This essay analyses Vodafone Group in relation to work motivation, power, politics and conflicts in the organization and finally organizational structure and organizational goals. Basically, management approach to employees determines how well they take to their work. Defining power balance in the organization, in the way organizational structure is set; helps focus resources on organizational goals as opposed to power struggles and derailing conflicts.
Work Motivation
Human behavior unlike animal behavior often has a rationale behind it. It is widely accepted that even our instincts are based on a belief system or collective thoughts that inform our interpretation of situations. Vodafone appreciates that workers are intelligent beings out to self actualize through their every day work endeavors.
Fitzmaurice & Kuklewicz (2010, p.3) define employee motivation in terms of the liveliness, ingenuity and dedication that employees bring into an organization or company. In the wake of the modern work conditions, employee motivation is a major concern in many organizations. Employees feel secure, satisfied and ready to work if they are motivated to work.
Psychologist Abraham Maslow advanced the needs theory, in which he indicated that employees have hierarchical needs. The hierarchy is organized in five levels of needs; the physiological needs, security and safety, belonging, self esteem and self actualization as the highest need in the pyramid (Armstrong, 2004, p. 108). Maslow emphasizes that the lower level needs are the basic human needs which must be satisfied first before the next need levels.
The expectancy theory advanced by Vroom indicates that people tend to invest their efforts in order to attain desired performance. The strive to achieve desired level of performance because it leads to realization of personal expectations from employee (Armstrong & Tina, 2005, p.98).
The theory spells out three factors that influence an individuals’ level of motivation. The factors are expectancy, valence and instrumentality (Sandi, 2008, p78). Expectancy is the measure of outcome that an individual perceives his or her effort in a particular task will result into. Employees become motivated to work on a particular task if the effort they invest yields an outcome equivalent to the effort.
Vodafone appreciates that employees are the most important asset in an organization (Vodafone 2010). Therefore, it strives as best as it can to have operations streamlined in a way that they are a self actualization avenue for the employees. Secondly, in line with the expectancy theory, Vodafone provides a total package that is meant to satisfy the employee’s expectations materially and spiritually (Vodafone 2010).
Further, Vodafone keenly seeks to find out employee needs through regular surveys and strives to address them. All employees are allowed to join trade unions that ensure employee rights are appreciated by management (Vodafone 2010). By doing so, Vodafone strives to both legally and altruistically ensure it has a delighted workforce because only a delighted work force can delight customers.
Power, Politics and Conflict in Organizations
Just as it is the case in society, business organizations also have among its members different or diverse interests. Politics and conflicts are often driven by difference in interests or concerns. In organizations, the difference in interests often results into organizational politics and conflicts. Major conflicts in organizations are closely related to who has what power and what jurisdiction.
The word power is often associated with negative connotations. However, close inspection indicates or dissipates any such connotations. It is latently believed or subconsciously held, in many cultures around the world, that power makes individuals exploit, mistreat malign and even enslave others (Clegg et al, 2006, p. 40). Therefore, when some people get some position of power, they tend interpret it as a license to lord over others. Power is not bad in itself, it is the application or relation to power that demonizes it.
In actual sense, each individual has some form of power or capacity within himself or herself (Thomas, 2003, p. 7). Power basically refers to or is synonymous to authority, influence, clout and control. Having power over others does not mean having lee way to coerce, manipulate and dominate. In the real sense, power only means one has capacity, a talent, a skill, knowledge that others can rely on. Therefore, the individual can provide direction or influence others positively towards a goal.
There are different kinds of power; the most widely known ones being position power, legal power and personal power. In organizations, the basic struggle is striking a balance between personal power and position power. Conflicts are minimized in an organization if position power is pegged on personal power.
Organizations cannot survive without control. Control, which is one of the fundamental functions of management, ensures everything in an organization is done in an orderly way. It is only through managing power in organizations that control is achieved. Proper management of power in organizations means that each employee understands his or her position in the organization. Therefore, power distribution largely depends on the organizational structure.
Vodofone ensures a proper balance of power in the organization by focusing on meritocracy when recruiting employees (Vodafone 2010). Each employee who holds a given position has enough knowledge, skills and acumen to hold such a position. By so doing, position power is pegged on personal power thus reducing risk of conflicts.
Vodafone endeavors to empower all employees within its ranks. Empowerment of employees calls for power decentralization. When power is decentralized in an organization, it means the decision making process is decentralized as well (Clegg et al, 2006, p. 111). Therefore, the top management in Vodafone sets the strategic tone but the junior managers pick up the same and make strategic decisions in their areas of operation in consultation with the board.
Organizational structure and Goals
An organizational structure is a critical component that determines operations and power spread in an organization. For an organization to achieve its objectives, the organization structure has to be one that allows or facilitates the same. The organizational structure shows how power is shared and balanced in an organization.
It forms the central channels of communication and gives the basic reporting structure or official communication channels followed in an organization. The way an organization is systematically designed, planned and arranged determines how effectively and efficiently operations are done in the organization.
The organizational structure of Vodafone has been changing over the years in tandem with discerned organizational goals. For example, there were announced changes in the organizational structure of Vodafone in September of 2006 (Vodafone Group, 2006). Most recently, in 2009 the company announced major changes in its organizational structure in tandem with the changing market features and scope (Vodafone, 2010).
The top most management organ in the organization is the board. The board consists of representatives drawn from different operational areas in the organization. Each representative is a CEO of a given region. In each region, there are CEOs of different outfits in different countries. The different outfits take on structures that are most responsive to the host country characteristics. In early conception years, management in the organization was function based.
However, as the organization has developed and diversified a matrix organization structure has been developed. The structure infuses functionality, divisional differences, and geographical spread into one structure that best serves the interests of Vodafone as a group. The organizational structure is meant to reflect the global nature of the organization and the unique characteristics of the countries within which the group operates.
Vodafone’s top management has devised, in close collaboration with subordinates, various goals. Organizational goals are set with the aim of focusing organizational energies on a given success tangent. The success tangent or path is defined in each organizations vision and mission.
Vodafone strives to be the champion of best practices in development mobile telephony devices, building of masts and in the health sector. Its goals are in tandem with becoming the global leader that others follow when it comes to best practices. The key goals of the company are in tandem with being a leader in mobile phone development services, attracting new revenue streams, driving profitability up and to proactively manage costs, cut out unnecessary expenditure for growth.
Conclusion
As shown in this essay, power, organizational structure and employee motivation are intricately connected. The case of Vodafone illustrates clearly that the organizational structure determines power balance in an organization.
A proper balance between personal power and position power is achieved when employees are recruited and promoted based purely on meritocracy. Further, when the organizational structure is good and management is interested in employee welfare, employees become motivated to continue work towards the realization of organizational goals.
References
Armstrong, M., & Tina, S. 2005, A Handbook of Employee Reward And Management. Kogan Page Limited, London.
Armstrong, M. 2004, Employee Reward, Chattered institute of personnel development, London.
Clegg, S., Courpasson, D., & Phillips, N. 2006, Power and Organizations, SAGE, London.
Fitzmaurice, J. & Kuklewicz, K., 2010, Motivation and Incentive Programs. Web.
Sandi, D., 2008, Security Supervision and Management: The Theory and Practice of Asset Protection, Butterworth Heinemann, Burlington.
Thomas, K., J. 2003, Personal Power, Kessinger Publishing, New York Vodafone, 2010, About Vodafone, Vodafone. Web.
Vodafone Group, 2006, News Release: New Organizational Structure at Vodafone, Vodafone. Web.
An organization strategic position is very important in determining how the organization is going to deal with changes in the local and global market. An organization that has well defined and specified strategies is likely to succeed in maximizing profits and in promoting innovation.
Competition among organizations in an industry can be quite detrimental to an organization’s success. In order to overcome the various challenges in the business sector, a business should have well defined strategies and objectives in order to fit in the dynamic business world (Sherif, 2006).
Business strategies are wide and encompass a wider scope. The main scope of a business strategy will encompass areas which include but not limited to the following: legal position of the business, social and economic environments, management structure, and the financial position of the organization (Sherif, 2006).
The following research paper is going to evaluate and find out the various strategies taken by Vodafone Company in the United Kingdom in order to realize its goals.
The various environments include the legal environment, management structure, operational and financial issues, social and economic environments and the impact of potential change factors.
Background information
Vodafone is a leading multinational telecommunication company in the United Kingdom. The company has its headquarters in London, UK. Vodafone is the world’s largest telecommunication company in terms of revenues.
The company is the world’s second largest company in terms of subscribers, coming second after China Mobiles (Books Llc, 2010).
The company has its operations in over 30 countries and has partners with over 38 networks in other countries worldwide. Vodafone has operations in various regions around the world. These regions include Africa and the Middle East, The American region, the Europe region and the Asia- Pacific region.
The company deals in a variety of products and services. The main product and services being offered by Vodafone include mobile money transfer services, mHealth solutions, voice calls, data calls, internet services and sell of mobile and related accessories (lbbot, 2007).
Discussion
The legal environmental
The legal environment will always dictate the limits of operations of a business. Various countries have various legal policies, restrictions and guidelines that dictate how an organization should conduct its activities. Any non compliance to these legal policies and guidelines is considered a breach of law which is punishable in courts (Ibbot 2007).
Also, various countries have various legal requirements for registering a business organization. These requirements ensure that a business conducts the legal business activities it was registered for. For any business to be legally recognized, it must meet the set requirements in the region of its operation.
In the United Kingdom where Vodafone has its headquarters, there are various legal requirements and policies a business must observe and adhere to. Some legal requirements of a business in the United Kingdom include compliance with paying taxes, conducting the legal business a business was registered to do, protecting the customers from product and services fraud (lbbot, 2007).
Like any other company in the United Kingdom, Vodafone UK adheres to the various legal requirements in the United Kingdom. The company has been able to fulfill all the needed legal requirements for registration. The company has also, on several occasions, been named the best tax payer and tax compliance company in the United Kingdom (Books Llc, 2010).
All the above scenarios indicate the company has a good legal structure and system. It also indicates that the company follows and adheres to various legal policies, requirements, regulations and guidelines. The company has various ways and measures that ensure customers are not exploited and that they get the best services and products.
Through advertisements and forums, the company is able to enlighten the consumers about their products and services. Also, the company has a well structured complaint system where customers are able to login air their complaints.
The complaint systems enable the company to have continuous improvement in their products and services. This eventually leads to the creation of products which adhere to the legal quality standards.
The company has also received some ISO: 9001 certificates and recognitions. These recognitions indicate that the company is adhering and is at the forefront in promoting quality products and services to consumers.
The company has a faster feedback response system when a customer reports a malfunctioning in a particular product. In some cases, the customer is refunded their money or the product replaced. This is done by the company in a bid to adhere to consumer protection legal policies (Books Llc, 2010).
Management structure
The management structure may be defined as the arrangement of hierarchy of power in an organization. This structure will largely determine how organizational activities are going to be managed.
Managers are the people who are mandated with the task of managing various functional areas within an organization. Managers perform various duties which include planning, controlling and directing among others (LexixNexis, 25).
The extent to which these activities are managed will depend on the competence of the managers. If these activities are well managed, then the company is going to perform well in terms of efficiency and effectiveness.
