An executive summary for

managers and executive CASES

readers can be found at the
end of this article Vodafone and the wireless
industry: a case in market
expansion and global strategy
Syed Tariq Anwar
Professor of Marketing and International Business, T. Boone Pickens
College of Business, West Texas A&M University, Canyon,
Texas, USA

Keywords Global marketing, Wireless technology, Telecommunications industry,

Business expansion scheme
Abstract This illustrative case discusses and evaluates Vodafone Group and its overseas
expansion and diversification in global business. Vodafone is a UK-based company that was
established after a spin-off from Racal Electronics Group in 1982. The primary objective of
this case is to examine Vodafone's changing focus and international expansion in the world
wireless industry. The case intends to look at Vodafone's future expansion, growth and
global strategies within the concept of internationalization and competitive advantage issues.

Introduction
Vodafone Group This illustrative case discusses Vodafone Group[1] (hereafter called Vodafone)
and its overseas acquisitions, market expansion, and global strategies in the
wireless and mobile phone industry. In the last six years, Vodafone has
transformed itself from virtually an unknown small UK-based company into a
multinational enterprise (MNE). In 2002, Vodafone was the largest wireless
operator with 93 million subscribers and the company's operations had reached
over 29 countries in every continent in the world (see Table I). The main
purpose of this case is to examine Vodafone's global expansion in the
European, North American, and Asian markets. Vodafone was established after
a spin-off from a UK-based company, Racal Electronics Group in 1985 (see
Table II). The company is composed of five regions, i.e. Northern Europe and
MEA, Central Europe, Southern Europe, Americas and Asia Pacific. Vodafone
has established itself as the main wireless/mobile phone operator in the world
and is highly competitive in its markets. It is also known for its high-profile
acquisitions and alliances/joint ventures such as Orange (UK), AirTouch
(USA), Verizon (USA), and above all, its hostile takeover of Germany's
Mannesmann. Vodafone's wireless technology is one of the fastest growing
products worldwide. The company's main products and services include
network business, distribution business, retail shops, data services business,
SMS (Short Message Service), multi-media portal, third generation (3G)
licenses, cellular/PCS operations and satellite services (Vodafone Group, 2000).

This case is intended to be used as a basis for discussion rather than to illustrate
either effective or ineffective handling of a managerial situation or business
practices. An earlier version of this case was presented at the 2002 Southwest Case
Research Association Conference in St Louis, Missouri on March 7, 2002. The
author would like to thank Michael K. Rich (Associate Editor, Journal of Business &
Industrial Marketing), Marlene Mints Reed, Rochelle Reed Brunson and three other
SWCRA reviewers for their helpful comments on an earlier draft of this work.

The Emerald Research Register for this journal is available at

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270 JOURNAL OF BUSINESS & INDUSTRIAL MARKETING, VOL. 18 NO. 3 2003, pp. 270-288, # MCB UP LIMITED, 0885-8624, DOI 10.1108/08858620310471331
 Market
Vodafone's penetration Year started
Region/ Subsidiary/local ownership (December Customers (standard)/
country operator % 2000) % (000s; 2001) competitors
Europe
Belgium Proximus 25.0 54.4 915 1994 (GSM)/2
France SFR 32.0 49.3 3,297 1992 (GSM);
1989 (NMT450)/2
Germany D2 Vodafone 99.2 58.3 21,640 1992 (GSM)/3
Greece Panafon Vodafone 55.0 55.4 1,287 1993 (GSM)/2
Hungary Vodafone Hungary 50.1 28.0 293,000 1999 (GSM)/2
Ireland Eircell 100 63.4 1,571 1993 (GSM)/2
Italy Omnitel Vodafone 76.0 74.7 12,400 1995 (GSM)/3
Malta Vodafone Malta 80.0 26.3 95 1990 (ETACS);
1997 (GSM)/1
Netherlands Libertel Vodafone 70.0 66.8 2,326 1995 (GSM)/4
Poland Plus GSM 19.6 16.9 518 1996 (GSM); 1998
(GSM)/2
Portugal Telecel Vodafone 50.9 63.0 1,261 1992 (GSM); 1998
(GSM); 1999 (IP)/2
Romania Connex GSM 20.1 10.8 294 1997 (GSM)/3
Spain Airtel 73.8 62 6,680 1995 (GSM)/2
Sweden Europolitan Vodafone 71.1 73.8 739 1992 (GSM)/2
Switzerland Swisscom 25.0 63.1 828 1993 (GSM)/3
UK Vodafone 100 67.8 12,548 1985 (ETACS);
1992 (GSM)/2
Americas
Mexico Grupo Iusacell 34.5 14.2 NA 1998 (CDMA)/
many competitors
USA Verizon Wireless 45.0 28.9 12,330 1984 (AMPS);
1996 (CDMA;
TDMA); 1997
(CDMA/TDMA)/
many competitors
Africa and
Middle East
Egypt Click GSM Vodafone 60.0 3.5 762 1998 (GSM)/2
Kenya Safaricom 40.0 0.3 37 1997 (GSM)/2
South Africa Vodacom 31.5 20.3 1,609 1994 (GSM)/1
Asia Pacific
Australia Vodafone 91.0 53.43 2,030 1994 (GSM)/4
China China Mobile (HK) 2.0 6.8 1,134 1994 (GSM)/2
Fiji Vodafone 49.0 5.4 32 1994 (GSM)/None
India RPG Cellular 20.6 0.3 14 1995 (GSM)/many
competitors
Japan J-Phone 23-27 45.7 6,092 1994 (PDC); 1996
(PDC); 1997
(PDC)/3
New Zealand Vodafone 100 51.5 990 1993 (GSM)/3
South Korea Shinsegi 11.7 56.6 387 1996 (CDMA)/4
Worldwide
NA Globalstar 7.2 NA NA NA
NA Arcor 74 NA NA NA
NA Passo 100 NA NA NA
NA Vodafone Telecomm 100 NA NA NA
NA Vizzavi 50 NA NA NA
Note: NA: Not available/not applicable
Sources: Financial Times; Fortune; Vodafone Group

Table I. Vodafone Group: ownership structure, worldwide subsidiaries, market

penetration, customers, and service history (early 2002)

