Vodafone's Strategic Business Analysis

1. Introduction

For ensuring success in the contemporary market trends, companies apply different business strategies and tactics to improve overall organizational efficiency. In this context, management applies different approaches to conduct external and internal business environment analysis. This report applies different concepts and models like PESTLE analysis, Porter’s five force model, Value Chain, and Internal Resource Assessment for determining the corporate opportunities, threats, strengths, and weaknesses of Vodafone Group Plc (Welford, 2014). It is a British multinational telecom company that has headquarter in London, United Kingdom. Vodafone Group Plc was incorporated in 1984. Currently, it is a leading telecom network service provider of the world that has maintained its significant presence in the market of Asia Pacific, Africa, the Middle East, and Europe. The company is managing its operation in more than 25 countries in the world. It offers a variety of telecommunication-related services like mobile telecom, Internet of Things (IoT), fixed broadband, Cloud & Security, Carrier services, and many more (Vodafone Group Plc Annual Report 2019, 2020).

The business model of the telecom company is focused on delivering high-value services and benefits to society and returns to shareholders. In this regard, Vodafone Group Plc has paid extra attention to the differentiated assets and leading scale; sustained reinvestment; growing revenue streams; encouraging the free cash flow; and transformation of new opportunities. In this context, the company transforms the business toward digital innovation, the safety of the environment, and others to attain organic growth.

2.0 External Analysis

2.1 PESTEL Analysis

Political

Government policies play a critical role in influencing the business operations and corporate strategies of an organization. In this context, the taxation policies of different government and international trade regulations may have a direct impact on the operational capabilities of an organization (Nixon and Burns, 2012). In the context of Vodafone, the announcement of Brexit encourages telecom service providers to increase the roaming charges that could be considered as an opportunity for Vodafone to increase the profit margin. Similarly, the vision of the Indian government to introduce 5G telecom services in-country would emerge as an important opportunity for the company. However, the high value of spectrum cost and high taxation rates could be considered as threats for the business expansion projects.

Economic

The economic stability of countries in terms of GDP growth rate, inflation rate, interest rates, and spending cycle plays a critical in influencing the business operations and efficiency where Vodafone operates. In the context of the European and Asian markets, economies have recorded stable growth trends and employment opportunities influence companies like Vodafone to expand the business. Therefore, the stability in the economic conditions of different countries can be considered as a great opportunity for business expansion.

Social

In the context of the contemporary business environment, the changes within sociocultural factors of an economy may have a profound impact on the sales and profitability of business entities in a different region. This is because the change in interest and social trends leaves a direct impact on the demand for telecom services. In addition to that, the change in lifestyle, along with the preferences of target consumers, directly impacts the financial health of the companies in highly competitive market trends. Furthermore, the growing demand for internet in the whole world due to consumerism has increased the requirements of high-speed internet service providers (Johnson, 2015). This is because the usage of the Internet has recorded huge growth for both entertainment and work purposes. In this regard, the growth in demand for internet and other related services has proved several benefits to international telecom companies. Therefore, the management of Vodafone should treat the change in social trends and demographics as an important business opportunity.

Technological

In the context of the telecommunication industry, technology has been addressed as a key driver of the strategic planning process. The management of Vodafone has determined the high targets for the business transformation by paying extra attention to the operational excellence and improving the overall performance of the group (Engert et al., 2016). With reference to the emergence of technologies, the company has focused on different digital platforms to provide the best value to customers such as MyVodafone App has provided an opportunity for to company to establish long term relationships with customers. In addition to that, the company establishes a global partnership to manage the IoT requirement. Furthermore, the M-Pesa platform of the Vodafone has emerged as the largest payment platform in Africa. Moreover, the business entity is focusing on developing a smart infrastructure. Therefore, technological advancement could be considered as a great opportunity to manage in improving the overall business efficiency (PESTEL ANALYSIS OF VODAFONE GROUP, 2020). This is because an appropriate investment in technological advancement would support the organization in improving the service quality and also influencing the organizational capabilities.

Legal

It is one of the most critical elements of the business environment that may have significant influence over the strategic planning and decision-making process of an organization. In the context of the telecom industry, an organization has to follow different domestic and international regulations related to consumer protection, the safety of the environment, taxation, and others. Therefore, if an organization is failed to cover all compliances in different business operations, then a particular firm would be penalized from different types of fines along with legal restrictions (Webb, 2013). In the context of the European Union, different telecom regulatory authorities have violated different legal compliances in their business practices, so EU authorities have increased the number of fines and penalties. Similarly, the business operations of Vodafone came under legal scrutiny in India after the merger of Idea in Vodafone in which the company was charged huge taxes and penalties due to the purchase of the assets of the Indian company. After several legal proceedings, the Supreme Court passed a decision in favour of Vodafone so as income tax department could not levy any tax on the overseas transaction. Therefore, legal norms and compliances would be treated as a threat to Vodafone in the form of fines and penalties (Ahenkora et al., 2013).