Vodafone UK success in terms of revenues and clientele base has been attributed to its well qualified management team. The managerial team is made up of highly qualified and specialized individuals.
The company management structure is in such a way that it fosters and promotes interaction between the various functional areas. This interaction increases mobility as well as dependence among various functional areas (Flood, 1997).
The organization structure is also structured in a way that information flow is two way. The structure fosters information flow upwards and downward the organization chart.
The bi-direction flow of information ensures that the managers are furnished with the operational information which they can use to make decisions. The bi-directional flow also ensures that the operations staff is furnished with information about the business policies and decisions (Slaa & Klaver, 1992).
The bi-directional flow also builds trust between managers and employees. This trust ensures that employees are well motivated and eventually leads to creativity and innovations. Also, the trust creates a sense of belonging where individuals feel part and parcel of the organization.
The following diagram illustrates the organization structure of Vodafone
Operational and financial position
Vodafone UK is one of the best companies in the United Kingdom with the best operational and financial status. The company’s operations are well managed and are of a high standard. The high quality of operations is geared towards the provision of high quality services and products to consumers.
The operations at Vodafone are almost real time in the sense that most of the operations are automated. This has increased the response time in the company which guarantees customer satisfaction (Borman & Williams, 1994).
Also, the company has a feedback mechanism which ensures customers are able to express their complaints and compliments. The company has a well structured quality department that ensures that the feedback collected is acted upon immediately. This has increased the response time in the company.
The company embraces the emergence of new technologies in their operations which ensures that the consumers get the best from the company’s network. The company has been able to embrace new technologies like fibre optics which has high speed in data and voice transfers (Borman & Williams, 1994).
Vodafone is the world largest telecommunication company in terms of revenues. The company is the world second largest company in terms of subscribers, coming second behind China mobiles. The company has, on several occasions, emerged the best taxpaying company in the United Kingdom.
This indicates that the company is performing well in terms of financial capabilities. The company has a strong financial base which has seen the company invest in other regions as well as create partnerships with other networks (Borman & Williams, 1994).
Social and economic position of the company
Every business is created with the aim of making profit. Profit making should not be the only major and key focus of businesses. The business should also concentrate on promotion of social corporate responsibility, and business ethics within their area of operations.
Vodafone Company is not an exemption. The company has been at the forefront of promoting various social corporate responsibilities like sports. For example, the company has been able to sponsor Manchester United football club as part of the company’s social responsibility (Sherif, 206).
As stated earlier, Vodafone Company is one of the best performing companies in the United Kingdom. This has placed the company in a better economic position since the company is able to re-invest the extra profits made in other revenue generation activities.
This trend of reinvesting in other countries has made Vodafone the fastest growing telecommunications company in the world. The company has been able to obtain major shares in various telecommunications companies around the world.
Impact of potential change factors
For any organization to survive in the current dynamic world, then change is inevitable. A company’s ability to adapt to change is highly determined by the financial as well as the strategic position of the company (LexisNExis, 2005).
If the company is strategically placed and has a good financial base, then the company is better placed to adapt to change. On the other hand, if the company is not well strategically placed, and has a weak financial base then the company can be on the brink of collapse (Sherif, 2006).
Business changes are not only changes in the technology field but also changes in the physical environment, political changes and economic changes. For example, the company remained stable in the recent global financial crisis period.
Despite the economic changes in the global market, the company remained at the forefront in providing its services and products to consumers.
The company is also well placed in adapting to changes in information technology. The company has developed mechanism and ways of accommodating the changes in information technology (Flood, 1997).
The only threat the company is faced with is the climatic and environmental changes. Climatic and environmental changes affect the company in the sense that they inhibit and reduce the strength of the communication signals.
During the winter season, the effect is even diverse since the frozen frost weakens and inhibits the transmission of the communication signals (Flood, 1997).
Conclusion and recommendation
In conclusion, Vodafone Company has been able to withstand the dynamics in the global market and become one of the largest telecommunications companies in the world. The company has always been embracing continuous improvement which has seen the company be at the forefront in promotion creativity and specialization.
The company is also better placed in adapting to the various economic, political and technologies changes due to the large revenue base of the company.
As a recommendation, in order to withstand and overcome the stiff competition in the telecommunications sector, the company needs to invest more in the provision of internet services. The company should develop its product and services in order to be the leading internet service provider in the United Kingdom.
Also, in order to overcome the climatic and environment changes, the company should invest more in the transmission of high quality signals which are less affected by climatic changes. The company should also invest in fiber optic data transfer.
Fiber optic data transfer will offer high data connectivity speeds. This high data connectivity speeds will increase the data transmission rates, hence increasing efficiency.
Borman, M & Williams, H. (1994). Telecommunication: exploring competition. Amsterdam: IOS Press.
Flood, J. (1997). Telecommunication networks. New York: IET.
Ibbot, C. (2007). Global networks: the Vodafone-Ericsson journey to globalization and the inception of a requisite organization. London: Palgrave Macmillan.
LexisNExis. (2005). The mobile internet. New York: Information Gatekeepers
Sherif, M. (2006). Managing projects in telecommunication services. New Jersey: John Wiley and Sons.
Slaa, P & Klaver, F. (1992). Telecommunication: new signposts to old roads. Amsterdam: IOS Press.
Vodafone Inc. is a multinational Company that operates in the telecommunication industry. It is one of the leading companies in the global telecommunication industry in terms of market share and asset capitalization. The company was started in 1984 as a subsidiary of Racal Electronics Plc. and it became an independent company in 1991.
Since then, the company has experienced growth and expansion. The vision of the company is “to be a world leader in responding to public concerns regarding mobile phones, masts and health by demonstrating leading edge practices and encouraging others to follow” (Vodafone, 2011, p. 1).
Vodafone Group Inc. is present in 31 countries across five continents and its market capitalization was estimated at 71.2 billion pounds as at November 2009. The company operates in Europe, Middle East, Africa, Asia Pacific and the United States through subsidiaries, joint ventures and other forms of investment.
The company has partnerships with more than 40 networks in the world. The strategic position of the company can be analyzed in three steps that include the past strategic position, current strategic position and the future strategic direction.
The key success factors for the company are effective and continuous research and development, innovation and customer satisfaction focus. The company continually conducts research and development in order to understand the market requirements and employ use of innovation in order to satisfy the market.
The company has also invested heavily in technology and the other key success factor is the presence in both enterprise markets in large corporate as well as in the small and medium sized business markets. Generally, Vodafone Group Inc.pursues strategies which are focused on driving operational efficiency, pursuing growth opportunities in the communications industry, enhancing strong capital orientation and taking advantage of new and emerging markets. The company slogan is “make the most out of now” (Vesa, 2005, p. 201).
Investment in Industries and products
The company has invested in the telecommunications industry in the Europe and other continents. The major products of the company are calls, text messages and other advanced services such as Vodafone at Home and Vodafone Office, Vodafone passport, Vodafone Live, Vodafone 3G, Vodafone Mobile Connect data cards and other Mobile applications.
Vodafone at Home and Vodafone Office are fixed line services that deliver customer’s communication needs to their homes or offices. Vodafone passport enables customers to travel to other countries with their home tariffs while Vodafone Live offers communication and multimedia options for mobile phones.
The 3G product provides customers with the ability to transfer both voice data and non-voice data at the same time. The connect data cards and mobile applications make use of email, internet and other integrated services easy and secure to use(Hill & Jones, 2009, p. 67).
Structure, leadership and Culture established
The company has headquarters in Newbury, Berkshire, England and it is managed through regional managers who report to the CEO. The company operates in more than 30 countries and has over 270 million subscribers. Vodafone Group Inc. is organized and managed through two geographic regions, which are Europe and EMAPA.
EMAPA stands for Eastern Europe, Middle East, Africa and Asia, Pacific and Affiliates. The Europe region covers the major subsidiaries of Vodafone in the U.K., Germany, Spain, Portugal, Netherlands, Malta, Greece, Ireland and Albania. The EMAPA region covers all the subsidiaries in other countries where Vodafone has subsidiaries and they are not part of the Europe region.
The Europe region is mature compared to the EMAPA region and the company derives almost 79% of its revenue from the Europe region (Vodafone, 2011, p. 1). The organization structure for the company is a centralized structure. The Chief Executive Officer and a board of directors drawn from professionals and players in other industries across the world lead it.
The company has national and regional branches headed by managers who report directly to the CEO. The company has established and maintained a culture of hard work, integrity and innovation.
Strategies in the Recent Past
The Company has been pursuing growth and expansion over the recent past. The major goal for the company has been to become the leading mobile services provider in the world. The company sought to expand into international markets through acquisitions of mobile service providers in various countries.
For instance, Vodafone Group Inc. acquired Air touch, Mannesmann and Japan Telecom in the U.S., Germany and Japan respectively. Those are just but examples of the largest takeovers that Vodafone Group Inc. completed in its expansion scheme (Sutton, 1980).
In the years 2006 to 2009, the company adopted a contraction strategy. Over this period, Vodafone Group Inc. sold off many subsidiaries. However, the company acquired Hutchison Essar in India in 2007, Ghana Telecom in Ghana and more shares in Vodafone South Africa. In this period, divestment was the only option for companies since the effects of the 2000s financial crisis was starting to be felt.
Some of the subsidiaries that Vodafone disposed off between 2006 and 2009 were Vodafone Sweden, 25% interest in Bolgacom Mobile S.A. and Wisdom Mobile AG in Belgium and Switzerland respectively and 5.6% shareholding of Bharti Airtel in India. These measures were to fight the global financial crisis that was threatening the existence of multinational companies (Porter, 1998).
During this time, Vodafone Group Inc. was operating under pressure from the investors. The investors pressurized the company to give them more returns for their investments. These were mainly the institutional investors. The company thus formulated strategies to take advantage of the global network to improve on its performance and profitability.
In this time, there were new opportunities, which were brought by the invention of 3G. This gave Vodafone Group Inc. as well as the competitors an opportunity to roll out new mobile internet access services (Porter, 1980). Vodafone Group Inc. formulated and implemented various strategies when Mr. Arun Sarin was the Chief Executive officer.
In 2006, Vodafone Inc. developed a five point strategic plan, which according to me helped the company to maintain its competitiveness for more than two years. This plan made the company to gain in market share compared to the market share of the main competitors of the company. The plan also helped Vodafone Inc. to achieve its targets in terms of costs, increased the revenue, and achieved market growth.
Despite these achievements brought by the five-point plan, there were some challenges over that period and these are attributed to the business environment (Warren, 2002, p. 78). In 2005, Vodafone Group Inc. underwent restructuring with the aim of consolidation the operations of the company. Under the restructuring, various regional operators affiliated to Vodafone would report directly to the CEO.
These were subsidiaries operating in countries like the U. K., Germany, Italy, Asia-Pacific, South Africa, France and China among other countries. Under the new structure, all functional departments were required to report directly to the CEO. This was necessary to enable the company have a complete global approach in its operations.
The company would now produce standardized products and services and use the same marketing strategies to market the products globally. Two management committees were also formed after restructuring to guide the strategic direction taken by the company. The focus of the executive committee would be financial structure, organizational developments and strategy.
The operations committee was charged with the operations and budgeting functions of the company. Both committees were to be chaired by the CEO. Over the past and even today, elasticity on major voice and messaging services remains below one, which means that the company cannot transfer the costs to end users effectively.
