Introduction
Vodafone is a multinational
telecommunication company based in UK. The headquarters of the company are in
London and a registered office in Newbury. Based on the number of subscribers,
it is the second largest in the industry all over the world. According to a
report released in 2011, it is only second to China Mobile in terms of revenue.
In 2011, the company had over 438 million subscribers. The organization operates
its own networks in more than 30 countries. In addition, it has partner
networks in over 40 countries. Partner networks arise as a result of having a
substantial share ownership in the networks. There is also the ownership of 45%
of Verizon Wireless (Giudice
& Kuenzel, 2012). This is considered to be the largest
telecommunication organization in the mobile sector based in USA going by the
number of subscribers. Vodafone offers both services and products in its mix.
Among the products there are chargers, memory cards, headsets and flex arm
cradle. These products are usually of high quality compared to a variety out
there. Services include data offerings, messaging and voice services among
others. Hi-tech systems have been devised to enhance that the services are not
hindered during the delivery process. Any form of laxity is considered to be
harmful to the organization in one way or another. Vodafone has been listed on
the London Stock Exchange. Over the years it has been a constituent of FTSE 100
index. In mid 2012, it had a market capitalization of about 89.1 billion pounds
(Giudice & Kuenzel, 2012).
This was considered to be the third largest for all the companies that are registered
in this stock exchange.
Vodafone and the Telecommunication
Industry
Most of the organizations in the
telecommunication industry are similar in a variety of ways. This is based on
the goals that they aim at achieving and the strategies that they use towards achieving
these objectives. The ultimate purpose of these organizations is providing
services and products to the consumers and generating profits from these
ventures. It is the goal of every company in the telecommunication industry to
immerse as much profits as possible. However, there are differences when it
comes to the mission and vision of the organizations. A good example that can
be used as a comparison with Vodafone is British Telecom. Vodafone’s vision
aims at enriching consumer lives by offering unique mobile communication (Plunkett, 2008).
British Telecom vision on the other hand, aims at being a global brand in
system integration by providing consumers with cutting edge technology to
guarantee satisfaction. Vodafone’s mission is to be the leading figure in the
telecommunication industry in the highly connected world. British Telecom
mission on its part aims at client engagement while working towards realizing
profitable ventures.
Vodafone has several strategic
objectives that it desires to accomplish. The company is targeting to increase
its market share by 20-25%. This will be supplemented by massive promotional
activities in areas of operation and venturing in new markets. Another
strategic objective of the organization is the total cost associated with
network ownership. Once the costs have been reduced, the extra funds can be
used in other areas. It would also help the company in lowering its prices so
as to attract more consumers. British Telecom’s strategic objective is that of
enhancing a consumer focused approach. This will be enabled by the
organization’s mission statement that aims at consumer engagement.
Vodafone’s stakeholders include the
government, consumers, suppliers, shareholders and employees. The stakeholders
influence the organizations goals and mission. Employees are viewed as a
pivotal asset to the company. There are more than 85,000 employees and the
company’s success is dependent on them. They are critical in ensuring that the
mission statement of the organization has been attained (Ibbott, 2009).
Shareholders on the other hand help the organization in attaining its strategic
objective of increasing the market share. They do so by providing funds
necessary for the expansion of existing networks. The company meets their
expectation by enhancing that a profitable business model has been adopted. Shareholders
benefit from the profits realized hence the organization must work hard to see
this through. Consumer expectations are met by providing quality services and
products. This is paramount for consumer satisfaction in any market. For the
government, the organization ensures that it adheres to all the regulations and
laws brought forward. It also makes its duty to pay all taxes as they fall due.
Vodafone Operations in the UK
United Kingdom’s economy is the
sixth largest all over the world in terms of GDP. It comes in at position eight
based on purchasing power parity. The economy has been improving all through
the years based on the output levels. UK’s economy is free and open based on
how the systems tend to operate. Being a free market it entertains international
corporations in the country without having much control on them (Card, 2008).
Such organizations are subject to paying customs duty, import tax and other
relevant levies. The economic freedom of United Kingdom has a score of 74.8. In
2013, this is the 14th freest economy based on the score. The score
has gone o.7 points higher compared to last year (Giudice & Kuenzel, 2012). This is great
indication of how government spending is being controlled. Such an economy has
several impacts on Vodafone. One is that it makes the telecommunication
industry open to new entrants and other international corporations. The essence
increases the players in the industry hence creating the need to scramble over
consumers. As the competition intensifies, Vodafone needs to develop strategies
that would help in gaining competitive advantage. Such strategies do not come
just like that. There is a lot of time and resources spent on research and
testing the effectiveness. The implementation process also consumes substantial
resources. This increases the company’s cost hence lowering the profits.
Vodafone might also lose part of its market share to the new entrants.
United Kingdom government manages
the economy through the use of fiscal and monetary policies. The policies are
deployed once the automatic forces fail to restore the economy in the necessary
equilibrium. This includes the times of inflation and unemployment. When the
government is faced is by a budget deficit, it has two options in financing it.
It can either sell bonds to the public of print money. The aspect of printing money
is a monetary policy because it increases the supply of money in the economy. Increase
in money supply affects Vodafone in a positive way. When there is an increase
in money supply, consumers have more money on their disposal. This means that
their consumption levels will go up. Consumers associated with Vodafone will
tend to acquire more of their products and services. The sales revenue
increases hence the profitability aspects follow in suit. On borrowing from the
public by selling bonds in the open market operations, the government would be
using a fiscal policy. The government through the central bank sells the bonds in
order to expand its money supply. These bonds come with a relatively low price
so as to entice the public based on the profits that they will make once the
interest rates change (Giudice
& Kuenzel, 2012). This tends to reduce the amount of
money on consumers’ hands hence reducing their consumption levels. It would
affect Vodafone in that the consumers reduce the consumption level of their
products and services hence reducing the sales levels. In the long-run, it
affects the profitability aspects.
