Vodafone Group PLC is a British multinational telecommunications company having its headquarters in London. It is indeed one of the world`s largest mobile companies operating in over 30 countries and also has partnership with other network operators across over 40 more countries. The Companies outright vision is to become a global mobile leader in terms of profit, value and customers. Vodafone has networked economy bridging three major developed markets (Europe, US and Japan).

Vodafone`s current business strategy is to develop from Strong Vodafone into more valuable oriented.

2.0 Porter`s five force Analysis.

The Porter`s five forces analysis is a useful component which will be used to determine the depth of competition within the internal environment of the industry. According to Porter, M.E (1980), the state of competition in an industry depends on five forces which estabish the micro-environment.

Threat of New Entrants

Bargaining power of Supplier

Industry Competitors/ Intensity of Exsiting Rivalry

Bargaining power of Customer

Threat of Substitutes

Threat of New Entrants.

There are a lot of threats when your entering a market. Some of these threats are as follows.

High Sunk Cost: Cost is one of the most important factor that has to be considered when entering a market. It is very diffcicult to enter a market as there is usually a large amount of capital required. For example, a lot cost is required for advertisments and promotions for the new brand entering the market for people to be aware that there is a new brand in the market. This positively affects Vodafone.

Economies of Scale: It helps reducing incremental cost of production for the producers. When new Entrants enter the market, they will have a higher cost of production, because they have smaller economies of scale. This positively affects Vodafone.

Geographic factors: Vodafone has presence in major countries of world. New entrants will have to have a huge market orientation to survive in the market as there are already a lot of dominating companies in the sector from before. Thus, positively affects Vodafone.

Bargaining power of Customer

Customization: Customisation is the most important aspect of a company. In todays climate where there are so many competitors customer service stands outs the most to the customers. If customers are happy with the service that is being provided to them then they would not switch to another producer or supplier. In this case Vodafone has various customised schemes for their customers positively affecting it.

Large Customer Base: As Vodafone is a huge company and is one of the dominating companies in its market which being oligopoly it has very high customer base and thus avoids bargining leverage by any one paticular customer.

Product Importance: Product is the key to gain huge amount of customers. Product is the most important for a customer, if a product is good and a good customer service is being provided then the customer would not mind paying extra for thr product. Furthermore, Vodafone with its customer obsessed strategy definitely have positively affects in terms of its innovative products.

Bargaining power of Supplier

Volume: The Suppliers of Vodafone are reliant on its high volume requirement thus Vodafone has a positive effect by threatening to cut the volumes.

Critical production inputs: In some cases production inputs are similar, in this case it is easier to mix and match inputs and this tends to reduce the suppliers bargining power.

Industry Competitors

Fewer Competitors:

Vodafone tends to provide excellent quality products and an outstanding customer service, in these sectors no other competitor is able to compete therefore, this positively affects Vodafone. As Vodafone has a market structure of an oligopoly this means it is one of the firms that dominates the market. Vodafone competitors will be competing over non-price strategies such as advertising and promotions. For new entrants this would increase there costs and therefore this suggests that there is high barriers to entry in this market.

Statutory regulations: Government through its various policy actions try to limit the Competition. Example: limiting the license of Spectrum band. This gives Vodafone the priority to establish its company furthermore to a global level without having any problems with other competitors from the help of government regulations.

Large Industry Size: With the growing population the usage of mobile phone is rapidly increasing so as the number of service providers entering the market. Vodafone is neatly poised to absorb the competition from other service provider. Furthermore, large industries such a Vodafone sometimes do let multiple firms prosper without having to steal market share from each other.

Threat Of Substitutes:

Switching cost: Customer tends to consider the cost element before shifting to the substitutes. However, if the market is oligopoly then the price is rigid and competition is over non-price services such as promotions. Currently there are very few substitutes for Vodafone products. This positively affects Vodafone with its current products & customer base.

Limited Substitutes: Currently there are very few substitutes available in the market. And the general business trend is what Vodafone provides. This reduces the risk for customers of Vodafone to swtich to any other network as they will not receive the same sort of service or prices in many case.

3.0 PEST Analysis

PEST analysis is a strategic tool used to analyse external factors affecting the business and stands for political, economical social and technological factors (Lancaster et al, 2002).

In terms of the political factors affecting Vodafone, this includes EU Roaming Regulations that tends to aim to decrease charges for mobile phone usages abroad by 70% (Preissl et al, 2009) and also to increase customer rights within Europe. This is one of the recent political factors that have had an effect on Vodafone.

