operates through a single reportable business segment: providing communications services and products. The group provides mobile voice, messaging, data, and fixed broadband services. It has a significant presence in Europe, the Middle East,
Africa, Asia Pacific and the US through its subsidiaries, joint ventures, associates and related investments. The group has equity interests in 27 countries and partner networks in over 40 countries. The group’s mobile subsidiaries operate under the brand name: Vodafone, while its associate in the US operates as Verizon Wireless. At the end of 2008, Vodafone Group had 289 million customers worldwide, as
calculated on a proportionate basis. Vodafone is an international company, with more than 260 million proportionate customers across 25 markets and partner
networks in 42 more countries.
This report will include a full market analysis and a set of strategic recommendations to secure Vodafone’s short, medium and long term future.
UK based with its headquarters in Berkshire, the company employs 72,400 people and provides mobile voice and data communication services to consumers and
enterprise customers covering Europe, Middle East, Africa, Asia Pacific and the US.
The group company recorded revenues of £35,478 million (approximately $71,224.9 million) during the financial year ended March 2008 (FY2008), an
increase of 14.1% over 2007.
The operating profit of the group was £10,047 million (approximately $20,170.2
million) in FY2008, as compared to an operating loss of £1,564 million
(approximately $3139.9 million) in 2007.
Its net profit was £6,660 million (approximately $13,370.5 million) in FY2008, as compared to a net loss of £5,426 million (approximately $10,893.1 million) in 2007.
Vodafone Group PLC
Berkshire RG14 2FN
0044 1635 33 251
0044 1635 45 713
The Voadfone vision has been consistent throughout its existance: to be the world market leader in mobile communications by improving inter-connectivity in a rapidly expanding communication market.
Establised in 1984, the central strategy of Vodafone has always been business expansion, both internally and externally, by utilising their vision to predict ground-breaking strategies. A prime example was Vodafone and Telcom Finland initiating international roaming call link services.
Their core values enshrine customer service satisfaction. They value their employees allowing them to develop. This encourages retention, promotion and reward.
Not all organisations publicise and promote a mission statement. However, the Vodafone mission statement is clear:
“The Vodafone Group Foundation is driven by a passion for the World around us. The Foundation makes social investments that help the people of the world to have fuller lives by:
Sharing the benefits of developments in mobile communications technology as widely as possible;
Protecting the natural environment; and
Supporting the local communities in which Vodafone’s customers, employees, Investors and suppliers live.”
By articulating this statement, Vodafone is highlighting the consumers’ interation with the company, i.e.
Benefits on offer.
Type of business they are involved in.
An aditional benefit of their written mission statement is possibly gaining a physiological advantage over their competitors.
An organisations’ primary objective is survival with the secondary objective being profit maximisation.
By setting high standards, Vodafone aims to attain both objectives by
Becoming the world’s mobile communications leader.
Going into joint ventures around the world.
Increasing customer mobile communication use and enhancing thier life experience.
Ensuring mobile communications becomes the primary means of personal communication.
More flexible than McCartney’s original four variables marketing mix model, the
extended marketing mix of Booms and Bitner is a marketing tool that has expanded the variables to seven (Daniels, et al, 2008). This model is more useful when considering service industries and knowledge-intensive environments. The table below covers the current Vodafone organisation.
Vodafone seeks to promote widest possible product distribution by
tailoring its price structure to different user groups,
Monthly price plans are available.
Rewards on the usage – 10% reward into Vodafone Bonus Bank scheme.
Competitive international roaming costs reduced.
Covering almost 75% of its operational area, Vodafone also sells through a network of independent retails (Carphone Warehouse) where
customers are able to see, handle and talk to staff before buying the product.
This option also extends to on-line sales services where prospective purchases can use ‘Contact Us’ and ‘e-Forum’ options.
Mass media – TV, magazine and billboard advertising promoting brand image to a wide audience.
On-line / viral distribution (e.g. YouTube)
National newspaper press releases via Vodafone website.
Vodafone offers voice, data, and multimedia content and related services across a broad range of products. From basic phone / messaging only
options to full internet connectivity and GPS functionality.
Other features include games, music download and video clips.
Security features include black list caller capability.
Vodafone live! provides on-the-move information services
Vodafone deliver their services through a mix of direct sales, on-line facilities and independent retailers.
Qualitative and quantitative
performance indicators allow
company’s processes and
sub-processes to be measured by such means as:
customer feedback – on-line and in store.
surveys – text messaging, in-store, on-line.