JOURNAL OF BUSINESS & INDUSTRIAL MARKETING, VOL. 18 NO. 3 2003 271

 A: Financial data (2002)
Consolidated revenues: $32.71 billion
Profit (loss): ($23.13 billion)
Market capitalization: $102.95 billion
Assets: $31.96 billion
Total customers: Over 93 million in 29 countries
B: Corporate data/key businesses:
Location: Newbury, UK
Key business: Network business, PAYT-Pay as you talk, distribution business,
Vodafone retail shops, value added and data services business,
SMS-short message service, multi-media portal, 3G licenses,
cellular and PCS operations, and satellite services
C: Board of directors:
Lord MacLaurin of Knebworth, Paul Hazen, Sir Christopher Gent, Julian Horn Smith,
Peter R. Bamford, Vittorio Coalo, Thomas Geitner, Kenneth J. Hydon, Michael J.
Boskin, Professor Sir Alec Broers, Penelope L. Hughes, Arun Sarin, Sir David Scholey
and Jurgen Schrempp
D: Brief history and timeline:
1982-1985: Spin-off from Racal Electronics Group; the Vodafone analogue
network was launched in January 1985; total customers: 19,000
1987: Vodapage was launched; total customers: 36,000
1988: Racal Telecomms Plc established; total customers: 264,000
1990: Commercial packet data services introduced; total customers:
665,000
1991: Racal and Vodafone separated; Vodafone Group established;
total customers: 697,000
1992: GSM introduced; total customers: 795,000
1993: First high street Vodafone store opened; total customers:
1,051,000
1994: Data, fax, and SMS services started; total customers: 1,638,000
1995: Over 500 specialist retail stores and seven high street chains
connected to Vodafone; total customers: 2,330,000
1997: Vodafone reorganization started; Chris Gent became CEO;
three wholly owned service providers were established; total
worldwide customers: 3,259,000
1999: Vodafone AirTouch established; market value: $90 billion; top
25 companies in the world; new acquisitions/alliances overseas;
total worldwide customers: 10 million
2000: Takeover of Mannesmann AG; Other JVs and acquisitions
with: Verizon, Vivendi, Globalstar; unloaded Orange; total
worldwide customers: over 30 million
2001/2002: Various acquisitions; 93 million customers worldwide in 29
countries
2003: In December 2002, Vodafone named Arun Sarin (former
AirTouch executive) to succeed Sir Christopher Gent in July
2003 as the new Chief Executive
Sources: Vodafone Group Plc; Financial Times; Fortune

Table II. Vodafone Group: selected financial/corporate data and company

timeline (2001/2002)

NTT DoCoMo Like NTT DoCoMo from Japan (Anwar, 2002), Vodafone offers one of the
best technologies in the wireless industry that helps consumers to download
data and other information as well[2]. Vodafone's success can be judged
from the fact that in 2000, it was ranked number one in market capitalization
($227.15 billion) among the world telecommunication companies. In 2001,
Vodafone ranked eighth in market value among the Financial Times' Global
500 Companies (Financial Times, 2000a-c, 2001a-e). In 2002, Vodafone's

272 JOURNAL OF BUSINESS & INDUSTRIAL MARKETING, VOL. 18 NO. 3 2003

 market value has dropped because of the Internet bubble, corporate debt,
and 3G licenses. Vodafone is one of the best high-tech performers in the
European and other markets. Vodafone's early successes benefitted from
its niche-oriented strategies, changing demographics, and strong business
and consumer demand. In 2002, Vodafone's consolidated revenues
reached $32.71 billion (see Tables III and IV). Because of Vodafone's
marvelous growth and its entrepreneurial culture, it is well praised by the
world media and industry analysts. Financial Times (2000c, p. VI)
comments:
Vodafone's senior managers, however, have been together for a long time. They
have a comprehensive understanding of the mobile phone industry and work
together in a focused, consensual style which may help to explain the company's
apparent ability to take on the world and conquer it.
A global company Vodafone has become a global company in a very short period and is highly
focused regarding its products, markets, and company strengths. The
company states:

Market value Market value Sales 2001 Profit

2002 2001 (rank) (global rank) (loss) 2001
Rank/company/country $ billion $ billion $ billion $ billion
1. General Electric (US) 309.46 477.40(1) 125.91(9) 13.684
2. Microsoft (US) 275.70 258.43 (2) 25.29 (175) 7.346
3. Exxon Mobil (US) 271.23 286.36 (3) 191.58 (2) 15.320
4. Wal-Mart Stores (US) 240.91 250.95 (6) 219.81 (1) 6.671
5. Citigroup (US) 223.04 250.14 (5) 112.02 (11) 14.126
6. Pfizer (US) 216.78 263.99 (4) 32.25 (127) 7.788
7. Royal/Dutch Shell
(The Netherlands/UK) 194.55 206.33 (8) 135.21 (8) 10.852
8. British Petroleum (UK) 192.12 178.00 (9) 174.21 (4) 8.010
9. Johnson & Johnson (US) 186.94 135.00 (21) 33.00 (121) 5.668
10. Intel (US) 184.67 227.14 (13) 26.53 (162) 1.291
11. American Int'l Group (US) 174.99 206.08 (12) 62.40 (34) 5.363
12. Coca-Cola (US) 138.00 143.12 (23) 20.09 (239) 3.969
13. IBM (US) 137.72 164.08 (10) 85.86 (19) 7.723
14. NTT DoCoMo (Japan) 135.86 175.43 (11) 41.67 (a) NA
15. Merck (US) 129.68 195.74 (16) 47.71 (62) 7.281
16. Glaxosmithkline (UK) 126.27 160.40 (15) 29.50 (140) 4.454
17. Novartis (Switzerland) 123.93 109.76 (27) 18.98 (257) 4.162
18. Philip Morris (US) 122.93 113.08 (26) 72.94 (24) 8.560
19. Bank of America (US) 117.09 95.20 (36) 52.64 (47) 6.792
20. Verizon Communications (US) 116.84 147.85 (21) 67.19 (26) 0.389
21. Proctor & Gamble (US) 116.38 83.75 (39) 39.24 (93) 2.922
22. HSBC Holdings (UK) 116.34 140.69 (23) 46.42 (64) 5.406
23. Cisco Systems 115.53 304.69 (2) 22.29 (213) (1.014)
24. SBC Communications (US) 114.53 174.83 (17) 45.90 (69) 7.242
25. Berkshire Hathaway (US) 114.36 104.86 (30) 37.66 (101) 0.795
26. Total Fina Elf (France) 110.51 107.89 (28) 94.31 (15) 6.857
27. Vodafone Group (UK) 102.95 227.15 (8) 32.71 (123) (23.133)
28. Toyota Motor (Japan) 99.70 130.43 (22) 120.81 (10) 4.925
29. Home Depot (US) 97.97 114.42 (25) 53.55 (46) 3.044
30. Nestle (Switzerland) 96.16 80.43 (45) 50.19 (55) 3.959
Notes: NA: Not available
Sources: Business Week (2001a, 2002); BusinessWeek Online (2002); Fortune (2002),
a
Company information

