Strategic Analysis of Vodafone Group PLC

Beginning with a basic tool, a mobile wallet and how Vodafone (rated 10th on the FTSE 100 index) is engaging this issue, then moving on to discuss smartphones and how their popularity is increasing. An assortment of examples where strategic management is occurring within the organization alongside the frameworks used by managers to calculate the company’s future expansion will be reviewed; plus, where threats are causing concern and how Vodafone plans to start a new strategic approach to tackle them. Finally, a conclusion based on the evidence will provide recommendations on how the organization should progress in order to sustain future growth.

Introduction

This report will illustrate how Vodafone Group PLC (the world’s leading mobile network company), is using key strengths and opportunities; with a series of analytical frameworks employed by managers, explaining how capitalization is being accomplished. An overview of Vodafone’s M2M markets will be provided, to illustrate the importance of the organization’s interest in merging and acquisition to compete globally with rivals and their substitutes. The examples and strategic methods will identify how the company will protract future growth and emphasize areas of concern in mature European markets. Finally, implications toward what needs to be enhanced and maintained to maximize growth will be examined, because Vodafone currently stands 10th on the FTSE 100 index; and, since 2010, revenue has become ‘organic’.

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M2M Marketing and Future Innovation

Most consumers seem not too bothered by having a mobile wallet – younger people do not feel as subdued as older users. Vodafone is working with Visa to reach out to consumers who are willing to use one; also, to combat substitutes such as Orange who have merged with MasterCard. A smartphone is needed by consumers to obtain a mobile wallet. ‘Smartphones now make up the majority of consumers’ handsets, with 53% of mobile phone subscribers using a smartphone as their primary handset. This is a rise of 17 percentage points from one year ago,’ (Mobile Network Providers, Mintel, 2012). Ten percentage points of this rise included a Vodafone competence, their Blackberry device. Vodafone has noticed augmentation in smartphone usage ‘with 27% of customers in Europe using these devices today, compared to 19% last year,’ (Vodafone Annual Report, p. 22, 2012). Generic strategies in the U.K. seemingly target the younger generation (16-24 year olds) and Vodafone appears to be thinking broadly with what seems to be a cost leadership strategy to trounce rivals.

Technological innovation and Vodafone’s vigorous market position enables it to offer new commodities to its consumers; but however, robust competition from telecommunications companies are threatening overall growth. Vodafone has merged with and acquired organizations to strategically position itself globally in the M2M market.

‘The global cellular machine-to-machine (M2M) connectivity cervices market is growing rapidly. M2M refers to technologies that allow both wireless and wired systems to communicate with other devices of the same ability. The M2M market has become a mainstream segment of the cellular industry. The market for cumulative cellular M2M connections is expected to grow at a CAGR of more than 25% between 2011 and 2016 and is expected cross 360 million connections.’ (Vodafone Group PLC, SWOT Analysis, Marketline, p. 6, 2012)

Corporate strategies seem centred on market penetration, as Vodafone aims to increase its share in a growing market. The ‘new markets and existing products’ quadrant of the product/market matrix is one Vodafone often selects to obtain new territories, segments and uses. Currently, tactics in the M2M market are seemingly being reconsidered, since Vodafone ‘is focused on offering value added mobile data services to its customers. In addition, is also focused on improving technologies to deliver data faster,’ (MarketLine, p. 7, 2012). This indicates Vodafone is also enhancing ‘existing markets and new products/services’ with product development. ‘Vodafone has a strong focus on providing M2M services. The group serves around 5.3 million M2M connections around the world. In addition, Vodafone is in the best position to take advantage of the Vodafone Group Public Limited Company global M2M communications opportunity and was topped in a benchmarking study by Machina Research. The group’s diversified geographic presence and long-established network of partner markets would further accelerate this opportunity. Hence, the positive outlook for these services would allow Vodafone to increase its revenues and market share in the future’ (MarketLine, p.p. 6-7, 2012).

Vodafone is frequently expanding its M2M market. After bidding for the troubled telecoms group Cable & Wireless Worldwide (C&WW), the group’s shares increased by almost ‘45% after Vodafone confirmed that it was interested. […] Confirmation of Vodafone’s interest pushed up shares in C&W Worldwide 28.5p, taking the company’s equity value to more than ?700m,’ (Financial Times, 14-02-2012). On April 23rd 2012 Vodafone’s strategic capability increased with a deal, alongside external interest from shareholders. ‘Under the conditions of the deal, Vodafone will pay 38 pence per C&WW share, meaning the firm has a value of ?1.044bn. The deal will add a U.K. fixed-line network to Vodafone’s mobile network currently in place.’ (BBC, 24-03-2012).

European markets are an area of concern (particularly competency in mature markets), also, various legal proceedings – perceived as external threats – have been occurring there, which could potentially damage intangible resources such as reputation and popularity in the region alongside attitudes, opinions and interests (AOIs); plus, ‘high penetration rates in these markets signify weak prospects for the group to report growth, making it dependent on differentiation and value added services for future growth,’ (MarketLine, p.9, 2012). So, the company’s development of ‘long-term evolution technology’ (LTE) seems to be an attempt to tackle this, which can produce ‘user speeds of up to 12 Mbps, compared to up to 6 Mbps on 3G. In Germany, our first market to launch LTE, we have already deployed the capability on 12% of our radio sites,’ (Vodafone Annual Report, p.24, 2012).

Conclusion

Vodafone’s value chain will need to be altered upon acquiring C&WW. Firm infrastructure, technology development and service will possibly be enhanced; especially by obtaining C&WW’s unique resources including corporate voice, data and hosting services; which can potentially impinge on the primary activities within the value chain; increasing marketing and sales, operations and service. Vodafone should continue with their penetration strategies in growing markets as acquisition has been functional for growth. In Europe, decisions should be based on consolidation to protect the company’s shares; because the business has selected a differentiation strategy, which seems sensible with weak prospects. Therefore, LTE should be prioritised for ‘4G’ phones now and in the future, because the experience curve will potentially increase in emerging markets (i.e. India etc.) as it decreases in Europe and the U.S. hence, entrepreneurial innovation and core competences are practical to uphold cost leadership.

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