Action plans developed where required in order to achieve process
improvements, e.g. retail outlet inefficiency identified by customer survey returns.
Trained staff available at relevant outlets to ensure correct product / package matched with customer need.
Internal / external customer satisfaction interdependent on correct product customer match and perception of purchase experience, ultimatley reflecting on Vodafone brand image.
Vodafone core values include prizing employee involvement and development in all company processes. This encourages forward thinking leading to staff reward, promotion and retention.
The environment in which the service is delivered and the measured ability of the business to deliver customer satisfaction.
Vodafone’s retail outlets, its products and its staff all project the brand
Vodafone’s on-line services employ state of the art web design and customer interactivity processes. This promotes the customer experience during product enquiry or purchase. This can be measured visibly by recording site hits and sales levels achieved.
Vodafone’s recent 360 degree campaign is reconnecting the company to its younger customer base and success can be measured in TV
advertisement viewing figures and viral response (YouTube, etc).
Vodafone enjoys strong brand recognition. This provides competitive advantage as well as allowing effective new market penetration (Brassington and Pettitt (2007).
Strong brand building policy
Extensive global reach and diversified revenue base
Leading market position
Agreement with Telefonica
Positive outlook for mobile advertising
Increasing 3G penetration
The Vodafone Group has a well founded brand building policy. Its mobile subsidiaries and joint ventures cover Europe, Africa and Asia Pacific and the group specialises in delivering differentiated customer experience through its brand and communication activities. By creating a new marketing framework within the business, the group and its brand are now showing their commitment to move from a mobile only environment to one of total communications. Additionally, its brand and customer experience continues to develop and enhance Vodafone’s strategy of putting customer satisfaction to the forefront. The development of well defined guidelines, allow the positive use of Vodafone branding, covering
advertising, retail, online and merchandising processes.
A prime example of its branding expertise is the ease and speed with which it re-branded Hutchison Essar in India to Vodafone. The rebranding campaign of 2007 announced ‘Hutch is now Vodafone’ and encompassed over 400,000 multi brand outlets, over 350 Vodafone stores, over 1,000 mini stores, over 35 mobile stores and over 3,000 touch-points
Brand Health Tracking, a program designed to measure brand performance is
regularly undertaken. Additionally, external independent market research provides companywide coordination of methodology, reporting and analysis of the group. This contributes to the Vodafone brands’ international status, with its inclusion at the number 11 position of the BrandZ Top 100 global brands list as published in the Financial Times last year.
Strong brand building initiatives have consolidated significant brand related competitive advantage to Vodafone, particularly in new market penetration.
Aggressive global expansion through acquisition of stakes in several companies and associated networks resulted in Vodafone becoming one of the world’s leading international mobile telecommunications companies by the end of 2008. With equity interests in 27 countries and partners in more than 40 countries,
Vodafone can boast almost 289 million customers and a well diversified revenue base. In FY2008, the group’s geographical revenue breakdown was – UK, 15.2%; Germany 14.9%; Spain 14.1%; Italy 12.4%; Europe (Other) 12.8%. Revenues from the Middle East, Africa and Asia totalled approximately 12.8%, with East European contributions totalling 8.8%.
Combinations of global player status, diversified revenue base and multinational telecom operations synergies (such as roaming facilities and international call charges) work well to reduce business risk.
Vodafone Group is a global market leader and operates in Europe, the Middle East, Africa, Asia Pacific, and the US through subsidiaries, joint ventures and associated operations. By the end of 2007, a brief synopsis of company market share breakdown was – Germany 35%; Italy 33%; Spain 31%; Romania 39%; Turkey 26% and the UK 24%. Other regions – Egypt and India (18%) and the US (partner operations etc) 26%.
A strong/dominant market position impacts positively on the group operating performance.
Vodafone Group is currently embroiled in various legal proceedings related to tax issues.
A subsidiary of the group, Vodafone 2, is currently appealing against a High Court ruling in favour of HM Revenue & Customs (HMRC) regarding the UK tax treatment of its Luxembourg holding company, Vodafone Investments Luxembourg SARL, under the Controlled Foreign Companies section of the UK’s Income and Corporation Taxes Act 1988 (CFC Regime).
As a result, the group has potential exposure to liability for £2 billion in unpaid UK corporation tax liability
Additionally, Vodafone Essar Limited (VEL) and Vodafone International Holdings (VIH) tax irregularities, relating to notices issued in 2007 by Indian authorities, was still being investigated through 2008 and into this year, with Indian tax officials seeking £989 million in unpaid taxes.