Another challenge is strong regulation on the communication industry. Another challenge is that some market expectations are unrealistic and unattainable and this is a major setback in the strategic review of the company (Grant, 2005, p. 89). The focus of the strategies for Vodafone Group Inc. in the past was consolidation of the market.
The company had shifted its attention from the traditional growth strategies to focus and consolidate powers over the markets it had gained. The company also wanted to achieve top-line growth in some markets. This is the reason why the company adopted some aggressive and bold strategic decisions in order to consolidate itself and to achieve top-line growth in new and emerging markets.
These strategies taken by Vodafone Inc. in this period worked for the company. The company had realized that in order to gain from the wide global market coverage, it had to integrate its activities to enhance synergy and coordination. The Strategy was well implemented since it respected the autonomy of the local operators and their ability to respond to the local customer needs.
Macro environment trends
The PEST analysis is a tool that is used to understand the market and the industry in which a company operates. This technique involves looking and evaluating different environmental variables in order to understand the market fully. PEST analysis refers to the analysis of the Political, Economic, Sociological and Technological factors of the environment.
PEST analysis is an important task in formulation of strategy because in strategy formulation and implementation, a good understanding of the environmental variables is required (Walker, 2004, p. 56). PEST factors affect to a great extend the way business operate, make decisions and formulate their strategies (Spulber, 2007, p. 123). It helps businesses and organization to conduct their business in readiness of the changes brought by dynamics in the environment.
The analysis helps a business to determine what to produce, how to produce, when to produce and for whom to produce. Political factors: Political factors refer to the regulations and policies that affect the conduct of business in an industry or market. They include labor laws, taxation laws, environmental conservation laws, trade barriers, tariffs and general political condition of the countries in which a company operates (Warren, 2002, p. 82).
Most countries who are members of the European Union have implemented the E.U. Regulatory Framework for the communications sector whose aim was to encourage competition in the sector, improve functioning of the single market and ensure basic customer interests are safeguarded. This regulation forced Vodafone to reduce its phone termination charges significantly.
Another regulation is the spectrum liberalization reforms commissioned by the European Union in 2005. These reforms aim to allow holders to a trade spectrum to effect harmonization of brands with effect from 2010. There are other regulations, which seek to protect the consumer such as the E.U. Roaming Regulation, which was enacted in 2007.
Economic factors refer to the general economic condition of the market and they include gross domestic product (GDP), interest rates, exchange rates, economic growth, inflation rates and Consumer Price Index (CPI) among other factors (Porter 1998, p. 151). The GDP for most economies has been growing and this means good business environment for Vodafone.
However, due to the economic downturn in 2007-2008, the growth in the global economy experienced deceleration and this means that business environment is not good for Vodafone Group Inc. as well as other companies. Social factors are the cultural aspects and their impact on business. They include population and population growth, distribution of age, health consciousness, safety requirements and other religious considerations.
According to recent population surveys in most countries, people are living longer and they are leading healthier lives than before. There is however, a drop in fertility hence the E.U. population is growing old. The population growth is slowing in most countries (Porter, 2008, p.23).
The Technological factors are the research and development activities, automation, innovation, rate of technological advancements and general improvement in environmental aspects (Day, Reibstein & Gunther, 2004, p. 83). A look at the intensity of Research and Development in most countries show that most economies are investing heavily in research and development. Some countries where Gross Domestic Expenditure on Research and Development was found to be high are in the U.S, Japan and most countries in the European Union.
Industry and Market structure for the Telecommunications
The porter’s five forces of competition model are used to analyze an industry and determine the level of competition hence its attractiveness. The five forces are buyers bargaining power, bargaining power of sellers, threat from new entrants, threat from existing players and threat from substitute products.
There is a notable increase in subscriber base for mobile services, which means that the buyers for the products in this industry are many. This has been observed especially in the developing and underdeveloped countries. However, the buyers are becoming more complicated in terms of demands and companies must move with speed to keep pace (Porter, 1980, p. 73).
There is rivalry between existing firms since the telecommunications industry has more players. The competition is however, regulated and emerging markets favor Vodafone. The main competitors of Vodafone Group Inc. are the T-Mobile, Orange and Telefonica O2. These competitors have substantial presence in most countries and they have a competitive subscriber base.
Threats from substitute products remains low since the use of fixed lines is reducing in most countries. In the future, it can be expected that there will be no substitute products because there would be no fixed lines in use (Barney, 1991, p. 103). New entrants in the industry are not a threat since the industry is highly regulated.
This combined with the existence of well-established multinational companies in the industry lower the probability of entrance and survival of new companies. The suppliers to this industry include software developers, providers of network infrastructure and other digital devices. Well establishing companies like Vodafone have high bargaining power over the suppliers hence supplier’ bargaining power is not a threat (Walker, 2004, p. 106).
Strategic resources, Capabilities and core competencies
SWOT means the Strengths, Weaknesses, Opportunities and Threats of a business. These are formulated after an understanding of the market and the general business environment. An organization should match its strengths opportunities to overcome the weaknesses and threats. Thus, SWOT analysis is an important process in formulation of strategies for a company (Pahl & Richter, 2009, p. 102-103).
The strengths of Vodafone Inc. are the good reputation the company has had in the market and a strong orientation towards meeting customer needs. Other strengths are up-to date technology that the company has, global brand strength and general geographical presence.
The major weakness of the company is shortage of materials needed for production or purchasing of expensive material for production in various countries of operation. Another weakness in failure to meet the customer’s demand since it is high and it increases every time. The company also has a highly centralized system of control, which reduces flexibility in decision-making.
The opportunities available for the company are ample political climates in most countries and opportunities for growth brought by improvement in market for mobile data, enterprise and broadband. Another opportunity is the existence of strategic alliances with other companies. The major threats are existence of major competitors, high market saturation in the Europe and emergence of new low-cost brands in some markets (Bohm, 2009, p.23).
Business Partners, Alliances and important networks
The company has various strategic alliances with some companies. In total, the company has partnerships with more than 38 networks in the world. The notable strategic alliances, which Vodafone Group Inc. has, are alliances with Citigroup, with Jersey Airtel, with DSG international in the U.K., partnerships with Dell, Acer, Hp and Lenovo among other alliances
Synopsis of Current Strategies
When Mr. Arun Sarin left, Mr. Vittorio Colao became the chief executive officer for Vodafone Group Inc. and unveiled his strategies for the company in 2008. According to Colao, the reasons for the change of strategy were changes in the business environment and other factors of operation. This was true and necessary since the new CEO was faced with economic pressures and regulatory changes.
Due to the worsening economic condition, the strategic direction of the company shifted to cutting costs and attaining efficiencies. The most important aspect of the company today is to reduce costs. The company is targeting to reduce costs by 1 billion pounds by the year 2010-11. The costs could be reduced further depending on the economic condition.
This strategy is necessary and appropriate since the global economy is yet to recover from the 2010 financial crisis. This crisis affected the performance of many companies and firms that reduce their costs would survive the financial difficulties. Consolidation of existing markets is not left out of the current strategies of the company. Vodafone seeks to consolidate its activities in some parts especially in Europe.
This strategy is important since there are many competitors in those markets who are making Vodafone to lose its market share. The strategy is to buy some competitors in order to reduce the competition. The company intends to finance such acquisitions through disposal of other subsidiaries, which are not strategic to the success of the company.
Another strategy that is being pursued by Vodafone Group Inc. is organizational restructuring in order to bring nationalization of systems. These activities do not appear in the headlines but this does not mean they are not taking place. It is now the priority of the management to bring together the national affiliates of Vodafone Group Inc. in order to enable them to use the same technology.
This is a sure way to cut costs as it enables the company to develop a new product or service and then introduce it to many markets at the same time. The management was restructured in such a way that the managers of regional operations report directly to the chief executive officer. Regional heads of departments should now report directly to the overall head of that department for the company rather than reporting to the regional manager.
This was implemented in order to bring together the regional operators and give the management more direct control over the operations of the company. According to the management, this is a simplification of the organization structure of the company and it would help the company to take advantage of its economies of scale (Porter, 2008. p. 91).
There are some inadequacies in the current business strategies for Vodafone Group Inc. one of the shortcomings includes the failure to capitalize on the growing semi-urban markets. In addition, I feel that Vodafone Group is not well positioned to address the issue of mobile number portability. Since the implementation of mobile number portability in most companies, there are new entrants in the market who pose a threat to the company.
I would therefore recommend the company to formulate a strategy that would tackle the issue of mobile number portability and thus retain the company’s market share (Porter, 2008. p. 91). The cost cutting strategies could not have come at any better time than now for Vodafone Group Inc. The company has been pursuing aggressive expansion strategies over the past and with the current economic depression, such strategies would leave the company financial crippled.
The company has already penetrated more markets than any other player in the telecommunications industry has, and therefore what it needs to do is to formulate strategies that will help it capitalize on the wide market coverage. This could be achieved through cross-border integration and the company viewing itself as a portfolio composed of many mobile operators who have the same aim in business (Leontiades, 1987, p. 53).
Future strategic direction for the company
The main goal for a company is to maximize the shareholder value and sustain it. All the strategies developed must have aimed at achieving this main goal. The strategies for Vodafone Group Inc.for the future must therefore be aimed at considering the opportunities that exist in the markets and exploiting the opportunities to maximize shareholder returns.
It is good to appreciate the fact that the business environment is changing and becoming complex hence the need to be careful in coming up with strategies for the future. For Vodafone Group Inc., competition is on the rise from the existing mobile telephone services providers and also from small national service providers, the regulatory environment is changing rapidly, the growth in the European market is becoming slower and other challenges.
These are challenges that put pressure on the performance of the company and they must be put in consideration when formulating future strategies (Andersen, 2006, p.53). After a careful consideration of trends in the telecommunications industry worldwide, I would suggest that Vodafone Group Inc. should formulate strategies that capitalize on rural markets since there is increasing use of phones in the rural areas.
The company should also move towards infrastructure sharing with other companies because this will cut on cost, increase efficiency and help the company to enter new markets easily. Mobile phone use in the rural areas is increasing hence it is a good opportunity for the Vodafone Group to increase its revenue (Dransfield, 2001, p.43).
Due to increased competition, Vodafone should shift its attention from customer acquisition to customer retention. The company should formulate strategies to stimulate additional voice usage and substitute fixed lines for mobile phone services. The company should shift its strategies from the traditional unit pricing and unit based tariffs to pricing strategies, which provide the customers more value for their commitment.
The new pricing strategy will ensure a balance in the commercial costs for customers and generally offer value to the customers while at the same time safeguarding the financial position of the company. The company should position itself to take advantage of core voice and messaging services through larger data bundle. These measures will ensure more revenue despite the slow growth in the telecommunications industry especially in Europe (Pahl & Richter, 2009, p. 117).
Innovation in the company should be emphasized. Vodafone should ensure that it develops new products and continually improves on the existing products. Research and development should be continuously conducted to understand the customer requirements and then focus on delivering the customer requirements.
For instance, customers would like to have high-speed internet access, VoIP and instant messaging, integrated personal computer offerings and other services. Vodafone should use innovation and technology to increase usage of non-voice services and this will boost the revenues for the company. The other strategic issue that will take the forefront in product improvement is to make use of more enhanced voice services.
