Task 1- The External Environment
P1 Impact and influence of macro environment on Vodafone
External environment refers to the environment which surrounds the organisation externally and impacts on the productivity and growth of company (Oseni and Pollitt, 2017). In this context, this section will cover the impact and influence of external environment of Vodafone by using two models which are PESTLE and Ansoff Matrix.
PESTLE analysis of Vodafone
- Political Factors: The political conditions of United Kingdom are not very stable especially after Brexit referendum. Many organisations shifted their headquarters from UK which impacts on the market economy of country (Burns, 2016). The main political factors affecting Vodafone include EU Roaming Regulation that aims to decrease charges for mobile phone usages abroad by 70% and increasing level of consumer rights within Europe, and decisions made by European Union Regulatory Framework for the communications sector.
- Economic Factors: Due to recession and increase in inflation rate, the market economy of United Kingdom has been affected. Consumer purchase power has been declined impacting on organisational productivity and growth. After BREXIT impact, market has been shaken which drastically affect mobile telecommunication companies. In the twelve-month period under review Vodafone Group generated a total turnover of EUR47.6 billion, representing a 4.4% year-on-year decline, with this primarily due to foreign exchange movements (Charter, 2017).
- Social Factors: Social factors refers to frequent changes and transformations in taste and preferences of consumers. Consumers taste and preferences are dynamic in nature. As per the analysis of UK consumers, it has been identified that people like unique and innovative plus quality products. In terms of mobile networking, people wants cheap and affordable network plan which provides robust connectivity (Rashidirad, Soltani and Fazeli, 2017). Vodafone fulfils the needs and expectations of UK consumers in order to sustain in competitive environment.
- Technological Factors: In present era, technologies are evolving rapidly and new technologies are providing assistance to the organisation in order to accomplish their prescribed goals and objectives. As a Global Leader in Internet of things (IoT) solutions and services, Vodafone believes in making IoT simple by using its power to truly build a better tomorrow and transform lives and businesses (Rao and Shekhar, 2016).
- Legal Factors: To sustain in the environment of United Kingdom, it is rudimentary for the management of Vodafone to follow certain rules and regulations so that they can avoid legal uncertainties and consequences. Vodafone follows core legislations including Data Protection Act, Employment Rights Act, National Minimum Wage act, consumer health and safety laws, etc.
- Environmental Factors: It is the duty and responsibility of business organisations to formulates strategies in order to protect the natural environment and resources. Vodafone's management in United Kingdom raised many campaigns in order to increase awareness among the citizen to protect environment. Vodafone spends millions of pounds every year as part of their CSR activities where they promote about environmental protection.
- Market Penetration: In market penetration, the management of Vodafone with its effective marketing tactics increase its market share by using existing product in existing market. This strategy helps in enhancing the market share and growth of the organisation. It is also known as low risk strategy as all management has to do is to focus on their marketing strategies and tactics.
- Market Development: Under market development, the management of Vodafone seeks newer markets by using their existing products. In order to do that firm have to build robust impression with the product in domestic market (Hashem and Su, 2015). To capture newer market, management of Vodafone uses different marketing tactics in order to enhance its market share.
- Product Development: In this strategy, management of Vodafone developed new product and launched it in existing market. The strategy is successful only if previous products of the organisations satisfied the consumers of existing market. The strategy helps in increasing the productivity of the organisation.
- Product Diversification: Product diversification is the strategy where firm launch a new product in entirely new market (Cawsey and Rowley, 2016). This is high risk strategy as management of Vodafone has to acquire adequate knowledge and information about the new market, customers tastes and preferences.
Task 2 - The internal environment and organisation capabilities.
P2 Vodafone's internal environment and its capabilities
Meaning of Strategic Capabilities
Strategic capability refers to the business ability to meet competitive strategies that enables them to sustain and enhance their value in period of time. Strategic capability takes business strategic decision into account and concentrates on organisation assets, resources and market positions (Arakpogun, Wanjiru and Whalley, 2016). A business strategic capability is most essential and crucial element in remaining financially viable and thrives despite the presences of competitors. The strategic capability refers to the process of utilising organisational resources, skills, capabilities, assets in a precise and appropriate manner so that the desired aims and objectives of the organisation can be accomplished effectively and efficiently.