Any involvement in legal proceedings, particularly when related to tax issues, may involve punitive fines and brand image damage.
In March 2009 Telefonica and Vodafone entered into an agreement allowing each other to share selected mobile network assets across clearly defined European operations (Germany, Spain, Ireland, UK and possibly the Czech Republic at a later date). Ongoing discussions are expected to highlight potential savings in other related areas, with predicted cost efficiency savings of around £100 million in the short to midterm. The net benefit of the agreement is a reduction in capital and recurrent expenditure costs for both the companies. Additional benefits include reduced environmental impact as both companies’ consolidate existing sites and Vodafone Group’s enhanced operating performance in coming years.
As mobile phones become the centre of the digital convergence, advertising on mobiles can be considered a potentially rich growth area for telecom players. Although not recession proof the mobile advertising market is still forecast to record strong growth in coming years. As an example, mobile advertising and search revenues in the US alone are forecast to record growth rates of over 70% between 2008-13.
Vodafone has various business models covering this area, including targeted demographic advertising and search advertising. Additionally, it has set up agreements with over 40 leading brands. If it realises its potential mobile advertising will contribute to group revenue growth in future years.
Third generation (3G) technology will soon be the industry standard customers expect. 3G technology allows the provision of a myriad of services. e.g. high speed mobile broadband, mobile TV, and mobile VoD. With the traditional voice revenues of mobile operators being adversely affected by changing tariffs, increasing
competition and technology development, operators are switching to 3G services in order to maximise their revenue opportunities. As a result, global 3G penetration is forecast to increase rapidly, with advanced economy penetration (US and Western Europe) rising from 30% in 2008 to over 60% by 2013.
Vodafone Group is a global market player in the world wide telecom market. The group has expanded its 3G networks service offering high speed internet and email access, video telephony, full track music downloads, mobile TV and other data
services in addition to existing voice and data services. In 2009 its 3G licenses cover Germany, Italy, Spain, the UK, Greece, Ireland, Malta, Netherlands, Portugal, Australia, Czech Republic, Egypt, Hungary, New Zealand and Romania.
Increasing adoption and development of 3G will contribute to the group’s future revenue growth.
Operating in a highly competitive and rapidly changing technology-based
telecommunications industry, the marketing focus is moving from customer acquisition to customer retention. This is further evidenced by highly penetrated markets and the effects of the current recession. Major competitors of the group
include France Telecom (Orange), Deutsche Telekom (T-Mobile), Sprint Nextel Communications, 3 (Hutchison), and Telecom Italia. Intense competition increases customer turnover and affects product and services pricing strategies.
Increasing competition may adversely impact on market share and revenue growth.
The European markets have high penetration rates, with Germany, Spain, Italy and the UK estimates to be 130%, 112%, 142.7%, and 137% respectively, at the end of FY2007. High penetration rates indicate that majority of the population are using the telecommunication products and services.
Mature markets (as in the case of the UK) inhibit future growth and lead to saturation. This adversely effects company revenue from these markets.
Telecom operations are highly regulated at both national and EU level. These regulations impact significantly on the telecommunications sector. As an example, approximately 20% of group revenue is directly subject to regulation, mainly related to termination rates and international voice roaming services. The competitive
environment is also impacted by regulations such as allocation of radio spectrum, provision of third party network access and network sharing.
As future regulations are enacted group operations may be adversely affected.
Adcock (2000) states that a PESTLE analysis raises awareness of threats and helps identify future issues in order that action can be taken to avoid or minimise the effect. Detailed below is a PESTLE analysis for Vodafone.
Inter an intra governmental policies heavily regulate the telecomunication industry regarding various area from infrastructure to content. For example, proposed EU regulations will impact Vodafone across national boundaries.
Regulations – mobile phones licenses are tightly controlled and are very expensive to acquire. Next generation (4G) licences will be more expensive than 3G. Additionally, some governments have implemented health
orientated measures in relation to phone use by children.
Infrastructure to support networks usually requires planning permission from the
government and other regulatory bodies. Vodafone / O2 asset sharing agreement will reduce this need.
Global and national economies affect the levels of potential revenue available to Vodafone. This has a detrimental impact on the cash available for research and development.
The recession has decreased the amount of money available to customers and this has provoked competition as customers shop around for best deals and products. This may result in a reduction in Vodafone’s revenue as process are adjusted down to attract more customers
Cost of licensing – The launch of 3G technology was preceded by a bidding war amongst leading companies keen to acquire this technology. As a global player, Vodafone was well placed to acquire this new technology.
