Business Strategy is essential need of an organisation with the help of which all business activities are executed and performed in an effective and efficient manner. Strategy refers to an action or plan which is made by management of an organisation with an objective to achieve desired goals and objectives within pre-determined period of time. It is like a roadmap which gives direction and guidance to the employees to perform according to the given standards so as to achieve profitable outcomes. Vodafone, a mobile telecom company which has operated its business in Europe, Africa, Middle East and United States is taken for the purpose of preparing this report. The project includes the impact and influence of macro environment on firm and its strategies to deal with such factors. Assessment of internal environment of enterprise has been also discussed under this report (Addison, Portugal and Vilares, 2017).
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Impact and influence of macro-environment on business organisation and its strategies
The business operations of every organisation whether small, medium or large are much affected and influences by macro-environmental factors which forces management to formulate an effective strategies and plans to deal with such factors in an effective and efficient manner. Macro-environment factors includes political, economical, social, technological, legal and environmental which may either support an organisation or brings negative outcome to company. The major elements of macro-environmental factors and their impact on business strategies and actions of Vodafone are briefly explained as under:
Such analysis shall be conducted to determine the factors which influences the business operations either in negative of positive way due to which the management of Vodafone take further actions and plans to deal with them in an effective and efficient manner. Vodafone has been operated its business in more than 30 countries and achieve growth on continuous basis. Thus, they get much affected from macro-environmental factors which includes:
Political factors: The business operations of Vodafone may get affected due to political changes happened due to changes in government. For example, In UK new government may increases tax rate on telecom services which rises the prices as well due to which the company find difficulties in attracting customers (Basco, 2015). Therefore, company prefer to provide telecom services in such country where the political conditions are more stable. In recent case, the conflict take place in Europe which make huge impact on operations and decision of Vodafone.
Economic factors: Such factors which are related with economic stability of country which makes huge impact on the business of Vodafone. The more country develop the more chances the company get to expand their business in new areas. Growth in economy of country will increases the income of people due to which they will show more interest and willingness to adopt new technology. It will help company in generating huge revenues for longer period of time. Economic crisis currently in United Kingdom brings negative impact on the business operation of Vodafone.
Social factors: Such factors are related with culture and beliefs of individuals living in the area in which company is operating. It may affect the growth and success of company thus need to makes changes in their policies and strategies pertain to culture. As Vodafone is European firm thus required to changes in policies according to the social elements in which the company has operated (Downey, 2014).
Technological factors: Vodafone is always tried to work as per the trends occur in communication and technological area. Due to high competition in telecom industry, it is important for Vodafone to go one step head than their competitors through adopting advanced technology and launched new technical products and features of devices.
Legal factors: Vodafone has operated its business at international level due to which they get tough competition from their rivals. Therefore, it is important for Vodafone to follow all legal laws and legislations formulated by government of such country in which they are operated. Vodafone indulge in various legal issues due to which the company faces so many legal penalties. Along with this, Vodafone also faces issues regarding not paying sufficient amount to their staff members as compared to their competitors due to which so many employees leaves firm and shifted to rivals' firm which increases the chances of leakage of new and innovative ideas of company. Therefore it is important for company to follow all legal laws and standard in order to sustain in market and gain trust of individual for longer period of time.
Environmental factors: Due to globalisation, individual become more ethical. As every customers expected from their favourite brand to take participate in social welfare programs. They want from their brand to be socially responsible and contribute more in development of society. Therefore, it must required for firm to maintain healthy working environment so as to attract skilled and knowledgeable employees and achieve desired goals within pre-determined time period.
Vodafone is multinational telecom company which has attain strong brand position in market thus to maintain their exist position, it is required for company to analyse such factors and take corrective steps to deal with them in an effective and efficient manner.
Ansoff's growth vector matrix: Such matrix is considered as an effective strategy tool which help company to decide corrective and profitable strategy for their business operation. With the help of such matrix, the management are able to understand how business opportunities match with the business strategy in terms of markets and products. It includes four growth strategies which are described as below:
Market penetration: In this strategy, the company mainly focuses on capturing large market share through utilising available resources in current market thus it is less risky and the chances of achieving growth and success will be more. Therefore, Vodafone need to focus on adopting such strategy if they want to survive in exist market for longer period of time (Higgins, Omer and Phillips, 2015).