Secondly, economical factors also affect Vodafone, such as increase in GDP and also the inflation rate. For example, if there is an increase in inflation this means that the price of products tends to increase. This increase in price can lead to cost push inflation or demand pull inflation. It usually tends to lead to cost push inflation where the extra increase of cost is passed onto the customer itself. Furthermore, the recent recession could have had an effect on Vodafone as people were saving rather than spending. This could lead to a lot of customers dropping down in their monthly plan or even changing to a cheaper network this would have lead to a drop in sales for Vodafone. However, this all depends on whether the demands for Vodafone products are elastic or inelastic.

Furthermore, there is a range of social factors as well that affect Vodafone. For instance; changing work patterns that are becoming very popular make people work from home increasingly relying in communication technologies. In Addition, there is a lot of impact of technological factors on Vodafone is due to the nature of the telecommunications industry.

Specifically, a technological innovation in communications and emergence of alternative means of communication such as online chatting, and Yahoo! Messenger are going to affect Vodafone strategy in a way that the company is left with a choice of either to form strategic alliances with above companies or to commit to considerable amount of research and development in order to introduce innovative products and services to the market.

4.0 Competitive elements

From the above, the most important general business trends are the Bargining power of customer. This is the key to business for Vodafone. The customers demands will keep on changing with the new trends that will keep on occuring in the market. To be up to date with the trends in the market the company needs to be proactive to have a competitive age. Another important consideration is the number of existing competitors that do tend to change and provide the company with different challenges each day. The strategic deicison makers of Vodafone must consider the above before making a stand in the current market.

Network:

The Vodafone tagline for its network says “A Network you can depend on”.

An independent research by YouGov focused that the iphone owners who were looking to switch network when asked they preferred Vodafone over other network. (See Appendix 3)

The Order of their preference in percentage terms was as follows:

Vodafone – 22%

O2 – 20%

Orange – 7%

3-Mobile – 6%

T-Mobile – 4%

Also, just 9% of Vodafone’s iPhone customers said they were going to leave, the same as 3-Mobile, But lower than Orange (15%), T-Mobile (14%) and O2 (12%).

In addition, more Vodafone iPhone users said they were NOT going to switch (66%) than any other operator (Orange 61%, O2 59%, T-Mobile 55% and 3Mobile 54%).

This proves Vodafone’s competitive advantage on network front in comparison to its peers to sustain any source of competition.

Innovative Branding Style: Vodafone has one of the most innovative branding style among its competitors. The example of can be taken from its most unique ZOO-ZOO style of Branding.(See Appendix 4). The Vodafone style of Branding is famous worldwide. This gives it a competitive age over its peers.

Strong Financial Performance: Vodafone is known as a high performance company with a high leading market position. Vodafone is a high performance company with a leading market position. It is either number one or number two mobile operators when measured by revenue market share in 14 out of 18 countries it operates. It has outperformed its competitors by increasing the market share in most of its key markets over year 2011. (Annual report 2012)

This outstanding performance gives a more realistic picture of its competitive advantage.

The prime asset of the company; its Network has been awarded with six Best network awards over the last couple of years, and recently been voted as the best network by readers of mobile choice.

To demonstrate its new source of competitive advantage on innovation front it has come up with the following.

To attract customers Vodafone has introduced a new strategy. Its new strategy is to keep up to date with the 4G technology service. The customer will get their free upgrade to the new 4G technology. In this way Vodafone is able to attarct its existing customers with the high quality service, network and goodwill.

Competency GAP with Vodafone network in Australia.

Vodafone Hutchison Australia (VHA) CEO Bill Morrow has admitted that the company still has a long way to go before its network meets the customer demands.

The Vodafone CEO admitted that the customer demand for the coverage has exceeded the network resulting in Cal drop-outs & network being plagued. All this happened not long after Vodafone was scored as the top brand-preference among the consumers.

This has cost Vodafone with reporting loss of AU$260.2 million in first six months of 2012. To add to the curse company lost 700,000 customers between 2010 and 2012, sliding from 7.5 million to 6.8 million as of June this year. But Vodafone Australia expects the situation to improve with investing billions into the network. The Strategic decision makers should apply SWOT analysis to solve the problem. For the market like Australia it is very important for Vodafone to maintain its competitive advantage like other markets.

Strength

Global Brand

Customer support/demand

Latest Technology

Competitive advantage

Weakness

Network problem in Australia

Lose of Customers

Opportunities

Investment in network building

New Technology in form of 4G hitting the market

Threat

Lose of Customers due to network problem

Chance for Competitors for capture the market

Long Term Strategy

The long term strategy of Vodafone is influenced by its current values of converting Strong Vodafone to more value Vodafone.

Vodafone should consider the following Strategic options for coming 5-10 years.

Duel Branding (Expansion in Emerging markets)

The main intensity of growth for Vodafone is its global presence. Vodafone should continuously target to expand its business in remotest part of the globe where the people do not have the access to the mobile phones. These areas tends to include which have not been developed in terms of infrastructure and have a difficulty in achieving a good landline service. Vodafone should committ to these places in providing them with its mobile technology to develop communication that in future will help both the economy and society.

