36858 Usman Muhammad

Assignment 2

Vodafone Group Plc

Strategic Management Process

1
 36858 Usman Muhammad

Vodafone Group Plc

The term VODAFONE comes from Voice Data Fone chosen by the company to reflect
the provision of voice and data services over mobile phones.
Vodafone Group is a global telecommunication company with headquarters located in
Newbury, Berkshire United Kingdom. It is the world’s largest mobile telecommunication
company with around 341 million users worldwide. It operates network in over 30
countries and has partner networks in over 40 additional countries.
Vodafone was formed in 1983 as a joint venture between Venture electronics and
Millicom and was granted one of two mobile phone licenses in the UK. It launched
services in 1985 as Racal subsidiary. In 1988 Racal offered 20% of Vodafone to the
public. Consequently three years later the rest of the firm was to become Vodafone
Group.

Products and services:

Vodafone offers a wide range of products and services including voice, messaging, data
and fixed line solutions and devices to assist customers in meeting their total
communication needs.

Vodafone’s Handsets, Smart phones and branded handsets are available in a variety of
designs to meet the customer needs. They are enabling millions of people in emerging
market to share the benefits of mobile technology. Handsets are low-cost combined with
high-end features such as touch screen and mobile internet capability.

Vodafone provides a range of data products including PC connectivity, Internet services

and roaming services. PC connectivity services, available through Vodafone Mobile
Broadband devices and certain handsets, provide mobile internet access for laptop,
netbook and PC users. Vodafone Mobile Broadband provides simple and secure access to
the internet and to business customers’ systems.

2
 36858 Usman Muhammad

Online Mission Statement

Vodafone’s vision is;
‘To be the world's mobile communication leader enriching our customers' lives
through the unique power of mobile communications’

Vodafone’s value is;

Our Values are about the way we do things. They describe the way Vodafone people are
expected to behave within the business, to help turn our vision to reality.

• Passion for customers: "Our customers have chosen to trust us. In return, we must
strive to anticipate and understand their needs and delight them with our service."
• Passion for our people: "Outstanding people working together make Vodafone
exceptionally successful."
• Passion for results: "We are action-oriented and driven by a desire to be the best."
• Passion for the world around us: "We will help the people of the world to have fuller
lives – both through the services we provide and through the impact we have on the
world around us

Reference: http://www.csrglobe.com/login/companies/vodafone.html

Vodafone Group Plc is the world's leading mobile telecommunications

company, with a significant presence in Europe, the Middle East, Africa,
Asia Pacific and the United States through the Company's subsidiary
undertakings, joint ventures, associated undertakings and
investments.
The Group's mobile subsidiaries operate under the brand name
'Vodafone'. In the United States the Group's associated undertaking
operates as Verizon Wireless. During the last two financial years, the
Group has also entered into arrangements with network operators in
countries where the Group does not hold an equity stake. Under the
terms of these Partner Network Agreements, the Group and its partner
networks co-operate in the development and marketing of global
services under dual brand logos
The Company's ordinary shares are listed on the London Stock
Exchange and the Company's American Depositary Shares ('Ads') are
listed on the New York Stock Exchange. The Company had a total

3
 36858 Usman Muhammad

market capitalization of approximately £74 billion at 31 December

2008.
Vodafone Group Plc is a public limited company incorporated in
England under registered number 1833679. Its registered office is
Vodafone House, The Connection, Newbury, and Berkshire, RG14 2FN,
England.

SWOT Analysis
STRENGTHS: Vodafone has its brand image and its ranking is second in world. So here
one thing is confirmed that Vodafone has good network and outstanding services that’s
why its users are most after China mobile. It can offer International roaming facility more
than any network in the world. Financially, Vodafone is strong and is able to invest heavy
amount in the world.

