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Vodafone: How Can It Expand Its Market Segment

Business Report

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VODAFONE: HOW CAN IT EXPAND ITS MARKET SEGMENT?

 

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Section 1

Introduction

The assignment will analyze Vodafone Group PLC, the United Kingdom’s leading telecommunications company. As of 2020, the company had over 93,000 employees, making it one of the largest employers in the country (Holtgrewe & Schörpf, 2017). The organization is a multinational corporation with assets abroad, including Asia, Africa, Europe, and Oceania. The entity has also partnered up with or acquired a stake in similar businesses in other parts of the globe, making it one of the most recognizable brands on earth. Vodafone currently owns and operates telecommunication networks in 22 countries with subsidiaries and partners in 48 hours. The company has a primary listing on the London Stock Exchange and is regarded as one of the most valuable brands in the region. Headquartered in Berkshire, England, the corporation was founded in 1981 by Racal Electronics, a subsidiary of the country’s leading military communication infrastructure manufacturer, Millicom.

The venture was established to counter the growing influence of other regional brands in the local market. Racal electronics partnered with General Electric Company to gain access to decommissioned tactical battlefield telecommunication equipment to examine how facets such as range and encryption of data and voice services provided to the public could be performed. The experience resulted in one of the most prominent and reliable brands in the United Kingdom. The organization is one of the largest corporations in terms of customer numbers, with over 400 million connections worldwide. The company consistently engages in additional research in consumer behavior and telecommunications systems to improve the experiences of its users.

The entity remains competitive largely due to its market dominance and innovative services, which are often adapted to consumer characteristics. Facilities such as voice and data roaming enable customers to remain connected, thus, increasing their loyalty. In the contemporary business framework, the organization has had to adapt to the stiff competition offered by private entities as they endeavor to expand their market foothold. Some of the most recently unveiled services include mobile advertising, fixed data and voice solutions, and business management alternatives. Secure communication is an emerging trend that the company has steadily invested in the expansion of broadband connectivity both in the country and beyond.

This research expedition will examine the key issues, challenges, and opportunities available to Vodafone that have defined its existence hitherto. The report will provide background to the company as well as its significance on the larger United Kingdom business front. The reporting relationships, resource support, and current objectives of the subsidiary and parent organization will be intently studied. Fundamentally, the research project seeks to determine how to expand Vodafone’s market size, especially on the global front, and adequately prepare for the future with the impending widespread adoption of the 5G network.

How Can the Company Expand Its Market Footprint?

 Vodafone is one of the most widely recognized brands in telecommunication. The organization has operations in over 40 countries and has one of the most expansive asset bases of similar companies in Europe and Asia. Vodafone has a majority stake in many leading communication corporations worldwide. However, the company struggles to develop a reliable market footprint, more so in niche segments such as business management services, including cloud computing. The uptake of programs such as the M-Pesa, a fintech approach that allows individuals to send and receive money on their mobile platforms without access to their bank accounts, has been fairly dismal. While the growth of Vodafone has undoubtedly been phenomenal, progress on the two fronts has been slow. The company ought to apply numerous extensive strategies such as increasing the awareness of their customers on the positive consequences of the new services. The corporation ought to engage in extensive public campaigns aimed at popularising the commodities to realize positive outcomes.

History of Vodafone

 The company was founded as a result of a partnership between the General Electric Company and a subsidiary of Millicom referred to as Racal in 1981. Millicom is the largest manufacturer of military communication equipment in the United Kingdom. The mobile telecommunication business was expanding rapidly, with several service providers being founded in Europe and encroaching into the UK market. The United Kingdom segment was mostly untapped due to the lack of a competitive local enterprise. Millicom and General Electric entered into an agreement that involves permitting access to out-of-use military communication infrastructure to improve the understanding of Racal engineers on the development and maintenance of secure systems. The domestic telecommunication front was projected to be promising following its success in the rest of Europe, Asia, the Middle East, and the United States, thus, cementing the motivation of the company to pursue a sustained process improvement.

Vodafone first experimented with the prospect of commercial mobile radio and endeavored to build the prerequisite business infrastructure to support it. The company acquired a cellular radio license in 1982 (Simon 2016). The two UK firms sought to expand their stake in the company following concerns by the British government regarding the massive share held by General Electric which is widely perceived as a foreign firm. However, the agreement with the American brand represented the best prospects of realizing national coverage, resulting in additional discussions that led to the reorganization of the stakes held by each party. In 1991, the organization changed its name to Vodafone Airtouch PLC following its demerger from Racal Electronics. The corporation would subsequently acquire a two-thirds stake in an emerging and widely popular brand, Talkland, for £30.6 million. The entity will continue to expand its portfolio by purchasing People’s Phone for £77 million. The acquisition significantly expanded Vodafone’s retail capacity and increased its store chain count by 181, situated all across the country. In the same year, the company added 21 outlets by purchasing astTECS         Communications. In the next four years, the company will engage in a massive expansion endeavor acquiring several competitors, including Bell Atlantic Corp, Mannesmann, E-Plus Mobifunk, and AirTouch Communications.

