Business Strategy Assignment Level 5

TASK 1

1. PESTLE Analysis of Vodafone

Vodafone is the largest telecommunication network in the world. It has expanded its business in Europe. There are certain factors that should be considered for evaluating its success and all are discussed below:

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Political factor

Political factors influence the path of success of this company, which includes developing infrastructure and operating in a state. Vodafone depends upon the political scenario of the country where it has decided to operate (Flander, 2014). Also, aspects like peace in the state and instability in political areas create a direct impact on the working of a company because states with unstable political conditions are most prone to wars, and establishing good infrastructure for the betterment of the network becomes very tiresome.

Economic Factors

It is considered as a crucial dimension for Vodafone. The fast development of a state provides higher chances for getting better economic conditions, which facilitates the chances of company expansion and opening up of new units in developed areas. It results in increasing the GDP of the country, which means that the income of its people becomes higher and it will be able to adapt new technologies in the field of communication. These aspects will lead to increased overall profit for the organization, due to which it would be able to expand globally. Certainties in global scenarios lead to changing its various strategies every time.

Social Factors

This impact can be aroused through the beliefs and culture of local people where the company is operating. This factor is very dynamic, and to achieve success, organizations have to make their strategies flexible by the culture of that particular area. Vodafone is known to be a pure European company, which has also changed its preferences and policies concerning social factors.

Technological Factors

They are known for coming up with innovation. It always follows trends in the areas of technology and communication (Abraham, 2012). As in the telecommunications sector, there are many rivals. Vodafone has to come up with new technologies and ideas because they are the essential factors that will lead to sustaining the market. All the products which they are producing are related to technology only. Therefore, the launch of new devices along with unique features has made them focus on the latest trends so that they can deliver something new to the market.

Legal Factors

Every global company faces many rivals. So, Vodafone should be aware of various legal issues such as copying and piracy. Many times the state has blamed them for the infrastructure, due to which the company has paid penalties. Their employees have accused them that they are not paying well, so the result is the shifting of these employees to rival companies, which has increased the risk of the leakage of their innovative ideas. Vodafone should try to avoid legal issues as it affects their positive image among customers.

Environmental Factors

As globalization has risen, in the present time people are ethically oriented. They always want the company they choose to be socially responsible and play a vital role in making society better in every aspect.

2. Ansoff's Growth Vector Matrix

It is also known as the Product/Market grid or matrix. It provides four options for growth by matching up with new and existing products in the market that are plotted on a matrix. It identifies and provides acknowledgment regarding the risk that a particular strategy of growth may possess when one moves from one section of the matrix to another. These approaches provide four types of growth strategies, which are market penetration, market development, product development, and diversification.

Business development direction can be better described as they are using six various directions to develop their business.

Product development

They have focused on their current market, which has led them to increase the quality and range of services they are providing and increase their market share against those competitors who are not developing as fast as compared to them. There are various services that require the adoption of new technologies, such as LTE networks and 4G services, to provide a competitive edge for the company to sustain itself in the market and compete with rivals. (Ferrell and Hartline, 2010).

Market penetration

            . Market penetration is the selling of products and services in the market successfully. They mainly use horizontal integration strategies for entering the market, which has helped them in erasing their competitors in various markets who have their main operations in mobile communication. They have also merged with Mannesmann, who brought fixed landline networks. They require some new market penetration strategies to increase their shares from the present competitors, who are already well established.

Market development

            These steps have not only made Vodafone a leading company in Europe but also internationally. Company is doubling its size and is getting an extreme portion of experience from themselves as well as from Mannesmann. After having their first international experience, they are growing bigger and following a path which is quick and active in development, which other companies have to adopt as they lack that experience. Also, the company has to respond to various changes in the market for which new strategies have to be developed. Vodafone needs to develop the market to increase its customer base and also grow globally in the market of telecommunication. They should enter the markets of other continents and should form various strategies to compete with their locally established competitors by forming some mergers with them.

Diversification

Diversification is to expand their business by a new product or existing product potential in the market.  As now many telecommunication companies are providing routers and broadband, Vodafone should come up with new ideas. This organization has also decided to consolidate its own IT activities and outsource to big international IT companies, which would not only decrease the cost but also increase their quality and consistency. They need to diversify their product line and should make their portfolio much wider by entering into different fields such as banking, aviation, films, food, entertainment, health care, etc.