Table III. Top 30 global companies ranked by market value in 2002

JOURNAL OF BUSINESS & INDUSTRIAL MARKETING, VOL. 18 NO. 3 2003 273

 Market value Sales Global rank by market value
(2002) (2001)
Industry rank/company/country $ billion $ billion 2002a 2001b 2000b 1999b
1. NTT DoCoMo (Japan) 135.86 41.67 14 16 3 27
2. Verizon Communications (US) 116.84 67.19 20 21 NA NA
3. SBC Communications (US) 114.53 45.90 24 17 23 31
4. Vodafone Group (UK) 102.95 32.71 27 8 24 70
5. NTT (Japan) 73.71 93.42c 41 29 7 13
6. Bellsouth (US) 62.53 24.13 51 53 54 36
7. Telecom Italia (Italy) 53.23 29.90 64 84 67 NA
8. Telefonica (Spain) 51.45 27.80 67 61 55 80
9. Deutsche Telecom (Germany) 46.47 43.26 77 40 10 23
10. AT&T (US) 42.69 59.14 90 54 18 7
Notes: NA: Not available. aBusiness Week Annual Rankings; bFinancial Times Annual
Global 500 Rankings; cGroup sales
Sources: Business Week (2001a, 2002)

Table IV. World telecommunications/wireless industry: top ten companies

ranked by market value in 2002

Our vision is to be the world's leading wireless telecommunications and

information provider, bringing more services and more value to more customers
than any other. Mobile telecommunications is growing faster than the Internet.
Vodafone's global strategy embraces voice, information, video, m-commerce and
other data services (Vodafone Group, 2000).
Furthermore, Vodafone is very well aware of its competitive position and
changing demand in global markets. The company's global strength is rooted
in its geographic reach, timely mergers, and acquisitions. About the changing
markets and its values, Vodafone states:
We have created an organization which is a global team of local leaders, focused
on winning customers through quality speed, and innovation (Vodafone Group,
2000).
Global diversification Since establishing itself as the main leader in the UK market, Vodafone has
sought aggressive global diversification by acquiring a selected number of
wireless and Web-based companies from Asia, Europe and the USA. In
2000/2001, Vodafone's selected overseas acquisitions and alliances/joint
ventures where the company had 50 percent or more equity stake included:
Libertel Vodafone (The Netherlands), Europolitan Vodafone (Sweden),
Click GSM Vodafone (Egypt), D2 Vodafone (Germany), Vodafone
Hungary, Panafon Vodafone (Greece), Omnitel (Italy), Vodafone Malta,
Telecel (Portugal), Airtel (Spain), Verizon (USA), Vodafone Australia, and
Vodafone New Zealand (see Table V). This change in Vodafone's core
competence beyond the UK market signifies its future growth and expansion
in the global wireless and Web-based industries. Analysts believe that in the
next five years, Vodafone plans on becoming the key wireless company. On
the other hand, Vodafone may face heightened competition and will be
challenged by newcomers as well as established companies from Europe,
North America, and Japan. The paper is organized in five sections. The first
section presents the company history and its organization structure. A
selected literature review is presented in section two. Global wireless
industry and its standards are discussed in section three followed by
Vodafone's strategies and problem areas. Future developments are presented
in section five. The final section concludes the work with selected
implications and future developments in the wireless industry.

