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Business Strategies for Organisational Success | Vodafone's Case Study

952 Downloads1 I Published: 12 Nov ,2019

Introduction

Business strategy refers to the set of tactics which form up a long term action plan that support an organisation to achieve its goals and objective. These strategies provide a path way along with set of activities to be performed with an aim to reach at targeted objective. Vodafone group Plc is a British multinational telecommunication organisation which is headquartered in Newbury, Berkshire. It is considered as one among the largest mobile network around the world and provide services in approx. 25 countries. This report is about business strategies and its contribution toward an organisational success (Aubry and et. al., 2012). The report describes about the impact of macro environmental factor on business strategy by applying Pestle and Ansoff matrix framework. It will also brief about internal environment and capabilities of Vodafone using VIRO analysis. In addition to this it also includes Porter's five Force model for industrial competition evaluation and then app lication of different theories, models and concepts for strategical planning.

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Task 1

P1. Analyse the impact and influence of macro environment on Vodafone organisation and its strategies

External environment refers to the combination of various factors that are present outside the organisation but have a great influence over the operations performed by a company. Hence, in order to perform its operations effectively, Vodafone must focus over evaluating external environment on regular basis to determine the changes happen so that major actions could be taken on time.

PESTLE analysis:-

Macro environmental factors have a great influence over the strategies formulated by a company as these elements affect the way in which business operates. Hence it is very essential for Vodafone to evaluate the macro environmental factors and the way it affect the organisational operations whether positive or negative (Burgess and Radnor, 2013). So for this analysis PESTLE tool can be used which help in identifying various threat and opportunities present in marketplace for Vodafone. Pestle analysis of Vodafone is explained below:

Political:-This includes factors like change in governmental policies, rules and regulations of a country. The government of UK is stable and consider as one of the most successful country in term of rule implementation, corruption control, regulatory quality and government effectiveness. Vodafone has to consider several rules and regulation in order to achieve sustainability within marketplace like, communication Act 2003, a consolidation of telecommunication regulators (UK telecommunications regulation, 2019). This regulate the communication medium by restricting Wi-Fi broadband connection without permission.

Economical:-It includes factors like inflation-deflation rate, foreign exchange rate, taxes etc. UK has experienced a huge downturn within its economy after global crises which affect the financial health of not only businesses but also people living in that area (Cacciolatti and Lee, 2016). The result of which disposable income of people are not much high and Vodafone have to offer its services at lower price in order to maintain its customer base.

Social:- It includes factors like customer taste, preferences, demand, social trends, cultural norms which affects the choice of customer. In UK more than half of the population i.e. 53% in age between 16-75 years are using smartphone and require a network with high speed. So it is a greatest advantage for the Vodafone as it promises to provide high speed 4G internet speed over a lower frequency rate.

Technological:-UK is one of the most technologically advanced countries which is a major concern area for Vodafone as number of player within Telecom sector are bringing new technologies to provide more reliable and customised services to its target market. Vodafone always remain active in utilising the technological facilities provided by the country and with the help of which company is planning to launch high speed data services that is 5G network by 2020 (Vodafone 5G in the UK, 2019).

Legal:-It refers to the certain law as well as standard that a company must follow in order to perform its operations effectively within the marketplace. There are certain laws formulated by government to govern the practices performed by companies belongs to telecom sector that includes data protection Act 1998, Consumer right Act 2015, Consumer Contract Regulation 2013 etc. (regulation and outsourcing in the UK, 2019). These all must be followed by Vodafone in order to provide its services legally and by protecting the rights of customers which help in making a positive brand image within marketplace (Cserháti and Szabó, 2014).

Environmental:- It refers to the factors like change in climate condition, natural disaster, seasonal changes that may affect the operations performed by company. Being a part of telecom sector it is very essential for Vodafone to work over bringing new technology so that the network barrier could not be faced by customer in changing weather condition.