TASK 2. Strategic Capability

As business includes competing with other rivals for customers, market shares, and revenue, they apply certain tactics that are made after deliberating strategies. Business leadership includes the process of shaping all strategies and putting them into action. Every business has to make different strategies for gaining advantages. The better strategy depends upon strategic capability. It is known as the ability of a company to successfully imply competitive strategies that enable it for better survival and increase in value over a particular phase of time. It has a focus on aspects such as its assets, resources, and position in the market and presents how well it can employ various strategies in the future.

Significance

To remain financially viable and grow endlessly in the market, along with the presence of competitors, business strategic capability is considered a major component. There are numerous groups that consist of interested parties that attempt to measure and track all strategic capabilities. These interested groups include investors, who are seeking an opportunity to put their money into businesses for a chance to grow and succeed in the future. Employees also have relevance with the strategic capabilities as it reflects the stability of a business. Various business leaders keep a check on strategic capability, not only to focus on their company but also on the rivals to understand the market completely in which they want to enter or are already operating.

There are many elements that contribute to business strategic capability. There are assets like cash, property, and patents, which all contribute to and employ various strategies that provide man benefits to business. Other elements of it, such as human resources, the structure of the organization, and skills, all contribute to strategic capabilities and influence every tactic implied after making different strategies. It includes various phases, such as strategic analysis, which helps to understand the company's strategies concerning the change in environment. It can further include internal and external factors that influence their strategies. Secondly, it includes strategic choice, which includes the selection of the best strategy for the goal from the available options, and the final element, which is implementing that strategy into an action (Henriques and Richardson, 2013). It includes carefully planning and properly deploying the resources of the company and effectively handling those possible changes concerning the organisational structure (Hyde, 2014).

2. VRIO/VRIN' Model

It is known as a business analysis framework. VRIO is considered an internal analysis but is used as a framework for the evaluation of all resources and capabilities of a company. It has four components, which include value, rarity, imitability, and Organisation.

There are certain questions of every component that one has to answer, which are whether the firm can grab the opportunities or can neutralize the threat, which is external, along with the available resources. The question of the second aspect includes whether the control of all resources is in the few hands or not. The question regarding imitability includes whether it can be easily imitated or not; there will be significant disadvantages related to cost when other firms try to copy and develop the same idea as them; and lastly, the question related to organization is whether it is ready for exploiting the resource or capabilities or not.

The question of value defines whether available resources or capabilities can work for exploiting the opportunity to eliminate or compete with the threats available in the market. If these two factors are not fulfilled by the company, then it is proven to be the strength of a company. If it does not work in vision to exploit available opportunities, then it is considered a weakness.

The question of rarity defines whether having a quality of rarity in the company can lead it to a competitive advantage. It is a unique resource that is considered to be the breaking point of every company. These valuable resources are not present in any other competitor.

The question of imitability questions such factors as whether the company is able to fcanages related to cost when other competitors imitate or copy or obtain that particular resource available only to them (Jones and Ratnatunga, 2012).

From the above analysis, it has been determined that Vodafone has a temporary competitive advantage, and this advantage can be lost if competitors come up with more advanced products that are not imitating, and the advantage in the market would be gained by other rivals in the telecommunications market.

3. Strength and Weakness of Vodafone

Strength

• Strong research and development have enabled Vodafone to gain a competitive advantage as they have become the market leader in providing new technology, which creates low differentiation between competitors.
• A strong corporate culture has also allowed Vodafone to become successful in the telecommunication market.
• A financially strong base is giving Vodafone the ability to reinvest in the low-power market in Europe due to extensive competition.
• It is regarded as the most popular provider of cellular services around the world.
• It has a huge employee strength, which is about 1000,000+ globally.
• company has hugely diversified product such as landlines, mobile telephony , digital services, etc.
• There is strong brand visibility for Vodafone and effective brand recall.
• Promotional activities are very effective, such as advertising with the concept of ZooZoo, which has made them very popular among audiences, and publicity through huge boarding around the highway grabs the eyes of the people.
• They have also tied up with many international sports, such as Formula One races and other sports events, which are very popular.
• It is widespread globally as it has a presence in about more than 150 countries and a customer strength of 470 million, which they used to serve.
• It is also provides some other services, such as payment options, health services, foundations, etc.
• Websites are highly efficient designed, which ensures and facilitates easy online payments, recharges, and service activations.
• Apps of Vodafone are very popular among youth as they provide movies, music, etc., which can be accessed very easily.

