Marketing Business Strategy for Vodacom

Marketing Business Strategy for Vodacom

Executive Summary

This paper presents a thorough market analysis of the Vodafone Group Plc. The article starts by describing a short overview of the history of the company and the transformation that it has undergone throughout the years. The paper traces the roots of the company from the time of the partnership between the British and American companies to the current market share that the entity possesses. After that, the paper analyzes the company from different perspectives. The problems bedeviling the company are identified, and the possible recommendations are made. The paper can establish that Vodafone is a company that has the potential to become among the top five most prominent brands in the entire world. Fundamentally, the enterprise has to look at how it can penetrate the markets that it has little or no brand presence.

Introduction

Vodafone is a world-leading company in the mobile communications sector. The company’s history dates back to the 1980s when telecommunications were taking shape throughout the world. The company is multinational, and it operates in about 44 countries around the globe. Furthermore, it has partnerships with mobile communications providers in at least 55 other states, thus, giving it a global outreach. The company began as a subsidiary of the British company, Racal. The parent company, Racal Electronics Plc, was the largest developer of British military radio technology (Merriden, 2003). Through a partnership with the U.S. telecommunications provider, Millicom, the company Racal Strategic Radio Ltd, was formed. At first, the corporation faced licensing issues from the British government due to the concerns on foreign ownership. Thus, the partners agreed to revise the ownership to; 80% Racal and 20% Millicom. This allowed the company to be registered and start operations in England in 1985. The name Vodafone is an acronym for ‘voice-data-fone,’ which is an indicator of the services that the company provided. Hence, the company began its initial operations as ‘Racal-Vodafone Holdings Ltd.’ The name and identity of the corporation have undergone immense changes over the years to reflect some acquisitions and mergers with other mobile communication providers. The headquarter was established at Newbury, Berkshire, and the enterprise has maintained it there ever since.

In 1986, the company went public and floated its minority shares to subscribers (Vodafone Group Plc MarketLine Company Profile). The uptake was impressive, and the entity raised over 100m. However, the subscription at the London Stock Exchange posed a corporation with a problem. The value of the parent company in the subsidiary was more than the actual valuation of the parent company itself. Thus, Racal Telecom and Racal Electronics demerged to allow the subscribers of the floated shares to enjoy the full value of their shares. Currently, the company has an equity valuation of over €63b, while its total assets are valued to be more than €140b. As of 2019, the enterprise had about 100,000 employees, and it is one of the biggest employers in the U.K.

Mission and Vision Statements

The company is committed to ensuring that the U.K. is connected to the world (Mission and values). It has demonstrated intention and capacity to achieve this mission through implementation of flagship projects in the country since it was established. For instance, Vodafone was the first company to make cellular phone services a reality in the U.K. The company made the first call in the country in 1985 and subsequently sent the first text message through a mobile device. Furthermore, the enterprise’s mission is to expand, improve and innovate. This is evidenced through the activities that the company has undertaken to consolidated its market position throughout the years. For instance, in 1999, the company acquired AirTouch Communication. This transaction allowed Vodafone to have a 35% stake in the most prominent mobile communication entity in Germany. However, for the acquisition to go through, the entity had to sell its 17% in the rival telecommunication, Mobiflunk. The enterprise’s global operations have pointed towards an ambitious drive to ensure it maintain a competitive advantage over its rivals. In the U.S., for instance, Vodafone has partnered with T-Mobile U.S. to develop a virtual mobile network operator. The virtual operations in mobile communications are new technological advancements that were rolled out as recently as 2015 (Dodourova, 2003). The company’s vision of innovation is made a reality through how it has remained steadfast in the adoption and implementation of technological advancements in the telecommunications sector.

Vodafone’s mission and vision statements point towards a venture that is dedicated to ensuring sustainable use of the available resources on earth. For instance, the company elaborates that it seeks to reduce the wastes produced at the workplace and ensuring that the resources available are used with minimal dissipation. This is a particularly bold step taken by the company and provides optimism to the users of the company’s products for a better future. Such actions are within the internationally established guidelines and regulations that have been formulated to tackle global issues such as climate change.