Environmental

The safety of the environment is being emerged as a key responsibility of all types of commercial units. It plays an important role in the business decision-making process. In this regard, Vodafone has announced that it will reduce 50% of the environmental implications of the different business processes by 2025. This target influences the Vodafone to consider three different domains that include digital society, inclusion for all and the planet. In this regard, technology advancement provides an opportunity to reduce the consumption of energy in different business operations. Furthermore, the business entity pays extra attention to the sources of renewable energy to reduce the carbon footprint (Kerr and Moloney, 2019). Therefore, the consideration of environmental safety norms would have emerged as an opportunity for a business entity in improving the efficiency of the business processes and the application of the latest technologies to reduce wastage of resources.

2.2 Porter’s Five Force Model

The Vodafone Group Plc is the part of the telecommunication industry. Therefore, Porter’s five forces model has found a great tool in analyzing industry trends. In this regard, the application of this model in the case of Vodafone is carried out below:

Rivalry among companies

The Vodafone has maintained the leadership position in all over the world. However, there is a huge business rivalry identified within the domestic and international markets. The high level of competition with other companies influences the Vodafone to maintain appropriate control over the prices of different services in an efficient manner (Kerr and Moloney, 2019). Therefore, the level of business rivalry is relatively high. In the context of the global market place, the key competitors of Vodafone include China Mobile, Verizon, Nippon, Telefonica, BhartiAirtel and others. In the UK market, the company faces tough competition with the Three (3) and O2. This industry has recorded declining trends, and the industry has estimated the negative growth rate of -2.1% during the period 2020-21 (Wireless Telecommunications Carriers in the UK - Market Research Report., 2020).

Bargaining Power of Buyers

In the context of the telecommunication industry, there is low switching cost so the companies have to consider the competitive pricing approach that may have a significant impact on the profit margin of different companies like Vodafone. In addition to that, the satisfaction level of customers leaves direct on their loyalty (Rugman and Verbeke, 2017). Therefore, the bargaining power of buyers is relatively high.

Bargaining Power of Suppliers

The efficiency of telecommunication companies is highly dependent on technologies. Therefore, the suppliers play an important in maintaining the availability of high-quality technical equipment (Rothaermel, 2016). For lowering the cost of operations, the Vodafone Group Plc has to pay extra attention to control the supplier’s costs. However, the bargaining power of suppliers is high in the context of high-tech equipment.

The threat of new Entrants

The telecommunication industry is dominated by various large companies like Vodafone, and a new firm requires huge investment in expanding the business in the telecommunication industry. It makes this industry less attractive. Therefore, the threat of new entrants is relatively low.

Product Substitution

The emergence of new internet-based services has influenced telecommunication to rethink about the product offering (Siano and et al., 2013). Apart from that, the threat of substitution is relatively low. This is because substitute products have not attained value proposition goals.

As per the above discussion, the telecommunication industry seems less attractive for new entrants due to high level of competitive rivalry among companies, the high value of the initial investment, high bargaining power of customers, and increased dependence on the suppliers. All these factors have lowered the attractiveness of the selected industry,

3.0 Internal Analysis

3.1 Resource Analysis

The assessment of different resource of the Vodafone Group Plc is carried out below that are acting as the strengths and weaknesses of the business entity:

Network Coverage

Vodafone Group Plc is operating its business operation in more than 24 countries. It controls the telecommunication services in 24 countries with the help of 42 and more mobile networks. Moreover, it also provides a fixed brand service in 19 markets. Moreover, it has the largest 4G/5G network coverage in Europe (Vodafone Group Plc Annual Report 2019, 2020). Company has also maintained Gigabit networks in Europe in facilitating high-speed services. It is termed as a key strength of the company.

Workforce

Vodafone Group Plc is an international brand, and it operates in several countries. Therefore, it has a culturally diversified workforce that involves more than 92005 individuals who are associated with different nationalities all over the world. Moreover, the company works with more than 10423 contractors in different countries to maximise the efficiency of the business operations and the quality of services (Vodafone Group Plc Annual Report 2019, 2020). For ensuring the long term growth and increment in the efficiency of the business operations, an efficient workforce has been acted as key strength or support system for an organization.

Value Added Service

The management Vodafone Group Plc is always focused on diversifying its service mix. Along with the traditional telecommunication services, Vodafone Group Plc focuses on Internet of Things (IoT) connectivity for automotive and insurance service providers. The company also offers public and private cloud services for securing networks (Ghosh, 2016). It has the global submarine and terrestrial cable system to facilitate the international voice, IP transit and messaging services. The company also facilitates the mobile-based payment service that is known as M-Pesa. All these services are worked as key strengths of the business entity.

Investment in Technology

The company pays extra attention to research and development activities for the development of the latest communication technologies and network systems. It supports the establishment of a highly efficient infrastructure (Gershon, 2013). The significant investment in research and development operations seems a key strength of Vodafone.