Market development: According to the data collected from the survey, it has been identified that large amount of population especially youngsters are moving forward to use smartphones in order to update their knowledge and lifestyle. It brings profitable advantages to Vodafone as well. During adoption of such strategy, Vodafone are required to enter into new market segments with existing products and services. As it has been identified by Vodafone that their large amount of revenue are generated from urban areas thus to expand their business and increase revenue, the company need to focus on attracting people of rural areas as well.
Product development: Along with the telecom services, Vodafone also required to introduce new products or services into market so as to capture to large current market share. For example, introducing Wifi hotspot devices which grabs an attention of large number of customers. It may increases the revenue and profit of Vodafone as well.
Diversification: This strategy gives direction to Vodafone to diversified their business through developing their existing new products and services. For example, Vodafone acquire new company or support other company to expand their business to worldwide (Kwon, Lee and Kim, 2011).
Assessment of internal environment of enterprise
As Vodafone operate business at international level due to which they face tough competition from national as well as international competitors. It is essential need to make an effective strategies and plans regarding offering quality services to customers so as to maximise the level of satisfaction of customers.
Strategic capability: It refers to an ability of an organisation to gain competitive advantage so as to sustain in market for longer period of time. This undertake the strategic plan with the help of which the business operation can be executed in an effective and efficient manner through utilising available resources in an optimum manner. This will help Vodafone in maintaining their exist position in market. Strategic capability of a firm is an effective component for a business organisation in order to strong their presence towards their competitors. With help of getting support from stakeholders and other interested parties, the company can able to formulate an effective plans and strategies. For example, in order to bring advanced and updated technology in company they need to get financial funds thus need to invite investors and financial institutions to provide loan to them at particular rate of interest. Along with this, staff members are also required to be motivated through defining roles and responsibilities decided while formulating an effective strategies and plans (Lee, 2012). The government authorities and financial bodies are also play an important role in achieving growth and success of Vodafone.
VRIO Analysis: It is considered an analytical tool with the help of which the company can able to analyse their capabilities and available resources so that proper decision shall be made by management of Vodafone. This is an effective tool which directs managers to utilise resources in such as effective manner so that profitable outcome will be received in near future. It consists of different aspects which are determined as below:
Valuable: The resources of an organisation are valuable for company thus need to be allocate them carefully so that positive outcomes will be easily received. It indicates that if the company successfully utilised their resources then it help them in capturing opportunities arises in business environment. Maximum utilisation of resources enable company to reduce cost of the services they offered due to which the large number of customers are easily attracted. Any misuse or shortage of resources will brings competitive disadvantage to company. Therefore, it is essential for Vodafone to evaluate the value of resources as changes in business environment may reduce the value of resources of company.
Rare: It indicates that if company has sufficient amount of resources then it will definitely bring competitive benefit to them in future. As Vodafone is one of the largest telecommunication firm which has operated business in many countries thus the company has attained huge resources due to which they are more capable to executer business operations in more effective and efficient manner thus can easily achieve competitive advantage in market (Pardeck, 2014).
Costly to imitate: When company adopt an effective tools and techniques which are difficult to imitate increases the chances of achieving competitive advantage. In context with Vodafone, there are various resources and techniques developed during past times due to which it is difficult for other company to copy them for their own benefits.
Organised to capture value: It is essentially required for an organisation to realise the value of resource they have at present so that they can utilised accordingly. If an organisation fails to do this then it will bring negative outcome to company. For this, it is important for Vodafone to adopt an effective process, methods and policies and required to be structured in an effective manner.
Strengths and weakness of Vodafone
- Vodafone is one of the popular telecommunication company across worldwide and has attained more than 1 Lakh employees globally.
- The company has engaged in providing different products and services such as landlines, mobile telephony, digital TV services etc.
- It has attained strong brand image and visibility in market.
- In 2016, the company has recorded approx 350 million as subscribers across worldwide.
- The brand value of Vodafone has been recorded 28 billion dollars in 2016. Along with this, brand recall and equity of company also goes high (Quirke, 2017).
- In the year 2016, the company has generated revenue of 87.3 billion dollars.
- Vodafone come under top 2000 brands and ranked 395, enterprise is well known for its wide network and distribution. The company has operated in over 25 countries due to which they have captured large market share.
- From last 4 years, the company has identified the downfall in customer base due to charging high prices and low networks. Therefore, the management need to formulate an effective strategies and plans to maintain their customer strengths.
- The brand value of company also goes down due to having large number of competitors.
- Due to Brexit and other economical conditions in Europe, the performance of Vodafone has been poor and their revenue generation are also goes down.