Ansoff's growth vector matrix:-

It is a type of strategic planning tool which provide a structure for formulating action plan regarding the future growth and development. This matrix is consisting of four major strategies that help a business to achieve higher success at marketplace (Eason, 2014). By applying this model Vodafone will be able to assess which strategy is more appropriate to achieve competitive advantage at marketplace:

  • Market penetration:- Under this strategy company focuses over improving its current services or offering within the existing market. This help company in expanding its market share by improving its performance. Vodafone can maintain its market share by improving the quality of services or may provide them at lower price than competitors.
  • Market Development:- It is a strategy in which company has decided to enter within a new market by targeting additional customer segment. By entering into a new market Vodafone will be able to increase its profitability level by enhancing customer base.
  • Product Development:- The main focus of this strategy is to bring a new product or services within the existing market in order to target new customer along with retaining the existing customer base. Under this strategy Vodafone is required to offer a new service to its customer as per the changes in need or expectation of target market.
  • Diversification:- This strategy is about bringing a new product for new market which help in providing several growth opportunities to company. Under this strategy, Vodafone can bring new services and offer it to an untapped market which provide them growth opportunity

Above explained are the different type of strategies which Vodafone can adopt in order to achieve competitive advantage at marketplace. But from the above all the Product development is more suitable strategy for Vodafone as telecom market of UK is having several growth opportunities for the company (Hoque, 2013). So, Vodafone can improve its existing service and reposition it as an improved version for maintaining its customer base and attracting more people to try it.

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Task 2

P2. Analysation of internal environment and capabilities of Vodafone organisation using VIRO analysis

Internal environment refers to the composition of various elements that are present within the organisation which also affect the functionality of company. It includes existing employees, corporate culture, employee behaviour etc. This help in collecting information for anticipating changes within the operations performed within the company for developing a long term competitive advantage (Kohtamäki and et. al., 2012).

  • Strategic capability:-

It refers to the ability that a business has for employing the competitive strategy which help in enhancing the value of operations performed by them. Strategic capability considers the strategy a business uses along with the resources, market position, organisation's assets and the way in which these will be applied to the strategies in future. This help Vodafone in evaluating the resources required for executing a particular strategies and its consequences that must be consider before employing resources. It will help in minimising the risk of any miss-conduct and provide positive result in term of success to the company. As the competitive position of the business firm is only possible with the help of competencies company possess.

  • VRIO/VRIN model:-

VRIO analysis is an analytical technique which is used for the evaluation of company's resources which further help in achieving competitive advantage. VIRO analysis stand for Valuable, Rareness, Imitability and organisation. The current business strategy of Vodafone is to expand its business in term of geographical region, targeting new customers by enhancing the quality of innovational technology (Lee, 2014). So this can be achieved by improving the internal capabilities of Vodafone as the performance and high quality services are the main factors that support company to achieve sustainability within marketplace. The VRIO model of Vodafone is mentioned below:

  • Valuable:-this factor focuses over determining that whether the resources that a company have are able to create value among customers by enabling firm to exploit opportunities or fight against threats. This can be achieve by differentiating and minimising the cost of goods, resources which fails to create value in market leads to competitive disadvantage.
  • Rare:-It refers to the type of resources which are unique and acquired by one or two organisations. The competition is very high within telecommunication sector and resources are similar across the industry (Morton, Wilson and Cooke, 2015). Hence it is very essential for Vodafone in providing training to its employees in order to improve their skills and competency for increasing their working capabilities.
  • Imitable:-It refer to the type of resources that a company have and it is harder for other competitors to imitate. Companies with rare capabilities and resources usually become successful in achieving competitive advantage at marketplace as they have very few competitors.
  • Organisation: -This factor works toward analysing the resources for ensuring that they must be organised in more efficient manner so that the resources can be fully utilised within business operations. As all the resources that are valuable, rare and inimitable are useless until and unless they are organised in effective manner.