My recommendations towards Vodafone’s mission and objectives statements will be concerning the inclusion of ethical standards as part of their guiding principles. The company should come up with specified values that will allow it to operate in an environment that respects and upholds human rights and dignity. The inclusion of the ethical provision in the crucial statements will indicate some level of determination to deal with some of the critical ills facing the corporate world. For instance, it is improper for large corporate entities to establish a practice in developing countries simply because they intend to take advantage of and exploit the labor force that is in a deep state of poverty.

Porter’s Five Forces Industry Analysis

As expounded by Michael Porter, the five forces will be instrumental in evaluating whether Vodafone Group has the likelihood of maximum profitability. Also, Porter’s forces will help to determine whether the company possesses the level of attractiveness that is necessary for bringing investors or partners that can help the entity to achieve its laid down goals and objectives. Fundamentally, this method of analysis will provide holistic evidence of the present and future fortunes that the company may attain. Since the company is in the mobile telecommunications sector, Porter’s five forces analysis will help to inform the company of emerging trends and technologies. This information will help Vodafone to remain abreast ahead of its competitors on how to tackle technological dynamism.

1. Competitive Rivalry

Competitive Rivalry is a crucial indicator of the intensity of the amount of pressure Vodafone may experience from other mobile communication providers in its operations. When competition is quite intense, the prices of voice and data services will have to drop. This effectively results in reduced profitability of the enterprise. The intense company competition from global telecommunication providers such as the B.T. Group, Tesco, and Telefonica (STATISTA). For instance, in 2019, it was estimated that the B.T. group enjoyed up to 28% of the market share of mobile operators in the U.K., while Vodafone’s share was 21%. Providers. These figures are evidence of an intensely competitive environment between the top telecommunication service providers in the U.K.

Vodafone Group Plc has to take a myriad of measures to ensure that it remains competitive and profitable within the environment that it operates. A crucial step to be adopted could be the building of sustainable differentiation of the services that it provides. Thus, the company should strive to establish the gaps in the market so that it could take advantage of the sector. Also, the entity should come up with appropriate ways through which it can collaborate with the competitors in the provision of telecommunication services. Such a move, if implemented well, can have the desired effects of increasing the market share which the companies enjoy. It will be more profitable for companies to rise above a relatively small market.

1. Supplier’s Bargaining Power

Supplier power refers to the ease with which a company’s suppliers could increase the alter prices of commodities that Vodafone uses. The bargaining power of supply is dependent on the number of suppliers the corporation has at any given time. As a mobile communications service provider and a distributor of telecommunication products, Vodafone has to have numerous suppliers. The more the suppliers, the lower their bargaining power against the company. For instance, if the enterprise were to have a single supplier for all their commodities and raw materials, it would be much easier for the supplier to alter the prices of the supplies. Thus, the entity is left to be at a disadvantaged position whereby they have to be at the mercy of their supplier continually. Contrastingly, when the company has a broader pool of options to select their suppliers, then it is easier to get cheaper alternatives to supply its products. Vodafone Group Plc may suffer reduced profits due to the more significant bargaining power enjoyed by powerful suppliers.

To ensure sustainable profitability at the hands of suppliers, Vodafone has to develop efficient supply chains from various suppliers. Preferably, each department of the company’s services should have a different supplier. For instance, the providers for raw materials used to put up boosters should be different from the suppliers of office materials. Moreover, the company should embark on innovative experimentation of materials that are used to put up their product designs. The experiments are meant to act as a shield for the company in case the powerful suppliers choose to abuse their positions by hiking the charges for the products that they supply. Also, practical experimentation could facilitate innovation at the workplace, whereby the company can develop new solutions to the challenges faced. Furthermore, the company should maintain contacts with dedicated suppliers who share mutual aspirations. Hence, the working relationship between the company and the suppliers should be dependent on each other.

