Vodafone developing a total communications strategy in the UK market

Introduction In the face of competition, this report presents Vodafone’s strategy aimed at having a competitive advantage over its current and future competitors by adopting several measures aimed at giving consumers greater value for their money.Advertising We will write a custom term paper sample on Vodafone: developing a total communications strategy in the UK market specifically for you for only $16.05 $11/page Learn More Michael Porter (2004) put forward two fundamental forms of competitive advantage: cost advantage and product differentiation advantage. In cost differentiation, a company lowers its product costs than the prevailing market costs for similar or related products. However, in product differentiation, based on a market analysis, the company chooses a strategy that will give it a unique position among competitors and enable it to have an advantage over competitors. Differentiation frequently entails delivering benefits that surpas s those of the competitors, and enables it to create superior value for its customers and establish itself in the market. In this case study, Vodafone seeks to adopt strategies for enabling a competitive advantage over its competitors but contemplates whether it should build its own network to provide the required services or provide them through partnerships and/or acquisitions. Summary This case study on Vodafone, the world’s largest mobile telephone operator by revenue, presents the company’s strategy in its attempts to emerge out of competition from companies offering similar products in the UK home market in 2009. During the said year, Vodafone faced competition from a number of companies in the rapidly expanding market for high-speed internet services in the home market.Advertising Looking for term paper on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More The increasing demand for these products had att racted not only Vodafone’s traditional competitors such as British Telecom (BT), O2, and Orange, but had also drawn attention from other communication firms such as Virgin Mobile and Sky Broadcasting. New competition also arose from arose from Carphone Warehouse and suppliers such as Nokia and Apple. Other firms were also contemplating moving into the high-speed internet services market. Besides changes in competition, Vodafone and other providers faced challenges from rapid changes in technology and regulatory changes in the UK communications sector. Consequently, many operators adopted their own strategies around the consumer’s need for ‘converged services’, meaning that companies could provide two or more services making up the ‘quad play ’ offered by Virgin Media (fixed line telephony, mobile telephony, television, and broadband internet). While most of the competitors offered a combination of the services, Vodafone focused mainly on mobil e services and this caused concern to both shareholders and the management. The challenge was to decide if they should provide any of the other services, and if so, should they build their own networks or through partnerships or acquisitions. Analysis of the Major Facts PESTEL Analysis In order to determine the best strategy that should be adopted it is imperative that we determine the roots of the intense competition in the high-speed internet services. A PESTEL analysis shows that the source of competition in the communications sector originated from a number of macro-environmental factors. Political factors had been due the regulatory changes undertaken by the government, specifically the Office of Communication (Ofcom).Advertising We will write a custom term paper sample on Vodafone: developing a total communications strategy in the UK market specifically for you for only $16.05 $11/page Learn More These changes included the privatization of the nat ional telephone company, BT, forcing it to allow access to its services at competitive rates, licensing more mobile-operators and allowing virtual operators (MVNOs), and supporting competition in television and internet sector to improve service delivery. Economic factors arose from the global financial crisis that had heavily impacted the UK economy, just like all developed nations. The UK was expected to recover more slowly than other countries due to the important role of financial services to its economy. Economic factors also affected sociocultural factors as it affected income distribution and spending patterns. Technological factors arose from the changes in technology with the development of internet protocol (IP) technology, emergence of new broadcasting technology, and the ongoing upgrading of speeds over fixed and mobile networks. Environmental and Legal factors did not seem to have a significant role of the competition. In adopting a strategy to emerge out of the competi tion, Vodafone had to address each of these issues (Johnson et al, 2010). Competitor Analysis A number of competitors were already providing at least three of the four services in the high-speed internet market, however, Vodafone mainly focused on mobile telephony. Therefore, to gain an edge over its competitors, Vodafone had to adopt either the ‘triple play’ of the ‘quad play’. In order to do this, the company has to analyze its competitors and determine the methods they used to roll out their service to come up with the most cost effective method. The fixed line telephone network had been developed by the government through BT, which had subsequently been privatized, hence BT was the initial sole operator of the fixed line telephone, however, Ofcom introduced a process referred to as local loop unbundling (LLU) which required BT to allow other operators to install their own equipment in the existing BT network to provide voice and broadband internet servi ces to their own surrounding customers.Advertising Looking for term paper on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More This meant that operators such as Vodafone could provide these services without building their own network. Mobile telephone was Vodafone’s core competency, being the world’s largest mobile telephone operator by revenue, therefore, it did not require any acquisitions or partnerships to create an advantage over its competitors. However, the failure to create a ‘total communications’ strategy could lead to user migrating to other operators, especially