Vodafone UK's Market Presence

Introduction

The telecommunications network industry in the UK is considered a crucial part of the Critical National Infrastructure. Usually, there are two main parts of the telecommunications network, and they are the core network and local or access network. The core network comprises a large number of buildings which are linked using transmission systems. The access or local network comprises the fibre and copper cables which connect different customer premises to the core network. Each telecommunications network organization has its own core and access networks. Although, the largest network in the UK is BT. So far, the telecommunications industry in the UK has five major networks, these are Orange, Vodafone, T-Mobile, O2, as well as the new network operator in the third generation known as 3. In this report, the focus shall be on Vodafone UK as the telecommunication network organization which shall be used in the analysis of its strengths, weaknesses, opportunities and threats. The parent company for Vodafone UK, known as Vodafone Group, operates in over 25 nations. Vodafone UK operates in the United Kingdom, which is one of the main markets of the parent company (Vodafone Group Plc, 2018). In 2018, Vodafone UK reported to have 17.5 million mobile customers, 0.4 million fixed broadband customers, and 0.2 million customers who are converged consumers. Vodafone generated 22% of the total mobile revenue market share, 4.9% of the fixed revenue market share, and a convergence penetration of 63%of the total acquired by the parent company in each category respectively in the UK. In total, in 2018, Vodafone UK generated up to 6.1 billion euros of revenue from the groups services of the parent organization (Vodafone Group Plc, 2018).

SWOT Analysis

Strengths

Vodafone UK is part of the larger Vodafone Group PLC which is ranked by Forbes as being position 395 out of 2000 of the world’s top brands. Vodafone has a broad network and distribution cover. It is for this reason that the company makes up 22% of the total revenue contributed from the telecommunication network industry in the UK. The company can acquire capital from its parent company. With more than 5 billion euros worth of free cash flows, Vodafone Group PLC can provide Vodafone UK with sufficient capital that will enhance the operating capabilities and intensify advertisement activities. A total of 17.5 million customers use Vodafone services in the UK and this is facilitated by its network capabilities (Vodafone Group Plc, 2018). With access to vast capital from the parent company, Vodafone has made significant investments to its network and this results in internet at fast speed with coverage that is excellent both outdoors and indoors.

Weaknesses

Over the previous 4 years, Vodafone UK has been experiencing a decline in its subscriber base. In relation to the global market context, this is a major problem to the company and this requires that the company strengthens its core value and implement strategies which are customer-focused (Forbes Media LLC, 2016). Another weakness is that the company is being faced with a dropping brand value, and this could be an explanation for the dropping base of subscribers for the company. In addition, Vodafone is facing poor performance in Europe particularly due to Brexit as well as other economic phenomena in the continent. The company’s performance in the UK has been poor and much of the revenue is not generated form the home market. Matter-of-factly, nearly 40% of its revenue is acquired from India and not the UK or US.

Opportunities

The company is forming joint ventures which unlock valuable opportunities to its continuous operations in the UK market in future. For instance, Vodafone has engaged in a joint venture with Everything Everywhere and Telefonica UK to develop a kind of mobile payments and marketing joint venture (Vodafone Group, 2019). This venture presents groundbreaking opportunities towards accelerating the establishment of mobile services for business customers and consumers. One of the approved functions of the venture is that it will create a single m-commerce ecosystem that will aid advertisers, banks and retailers to access customers using their mobile phones. Rather than using physical wallets, consumers shall begin using secure mobile wallets that rely on Near Field Communications (MFC) technology to facilitate payment for services and goods (Vodafone Group, 2019). There are also more opportunities presented to the company through its pursuit for the strategic development of the Digital Vodafone programme (Vodafone Group Plc, 2018). By aiming to use different kinds of digital technology to enhance the experience for its customers, the company presents the opportunities for the management of digital customers, digital technology and engaging in digital operations (Vodafone Group Plc, 2018).

