Mobile evaluation is only three decade old but there are major changes been seen year after year. There are more than 5 Billion mobile users all over the world which is served by different service provider. The major names in UK are:-
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The services include voice calling, Internet service, multimedia messaging, video conferencing, fixed line internet etc.
In 1982 Racal Electronics won a private sector UK cellular licence and they set up a new network although The first call was made by using Vodafone service is few minutes passed midnight on 1st January 1985, and by 1987 Vodafone was known as largest telecommunication company in the world. They are the first in business to launch Vodapage which provides 80% of UK population paging service. By year 2010 Vodafone proved their significant global presence over 30 countries and over 40 partners markets in Europe and worldwide. The Group operates in three geographic regions Europe, Africa and Central Europe, Asia Pacific and Middle East and has an investment in Verizon Wireless in the United States. By market capitalization, Vodafone Group plc. Is one of the largest companies providing service to more than 500 million users in Europe and worldwide.
The group’s main principal activity is to provide mobile telecommunication service to mobile users and operate a fixed line services for business and offices in privet and government sector. Vodafone has tried and retain their leadership in telecommunication market by providing better value, better product, and services in Europe and worldwide .Their global strategy is to embrace voice, data and internet service and to focus on satisfying customer’s needs and for that they had invested large amount for developing and launching new services for customers such as free mobile application, money transfer service, fixed and individual line internet service, Vodafone 360 etc.
Vodafone group’s objective is to achieve and maintain a position of dominance in its markets in worldwide .The company has maintained a strategy of focusing on global mobile communication and providing network to allow its customers to communicate using mobile product and services. Their growth strategy is
- Attract, service and retain high value customers
- Continued geographic expansion
- Provision of new products and services to support growth in revenues from both voice and data.
Vodafone and Verizon Wireless Merger
Vodafone group has able to establish his network and on several continent including Europe, Asia, Africa, north and South America. Joint venture with Hutchison Essaar is their one of the biggest investment. Vodafone group had developed their business successfully all over the world apart from America. They had entered to USA in 1999 merger with air touch communication and later in 2003 they also invested in Verizon wireless in which they hold 45% but still after all these they are not able to get success which they achieved in other countries.
Verizon communication who owns the 55% shares in Verizon wireless is formed in 2000 mergers between two biggest companies in USA Bell Atlantic and GTE. The merger also made Verizon wireless a largest wireless network provider in USA and after that they had managed well to involve in good deal such as acquisition of Alltel Corporation who ranks eighth largest wireless network provider in USA with approx. 800000 customers. Currently Verizon communication owns most of the shear in company and management decisions in Verizon wireless.
Vodafone group has successful business in UK and Europe but even after 10 years in USA telecom Market they still not able to expand their business. After investing in Verizon wireless they are trying to grow in USA but they are still waiting to achieve that. At one stage there was a persistent speculation of possible merger between these two companies which will be helpful for the future of both the companies. There is huge battle going on these companies for ownership of Verizon wireless and both companies had shown interest buying out the rest of the shares.
The USA telecom market is growing rapidly and with every opportunity these two companies try to be on top of each other which are one of the reasons behind delaying the possible merger between Vodafone and Verizon wireless. After financial downturn CEO of Verizon communication advised Vodafone to sell their shares in Verizon wireless which also shows the business environment between these two organisations is unstable. As research figure shows that if Vodafone and Verizon wireless obtain full merger in future the company could worth ?120 billion .Vodafone group had a market value of ?77 billion and Verizon communication $86 billion (?57billion). Vodafone group had been expecting merger between two companies should be 60:40 in Verizon wireless but the partner company is not agreed on these terms. Although with less market value Verizon wireless generates significant and continuous cash flow. They had paid dividends to his shareholder which is Vodafone group till 2005 but after they stop explaining reason is to reducing a down debts of the company. As per Bloomberg report there are three possibilities could be seen between this two organisations
- Full merger of these two companies
- Verizon wireless would start paying dividend to Vodafone
- One of the partners to sell their share either to each other or to the third party.
Many of the city business analyses have seen potential in these companies and they think they should solve their problems and issues in Verizon wireless which could worth ?40 billion. Royal bank of Scotland one of the largest organisations in banking sector in UK suggested that Vodafone should either merge with Verizon communication or they should sell their stake in Verizon wireless for better profitability. Vodafone CEO Vittorio Coalo also thinks the same way and he said merger is the best alternative to solve the problems in Verizon wireless than other. They had discussed number of options earlier in 2010 which could be helpful foe Verizon wireless future but they also think merger would be more complex because of competition between UK and USA businesses compared to the other option such as separation between Verizon communication and Verizon wireless.
