Assessment: Essay 2
Student number: 4319679
Organisational strategy of Vodafone
As one of managerial functions, planning plays a significant role in decision making for organisational mission and goals as well as in strategy formulation. Strategies are different in corporate-level, business-level and functional-level, and strategies from all three levels have to coordinate to be able to meet the organisational goals. In order to form a good plan, SWOT analysis and Porter’s Five Forces model are applied to develop appropriate strategies.
Vodafone has been operating for nearly 30 years and now it is one of the world’s largest mobile companies. Vodafone is a British brand that extends its operation in Africa, the Middle East, the Americas, Asia-Pacific region and Europe. By using voice, messaging, data and fixed broadband service, Vodafone wants to make people’s lives simpler and easier. In November 2010, Vodafone set a series of strategies in order to turn it into a more valuable Vodafone. For it has existed for so many years and grows much stronger, it must have done a good job on planning. In order to select appropriate strategies, techniques like SWOT analysis and Porter’s Five Force model has been applied.
SWOT analysis is a technique that is used to examine internal organisational strengths and weaknesses as well as external opportunities and threats of a company. Due to SWOT analysis, managers can select appropriate strategies in corporate-level, business-level and functional-level in order to best position the organisation and achieve its mission and goals (Waddell et al. 2007, p313).
As a market leader, Vodafone operates in over 30 countries and partner with other network operators across over 40 more and it owns 404 million customers at the last count. According to Vodafone Annual Report 2012 (p32), the leading performance above is based on three major strengths—its global scale advantage and close attention to cost efficiency, the successful implementation of its strategy to generate liquidity or free cash flow from non-controlled interests and the application of rigorous capital discipline to investment decisions. Though Vodafone is one of the world’s largest telecommunications companies, it continues to expand its market share.
A potential weakness is high level of customer churn rate. Even though it commonly happens to subscriber-based service model companies, it has many negative effects. For example, Vodafone Hutchison Australia has lost more than 700,000 customers due to ongoing network problems since 2011 (McDuling 2012). Nevertheless, Vodafone NZ suffered a loss of 50,000 customers in 3 months (Fletcher & Tapaleao, 2012). It can be network problems or services that cannot be satisfied with customers. However, once a customer lose his/her faith to a brand, it is hard to build up their loyalty again.
According to Vodafone Annual Report 2012 (p26), in some parts like India and Africa, there are emerging markets for telecommunications companies to develop their business scale. It is a significant opportunity for Vodafone to expand its markets. Over 70% of the world’s mobile phone users are in emerging markets and emerging markets have much stronger growth prospects than mature markets such as Europe. It is also an opportunity to attract more customers to fill up the loss of subscribers, which has been mentioned in the weakness part.
The last part of SWOT analysis is threat. As high level of customer churn rate, it can threaten Vodafone’s brand and it can be a barrier for Vodafone to expand its markets. Because of the expansion, Vodafone hosts increasing quantities of confidential personal and business voice traffic and data which are carried and stored by mobile networks. It can be a threat from external environment to access these data, so Vodafone needs to ensure its service environments are secure to protect customer information.
Porter’s five force model