Strategic Position Vodafone Uk

Introduction

The Vodafone Group is the biggest mobile telecommunications network organization in the world. Its headquarters is in Berkshire, England. The large group has successfully launched its operations in 25 nations and has developed partnership networks in 42 other nations. Its annual revenue is $121 billion. The company’s UK division has a collection of 44 exchange and office buildings with over 13,000 employees (Davies). Vodafone group has 444 million customers globally and in the UK alone, it has 19.5 million customers. Vodafone UK majors in innovation, investment and the delivery of top-notch customer service. In addition, the UK division runs a retail estate having over 480 stores in different locations across the nation which sell home and business broadband and landline, Vodafone SIM offers and contracts, and mobile phone handsets (Vodafone Group PLC).

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This report aims at investigating and evaluating, using tools, techniques and models of strategic management, how Vodafone UK is impacted by the external environment which frames its threats and opportunities, and the strategic capabilities that result from its weaknesses and strengths. This investigation shall be carried out using the PESTLE analysis, Porter’s five forces analysis and the SWOT analysis of Vodafone UK so as to develop a conclusion of the external environment which the organization operates within.

PESTLE Analysis

Since the vote by the British public to break away from the European Union (EU), Vodafone has been in the dark concerning Brexit. The uncertainties brought about by the Brexit, particularly there being insufficient information concerning the post-Brexit strategies, leads Vodafone to plant to relocate its headquarters from Berkshire to another place in Europe. This is because Brexit would shut the UK away from the single market of the European Union (EU) which would prevent the company from expanding its opportunities concerning cloud-based services and the Internet of Things. As a result, while Vodafone still retains its operations in the UK, it works to strengthen its public and regulatory policy functions in Brussels as a way of ensuring substantial business proceeds in the EU (Morris).

With regards to the slowly recovering British economy, Vodafone appears to be benefiting more from the larger European market than the British market. For instance, in an earnings report between July and September in 2017 revealed that the revenues from Vodafone’s services in the UK made up only one fifth of the total European market. This ratio reflected a decline from the previous year during the same time frame. Vodafone UK is experiencing a diminishing business while the main organization, Vodafone Group, is shifting its focus to nations such as Spain and Germany. Furthermore, the Brexit uncertainties cause the company to report its financial statements in euros and not the Sterling pound (Davies).

Vodafone UK is concerned about the youth and children below the age of 18 and the risks they encounter while utilizing mobile telecommunication networks. For instance, the organization shows concern for paedophiles and other adults contacting their children using mobile phones. There is also concern for adult content and material being availed to children below age 18 through mobile phones. The risky content that children can access include violence, pornography, harmful and misleading information, advertising, gambling, and scams and spams among others. The organization is also concerned about the possibility of children being persuaded, due to their trusting nature, to reveal personal information online which could lead to them being tracked and stolen or their details being used in a crime scene (Bunker).

Brexit presents several legal challenges to the mobile telecommunications network industry and this has a direct impact on Vodafone UK. Before Brexit mobile phone owners using Vodafone services had the freedom to travel to any EU nation without having to incur roaming surcharges (Reality Check Team). However, with Brexit in place, mobile operators like Vodafone UK have a freedom of implementing surcharge fees on roaming customers. Despite the ability to the commercial decision of charging UK citizens, Vodafone has shown no intentions of changing its roaming charges. Regardless of the Brexit negotiations, Vodafone UK still wants to ensure that its clients acquire maximum benefit for their services (Byager).

The mobile telecommunications network sector is highly profitable because communication is widely used across the nation. Vodafone UK is part of one of the largest organizations in the telecommunications industry and this, in retrospect, makes it difficult to be challenged with the threat of new entrants. Furthermore, the new entrants will have to incur high start-up costs in the telecommunications sector. These costs are necessary to cover for the setup of network infrastructure (Al-Atiqi and Mumen).

