Vodafone Strategic Plan
VODAFONE’S STRATEGIC AUDIT External Environmental Analysis:PEST ANALYSIS Political factors Vodafone is generally subject to regulations governing the operation of its business activities.
Such as industry specific laws and regulations covering telecommunications services and general competition (antitrust) laws applicable to all activities. Most member states of the EU have now implemented the EU Regulatory Framework for the communications sector, adopted in 2002.
It aims to encourage competition in the electronic communications markets, to improve the functioning of the single market and to guarantee basic user interests that would not be guaranteed by market forces6. The impact of EU Framework on Vodafone was significant. After member states of the EU enacted national laws implementing the EU Framework, Vodafone had to reduce its mobile phone termination rates considerably Spectrum liberalization has been one of the key issues in mobile regulation for a number of years.
At its heart is the simple proposition that markets, rather than regulators, are better placed to decide the most efficient use of the spectrum. In September 2005, the European Commission published proposals for spectrum reform across the EU, including proposals to allow holders of spectrum greater flexibility on the use to which it is put, to allow holders to trade spectrum within a spectrum market and to improve harmonization of certain bands. Regulation, which seeks to reduce by up to 70% of the charges consumers have to pay for using their mobile phone abroad9.
These proposals came into force on 30 June 2007. The regulation requires mobile operators to offer a ‘Euro? tariff’ under which the cost of making calls within the EU is capped at 49 eurocents and the cost of receiving calls within the EU is capped at 24 eurocents.
Economic factors The most common indicator for measuring a nation’s economic activity is gross domestic product (GDP). This indicator covers the production activity of resident producers, calculated as the sum of gross value added from all activities/industries within an economy. Social factors
The EU and other regions are facing unprecedented demographic changes that will have a major impact on many areas of society such as social systems, consumption patterns, education, and job markets in the coming decades. People are living much longer and in better health, while fertility rates have dropped. Technological factors The Mobile Industry faces a stiff competition among key players in the aspect of Technological innovation. Various innovations like iPhone and smart phones have made the industry more competitive.
2. 2 Analysis of telecommunications industry
Porter’s five forces model [pic] Buyers The main factor that have marked recent developments in the mobile services market is the enlargement of subscriber bases in the developing economies, particularly in the major emerging markets but also in the industrialized countries, despite already high penetration rates. Regional mobile density, 2003/2007 number of mobile subscribers per 100 inhabitants’ at year end [pic] In the mature markets operators face fierce competition and consumer demand for more features, minutes and texts, for less money.
This leads to companies trying to cut costs and transfer these benefits in the form of price cuts to consumers. Buyers are becoming increasingly sophisticated and make use of the wider range of services that mobile operators have to offer.
Rivalry As the European telecommunications market is highly saturated and regulated, it is characterized by high levels of competition, whereas the situation in the emerging market is more favourable for Vodafone. Telefonica O2, T?
Mobile, Orange and “3” are the main competitors of Vodafone in the telecommunications market. 1. Telefonica O2: Telefonica is originally a Spanish company with affiliates in 19 countries and operates with both fixed and mobile lines. 2. T? Mobile: The company has strongly increased its presence within the European area.
TMobile has 12 direct and indirect shareholdings in mobile communications companies worldwide. 3. Orange: Orange is the key brand of France Telecom, one of the world’s leading telecommunications operators.
France Telecom serves more than 172 million customers in five continents as of March 31, 2008, of which two thirds are Orange Substitutes The increasingly vague scope of the market boundaries has drawn considerable interest within the industry. Fixed? mobile line conversion is a real future prospect for network operators. Research shows that the total number of fixed lines fell by 1% in 2004 and by 1.
8% in 2005. One of the main driving forces of this change is their substitution by mobile service..
Entrants New initiatives from outsiders are not likely in an industry that is highly regulated and protected by significant barriers to entry and high initial fixed cost requirements. Yet the increasing interdependence between mobile network operators and online entertainment providers (music, video, data downloads) leads to a redefinition of the industry boundaries.
In the long run, communications’ usage and purchases will be increasingly intertwined with those of other digital goods. Suppliers
In the context of the mobile network operators market, the concept of suppliers should be redefined indicating the providers of mobile devices, but also the providers of network infrastructure, software and additional digital services. While it is very important for network operators to sustain a close relationship with device providers, there has been a shift to increase independence. Indicatively, Vodafone’s global presence means it has significant purchasing power allowing it to secure exclusive deals with phone manufacturers. 2.
3 SWOT Analysis |Strengths |Weaknesses | | | | | |INTERNAL | | | | | | | | | | | | |Leadership position |Centralized control – low | | |• Global brand strength |flexibility | | |• High geographical reach |• High customer churn rates | | |Opportunities |Threats | | | | | | | | | |EXTERNAL | | | |Expanding market |Increased competition | | |boundaries |Market saturation in Europe | | |• Growth through 3G |Emergence of Low? Cost | | |• Strategic alliances |Brands/ MVNO | Strengths The main strength of Vodafone within the telecommunications market lies in its brand image and recognition. Vodafone, having established a global presence and having invested highly in marketing a differentiated image by promoting a Vodafone life style, currently enjoys a differentiating advantage that, if exploited properly, can offer a lead in competition.
The presence of Vodafone in numerous countries within Europe as well as in all part of the world enhances this image. It allows customers to travel and enjoy easily the services of their home country operator. Weaknesses 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 (e. g. the acquisition of the third biggest Czech mobile phone operator, Cesky mobile) rather than organic growth. This increased its subscribers’ 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. Opportunities The telecommunications 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 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? ine service and to better enjoy the benefits of its high investment in 3G technology.
Threats The European part of Vodafone’s market is characterized by existing high levels of competition. Major brands such as O2 and T? Mobile 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 (not only voice) Internet? based services.
This, combined with the upcoming European legislative measures is expected to limit further the tariffs for the network providers imposing further need for price cuts which could harm the bottom line profitability of the company.