Weakness

• It is a global brand, but it comes constantly under consideration from various global authorities.
• They have to fight for every market share with rivals mainly because of wars based on prices.
• The market is very saturated, which makes it hard for them to compete with competitors.
• The product life cycle of their product has a short time span, which provides only temporary advantages (Kiptoo and Mwirigi, 2014).
• Vodafone does not create much influence in the market where it operates, as every other competitor is providing similar kinds of services.
• They have subcontracts with the manufacturers of their handsets and they only provide their name on the handset, which poses a potential risk because if any thing goes wrong in mobile handset , their goodwill would be damaged among the customers.
• There are also excessive phone radiation complaints that have been filed, which are very hazardous for health and can also lead to cancer.
• Not being able to completely exploit the market consisting of mobile wallet market.
• There are often complaints for the negligence of channel's sales manager, as he visits the retail stores minimally.
• It is most likely to become a follower in the market instead of becoming a leader or to follow a lead in the market.
• I t has a lack of clarity in vision, which is resulting in difficulty identifying current market trends

TASK 3

a. Bargaining Power of Buyers

            Buyers in telecommunication market has lots of demand. They want the best offer they can get by paying less. This creates pressure on the profitability of the company in the long run. The bargaining power of customers is very high as they seek an increase in discounts and related offers.

Vodafone can tackle these situations by implementing the following steps:

• By building a customer base which is very large. This can be helpful in two ways. It would help to reduce the bargaining power of customers and company would get an opportunity  to streamline the sales and process of production.
• By introducing new products very rapidly as customers seek more offers on established products, they should come up with new products in the market.
• new product will lead to a decrease in defects in the existing products (Njeru, Stephen, and Wambui, 2014).

b. Bargaining Power of Suppliers

As all the companies in the wireless communication industry get their raw materials from various suppliers. Suppliers for earning profit can have dominant positions, which can result in decreasing their margins. Suppliers, which are powerfully established, negotiate to extract possibly higher prices from the company. The impact is created on the overall profitability of Vodafone.

            Following steps are implemented by them to tackle suppliers

• They can build efficient supply chain consisting multiple suppliers.
• One can do experiments with designs of product by using different materials.
• Developing suppliers who are dedicated and whose business is dependent on the company.

Threats of New Entrants

            It is the most effective threat when a rivals comes up with new innovative ideas, introduces new ways for doing different things and also applies lower pricing strategy, which puts a lot of pressure on Vodafone to reduce the cost and to provide new value propositions. It has to manage all these kinds of challenges to compete with them and sustain in markets.

            It can apply following strategies to compete with competitors:

• Introducing innovative products would help to bring new customers and give  reasons to existing ones to keep continuing with them.
• Building economies of scale to lower down the fixed cost per unit
• Spending more on research and development and building up of capacities.

d. Threats of Substitutes

            When a new product in the market meets similar kind of needs in another way, it leads to a decline in industrial profitability. For example, dropbox and google drives are known as substitute of each other to store hardware drives. The threat of introduction of substitute is very high, as it provides a value proposition which is completely unique and different  from the present offerings in the particular industry.

The following steps should be taken to tackle this situation:

Be service-oriented along with being product-oriented.

Understand the core needs of every targeted customer rather than keeping focus on what customer is buying.

Increase the cost of switching to the customers.

e. Rivalry Within the Market

The competition in the telecommunications industry is very intense, as it leads to lower prices, which results in decreasing the overall profitability of the particular industry. It operates in an industry market that is very competitive.

            Here are some steps that can help to overcome such situations

• They should build a sustainable kind of differentiation
• A scale should be developed to measure the competitive areas.
• Try to collaborate with other competitors, which would result in the increase of the size rather than just competing for small segments of marketing (Parnell, 2010).

TASK 3

Bowman's Strategy Clock Model

It is considered to be a model which Vodafone uses to design its marketing strategies for analysing its competitive positions  in comparison with other competitors. It is a representation which shows the relation between customer value and price.