In the future, the company will make use of alternative radio spectrum bands; make use of UHF (between 450 MHz and 1 GHz) in Europe; use of WiMax (2.6 GHz) in Malta and use WCDMA (900 MHz) in New Zealand. These product developments are underway and they are in the trial stage (McGee, Thomas & Wilson, 2005, p. 152).
The company should continue to seek growth from the emerging markets. These are the developing countries whose GDP is increasing. Such countries are mostly less penetrated in terms of telecommunications hence they are a good business for the Vodafone Company. The company should understand that getting new customers depends on quality of services and satisfaction of customers hence this should also be a major area of focus.
The company should also consider selling non-profitable subsidiaries, which are mainly cost-centers instead of being revenue-centers. This would be a good move to boost the financial performance of the company (Porter, 2008, p. 88). Cost reduction for the company should remain a matter of strategic plan.
This is because competition in the telecommunications industry is getting stiff year by year and this need financial discipline in order for an organization to survive in the industry. The world is still recuperating from the financial crisis whose peak was 2007-2009 and therefore Vodafone group Inc should cut down on costs to avoid financial strains.
Another strategy that Vodafone could consider is to adopt a push marketing strategy, which would boost the revenues of the company. Under this strategy, the company should influence more people to buy phones that connect to the internet and to influence more companies to purchase telecom services. Growth should not be completely left out of the strategic direction of the company.
Vodafone Group Inc should aim at expanding into developing economies (Pahl & Richter, 2009). In the future, I can see the company the personal computer components to mobile handsets. This is because the users now demand handsets with Google maps, yahoo, Microsoft, search engines and other components.
With the direction technology is taking, it is clear that Vodafone Group Inc will have no alternative other than to integrate these services in handsets. The company would also continue to expand into the emerging markets to tap new market potentials. In the next few years, the company will target countries with increasing penetration of mobile phone use and with rising per capita income and this will increase the revenue for the company (Spulber, 2007, p. 211).
We also expect to see more partnerships between Vodafone Group Inc and other investors in various markets. This is an attempt to take advantage of the wide global market coverage to boost the revenues for the company. The notable strategic alliances whose progress are in advanced stages are with Citigroup, with Jersey Airtel, with DSG international in UK, partnerships with Dell, Acer, Hp and Lenovo among other alliances (Johnson, Scholes & Whittington, 2008).
For these strategic directions to be effective, the company needs to align its organizational structure to keep in line with the dynamic business environment. The managers and top employees hired by the company should have a clear vision and should be well motivated to drive the company towards achieving its strategies. Communication within the company should be fast and reliable to ensure that the employees understand the goals and objectives of the company.
List of References
Andersen, T. 2006, Global derivatives: A strategic risk management perspective, Pearson Education, Harlow.
Barney, J. 1991, Firm resources and sustained competitive advantage, Journal of Management, 17(1), 99‐120.
Bohm, A. 2009, The SWOT analysis, GRIN Verlag, Norderstedt.
Day, S., Reibstein, D. & Gunther, R. 2004, Wharton on dynamic competitive strategy, John Wiley and Sons, London.
Dransfield, R. 2001, Corporate strategy, Heinemann, Oxford.
Grant, R. M. 2005, Contemporary strategy analysis, Wiley-Blackwell, Cornwall.
Hill, C. & Jones, J. 2009, Strategic management theory: An integrated approach, Cengage Learning, New Jersey.
Johnson, G., Scholes, K. & Whittington, R. 2008, Exploring corporate strategy. London: Financial Times Prentice Hall.
Leontiades, J. 1987, Multinational Corporate Strategy: Planning for World Markets. New York: Lexington Books.
McGee, J., Thomas, H. & Wilson, D. 2005, Strategy Analysis & Practice. New York: McGraw‐Hill Maidenhead.
Pahl, N. & Richter, A. 2009, SWOT Analysis – Idea, Methodology And A Practical Approach. Norderstedt: GRIN Verlag.
Porter, M. E. 1980, Competitive strategy: techniques for analyzing industries and competitors: with a new introduction. London: Simon and Schuster.
Porter, M. E. 1998. Competitive advantage: creating and sustaining superior performance: with a new introduction. London: Simon and Schuster.
Porter, M. E. 2008, On competition. London: Harvard Business Press.
Spulber, D. 2007, Global competitive strategy. New York: Cambridge University Press.
Sutton, C. J. 1980, Economics and corporate strategy. New York: Cambridge University Press Archive.
Vesa, J. 2005, Mobile services in the networked economy. New York: Idea Group Inc (IGI).
Vodafone, 2010, Vodafone Group Inc. Web.
Walker, G. 2004, Modern competitive strategy. New York: McGraw Hill Publishers.
Warren, K. 2002, Competitive Strategy Dynamics. London: John Wiley and Sons.
Vodafone Limited (1) suggested that the company is the first mobile operator of the UK, which started its journey in 1985; however, for its innovation, investment and appreciated customer service, the company has turned into the number one mobile operator in Europe and the rest of the world.
In 2010, the company gained the ‘Best Network’ award in the UK, providing one million satisfactory business solutions, connecting mobile and landline numbers, launching Vodafone VIP, Apple iPhone, 400 retails store, World of Difference programs, and service agreement with Twitter, and Secure Remote Access for the customers globally.
However, this report will discuss the affect of environmental variables on Vodafone, positioning strategies, competitive advantage, the marketing mix, timing and mode of entry and so on.
Affect of Environmental Variables on Vodafone
Economic Factors
It is important to note that the KSA consists of a prosperous oil- based economy with well-built administrative power in about seventeen percent of globe’s fuel assets, making approximately eighty percent of budget-revenues, forty-five percent of GDP, and ninety percent of export-profits; yet, it is extremely helpful for the international marketing activities of Vodafone to sustain in this market.
This is because the government of the country is supporting the enlargement of private sector for expanding the market and creating more employment; in addition, as the expansion works are concentrating on power generation and telecommunications, Vodafone is greatly supported by the country’s authorities to conduct international marketing activities in a profitable way.
Moreover, it is important to note that, as the people of Saudi Arabia are generally quite rich, with high-income levels and high purchasing powers, so while formulating the international marketing plans, the company is able to keep this in mind and structure the pricing strategy accordingly, in a profitable approach.
it is essential to note that last year, the per- capita gross domestic product of the country was 25700 American dollars, buying capacity parity was more than 740 billion, and expansion- rate was about six percent; this indicates that this country is highly lucrative for any international business for allowing its operations to flourish in the global market (Indexmundi 1). However, the following figure gives more information
Figure 1: GDP overview
Source: Indexmundi (1)
On the other hand, the key economic indicators of the country shows that on average, its government invests more than twenty- one percent of its gross domestic product and the budget surpassed about 12 percent in 2012; however, the inflation rates were less than five in the same year.
Figure 2: Economic indicators
Source: Indexmundi (1)
Political Factors
The political condition in this modern monarchy in Saudi Arabia is quite stable and instable conditions such as strikes, protests, political uprisings, and other forms of unrests are quite rare. This has meant to be greatly helpful for the international marketing activities of Vodafone, as it is able to operate without any hassles, interruptions, and any predicted losses.
As a result, compared to Asian countries like India, where political unrests is regular problem for business operations, in Saudi Arabia the peaceful political environment ensures prospective business atmosphere without any threats.
Legal Factors
While conducting its operations, this company needs to ensure that it conforms to all rules and regulations of the country in which it operates. It is important to state that without due compliance to the country’s laws, it would be nearly impossible for the company to sustain in long run, and there are chances for it to get engaged in lawsuits and other legal hassles.
However, it is quite good to know that Vodafone complies with all laws of the kingdom, which, for example, includes the environmental laws, labor laws, employment laws, health and workplace safety laws, company laws, taxation rules, as well as other rules and directives.
Culture
Even though this is one of the largest Muslim countries in the world with almost hundred percent of the population being Muslims, it is important to note that the old characteristics of the country contained numerous chronological customs and folk-traditions which included dance or music; however, most of the conventional cultural factors are subject to lawful-prohibitions since Prophet Muhammad (PBUH).
In addition, people who belong to other religions are also banned by rule from practicing their respective religions within the country; on the other hand, intoxicating drinks are proscribed as well; moreover, girls are not allowed to go outside alone by driving their own, and they are always in complete veil so that nobody could even see their toes.
The kingdom has its own religious polices, who arrests anyone who break this rules or do not veil themselves in a proper manner. In so much of religious conventions that are even binding on the foreigners, it would not be possible for Vodafone to sustain without complying with their customs and traditions.
As a result, while conducting the international marketing activities, or creating the advertisements, this company complies with all these rules having regard to the strict Muslim laws.
Strategic Planning
Muhammad (2) stated that Vodafone was seriously concentrated on joint venture and acquisitions strategies to gain cost advantages, to gain market share and to become technological leader in the mobile telephony industry; however, this report will analyze Positioning strategies and Competitive advantage of this company.
Positioning strategies
According to the annual report 2012 of this company, the motto of this group is to ensure simple, reliable and richer communication system at anywhere and anytime; however, the marketers of Vodafone considered positioning strategies of Hutch to develop world class marketing campaign to increase brand image.
On the other hand, Vodafone took over Hutch in 2007 for which this company redesigned positioning strategies and implemented it within the next four months, for example, it introduced simpler advertisement campaigns. However, the following strategies helped the company to become popular in the marketplace, such as-
It never disappoints the subscribers and respect the customers;
In addition, it ensures high quality services to the subscribers
Each advertisement of this company is used to promote a specific value added service;
customer care and happy to help attitude ensure better services and create strong position
Competitive advantage:
Vodafone has long experience to operate in the telecommunication industry and its ranking is second in world;
According to the annual report 2012 of this company, it has 86,373 high qualified employees in 65 countries (Vodafone Group 1);
Chronological development, strong brand image in the global market, customer relationship management, outstanding supply chain and communication system;
It has loyal customers base, for instance, 439 subscribers are the key success factors of the company (Vodafone Limited 1)
Product line, new product development, product features and design help the company to gain competitive advantage over the global market players;
Strong position in the market and financial capabilities enhance business opportunities such as enter new international market;
Timing and Mode of Entry
Vodafone considered several mode of entry strategy in order to penetrate global market place, such as, acquisitions, strategic alliance, and licensing; however, the decision markers have researched on the risk factors of global market place and alternative entry mode strategies to take decision in this regard.
At the same time, Keegan and Mark (68) argued that acquisitions and strategic alliance are the effective entry mode strategies for the late entrants; however, this company has reputation as the first mover to bring new technologies as well as buy 3G licenses in the global market.
Former CEO, Chris Gent turned the company into a global company, for instance, the acquisition of Mannesmann started in1999, and it acquired a large mobile company in Japan called J-Phone in 2001, it took-over Hutchison Essar in India, and so on.
The Vodafone Group (1) added that the company at its tenth anniversary of international operation, it has established partnerships with the mobile operators of more than 40 markets all over the world where the successful strategic associations have generated reliance of technology and excellence of customer service.
Still the company has been striving to expend its global operation with superior market knowledge and experience in terms of both sides beneficial for Vodafone and its global partners with special attention to get entry in the emerging markets.
