Strategic Report to Board of Directors
Macro-economic analysis of Vodafone’s market environment reveals that increasing mobile penetration in European and emerging markets mandates the company to invest more in expanding its networks through emerging technologies, such as 4G and LTE, in order to meet consumer demand for high speed and reliable data connectivity. Competitive environment analysis demonstrates that Vodafone faces intense competition from other mobile network operators and virtual mobile network providers within emerging markets. However, Vodafone’s internal strengths, such as financial strength and strong brand recognition will allow it to invest in the expansion of its networks and to compete favorably in emerging markets. The main strategic issues facing Vodafone include growth of its markets in Europe, delivery of unified communications, improving enterprise services and enhancing competitiveness in emerging markets. It is important for Vodafone to invest in the expansion of its mobile money services in emerging markets and to provide unified communications so as to enhance consumer experiences and to overcome the intense competition in emerging markets.
Vodafone has maintained a relatively steady growth since its forming in 1982. The company ranks second in the global telecommunication market for having over 435.9 million subscribers (Mihaila, 2012). Vodafone’s success is attributed to its winning strategies and choices. However, the company must focus on implementing strategies that are aligned with the rapidly changing business environment in the global telecommunication industry. Vodafone’s market capitalization reached a record of £89.1 billion in 2012 (Carroll, 2015). It continues to improve its overall performance in the global market so as to compete favorably against big rivals, such as China Mobile. The Vodafone 2015 strategic plan was specifically designed to allow the company to compete fairly against its global competitors (Morris, 2015). In this report, Vodafone’s current external and internal environments are analyzed with a view of assessing its competitiveness within the global telecommunications market. The report also provides an evaluation of Vodafone’s strategic choices with a goal of recommending a strategy that will enable it to compete more favorably in future.
Factors within the macro-environment influence Vodafone’s current and future business strategies. For instance, the increasing penetration of smartphones in the European market shape the design and implementation of Vodafone’s market penetration strategies (O'Reilly, 2013). Changing technological environment and consumer preferences, such as shifting from 3G to 4G and LTE internet technologies will mandate Vodafone to review its strategy in IT innovation. The company’s strategic investment in 4G and LTE networks will determine its ability to provide connection speeds that are aligned with the changing consumer preferences on technology. Vodafone’s top competitors, such as Telefonica Europe, Eircom Limited, Deutsche Telekom and Orange are offering both mobile and fixed bundles with a view of meeting the needs of new market segments (Nalwaya & Vyas, 2014). Carroll (2015) explains that the changing competitive and technological environments will shape Vodafone’s future wholesale arrangements, investments and acquisition strategies.
The macroeconomics of emerging markets, such as rapid economic and population growth, will influence Vodafone’s entry strategies into new international markets. Emerging markets within the developing world are characterized by inadequacy of fixed infrastructure and an increasing demand for data (Bettelley, 2015). As a result, Vodafone will have to implement strategies of improving its distribution and network capabilities within emerging markets. The preferences of companies for telecommunication services are also changing. For example, most companies seek communication services from a single source (Mihaila, 2012). In addition, mobility is increasingly becoming the strategic choice of many companies as employees are enabled by technology to work from anywhere (Nalwaya & Vyas, 2014). This means that Vodafone must invest more money in innovative telecommunication technologies and solutions, which are aligned with the changing preferences of the corporate market, including Cloud and Hosting, Vodafone One Net and M2M.
The global telecommunications industry has numerous alternative providers, making it highly competitive. Each country has three or more telecommunication companies and mobile network operators (Kresak, Corvington, & Williamson, 2016). For instance, there are over 100 mobile network operators like Vodafone in the European telecommunications industry alone. Mobile network operators also face significant competition from virtual mobile network providers. Communication operators that use instant messaging, Wi-Fi or other internet-based services also compete directly with mobile network operators (Morris, 2015). Sagar (2011) asserts that the competitiveness of the global telecommunication market is expected to intensify as established mobile network operators enter emerging markets. According to Bettelley (2015), smaller mobile operators and virtual mobile network providers compete favorably against larger mobile network operators as they are attractive to consumers who seek value.