- Adopting less effective distribution channel due to which the company fails to offer products and services in the backward areas of the country.
Examine the competitiveness of telecommunication sector
Porter's five forces analysis:
It is an effective tool which required company to adopt in order to analyse the forces which increases the competition in telecommunication industry. Making such analysis help company in formulating an effective plans and strategies to deals with influencing factors arises due to business environment which are complex in nature. Through this, Vodafone can able to achieve competitive advantage and survive in market for longer duration. Such analysis includes five forces which are briefly described as below:
Bargaining power of suppliers: The power of supplier of the telecom industry are high instead of that the company earn hug profits. Vodafone operated business on large scale due to which the company have power to control the prices increases by their suppliers. Through this, the company can easily attract large number of customers by maintaining the prices of their services (Smink, Hekkert and Negro, 2015).
Bargaining power of Buyers: The bargaining power of customers in the telecom industry are also high due to having large number of telecom companies in market such as Airtel, Idea etc. Therefore, to attract and influence the interest and buyer behaviour of customers, Vodafone need to set an effective prices as compared to their competitors.
Threats of new entrants: There are number of barriers which changes the mind of new company to enter into telecom sector therefore the threat to entering new company into telecom industry are very low. While entering into telecom sector, the new company should required to pay huge amount of licensing fees and regulatory issues which belongs to such sector. Apart form this, adoption of establishing network infrastructure are very high and continuous changes in technology will brings so may difficulties towards new company to enter and compete with current rivals.
Threat of substitutes: Vodafone faces low threats regarding substitutes of their products and services. Video conferencing, VOPI such as Skype, google talk, Yahoo messenger etc. are such emerging substitutes to mobile services but due to strong buyer power and effective economies of scale, Vodafone doesn't much get affected thus doesn't need to reduce the prices of services as well.
Rivalry with Existing competitors: Vodafone faces tough competition from their rivals due to which the company may need to constantly improve the service and products so as to maximise the satisfaction of customers (Business Strategy. 2015).
Strategic directions and options available to enterprise
Bowman's Strategic Clock:
It is an effective model which are essential for company to adopt in order to identify different options for strategic positioning. It help company in positioning the products and services so as to achieve competitive advantage in market. This model provides various options of positioning product on the basis of two dimensions which includes price and perceived value.
Vodafone is multinational firm which deals in providing telecom services through out the world. This model includes 8 different options which are briefly explained as under:
Low price and low value added (Position 1): It includes the services which are low in value and price thus difficult to attract customers as using such type of services fails to maximise the level of satisfaction of customers.
Low price (Position 2): In this strategy, the price of products and services should required to be minimised with an objective of maintaining huge customer base. Through this, the company earn huge profits as well.
Hybrid (Position 3): It is the combination of two different types of strategies. It involves some element of low price and product differentiation. The main objective of Vodafone is to influence buying purchasing decision of customers in order to generate huge revenues.
Differentiation (Position 4): According to this strategy, the company provides valued services to the customers in order to maximise their level of satisfaction. Therefore, Vodafone need to offer quality services due to which customers are easily attracted towards customers.
Focused differentiation (Position 5): According to this strategy, the price level are increased due to providing luxurious products and services. Due to maintain position of company in market, it must required to adopt promotional strategies, segmentation and distribution.
Risky high margins (Position 6): Under this strategy, the company increases the prices of their products and services without providing any benefits to customers. Thus, if customers continuing buy their products then the company may earn huge profits but if customers shifts to rival's products and service then it is difficult to sustain in market for longer period of time.
Monopoly pricing (Position 7): In this type of market, there is one seller who sell the product in market thus faces no competition in market. Due to this, the seller didn't consider the satisfaction level and preferences of customers as the customers have only one option to buy or not.
Loss of market share (Position 8): Such aspect highlighting the strategy which need to be adopted by company in order to maintain their stable position in market. For this, the company need to set an effective price for their services to attract customers.
All such major strategies are required to be implemented by Vodafone in order to operate their business operations more smoothly. From given strategies, 7 and 8 are the uncompetitive ones for the Vodafone because these are the one in which price is more than the value perceived by the customers (Škerlavaj, Song and Lee, 2010).
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It has been concluded from the above project report that Business strategy is essential need of every organisation to make in order to achieve competitive advantage and sustain in market for longer period of time. To analyse the business environment, it is important to conduct PESTLE and Porter five forces analysis so that corrective actions should be taken to deal with influencing factors.
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