Vodafone’s Relationship with Zain KSA
Zain (1) pointed out that Zain Group is a Kuwaiti company started its journey in 1983 and now established itself as a regional telecommunication leader in the eight MENA1 countries including the Kingdom of Saudi Arabia with 6000 workforce serving 44.1 million active mobile services to the individuals and business communities.
In September 2012, the Vodafone Group and Zain Group signed a partnership agreement that contributed the company to extend its services in the MENA countries, under the agreement Zain gained the capabilities to meet the growing demand of complicated voice and data communications solutions for eight countries including KSA by accessing devices and services of Vodafone with enhanced network coverage.
Zain has already introduced ‘Vodafone Passport Service’ to the mass market of KSA that enhanced roaming data transfer with a rate of 0.75 SAR, such wonderful roaming solution has generated significant revenue boosts for Zain and encouraged this vender to enhance its further partnership with Vodafone for upcoming innovations and welcomed for major network improvement in this region.
The Marketing Mix
Products & Services
As a pioneer in the mobile network and service provider, the Vodafone has a large array of products and services to serve and support the global mobile industry and its enthusiastic customers, for better understanding, the company categorized its product and services into three types such as Business, Corporate, Public sector and the industry as a whole.
For business solution, the company aimed to resolve the business challenges with perfection of its business phone, internet solution, One Net Express for landline to mobile access, Dongles & Mobile Wi-Fi, Office 365, iPad & tablets including secure mobile working and Vodafone Data Sharer and so on.
For corporate solution the company provides secure mobile working, one net enterprise, mobile email, mobile voice and coverage, fixed network services, remote access, contact centre solutions, while its public sector solution works for all the above including enterprise telephony, remote access, machine-to-machine solution.
Promotion
The promotional strategies of this company actually diverge correspondingly along with altering buyer drift, wants, and other external situation in Saudi Arabia; however, Vodafone prepares the promotional offers by studying the issues, for example, special time of year, New Year, Mother’s Day, Father’s Day, Eid-ul-Adha, Eid-ul-Fitr, Ramadan month, as well as other countrywide holidays, like Shab-e-Barat, Eid-e-Miladunnabi, and so on.
In addition, irrespective of special occasions, this company all of the year broadcasts commercials on television channels, hoardings, periodicals, newspapers, radio, social media, blog, as well as in supplementary intermediate outlets that catches huge group of people, transmitting brand-image efficiently; the company’s outlets also have extraordinary offerings, promotions in addition to point-of-sale placards to draw people within the outlets.
Consequently, Vodafone attains viable benefit in comparison with the rivals through boosted sales in annual term
Price
In the Kingdom of Saudi Arabia, due to the fact that the economy is quite rich from the overall point of view and because of the fact that the purchasing power parity and GDP per person in very high, the company considers that the pricing strategies can be placed in rather high levels, as people of KSA can afford it.
However, the company does this in a smart way so that it does not impose too high call rates on the customers so that they stop buying the products and do not stay loyal. The key strategy is actually to balance the offered rates in a way to charge high, but still enough affordable for the people of KSA that they will not find themselves being exploited.
Place
Vodafone places itself in Saudi Arabia though numerous outlets within the country; it also sells by self- governing vendors, where clients are capable to observe and test the items they deem to purchase; employees are present to ascertain clients’ requirements with perfect products and to clarify diverse choices accessible.
Extent of Standardization Vs Adaptation Considering Market Entry
It would have been almost impossible for the company to make a successful market entry without aptly adapting to the Saudi Arabian culture. As a result, it has adapted its price, place, and promotional strategies with the Saudi market; however, even though no big alteration is brought in the products or services to fit the traditional distinctiveness, in case of price the company does not use permanent strategy at every global market.
In KSA, it charges the customers considering their income levels and local competitive situations; on the other hand, rather than using standardized distribution arrangements the company does the placement by modified allotment, and promotes itself by making particular transformations to suit customary circumstances:
Figure 2: standardization v adaptation
Source: Self-generated
Managing, Measuring and Controlling the Marketing Effort
Keegan and Mark (135) stated that managing the marketing effort is one of the most important processes, which deals with measuring the attainment of the objectives; however, marketing efforts should be different for foreign countries due to different social, cultural and economic background of the foreign nations.
In this situation, the board of directors and head of marketing department controlled the marketing efforts and focused on many areas particularly cultural and economic environment of particular country to make string position.
In the wake of globalization, many companies are considering expanding into new markets outsides their home countries. However, the transition has a number of risks that most companies should put into consideration before making decisions to enter new markets (Beath, Fan, Frauscher, Jarvis, & Reis, 2008). Multinational corporations seeking to expand overseas are usually faced with challenges categorized into economic, business, and legal issues. This discussion will focus on some of the risks of doing business in Brazil and India with reference to Vodafone.
India
India has many opportunities for economic growth, something that is attracting many foreign investors to consider expanding into the country. However, many constraints should be considered prior to do business in India. A major risk of expanding into India concerns regulatory issues. The impacts of political risk cause positive outcomes of free trade reforms put in place in 1991 to decline (Beath, Fan, Frauscher, Jarvis, & Reis, 2008). The political environment of India is weak because of many scandals associated with corruption in addition to escalating food and fuel costs. There is a history of paralyzing the decision-making process in the country.
Investors from overseas in India, especially with regard to phone companies, have been disrupted and about $900 million pulled out of the stock market of India. The main worry is that mobile phone licenses are on the brink of being revoked or renegotiations being inevitable. In the last five years, India’s inflation ran at 8.23pc, which is above the target of the central bank pegged at 5 to 6pc. In a move to have inflation rate checked by the central bank, there are high chances that interest rates will soar at a faster rate than before. The move reduces the economic growth of India. Statistics reveal that the country is experiencing a rise in interest rates by 175 percent (Reuvid, 2013).
Brazil
Brazil has experienced economic stability in the past 10 years, making it one of the first nations to exhibit recovery from the 2008 global economic recession. The country is rated seventh in the world based on GDP at PPP (Beath, Fan, Frauscher, Jarvis, & Reis, 2008). However, with a population of more than 200 million, Brazil’s income per person is still low, ranking 74th worldwide. In the past decade, over 35 million people in Brazil have come out of poverty, although income distribution is still unequal.
Economically, Brazil grew by 0.1 percent in 2014 and it was projected to reduce by about 1.5 percent within a year. Economic growth in the country has been marred by declining prices in primary goods. There is also a decline in consumer purchasing power since inflation increased unpredictably to 9 percent (Reuvid, 2013). To stabilize the economy, interest rates rose sharply in the last decade. From 2014 to 2015, the country experienced an increase in unemployment rates from 6.5 percent to 8.1 percent.
Brazil is rated among the leading investment destinations in the world. However, amid a formally robust business environment, corruption is still a major hindrance to doing business in Brazil. The aspect of corruption is prevalent when it comes to conducting business deals with local authorities. It is notable that Brazil has various regulatory bodies because of the national makeup of the political system. This increases the possibility for officials to demand bribes from potential investors (Cavusgil, Ghauri, & Agarwal, 2002).
At the same time, the tax system in Brazil is sophisticated and prone to incidences of corruption. Available information indicates that tax collection agencies usually ask for bribes to be less stringent on tax evaluations and inspections. Investors may find it hard to maneuver sophisticated systems and stakes when expanding to do business in Brazil.
Risks for Vodafone to Consider Before Entering Brazil and India
India
Cultural Risks
When entering India, Vodafone should overcome the aspect of cultural differences evident in the Indian population. Due to cultural diversity, India does business differently. The country’s business culture is established on the Hinduism culture with an overlay of Islam, western business structures, and the British Raj. It will be important for Vodafone to understand the hierarchical perspective, sophisticated communication patterns, and a slew of other subtleties before establishing the approach of entry.
When entering India, Vodafone should overcome the aspect of cultural differences evident in the Indian population. Due to cultural diversity, India does business differently. The country’s business culture is established on the Hinduism culture with an overlay of Islam, Western business structures, and the British Raj. It will be important for Vodafone to understand the hierarchical perspective, sophisticated communication patterns, and a slew of other subtleties before establishing the approach of entry.
The Indian hierarchical structure of the society is one of the key aspects of the culture Vodafone has to consider before entering the market since it can significantly affect the business. For example, it may not be quite clear about who is making the final decision when partnering with foreign companies. The majority of Indian companies are family businesses where the decision is made by the family’s patriarch; this can significantly complicate the interactions with possible business partners of Vodafone, a company that is used to the Western traditions.
Furthermore, the hierarchy is also present with regards to middle and junior management, so it will be very confusing for the Vodafone representatives to understand in which way they should approach business with Indian corporations. Communication patterns in India are also irregular; for example, even company owners cannot answer ‘no’ to a business deal and will make promises that they cannot accomplish. This, in turn, can significantly affect Vodafone since it is ineffective to establish clear plans when there are no guarantees that a business deal will go through.
Financial Risks
A major problem when expanding into India with regard to financial risk is foreign exchange rate fluctuation. India uses Rupee as its currency. While Vodafone may have an advantage because of the strength of the dollar and sterling pound, the constant fluctuation of the Rupee may present a risk when doing business in India. The currency is not pegged at other foreign currencies at a stable rate.
Economic and Political Risks
According to market assessment, the government of India put in place predetermined conditions that should be met by foreign investors. Such policies are in line with the bureaucratic system of the government, which makes it hard for an increase in India’s FDI.
Furthermore, some sectors of the economy in India cannot get FDI, and such regulatory deterrence locks out a profitable source of technology and expertise. Vodafone should put in mind that most sectors in India require a license from the government before investment takes off. While the licensing procedure was established to improve quality and hygiene, it has instead become a problem affecting competition in the telecommunication industry (Cavusgil, Ghauri, & Agarwal, 2002).
However, in recent years, the government has significantly relaxed the norms for foreign direct investment in the sectors of defense, power, and stock exchanges, as well as telecommunications (IBEF, 2016). This means that despite the fact that Vodafone will have to go through a licensing procedure, it is highly likely that India will accept its foreign investment and allow expand the business in the country.
As aforementioned, corruption is a big problem among officials in India. Statistics show that the government controls approximately 43 percent of the capital stock and 15 percent of labor outside agriculture. As such, entering India will present a problem in terms of the privatization of foreign companies.
Poverty levels of India are rated among the worst globally. It would be difficult to achieve profitability for a company like Vodafone operating in a poor population. The last aspect to consider when entering India is the security (Reuvid, 2013). The country is yet to have peace with Pakistan. The conflict makes India vulnerable to terrorist attacks, which paint a bad image for the country.
Infrastructure Constraints
India is known to have a poor transport infrastructure. This poses a great risk for any foreign company planning to expand into the country because accessibility to some areas to market a product would be challenging. Despite the fact that Vodafone offers telecommunication and does not rely on transportation as a tool for delivering quality services, the poor transport infrastructure may become a barrier in cases of emergency technical maintenance procedures. For example, if there are some issues with the operation of a cell tower and an emergency technician has to get to it quickly, the traffic and the overall poor infrastructure may increase the downtime and leave customers unsatisfied.