Threats

National polls reveal that Vodafone customers are not happy with the mobile operator’s services so far throughout its operations in the UK. This is a threat to the company’s operation into the future in the nation, even though its longevity could be guaranteed by the revenue it acquires from the international market (Goodbarne-Mulley, 2018). This threat places its competitors ahead in the UK market. For instance, the Utility Warehouse, a communications and energy company in the UK was regarded as the telecom network firm whose customers are happiest (Sweney, 2018). Vodafone acquired a low score for satisfied customers along with the likelihood of existing customers to recommend the mobile operator’s services to a friend. In 2017, Vodafone was paid an approximate 4.6 million pounds as fine for sustained and serious breaches of rules regarding customer protections (Sweney, 2018).

Porter’s Five Forces Analysis

Threat of New Entrants

The mobile telecommunications network sector is highly profitable because communication is widely used across the nation. Vodafone UK is part of one of the largest organizations in the telecommunications industry and this, in retrospect, makes it difficult to be challenged with the threat of new entrants. Furthermore, the new entrants will have to incur high start-up costs in the telecommunications sector. These costs are necessary to cover for the setup of network infrastructure (Al-Atiqi and Mumen).

Threat of Substitutes

Initially, the telecommunications sector is mainly focused on providing mobile voice communication. The internet has brought about applications which use Voice-over Internet Protocol (VoIP)which replaced the traditional voice services provided by GSM. Vodafone UK faced the threat of substitutes from applications such as Viber and Skype which use VoIP technology and this reduces the amount of revenues it earns. Also, susbtitutes from instant messaging services like Facebook Messenger and Whatsapp reduce Vodafone’s revenues on the part of SMS. However, considering that Vodafone UK provides data services, it can recover voice revenue lost to companies like Skype and Whatsapp through data revenues (Al-Atiqi and Mumen).

Bargaining Power of Buyers

Mobile Number Portability (MNP) services give consumers the freedom to change operators. The increase in mobile virtual network operators (MVNOs) makes the telecommunications industry highly competitive as consumers can freely choose the major network operators and can also become MVNO customers. The regulations offered by Ofcom, by controlling and monitoring different operator activities raises competition and accordingly raises the consumers’ bargaining power (Al-Atiqi and Mumen).

Threat of Suppliers

Vodafone UK is present in an industry which has a convergence of many suppliers. Large MVNOs are supplied with network infrastructure from large telecommunication organizations. Due to lack of their own infrastructure, MVNOs, companies like Vodafone UK acquire higher bargaining power. Smartphone device manufacturers such as Samsung and Apple are deemed as suppliers due to their bundling with telecom operators such as Vodafone for data and voice services while offering long-term commitment packages. For instance, Vodafone could has an exclusive right to sell Samsung phones during a specific period and this exemplifies how smartphone manufacturers have a high bargaining power as suppliers (Al-Atiqi and Mumen).

Rivalry

The competition in the telecommunications network is rife. In the incidence of price cuts, price wars are likely to erupt and this leads to companies like Vodafone UK to resort to differentiation strategies as a way of gaining an edge over competitors. Differentiation is done through the adoption of latest technologies such as 5G and 4G LTE. However, competition in this industry is too high to the extent that resorting to technological upgrades would only offer a temporary edge because other operators are likely to adopt the technology (Al-Atiqi and Mumen).

Strategic Direction

Vodafone UK’s core strategy is to become a leader of converged communications and enabling the gigabit society. The company builds its competitive advantage through network leadership, excellence in customer experience and being fit for growth as the company reinvents itself for business through Digital Vodafone (Vodafone Group Plc, 2018). The company’s strategic direction underpins its strategic engines of growth which are mobile data, and enterprise. The company’s strategic direction is supported by its people and culture, sustainable business, governance and risk management activities. Through pursuing its strategic direction, the company creates value for its shareholders and the society as well. The company uses network leadership to stretch it competitive advantage by making substantial investments through its sustained and progressive capital expenditure that targets to maintain the firm’s network leadership. The company is optimistic about future technology, such as the potential of the 4.5G and 5G network services. In the company’s annual report for 2018, Vodafone targets to invest in the auctions of the 5G spectrum for the following two years so as to optimize and maintain the spectrum position across every technology. Vodafone uses customer experience excellence (CXX) in an effort to deliver a customer experience which is outstanding and capitalizing on its leading network quality. Digital Vodafone leverages with the work of CXX program by fostering the organization’s aim to transform its business model through the delivery of the most phenomenal digital experience for its consumers by the use of the advanced data analysis technology in the improvement of every technology and commercial investment decisions (Vodafone Group Plc, 2018). The organization is ambitious towards the generation of incremental revenues and to proceed in the reduction of the net costs of operation in an organic basis.