Customer Base

Vodafone Group Plc is one of the leading telecommunication network service providers in the world. It has a very large base of loyal customers. The approximate number of mobile customers, fixed broadband customers, and TV customers are respectively 625 million, 27 million and 22 million. In the context of strategic planning, the loyalty of customers plays a key role in ensuring the long term growth and success (Vodafone Group Plc Annual Report 2019, 2020). However, the company has recorded significant downfall in the number of loyal customers due to the emergence of new companies. Therefore, the business entity is facing some issues in the attainment of expectations of consumers in different markets that could be considered as a weakness of the company.

3.2 Competences

For determining the key competencies, the value chain analysis has been identified as an important tool that covers different primary and supportive activities:

Value Chain

The value chain model has found very effective in the identification of corporate competencies. In the context of inbound logistics, network infrastructure management along with Research & Development assists business development of high-quality services. The operations section involves the integration of different resources that include technologies and employees (Ghezzi, 2013). The outbound logistic includes network sharing, development of some unique services, advancement in 4G/5G technologies and telecommunication services. The marketing & sales department covers the interest of customers, but a large number of customer base could create some difficulties in the development of standardized marketing and promotion channels. However, the final service would emerge in the form of mobile network, fixed landline services, cloud-based systems and others.

VIRO Model

The VIRO model provides excellent support within the strategic analysis process. It provides great support to the management of Vodafone Group in the evaluation of the effects of different resources in attainment of corporate objectives:

As per the above assessment through VIRO and Value chain, key strengths of the Vodafone include significant investment in research and development, optimum management of human resource management, high-end value-added services, and network coverage and resource integration. On the other hand, the organisation faces some issues in the attainment of distinct needs of the large customer base in different countries that have resulted in the downward trends in the number of loyal customers.

4.0 Evaluation

4.1 Suitability- TOWS Analysis

SO

Vodafone Group Plc has a vast network coverage and significant investment in technologies that would support organisation in the adoption of the latest technologies, the fulfilment of the requirements of government agencies, and development of new services.

ST

The Vodafone Group Plc has a highly efficient workforce and team contractors through which the management would be able to manage a variety of legal compliance and government policies in an optimum manner. It could reduce the threat of legal penalties (Holweg and Helo, 2014).

WO

For removal of the corporate weaknesses, the management of Vodafone Group Plc pays extra attention to different business opportunities such as consideration of the change in the interest of customers, advancement in the service network and welfare of society. These potential opportunities would help management in lowering corporate weaknesses.

WT

This section highlights the corporate weaknesses that could enhance threats of business. In the context of the present case of Vodafone, the large customer base and competitive rivalry influence the threats of the firm like reduction in sales revenue, low-profit margin and others (Jung, 2014).

4.2 Acceptability

In the context strategy planning and implementation process, stakeholders of an organisation play a key role in controlling the different business operations in an appropriate manner (Khan et al., 2016). Therefore, the power/interest matrix finds a great tool in managing different stakeholders to avoid threats and weaknesses of Vodafone. Key elements of the power/interest matrix are listed below:

Manage Closely

In the present case of Vodafone, the organization has to develop an appropriate relationship with different contractors in an efficient manner. This is because the company’s relationship with contractors would assist the company to maximise the efficiency of network infrastructure. In the context, the business entity has to increase its engagement with contractors.

Keep Satisfied

As per the present case of Vodafone Group Plc, the company has faced some issue in the attainment of the needs of customers associated with different cultures in an appropriate manner (Shvindina and Shkurko, 2015). In this context, the management should have to pay extra attention to the change in the interest of customers, level of market competition, along with service offering of other customers in an efficient manner. It would enhance the satisfaction level of customers and sales volume.

Keep Informed

For improving the organizational efficiency, the management of Vodafone Group Plc needs to pay extra attention to the performance and productivity of employees. This is because the optimum integration of resources could be managed by the skills and efficiency of the workforce (Aithal, 2016). Employees have low power but highly interested people. Therefore, employees are regularly informed about advancement in organizational processes and managerial decision to attain corporate goals.

Monitor

It includes low power and low-interest people that do not require any kind of formal communication. In this regard, an organization just monitors the efficiency these individuals like suppliers and external consultants.

4.3 Feasibility

For increasing the effectiveness of corporate strategies, the management of Vodafone should have to pay extra attention to the market research activities through which the management can assess the change in interest and perception of customers in the different cultural environment so as the management could improve the quality of services with reference to contemporary market trends and the level of competition (Tonelli and Cristoni, 2018). By increasing the engagement with customers, Vodafone Group Plc could maximise the efficiency of managerial operations. Furthermore, the detailed assessment of different legal norms in the strategic planning process with reference to distinct requirements of different countries would support the telecom company in lowering the number of penalties and other legal actions.

5. Conclusion

As per the above assessment, this report concludes that the analysis of external business environment along with internal business efficiency helps companies like Vodafone Group Plc in the evaluation of the corporate strengths, weakness, opportunities and threats. In this regard, the PESTEL and Porter’s five force model have found very effective in the evaluation of organizational success factors and threats. In a similar way, value chain and VIRO model assists the management in the evaluation of core competences. By applying different tools, key strengths like network coverage, efficient workforce, digital technologies, and others support management in handling the corporate weaknesses, opportunities and threats.

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