Consumer Behavior
India has the worst poverty rate in the world, which causes malnutrition and reliance on child labor. Demographically, India has more children below the age of 14 years as compared to most developed countries around the world. Children comprise 3.6 percent of the total workforce in the country (Cavusgil, Ghauri, & Agarwal, 2002). Although in many poverty-stricken countries the usage of the Internet and mobile phones is considered a luxury, the sphere of tech and telecom has advanced in India so extensively that is embedded in the everyday culture of the country.
Even the poorest families in India have at least one cellphone, so the potential for Vodafone to expand its business in India is very high. Moreover, Vodafone already had a positive experience with expanding its business in Kenya (launching of M-Pesa cooperatively with Safaricom) (Leach, 2015), a developing country in Africa, so reaching customers in India where the culture of telecommunication is an integral part of everyday life for the majority of the population should be an accomplishable task.
Brazil
Cultural Risks
Uncertainty avoidance presents a major cultural risk when it comes to doing business in Brazil. With regard to cultural peculiarities that can present some risks for Vodafone, it is important to mention the language barrier. While in India the bulk of the population understands and speaks English, the distribution of the English-speaking population in Brazil is uneven (Plotkin, 2013), so Vodafone’s representatives will have to employ translators and interpreters in order to adapt to the cultural environment in the country.
Financial Risks
While Brazil is perceived as a considerably stable economy, any company entering the market has risks to face with regard to finance. The country’s currency has remained obstinately expensive for many years (ScotiaBank, 2016). The effect of this is seen in the high cost of living. Moreover, the widening gap between the urban rich and rural poor presents a risk of inequality.
Such a gap between the earning abilities of the highest and the lowest-earning population in Brazil is a significant challenge that Vodafone will have to overcome since it is important to provide high-quality services that will satisfy the rich and offer prices that will be acceptable to the poor. It is, therefore, important for Vodafone to undertake extensive market analysis to understand the difference between people in the urban and rural areas of the country.
Economic and Political Risks
Politically, Brazil has 26 states and a single national district. The legislative organ comprises of a bicameral National Congress that is made up of the Senate and the dispute chamber (Cavusgil, Ghauri, & Agarwal, 2002). Three decades ago, the country transitioned from a military dictatorship and embraced a positive democracy that has a presidential structure. Although President Dilma was re-elected, the 2015 economic recession and severe policy implemented to attain a balance in public finance; the government is infamous due to huge corruption scandals.
According to the research conducted by ScotiaBank (2016), the vote to impeach President Rousseff in Brazil will be one of the key challenges for foreign investors in 2016-2017 due to economic and political instability. Therefore, Vodafone should investigate the situation in the country in great detail in order to account for any possible risks associated with entering a new market.
Brazil has more than 200 million people with an income rate per person ranking the country 74th globally. The income per head indicates that most of the people in Brazil fall under the middle class. This requires that Vodafone provide products that meet the needs of middle-class populations to assure profitability. Economic growth in Brazil is still very low with only 0.1 percent in 2015. Conducting business in the country proves challenging because of the declining prices on primary commodities (Cavusgil, Ghauri, & Agarwal, 2002).
Infrastructure Constraints
While Brazil has a strong economy, it still has some characteristics of developing countries. The integration of big cities with other areas of the country is hindered by a poor transport system. Infrastructural inefficiency will present a challenge for a company like Vodafone to reach areas where the coverage of the telecommunication needs to be fixed, which is similar to the problem the company may face in India. Despite the fact that Vodafone does not manufacture any products, the efficient design of the infrastructure is needed for maintenance purposes as well as cooperation with local businesses.
Consumer Behavior
Consumer purchasing power is also low because of a 9 percent increase in the inflation rate. Vodafone may find it hard to get prospective customers for its services because of the steady increase in unemployment rates. It has been noted that unemployment rates soared from 6.5 percent to 8.1 percent in 2015. Most people may not have enough income to purchase expensive telecommunication services from a foreign company. This challenge may be one of the most significant barriers that Vodafone will face when entering the Brazilian market since there is not much room for growth.
On the other hand, the upper and middle class of consumers is characterized by a large population of young people who are proficient in technologies and are always on the look for a good telecommunication provider that will offer high-quality services and be reliable enough for the Internet coverage. Therefore, consumer behaviors in Brazil are quite diverse due to the broad range of customer segments that have different requirements with regards to the services offered by Vodafone.
References
Beath, A., Fan, Q., Frauscher, K., Jarvis, M., & Reis, J. G. (2008). The investment climate in Brazil, India, and South Africa: A comparison of approaches for sustaining economic growth in emerging economies. Washington, DC: World Bank.
Cavusgil, S. T., Ghauri, P. N., & Agarwal, M. R. (2002). Doing business in emerging markets: Entry and negotiation strategies. Thousand Oaks: Sage Publications
As an international company, Vodafone has unique ways of meeting consumer demands in all social-economical settlings where it has hugely invested in. Some of the distinctive properties that Vodafone has over other competing companies include the customer admiration gained over its business services. Secondly is the customer’s trust it has achieved due to the special responsibilities meant to enhance its reputation and lastly is by building customers’ loyalty. Vodafone sustainable way of doing business has enabled them to gain long-term commercial remunerations by linking business strategies with corporate responsibilities.
Vodafone has provided product expansions among its dealers by incorporating new or advanced features and services especially in already advanced countries such as the UK, USA, and Europe where sophistication meets a market that is already saturated with sophisticated users or competitors. (The Times Newspaper Ltd, 1)
Issues discussed in the case study
The study case discusses issues regarding technology where the Third generation (3G) technology has improved data and voice transfer via internet due to efficient transfer speeds. It also has other extended services such as mobile downloads, mobile television, e-mail messaging and video conferencing.
Vodafone has experienced rapid expansion as it search for emerging market opportunities especially in developing countries. It has also incorporated other services such as the e-banking which is evident in some developing countries like Kenya where “safaricom”, a partner of Vodafone provides the “M-pesa” services which literally means “mobile money”.
According to the Times Newspaper report, (2) this is a trend which indicates that Vodafone is committed to finding emerging market opportunities especially in the developing countries. It is devoted to the new markets where they provide new technologies to keep them in touch with the latest trends in the market. This is a great boost to social-economic development especially in developing countries. For the developed countries, Vodafone relies on the variety of innovations so as to be distinctive in the market and meet the already sophisticated clientele.
Recommendations applicable to Qatar social-economic markets
In relation to Ali and Partners, the creation of the “Gulf Cooperation Council (GCC)”, among six Gulf States namely “Kuwait, Bahrain, Qatar, Oman, Yumen and Saudi Arabia” has promoted drastic changes in support of the installation of the digital systems by overseeing the installation of the fibre-optic network cables to link them. The most challenging task involves the laws. Telecommunication industries especially the international companies are not able to venture into such countries due to the tough control measures the governments had subjected to the sector.
Ali and Fagan indicate that the biggest challenge facing Kuwait is the monopolization that has been granted by the government. Every public telecommunication company is under tight supervision by the Ministry of Communication and this is a gag to the industrial development. Privatization of the companies would open up chances for free competition and thus lower cost for the consumer as well as encourage the much required investment in the area.
According to Fagan (2), Qatar has been a country in the Middle East without any rule or regulation to govern the use of the voice over internet protocol. The telecommunications regulatory authorities of Qatar also need to enhance competition by promoting the investments by various international companies such as Vodafone. This would improve and meet the countries need for transfer of information.
Information is the key to understanding or discussing matters to solve conflicts. Good communication can only be enhanced if the government is in position of controlling the frequency spectrum in accordance with the regulations or internationally recommended practices. The harmonized spectrum allocates international service providers such as mobile service renders with the frequency bands. These bands need to be in line with the international approvals so as to speed up the industrial growth consistently.
These are some of the policies that would enable countries in the Middle East to meet similar markets oriented to focus on customer services and customer’s demands regardless of the innovations and social differences involved just like many other countries all over the world.
Fagan recommends the telecommunication sector reforms which entails attracting the investors and also having administration practices which promote commitment to already competitive markets aligned with the international practices.
The service Vodafone provides would meet the urgent consumer demands such as the voice over data coverage, provision of hardware and software which meet various special needs and social status of the customers. These are places that need new innovations in technology for instance sharing of videos, music, or images through mobile phones. The mobile banking has already advanced and Vodafone is updating such services to some Middle East countries. (Porter, 3)
How Vodafone can apply Michael Porter five forces analysis
According to Porter, (3) the Porte’s five forces “model of pure competition”, less risky rate of return ought to be constant across firms and industries. Numerous researches have indicated this as impossible because of the differences in the levels of profitability. In line with the porter’s model (3), “the industry is governed by five forces namely the supplier power, barrier’s to entry, threat of substitutes, buyers’ power and the degree of rivalry”. Vodafone is a firm among other business rivals and needs to utilize this model to develop a competitive edge over them. This enables it to understand their operational grounds in terms of industrial context.
On the aspect of suppler power they need to focus on the impact their products have to the consumer especially in terms of cost, availability and customer’s ability to differentiate them. The suppliers have influence over the manufacturing industries especially for the costs of raw materials if the are powerful enough. The focus should also be on the presence of substitute inputs, threats on their expansions especially to Middle East countries where substitute inputs may not be available.
The threat of entry analyzes the inputs, government policies, economy of scale, the required capital, identification of brands and accessibility. These are all aspects that influence the probability of firms entering the industry. If new rivals enter the market then the profit levels reduce.
The other competitors may be producing comparable merchandise and this will be the threat of alternative products. They include switching cost or price performance among others. Threats exist when prices of substitute products change and more substitutes’ translates to more elastic demands since the consumer has more alternatives to choose from.
The power of the buyer depends on the number of suppliers for instance if this communication industry have many service providers, then the consumer’s cost would be low due to competition. The firm checks on the purchases volume, brand identity, price sensitivity, differences in products, buyers’ concentration and incentives.
Lastly, the degree of rivalry indicates that the competition among rival firms reduces profit margins because the firms strive for competitive advantages over the rivals. Firms need to checks on the existing barriers, concentration in the industry, growth or differences in products, switching costs, brand identification, diversity of the rivals and corporate stakes.
Works cited
Ali and Partners. Bridging business cultures, 2004. Web.
Fagan, William Outlook and Regulatory Challenges in Qatar’s wireless Broadband Sector, IctQatar journal 2008: Web.
Porter, Michael. E. On Competition: Porter’s Five Forces. Boston MA. Harvard Business Press, 2008
The Times Newspaper Ltd. Using technology to improve economies. CMBA Pushers Ltd. 2009. Web.
Vodafone is “one of the world’s leading mobile communications providers, operating in 26 countries and partnership with networks in over 55 more” (Vodafone through the years 2016, para. 1). The organization is located in Newbury but is well-known all over the world. It has more than 400 million clients, and 13,000 employees work in the UK. Vodafone is focused on the delivery of innovative products and services. It pays much attention to the customers and does its best to provide them with high-quality communications.