The 2000s marked a renewed motivation for Vodafone Group PLC to expand its market foothold. The organization sought to permeate into the European Union commercial telecommunication front and entered into agreements with Denmark’s TDC mobile to venture into the Nordic country. In 2007, the corporation sponsored the McLaren Formula 1 team to increase its brand visibility. The entity identified the quickly changing global telecommunication environment and specifically the home and business management segment, resulting in its acquisition of Bluefish Communications, a cloud computing firm based in Reading. The merger marked the beginning of the definition of Vodafone as one of the largest home and office web solutions conglomerates. In 2013, the corporation disposed of its 45% in Verizon wireless for USD 130 billion when the funds being largely utilized in improving the strength of its network in Europe and emerging economies such as India and Kenya (Singh 2014). In Africa, Vodafone Egypt and Safaricom Kenya are some of the most pronounced investments in the region. The company has also partnered with predominantly networks in Tunisia, Libya, and Benin. The organization also owns a majority stake in South Africa, Lesotho, Ghana, Tanzania, and Egypt. In the Middle East, the entity has operations in the United Arab Emirates, Qatar, Kuwait, Bahrain, Jordan, and Iraq.

Vodafone Forces/ Challenges and Opportunities

 Despite having a vast portfolio and strategically located subsidiaries, the organisation faces immense challenges that severely impact its capacity to expand its market footprint. The company exhibits main restrictive forces, including rivalry among current market players, an abundance of substitute products, increasing bargaining power of the customers due to expanding variety, enlarging bargaining capabilities of the suppliers, the threat of new entrants (Baburaj and Narayanan 2016). The company must identify effective solutions to the challenges posed by the five Porter forces to increase and sustain its competitive advantage.

Resources/Threats of New Entrants

The wireless communications industry’s rapidly changing innovation continues to attract new players who leverage the existing technology to solve emerging problems in the consumer market. Innovative products tailored to the needs of consumers are being launched on a frequent basis, threatening Vodafone’s market dominance. New entrants have prompted the customer’s company to consider lower pricing strategies and reduce operational costs to ensure financial sustainability. The organisation has been challenged to provide new value propositions to continue appealing to the marketplace. Vodafone must confront the developments to safeguard its position in the local and international market, which is threatened by emerging players who offer their services at competitive prices. The corporation can consider increasing its spending on research and development to identify the needs of a modern customer. Developing new innovative products is likely to significantly minimise incentives of new players to venture into the industry due to the prospect of minimal profitability.

Partners/Bargaining Power of Suppliers/

Suppliers are one of the most critical aspects of the supply chain as they allow the company to acquire the prerequisites raw materials at competitive prices. The entities invaluable in the value creation cycle and determine the rate of availability of the end product. Suppliers in the wireless communication industry are often established companies with a capacity to utilise their dominant positions to decrease the margins of the Vodafone at will and without any notable justification. The organisations often utilise their negotiating power to demand higher prices, especially in light of the increasing wireless communication market players. The net impact of this development is reduced overall profitability. Vodafone can tackle the challenge by establishing an efficient supply chain through cooperative agreements with multiple suppliers. The organisation can also experiment with numerous product designs and market them effectively so that when the price of one raw material goes up, the entity can shift to others. Vodafone should consider developing dedicated suppliers who rely solely on the company for their sustenance. The third-party manufacturers will develop products for use entirely by the telecommunications corporation.

Customers/Bargaining Power of Buyers

Prospective buyers are one of the most challenging stakeholders to satisfy due to their vastly different and rapidly changing needs. Customers demand high-quality products at minimal costs. Smaller consumer bases have larger bargaining power due to their ability to agitate for increased discounts and offers. Vodafone can address the problem by significantly expanding its market through product differentiation. A large number of consumer segments diffuses the bargaining power of the buyers. Additionally, the process will markedly minimise the prospect of defection by existing customers to competitors. Vodafone can also tackle the bargaining power of buyers by innovating new products. The loyal customers who seek discounts and offerings may be granted the request on established products allowing the company to maximize their profitability on the more recent commodities.