Business environment with USA Partner
Vodafone group is facing huge competition from his American partner and their rivals in business such as AT&T wireless. Verizon communication had a joint venture with Vodafone in Verizon wireless putting pressure to sell their 45% stake in company. Expected merger between Vodafone and Verizon wireless is still on hold but in competitive telecom market partner group is bearing down Vodafone. The group operates their business from United Kingdom and provides services more than 27 countries in 5 continents. The group 80% of revenue is comes from their UK business but existence in emerging markets like India makes their position strong in telecom sector. Verizon communication is trying continuously to buy the Vodafone stake in company and ruled on Verizon wireless. In 2006 both group had played down ownership battle for Verizon wireless but they failed. Since 2000 when Vodafone group was new to US telecom market and Verizon communication was newly formed company had pooled out their US wireless assets. Both are the largest wireless network providers in world had suffered from periodic tension.
Mr Seidenbeg CEO of Verizon communication said in an interview that he would like 100% of earning from Verizon wireless because they are doing 100% work. In 2008 business analysts reported the Vodafone stake value in Verizon wireless is been increased by $10 billion to $60 and even after 2005 they had not received a dividends from Verizon wireless it seems that group thinking positive about the merger with Verizon communication.
Vodafone group had always focused of customer satisfaction for that they had shifted their business approach towards customer benefits. They had moved on from unit pricing to unit based tariff. Vodafone group had invested in United States to explore their business and make more profit from highly developed market. The group outsource their US business from outside and so they had considered different international laws in order to explore their business in other countries. They had considered the tread restriction which is also important in political factor.
Recently communication commission in USA made attempt to bring telecommunication sector under government oversight more specifically put under government regulation but apparently US court denied this appeal for the D.C. circuit ruling which regards information service underlying of telephone rules.
Economical factors are interconnected with political factors which might affect the development of the company. The economic factors include growth rate, exchange rates, interest rates and inflation. These factors are pretty important which gives right and accurate cost to the customer so that everybody can aware of their product. During the investment in Verizon group Vodafone group had received returns in form of dividend till 2005 but after that they stopped paying explain reason to reducing the lower debt. In 2009 Verizon communication used Verizon wireless $5 billion to pay off their debts. Vodafone and Verizon wireless have 87.8 million retail customers all over America. Vodafone group owns 45% share and both the partner companies are made compelling amount of stock in telecom infrastructure class. According to Bernstein Report there are four option Verizon communication have to pay the internal borrowing which are either they could rebuilt their debt level or they could just buy Vodafone 45% share which could be more expensive. Another option they have is to start paying dividends to Vodafone or a merger with partner group.
Social factors are very important for the development of the company more than any other. This is because social factors have more impact on customers regarding to the product and services. Vodafone group had invested in social factors and to make them effective they are mainly focusing on education, enterprise, health and welfare. The group runs several charitable trusts in USA and Europe which is making positive contribution to the local communities in specific projects which are run by Vodafone and Verizon group. The group had also made investment in youth projects to draw a traditional philosophy. In 2001 they had managed to raise ?3 million donation through these welfare which helped youth people all over the world to take informed decisions and choices. The group also founded Peace Parks international foundation which supports in sustainable economic development conservation of biodiversity and regional peace. Both groups also a part of voluntary service champagne to fight against HIV and AIDS and other deceases like Cancer.
Technological factors focuses on research and development activities which includes development of new technology and services. Mobile phone industry is growing rapidly a great deal of technological changes and development is continued to be seen. Vodafone group offers variety of mobile phones with latest technologies to their customers. 3g technology is already helping companies to increase their sales revenues. However Vodafone has brought additional responsibility to protect young people from inappropriate content, gambling and violent games.
Environmental factors also important in successful business although telecom industries impact on environment is very small as compare to other industries however these companies have to work on to reduce it . Vodafone group has started CO2 ring to reduce energy consumption which will produce less carbon. Company estimated during year 2008 their business in Europe, Australia, NZ had produced 1.23 million CO2 and they aims with this ring they will reduce emission by 50% by 2020. Vodafone group is also worked in mobile phone disposals in which they helped to developed support industry to minimize phone disposals. They also had developed guidelines to reduce greenhouse gas emission and to monitoring progress.
Legal factors are very important for any organisation to form a business and it’s also important for organisation to follow them. Vodafone group have their business all over the world and throughout their business journey they had worked as per the laws and restrictions. However in some issues they had gone beyond government regulation while working in competitive market. Group also believes to retain the position in market companies must exceed the legal and industry self regulation.
