets will decelerate the global growth of the company (Jacobson, 1995). However, the prediction can be offset by the increasing demand and following in Asia and Latin America.

Social Factors

While the company is now reaping the benefits of the younger generation’s dependence and obsession to technology such as tablets, phones and computer, the ageing population cannot be taken lightly as well. Meaning to say, as the population gets older, the growth of the company might suffer as well. It is projected that by 2050, Europe will have 15 million fewer children and a lot more older people. Comparing the EU’s demographics against its global competitors, it can be seen that Vodafone will have less young people as consumers than its competitors. Older people’s propensity to technology is not as intense as the younger generations. Meaning to say, Vodafone might lose a considerable amount of customers that can impact the company and its operations negatively.

Technological Factors

Research and development is one of the most important aspects of any business or company. Vodafone’s research and development has positively influenced how the company makes innovated to its products and services. However, it is apparent that other global competitors such as Japan and the United States of American have exerted more effort in R&D. It is revealed that while the United States and Japan shares over 2% in R&D, EU only spend about 1.2%- based on the funds and allocation afforded by the government for research and development.

Strengths

Undeniably, the company’s brand and image is its main strength. Vodafone, through hard work and perseverance, has already has its global presence established through the years. The company is invested in marketing and made itself a part of the lifestyle of every person. The image it portrays speaks of strong alliances in the countries in which they are operational. They know how to incorporate their products and services in the daily undertakings of their customers’ lives and it will help them become the leader in a very strong and competitive telecommunications industry (Ulrich, 2005).

Weaknesses

While most company focuses on organic growth, Vodafone does things differently by growing the company through acquisition not just locally but internationally as well. In this regard, it employs a more centralized structure of operations where its main headquarter is the chief business unit. The downfall in this system is that everything is being looked at in a larger perspective- maybe international- and neglecting the local markets as a result. Furthermore, because of the unintentional disregard to the local market, the small and local competitors gain the market share leading up to prices increase in an industry where price matters.

Opportunities

Even though the telecommunications industry is one of the most saturated industries, it cannot be denied that people are dependent to it. Hence, with the proper utilization of full market segmentation and exploitation of the consumers’ obsessive attitude towards technology, Vodafone will sure make a profit and continue growing. It can also take advantage of price competitiveness by creating phones that are affordable to gain a good portion of the market share and maintain it (Joiner, 1994). Simple and user-friendly phones, attractive phone packages and affordability will help target younger generation’s business.

Threats

Its primary threat is competition. All types of business and industry experience competition not just in the local aspect of operation but also globally. With new emerging companies, demand and supply, pricing and packages, Vodafone’s competitive advantage might slow down. In addition, other forms of communication such as Facebook video calling, Skype and Viber might decelerate the need for phones.

Buyers

Buyers are the ones that contribute to the rise and fall of any company. Although there is a high rate of saturation in the mobile and telecommunications services, there is a growing numbers of subscribers for cellphones in all part of Europe and other countries where Vodafone operates. This trend proves to also increase the number of emerging markets and directly affects the prices of services and the subscription packages that are being offered by Vodafone. As a matter of fact, it is revealed that in the last 4 years, the number of Vodafone subscribers has marked up a 26% increase. This is consistent with the gathered information wherein a total of 70% mobile subscriptions are from developing countries. Emerging economies in Asia, Latin America, Europe and Africa contribute to the 90% net increase of mobile subscription in a global scale.

Rivalry

Like previously stated, the telecommunications industry in Europe where Vodafone largely operates is saturated with competition such as the Telefonica O2 and T-Mobile among the many others. The competitions in this industry do not only mean the battel for market share but also for the profitability. Yet, the emerging markets and the mature markets are clearly favourable with Vodafone. This is most likely due to its image, brand and global presence. Once a company has already established its name in the market, it will have a strong following and growth compared to emerging new ones (Johnson, 2001).