274 JOURNAL OF BUSINESS & INDUSTRIAL MARKETING, VOL. 18 NO. 3 2003


Racal Radio Group
Partnerships and licenses
JOURNAL OF BUSINESS & INDUSTRIAL MARKETING, VOL. 18 NO. 3 2003
No. of licenses Corporate debt Cost of licenses
Company acquired (2001) (billion $) (billion $)
Vodafone 10 9.33 17.3
France Telecom 6 50.89 19.84
British Telecom 5 40.70 14.5
Deutsche Telecom 3 48.34 13.48
KPN (Netherlands) 3 19.50 7.55
Sources: The Wall Street Journal (2001c); Forbes (2001)
Table V. Cost of third generation (3G) licenses and corporate debt
Company history and organization structure
Vodafone was launched in 1985 after its spin-off from Racal Radio Group.
Led by an entrepreneurial team of highly motivated executives and its CEO,
Chris Gent, the Group achieved new heights in global business (Financial
Times, 2000c, 2001e). The company's first mobile products were based on an
analogue network. By the end of 1986, Vodafone had attracted 63,000
customers in the UK. In 1987, Vodafone was ranked the largest mobile
communications company in the world and had made inroads in the voice,
data business and paging network that covered 80 percent of the UK market.
In 1990, Paknet (the radio data network company) was launched to fulfill the
needs of the business community. In 1991, because of changing market
conditions and surge in consumer demand, Racal and Vodafone demerged
and Vodafone Group started operating as an independent entity. In the same
year, the Group was listed on the London and New York Stock Exchanges.
Vodafone launched its digital GSM (Global System for Mobile
Communications) service in 1991. In 1992, Vodafone and Telecom Finland
signed an agreement to provide international GSM roaming services.
In 1993, Vodafone Group International was formed to seek overseas
partnerships and licenses in Germany, South Africa, Australia, Fiji, and
Greece. By December 1993, Vodafone had acquired over 1 million
subscribers worldwide. In 1994, Vodafone introduced data, fax and SMS
(Short Message Service) to the business community. In the same year,
Vodafone became part of the Globalstar Consortium that was based on low
earth orbiting satellite mobile phone service. In 1997, Vodafone started
major re-organization and Gent was named the Groups's new CEO. It was
only under the leadership of Gent that Vodafone started to initiate high-
profile acquisitions in global markets. By 1999, Vodafone's market
capitalization had reached $90 billion. By 2000, Vodafone had acquired
some of the prized properties in the wireless industry which included:
AirTouch (USA), Mannesmann (Germany), and Omnitel Pronto Italia.
Vodafone's 1999 hostile takeover of the Dusseldorf-based Mannesmann
attracted worldwide media attention where the Group paid $180 billion for
this acquisition[3]. Interestingly, the acquisition encountered limited
opposition from the German government and corporate groups and was
approved by the European Commission in April 2000[4]. Businessweek.com
(1999, p. 1) comments on the Vodafone-Mannesmann merger:
Vodafone didn't exist as an independent company a decade ago and is now worth
$136.7 billion. Six years ago, Mannesmann was a money-losing maker of pipes
and machinery. Both rode new technologies to prosperity ± creating thousands of
new jobs. And both are worth more on the stock market than DaimlerChrysler.
These are powerful models that will drive change.
275
 Alliances and acquisitions Vodafone made a multitude of alliances and acquisitions with companies
such as: Vivendi, Verizon (Bell Atlantic and GTE Corp.), and other big
names in over 25 countries (see Table I). In 2002, Vodafone had over 93
million subscribers in 29 countries. This makes the Group the largest
wireless/mobile phone operator in the world and ranks among the top ten
global companies in market capitalization. The Vodafone brand is well
known beyond its UK market. In 2000, Vodafone also acquired high-profile
3G licenses in the UK. Interestingly, Vodafone's global reach and market
dominance is clearly evident from the fact that 25 percent of consumers
worldwide use those wireless and mobile networks in which the Group
maintains some kind of shareholding and alliances (Vodafone Group, 2001).
At present, Vodafone Group is divided into five parts: finance, legal and
company secretariat, strategy, corporate affairs, and human resources (see
Figure 1). As mentioned earlier, Vodafone's aggressive acquisitions have
made it the main wireless brand although it is still not a household name like
AT&T and Deutsche Telecom. Vodafone's CEO, Gent, can be compared to
Virgin Group's visionary CEO and Chairman, Richard Branson, who in his
early days provided excellent entrepreneurial and leadership skills which
made Virgin a global brand. The growth process and market expansion in
both companies was very much a reflection of their fast paced expansion. On
the other hand, Vodafone's acquisitions were made possible by those factors
which were peculiar to the 1990s' globalization process and FDI activities in
the developed and the emerging markets[5].

Market expansion and internationalization issues

International issues MNEs' mode of entry and internationalization issues have been one of the
most discussed areas in international business and global marketing. Since
the early 1970s, prominent researchers such as Buckley, Casson, Caves,
Dunning, Guisinger, Kogut, Roth, Rugman, Stopford, Vernon, Wells, and
others have contributed to this inquiry (Anwar, 2002). It is believed that first-
mover firms always capture market share in the initial stages which helps to
bring economies of scale, learning curve, and setting the industry standards
(Pan et al., 1999). Looking at Vodafone's global expansion, the company
definitely fits in this category. Recent selected topics which were
investigated in the domain of MNEs' internationalization issues include
market expansion and global strategy (Anwar, 2002), reciprocity and
alliances (Kashlak et al., 1998), firm-specific/location-specific advantages
(Erramilli et al., 1997), technology and knowledge transfer/acquisitions
(Bresman et al., 1999; and Lord and Ranft, 2000), the acquisition process as

Figure 1. Vodafone Group: organizational structure

276 JOURNAL OF BUSINESS & INDUSTRIAL MARKETING, VOL. 18 NO. 3 2003


Research community
Traditional companies
JOURNAL OF BUSINESS & INDUSTRIAL MARKETING, VOL. 18 NO. 3 2003
a learning mechanism (Very and Schweiger 2001); managerial and
synergistic motives (Seth et al., 2000), profitability and market share issues
(Pan et al., 1999), and internalization issues (Buckley and Casson, 1998). In
the telecommunications industry, inter-organizational alliances, mergers and
acquisitions (M&As), and collaborative activities have become one of the
fastest growing areas (Anwar, 2002). The studies which investigated this
area include Kashlak et al. (1998); Parker (2001); and Sarkar et al. (1999).
The wireless compatibility, growing markets, and digital standards are other
areas that encourage firms like Vodafone to seek expansion abroad.
Other topics investigated by the research community include cross-border
M&As, overseas expansion, alliances, and networks (also see Freidheim
(1998) and Mintzberg et al. (1998)). For detail, see: Dussauge et al. (2000)
on learning from competing partners, Bartlett and Ghoshal (2000) on lessons
from late movers, Anand and Khanna (2000) on value creation and alliances,
and Elg (2000) on home-market relationships and international alliance
partners. From the FDI perspective, cross-border M&As provide two distinct
benefits: first, readily available proprietary assets and infrastructural
resources; and second, access to the needed markets (UNCTAD, 2000). After
looking at Vodafone's massive global acquisitions and expansion in the
global markets, we come to the following three conclusions:
(1) the company capitalized on the 1990s' wireless and Web-related
opportunities;
(2) the company sought those niche-oriented markets where a limited
number of wireless operators were willing to invest; and
(3) the company developed and introduced the right business and consumer
products that made its markets grow.
Global telecommunications/wireless industry
In 2000/2001, the wireless/mobile phone industry was one of the fastest
growing industries in Western Europe and North America. In the last ten
years, the $700 billion world telecommunications industry has seen many
structural changes. The industry witnessed hundreds of acquisitions,
takeovers, joint ventures, and alliances because of a rapid growth and
consumer demand (Anwar, 2002). Fortune (2000c, p. 45) comments:
The telecom industry today is just like the steel industry in the 1970s, the airlines
in the 1980s, and commercial real estate in the early 1990s. The next few years
will bring a wrenching consolidation of these over suppliers.
Traditional telecommunication companies are having a hard time increasing
their customer base because of regulatory barriers and availability of mobile
technologies. In 2002, Vodafone Group, NTT DoCoMo, SBC
Communications and Verizon each maintained a market capitalization that is
larger than the market values of established companies such as Toyota
Motor, Nestle, Dell Computer and Lloyd TSB Group (see Table III). In 2001,
Vodafone ranked eighth in market capitalization among the Global 500
companies worldwide. In Japan, NTT DoCoMo ranks first in market
capitalization, even beating established companies such as Toyota Motor,
Hitachi, Mitsubishi and others. The same is true for Vodafone that ranked
first in 2001 in market value among the British companies. During the boom
times, telecom companies maintained high market capitalization (Business
Week, 2000b). These developments signify an industry that is dominated by
digital and Internet-related markets and surging consumer demand. The
phenomenon also resembles the dot.com industry where market values do
277
 not conform to the basic business fundamentals. Of course, most of the
market values have disappeared in 2002 after the Internet bubble. In
addition, 3G licenses have brought massive debt to the companies (see
Table V) in Europe and Asia (Anwar, 2002).