Verizon wireless works under management board of Vodafone group and Verizon communication. Although it’s true that Vodafone is included in board decisions but still they don’t have full control because of fewer stakes in firm. It’s been seen several times when Verizon communication opposed the Vodafone decision. Both companies had shown interests in buying Verizon wireless not ready for any settlement which shows their business instability. It all started in 2000 when Vodafone and Verizon communication bided for air touch communication and apparently Vodafone group won the bid which helped them to enter into USA telecom market. In March 1995 US cellular A&B PCS auctioned for spectrum in 1900 MHz range in which Air touch USA, Bell Atlantic, Nynex and US west formed their joint venture called Prime co communication. Later in 1999 when Vodafone merged with Air touch Partner Company approached Air touch Vodafone about the merging wireless communication (air touch Vodafone, bell electronics, prime co) to form a Verizon Wireless but due to FCC regulation prime co and Verizon territories and region was split. When Vodafone merged with air touch CEO of Vodafone Air touch Arun Sarin was involved in various other formations of partnership’s and technology dimensions as well. Sarin was also involved in decision to use CDMA technology over GSM in root of Verizon wireless network but Verizon communication opposed to this decision specifying CDMA technology to use on Vodafone network.
Both the group had formal meeting about the company expansion it seems very often when these come to any mutual decision. In 2004 Vodafone considered to buying AT&T wireless Verizon communication turn out the deal to take over joint venture. Vodafone however managed well to gain profit from their business and Verizon wireless also started paying dividends in 2009 and continued to gain its value.
Michel Porters Diamond Model
Michel Porters diamond model form competitive advantage helps to understand the comparative position of the organisation in global competition. The model helps to measure company performance over geographic regions.
Rivalry, Firm strategy, structure
Vodafone group business strategy is to meet social needs of the customers which create opportunity to increase profit. Vodafone group also made consideration in developing product and services which meet the specific needs of customer in local market. The group had set their goals to be leading communication provider but huge battle with competitor and instable business in USA they are facing problem to keep up the leading position. Vodafone group runes their business all over the world and major parts covered by group are in UK and Europe. Their UK business produce 80% of revenue were they are facing competition from O2, Orange, and T-mobile. Were in USA they are competing by their partner firm who is second largest in USA and who owns most of the Verizon company stake. Verizon wireless have their business all over the America who competing against AT&T who recently announced merger deal with T-mobile USA which made them strongest and leader in US telecom wireless network.
Demand condition plays crucial role in porter’s diamond model in business. Vodafone group have successful business in UK and Europe because they are able to evaluate demands and expectations and to fulfil them. In late 90s telecom sector was focused on providing fixed line services and in early 21 century wireless technology was introduced who gains popularity in very quick session. So as demand changed mobile companies are grown in telecom market. Vodafone group also considered customers demand they introduced I-Phone in 2010 and in first week they sold more than 400000 cells. In USA also they sold I-phone through their joint venture company and group was aware of the demand but they did not imagined the sales figure could go so high were demand was more and supply was less and therefore it is very important in business to measure demand in customer satisfaction point .
Related Supporting Industries
Related supporting industries are very important in relation to the grown of business. Vodafone group is working with few other companies on their territory. Vodafone group have been supported by air touch communication their partnership with Verizon communication is also somehow helping them to grow in US telecom market. Vodafone group also developed good relationship with mobile phone producing companies which is helping them to fulfil customer demands. In 2010 they made partnership with Apple to launch I-Phone which was great hit.
The group also helped to develop mobile disposal industries they think disposal of mobile phone is very big problem and with their help this industries trying reduce this problem and help environment. They are also working with few other companies in telecom market to reduce CO2.
Recommendation and Conclusion
Vodafone group has got successes in America but their business and relationship with partners is not stable. Vodafone group had already shown their co-operation while developing their business in US telecom market and working with Verizon communication. I think Vodafone group should try for merger with Verizon communication to obtain and retain their leading position. Verizon had a control over management decision and they had paid return in form of dividends to Vodafone until 2005 but after that they stopped paying explain reason is to reduction of lower debts and for almost four years Vodafone group did not received any returns for their stake.
USA telecom market is moving rapidly so buyout of Verizon wireless or 50:50 partnerships could be a very good option for Vodafone although both options are never opened for group. I think they should try to maintain good relationship with partner group for the better future of Verizon wireless. Currently Verizon wireless is a second largest wireless network provider in America which was takeover by AT&T in 2010 in multimillion dollar merger with T- mobile USA.