The strong financial capabilities of large mobile network operators, such as Vodafone, allows them to invest adequately in 4G and LTE networks within emerging markets with a goal of appealing to value seekers (Kresak et al., 2016). Vodafone’s financial capability to invest in new technologies demonstrates its competitive advantage over smaller mobile network operators and virtual mobile network providers. Investment in new telecommunication technologies and networks will allow Vodafone to differentiate through service quality and higher network capabilities, making it more competitive against smaller mobile network providers. Sagar (2011) illustrates that investment in wholesale agreements, acquisitions and fiber networks will determine Vodafone’s competitiveness against the fixed data capabilities of fixed operators.
The SWOT analysis framework can be used to analyze the internal strengths and weaknesses of Vodafone. Through SWOT analysis, the strategies the company should use to leverage its strengths and to overcome its weaknesses can be determined. Vodafone’s large customer base of over 435.9 subscribers across the world enables it to enjoy a strong position in the global market and to amplify its financial leverage (Vodafone Group Plc, 2016). Vodafone is also able to absorb risks, such as changes in global economic environments, due to its large market base (Vodafone Group Plc SWOT Analysis, 2015).
Diversification is among Vodafone’s notable business strengths that promote its competitiveness in the global market. Vodafone’s business operations are geographically diversified. Markets such as the UK and Germany provide the larger portion of Vodafone’s revenue but it is diversification into emerging markets, such as India, which provide Vodafone with an immense potential for growth in both data and voice services (Vodafone Group Plc SWOT Analysis, 2015). Vodafone’s advanced networks, such as high-speed wireless networks and LTE enables it to meet changing consumer preferences and allows it to maintain its strong brand image. Notably, Vodafone’s employee friendly practices, decent customer services, creative advertising and aggressive marketing enable it to enjoy strong brand recognition in markets across the world (Morris, 2015).
Vodafone’s weaknesses must be addressed in order to promote its strategic objectives for growth. Vodafone depends on the European market for two-thirds of its income. Dependence on the European market predisposes the company to Europe’s sluggish economic situation in the past 5 years (Nalwaya & Vyas, 2014). The huge presence of Vodafone in Italy, Portugal, Spain, Ireland and Greece specifically exposes it to the recent poor economic conditions in these countries, which forced customers to reduce their mobile phone bills (Bettelley, 2015). Furthermore, Vodafone’s absence in the vast and profitable telecommunications market in the United States is a weakness that should shape changes in its future internationalization strategy. For example, Vodafone’s move to sell $130 billion stake to Verizon in 2013 is a drawback that limits its presence within the U.S market (Kresak et al., 2016).
The strategic choices that define Vodafone’s future direction are grouped into consumers in Europe, consumers in emerging markets, enterprise market and unified communications. Vodafone’s strategic choices influence the design and implementation of its strategic objectives for growth in both the European market and emerging markets. The company’s strategic investment in the implementation of the Vodafone 2015 strategic plan is determined by the effectiveness of its strategic choices. The company’s strategic choices are meant to support investment in lucrative markets and to allow it to leverage on its core revenue streams for improved financial performance and competitiveness in the global telecommunications market (Vodafone Group Plc., 2016).
Vodafone’s strategic choice for the European market is driven by the growing demand for data (Burt, 2002). Since Europe is Vodafone’s largest market, it should focus on meeting the growing demand for data in this market so that it can effectively achieve its financial objectives. Vodafone’s strategic choice for the European market is demonstrated by its strategic objectives of expanding and providing 4G connection to more than 90% of consumers in the European market (Mundy, 2011). Vodafone will achieve high revenue streams from the European data market by modernizing its mobile networks through high bandwidth and high speed backhauls. This will allow the company to provide its large data market in the Europe with consistently good and reliable network experiences.