The company’s strategic direction relates to its growth and innovation through the provision of the most excellent experience of mobile data. Taking into consideration the company’s strengths, weaknesses, opportunities and threats, the strategic direction is suitable in the context of mobile data whereby there is an increasing demand for mobile data, there is an increasing adoption of smartphones and more customers are migrating to 4G (a fourth generation network which provides faster speeds for data and a latency that is low enough for the best experience for customers, and clients have the urge to use data without ever having to worry (Vodafone Group Plc, 2018). Vodafone is converting the fast growth of usage of mobile data into financial value by making propositions of ‘more for more’ of making offers which are personalized. Eventually, the results of its suitable strategic direction has resulted in an increase in Vodafone Group’s traffic for mobile data by 63% (Vodafone Group Plc, 2018). The strategic direction towards Digital Vodafone is fostered by the company’s strength in being able to access capital from its parent company to invest in delivering the most breathtaking digital experience for its clients and blending the company’s physical and digital assets in providing easy, instant and personal interactions.

Vision

The company’s vision and approach is to use its services and products to aid in the transformation of societies and contribute towards a living that is more sustainable. The vision places the company’s ambition in delivering innovative and connectivity services for the improvement of the people’s quality of life and livelihood. Central to the achievement of its vision is the company’s longstanding commitment in managing its operations both ethically and responsibly (Vodafone Group Services Limited, 2014).

Marketing Strategy

The company’s marketing and brand teams are focused on a mission of winning over the minds and hearts of the customers. This is done by facilitating the development of a close and emotional connection between the Vodafone’s products services and its customers (Vodafone Careers UK, 2018). This is done by demonstrating the purpose of the company and the benefits of its services and products. The company leverages its marketing and branding teams to communicate its difference from other mobile operators in the telecommunication network industry in the UK (Vodafone Careers UK, 2018). The company sources the best talent in the branding and marketing world to spearhead the journey towards its redefinition of its market strategy, commercial development and proposition design. The teams provide branding and marketing campaigns which are targeted at business customers and consumers (Vodafone Careers UK, 2018). With the same marketing strategy, the organization can capitalize on the opportunities is acquires by partnering with Everything Everywhere and Telefonica UK in the developing a mobile marketing and payments venture. The branding and marketing teams will do so contributing in the communication of its uniqueness in the industry. Thus, the marketing strategy steers the organization towards it strategic direction.

Strategic Analysis

One of the suitable strategies that will be used for strategic analysis using the SAF Matrix is that of network leadership. The SFA matrix was established by Kevan Scholes and Gerry Johnson as a tool for analyzing the strategic possibilities of an organization (IronTrade, 2019). SFA is the acronym for Suitability, Feasibility, and Acceptability. The suitability component of the SFA matrix analyzes the extent to which the strategic opportunity of network development is suitable for Vodafone. The feasibility component analyses the degree at which network leadership is a feasible option and this will involve looking into the weaknesses and strengths of Vodafone. The Acceptability component of the SFA matrix determines the acceptability of network leadership as a strategy using two criteria, which are the degree to which network leadership guarantees the fulfilment of shareholder interests and financial aspects (IronTrade, 2019).

Suitability

This component of the SFA matrix determines how Vodafone’s strategy of network leadership will be substantiated. In order to determine how network leadership is a suitable strategic goal, it is important to consider whether, or not, the strengths and weaknesses have been capitalized upon, whether, or not, the weaknesses and threats are considered and mapped, and the desired effect which the option has.