Verizon communication should pay the dividend to their partner group in future or they could try to buy Vodafone stake in Verizon wireless which are quite expensive. The company currently serves nearly 93 million customers all over the America which shows the strong position and settled business of the Verizon wireless in American market. But recent controversial business environment between partner group could affect the market value and shares of Verizon wireless. Vodafone group had experience in managing business in different countries so they can be useful for Verizon wireless in
subject of developing new products and services, entering new markets. The recent merger between AT&T had already affected the positions of Verizon wireless which also knocked them out from top position to second and so if the new group’s strategy is to pay off then Verizon wireless will suffer in business.
1.SWOT analysis on Vodafone
To identify company’s internal and external strength and weakness swot analysis is very important.
Vodafone group have their business all over the world and they have ability to grow in many countries.
Vodafone group have nearly 500 million customers in nearly 40 countries and 5 continent.
They have very strong platform which gives them power to work in R&D to innovate new products and devices in subject to the growth of the market.
Group’s biggest strength is their customers. They had managed well to maintain good relationship with their service users.
Good decision makers and efficient people on the board is also Vodafone group’s strongest link.
Vodafone group’s biggest weakness is the capital expenditure over fixed tangible assets. In past five years their average depreciation charge been exceeded by 58% which also suggest that group might have cash shortage in future.
Vodafone group has been spending lot of money on research and developing new product and services. So if the product fails in market group could face heavy loss.
Legal issues with partner companies are also their business weakness
New innovations and technologies and services are expected to be major hit in telecom market. Vodafone group always try to bring new services for their users which will use by them for data transfer, calling and internet.
Mobile phone industry is growing very rapidly were persuasion to have at list 1 mobile gives opportunity to mobile companies to increase their size and share in market.
If Vodafone merge with their US partner will give them opportunity to establish and make their position stronger in US market.
Vodafone group work in developing new technologies and services and if something goes wrong with product it will leave company with heavy loss.
As industry grows mobile companies have to take special care so that no one can misuse the technology and at some point they also have to accept the decisions made by social or political reasons.
Competition from other companies who serves same product and services.
2) Porter’s generic strategies
Relating to the SWOT analysis, Porter (1980) identified three generic strategies for competitive advantage, which can represent a distinctive strength of a company. These are shown in the diagram below:
Vodafone use the cost leadership strategy and differentiation but do not adopt the focus strategy as they do not focus on a niche market. Vodafone needs to compete on a cost leadership strategy because number portability means that people will move to whoever can provide a reliable service the cheapest and by becoming the lowest cost producer in the industry through economies of scales allows Vodafone to compete on price with other producers to earn higher unit profits which in turn achieves competitive advantage through driving down costs. Vodafone also differentiate themselves through providing customers with added value through their product features and quality that are unique and different from their competitors.
In order to retain market leadership, Vodafone has established a set of marketing objectives. These are to:
- Obtain new customers
- Keep the customers it already has
- Introduce new technologies and services
- Continue to develop the Vodafone brand.
Vodafone is achieving these objectives by continually updating their range of phones and services offered to keep ahead of its competitors. Vodafone also communicates with its customers to keep them well informed of the benefits of all Vodafone products.
The marketing mix consists of many different factors, which are grouped together into four main categories: product, place, price and promotion.
Vodafone’s products have many different features which provides customers with opportunities to chat, play games, send and receive pictures, change ring tones, receive information about travel and sporting events, obtain billing information and view video clips and send video messages.
Vodafone UK operates over 300 of its own stores it also sells through independent retailers e.g. Carphone Warehouse and Phones 4 U. Customers are able to see and handle products they are considering buying and staff are on hand to ensure customers’ needs are matched with the right product and to explain the different options available to them.
Vodafone offer various pricing structures to suit different customer groups, monthly price plans are available as well as prepay options and phone users can top up their phone online. Also Vodafone gives NECTAR reward points for every one pound spent on calls, text messages, picture messages and ring tones.
Vodafone has worked with icons in the past such as David Beckham to communicate its brand values they use advertising on TV, billboards, magazines and in other media outlets to reach large audiences and spread their brand image and message effectively. Their stores have special offers, promotions and point of sale posters to attract customers inside the stores to buy and Vodafone actively develop good public relations through sending press releases to national newspapers and magazines to explain new products and ideas.
Also relating to the product aspect of the marketing mix, the Boston matrix represents the company’s portfolio according to where the products stand regarding market share and growth.
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