vodafone strategic planning

36858 Usman Muhammad

Assignment 2

Vodafone Group Plc Strategic Management Process

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36858 Usman Muhammad

Vodafone Group Plc The term VODAFONE comes from Voice Data Fone chosen by the company to reflect the provision of voice and data services over mobile phones. Vodafone Group is a global telecommunication company with headquarters located in Newbury, Berkshire United Kingdom. It is the world’s largest mobile telecommunication company with around 341 million users worldwide. It operates network in over 30 countries and has partner networks in over 40 additional countries. Vodafone was formed in 1983 as a joint venture between Venture electronics and Millicom and was granted one of two mobile phone licenses in the UK. It launched services in 1985 as Racal subsidiary. In 1988 Racal offered 20% of Vodafone to the public. Consequently three years later the rest of the firm was to become Vodafone Group. Products and services: Vodafone offers a wide range of products and services including voice, messaging, data and fixed line solutions and devices to assist customers in meeting their total communication needs. Vodafone’s Handsets, Smart phones and branded handsets are available in a variety of designs to meet the customer needs. They are enabling millions of people in emerging market to share the benefits of mobile technology. Handsets are low-cost combined with high-end features such as touch screen and mobile internet capability. Vodafone provides a range of data products including PC connectivity, Internet services and roaming services. PC connectivity services, available through Vodafone Mobile Broadband devices and certain handsets, provide mobile internet access for laptop, netbook and PC users. Vodafone Mobile Broadband provides simple and secure access to the internet and to business customers’ systems.

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Online Mission Statement Vodafone’s vision is; ‘To be the world's mobile communication leader enriching our customers' lives through the unique power of mobile communications’ Vodafone’s value is; Our Values are about the way we do things. They describe the way Vodafone people are expected to behave within the business, to help turn our vision to reality. • • • •

Passion for customers: "Our customers have chosen to trust us. In return, we must strive to anticipate and understand their needs and delight them with our service." Passion for our people: "Outstanding people working together make Vodafone exceptionally successful." Passion for results: "We are action-oriented and driven by a desire to be the best." Passion for the world around us: "We will help the people of the world to have fuller lives – both through the services we provide and through the impact we have on the world around us

Reference: http://www.csrglobe.com/login/companies/vodafone.html

Vodafone Group Plc is the world's leading mobile telecommunications company, with a significant presence in Europe, the Middle East, Africa, Asia Pacific and the United States through the Company's subsidiary undertakings, joint ventures, associated undertakings and investments. The Group's mobile subsidiaries operate under the brand name 'Vodafone'. In the United States the Group's associated undertaking operates as Verizon Wireless. During the last two financial years, the Group has also entered into arrangements with network operators in countries where the Group does not hold an equity stake. Under the terms of these Partner Network Agreements, the Group and its partner networks co-operate in the development and marketing of global services under dual brand logos The Company's ordinary shares are listed on the London Stock Exchange and the Company's American Depositary Shares ('Ads') are listed on the New York Stock Exchange. The Company had a total

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36858 Usman Muhammad market capitalization of approximately £74 billion at 31 December 2008. Vodafone Group Plc is a public limited company incorporated in England under registered number 1833679. Its registered office is Vodafone House, The Connection, Newbury, and Berkshire, RG14 2FN, England.

SWOT Analysis STRENGTHS: Vodafone has its brand image and its ranking is second in world. So here one thing is confirmed that Vodafone has good network and outstanding services that’s why its users are most after China mobile. It can offer International roaming facility more than any network in the world. Financially, Vodafone is strong and is able to invest heavy amount in the world. WEAKNESS: The expansion of Vodafone has been completed at the expense of direct control of its operations. The company grew through a process of acquisitions of national telecommunications companies rather than organic growth. This increased its subscriber’s base quickly offering direct market knowledge and immediate additions of customer bases at the expense of direct effective control of the subsidiaries. At the same time though, it implicitly imposed a centralized operational structure for the group, nominating the UK headquarters as the leading business unit running a much centralized marketing and handset procurement at group level. This has resulted in the neglect of local market and local differences, allowing market share to be gained by smaller local competitors. Due to the highly saturated western European market this has resulted in increase in the price elasticity of demand with consumers continuously becoming price oriented. OPPORTUNITIES: The telecommunication market, even though highly saturated in some regions offers great potential due to the ageing population and the sophistication of the consumers. It offers great opportunities through a careful market segmentation and 4

36858 Usman Muhammad exploitation of particular profitable segments. Different strategies should be pursued – simple phones and simplified pricing plans to the ageing population and more updated, sophisticated solutions for younger generations. The expanding boundaries of the market could provide further opportunities by allowing Vodafone to enter more aggressively into fixed line service and to better enjoy the benefits of its high investment in 3G technology. Moreover the company has undertaken its first steps in establishing strategic alliances to develop customized solutions for end-users. Vodafone recently announced two new partnerships, one with supermarket group ASDA to launch an ASDA-branded mobile service in the UK, and another with electrical retailer DSG International to provide mobile solutions to mobile solutions to small businesses. This could further be enhanced to avoid being a late-entrant in this new method of distribution which offers access to a wide potential customer base. THREATS: The European part of Vodafone’s market is characterized by existing high levels of competition. Major brands are exploiting the price sensitivity of customers and in this way they are building a stronger image and presence in the market. Indirect competition is also increasing further, through the presence of Skype and other related Internet based services. This combined with the upcoming European legislative measures is expected to limit further the tariffs the network providers imposing further need for price cuts which could harm the bottom line profitability of the company.