Vodafone’s history starts in the 1980s. It is connected with Racal Electronics because its subsidiary turned out to become a starting point of the provider’s evolution. The company had several different names and turned into Vodafone Group Plc only in 2000. During the last five years, the organization did not stop improving its performance and implemented numerous changes. In 2011, it launched JustTextGiving and Freebee Rewardz, which provided charity organizations with the fundraising text code and general clients with an efficient rewards scheme. Except for that Vodafone Guardian for parents and their children was created to control the content of information available. In 2012, it acquired a company that provides fixed and mobile services, improved cooperation with Telefónica UK, and made a step forward to the creation of the single national grid. Vodafone Euro traveler and Vodafone Red were launched to enhance tariffs for communication with foreign countries and allow unlimited calls, texts, and loads. In 2013, the BlackBerry Z10 entered the market, the Red Freedom Freebee was created, network investment boosted, and a 4G network was launched in the capital. In 2014, retail expanded as well as the 4G network. Vodafone WorldTraveller and the Rural Open Sure Signal program were provided. New technology (Voice over LTE) was developed. A year ago, it was the 30th anniversary of the first call made with the help of Vodafone (Vodafone through the years 2016).
As the company introduced numerous innovations during the last several years, its finances were affected. However, it cannot be claimed that Vodafone lost its savings and stop being profitable as the company followed efficient strategies. All in all, organizational revenue increased by £2,000 million in 2015 (in comparison with 2014) while expenditures increased by approximately £1,000 million. Still, alteration in taxation turned out to be advantageous for Vodafone, as the organization reduced its expenditures greatly. As the company faced expansion and employed new people, its staff costs increased. However, improvement in services and new opportunities provided for customers allowed this firm to remain competitive and hold a stable position among the industry leaders. It should be also mentioned that enhancement of operations led to the reduction of expenditures connected with the loss on disposal of property. Vodafone reduced investments by almost £100 million, which provided an opportunity to save this money for other operations. Still, the company’s stakeholders are likely to remain loyal, as it provided more possibilities for charity organizations and made substantial investment previously with the expansion of retail. In the previous year, Vodafone spent more on machinery, which allowed the company to improve existing products but cut research and developmental funds, and no extreme innovations were made. However, such an approach may be beneficial for now as the company’s fees increase each year, and it needs some time to stabilize the situation efficiently (Vodafone Group Plc 2015).
Many companies in the UK are pressured to make sure their dividends are high even though their performance and income worsened. Nowadays, the biggest organizations provide up to 70% of their earnings for dividends, which is rather critical (Canaccord Genuity 2016). Focusing on the security of dividends, Canaccord (2016) encourages clients to be ready to make difficult decisions following the expected cash flow. It claims that they need to be sure of the possibility of shareholder payments that is why Vodafone is not the company to be trusted in this framework.
Of course, Vodafone itself does not support such a position and tends to prove its sufficiency by a consistent dividend policy. The dividend is seen as the main element of shareholder returns, and they increase for a 2.0% increase year-on-year, which is beneficial for this population. The organization is one of the largest dividend payers that returned more than £13 billion to shareholders during three years (Vodafone Group Plc 2015). However, it cannot be denied that with the implementation of the new investment program, capital expenditure increased as well. Such tendency supports the position of Canaccord, as it cannot be proved that Vodafone will be able to provide all its shareholders with constantly rising dividends.
The company is trying to do its best to attract ordinary shareholders and help them to manage their dividends. In this framework, a Dividend Reinvestment Plan was developed. It is claimed to allow “holders of ordinary shares who choose to participate to use their cash dividends to acquire additional shares in the Company that are purchased on their behalf by the Plan Administrator through a low cost dealing arrangement” (Dividends 2016, para. 7). They need to get a Shareholder Reference Number to enter the system and become able to manage their dividends. Such an approach ensures security for both shareholders and the organization.
Needless to say that Vodafone implemented numerous changes on its way to enhancement. Various situations and events influenced its operations, allowing the company to reach its today’s state. For example, at the very end of the 20th century, there were only a couple of interim dividends (of 0.624p and 0.648p per share) with no final one. In 2012, a special dividend was added to the interim one in respect of the Verizon Wireless distribution (Dividends 2016). The company is targeted at the maximization of shareholder value and all alterations it implements are made to support and streamline it. Annual increases in the dividend are likely to allow Vodafone to reach its goal. The amount of dividend increased by about £1 billion equity dividend and reached almost £3 billion in 2015, increasing shareholder value. However, Connington (2016) emphasizes that the situation is likely to alter this year. Organizations are at risk of a dividend cut because of the raised payout ratio. Problems with cash flow are expected to become worse. Cashflow returns will decline because debt exceeds earnings. Vodafone’s dividend yield is 5 while its cover is only 0.5. The fact that the dividends are so uncovered may make people who used to rely on Vodafone for income change their opinions. In this way, while the company is speaking about constant dividend increases, it can face dividend cuts that affect shareholder value adversely. Such movements may be not critical for the long term, but they are mainly considered to be negative by investors.
Vodafone is a United Kingdom based company founded in the year 1984. It has invested in many telecommunication companies, in different parts of the world. This means that its services are used in many countries in the world. It specializes in the provision of telecommunication services such as the voice calls and the messaging system services.
Currently, the company is ranked as the largest in the world in terms of revenue. This is mainly attributed to the idea that it has invested in other telecommunication service providers in the world that have over the years been making huge profits.
However, in terms of subscribers, Vodafone is ranked second in the world after the China Mobile. As at 2010 it was estimated that the China Mobile Company had over three hundred million subscribers.
The objectives of the paper
This paper will try to look at the Prahalad and Hamel’s core competence issues and ideas. That is, the issues that have been raised by the two people in regard to strategic management in corporate companies and organizations. The paper will further look at how Vodafone has made use of these ideas to remain ahead of its rivals in the United Kingdom and the world at large.
Vodafone has been chosen as a case study for this paper because it is the leading telecommunication company in the world in terms of revenue and subscribers. In the last section of the paper, the contributions made by Prahalad and Hamel in the field of strategic management shall be addressed.
This will involve looking at some of the available theories so that the points can be well illustrated. In the end, a conclusion of the points raised will be given so that a common ground regarding this topic can be achieved.
Prahalad and Hamel’s core competencies
According to these two people the company should have a clear outline of what it wishes s to achieve in a given duration of time. They say that this is very important because it can be used to gauge the growth of the company over time.
They have given examples of two companies, GTE and NEC, which were the greatest rivals in the 1980s and early 1990s. They say that NEC was a smaller company compared to GEC in the early 1980s. However, due to proper planning and organization, they have observed by the late 1980s NEC had out done GEC in terms of sales.
On the other hand, they argue that in order to remain competitive in the market, a company needs to diversify and improve on its products. Such a move they argue may go a very long way in making sure that the company remains relevant in this competitive world.
For instance, we find that the NEC top management decided to make semi conductors as its main core product. As a result, the company had to make sure that it makes the best semi conductor at a very low cost. This went a long way in making its presence felt in the market in spite of the existence of other players.
In order to have a competitive advantage over their rivals, the companies should integrate multiple streams of technologies and have in place a team that is able to coordinate the production of goods in the company. Moreover, they have claimed that production of smaller items able to perform similar tasks makes the company remain at a competitive edge than its rivals.
The company’s ability to establish an effective communication is another way of establishing competence. According to them, the company should be able to know the needs of its clients. This can only be possible if it has created an effective line of communication with clients. Moreover, they have observed that it is important for the concerned companies to establish subsidiaries in different parts of the world.
They argue that such a move will increase revenue because there will be no tax levied on such goods. As a result, the products will be cheap and hence accessible to many. They have also noted that it is very critical to establish a research and development center.
This according to them will help the company address the needs of the people effectively. The research and development centers are meant to help the company develop goods and services that are easily accepted in the market.
The employees who are the main players in the success of the company should not be ignored. In fact, in order to increase their input in the company they need to be paid better wages than the rival companies. This will reduce the chances of another company poaching the experienced staff. Besides monetary issues, employees should be given a good working environment.
Many companies have often blamed their employees of laxity while it is the one that fails to provide the necessary environment for them to work under. These are some of the issues that some companies have ignored. As a result, their company does not record any significant growth as others who have adopted the above strategy.
According to them, the core competencies are characterized by a number of factors. Firstly, the company must be prepared to provide a wide variety of markets for goods and services. That is, by way of diversifying products and services the company stands a better chance of conquering the markets than its rivals with a single product.
Secondly, the core competence of the company should ensure that customers have a positive perception of goods and services. The value of the products must perceived by the customers just as designed in the company. They should see the benefits of the designed products. This means that the clients who buy such products should enjoy the benefits that come with purchasing such other than regret buying it.
Lastly, they have argued that core competencies should be difficult to be imitated by other organizations. According to them, a company cannot claim to have core competencies if other companies can easily copy and imitate what they claim to be their core competencies.
They acknowledge that although the rival company may copy some features, it should not be possible for such company to get the inner details of such core competencies.
The application of Prahalad and Hamel’s core competencies in Vodafone
Based on what Prahalad and Hamel have said as the core competencies of an organization, Vodafone has adopted most of them, and this can be explain why the company has remained as one of the major players in the telecommunication industry. According to Scholz (2008), the company has an every- year plan where its growth is evaluated based on its performance in the previous years.
He has observed that, the company’s top brass has to make sure the goals set are realized by allocating each department its own goals. The head of the department further delegates the set goals to each person within his or her department. This means that every person within the company has set goals that have to be realized at the end of the year.
As a result, each department is held responsible if has not achieved the set goals. He argues that reports are usually produced at the group level although the senior managers can access them before other members. He has noted that it is the duty of the senior managers to call the departmental heads to enquire why the established targets have not been met.
According to him, the company has recently introduced a policy where its members of staff are paid bonuses at the end of the year based on their performance in the entire period. Therefore, there is increased competition amongst staff as each tries to achieve the set benchmark. This he says explains why the company has continued to record significant growth year in, year out in terms of revenue and customers base.
In addition, Vodafone has diversified its mode of operations. This is according to Gruber (2005) who has stated that mobile phone companies are known for providing calling and messaging services. However, Vodafone has moved a notch higher and has introduced a number of services to its clients, not only in United Kingdom but to the rest of the world where it operates.
For instance, he has observed that the company introduced internet services to its customers with internet enabled mobile phones. He argues that this is a major milestone to the company because there will be an increase in revenue from the internet besides the one from voice calls and the messaging system.
In addition, he has stated that, the company has introduced the fixed data internet service. This entails providing internet services for use in the computers. This according to him has not only forced the other providers to lower their internet charges but also increase their penetration in the market.
The company in the year 2007 introduced an exclusive service to its clients operating under the Safaricom brand in Kenya; it was the MPesa service where people were able to send and receive money using their mobile handsets. According to Amason (2011), this service was designed by Vodafone in the United Kingdom but was tested in Kenya where it has revolutionized the mode of sending and receiving money.
This he says earned the company much respect all over the world. He says that the company has continued to be honored by many organizations for such an achievement. The idea of diversifying the products and services offered to the customers has been well illustrated by Prahalad and Hamel.
According to Amason (2011), Vodafone has heeded to the advice given by Prahalad and Hamel. He has observed that the company has moved a step further and introduced numerous tariffs to cater for the different classes of people in the society. He notes that this is a strategic move to capture the poor and the rich in the society.
As a result, he has claimed that the company has continued to record an increase in the number of subscribers all the years it has been in operation. Its rivals have been forced back to the drawing board to look for modalities on how to counter the move by the Vodafone Company. Therefore, he argues that having a proper guideline on how the company should be operated and run is very important.