WEAKNESS: The expansion of Vodafone has been completed at the expense of direct
control of its operations. The company grew through a process of acquisitions of national
telecommunications companies rather than organic growth. This increased its
subscriber’s base quickly offering direct market knowledge and immediate additions of
customer bases at the expense of direct effective control of the subsidiaries. At the same
time though, it implicitly imposed a centralized operational structure for the group,
nominating the UK headquarters as the leading business unit running a much centralized
marketing and handset procurement at group level. This has resulted in the neglect of
local market and local differences, allowing market share to be gained by smaller local
competitors. Due to the highly saturated western European market this has resulted in
increase in the price elasticity of demand with consumers continuously becoming price
oriented.

OPPORTUNITIES: The telecommunication market, even though highly saturated in

some regions offers great potential due to the ageing population and the sophistication of
the consumers. It offers great opportunities through a careful market segmentation and

4
 36858 Usman Muhammad

exploitation of particular profitable segments. Different strategies should be pursued –

simple phones and simplified pricing plans to the ageing population and more updated,
sophisticated solutions for younger generations. The expanding boundaries of the market
could provide further opportunities by allowing Vodafone to enter more aggressively into
fixed line service and to better enjoy the benefits of its high investment in 3G technology.
Moreover the company has undertaken its first steps in establishing strategic alliances to
develop customized solutions for end-users. Vodafone recently announced two new
partnerships, one with supermarket group ASDA to launch an ASDA-branded mobile
service in the UK, and another with electrical retailer DSG International to provide
mobile solutions to mobile solutions to small businesses. This could further be enhanced
to avoid being a late-entrant in this new method of distribution which offers access to a
wide potential customer base.

THREATS: The European part of Vodafone’s market is characterized by existing high

levels of competition. Major brands are exploiting the price sensitivity of customers and
in this way they are building a stronger image and presence in the market. Indirect
competition is also increasing further, through the presence of Skype and other related
Internet based services. This combined with the upcoming European legislative measures
is expected to limit further the tariffs the network providers imposing further need for
price cuts which could harm the bottom line profitability of the company.

CORPORATE LEVEL STRATEGY

Vodafone was heavily focused on acquisitions, including Mannesmann, to open cost
advantages through economies of scale. Vodafone wanted technological leadership in the
mobile telephony industry. Vodafone wanted to strengthen its standing in continental
Europe, a geographically significant area where they had low market share.
Vodafone wanted to acquire Mannesmann because they held a considerable portion of the
market share in their industry. By acquiring Mannesmann Vodafone would be able to
gain cost advantages as well as gain market share and market power in Europe. By
buying a competitor off the market Vodafone could gain their entire market share and

5
 36858 Usman Muhammad

eliminate the risks associated with rivalry that had been present between the two
companies. This acquisition would also be a diversification for Vodafone if they chose to
take advantage of the fixed line capabilities of Mannesmann. It would also help Vodafone
reduce the barriers to a greater share of the European market since Mannesmann already
had a strong market share.
Vodafone merged with Airtouch to become Vodafone Air Touch, the largest mobile
phone operator in the world. It gave Vodafone an easy way to expand to North America
with low barriers to entry since Air Touch was already the leader in that market. This was
“a major step forward in our strategy to expand the penetration of mobile phone services
to the largest possible number of customers and the largest possible markets…” said
Chris Gent, Vodafone CEO, on the merger with Air Touch.
Vodafone formed a strategic alliance in the United States with Bell Atlantic that would
use the same digital technology as Vodafone Air Touch and it would be the largest
mobile telecommunications company in the US. They owned 45 percent of the company
giving them a high potential for profits. Since Bell would be managing the company,
Vodafone would not have to worry about understanding the competitive conditions, legal
and social norms, and cultural idiosyncrasies of the US market, which would help
Vodafone manufacture and market a competitive product.
What type of diversification best represents Vodafone’s mix of businesses (i.e., single
business, dominant
business, related constrained, or related linked)?
(Sky Huvard, Matt Wentz)
Vodafone had recently expanded internationally through an alliance with Bell Atlantic, a
merger with Air Touch, and several acquisitions. These value creating strategies of
diversification exhibit high operational relatedness between businesses and somewhat
low corporate relatedness because Vodafone did not maintain managerial control in all of
its new ventures. These related diversifications would increase Vodafone's economies of
scope by sharing activities and transferring core competencies. Vodafone's market power
would be increased by being able to block competitors through multipoint competition.
What is the international corporate-level strategy being followed by Vodafone?
(Sky Huvard, Matt Wentz)