Following are the eight strategic positions of Bowman's Strategy Clock

Position 1. Low price/low added value

            This is the segment under which company does not want to compete. this is  considered as the bargain  basement and many company do not want to opt this option. This position is chosen when the product lacks differentiated values. One can imply this by selling volumes which are cost-effective and also by attracting new and potential customers. These are adopted by those companies that are about to liquidate or planning for retrenchment.

Position 2. Low Price

            The company chooses this position when they are potentially low-cost leaders. When the firm will operate in this category, it will generate less profit margin and there will be a need to sell high volumes of services and products. For this one needs a good strategy so that they  can sell the high volumes of their offerings at a good price, thus maintaining a good amount of profit.This strategy is adopted by those firms who are weak competitors; this strategy is used by local network operator of the country who have fewer customers.

Position 3. Hybrid

            Hybrid position uses moderate pricing as well as differentiation. These are the companies which provide product or services to the customers at a lower price but the offerings are of high perceived value as compared to the low-cost rivals. In this, the company mainly builds their reputation and offers a fair price (Rumelt,  2010). This strategy is implemented by Vodafone, which has a greater concern for aspects such as brand building as well as increasing the customer base and also earning a great profit.

Position 4. Differentiation

            In this kind of position, the company builds that type of product or service which has unique features and that are valued by customers. company that provides differentiated products always gets competitive edge in the market. Here, branding plays a major role. This strategy is also used by this firm to create a different image in the minds of the customers so that they can effectively differentiate their services from other competitors.

Position 5. Focused Differentiation

            In this position, the company sells products which have highly perceived value and have high prices. This kind of strategy is adopted by those companies whose targeted customers prefer to buy product or services which have high perceived value, where it is not necessary that the product also have any real value. This strategy is mostly followed by the companies that are in apparel, like Gucci or Armani, who have very high prices as well as the loyalty of the customers.

Position 6. Increased Price and Standard Product

            It is that kind of a strategy in which company puts a higher price on the product or services and does not increase any value of the product. It is a risky position if customers accept the pricing; then the company earns a great profit, whereas if not, then they face a fall in their market share, which can be corrected by adjusting the price of the product. This strategy is implemented by those whose customer base becomes  very high but not implemented by many.

Position 7. High price/Low Value

            This strategy is implemented where there is no availability of competition and choices for customer to buy that product. As a monopolist company, it doesn't get concerned on the value of the product.

Position 8. Low Value/Standard prices

This is the worst strategy, which can make the company lose market share as they would not provide quality products to the customers.

CONCLUSION

It has been concluded that many external factors, such as political, social, economical, technological, legal, and environmental aspects, influence the functioning of Vodafone. The strategic capability of any company includes strategic analysis, strategic choice, and its implementation, which is a set of processes in which strategies are analysed and, among the options, choose an appropriate one and imply the strategy in action. There are certain forces, such as the bargaining power of buyers and suppliers, threats of substitutes and new entrants, along with the competition with rivals.

REFERENCES

• Abraham, C. S., 2012. Strategic Planning: A Practical Guide for Competitive Success. 2nd ed. Emerald Group Publishing.
• Ferrell, C. O., and Hartline, D. M., 2010. Marketing Strategy. Cengage Learning.
• Flander, J., 2014. Great strategists say "no.”. Strategic Direction. 30(4). pp. 31-32.
• Henriques, A., and Richardson, J., 2013. The Triple Bottom Line: Does It All Add Up? Routledge.
• Hyde, M., 2014. Technology is reinventing your business. Strategic Direction. 30(4). pp. 1-2.
• Jones, S. and Ratnatunga, J., 2012. Contemporary Issues in Sustainability Accounting, Assurance and Reporting. Emerald Group Publishing.
• Kiptoo, J. K. and Mwirigi, F.M., 2014. Factors That Influence Effective Strategic Planning Process In Organizations. IOSR Journal of Business and Management. 16(6). pp. 188-195.
• Njeru, N. E., Stephen, M. A. A.  and Wambui, M.A., 2014. Analysis of factors influencing formulation of strategic plans in Embu North District, Embu. Global Business and Economics Research Journal. 2 (5). pp. 116-129.
• Parnell, J., 2010. Strategic clarity, business strategy and performance. Journal of Strategy and Management. 3(4). pp. 304-324.
• Rumelt, R. P., 2010. Towards a strategic theory of the firm. Competitive strategic management. 26. pp. 556-570.

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