Resource and capabilities of Vodafone:-

  • Capital Access:-Vodafone UK have an internal source of fulfilling its capital demand that is it take fund from parent company i.e. Vodafone Group in order to finance its operations as well as intensifying advertisement. But the competitors of Vodafone also having different sources to access capital, hence this capability is common.
  • Network capability: - Vodafone make an huge investment over its network and because of which it is able to provide a fast speed internet along with excellent outdoor and indoor coverage. Its low frequency 4G signal help it in providing a fast indoor internet speed which is a more valuable capability that put it ahead within competition.
  • Brand equity: -Vodafone is proved to be one of the best network operator which provide high speed network guarantee without any sort of speed hurdle to customers (Pasquinelli, 2014). It provide services in various countries and have a higher brand equity. Because of this familiarity not only the citizens but also the people who visit UK prefer to become a customer of Vodafone due to familiarity with this brand.

Resources and capabilities

Valuable

Rare

Costly to Imitate

Organized to Exploit

Impact on Competitive Advantage

Access to capital

Yes

No

No

No

Realized Competitive Parity

Network Capability

Yes

Yes

No

No

Temporary competitive advantage

Brand Equity

Yes

Yes

Yes

Yes

Market sustainability and competitive advantage

  • Organisation's strength and weaknesses of Vodafone:-

Strength:-

  • Vodafone has a higher geographical reach with a broader customer base and its infrastructure network is also highly developed.
  • It has a strong leadership position at marketplace as it maintains a higher market base with a surety of high speed network.
  • Vodafone has approx 10,00,000 employees throughout the world and provide variety of services to people like mobile telephony, digital TV related services and landlines.
  • The advertisement campaign is also very strong where promotion is done over the concept of animated character named as ZooZoo which is very popular worldwide (Rasula, Vuksic and Stemberger, 2012).

Weaknesses:-

  • Vodafone have to constantly deal with the market competition in term of price of its services
  • It maintains a large number of stores throughout the world to offer variety of services but fail to serve customers who live in off area.
  • Another major weakness is high price for broadband services and fixed lines, main reason behind this is that Vodafone purchase these services from BT and it has to add profit margin above BT's initial price.

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Task 3

P3. Porter's five force model to evaluate the competitive forces of telecom sector for Vodafone

Porter's five force model refers to an analytical tool that consider five industrial forces for identifying the intensity of competition in order to evaluate its position within the industry and profitability level (Ryan and Wilson, 2013). This analysis will help a company in formulating effective strategy for dealing within the competition present within the market so that it can achieve competitive environment and sustainability within the industry. These five force includes new entrant, bargaining power of buyer, bargaining power of supplier, substitute present and industrial rivalry. These all forces help in identifying the structure that industry have and level of competition present within the industry to which company has to deal.

Vodafone group plc is a British telecommunication conglomerate which offer services related to mobile network and operates its operations in several countries throughout the world. The telecommunication trend is also very high within the country like UK, as from the survey it has been found that more than half population i.e. 53% of 16-75 age people uses smartphones. The result of which competition is relatively higher for Vodafone within industry as there are various network operators present in UK who have the authority to serve people. It includes EE, Vodafone, Giffgaff, O2, BT and Three which are competing to capture one another's share. So, in order to survive in industry with greater marketing position it is very essential for Vodafone to perform industrial analysis on regular bases to improve their marketing strategies on its bases (Su, Yang and Yang, 2012). This help in achieving competitive advantage at market place. The industrial analysis is explained below:

Bargaining power of buyers:- The power of customers within telecommunication sector is relatively higher as they have number of operators to choose which provide similar type of services. Hence the number of options available in front of customers to select one among various companies those are engaged in telecom services. Therefore, customer usually perform a comparison between number of available operators and then choose the one which provide services with more benefit and at relatively lower price. This is the main reason telecom companies are reducing their service charges which in turn cuts the profit of telecom company.