6
 36858 Usman Muhammad

Vodafone pursued a global international corporate-level strategy. Their low market share
in continental Europe could be considered an artifact of their global strategy. The basis
for their mobile telephony network remained unchanged throughout their diverse
markets, these standardized products point to a global strategy. While their global
strategy produces lower risk, they may not grow as fast as their competitors who have a
multi-domestic strategy. As a result, recent diversifications, like the strategic alliance
with Bell Atlantic seem to point towards a more multidomestic strategy to take advantage
of their specialized corporate core competencies by delegating the management tasks.
Vodafone's global international corporate-level strategy is succeeding. The technology,
GSM, that enables their mobile telephony networks is built to global standards, and has
led to significant economies of scale in producing and operating these networks.
What was the choice-of-entry mode used by Vodafone in its expansion into international
markets?
(Sky Huvard, Matt Wentz, Lindsay Zolad)
Vodafone entered into international markets initially through merger, and later through
acquisitions and alliances. Vodafone's choice to use a cooperative strategy led to alliances
with its competitors in Europe, including Mannesmann, Belgacom, BT, Cegetel, TDK
and TIW. Vodafone was trying to get a larger market share in Germany so they bought
35% of D2 from Mannesmann, who is Vodafone’s top competitor in Europe. Vodafone
partnered again with Mannesmann to buy 21% of Omnitel (an Italian company).
Vodafone had alliances with Government organizations in Greece, Holland, Portugal and
Sweden. By partnering with competitors in Europe, Vodafone increased its market
shares.

BUSINESS LEVEL STRATEGY

1. Rivalry with Existing Competitors
Vodafone's position as cost leader, competitors has a hard time competing on basis of
price because the competitors will fall on their face if any aspects of the logistics or
operations are inferior.

7
 36858 Usman Muhammad

2. Bargaining Power of Buyers

The buyers in the mobile telephony industry are strong. These powerful buyers can
reduce the cost leaders prices, but not past the level of their closest competitor. This
ensures Vodafone will continue to profit at above average returns compared to its closest
competitor.
3. Bargaining Power of Suppliers
Suppliers of the mobile telephony industry are strong. Vodafone, by being a cost leader,
operates with margins greater than its competitors, which, in turn, allows them to absorb
price increases from its suppliers easier than its competitors. By being a large, focused
player of the mobile telephony industry, Vodafone could hold suppliers costs down, and
it could make a profit even if its competitors are making only average returns.
4. Potential Entrants
While the threat of new entrants is weak, Vodafone must continue to reduce costs below
that of its competitors. By maintaining high levels of efficiency, Vodafone can help make
the entrance into the mobile telephony industry unattractive to its potential competitors.
5. Product Substitutes
Vodafone faces a low threat of product substitutes. The focused cost leadership strategy
that Vodafone operates under makes it difficult for a comparable substitute to be
produced at a lower rate by their excellent use of economies of scale, their buying power,
and their absorption of temporary price increases that come from suppliers that don’t
need to be passed on to the consumer.
6. Summary
Vodafone is pursuing a focused cost leadership business-level strategy through their
exclusive focus on the mobile telephony industry. Because Vodafone did not have the
distractions that faced their competitors (such as fixed-line telephony) they are able to
save money and pass the savings to their customers or maintain a profit even when their
closest competitor is only achieving average returns.
Vodafone maintained a broad competitive scope and focused on cost for their competitive
advantage.