Activities/Threats of Substitute Products or Services

Whenever a new service or product is launched that satisfies a similar customer need, competitors in the market segment often suffer reduced profitability. The threat posed by a substitute often depends on its uniqueness and convenience. Vodafone will address the problem by integrating a service effective as opposed to just being product-oriented to maintain its competitive edge. The organisations should also endeavour to increase the switching costs for customers. Consumers will be provided with an opportunity to change the provider and retain their user information, albeit at prohibitive prices. An intimate understanding of the needs of the client also significantly minimises the impact of competition due to the company’s ability to satisfy them.

Relationships/ Rivalry Among Existing Competitors

Business rivalry is the foundation of the concept of capitalism and is a primary reason for sustained process improvement. The wireless communication industry is immensely competitive due to the presence of other established firms within the same market. Rivalry is a chief determinant of the long-term profitability of the company and plays a major role in organisational discourse assumed by the corporation. Vodafone can overcome intense competition by revising its short, medium, and long-term objectives to reflect emerging consumer needs. The corporation can also establish sustainable differentiation to increase its revenue streams. Additionally, the firm can collaborate with other players to expand the size of the market and make it available for everyone.

Figure 1:Vodafone organization structure (Vodafone, 2021).

Values and Organisation Structure

An analysis of a business’s organisational structure is critical to developing an intimate understanding of the opportunities available to expand its market foothold. Vodafone is trying to restate its key commercial and financial priorities, which include minimising levels of administration, simplifying managerial governance in a market in shareholder returns, brand advocacy, and realizing cost-efficiency. The company’s structure is headed by the group chief executive officer, the administrative figurehead of the unit, as indicated by figure 1. The individual is deputised by the numerous executives, including group corporate affairs, legal secretary, strategy, human resource, and finance directors. Vodafone’s business model features three main value propositions and clusters, including optimal resource used to improve customer experience, improving product specification meet specific consumer needs, and increased focus in understanding the target segment (Vodafone, 2021). The organisation also endeavours to drive growth by improving the trust, simplicity, and speed of its services.

Channels/Acquisition Policy

Since its inception in 1998, Vodafone has utilised acquisition as its primary means of expansion. The organisation identified and merged with prospective competitors, significantly expanding its market foothold. The entity has partnered with numerous other service providers to exhibit similar business interests or products. The organisation has a set of core principles that define the perceived success of every venture. Key considerations for the mergers include the need to expand into new channels and customer bases in promising or adjacent markets to increase its original invisibility and to create value addition for its current commodities. Vodafone is also driven by the urge to realise the most optimum financial benefit from the market on new products by leveraging on its current reputation. Adding quality control and security protocols to its existing value chain is a key motivation of Vodafone’s acquisition due to the evolving threat of cybercrime. The organisation also engages in the practice to balance its product portfolio and diversify risk. A majority of Vodafone’s acquisitions are motivated by the desire to strengthen economies of scale minimise overhead and operating costs. New companies joining its portfolio often represents an inherent need that ought to be satisfied to increase overall productivity and to add value to existing offerings. The acquisition approach has been flexible due to the widening of the marketplace. The acquisition policy is founded on leveraging the strengths of current assets to improve gross performance. However, the most prominent motivation of the market expansion endeavour is to develop a strong regional and global presence, a major mega-trendsetter in wired and wireless telecommunications systems.

References

Baburaj, Y. and Narayanan, V.K., 2016. Five forces framework. The Palgrave Encyclopedia of Strategic Management, pp. 1-7.

Holtgrewe, U. and Schörpf, P., 2017. Understanding the impact of outsourcing in the ICT sector to strengthen the capacity of workers’ organisations to address labour market changes and to improve social dialogue. Available at <https://www.researchgate.net/profile/Ursula-Holtgrewe/publication/321749121_Understanding_the_impact_of_outsourcing_in_the_ICT_sector_to_strengthen_the_capacity_of_workers'_organisations_to_address_labour_market_changes_and_to_improve_social_dialogue/links/5ca32cf0299bf1116956cce7/Understanding-the-impact-of-outsourcing-in-the-ICT-sector-to-strengthen-the-capacity-of-workers-organisations-to-address-labour-market-changes-and-to-improve-social-dialogue.pdf> [Accessed 13 Jun. 2021].

Simon, J.P., 2016. How Europe missed the mobile wave. Info, 18(4), pp. 12-32.

Singh, P.N., 2014. Verizon acquired Vodafone: Analysis of market reaction. Industrija, 42(3), pp. 163-182.

Vodafone, 2021Vodafone announces new organisational structure. [Online] Vodafone. Available at <https://www.vodafone.com/news/press-release/new_structure> [Accessed 15 Jun. 2021].

 

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