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Vodafone Group is an international mobile telecommunications company with headquarters in London, the United Kingdom. The corporation was established in 1991 as the result of demerging of Racal Telecom from Racal Electronics. Vodafone Group is one of the largest telecommunications service providers in the United Kingdom, operating in Asia Pacific, Africa, the Middle East, and Europe. Its mobile network includes 26 countries with the provision of the fixed services in 17 nations. Moreover, it has partners’ shares in additional 57 countries. The company holds 24% of the mobile market share in the UK. In the other states of functioning, its presence goes over 28% and reaches 50% in Africa. Vodafone has 462 million subscribers worldwide. The primary mobile services that the company provides are access to call, the internet, text, video and music streaming. Vodafone Global Enterprise is a branch of the enterprise that serves facilities and business solutions to other corporations and offers communication assistance in hosting, cloud computing, and IP-VPN (Virtual Private Networks).
The telecommunications industry is the rapidly changing field influenced by the innovations and deregulation processes. The growing multinational corporations compete in the global market acquiring shares of regional companies and privatising the states monopolies. The continually rising numbers of mobile users, the enhancing access to broadband technology, and the diversity of mobile services which are highly integrated with the Internet have changed the industry perspectives.
The Threat of Entry and Substitutes
The telecom field is extremely competitive. The fight for the leadership among the equal by size and ambitions companies determines the high level of rivalry. The economic scale and scope influenced by the limited number of operators and the abundance of independent data and applications providers can quickly change the dynamics of the industry. The major rivalries constitute strategic groups with the similar services and customer profiles. BT Group, EE, O2, and Vodafone are the enduring adversaries in the UK domestic market.
According to the European regulations, the mobile telecommunications companies can facilitate the same services as the fixed line providers. The laws give the mobile operators additional shares in the industry, but, at the same time, the telecom firms have to accept the rules of the game set by the fixed line facilities distributors. Seen as the obstacle by the dominant industry players, the regulations are supposed to equilibrate the relationships and stimulate the competition between two strategic groups of the sector.
The telecommunications market demands substantial investments in maintenance, updating, and extension of networks and services; moreover, obtaining the license for supplying utilities is the significant financial obstruction that newcomers barely go through if they do not have enough economic resources. The tendency of consolidation in the telecommunications sector is widespread and, probably, going to expand with such examples as the acquisition of O2 by Hutchison Whampoa, purchasing of Spanish Ono S.A. and the joint venture between Vodafone Group and the Dutch Liberty Global. The industry mergers create additional barriers to entry for the new companies. Thus, the threat of entry is a low force which provides the opportunity for the principal players to build the relatively strong barriers. However, the probability that the mobile and internet services can be offered by the alternative carriers is insignificant, the technology and IT companies are the potential threat of cloud computing and the Internet of things (IoT) development and consultancy replacement. The minor risks of entry and supplement reduce the attractiveness of the industry unless a company has sound financial, technological, and human resources. On the other hand, innovative and flexible businesses such as application developers which are not interested in the leadership of the industry and do not fight for significant shares of the sector can create the breaches in the barriers of entry.
The bargaining power of buyers and suppliers
The industry’s strategic consumers can be divided into three groups: residential, small business, and corporate purchasers. The individual users are searching for the balance between the decent utilities and the lowest prices. Thus, the switching costs for the private buyer are moderate, and the residential preferences and loyalty may depend on the additional services – customer and technical support, online and physical availability of the provider – that bring satisfaction. Although the small businesses are less volatile in comparison with the private purchasers, the enterprises are interested in low prices to minimise the expenses. The corporate buyers, on the other hand, rely on the customised services and products which increasing the switching costs. Overall, the bargaining power of buyers is medium regarding the spectrum of the customers and their flexibility in switching costs.
Another aspect that can influence the attractiveness of the industry is the bargaining power of suppliers. The dependence of the telecom companies on the suppliers may seem significant but only at first sight. The vendors provide mobile handsets, fiber-optic cables, billing software, and broadband equipment without which the market’s operators cannot transmit and store data and voice. The telecoms are not tied to the definite number of material manufacturers and sellers because of the diversity of providers.
Human resource equipment may increase the dependence on supply. Hiring talented engineers and managers requires significant investment in HR departments. Hence, equipment providers and the specialists equilibrate the bargaining power of suppliers and place it in the middle between the high and low force.
To sum up, Porter’s five forces analysis assists in the outlining of the industry’s attractiveness and the rivalry advantages the firm may have. At the same time, it helps to build up the strategy for secure presence in the sector. Nevertheless, the limited numbers of the rivals are in the industry; the market is hypercompetitive because of the severe struggle for the leadership in the industry and fights for the new mobile and other services users implemented through research, development, and application of innovative products. The shake out cycle of the industry creates the spaces for growth for the companies with the effective strategies. In Vodafone case, to increase its secure position, the firm should adapt the mobility barriers which enhance the competitive differences between the corporation and the other players in the industry and maintain required flexibility in the highly rivalry environment. Orientation on the new users and corporate clients is an attractive strategic space. It may be reached by the development of customised services and products. The solutions tailored in accordance to the needs of the expanding regional markets and designed for all strategic consumers intensify loyalty and attract new buyers. Vodafone’s significant share of the domestic market and international presence which allow hiring the talented professionals with the support of the local human resources departments and opening the opportunities to work with the numerous regional suppliers is a valuable strategic decision to strengthen the competitive potential of the company.
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