So, the bargaining power of customers is relatively higher which is a major threat for Vodafone as it may lead to reduction in customer base (Watson, 2013). Hence in order to maintain its market position among competitors, Vodafone must adopt the competitive pricing strategy that help them in retaining its customer for longer period of time.

Bargaining power of supplier:- The power of supplier is relatively lower within telecom industry as the network operators have number of suppliers available through which they can get their stuff to perform operations effectively. Another reason behind lower bargaining power of supplier is that there is lack of differentiation within the resources they provide to telecom companies. Hence, it is a positive factor for Vodafone as they can bargain with supplier easily and the switching cost is also very low as a result of which the expenses for the company is relatively lower.

Vodafone is operating its business with huge profit as compare to other competitors which support them in adjusting the cost which is increased by suppliers for offering services to its customer at an effective rate and be able to earn profit as well (Wilkins and Huisman, 2012).

Threat of new entrant:- The threat related to new entrant is relatively lower as there are number of barriers which restrict new players top enter into industry. As the new company who want to enter within the industry is required to invest huge amount in order to position itself among the existing competition. In addition to this a company have to pay a huge licensing fees and required to follow several regulations which make it more typical to perform operation with so much pressure at initial level. Apart from this the cost of establishing network infrastructure is relatively higher and frequent changes within technology brings more challenges for new entrant regarding the existing players within the industry. Hence, Vodafone is free from any sort of threat regarding new entrant within industry which lead company to focus over its operations without having fear of new rivalry.

Threat of substitute: - Technological enhancement is the major force which is increasing the competition within telecom industry by bringing new source of availing telecom services or alternative of existing one. Hence the threat of substitute within the telecom industry is relatively higher. Therefore, the threat of substitute for Vodafone is relatively higher. Though the Landlines and CDMA are usually declining but the broadband services it provide is an alternative which provide a tough competition to the existing players within the industry. Apart from this VOIP is another alternative where its quality is not equal to telecom devices and price is also higher still customer prefer it.

Rivalry within market: - The competition from existing player is relatively higher to Vodafone because the telecommunication player within the industry is bringing new and innovative method of serving its customers by promising maximum benefit at minimum rate. In addition to this the call rate charged by competitors is also almost similar to one another which costs very low to customers in case of any switch (Wright, 2014). So, in order to deal with competition Vodafone is required to improve its service efficiency as well as also try to provide different offers to its customers to attract them and maintain a long term relationship with them.

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Task 4

P4. Apply a range of theories, concept and model, interpret and devise strategic planning for Vodafone

Bowman's Strategic Clock is an analytical model which help an organisation to analyse its position within the industry in relation within its rivalry. This framework was given by David Faulkner and Cliff Bowman as an elaboration of Porter generic strategies. By working over Bowman's strategic Clock, Vodafone will be able to provide better ideas by making it available with required information of market position in term of present competition. Some positions of Bowman's Strategy Clock are mentioned below:-

Illustration 1: Bowman's Strategy Clock

(Source: Bowman's Strategy Clock, 2019)

Position 1. Low price and low added value:- This is not the most competitive position within this model and product or services offered by an organisation is also not differentiated that generate very little value. So, in such situation Vodafone must offer its services at lowest possible price without cutting off their profit as it is the only way to deal with such situation.

Position 2. Low price:- This position deal about the type of operations where company produce product in higher quantity but sold it into lower price which also leads to low profit margin. Due to high competition, Vodafone offer its services at relatively lower price which sometimes restrict it into earn adequate profit from business (Morton, Wilson and Cooke, 2015). So, for earning profit within this situation Vodafone can work over generating high volume of output by cutting off extra wastage that leads it to earn more profit.

Position 3. Hybrid:- This position elaborates about the company which use product differentiation strategy along with low pricing to deal with competition and to produce high value within marketplace. This position of Bowman is very effective and to gain this position Vodafone must try to work over offering the goods at minimum price to achieve competitive advantage.