Global wireless standards

M-commerce Mobile (m)-commerce brings benefits to the areas of information and data
products. M-commerce usage may encompass vending machines, parking
meters, payment of bills, delivery of news, travel, video conferencing, traffic
information, navigation tools, portable television, music on demand, etc. (see
Table VI)[6]. Overseas, growth in the wireless/mobile phone industry (see
Table VII) is attributed to lesser regulatory barriers, strong business demand,
and availability of Web-based technologies. Companies such as Vodafone,
NTT DoCoMo, Verizon, Orange, Sprint PCS, and other operators have been
the main beneficiaries in m-commerce[7]. Unlike Japan and Europe, m-
commerce in the USA is not well developed and lacks speed, services,
quality, and compatible wireless standards (Anwar, 2002; Funk, 2002)[8].
The Wall Street Journal (2000b, p. B1) comments on the overseas wireless
industry:
Overseas mobile phones work like electronic wallets; bank, buy wines, pay rent.
In Japan, digital wireless and m-commerce is synonymous with NTT
DoCoMo and is increasing at a very fast pace because of factors such as
population density, traffic congestion, changing demographics and lifestyles,
and demand patterns[9]. Table VI provides a list of the standards used in the
world wireless industry. In Europe and other markets, most of the wireless
operators use GSM (Global System for Mobile Communications). In 2001,
GSM had 176 million subscribers worldwide. NTT DoCoMo and US
companies use CDMA (Code Division Multiple Access) standard that has 67
million subscribers worldwide. TDMA (Time Division Multiple Access) is an
extension of CDMA that has attracted 47 million subscribers. For this reason,
there is no common global standard available in the industry and compatibility
problems hinder growth in the markets (Anwar, 2002; Funk, 2002).

Vodafone's global strategies and problem areas

Growth potential and Since 1995, Vodafone has conspicuously shown growth potential and
expansion expansion in the wireless industry. Questions which often arise regarding how
Vodafone managed to take a lead in an industry which is dominated by
established companies such as NTT DoCoMo, AT&T, Deutsche Telecom,
Verizon, French Telecom, and others. There are a multitude of factors which
explain Vodafone's marvelous successes. For example, in the area of
technology, Vodafone was the first-mover in bringing new technologies and
buying 3G licenses in the UK. The company's strategy was also
complemented by timely Internet-related innovations and booming stock
markets in the mid-1990s. In the area of global acquisitions, Vodafone had an
accurate forecast about the wireless industry and capitalized on some of the
changing factors that include: globalization of markets, strong product
demand, network structures, and reduced national barriers. In addition, the
company benefitted from de-regulatory environment, wireless auctions, and
availability of cash. In the area of company structure and its leadership,
Vodafone was fortunate to have a small group of executives who had stayed
with the company for a long time that knew each other very well. Above all,
Gent's aggressive leadership and corporate vision complemented the growth
process. In the last five years, the European markets witnessed a growing
demand for M&As because of opportunities and deregulations by the

278 JOURNAL OF BUSINESS & INDUSTRIAL MARKETING, VOL. 18 NO. 3 2003

 A. Current and future global
UWB (Ultra Wide Band):
Wi-Fi (Wireless Fidelity):
Bluetooth:
CDMA (Code Division
Multiple Access):
CDMA2000:
Edge:
GPRS (General Packet Radio
Service):
GSM (Global System for
Mobile Communications):
I-Mode:
IMT-2000:
UMTS (Universal Mobile
Telecommunications System):
WAP (Wireless Application Standard for mobile applications
Protocol):
W-CDMA (Wideband- CDMA for 3G; used in Japana
CDMA):
wireless standards
Transmits data/video in the form of short staccato pulses
Provides wireless access to the Internet
Short-range wireless communications standard for
linking various devices
Technology for 2G and 3G services
Introduced by Qualcomm for its 3G standard
For GSM enhancement
2.5G technology between GSM and 3G
2.5G for Internet access
Mobile service based on Internet access from NTT
DoCoMo
3G standard from International Telecommunication
Union based on CDMA2000, UNTS and W-CDMA
W-CDMA standard for 3G; used in Europe

B. Wireless technology timeline (2nd to 3rd Generation)

1989-1999: 2.0G ± Wireless Voice [10 kbps ± GSW/TDMA; 14.4
kbps ± CDMA one]
1999-2000: 2.5G ± Differentiation Usage [115 kbps ± GPRS; 64
kbps ± IS 95B]
2000-2001: 2.75G ± Wireless Internet [115/384 kbps ± EDGE; 144
kbps ± 1XRTT]
2001-2002: 3.0G ± Wireless Multimedia [±384 (512) kbps ± wide
area; (2 mbps) local W-CDMA; 1.4 mbps ± HDR
3XRTT]
2002-2003: Limited availability of 3G services in North America,
Europe and Japan)
2004-2005: 3G in Japan, Korea, Europe and North America