Parents of minors may have concerns regarding inappropriate use of mobile telecommunications, e.g. adult advertising or paedophiles abuse. Vodafone promotes ‘Blacklist’ capability for its products.
Current European fashion is mobile phone orientated with the current number one accessory being Apple’s iPhone. Vodafone has recognised this by currently announcing via its websites the immenent arrival of iPhones.
Vodafone is promoting its Corporate Social Responsibility ethos through its European Union participation in EU Business Network for CSR activities.
Vodafone is a major 3G player and the services they offer reflect this. Their products are designed to complement mobile internet connectivity (direct access to Facebook), on-line music downloads and GPS services, etc.
4G mobile technology is the marketing name given to the next generation of mobile devices such as cell phones. It has been trialed both in Europe and the US in 2009, but as yet, has no agreed industry standard.
Vodafone is actively moving towards 4G and recently announced success in its trials of HSPA+, a version of super-3G that provides greater speeds than HSDPA without being described as 4G. The fastest HSDPA speeds currently offered by Vodafone and its rivals run up to a maximum of 7.2Mbps.
This technology advancement in general will help Vodafone to combat global competition and will allow them to continue to increase their customer base.
National and international laws need to be complied with. These range from telecommunications rules and regulations to corporate tax requirements. An example of national laws that Vodafone must comply with would be The Sale of Goods Act 1974 covering products and the The Road Vehicles (Construction and Use) (Amendment) (No. 4) Regulations 2003 covering product use.
Vodafone is currently embrolled in two major tax avoidance battles with national governments (India and UK) leving the company potentially liable for approximately three billion pounds in back taxes. Such a loss in revenue would impact across the company structure.
OFCOM – the Office of Communications. OFCOM is the independent body for regulating the communication industry. However, Vodafone goes beyond government regulation, working with its competitors in self-regulation. However to retain its leading position in the industry Vodafone believes it must exceed both legal regulations and industry self-regulation.
Vodafone have established a recycling programme for phones in order to help the environment and recycle and reuse the materials used in the handset. They give incentives in terms of money to customers ho hand in their old phone in exchange for a new one.
In order to lessen environmental impact, Vodafone and Telefonica signed an asset sharing agreement in March 2009 that will mean fewer masts and other assets required to be built.
3G services – Mobile broadband, GPS, mobile TV, and mobile VoD.
Vodafone now selling Apple iPhone. A market leader offering potential for revenue growth.
4G services – Currently no industry standard. Individual companies persuing own R&D impacting Vodafone revenue.
Mobile advertising market penetration will require transition of current business models into viable marketing campaigns.
Vodafone’s Value added services (Currently ‘Recall’ and ‘Data Direct’) enhances customer experience at little cost and promotes repeat customer volumes.
Large portfolio of mobile telecommunication products. Current 360 degree campaign producing increased revenue results across the product range.
2G services – basic, no frills, voice and text only.
Product sales – Poor custmer response forces Vodafone to drop HTC flagship phone, the HD2.
To guage the profitability of an industry and relevent competitive advantage, it is necessary, according to Porter (1980); to analys the 5 forces of an Industry. These are:
Threat of Entry
Intensity of rivalry among existing competitors
Pressure from substitutes products
Bargaining power of buyers
Bargaining power of suppliers
Mintel (2009) states that aggressive expansion by mobile phone network operators has not only changed the mobile phone retail market dynamics but has also altered the UK retail landscape. Intense market competition has lead to a
proliferation of mobile phone stores, making the likes of O2, Orange and Vodafone amongst the highest profile brands on the high street.
Can this continue? Have the networks over-expanded and will the pendulum swing back towards the independents and non-specialists?
Added to this, are an ageing consumer profile, recession, increasingly complex technology, and some high-profile retail MVNOs. All of which are set to impact the market during 2009.
There are several firms operating in this sector with different natures: network operators (MNO) – T Mobile, Orange, O2 and 3 – and Mobile Virtual Network Operators (MVNO) – Virgin Mobile and Tesco Mobile. The launch by Tesco of the cheapest iPhone yet will be in direct competition to Vodafone, who are also launching this product. This presents a threat to Vodafone as Tesco uses its economies of scale to under cut rivals.
If Porter’s model (1980) holds true, this situation makes the competition more intense since there are several companies of similar size and equaly balanced resources. This may create instability because they may be prone to fight each other and have the resources for sustained and vigorous retaliation. Additionally, competitors from different global regions may have different strategies and not necessarily be able read each other’s intentions accurately. (Porter 1980).