Vodafone has created a good working environment for its employees. This is according to Dodd (2002) who argues that the company has a policy of rewarding its top performing staff. He says that this is a positive move aimed at improving the performance of the employees. Moreover, the company has allowed its employees who wish to further their studies to do so.
He says that the company has a policy of providing financial assistance to such staff and consequently promoting them once they are through with their studies. This he says has enabled a good number of its staff devotes all their energy to the company as a sign of appreciation to what it has done to them. This has gone a long way in propelling the company to greater heights of success.
In order to meet and address the needs of its clients fast and effectively, Vodafone has introduced a customer care number where its customers can call and share the issues and the problems they may be having. As Prahalad and Hamel argue, it is very important to have a communication line between the company and its clients.
As Hitt (2009) notes, the company records all the queries from its customers so that the problems raised can be addressed immediately. This gives Vodafone a competitive advantage because the problems raised by one customer are addressed so that they do not recur in future. As a result, subscribers will always be satisfied with the kinds of services being offered to them by the company and hence remain within the network.
This will prevent such subscribers from contemplating any attempts of moving away from the network because, the other networks may not be providing quality services as the one being provided by the Vodafone Company.
The company has also introduced a reward system for its subscribers. This is according to Hitt (2009) who says that the subscribers earns points depending on the amount of airtime they spend calling within or outside the network. He says that the company policy is to give back to its customers.
He argues that after a subscriber has accumulated a certain number of points he or she is allowed to redeem them to earn talk time, free data or even free messages across all networks within the United Kingdom. He argues that all these services are offered so that the company can retain and add in its customer base. He argues that this service has been spread to all the countries where Vodafone operates or its subsidiaries.
In addition, Amason (2011) has argued that the company has also gone a notch higher and introduced a service for its client to borrow credit in case they run out of the one they have. This service has been welcomed by many people because they do not have to worry of running out of credit along the road. He says that a person is required to dial a specific number to select the amount he or she want credited to the mobile handset.
However, he notes that this is not a free service because one has to repay the advanced credit within a stipulated time. An interest of ten percent is charged on every credit advanced. This has made Vodafone make millions of money from these advances.
As a result, it has continued to grow in terms of revenue and has been ranked as the leading telecommunication company in the world. We can say that Vodafone Company has fully utilized the points given by Prahalad and Hamel in the Core Competence of the Corporation.
Evaluation of Prahalad and Hamel’s wider contribution to the field of strategic management
Prahalad and Hamel have been regarded as the pioneers of strategic management. This is because most of their writings in the early 1990s have inspired many companies to adopt their way of thinking.
Strategic management refers to the plans laid down by the senior management team as a path to follow in order to achieve the desired goals. This according to Hitt (2009) entails the utilization of readily available resources so that what the company intends to achieve is realized. He says that an organization needs to have its vision and objectives from the day it began its operations.
Woods (2001) argues that Prahalad and Hamel have brought about some ideas that are very useful in the field of strategic management. According to him, the management team should have a vision of how they want the company to be after a number of years. For instance ten years. He says that this is paramount because it helps such people to have proper planning as they intend to achieve such a goal.
This is also another way of ensuring that the company stays ahead of its competitors because of prior planning. Furthermore, Prahalad and Hamel have brought about the issue of influence within the industry. According to Gruber (2005), a company that wants to remain ahead of its competitors should invent policies that will affect the other players in the market to follow the same trend.
That is it should redefine new ways of conducting business. In his remarks, he has said that Prahalad and Hamel see a successful business as a rule maker for the others other than the rule taker. They say that this gives the company a more bargaining power compared to others in any kind of business competition.
The other contribution by Prahalad and Hamel in the field of strategic management has been the issue of dangers posed by the upcoming competitors. According to Harrison (2010), the company has to keep on improving the services it offers to its client in order to retain them.
He has noted that the new players in the market are offering their services at a cheaper rate in order to poach customers from the already established companies. To counter this effect, Prahalad and Hamel had recommended that, the company needs to introduce other services that will be exclusive for their clients alone. This they said would go along the way in ensuring that customers do not move to other competitors.
Another point given by Prahalad and Hamel in regard to strategic management has been the issue of downsizing. They have noted that some companies spend a lot of money in salaries. Owing to the improvement in technology, he says that these companies need to embrace technology which is would help the company cut down its expenses.
Strategic intent
This is used to refer the objectives of the company as continues with its operation in a given area. According to Harrison (2010), the company ought to have a guideline that will help in the day to day running.
Prahalad and Hamel argued that strategic intent involves an active management process that zeroes in on the organization’s attention on the essence of winning, motivating the members of the public by way of informing them the importance of their target. In addition, they have said that it is very important for the company to set up a chasm between the ambitions and the resources.
According to them if a company wants to achieve a long term success, it is important for it to remain consistent by sharing the intent within the organization. They say this is a good way of driving a company to greater heights of success.
Strategy as related to stretch and leverage in the business environment
Prahalad and Hamel have argued that proper planning within an organization can make it the rule maker other than the rule taker. They say that some of the best performing companies in the world today have had big ambitions that they have managed to accomplish. They say that these companies have found a less intensive way to meeting their targets.
It is at this point that they say that leverage complements the strategic allocation of resources. They claim that this is only possible if the resources are concentrated around the strategic goals, making sure that the resources are accumulated in an efficient way.
In addition, this can happen through complementing some resources with others, as well as taking care of resources whenever possible. According to them, this can happen through the recovery of resources from the market place as fast as they can.
Theories
A number of theories have been brought forward to explain the strategic management debate. Some of them include the quantitative approach, the system perspective, and the human resource approach. According to Amason (2011), the human resource approach theory emphasizes that people should be managed by way of looking and understanding their psychological make up and needs.
This means that the company should not provide services or goods that are not of any interest to the people. In the Quantitative approach theory, he argues that the management perceives making decisions based on the opinions of the senior managers.
This is a very efficient way because it allows ventilation by all people concerned. The systems theory views an organization as made of inter related parts that have to be involved in every step of decision making by the company. This is because failing to involve one part of the system may result in a negative impact on the company.
Conclusion
Management of a business corporation requires people with thorough knowledge on how it should be run. We have found that Vodafone has become the world leading Telecommunication Company because of proper planning by its senior management team.
It would, therefore, be necessary for other companies involved in this kind of business to try and get some concepts on how well they can run their businesses. Such a move would go along the way in making sure that they improve on their performance in the future.
Reference List
Amason, A., 2011.Strategic Management: From Theory to Practice. New York: Routledge.
Dodd, A., 2002.The essential guide to telecommunications. New Jersey: Prentice- Hall, Inc.
Gruber, H., 2005.The economics of mobile telecommunications. Cambridge: Cambridge University Press.
Harrison, J., 2010. Foundations in Strategic Management. Mason: Cengage Learning
Hitt, M., 2009. Strategic management: competitiveness and globalization: cases. Mason: Cengage Learning.
Scholz, C., 2008. Human Resource Management in Europe. Oxon: Routledge.
Woods, A., 2001. Strategic management: a fresh approach to developing skills, knowledge and creativity. London: Kogan Page Limited.
So far, I used to think that numerous companies experienced financial crises and even bankruptcy because their CEOs had failed to provide viable solutions to problems. In addition to this, as my work dealt with public sector administration, I firmly believed that the governance strategies were applied to non-profit and governmental administrations. During the lectures, I have realized the actual meaning and definition of corporate governance, which can be defined as an integral system embracing policies, people, and processes, that serves stakeholders’ needs by controlling and assisting in business activities directed at objectivity, integrity, and accountability. More importantly, I have learnt other related definitions, like globalization, integration, and market magic that are closely connected with corporate governance and leadership policies. Finally, in the course of study, I have also understood the main peculiarities and recent tendencies of conducting business as well as possible types of legal violation. I have also concluded that the creation of multinational corporations provides some challenges for managers since they should take into account ethical and cultural issues to prevent communication problems and to encourage company’s productivity and sustainability.
Relying on this theoretical framework, I have defined that the Vodafone-Mannesmann case reveals the problems connected with corporate culture established within the company (Clarke, 2005, p. 402). The case has disclosed the encounter of two strategic policies of corporate governance on the part of Germany, which is in favor of collective decision-making and mutual agreement and on the part of British mergers, which are more concerned with the stakeholders’ interests and investments. Being concerned with internal policies, the merged Mannesmann has given way to Vodafone that has managed to pay more attention to the foreign policy. This is why I think the weak chain of German companies was lack of transparency and absence of sufficient connections and partnership with other competent organizations. Certainly, I cannot but admit that German company had a rich history of corporate culture development, where the managers were primarily concerned with the employees’ welfare and their involvement with the production process. All their resources, hence, were directed to creation and improvement of a well-structured system of support and communication within the company. In my opinion, this imbalance has lead to the frustration of the company’s strategies.
On the other hand, the analysis of Vodafone policies also uncovers some gaps in treating the employees. To be more exact, Vodafone’s executive branch has failed to consider the essential employees’ needs since it is more focused on the development of foreign policy.
With regard to the Enron case revealing inappropriate corporate governance policy in terms of information management and financial speculations, Vodafone-Mannesmann case outlines certain problems with organizational and corporate strategies. However, the similarities between the cases are revealed through the consideration of ethical problems but in different spheres of management. Hence, Mannesmann’s hidden information exchange has lead to negative consequences for the company’s image. In its turn, Enron’s company has been involved into illegal financial operations and ignored ethical and cultural concerns. Anyway, the case in question provides consistent approaches to the corporate governance of the company being the largest international organization.
During the previous week, I became the forth member of a project team. My group and I decided to select the Vodafone-Mannesmann case as the core case for investigating the main principles of corporate governance and organizational culture.
The case study may help us to develop necessary research skills for further understanding the main aspects of corporate governance as well ethical and legal problems connected with this case. Also, it is not of minor importance to consider how the process of globalization is associated with the problems of organizational management and what shifts it bears to the company in question. Our group will plan to divide the questions among the members. For this assignment, we will divide our group in two to consider global and ethical questions. My partner and I will answer the second question. Each question will be split into several issues that will be tackled individually.
Plan for the Next Two Weeks
Week number
Group 1
Group 2
Week #1
Analysis of Vodafone-Mannesmann case on the basis of the given theoretical framework;
Defining the definitions of globalization and its relation to business activities in the company, including takeover;
Analysis of Vodafone-Mannesmann case on the basis of lectures studied during the class;
Detecting the connection between concept of corporate governance and ethical and moral concerns, including the strategies of Vodafone and Mannesmann;
Week #2
Investigating the policies of Vodafone and Mannesmann, its merits and shortcomings;
Identifying the problems and searching for possible solutions.
Studying and predicting the consequences of the corporate governance investigation, positive and negative outcome;
Conducting a comparative analysis of the cases to define the most common gaps of organizational management.
In order to foster the accomplishment of the assignments, I have decided to read the textbook by Thomas Clark (2004), an effective companion to the International Corporate Governance analyzing the global tendencies in development and improvement of corporate strategies.
Reference List
Clarke, T. 2004. Theories of corporate governance: the philosophical foundations of corporate governance. NY: Routledge.
Clarke, T. 2005. Vodafone-Mannesmann Case. International Corporate Governance: A Comparative Perspective. NY: Routledge, pp. 402-417.