C. Wireless markets/sectors (current and future areas)

M-commerce in 2002/03 Future m-commerce (2003-2006)
Yellow Pages Travel reservations
E-mails/instant messaging Travel updates/weather reports
Various data services Online auctions/e-exchanges
Online trading
Events-driven transactions
Navigational aids
Online coupons for supermarkets/vending machines
Business-to-business (B2B), B2C, C2B, C2C), Business-
to-government (B2G)
Selected industries for Wireless portals, e-commerce companies, movie/music
wireless market: studies, auto companies, satellite companies, etc.
Note: aAt present, NTT DoCoMo is experimenting with W (Wideband)-CDMA
Sources: Adapted in part from Anwar (2002); also see: Buckley (2000); The
Economist (2000); B2B (2000); Business Week (2000c); Financial Times (2001f); The
Wall Street Journal (2000); Forbes (2003)

Table VI. Global wireless standards

JOURNAL OF BUSINESS & INDUSTRIAL MARKETING, VOL. 18 NO. 3 2003 279

 Company Subscribers
Vodafone Group Plc 93 million in 29 countries (2001)
NTT DoCoMo 40.0 million
China Mobile 34.0
Verizon (Bell Atlantic and GTE) 19.8
France Telecom 19.7
T-Mobile International/Deutsche Telecom 18.6
SBC 14.9
Telecom Italia Group 14.7
AT&T/AT&T Wireless 14.0
Source: Fortune (2000); Vodafone Group Plc

Table VII. Wireless/mobile-phone subscribers worldwide (2000/2001)

European Union. The wireless and mobile phone industry is highly region-
and product-specific because of industry standards and regulations. Vodafone
saw these opportunities early enough and was able to capitalize on the
changing trends. The mobile/wireless industry is one of the fastest growing
industries in the world. National monopolies are being privatized and wireless
auctions have fetched billions of dollars (Anwar, 2002; Funk, 2002). With all
the good fortunes, Vodafone may face heightened competition because of the
changing wireless industry and de-regulatory environment (see Table VIII).
Some of the problems and market threats are as follows:
Market expansion (1) Unlike AT&T, Verizon and other high-tech and wireless companies,
Vodafone is not a household name in the USA and other Asian markets.
The company lacks visibility and influence in North America. This may
change in the coming years if Vodafone pursues market expansion
especially in North America.
(2) In its early growth, Vodafone mostly stayed in the European markets and
sought its expansion by acquisitions. In the USA and other countries,
Vodafone and other wireless operators were not able to acquire local
telecommunications companies because of national security laws and other
regulatory barriers[10]. The congress often blocked foreign companies that
wanted to acquire sensitive technologies in the USA (Anwar, 2002).
(3) In 2001/2002, Vodafone's shares went down significantly. Deutsche
Telecom, French Telecom, and others have gone down as well. This has
happened because of massive investments made by wireless companies
in 3G technologies. Vodafone is expected to achieve its returns on 3G
investments between 2004-2006. Telecom companies have spent over
$124 billion for 3G licenses. Vodafone is not alone and has a heavy stake
in these licenses where return may not be fast enough to justify huge
investments (see Table V; Financial Times, 2001d)[11].
(4) Some of the global wireless markets may saturate in the coming years
because of slowing demand, burgeoning debt, and saturated markets.
(5) Although Vodafone is listed on the London and New York Stock
Exchanges, it may have problems attracting mutual fund managers and
institutional investors from North America. In addition, this may hamper
the company's future growth in other world markets. SAP, a Frankfurt-
based software company had the same misfortune when it listed its stock
on the New York Stock Exchange in 1998.
(6) The 1997 Southeast Asian crisis affected Vodafone's expansion in the
Asian markets. Although, economic conditions in the region have

280 JOURNAL OF BUSINESS & INDUSTRIAL MARKETING, VOL. 18 NO. 3 2003

 Stengths/opportunities
Marketing strengths/opportunities
Vodafone is one of the largest wireless
operators in the world; also one of the
most aggressive and innovative wireless
companies
Maintains an excellent network structure in
Europe and other markets
Good marketer and knows how to expedite
the product development process; very
effective in targeting new markets
The European region is Vodafone's largest
market and represents 54 percent of the
Group's worldwide business
Good prospects in the Japanese market
since 78 percent of the population lives
in the urban areas
Financial strengths
Vodafone owns majority stake in its
overseas alliances; chances for future
hostile takeovers are limited since
foreign investors hold minority stake in
Vodafone
Has established an excellent umbrella of
subsidiaries worldwide; aims to be the
industry leader; Vodafone is a cash rich
company
Shows excellent growth potential in future
acquisitions
Recent overseas acquisitions and alliances
look promising; most of the acquisitions
were sought through the company stock
Vodafone stock is listed on the London
and the New York Stock Exchanges
Technological Capabilities/Opportunities
Carries excellent potential in the areas of
current and future 3G technology; one of
the largest and the most advanced
wireless operators
Shows excellent potential in the area of m-
commerce in Europe and North America
One of the first-movers in the Internet-
related cell-phone technologies
Plans to offer more 3G-related technology
in 2003/2004; 3G is the only network
which provides continuous access to the
Internet via wireless phone
Vodafone's 3G wireless technology will
provide a good market; consumers will
be able to download music, TV shows,
and real-time video-conferencing
Source: Anwar (2002); Business Week; The Economist; Financial Times; Fortune;
The Wall Street Journal (various issues)
Table VIII. Vodafone Group: strengths/opportunities and weaknesses (2001/2002)
improved, Vodafone and other wireless companies may be affected
because of currency depreciations in the weaker economies of Indonesia,
Thailand, and others.
(7) At the world level, Vodafone is still a small player in wireless
technology although its infrastructure and networks carry good clout in
the European markets.
JOURNAL OF BUSINESS & INDUSTRIAL MARKETING, VOL. 18 NO. 3 2003
Weaknesses
Marketing weaknesses
Vodafone is not a household name in the
USA, Latin America and Asia
May encounter stiff competition in the
m-commerce market in Japan from NTT
DoCoMo
Limited expertise in Asia and Latin
America; global expansion may create
problems because of the telecom slump;
world voice and data service markets
have become very competitive and may
become overcrowded in the coming years
In North America, tougher competition is
expected from telecom companies and
application providers
Japanese competitors such as NTT
DoCoMo and KDDI are strong players
Asian, Latin American, and North
American demographics are different
from European market; unlike Japan,
majority of m-commerce consumers
overseas are not in the business markets
May have problems capturing a good
market share in the USA since 41 percent
of the population lives in the urban areas
Financial weaknesses
Since 1996, Vodafone has grown too fast
in global markets; may not control its
operations effectively in other markets
East Asian markets may take some years
to recover from 1997's economic crisis
May have problems in controlling
overseas alliances because of limited
exposure, competition and regulatory
issues
Technological weaknesses
As of 2002, m-commerce is still not well
developed in North America and Asia
(except Japan); incompatible wireless
standards are one of the main reasons
behind sluggish growth; the telecom slump
is another reason behind slow growth.
Wireless technology may change in the
coming years; limited compatibility
between GSM (Global System for Mobile
Communications) and CDMA
Because of the Internet-related bubble, the
industry may take time to market
technologies such as packet data, color
screens and other wireless-related multi-
media products
281
 (8) In the coming years, Vodafone plans to expand its reach to other
markets, especially North America and Asia. Some analysts believe
that Vodafone may face heightened competition because of its
unfamiliarity with those markets. The company's strong know-how
may not be replicated quickly to other markets.
(9) The wireless and its Web-based e-commerce at the global level is a
complex market because of the regulatory barriers and digital and
country-specific standards. Vodafone, along with other operators, may
face these hurdles beyond the European market.
(10) Some analysts feel that from the public relations point of view,
Vodafone's high-profile acquisitions became a liability since it drew so
much attention at the world level. In addition, analysts also feel that
Vodafone's entrepreneurial culture may hit a snag in the case of market
saturation, competition, overexpansion, and executive departures.
(11) In Japan, Vodafone's main competitor is NTT DoCoMo which is highly
successful in its i-mode product offerings. In 2000/2001, NTT DoCoMo
invested $9 billion (16 percent) in AT&T's wireless operations in the
USA although this investment did not yield good results in 2002 because
of the telecom downturn. In addition, smaller niche-oriented local wireless
operators are prone to be successful and profitable in selected markets.
(12) In 2002, Vodafone announced a massive net loss of $23.5 billion because
of the Internet/telecom slump and amortization of goodwill from its global
acquisitions (see Table III). These charges and writedowns were the
largest ever reported by a European company (Financial Times, 2002).