Barriers for Vodafone. Exit barriers are very high since Vodafone has invested heavily in the telecommunications sector since 1984. Although entry levels are low, as spectrum access rights are no longer necessary, the recession will increase competition and make the entrance level more difficult. Entrance of MNOVs (Virgin, Tesco and Asda) to the market encourage price wars.
This situation, according to Porter (1980) represents low and risky returns. Additionaly, brand competion is stronger when switching costs are low. In fact, within this sector, most standard customer contracts are for 12 months and it is easier than ever to unlock mobiles from network operators.
Vodafone is faced with an extremely competitive and ever saturated market where customers now have real choice. (Mintel 2009). Product inovation and added customer value will encourage increased customer loyalty. If there are more services, customers will be more likely to renew contracts with Vodafone. This also aid third party providesers like Carfone Warehouse.
The Vodafone 360° experience is targeted directly at the youth market. However, Holton (2009) states that the older generation within today’s markets, may have disposable income to spend on new phones (shows them as trend savy).
Vodafones’ partnership with Research In Motion (RIM) allowed them to market the BlackBerry Storm2 smartphone earlier this year. Additionally, they also provide IPTV (Digital Television delivery) which with internet connectivity make Vodafone, a full entertainment provider.
Cappell (2009) states that in lieu of acquisitions, Vodafone is pursuing growth by tapping outsiders’ ideas for new goods and services. Vodafone has setup www.betavine.net, a Web portal, where enthusiasts and amateurs can create and test one another’s mobile applications. Developers retain intellectual property rights, and Vodafone gains an insight into the latest trends and application uses
In line with its competitors, Vodafone has felt the power of the Internet, which allows people to communicate through VoIP – Voice over Internet Protocol. This allows free phone calls between computer or very low cost to phones, such as Skype. Additionally, Instant Messaging (IM) services allow free messages to be sent between computers.
Voadafon’s broad range of services ensure all aspects of consumer demand is covered. These include Vodafone at Home, Vodafone Wireless Office and Vodafone live! This connectivity is managed through partnerships with companies such as Yahoo, MSN, Microsoft and Google.
Notwithstanding the above, Vodafone is in a better overall market position than its Internet competitors since it has a diverse customer base, larger revenue base and greater market and customer experience to draw on.
Porter (2004) states that customers have a very strong bargaining power. Since Vodafone has a large segment of the telecomunications market, this puts them in a very strong position within this competitive sector.
A combination of price comparision sites coupled with the ability to unlock a mobile phone from a network provider increases the level of consumer bargaining power.
Further develop and enhance own in-house 3G super services (HSPA+) pending development of an industry 4G service. This can be promoted to customers as a 3G ‘super charged’ upgrade.
Resolve current financial situations with India and UK governments. Negotiate out of court settlement if possible on premise that any settlement less than three billion sterling would be beneficial to the company (negative media coverage and brand image damage) and result in less loss of revenue.
Negotiate further joint asset/ infrastructure sharing protocols where
appropriate with selected competitors. This option saves money,
promotes environmentally friendly credentials and gives greater operational area coverage to our customers at little or no cost to Vodafone.
Develop 4G services into an industry standard concept that can be fully utilised by Vodafone products. Associated marketing campaigns to be
formulated to ensure advanced economy (USA and Europe) penetration to overcome 3G market saturation.
Develop relevant business models to realise predicted market share in advertising through display and search advertising direct to mobiles
Currently Vodafone mobile products use applications developed outside the company. R&D investment may be needed to create an in-house
application design and development team (building on its www.betavine.net experience). This will bring product and
application under one provider with Vodafone customers gaining added
product value and increased customer satisfaction.
Corporate Social Responsibility. Vodafone to agressively market its CSR creditionals by in creasing carbon footprint reduction sponsorship, climate change projects (globally) and through local awareness events throught its operational areas. Further consideration could be given to sponsoring a UK academy status school through PFI. All CSR projects to be weighted against corporate brand visibility enhancement.
Vodafone was established as a subsidiary company of Racal Electronic Plc in 1984 in Newbury, London and through a planned global growth programme, has successfully become a market leader using agressive aquisition techniques. Past success should be built on using the same formula. If a technique works, do not change it, but refine it.
Provide adequate R&D funding to allow development of new ‘Voadafone branded’ hardware to meet mobile technology customer expectations. An example could be developing a light weight combined ear and eye piece for video conferencing via mobile phones.
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