CORPORATE LEVEL STRATEGY Vodafone was heavily focused on acquisitions, including Mannesmann, to open cost advantages through economies of scale. Vodafone wanted technological leadership in the mobile telephony industry. Vodafone wanted to strengthen its standing in continental Europe, a geographically significant area where they had low market share. Vodafone wanted to acquire Mannesmann because they held a considerable portion of the market share in their industry. By acquiring Mannesmann Vodafone would be able to gain cost advantages as well as gain market share and market power in Europe. By buying a competitor off the market Vodafone could gain their entire market share and 5

36858 Usman Muhammad eliminate the risks associated with rivalry that had been present between the two companies. This acquisition would also be a diversification for Vodafone if they chose to take advantage of the fixed line capabilities of Mannesmann. It would also help Vodafone reduce the barriers to a greater share of the European market since Mannesmann already had a strong market share. Vodafone merged with Airtouch to become Vodafone Air Touch, the largest mobile phone operator in the world. It gave Vodafone an easy way to expand to North America with low barriers to entry since Air Touch was already the leader in that market. This was “a major step forward in our strategy to expand the penetration of mobile phone services to the largest possible number of customers and the largest possible markets…” said Chris Gent, Vodafone CEO, on the merger with Air Touch. Vodafone formed a strategic alliance in the United States with Bell Atlantic that would use the same digital technology as Vodafone Air Touch and it would be the largest mobile telecommunications company in the US. They owned 45 percent of the company giving them a high potential for profits. Since Bell would be managing the company, Vodafone would not have to worry about understanding the competitive conditions, legal and social norms, and cultural idiosyncrasies of the US market, which would help Vodafone manufacture and market a competitive product. What type of diversification best represents Vodafone’s mix of businesses (i.e., single business, dominant business, related constrained, or related linked)? (Sky Huvard, Matt Wentz) Vodafone had recently expanded internationally through an alliance with Bell Atlantic, a merger with Air Touch, and several acquisitions. These value creating strategies of diversification exhibit high operational relatedness between businesses and somewhat low corporate relatedness because Vodafone did not maintain managerial control in all of its new ventures. These related diversifications would increase Vodafone's economies of scope by sharing activities and transferring core competencies. Vodafone's market power would be increased by being able to block competitors through multipoint competition. What is the international corporate-level strategy being followed by Vodafone? (Sky Huvard, Matt Wentz)

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36858 Usman Muhammad Vodafone pursued a global international corporate-level strategy. Their low market share in continental Europe could be considered an artifact of their global strategy. The basis for their mobile telephony network remained unchanged throughout their diverse markets, these standardized products point to a global strategy. While their global strategy produces lower risk, they may not grow as fast as their competitors who have a multi-domestic strategy. As a result, recent diversifications, like the strategic alliance with Bell Atlantic seem to point towards a more multidomestic strategy to take advantage of their specialized corporate core competencies by delegating the management tasks. Vodafone's global international corporate-level strategy is succeeding. The technology, GSM, that enables their mobile telephony networks is built to global standards, and has led to significant economies of scale in producing and operating these networks. What was the choice-of-entry mode used by Vodafone in its expansion into international markets? (Sky Huvard, Matt Wentz, Lindsay Zolad) Vodafone entered into international markets initially through merger, and later through acquisitions and alliances. Vodafone's choice to use a cooperative strategy led to alliances with its competitors in Europe, including Mannesmann, Belgacom, BT, Cegetel, TDK and TIW. Vodafone was trying to get a larger market share in Germany so they bought 35% of D2 from Mannesmann, who is Vodafone’s top competitor in Europe. Vodafone partnered again with Mannesmann to buy 21% of Omnitel (an Italian company). Vodafone had alliances with Government organizations in Greece, Holland, Portugal and Sweden. By partnering with competitors in Europe, Vodafone increased its market shares.

BUSINESS LEVEL STRATEGY 1. Rivalry with Existing Competitors Vodafone's position as cost leader, competitors has a hard time competing on basis of price because the competitors will fall on their face if any aspects of the logistics or operations are inferior.

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2. Bargaining Power of Buyers The buyers in the mobile telephony industry are strong. These powerful buyers can reduce the cost leaders prices, but not past the level of their closest competitor. This ensures Vodafone will continue to profit at above average returns compared to its closest competitor. 3. Bargaining Power of Suppliers Suppliers of the mobile telephony industry are strong. Vodafone, by being a cost leader, operates with margins greater than its competitors, which, in turn, allows them to absorb price increases from its suppliers easier than its competitors. By being a large, focused player of the mobile telephony industry, Vodafone could hold suppliers costs down, and it could make a profit even if its competitors are making only average returns. 4. Potential Entrants While the threat of new entrants is weak, Vodafone must continue to reduce costs below that of its competitors. By maintaining high levels of efficiency, Vodafone can help make the entrance into the mobile telephony industry unattractive to its potential competitors. 5. Product Substitutes Vodafone faces a low threat of product substitutes. The focused cost leadership strategy that Vodafone operates under makes it difficult for a comparable substitute to be produced at a lower rate by their excellent use of economies of scale, their buying power, and their absorption of temporary price increases that come from suppliers that don’t need to be passed on to the consumer. 6. Summary Vodafone is pursuing a focused cost leadership business-level strategy through their exclusive focus on the mobile telephony industry. Because Vodafone did not have the distractions that faced their competitors (such as fixed-line telephony) they are able to save money and pass the savings to their customers or maintain a profit even when their closest competitor is only achieving average returns. Vodafone maintained a broad competitive scope and focused on cost for their competitive advantage.

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