Threat of Substitutes

Initially, the telecommunications sector is mainly focused on providing mobile voice communication. The internet has brought about applications which use Voice-over Internet Protocol (VoIP)which replaced the traditional voice services provided by GSM. Vodafone UK faced the threat of substitutes from applications such as Viber and Skype which use VoIP technology and this reduces the amount of revenues it earns. Also, susbtitutes from instant messaging services like Facebook Messenger and Whatsapp reduce Vodafone’s revenues on the part of SMS. However, considering that Vodafone UK provides data services, it can recover voice revenue lost to companies like Skype and Whatsapp through data revenues (Al-Atiqi and Mumen).

Bargaining Power of Buyers

Mobile Number Portability (MNP) services give consumers the freedom to change operators. The increase in mobile virtual network operators (MVNOs) makes the telecommunications industry highly competitive as consumers can freely choose the major network operators and can also become MVNO customers. The regulations offered by Ofcom, by controlling and monitoring different operator activities raises competition and accordingly raises the consumers’ bargaining power (Al-Atiqi and Mumen).

Vodafone UK is present in an industry which has a convergence of many suppliers. Large MVNOs are supplied with network infrastructure from large telecommunication organizations. Due to lack of their own infrastructure, MVNOs, companies like Vodafone UK acquire higher bargaining power. Smartphone device manufacturers such as Samsung and Apple are deemed as suppliers due to their bundling with telecom operators such as Vodafone for data and voice services while offering long-term commitment packages. For instance, Vodafone could has an exclusive right to sell Samsung phones during a specific period and this exemplifies how smartphone manufacturers have a high bargaining power as suppliers (Al-Atiqi and Mumen).

The competition in the telecommunications network is rife. In the incidence of price cuts, price wars are likely to erupt and this leads to companies like Vodafone UK to resort to differentiation strategies as a way of gaining an edge over competitors. Differentiation is done through the adoption of latest technologies such as 5G and 4G LTE. However, competition in this industry is too high to the extent that resorting to technological upgrades would only offer a temporary edge because other operators are likely to adopt the technology (Al-Atiqi and Mumen).

In order to measure the internal capabilities of Vodafone, the VRIO analysis is used. It analyses the imitability, rarity and value of every capability and determine its organized exploitation. In terms of access to capital, Vodafone UK does so from the Vodafone Group, its parent company. Vodafone Group’s free flowing cash of £5.6billion can be provided to Vodafone UK as a way of enhancing its advertising or operating capabilities. In terms of Network capabilities, Vodafone has made huge investments which allows it to provide internet at high speeds which assure excellent outdoor and indoor coverage (Al-Atiqi and Mumen).

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Conclusion

This investigation looked into Vodafone UK’s external environment in terms of its threats, opportunities, weaknesses and its strengths. The PESTLE analysis tool reveals that despite the implications Brexit has on the telecommunications industry in UK, Vodafone is resilient, such that it can shift its headquarters to other EU nations while retaining its services in the home country. Porter’s Five forces reveals that Vodafone UK is too large an organization to be challenged with the threat of new entrants. The threat of new substitutes which lead to a reduction of its voice revenue can be overcome by the data revenue it acquires by providing data services which allows consumers to use internet based services. Supplier bargaining power is made understandable by the relationship between a telecom company and a mobile device manufacturer. The VRIO analysis illustrates Vodafone UK’s internal capabilities and how they make up its strengths and weaknesses.

Bibliography

  • Al-Atiqi, Abdelwahab and Faisal Mumen. "The Strategic Alternatives of Vodafone UK in 200." (2009). Web.
  • Bunker, Adam. #StandupToBullying: Tips, Info and Apps to help Keep Children Safe Online. 2016. Web.
  • Byager, Laura. How a no-deal Brexit could affect mobile phone roaming charges for UK users. 2019. Web.
  • Davies, Jamie. Brexit doesn’t matter to us, as long as it doesn’t kill the economy – Vodafone UK CEO. 2018. Web.
  • Morris, Iain. 'Brexit' Vote Hits BT, Vodafon. 2016. Web.
  • Vodafone Group PLC. "Connecting Everybody to Live a Better today and Build a Better Tomorrow." Annual Report. 2017. Web.

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