VRIO Model for analysing strategic capabilities of Vodafone
VRIO framework model is considered as one of the precise model which helps in analysing the internal capabilities of the organisation. To analyse the internal capabilities of Vodafone, VRIO model will be optimum and precise. The analysis is provided below:
- Value: There are several types of resources used by the management of Vodafone such as physical resource, human resource, information and technological resource, financial resource, etc. The resources used by Vodafone are valuable which helps them in gaining competitive advantage. As mobile telecommunication market is thriving in United Kingdom and new organisations are emerging, thus giving stiff competition to the management (Medudula, Sagar and Gandhi, 2016). In order to sustain in competitive advantages, management of Vodafone needs to use valuable resources.
- Rare: As mobile telecommunication market is rapidly increasing, it would be difficult to say the rarity of resources used by the management of Vodafone. From diagnosis of the organisation, it was identified that management utilised their own patented information and technological resources which helps them in gaining competitive advantages (Ntarzanou and Portela, 2015). Though, many of physical and mechanical resources used by the company has been used by other organisations like BT, O2 and Giff Gaff.
- Imitate: As said earlier, management of Vodafone mostly used patented information and technological resources which cannot be imitate by other organisation. The robust infrastructure and adequate manpower allows the company to sustain in competitive environment of UK.
- Organised: The management of Vodafone exploits its resources in an effective and efficient manner in order to thrive in the competitive market (Sujata, Jayendran and Rohit, 2015). All the resources involved in the organisation are organised appropriately and precisely giving an edge of competitive advantage to the company.
Strengths and Weakness of Vodafone
Â· World's second largest telecommunication service provider
Â· Diversified Business
Â· Enormous Customer Base
Â· Large staff support
Â· Developed and advance network
Â· Strong Brand recognition
Â· Poor economic condition in Europe.
Â· Stiff competition
Â· Diminishing subscriber rates in UK
Â· Decreasing brand valuation
Strengths: The strength of Vodafone is that its business is globally expanded and have enormous customer base. Its advance network aid in providing quality network to the customers. It has robust brand recognition and have enormous amount of employees working in all over the world.
Weaknesses: The weaknesses of the organisations is its diminishing subscribers in United States, Europe and United Kingdom. Vodafone faced heavy losses in India too due to networking issues. Stiff competition with companies like O2, Giff Gaff, E3 etc. affects the overall growth and development of the organisation (Oseni and Pollitt, 2017). The brand value of the organisation is declining speedily in European markets with rise of emerging and new organisations which provides same services at affordable prices.\
Task 3 - Analysing the telecommunication sector.
P3 Competitiveness of UK's telecommunication sector by using Porter's Five Force model
To analyse the competitiveness of UK's telecommunication sector, Porter's five force model will be used in this assignment. The model is efficient to deliver the information about the competitive position because of its five core elements. The competitive analysis of UK telecommunication sector is described below:
Bargaining power of buyers (High):
Consumer power is always high in UK telecommunication sector due to increase in telecommunication organisation. Consumers have variety of choices and options available and now they don't have to adhere to one organisation. This implied that the bargaining power of buyers is high and management of telecommunication organisations needs to devise precise strategies and plans in order to retain and attract more and more customers towards the organisation (Burns, 2016). In this context, Vodafone's management needs to devise precise strategies and focus on the price and quality of network in order to gain customers attraction and retention.
Bargaining Power of suppliers (Low):
Suppliers are resource providers for the organisations. In United Kingdom, telecommunication sector have partnered with their own respective suppliers in order eliminate the obstruction in supply chain management process. Suppliers are essential for growth and development of business organisation and without them no business could be able to sustain in the competitive environment (Charter, 2017). Though, there are minimum effects of suppliers power in telecommunication sector in United Kingdom, it essential for the sector to develop effective relationship with suppliers in order to enhance business productivity and growth. In this context, the management of Vodafone needs to foster relationship with the suppliers so that continuity of growth and development can be made effectively and efficiently.
Threat of new entrants (Moderate):
Threat of new entrants are moderate in UK telecommunication sector after the Brexit referendum. UK telecommunication sector is currently thriving due to agile governmental policies, raise in technologies and stability in political conditions. New organisations are emerging but remain unable to sustain in competitive environment. Currently the market leaders in telecommunication sector in UK are Vodafone, E3, O2, Giff Gaff, and BT. In order to sustain in competitive environment, new entrants have to conquer these organisations. With respect to this, management of Vodafone needs to devise specific strategies and plans so that impact of new entrants won't affects its market.