Capitalization of Strengths and Opportunities

The strategic goal of achieving network leadership is suitable as it takes advantage of the opportunities presented by Vodafone’s Digital Vodafone programme. One way that the opportunity is capitalized upon is by engaging in the management of its digital technology through future-proofing its infrastructure for its fixed lines. The company is upgrading its cable infrastructure to adapt the latest kind of technology and deepening the deployment of fibre into its network. This eventually results in increased maximum user network capacity and user speeds (Vodafone Group Plc, 2018, p. 10).

Mapping and Considering the Weaknesses and Threats

Through the pursuit of the strategic goal of network leadership, maps and considers its weakness and threat of reducing base of subscribers and being rated and the mobile operator with the least satisfied customers in the UK. This is done be the evolution of its 4G networks to become ready from 5G (Vodafone Group Plc, 2018, p. 10). Pursuit of this goal involves increasing Vodafone’s network capacity, reducing latency times, and introducing new capabilities of service. These enhancements to the network involve the use of different advanced types of technological solutions.

Desired Effect

The desired effect of pursuing network leadership for Vodafone is to expand its coverage, enhance speed of data and improve its reliability. Also, the organization targets to provide its customers with a user experience that is excellent (Vodafone Group Plc, 2018, p. 10).

Feasibility

This component of the SFA matrix determines whether Vodafone’s strategic option for network leadership is taken into consideration in line with the company’s opportunities present at its disposal. The strategic option will be checked for its success or failure. The feasibility of the strategic decision will be determined after the propagation of an external analysis. Some of the factors that will be used in the determination of feasibility include, the capability of the strategic decision being financed, whether its expectations are realistic, whether it relies on the right knowledge, or whether the strategic decision is ethical (IronTrade, 2019). Indeed, Vodafone’s strategic goal of network leadership is capable of being financed because, just like an investment, it will reap the organization financial benefit such as increased revenue emanating from the ability to attract and increase its subscribers base and acquire higher levels of customer satisfaction using faster data speed and observing excellence in user experience. The expectations of pursuing network leadership are realistic not only will the organization obtain a position of leadership, but it will also continue enhancing its network and deploy new leading technologies in the market (Vodafone Group Plc, 2018, p. 10). The pursuit of the network leadership strategy relies on the right knowledge because by future proofing its infrastructure of fixed lines, Vodafone will upgrade to the DOCSIS 3.1 kind of technology which is already well-advanced in Germany and Spain and is proven to maximize the network capacity and user speeds (Vodafone Group Plc, 2018, p. 10).

Acceptability

External factors are taken into account to determine the acceptability of the network leadership strategy. These factors include the profitability of the strategy, the financial risks involved and stakeholder influence (IronTrade, 2019). The strategic goal of network leadership will be fostered by mobile data development. Investing in mobile data will be profitable because the company will use the propositions for ‘more for more’ to monetize mobile data.

Recommendations

Vodafone ought to capitalize on its strengths and opportunities and identify its weaknesses and threats and make efforts to convert them into internal capabilities in order to overcome the potential challenges in the telecommunications industry. The strategy which should be given more attention is that of Digital Vodafone because it will empower every other strategy it has in place. The strategy has great economic benefits to the company in terms of revenue and will unveil several cost opportunities. Digital Vodafone will take advantage of the internal and external capabilities of Vodafone UK and transform them into the development of an inclusive and diverse organization that focuses on doing what is rights and centralizes its activities in customer satisfaction.

Conclusion

To conclude, the strategic direction chosen by Vodafone results from the synthesis of its internal and external capabilities. The strengths and opportunities are developed to balance the drawbacks presented by its threats and weaknesses. A good analysis of the telecommunications industry through Porter’s Five Forces reveals helps Vodafone to identify ways in which is should manage and tweak its services to be in a position to outcompete its rivals, acquire a higher buying power over its suppliers, and diversifying its services and dividing its market into segments so as to overcome the challenges posed by substitutes. The strategic analysis reveals that Vodafone UK’s strategic goal is suitable, acceptable and feasible.