• Buyer Power

According to Porter, it is fundamentally for a business entity to ascertain the nature and extent of power that the consumers to a product have over the very existence of a company. Hence, Vodafone has to remain aware of the buyers of the products, and the factors influencing their choices for their services. Fundamentally, the telecommunications provider has to understand the costs that the buyers may have before they opt to choose a rival. Porter posits that the service provider has to make it as difficult as possible for a company’s clients to choose a competitor. In this regard, Vodafone has to ensure that it has as many clients s possible. A majority of the clientele has to be kept satisfied or happy. This would ensure that the bargaining power of the consumers is reduced, and they are unlikely to dictate the terms upon which the enterprise will operate. In case the company maintains a limited pool of tech-savvy clients, the entity remains at risk of having clients with powerful bargaining powers. It is expected that clients will always desire to have excellent services at the lowest price possible. Therefore, Vodafone should ensure it takes care of the needs of the clients without necessarily making decisions that will adversely affect its profitability.

The continuous innovation of new products will be essential for Vodafone’s bid to minimize the bargaining powers of its consumers. Technologically improved outcomes will keep the buyers enticed to want more and more of the same. If the innovative services effectively fill the gaps in the needs of the clients, they will have no reason whatsoever to look for other alternatives in the market.

1. Threat of Substitution

Threat of Substitution refers to a situation whereby the clients no longer find the services and products of a provider as useful. Hence, the buyers find different ways through which they could deal with the situation themselves. Also, the threat of product substitution may arise in case a new player provides for telecommunications services in a manner that Vodafone does not. For instance, if a service provider automates a product in which a client feels as though it is essential for them, the buyer may opt to look for manual ways of doing the task to achieve their targets. The substitution of the products and services provided by Vodafone will negatively affect their profitability.

The most crucial step that Vodafone can take to avoid service substitution is to analyze the customer needs at any given moment. It is particularly very risky for the company to roll out products or services which the consumers deem irrelevant to their needs. Hence, Vodafone has to find ways of understanding why their clients purchase certain products that they offer. This will be a shift from merely concentrating on the product that the consumer has purchased. Appreciation of the needs of the customer base will help the service provider to understand why some clients choose to opt for other products in the market.

1. Threat of New Entry

It is prudent for Vodafone to analyze the possibility of the entrance of a new player in the telecommunications sector in the U.K. Such an analysis will guide the company on the position that it would occupy in case market dynamics were to be altered. Porter posits that the threat of a new entry is dependent on the costs associated with the listing of a new service provider. Also, the regulations of the sector could inform Vodafone of the ease with which a new telecommunications operator could enter the market. If it is straightforward, then this suggests that the threat is too high (Ang, 2016). Hence, the company has to continuously safeguard its competitive edge to ensure its profits do not suffer when the market gets an unexpected new player. The company could protect its position by safeguarding the technologies that it uses to undertake its mandate. A new entrant should find it very hard to compete with what Vodafone has already put in place.

Furthermore, the company should prefer the use of economies of scale in its service provision to ensure that its costs of production are much lower. This puts them at an added advantage over a new competitor who operates on a small scale (Director, 2004). To stay ahead of the rest, the company should invest accordingly in the research department and the development of capacities of its staff. This would ensure that the company works with well-informed projections. Companies are likely to shy away from entering markets that the leading players, such as Vodafone, have very well-defined systems and standards. The bar becomes raised so high that it would make minimal financial sense to compete against such operators.

Analysis of Current Strategies

The company has embarked on an ambitious strategy to become one of the five best brands in the world. Vodafone Group intends to be among the best brands in terms of recognition and brand value (Lu & Editorial Team, 2019). The enterprise has adopted several measures that it intends to use to achieve its goals. Primarily, the entity has set to ensure that it has a presence in almost every region of the world. Instead of establishing fully-fledged subsidiaries in every country that it is an operation, Vodafone Group has opted to use dual branding. This strategy involves the identification of an already established brand in a particular region and purchasing some stake in the company. After that, the company acquires a name that reflects the partnership which Vodafone Group has entered. A case, for example, is the company’s advertisement in the Dutch market. The company acquired Libertel, which is a mobile communications operator in the Netherlands. As part of dual branding, the company identifies as ‘Libertel Vodafone’ for a while to ensure that the market gets to know Vodafone fully. After that, when the name of the company is synonymous and known to everyone, the company finally gets to operate as Vodafone in that particular country. In 2017, the enterprise chose to undertake the dual branding exercise in all the 36 states that it has a presence in (Lu & Editorial Team, 2019). The strategy seeks to ensure that, eventually, the company has a global brand that is competitive and profitable in all the countries of operations.