What lies ahead?

Future developments Overall, Vodafone is in a strong position to capitalize on the changing global
wireless industry and its Web-based 3G wireless technology and other mobile
services. The company is already one of the largest wireless companies in the
world. Within the present circumstances and available secondary data and
market conditions, we discuss the following future developments in the industry:

A. Global acquisitions and alliances

Today's Vodafone is more aggressive in its global acquisitions and market
expansion. Since 2000, the company has announced partnerships and
alliances that are as follows:
(1) In 2000, Vodafone made a strategic alliance in the Japanese market with
J-Phone and later increased its equity stake to 25 percent. This could
have been prompted by NTT DoCoMo and AOL's planned alliance in
the Japanese market. For Vodafone, this may lead to a good market share
in the Japanese market[12].
(2) Currently, Vodafone has 45 percent equity in Verizon Wireless which is
a good entry move in the US market. At the same time, in 2000, NTT
DoCoMo announced investing $9 billion in AT&T's wireless operation
in the USA although this investment has not brought significant growth
opportunities to NTT DoCoMo in the USA[13].
(3) Currently, Vodafone has an alliance with Globalstar. In the coming
years, this partnership will help offer the Globalstar services in the UK,
USA, Mexico, the Caribbean, Canada, Australia, Southern Africa and
Greece (Vodafone Group, 2000).

282 JOURNAL OF BUSINESS & INDUSTRIAL MARKETING, VOL. 18 NO. 3 2003

 B. Issues of 3rd generation wireless technology
3G technology Vodafone has an alliance with J-Phone to introduce 3G technology in 2001/
2002. This will counter NTT DoCoMo's 3G i-mode/W-CDMA (Wideband
Code Division Multiple Access) technology which is scheduled for 2002[14].
C. Changing competition and global markets
In North America and Japan, Vodafone may face heightened competition
because of established players in the market. NTT DoCoMo plan on
expanding in Japan, North America and other Asian markets although the
company's performance in North America was not all that strong in 2002.
NTT DoCoMo subscribers have reached 40 million while Vodafone has over
93 million customers in 29 countries[15].

Concluding comments
A classic company Vodafone is a classic company in the wireless industry because of its aggressive
acquisitions and entrepreneurial culture. The company is truly a first-mover
company, taking advantage of the consumer demand and new wireless
technologies. Vodafone's diversification and global strategy looks right on track
although the industry has been affected by the dot.com downturn, telecom
bankruptcies and corporate frauds. Vodafone continues to accumulate a massive
market share in the wireless industry. In 2001, Vodafone's market capitalization
surpassed $227.15 billion which was larger than some of the established
companies such as Intel, Oracle, Merck, IBM and Verizon. Unlike its main
competitor NTT DoCoMo, Vodafone is making inroads in the global markets by
seeking majority stakes in other wireless operators and continues to expand in the
areas of its core business. The analysts believe that in the coming years,
Vodafone is set to become one of the key wireless companies in the world along
with NTT DoCoMo unless two big operators merge to form another giant
company. Of course, competition in the industry may be heightened because of
the availability of additional wireless auctions, rigid national laws, cost factors,
and regulatory barriers. In today's wireless and m-commerce industry, many
analysts see Vodafone as a unique English company because of its logical
alliances and acquisitions. Like NTT DoCoMo, Vodafone stands to reap huge
rewards if markets, technologies, and return on 3G investments remain
unchanged in the coming years. Some analysts believe that Vodafone plans on
consolidating its position in North America after its new CEO takes charge in
2003. Of course, it can be hampered because of sluggish stock markets and the
telecom downturn. In the coming years, it is expected that Vodafone will
gradually convert itself from its narrow product lines and may start to expand in
other wireless-related businesses. In sum, Vodafone is expected to reap huge
benefits because of its 3G licenses in the UK although it may carry risks because
of slow demand and changing technologies. As Fortune (2000b, p. 15) states:
The brash CEO of Britain's Vodafone has built the largest cell phone operator in
the world. Now comes the wake-up call. To justify a $220 billion market cap, Gent
must figure out how to make money on the wireless Web.