To achieve this, Vodafone has adopted duel branding policy with 30 companies to expand its global presence. It includes locally recognized brands and Vodafone name. The policy is once the Vodafone name becomes widely accepted it is believed to become the sole brand. The best example is its sponsorship deal with Manchester united, the alliance was formed to develop Vodafone brand in that part were Manchester united is good brand and Vodafone has not established.

Comprehensive Service

Vodafone with its professional service partner Flexility has devised a comprehensive communication strategy for its clients like NHS Foundation trust to make better use of office space while reducing administrative time. The objective was not to look technology in isolation but to take trust overall business objective into consideration. This plan has helped the trust in creating thousands of extra hours for the staff to spend on service users and work on initiatives to improve operational efficiency. Vodafone should look to tap such kind of market for developing it Brand & line business.

Technological Innovation

Vodafone should continuously look for the technological innovation in ever challenging Mobile network environment.

A step towards this innovation of Vodafone is by setting up a New Technology & incubation center in Tech city of London. Setting up of R&D center by Vodafone is intention to pool the Technology Stars of Tomorrow and help Vodafone to come with new Technology in coming 5-10 years.

Mobile Data network

Internet surfing & downloading on Mobile phones is the need of hour, so company should have long term strategy for its Mobile data network.

New Services

In this ever changing customer market Vodafone needs to have a strategy in place for new service. Its early entry into 4G well demonstrates its hunger for new services and the motivation to keep its customer base and loyalty.

Reaching the Masses

Currently Vodafone operates as premium mobile service provider. Many people may feel that Vodafone is expensive for them and it may not be affordable by all. Vodafone should come out with the strategy to reaching the masses to further expand its customer base.

Recommendations:

Out of the above Long term strategies of Vodafone, Duel Branding seems to be the best option as it allows Vodafone the opportunity to increase its presnece in the places where the brand is not as popular as yet. In addition, one of the best aspects of this strategy is that Vodafone does not need to invest on Brand promotion through TV advertisement etc. as it has already sponsored its Brand partner. Furthermore, setting up of R&D center may move to a new era of technology which can help Vodafone to have new and innovative technology in the coming future.

Key Performance Indicators (KPI)

The company evaluates its competitive advantage by looking for its Key Financial, operational & commercial performance indicators. The strategic decision makers of Vodafone should look into following Indicators to evaluates its competitive advantage;

Financial KPI

The strong financial position of Vodafone clearly demonstrates its competitive advantage over its competitors. Its increasing Revenue & related organic growth, increasing Operating profit & Capitalized fixed Assets addition is the best evaluation for its competitive advantage. (See Annexure 5). The Revenue for financial year 2011-12 was £46.4bn & the Operating profit was £11.5bn.

Free Cash flow

Maintaining a high level of free cash is a key indicator of good performance of a company. Vodafone paid dividend out of its free cash flow to the tune of £6.1bn for the year 2012 even after significant investment in CAPEX. This helps the overall performance of the company and increases its brand value.

Relative market share performance:

It is a tool to track the performance by measuring the change in mobile market share against the competitor. Vodafone gained mobile service revenue market share in 5 out of 7 of its main markets. (Annual report 2012)

Percentage of European network with 3G (14.4 Mbps or better)

Faster, more reliable networks with wider coverage stimulate data usage and create a clear point of difference over other operators. It was found that Vodafone has 82% of European 3G network up from 56% in year 2011.

Smartphone penetration

It is the key to give customer access to mobile internet; the more the customer use them greater is the opportunity for Vodafone to provide is data service. European smart phone penetration for year 2012 was 27% up from 19% for year 2011.

Findings:The company Vodafone is market leader in providing telecom service around the world. It strives on creating more value than just providing service. It has a strong customer base of 404 million people in more than 30 countries of the world. The most important think in building a brand like Vodafone you need the following

Great Coverage

Reliable connection

Good Value

Passion for improving the customer experience

Company needs to be innovation Hungry

Conclusion

The basic Motto of Vodafone is creating Value to customer; they place serious consideration to customer demand and satisfaction. In the growing competitive world it is important for Vodafone to concentrate on masses. It cannot have a biased approach of providing service to Middle & Upper class customer. The decision makers will certainly take into account the strategy of focusing onto the masses. The only reason for not accepting the strategy of reaching the masses might be the decision maker’s policy of sticking to the elite class and providing them the best possible service at slightly higher price. But time is the best judge, let’s wait and watch the ambitious journey of Vodafone. From the analysis of Vodafone group, it is important that company needs to have above factors working in their favour to be market leader like Vodafone.