Furthermore, the Vodafone Group has established geographical expansion as an immediate strategy towards making it be among the top five brands in the world. Therefore, the company has initiated steps of entering markets that it was not in operation before. The geographical expansion also involves the strategic acquisition of new clients who were not within the company’s scope. A case in example is the 2009 acquisition of Du by Vodafone group. Du is one of the biggest telecommunication providers in the U.A.E. (Kumar, 2012). The deal involved the cooperation of the two entities in the acquisition and retention of their international customers. Also, the company did a similar undertaking in Libya, whereby it purchased a stake in the country’s biggest operator. The entities signed a network partnership agreement deal that allowed for dual branding in the country. Thus, the aforementioned activities indicate the company’s commitment to ensure it become a world-leader brand. The company’s brand value in 2019 was $19b, which was an improvement from the $18b valuation that the company enjoyed in 2018.

Strategic Issues for the Company

The company is continuously faced with the issue of new entrants in the market who opt to drastically reduce the fees extended to voice and data services (Ang, 2019). The new entrants and other enterprises that have much lower market shares prefer luring customers through the provision of much cheaper services. Such companies use the tactic to get as many clients as possible. Thus, Vodafone is left at a hard position whereby the company has to gauge whether to appeal to the clients or pursue profitability. Occasionally, Vodafone has had to reduce the prices of its products and services to remain competitive in the market (Admin, 2017). When the company’s competitors drastically reduce the prices, there is an impending risk of losing the customers to the new entrants. However, the company has been able to shrug off price wars through its structures.

SWOT Analysis

1. Strengths

The company’s biggest strength lies in the value of the brand that it enjoys throughout the world. Brand equity refers to the monetary amount that consumers have attached to a particular commodity based on the name in contrast to the value of the product or services itself. Thus, it is the social value assigned to a brand based on its perceived worth (O’Dea, 2020). A more substantial brand equity mainly results in a stronger market position of an enterprise. Currently, the group enjoys a brand equity of about $19.5b (Ang, 2019). The high value attached to the name of the company is evidence of the trust that consumers have placed on Vodacom and its products. Also, the strength of the brand of the company has allowed it to get customers in all the countries that the entity is in operation. Currently, the enterprise has a customer base of over 600 million people around the globe.

The extensive range of commodities that the company provides has been a critical success in the growth and profitability of the corporation. The company has diversified its provision of services to individual buyers and enterprise clients. In recent times, the company has invested hugely in the Asia-pacific markets. These investments have proved to be a big success due to the growth experienced by some of the major markets in the region. For instance, the company has a customer base of over 200 million subscribers in India. The Indian economy is on the rise and, hence, Vodafone’s fortunes in the region are expected to grow further.

1. Weaknesses

As much as Vodafone Group has experienced continued growth in some leading economies in the world, the customer base of the company has experienced contrasting sharp declines in Europe. The enterprise continues to face stiff competition from some well-established telecommunication giants in the region (O’Dea, 2020). The race for innovative products has made other brands invest heavily in research and marketing. Some of the new competitors have successfully come up with creative strategies for client acquisition from Vodafone. Furthermore, the inability of the company to penetrate the U.S. made the entity miss out on huge revenues from a vibrant economy.

• Opportunities

Technological advancements in the telecommunication sector provide an excellent chance upon which Vodafone can effectively exploit. For instance, the development of Artificial Intelligence has made it possible for the mobile communications provider to engage the clients in a different capacity. The company can use A.I. to diversify the nature of the services provided. Moreover, the evolvement of the digital space has poses excellent opportunities for growth of the telecommunication provider. Through platforms such as Twitter and Facebook, Vodafone can actively engage with their consumers at any given time (B.S.C., 2011). the interactions help to communicate the clients’ feedback and the measures adopted by the enterprises. Through continuous engagements, the company will be able to score greater consumer satisfaction.

1. Threats

Competition from other global telecommunication players remains one of the main threats facing the Vodafone Group Plc. The drop in market share in some economies in Europe has been attributed to the emerging strength of some of the players in the sector. Most entities have invested heavily in innovative programs that are aimed to spearhead the companies to more enormous growth. Also, the Brexit poses unknown outcomes to the operations of the Vodafone Group. The uncertainties compounded with the full effects of the Brexit may make investors shy away from investing in Vodafone at the moment.