Threats of Substitutes (Low):
Threats of substitutes are low in telecommunication sector of United Kingdom. Due to lack of alternative consumers have less substitutes available giving competitive advantages to the firms working under telecommunication industry. Though, management must not underestimate the substitutes channels as many social media networking companies like Facebook, WhatsApp, Viber have already developed free calling applications through which users can communicate with each other or can make conference calls easily and efficiently and that too free of cost (Rashidirad, Soltani and Fazeli, 2017). These applications are not widely used by the users as it requires internet connectivity albeit the management is trying to develop applications which can work without internet. Thus, management of Vodafone needs to consider this issue and make precise strategies in order to overcome the challenges.
Rivalry within the market (High):
In today's global competitive environment, it is difficult for the management to sustain in the competitive environment without precise strategies and plans. UK telecommunication sector is thriving where new and emerging organisations are embarking their business activities giving stiff competition to existing business giants. There is high threat of industrial rivalry in telecommunication industry of United Kingdom (Rao and Shekhar, 2016). Different organisations like 3, O2, Giff Gaff, and BT have already acquired huge market in UK giving stiff competition to Vodafone. To survive in the competitive market environment of United Kingdom, the management of Vodafone need to devise precise and appropriate strategies so that growth and development of the organisation can be made.
Task 4 â Understanding and interpreting strategic direction
P4 Strategic direction and options available for Vodafone
In order to assess he strategic direction of Vodafone, Porter's generic strategy will be used. Porter's Generic strategy will be optimum tool for analysing the strategic direction and option through which the management of Vodafone will be able to gain competitive advantage.
To sustain in competitive advantages, the management of Vodafone needs to consider the importance of formulating precise strategies and plans (Hashem and Su, 2015). Gaining competitive edge in today's competitive world is difficult and complex process. Management needs to either focus on cost or product differentiation or both. In this context, the strategic direction in which Vodafone must go is described below:
- Cost Leadership: In this strategy, organisations focuses on cost by decreasing the price of products and services in order to gain competitive advantages. With this strategy, the objective of organisation is to become lowest cost producer in the industry. Cost leadership strategy requires close cooperation between all the functional areas of a business. The benefits is that management able to increase the customer base eliminating the competitive disadvantage (Cawsey and Rowley, 2016). The demerit is that management would not be able to generate more profits as compared to other organisations. In order to gain competitive advantage, Vodafone could implement cost leadership strategy. By doing this the management has to cut off the cost and provide its products and services cheaply to consumers so that their amount can be increase. The drawback management could face will decrease in brand value and lower profitability.
- Product Differentiation: Product differentiation strategy is the strategy utilised by the organisations where they provide diversified products at premium cost to the customers. With differentiation leadership, the business targets much larger markets and aims to achieve competitive advantage through differentiation across the whole of an industry. Here the management offers different kind of products to segmented customers at premium price which covers all the cost incurred in the development of product. This strategy helps the organisations to gain competitive advantages in effective and efficient manner (Arakpogun, Wanjiru and Whalley, 2016). The management of Vodafone could consider this strategy in order to enhance their business productivity and profitability. To sustain in the competitive environment it is essential and rudiment for the management to focus on producing diversified products through thorough market research. In this way, the management will be able to sustain in competitive environment.
- Cost and Product differentiation focus: This is most reliable strategy proposed by Porter. In this the management have to balance both cost and product in order to gain maximum competitive advantage within the industry. Here, the management needs to concentrates on producing diversified products and managing their cost through market research. The management of Vodafone can implement the strategies by developing and creating new products and services at optimum cost which can help them to increase the customer base.
From the above strategic analysis, it can be understood that management of Vodafone in order to sustain in competition needs to consider the precise options. Each option has some benefits and drawbacks. It is important for management to evaluate both limitations and advantages of options and choose the precise method so that the organisation could lead to growth and development (Medudula, Sagar and Gandhi, 2016). It is recommended to the management of Vodafone to go for cost and product differentiation focus in order to increase the customer base and make brand value of the organisations more robust.
From the above report, it can be understood that to gain competitive advantages, business organisations must devise precise strategies and plans. In this context, the business strategies and factors influencing the business strategies of Vodafone has been investigated. The present report aid in analysing the impact of macro environment on Vodafone company. The internal environment of the organisation has been assessed in this report. By using Porters' five force model competitive analysis of the organisation has been made in this report. The strategic direction of the organisation has been analysed in this assignment by using precise theory