Position 4. Differentiation:- This strategy is usually used by a company to perform their best for offering highest possible quality at average price. There are majority of options available in front of customer related to telecom services so it is very essential for Vodafone to offer differentiated services for creating higher customer value.

Position 5. Focused differentiation:- Under this businesses usually offer high quality services at higher price. This position is only possible for Vodafone when it brings up a differential services within marketplace for which customer will be agreed to pay premium price.

Position 6. Risky high margins:- Under this strategy organisations usually increase its cost of product without maximising value side of equation (Hoque, 2013). This strategy will bring loss for Vodafone as after this customers will cut of their losses and try to search for better quality product.

Position 7. Monopoly pricing:- This position his only available to those organisations which is the only business offering that product in their segment and for which they maintain monopoly. By applying this strategy Vodafone will be able to earn higher revenue but in UK the monopolist have to deal with high regulations through which government restrict companies in enhancing their price.

Position 8. Loss of market share:-This situation is describe about a position in which an organisation fails to offer product or services that create value to customers. In such situation Vodafone must opt for offering its services at standard price so that it will be able to remain somewhat competition.

From the above analysis it has been determined that Vodafone can work toward diversifying its business in new marketplace and another one is new product development for existing market (Eason, 2014). The reason behind this is that new product will support in attracting large number of customers for trying company's services. On the other side diversification will help Vodafone in offering services at new market which also increase its profit share as well as customer base.

Conclusion

From the above given information it can be conclude that effective strategy within a business plays an essential role in accomplishing organisational objectives and by providing long term sustainability. So, in order to make effective strategy a company must firstly determine the position it has within the industry by using porter's five force model which help in planning an effective actions to be taken for dealing with threats. In addition to this it must also perform PESTLE analysis for determining threats and opportunities present in external environment. So that on the bases of internal capability analysis using VRIO framework it can formulate effective strategies for future actions. Apart from this companies can also use Ansoff growth matrix and Bowman's clock model for strategical planning that help in making effective action plans by considering all the risk factor present in marketplace.

References

Books and Journals

  • Aubry, M. and et. al., 2012. Organisational project management as a function within the organisation. International Journal of Managing Projects in Business. 5(2). pp.180-194.
  • Burgess, N. and Radnor, Z., 2013. Evaluating Lean in healthcare. International journal of health care quality assurance. 26(3). pp.220-235.
  • Cacciolatti, L. and Lee, S. H., 2016. Revisiting the relationship between marketing capabilities and firm performance: The moderating role of market orientation, marketing strategy and organisational power. Journal of Business Research. 69(12). pp.5597-5610.
  • Cserháti, G. and Szabó, L., 2014. The relationship between success criteria and success factors in organisational event projects. International Journal of Project Management. 32(4). pp.613-624.
  • Eason, K. D., 2014. Information technology and organisational change. CRC Press.
  • Hoque, K., 2013. Human resource management in the hotel industry: Strategy, innovation and performance. Routledge.
  • Kohtamäki, M. and et. al., 2012. The role of personnel commitment to strategy implementation and organisational learning within the relationship between strategic planning and company performance. International Journal of Entrepreneurial Behavior & Research. 18(2). pp.159-178.
  • Lee, W. L., 2014. Environmental uncertainty affects inter-organisational partner selection: The mediating role of cost and strategy in alliance motivations among SMEs. Journal of Management & Organization. 20(1). pp.38-55.
  • Morton, J., Wilson, A. D. and Cooke, L., 2015. Collaboration and knowledge sharing in open strategy initiatives.
  • Pasquinelli, C., 2014. Branding as urban collective strategy-making: The formation of NewcastleGateshead’s organisational identity. Urban Studies. 51(4). pp.727-743.
  • Rasula, J., Vuksic, V. B. and Stemberger, M. I., 2012. The impact of knowledge management on organisational performance. Economic and Business Review for Central and South-Eastern Europe. 14(2). p.147.
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