with the introduction of number portability in 2007 and competitive approached adopted by operators. The television segment is dominated by five ‘public service broadcast’ channels: BBC1, BBC 2, ITV 1, Channel 4 and Five. These channels are supported by annual license fees and advertising. The rest of the market is taken by ‘multichannel operators’ led by BskyB, UKTV, Viacom and Virgin which are mainly supported by a mix subscription and advertisements. Ofcom reports that there were 49 5 channels by the end of 2008. BBC (all channels) had a dominant share of the market with 31.8%, up 0.8% the previous year and up 1.2% in 2006, ITV and Channel 4 followed with 22.6 % and 11.7% respectively, both companies had registered growth in the past two years. Going by this trend, the three companies, with a total share of 66.1%, will continue to dominate the market for the foreseeable future (Johnson et al, 2010). The fourth and final section of the ‘quad play’ services is broadband. Fixed broadband was available in 65% of UK homes in 2009, most of which were served by their existing phone lines using DSL technology, the rest are supplied with cable broadband. Analysts have predicted that this figure is likely to rise with DSL technology occupying a chunk of the market. wireless broadband is also provided by all major operators through 3G cards for laptops, however, most of the users have a DSL connection and see the mobile connection as a supplement. In addition , there are more than 12,000 Wi-Fi hotspots in early 2008, the largest operator being The Cloud (58.3%), BT Openzone (19.3%) and T-Mobile (10%) (Johnson et al, 2010). Together, the three Wi-Fi operators have a market share of 88.2%. The growth of the broadband sector has been encouraged by local loop unbundling, consequently, the five largest providers had 91% of all connections in 2009, with BT (26%), TalkTalk (25%) and Virgin Media (23%) leading the pack. Alternatives Owing to its dominance of mobile telephone, Vodafone is left with the other three options (fixed line telephone, television, and broadband). The local loop unbundling process allows companies to install their own equipment in the existing BT network to provide voice and broadband internet services to their own customers, therefore, Vodafone would only have to purchase the necessary hardware and have their fixed line telephone and broadband running, rather than build their own network, which would be very costly (Yip, 1995). However, it could acquire Wi-Fi operators or build its own network and increase coverage in other parts of the country. The only segment that would require a major partnership or acquisition would be in television as it is dominated by three major companies. Recommendations After a detailed analysis of the competitors, it is observed that the most effective measure for Vodafone would be to provide a ‘triple play’ strategy in which it would provide mobile telephone services, fixed line telephone, and broadband (Yip, 1995). The company already has well-established mobile telephone network while the installation of fixed line telephone and broadband would require less capital outlay because, by using the local loop unbundling as provided by the Office of Communication, it will rely on the existing BT network. Works Cited Johnson, Gerry, Whittington, Richard, and Scholes, Kevan. Exploring Corporate  Strategy. NJ: Pearson Education, 2010. Print. Porter, Michael E. Competitive Strategy: techniques for analyzing industries and  competitors. New York: Free Press, 2004. Print. Yip, George. Total Global Strategy : managing for worldwide competitive advantage.  NY: Prentice Hall, 1995. Print. This term paper on Vodafone: developing a total communications strategy in the UK market was written and submitted by user Morgan Stark to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here. Vodafone Developing a Total Communications Strategy in the UK Market Comparison of the Four Industries in terms of Industry Attractiveness Using Porter’s Five Forces, a comparison of the four industries (fixed-line, mobile, television and broadband) can be undertaken to demonstrate their attractiveness. UK customers have more discretion to choose which company to use in the provision of fixed-line, mobile and television services, hence these industries are continually registering fewer profits due to customers’ power.Advertising We will write a custom case study sample on Vodafone: Developing a Total Communications Strategy in the UK Market specifically for you for only $16.05 $11/page Learn More However, the broadband industry is increasingly growing as there are fewer companies offering the services due to huge capital costs involved, hence customers have less power in this industry. The suppliers’ power, reflected by the services and infrastructure offered by British Telecom (BT) to various compani es within the sector, is minimal in all the four industries owing to the many regulatory frameworks that have been developed and implemented by Ofcom (Office of Communications). Owing to low suppliers’ power, companies such as Vodafone can leverage on the profit potential by using BT’s networks and infrastructure to expand services. From the case, it is clear that the high rivalry between competitors has negatively affected the profit and customer subscription margins in the fixed-line, mobile and television industries. However, the broadband industry is still attractive to investors due to minimal rivalry among competitors. However, as the fixed-line industry faces a minimal threat of new entrants owing to the fact that customers are increasingly using newer technologies, the other three industries – mobile, television and broadband – face real threats of new entrants not only because of their potential for continued growth and profitability but also due to the ongoing acquisitions and partnerships affecting these industries. Lastly, in analyzing threat of substitute products, it can be argued that both the mobile and television industries face this threat as mobile providers bring into the market new mobile devices with enhanced capacity to roll out all the services in one single gadget, and as TV service providers look for innovative products that may enhance customers’ experiences. These opportunities provide adequate space for the proliferation of substitute products within the communications