Substitutes

Substitutes for the mobile usage have been making their name but are not really a threat- yet. Some of the most known substitutes for mobile subscription are VoIP calling suck as Skype, Facebook calling, Viber, and Wi-Fi enabled USB that can be easily plug in to a phone and can make long distance calling all over the world. These substitutes are increasing and making waves in the communications industry but it is not strong enough to totally impair mobile subscriptions.

Entrants

New enterprises from emerging markets are not likely to affect the Vodafone company due to the fact that there are significant and remarkable barriers to their entry such as fixed costs that are high, governmental regulations and policy, brand equity and distribution access. However, it cannot be denied that if the industry proves to attract more subscribers and the profitability is good, more and more threat will come to exist to get a share of that profitability and exploit all possible ways to provide competition (Wood, 1998).

Suppliers

The suppliers, as used in the context of telecommunications industry, should not be limited to mobile services providers but should also providers of device, network infrastructure, software and other forms of digital services (Hutchins, 1990). With the global presence and independence of Vodafone, it cannot be denied that they have a strong purchasing power. It can secure exclusive and good deals from its network that will help develop their brand, image, profitability and how the company interacts with the market.

Activity Analysis

Undeniably, Vodafone only recruits the best team for the operation of its company.  The approximately 72,000 employees it has proved to carry the goals and objectives of the company to heart. The company values its entire workforce and align them to what the company wants to achieve in the industry. Vodafone also align its products and service in line to what their customers look for to make sure that they keep their market share.

Value Analysis

The company knows that their customers want in terms of products, services and how to make the customers happy. It is not just about the products but as well as the delivery. The company checked on the factors that affect their consumers’ perception of the services and products and act and plan based on the feedback given (Hutchins, 1992).

Evaluation and Planning

Vodafone constantly evaluate not just the trend and he consumers’ behaviours towards products and services but also how they perform in the market. They constantly evaluate, plan and implement new actions to establish their brand and image through marketing, innovation and cutting-edge technology to deliver to the customers.

Recommendations

In order to maintain its strong market performance, it cannot be denied that Vodafone needs to equally focus on the local market. By doing so, it will be able to efficiently manage organic growth rather than just centralized management. In addition, Vodafone needs to provide more attractive phone service packages to the consumers due to high saturation in the market. New emerging markets are not afraid to provide discounts and exclusive deals for new customers to gain market share (Hussey, 1998). Vodafone should do the same to continue growing and exploit the market while it can. It has strong client-base but it is also more profitable for the company to gain new business from new customers.  But this should be done without sacrificing the customers it already has. The truth of the matter is that customer retention is as important as acquiring new one.

Conclusion

With all the foregoing, it cannot be denied that Vodafone is performing well in the market despite some of its weakness and the threats in a highly saturated industry. The value of its company is directly related and affected by the decisions it is making when it comes to evaluation, planning and implementation (Harrington, 1995). Moreover, the company has a strong business presence particularly in the global arena due to the fact that it knows where to hit the market and which ones are growing. If it will continue to innovate and focus on its customers, it will maintain its market share and gain some more even in the midst of increasing competition. The company knows its weakness and work based on those weaknesses and comes out strong.

Bibliography

Harrington, J. (1995). Total Improvement Management. New York: McGraw-Hill.

Harrington, J. (1991). Business Process Improvement. New York: McGraw-Hill.

Hussey, D. (1998).  Strategic Management. Oxford: Butterworth-Heinemann.

Hutchins, D. (1992). Achieve Total Quality. Cambridge, UK: Director Books.

Hutchins, D. (1990). In Pursuit of Quality. London: Pitman.

Jacobson, I. (1995). The Object Advantage- Business Process Reengineering with Object Technology. Englewood Cliffs, NJ: Prentice-Hall.

Johnson, G. (2001). Exploring Corporate Strategy. London: Prentice-Hall.

Joiner, B. (1994). Fourth Generation Management- The New Business Consciousness. New York: McGraw-Hill.

Ulrich, D. (2005). The HR Value Proposition. Boston: Harvard Business School Press.

Wood, R. (1998). Competency-based recruitment and selection. Chichester, UK: Wiley.