Vodafone’s strategic choices for consumers in emerging markets are motivated by the strong demand for reliable telecommunication services in these markets (Parker, 2011). Vodafone’s emerging markets are in Qatar, India, Kenya, South Africa, Ghana, Egypt, Tanzania and Turkey. These emerging markets are lucrative because of their high growth. Mundy (2011) reveals that emerging telecommunications markets by over 8% each year. Vodafone’s strategic choices for emerging markets include increasing network quality, driving data segments, enhancing customers experience and increasing access to mobile money services, such as M-Pesa. Vodafone continues to invest in emerging markets to meet its strategic objectives of improving network coverage and upgrading its telecommunication stations (Mas & Morawczynski, 2009).
Vodafone’s enterprise strategy is attributed to its strategic objective of improving Europe’s business environment. Vodafone realizes that businesses in Europe face same opportunities and challenges related to fixed and mobile communications (Mundy, 2011). In addition, employees expect reliable connections to applications, data, customers and colleagues. Vodafone’s strategic choices pertaining to the enterprise market in Europe include the building of highly comprehensive communication portfolio for three market segments: carriers, multinationals and small and medium sized enterprises (Boohene & Agyapong, 2011). Vodafone’s enterprise strategy specifically involves shifting into total communications, developing the Vodafone Global Enterprise, expanding its global voice carrier services, Cloud and Hosting and M2M communications (Boohene & Agyapong, 2011). Furthermore, Vodafone is investing in the expansion of its global IP-VPN footprint in order to provide total communication services to more than 62 countries.
Vodafone’s unified communications strategy is motivated by the increasing demand for media convergence and the need of new generation consumers for ubiquitous mobile connections (Thomas, 2013). The company realizes that customers need instant access to multimedia, such as videos, images, music and internet. Boohene & Agyapong (2011) explain that unified communications provides customers with a single point of contact and one bill for both mobile and fixed services. Therefore, customers get value from telecommunication services through unified communications. Vodafone focuses on providing high speed seamless connectivity through the convergence of fiber, cable, Wi-Fi, 3G, 4G and LTE technologies (Mundy, 2011). Unified communications is a lucrative market opportunity for Vodafone to expand its enterprise market segment.
Vodafone recognizes that its strategy for emerging markets is the prerequisite to its competitiveness in the global market and ability to meet strategic objectives for growth in new international markets (Parker, 2011). An evaluation of Vodafone’s strategy choice for emerging markets is important as it will provide insights on how the company can improve its global presence and competitiveness in the international telecommunications markets. Emerging markets are characterized by intense competition from mobile network providers. Therefore, Vodafone’s strategy for emerging markets should be designed to overcome the intense market rivalry. Additionally, Vodafone should diversify its services within emerging markets to enhance the experience of customers and to provide them with value for enhanced competitiveness (Boohene & Agyapong, 2011).
The delivery of diverse services, such as MyVodafone app, Webchat and data top-ups, is the prerequisite to customer satisfaction and competitiveness in emerging markets (Parker, 2011). Targeted price plans, such as reduction of prepaid prices will also allow Vodafone to compete successfully against mobile network operators in emerging markets. Furthermore, the expansion of Vodafone’s M-Pesa mobile financial services from Kenya to other emerging markets, including Tanzania and South Africa is an effective strategic choice for enhancing its presence and competitiveness within the global market (Jack & Suri, 2011).
The main strategic issues facing Vodafone include growth of its markets in Europe, delivery of unified communications, improving enterprise services and enhancing competitiveness in emerging markets. The growing demand for data in the European telecommunication market should be met by Vodafone in order to grow its revenue stream from its expansive European market. Vodafone also needs to provide unified communications through convergence of mobile and fixed communications in order to meet the changing needs of consumers, such as demand for high speed and ubiquitous access to multimedia. Vodafone should also provide cost-effective and reliable M2M, Cloud and Hosting, fixed and mobile services to meet the demand in the enterprise market segment. More importantly, Vodafone should continue investing in improving and expanding its services in emerging markets in order to enhance the experiences of consumers and to overcome the intense rivalry in its new international markets. The choices made by Vodafone’s top executives will influence its ability to become the global leader in the telecommunications business.
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