sector. However, the broadband industry may not attract such a threat due to the high capital costs involved in rolling out its services. Similarly, the fixed-line industry may not attract substitutes due to the nature of infrastructure and networks used.Advertising Looking for case study on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Key Drivers of Change in the Comm unication Industry From the case scenario, the key drivers of change in the communication industry include technological advancements, acquisitions, products and services diversification, willingness to collaborate, speed, flexibility and competition. In technological changes, it is clear that the digital revolution has forced most companies in the UK’s communication industry to reassess not only how to effectively and efficiently provide traditional voice services to their existing customers, but emerging high-band data, television and video services as well. Additionally, a number of significant players in the industry are increasingly acquiring smaller firms to expand their customer base, reach and profitability. Surprisingly, a few major players are willing to partner or even merge to sustain leadership and competitiveness, while benefiting immensely form the economies of scale as well as shared infrastructure. Products and services diversification, in my view, is acting as a critical driver to change for allowing the expansion of customer base with tailor-made products and services that satisfy specific needs and expectations of the customers. Moving on, it is clear that most companies operating in the industry are currently expending huge financial resources to develop fast and flexible networks, or to acquire other firms with such networks, with the view to enhancing customer value propositions and satisfaction. Vodafone, for example, has initiated a project to upgrade its Internet network from 3G to 4G to achieve faster speeds and flexibility. Lastly, there is intense competition within the industry for customers and market share, implying that companies must continually shift their strategies to remain competitive. The impact of these drivers will reflect in terms of a more streamlined sector, with companies attempting to buddle their services together and market them to customers in one package. Change in the UK’s Communication Industry From the case scenario, it is clear that the UK’s communication industry is increasingly changing from the provision of traditional voice services using the fixed-line industry to the adoption and expansion of digitised functions with capacity to provide data and video to customers. Consequently, as customer figures and profit margins for voice services drop over the years, it is expected that technology will play a major role in developing a framework that will enable industry players to expand into the mobile, television and broadband industries.Advertising We will write a custom case study sample on Vodafone: Developing a Total Communications Strategy in the UK Market specifically for you for only $16.05 $11/page Learn More More importantly, it is envisaged that more operators will make huge investments in the broadband industry due to its attractiveness (see Porter’s analysis), and also due to the fact that it has the capacity for con tinued growth. Consequently, by 2015, more companies operating in the UK’s communication industry will have developed capacities to roll out broadband Internet services in large scale as all evidence points to the fact that the broadband industry can also be used to provide mobile and digital television services. It is expected that services such as cable television and radio may become obsolete by 2015 as technological advancements, stiff competition from new service providers, proliferation of IP-based networks and mounting penetration of broadband Internet services drive companies operating in the UK’s communication industry to converge their services. However, it is highly unlikely that the fixed-line industry will become obsolete by 2015, though profit margins in this industry are likely to continue plummeting into the future. Overall, the industry is expected to be more attractive as services are converged not only due to opening up of many new opportunities for existing service providers and entrepreneurs (e.g., a mobile phone operator will have the capacity to sell digital music and movies using broadband Internet), but also due to improvements in customer satisfaction and retention (e.g., customers will be more satisfied for purchasing various services in a low-cost package). Vodafone’s Strategy Going into the future, Vodafone should change its strategies to reflect the realities on the ground, especially with regard to convergence of services in the UK’s communication’s sector. To achieve its objective of being a ‘communications leader in an increasingly connected world’, the company must not only invest heavily in new and emerging communication technologies but must be ready to partner with other like-minded companies in the pursuit of more customers and opportunities for continued growth, competitiveness and sustainability. The concept of partnering with other companies or even acquiring small firms w ithin the industry, in my view, is a ripe one for Vodafone if it expects to rise into the leadership position. Additionally, partnering and acquisitions will ensure the company expands its networks and customer base without having to make substantial capital investments in network infrastructure. Additionally, Vodafone stands at a better position to become the communications leader if its drives its operational performance through customer value enhancement to satisfy and retain existing customers while looking out for new ones, pursue growth and expansion opportunities in total communications (mobile, television and broadband) focussed on service delivery to customers instead, pursue emerging markets particularly in developing countries to increase customer base and revenue streams, and strengthen its capital discipline to ensure that more money is freed up for meaningful investments.Advertising Looking for case study on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More This case study on Vodafone: Developing a Total Communications Strategy in the UK Market was written and submitted by user Emiliano Gould to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.