Discussion questions
Question 1. What are your views of Vodafone's competitive advantage in the
wireless and mobile phone industry?
Question 2. Analyze and evaluate Vodafone's market niche in the world
wireless markets.
Question 3. What specific strategies does Vodafone need to undertake to be
one of the major key players in the wireless industry in Japan, Europe and
North America?

JOURNAL OF BUSINESS & INDUSTRIAL MARKETING, VOL. 18 NO. 3 2003 283

 Question 4. What did you learn from Vodafone's global ambitions and
market expansion?
Question 5. Compare and contrast Vodafone and other wireless and mobile
phone companies regarding their internationalization, diversification, and
global competition issues (see Tables IV and VIII).
Question 6. Why do some wireless companies seek global expansion while
others stay in their home market?
Notes
1. Vodafone signifies ``voice and data services over mobile phones.''
2. NTT DoCoMo is the fastest growing wireless/mobile phone company in Japan. It was
established in 1982 after a spin-off from Nippon Telephone and Telegraph. The company
is famous for its i-mode technology. For more discussion, see Anwar (2002).
3. For more details, see: Business Week (1999, 2000a,b); Businessweek.com (1999); The
Economist (1999a,b,c); Financial Times (1997); Forbes (2000), Fortune (2000a,b,c,d); The
Wall Street Journal (2000a). For a recent discussion on megamergers and EU's policies,
see: Angwin (2001); Ghemawat and Ghadar (2000); UNCTAD (2000); In 2002, Vodafone
owned 99.4 percent of Mannesmann and changed its name to Vodafone Deutschland.
4. For more discussion on Germany's corporate structure and governance issues, see:
Hampden-Turner and Trompenaars (1993); Kim (1995); Wever and Allen (1992).
5. For more discussion on the process of global strategy and other globalization issues, see:
Porter (1990) and Yip (1992).
6. See: The Wall Street Journal (2000d); The Financial Times (2001g; 2001h).
7. NTT DoCoMo Company Information, September 2000; Financial Times (2001d);
Business Week (2000d).
8. For more discussion, see: Mann et al. (2000); US Department of Commerce (1999); Tapscott
et al. (2000).
9. For more detail, see: Business Week (2000d).
10. For more discussion, see: The Wall Street Journal (2000e).
11. For more discussion on 3G and other spectrum issues, see: Business Week (2001b);
Financial Times (2001f).
12. For more detail, see The Wall Street Journal (2000f).
13. This development was covered in all the major media. See: The Wall Street Journal
(2000g); Financial Times (2000d).
14. See NTT DoCoMo's advertisement in The Economist (2000b).
15. See The Wall Street Journal (2000h).

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benefit of the material
present
JOURNAL OF BUSINESS & INDUSTRIAL MARKETING, VOL. 18 NO. 3 2003
Executive summary and implications for managers and
executives
The phenomenal growth of Vodafone
Spun off from Racal Radio Group in 1985, Vodafone Group has transformed
itself in the last six years from a virtually unknown small UK-based company
into the world's largest wireless and mobile-phone operator. With 93 million
subscribers in 29 countries, it ranks among the top ten global companies in
market capitalization. Its main products and services include network
business, distribution business, retail shops, data-services business, SMS
(short message service), multi-media portal, third-generation licences,
cellular operations and satellite services.
Vodafone made high-profile acquisitions in global markets, including
AirTouch in the USA, Mannesmann in Germany and Omnitel Pronto Italia.
Around a quarter of consumers worldwide use wireless and mobile networks
in which Vodafone maintains some kind of shareholding or alliance. How did
the company manage to take a lead in an industry dominated by established
companies such as NTT DoMoCo, AT&T, Deutsche Telecom, Verizon,
France Telecom and others?
How Vodafone came to dominate
Anwar suggests that Vodafone had a small group of executives who had been
with the company for a long time and knew each other well. In particular,
chief executive Chris Gent's aggressive leadership and corporate vision
complemented the growth process.
The company capitalized on the wireless and Web-related opportunities of
the 1990s. For example, in the area of technology, it was the first-mover in
bringing new technologies and buying third-generation (3G) licences in
Britain.
Vodafone had an accurate forecast about the wireless industry and
capitalized on the globalization of markets, strong product demand, network
structures and reduced national barriers. European markets, in particular,
witnessed growing demand for mergers and acquisitions partly because of
deregulation driven by the European Union. The wireless and mobile-phone
industry is highly region- and product-specific because of industry standards
and regulations. Vodafone saw the opportunities early enough and was able
to capitalize on the changing trends, including the privatization of national
monopolies.
Stock markets were booming and Vodafone had plenty of cash. It sought
niche-orientated markets where a limited number of wireless operators were
willing to invest. Moreover, it developed and introduced the right business
and consumer products that made its markets grow.
Problems and market threats
Vodafone lacks visibility and influence in the USA. It has not been allowed to
acquire local US telecommunications companies because of national-
security laws and other regulatory barriers. It may also have problems
attracting mutual-fund managers and institutional investors in north
America.
The 1997 crisis in south-east Asia affected Vodafone's expansion in the area.
Economic conditions there have since improved, but Vodafone and other
wireless companies may be affected because of currency depreciations in
the area.
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 If Vodafone does try to expand in north America and Asia in the years ahead,
it may suffer from being relatively unfamiliar with markets outside its
European ``core''.
Vodafone, like other Internet and telecommunications companies, has been
badly hit by the bursting of the ICT bubble. The company announced a $23.5
billion net loss in 2002 because of the Internet and telecommunications
slump and amortization of goodwill from its global acquisitions. The charges
and writedowns were the largest ever reported by a European company.
Vodafone has spent large amounts on acquiring 3G licences, and the return
may not be fast enough to justify this spending. Some global wireless markets
may become saturated in coming years because of slowing demand and
burgeoning consumer debt. Competition may be heightened because of the
availability of additional radio frequencies.

Vodafone ``right on track''

Anwar concludes that, despite the dot-com downturn, telecom bankruptcies
and corporate frauds, Vodafone's global strategy looks to be right on track.
It continues to expand in the areas of its core business. Under its new chief
executive, it will probably gradually convert itself from its narrow product
lines and may start to expand in other wireless-related businesses.

(A preÂcis of the article ``Vodafone and the wireless industry: a case in market
expansion and global strategy''. Supplied by Marketing Consultants for
Emerald.)

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