In UK, the regulatory mechanism is
defined by the rule of law. It is transparent and efficient hence favoring
businesses. There is no minimum capital requirement and only takes 13 days for
a business to be established. The legal system is independent hence ensures
that contracts and property rights are safeguarded. This is important to
Vodafone since it is on organization working in partnership with several
stakeholders. The regulatory mechanism ensures that all the parties meet their
contractual obligations without any failure. It also makes it difficult for
other people and organizations to infringe the company’s property rights. Competition
policy on the other hand works to reduce anti-competitive activities in all
industries. The essence of competition is aimed at ensuring that all
organizations provide consumers with quality services and products.
Market Structure
The United Kingdom telecommunication
market structure is a perfect competition. This aspect influences the
production decision and pricing of Vodafone. The company has opted not to
choose price since it is not a favorable approach. Competitors would use it to
bring the organization down and acquire its market share. Vodafone chooses output
quantity as their pricing strategy in the market. Here, the organization
produces more and ensures that all the units are sold. This increases revenue
hence the profitability levels. It has been the best approach to the company
since cost leadership is not viable based on many uncertainties brought b y the
market structure. On production
decisions, the organization has opted to go with product differentiation. This
helps the consumers in indentifying their products and services once in the
market (Horn & Faulkner, 2011).
This is very important since other players in the industry are providing
similar offerings.
The market forces in the
telecommunication industry include internal rivalry, bargaining power of
consumers, availability of substitutes, supplier bargaining power and threat of
new entrants. The notion of consumers having the bargaining power prompts the
organization to be very keen on its pricing attributes. This is because they
are very responsive to price changes. Taking the prices too high might lead the
consumers to shifting their preference towards the competitors. Presence of
close substitutes on the other hand, has made Vodafone to differentiate its
products from those of the competitors. Failure to do this would lead to lose
of sales. Threat of new entrants has enabled the organization in developing
strategies that would help in attaining long-run sustainability. Among them has
been establishing consumer loyalty. Once there is consumer loyalty, it becomes
difficult for new entrants to porch consumers. Rivalry in the industry is caused by the
intense competition. This has made the organization to devise more strategies
in trying to bit competition. Watching every move of the competitor has been
very important (Horn
& Faulkner, 2011). Supplier bargaining power on its part
ensures that the company pays the suppliers favorably and on time. They are the
same ones that serve the competitors and treating inappropriately might ruin
operations.
Vodafone’s business environment is
more of political, technological, demographic and social environment. The technological
environment is changing very fast based on the nature of the industry. This
makes the organization to be very flexible so as to adapt the new rends. Political
environment is concerned with the policies and regulations being coined. Some of
them favor the organization while others do not. Demographic environment seems favorable
since majority of the people are conversant with the telecommunication industry
hence utilize its products. Cultural environment that shapes the business is
diversity. Vodafone has the ability of operating in many countries and
remaining sustainable at the same time. The management has also made it
possible to deal with diversity at the workplace. Working in partnership has
contributed significantly to the success of the organization.
Impact of International Business on
Vodafone
The effect of international business
on Vodafone is double folded. This is because it has brought both benefits and
limitations to the organization. The benefits arise from the fact that the
organization has the ability of operating in other markets apart from UK. This
helps in diversification aspects since when one market fails the other works to
sustain the company. It also helps in increasing the market share due to the
new ventures being opened
(Galgoczi, Leschke & Watt, 2009). As the market share
increases profits are also likely to increase. The disadvantage comes in when
international telecommunication businesses try to venture into the UK market. They
tend to create some form of competition and porch into the market share that is
already available. In the long-run, Vodafone has to spend a lot in trying to
create competitive advantage.
Some global factors also work to the
advantage of the UK businesses. Among these factors is the establishment of
trading blocs like EU and NAFTA. These blocs have affected the cost of
operation in markets that companies like Vodafone operate in outside UK. Tariffs being charged have dropped
substantially due to availability of these blocs. As a result, profit
maximization is being realized in international markets.
The role of EU is enhancing that a
favorable business environment is established in all member states. To create
effectiveness the EU has come with various policies that have impacted UK
businesses in various ways. Among them is the environmental policy. This policy
stipulates that every organization operating within the member states of EU
must aim at reducing its pollution levels significantly. The policy came about
after it was noted that pollution levels keep on rising as each year passes by (Galgoczi, Leschke & Watt, 2009).
This would have an effect since most of its electronic devices are presumed to
contain elements of unwanted resource in the environment. This may deter people
from consuming the company’s product. This would mostly affect those consumers
that refer to themselves as being “green”. They usually work towards ensuring
that the environment is taken care of all the times. Such consumers force
companies to start producing environment friendly products something which cannot
be changed overnight.
References
Card, D. E. (2008). Seeking
a premier economy the economic effects of British economic reforms, 1980-2000. Chicago:
University of Chicago Press.
Galgoczi, B., Leschke, J., &
Watt, A. (2009). EU labour migration since enlargement trends, impacts and policies. Farnham,
England: Ashgate.
Giudice, G., & Kuenzel, R.
(2012). UK Economy: The Crisis in Perspective. London: Routledge.
Horn, S., & Faulkner, D. (2011).
Understanding global strategy. Andover: Cengage Learning.
Ibbott, C. J. (2009). Global
networks the Vodafone-Ericsson journey to globalization and the inception of a requisite organization.
Basingstoke, Hampshire: Palgrave Macmillan.
Plunkett, J. W. (2008). Plunkett's
telecommunications industry almanac. Houston, Tex.: Plunkett Research.
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