With the immense profit of which Vodafone is receiving they want continue to invest in even greater technology such as smarter, smaller devices and to combine these with faster, broader wireless connectivity.
Vodafone’s successful takeover bid of the German network operating company Mannesmann has showed their intention of being dominant on a global scale.
With the possibility of the UK joining the European single currency over the next five years this action is beneficial for Vodafone as they already begin to converge. This action has meant that Vodafone has grown ahead of its UK rivals
Threats to Vodafone
The UK mobile network providing market is structured as an oligopolistic market. This is because there are few firms in the market with the four recognised network providers are Vodafone, Orange, O2, and T-Mobile. The reason why Vodafone and the other mobile network operators are so dominant is because there is not a real substitute for a network operating company.
The only considered substitute could be the fixed phone sector. But there is a restriction of movement and lack of portability with fixed telephones. This is why it is not an ideal substitute.
Despite the fixed telephone sector still holding a greater percentage than that of the mobile phone sector there is evidence that there could be a shift in power. It is anticipates that in the next five years to come the UK market for mobile phones will show an accelerating growth of 81%.
The mobile network operating market has significant barriers to entry which makes it difficult for new operators to enter and leave the market. This is because in order for a handset to make and receive calls the phone must be within range of radio coverage of a base station. Therefore a high start up capital is required for the purchasing base stations. The current Network Operators currently benefit from economies of scale. This lowering of average cost is not reflected in the price of call charges but in the quality of their service. The current network operators have created a differentiated market for their product
The network-operating sector does not have any real form of competition. It therefore could be described that mobiles have low price elasticity. This force could be described as being low.
Competetive Environment
There is a high degree of branding existing, which would make it difficult for new companies to enter the network operating market.
This force has a low degree in the network operating market.
However the mobile production market could be described as being more competitive. Even though there is a degree of barriers to entry in the market with the use of banding it is not has significant as in the telecommunications market.
External Effects on the business of Vodafone
Examining the business environment helps the organisation develop appropriate marketing strategies, including the marketing mix. Important external forces that influence marketing include the following:
From the Customers
Customers may not have significant amount of power in the telecommunications market. This is due to the price elasticity of mobile phones. The network operating market has been segmented into section and each operator offers a service to specific type of customers. For example Vodafone obtains customers who priorities quality in service, but loyal pre-paid customers have more of a power on network operators. Network operators would be willing to offer a discount to loyal customers on specific handsets. They would normally other to negotiate through the fear of losing their customer to a rival network. There for buyers do have a degree of power.
From the Suppliers
The supplying of handsets for is critical for the network operating industry. The handset produced needs to be registered with a network producer in order for the handset to transfer and receive calls. The mobile development market could be described as being monopolistically competitive. It is made of large amounts of firms producing differentiated products.
There are two approaches that can be taken to analyse the impact of the environment, these are
- PESTEL Analysis
- Scenario Analysis
Scenario analysis is the generation of scenarios that may arise – asking what IF questions, exploring implications and analysing the strategic significance to the organisation strategy.
PESTEL Analysis
The PESTEL analysis approach is a useful way of analysing an organisations external environment, by grouping external forces into six areas. These are Political, Economic, Social, Technological, Environmental and Legal influences.
Political
Political factors play an important role in the development of the network operating industry. Political factors could include the provisions of certain laws, and pressures from certain pressure groups like Green peace for companies to be environmentally aware. The licensing of certain frequencies plays an important role in the development of the mobile operating network. A Company could only begin to use a frequency once they have been granted to them by the local authority.
Economical
The economic environment is dependent and influenced by world economic policies. These include the rates of economic growth, inflation, consumption patterns, income distribution and many other economic trends determine the nature of the products and services provided by Vodafone. High-income levels will result in an increase of usage of the Vodafone mobile services.
Social
Social factors look at the structure of the population and the impact of which it has on the demand for the product and the supply of labour. The distribution of the age population in the UK directly affects the level of demand for the service of Vodafone and other mobile network operator. This is because it is generally the age group of between 15-25, which has the most demand for mobile phones. This is because they demand it for personal reason, as having a mobile phone is a form of a fashion statement.
Technological
The success of technological development plays the most important role in the success of telecommunication companies. In the network operating industry technological development is based on the increase in efficiency and quality in the transfer of voice calls, and data between cellular phones. . With Vodafone’s competitors Orange, O2 and T-mobile are now offering the same GSM handsets as Vodafone. This shows that technology is feasible in the market of network operators.
Environmental
Environmental factors also play an important role in the development of network operating industry as company needs to take this into account when developing. Due to the growth of pressure groups like green peace the government has been forced to become more environmentally conscious. This means that the action of companies are being monitored making sure they are environmentally friendly. Any negative externalities given out will have to be paid by a full social cost by Vodafone.
Legal
The market in which Vodafone is in had only one Legal force. That is to provide safety in the use of its services through the handsets they sell and provide. This means that development cost will need to be done to produce handsets that attract low radiation. Vodafone should also compile the Data protection Act 1985 to protect customer’s information.
Key Factors of Success
The three main principles of key to success are:
Vodafone has many links with different suppliers around the world, which will help it to develop its products and services. For example the advantage of using 3G technology is that it will offer much faster data transmission speeds than the current GSM technology. This will allow the transferring of high bandwidth data services which includes multimedia services and broadband access to the internet. Vodafone and other mobile network operator companies to begin usage of this new technology in order to maintain their market position. The branding of different handsets used by the networks will encourage customers to switch networks just because of their wants of a handset.
The skills needed to remain the biggest network operator for Vodafone is to have knowledge about how the prices of different handsets affect its customers to switch onto their networks or to its substitutes.
An example of this is by introducing 3G mobile phones before its competitors to increase revenue a its reputation.
- Attributes of the organisation
The management of Vodafone has to be very efficient to make sure the right decisions are made to offer their services. If the price for a particular service is too high, customers will choose other alternatives, which offer the same service for less. Vodafone therefor has very good management because they value their customers as a high cost if lost.
Conclusion
This assignment was to produce a detailed analysis of Vodafone’s company objectives and see how the internal and external environment affects the business itself. A PESTEL analysis was done and the key factors of success were also identified. After undertaking all the knowledge from my sources of information I could be seen that Vodafone is now a dominant network provider and it is likely to continue to develop in the future.
Bibliography
To help me do this assignment information was used from the following sources;
Posted by rob at February 21, 2003 06:00 PM
- Business Studies by Ian Marcouse
Assignment 1
AF133 Business Marketing
Syed Zaheer Hassan
Student No. 03028804
