Vodafone Group Plc Business Environment
Vodafone Group Plc is a mobile network provider. Its headquarters are situated in Newbury, Berkshire, England. The wide range of affordable products and strong marketing network made the company a leader in wireless technology. Vodafone has been successfully promoting its mobile operations in thirty countries, employing more than 80,000 employees and offering services to more than 450 million consumers across the world (Vodafone Annual Report, 2016).
The micro and macro factors affect the worldwide operations of the company, but Vodafone manages to overcome the obstacles. The demand for new wireless technologies and the rising needs for new data services give unique opportunities to the company, whereas regulatory pressure, saturated market, legal and political influence, and intensive competition pose significant challenges.
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Market Identification of Vodafone
Vodafone conducts marketing activities in two geographic regions: AMAP (Africa, Middle East and Asia-Pacific) and Europe. The company belongs to top three mobile operators in the world. Its market shares vary from 25 percent to 55 percent in AMAP and from 25 percent to 45 percent in European countries (Vodafone Annual Report, 2016). In Europe, the company operates in Albania, the Czech Republic, Germany, Greece, Hungary, Ireland, Italy, Malta, the Netherlands, North Cyprus, Portugal, Romania, Spain, Turkey, and the UK. The group offers broadband operations together with partner networks. Asia-Pacific region includes Australia, India, and New Zealand. The Vodacom Group market covers DR Congo, Egypt, Ghana, Lesotho, Mozambique, Qatar, Tanzania, and South Africa. Despite an active involvement in many countries, Vodafone identifies Germany, India, Italy, Spain, and the UK its prime markets which can produce significant market share. In fact, the company expects to enhance its share by 15 to 20 percent in next two years in these countries (Annual Report 2016).
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Vodafone Macro-Business Environment and its Market Competitiveness
Vodafone usually encounters the issues resulted from the regulations established by different EU countries. In 2002, The European Union member countries introduced the EU Regulatory Legislation for the wireless communication sector (Whalley and Curwen, 2014). The aim was to promote the competition in the communication market, to protect users’ interests, and to enhance the efficiency of the single market functioning. The effect of the EU legislation on Vodafone was powerful. As soon the member states enforced the EU legislation, Vodafone had to decrease its mobile phone tariffs significantly. Besides, the European Union laws control the roaming charges within the European countries. On August 31, 2007, the EU member states enforced the regulation decreasing the roaming charges and setting a price cap on outgoing calls (Whalley and Curwen, 2014). Those regulatory changes created price flexibility and decreased company’s market share in the EU countries.
To evaluate the economic growth of any country, it is important to consider the gross domestic product (GDP). Figure 1 reflects the increase in GDP in Vodafone’s most lucrative markets, such as Germany, India, Italy, Spain, and the UK, and in other regions (Euromonitor International, 2014)
Figure 2 shows the real GDP growth in Vodafone’s prime markets – India and the UK – followed by Sub-Saharan Africa and the Euro Zone. The graph shows the global financial crisis of 2007-2008 followed immediately by the Euro crisis. Thus, the GDP growth in almost all of the operating markets dropped significantly in Europe, resulting in the decline of total GDP. However, it is anticipated that the growth rate would become constant starting from 2015: nearly three percent increase in the EU countries and between six to eight percent increase in the Sub-Saharan Africa and India (Tong & Haenggi, 2016).These figures project future revenue growth because the growth in GDP can affect positively Vodafone’s performance.
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Social changes continue to impact Vodafone throughout the world. It is commonly assumed that subscribers’ fees on mobile communications are only a small proportion of total disposable income. With the increased level of income, in the next five years, subscribers will probably spend more on mobile communications in the future. In fact, the demographic factors, such as social changes, consumption level, the life expectancy of older people, new job opportunities, and education quality, will help Vodafone produce additional revenue. Moreover, unprecedented changes in the lifestyle of the younger generation can bring new advantages. Due to their extensive use of mobile phones and continuous search for new technologies offered by network providers, Vodafone can design highly profitable modern platform (Misra et al., 2014). Finally, affordable means of communication will attract the customers of various income levels to join communication network.