SPACE Analysis

For purposes of the SPACE analysis, the environmental stability of the Vodafone shall be critically reviewed. The external environment of the entity is dependent on technological advancements. The rapid changes in technology within the telecommunication sector makes the external environment to be quite unstable. Essentially, the company has to ensure that it is up to date with any advancement made. Failure to incorporate the emerging trends would have far-reaching ramifications against Vodafone. For instance, if the company was to fail to implement the use of Artificial Intelligence, it will lag behind other competitors. Quick adaptation to the changes in technology will help to shield the company from any harsh effects.

The state of the economy is a crucial factor for the determination of the environmental stability within which Vodafone operates. A case in the example would be instances where the market is faced with significant levels of inflation. The prices of commodities would be directly affected. The consumer could also be vastly impacted. Such factors will have a substantial bearing on how the enterprise carries out its functions at any given time. Another critical indicator of external environmental stability is the stock markets. If the stocks remain relatively stable for more extended periods, it becomes an incentive for investors to channel their resources to a company like Vodafone Group Plc.

On the other hand, the internal environment plays a crucial role through which the enterprise may attain the desired financial and market growth. Competitive advantage is a fundamental indicator of the state of the internal environment. A company that has a significant market share such as Vodafone has to produce more so that it can satisfy the demands of the market. The ability to meet a company’s supply-demand will help to strengthen its market share.

B.C.G. Analysis

The ‘Stars’ for Vodafone include its brand equity. It helps the enterprise to earn a significant amount of revenue due to the trust extended to the products of the company. Vodafone’s international services are also a star for the company. The services have shown immense potential for growth (Dodourova, 2003). Different people around the globe are ever willing to reach out to their loved ones or business associates. Thus, the company’s international services are immense opportunities for the enterprise.

The data and voice services are the cash cows for the Vodafone Group. These products have been provided by the company ever since it was established, and they have continuously earned the enterprise significant profits. The gains made from the primary services have enabled the company to occupy its current market share. On the other hand, the Artificial Intelligence services within Vodafone are some of the question marks for the company. The services have not yet provided the necessary profit margins for the enterprise (Kerr & Moloney, 2019). Finally, the dogs of the company include M.M.S. services. With the development of social media platforms that allow individuals to share media files with relative ease, Vodafone should divest investments that were previously allocated for the M.M.S. services. Technological advancements have rendered them extremely unappealing and impossible to sell.

QSPM Analysis

The utilization of the Quantitative Strategic Planning Matrix has to be adopted after a review of a company’s internal and external environment. If implemented, a QSPM analysis would help Vodafone company to take note of the strengths and opportunities that are available to the company. Also, it would be a necessary tool that could be used to tackle the threats faced by the entity as established through the SWOT analysis.

Strategy Recommendations

As established, Vodafone has lost some of its market share in Europe. To ensure that the company effectively achieves its goals and objectives, the entity has to utilize Artificial Intelligence fully. A.I. has to be the cornerstone of how the company runs its business. The adoption and utilization of the technology would help the enterprise reach a wider audience and deal with their specific issues.

Also, the company has to find ways of penetrating the American market. This would help to raise the company’s revenue. It is imprudent for a global telecommunication giant such as Vodafone Group to give up entirely on one of the biggest markets in the world. Finally, the company should prioritize customer growth over geographical expansions. It is essential to ensure that the company maintains all of its currents clients without losing more ground than what has already been experienced. Hence, the company should put up specific strategies to ensure that customer satisfaction and trust are at the highest level possible. The geographical expansion could leave the company with immense coverage all over the world but with a limited market share with very few clients.

Conclusion

Vodacom Group remains a world leader in the provision of telecommunication services. The position enjoyed by the entity is as a result of shrewd strategic decisions and investments that have been made by the top leadership of the company since its inception in 1982. The environment within which the company was formed has changed drastically over the years. Technological advancements have made the digital space and Artificial Intelligence to be crucial components of telecommunication services. Currently, the communication industry is pegged at ensuring that customer satisfaction is maintained at all times. Therefore, Vodafone has to make the necessary investments in technological innovations to remain a world leader in its field of operations.

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