The technological developments play an important role in the development of electronic communications. The growth of networks has resulted in the improved data transfer. For example, Vodafone has introduced the GSM technology in 1990 (Ratasuk et al., 2015). Since then, the company has been upgrading its high-speed data transfer technology, such as EDGE and GPRS. Recently, Vodafone introduced LTE technology, the latest technique for the fourth-generation (4G) electronic communication. These technologies help Vodafone maintain its competitiveness in wireless telecommunication markets.
Vodafone Plc Environment Policy focuses on the improvement of energy efficiency and the minimization of carbon footprints throughout its supply chain activities. Even though the company largely uses sea and rail transportation for dispatching its handsets, it depends upon the road transportation as well. This aspect increases the carbon footprints in its value chain activities.
Vodafone legal implications are extremely sensitive worldwide except in the EU countries because of their more stable institutional structure and regulatory framework. Since the company also operates in developing countries, its investments remain at risk due to the possible changes in the taxation laws and legal systems which the enterprise cannot control (Johnson et al. 2014). In the case of legal transformations, the company might not recover its investments during the expected time in these markets.
How it works:
The SWOT examines internal and external factors that impact the operations of Vodafone.
The prime strength of Vodafone is its brand image known all over the world. The firm has established a competitive edge over its rivals by investing heavily in marketing. It has been developing new products at the competitive prices. The company differentiates its products by introducing latest technologies, such as GSM, LTE, and GRPS. The availability of Vodafone services across Europe and developing countries has increased its subscribers’ base to 450 million consumers. With the network of more than fifty partners, the company guarantees that its subscribers can enjoy traveling benefits using the same services at the reasonable price similar to one of their home country provider company (Indrayan, 2014). Besides, the company does not depend on the success in one particular market because its global base further strengthens position in the network provider market.
Vodafone has expanded its market base through acquisitions and mergers of electronic telecommunication firms instead of following the route of organic growth. This action enabled the company to enlarge its subscribers’ base, to expand a market fast, and to increase the immediate growth of customers by maintaining direct control of subsidiaries. The company adopted a centralized operational system nominating the UK head office its main functional unit for centralized marketing and procurement of handsets at the group level. It resulted in the negligence of the local markets thus permitting the market share to be seized by small local companies (Vodafone Sustainability Report, 2015). The financial structure of the company has certain weaknesses, for instance, its tax and legal disputes amounting to billions of dollars are pending in Europe and other markets where it operates.
The wireless telecommunication market presents a huge demand that can be exploited through the market segmentation. Thus, the company can focus on the most profitable segments. With different marketing strategies focused on the needs of the aging population or younger and middle-aged community, the company can expand the major markets (Ismail, Zhuang, Serpedin & Qaraqe, 2015). The increasing demand for communication provider services in developing nations of Africa and East Asia increases the opportunities for Vodafone to enter more strategically offering the latest 3G and 4G technologies.
A fierce competition dominates in the European markets of Vodafone where every network provider struggles to increase its market share. The price reduction and the launch of new products are the tools adopted by the rival companies. The popular brands, such as O2, Telefónica, and T-Mobile, exploit the price factor of consumers. Hence, they create a demand for their products expanding their presence in the communication markets. Indirect competition is also a threat to the company because it is mainly based on the popularity of Skype and other VoIP services (Indrayan, 2014). Vodafone expects that the upcoming EU regulation will further reduce the tariffs imposing price reduction that would impact the saturated markets of the EU countries.
Technological advancements become more effective if they are implemented in appropriate markets. In fact, users of wireless communication systems always search for innovations. Hence, Vodafone must analyze the trends in its markets to learn how new technologies can be introduced in the future. Besides, the company should not concentrate on a competitive advantage. Instead, its approach should consist of users’ product offers that save their money and time. This paper analyses Vodafone’s macro environment in the wireless communication industry, its markets, resources, and capabilities. The study of the paper concludes that despite the effect of the EU regulations, the saturation in the European markets, and the fluctuations in GDP of countries where the company operates, Vodafone has sustainable advantages which comprise its powerful brand, strong network, and ability to introduce latest technological products.