Introduction
Established in 1984 as a small subsidiary company, Vodafone Group Plc has grown tremendously to become one of the best performing corporate across the globe. This paper will discuss the factors behind Vodafone superior performance.
1.0 Factors contributing to Vodafone’s superior performance
Vodafone has continuously recorded excellent financial performance. Take revenue for instance, in year 2014, it recorded a revenue of € 38,346 Million and € 42,227 millions in 2015. This has made Vodafone the world’s largest telecommunication network based on revenue (Vodafone 2016) There are several factors that have helped the company achieve such performance. First, the company has continued to invest toward improving its services and products and this have worked in its favour. For instance, in 2014, the company launched a two year £19 billion investment dubbed ‘project spring’ which has lead to a 10.1% percent increase in revenue (Vodafone 2016). On top of financial performance, Vodafone has also achieved excellent operation performance. Take customers acquisition for instance, in 2014 and 2015; the company increased its mobile customer base by 15 million and 16 million subscribers respectively (Vodafone 2015, 2016). This performance has been mainly contributed by the company’s targeting strategy. Targeting can be described as selecting a segment of the entire market to serve (Kerin et al 2014). Vodafone’s targeting strategy focus on emerging economies including India, Africa, middle-east and Asia pacific where mobiles services intake on the rise (Vodafone 2014, 2015) hence the performance.
2.0 Vodafone’s marketing environment
2.1 Microenvironment Analysis
2.1.1 Stakeholders
Buyers Every successful company must have a profitable number of customers. Vodafone pride itself as the world’s largest telecommunication company based on customers. As of 2014, it had more the 435.9 million subscribers across the globe. Its customers are segmented into two; mobile customers and corporate customers.
Competitors Vodafone operate in industry with stiff competition and its future success depends on how well it stays competitive. Currently, the company faces competition from China Mobile, AT$T, Orange, Airtel, EE, and O2 among others all of which offer similar services and products. So far, Vodafone has managed to remain competitive by offering latest as well as value added products and services (Vodafone 2016). However, with the increasing competition, Vodafone future performance is likely to be affected.
Suppliers Vodafone buys goods from a number of major suppliers. Some of the products it procures include mobiles handset, simcard among others. Over the recent years suppliers such as handset manufacturers has been on the rise and this will affect Vodafone’s performance in positive way. On top of the stakeholder mentioned above, Vodafone’s microenvironment also includes the entire telecommunication industry. SWOT analysis and Porter five force models will be used to analyze Vodafone’s microenvironment further.
2.1.2 SWOT analysis
The performance recorded by Vodafone can be partly attributed to its SWOT position in the market, I.e. Strength, weakness, Opportunity and threat.
Strength
The company has quite a number of strength which has worked in its favour. These include an internationally recognized brand. According to the 2016 brand finance ranking, Vodafone was ranked among the top 30 most valuable and reputable brand globally (Brand finance 2016). Secondly, the company has strong financial background which has made it easier to take advantage of opportunities immediately they arise. For instance, the company has already rolled out 4G network covering 86 percent of entire UK which has significantly improves the quality of services it offers (Vodafone 2016). Thirdly, Vodafone is a regionally diversified business with presences in over 40 countries in Europe, Africa, India, Asia-pacific and middle-east (Vodafone 2006). In addition, Vodafone has very large customer base (more than 435.9 million) which make it the world’s second largest telecommunication company (Vodafone 2014).
Weakness
The major weakness Vodafone has is the inability to retain customers. The company has experience high customer’s churn rate which translates to lost revenue. For instance, in the financial year 2014, the company lost 278 customers per day (Vodafone 2014). Another weakness is the company inability to protect customer data. This is well evident in a recent case where the company admitted that 2000 customers’ account which was held by a third party was accessed by hackers (Thomas 2015). Another major weakness with Vodafone is that it mainly concentrates on the Europe and Asia market and this affects the performance of its business in other markets. For instance, the company is underperforming in the united State (Vodafone 2015).
Opportunity
Mobile usage on the emerging markets has been on the rise (Poushter 2016). This is an opportunity that Vodafone should ride on to acquire more customers, large market share and maximize it revenue.
Threat Vodafone’s biggest threat remains to be the fierce competition in the telecommunication industry. The company face ever increasing competition which is likely to have effect on its performance unless it works hard to retain its customers. The fast changing technology is also a threat to Vodafone. Technologies used in the telecommunication industry are changing extremely fast and failure to adapt may have negative impact on the company’s performance in future. Another threat facing the company is that the European telecommunication market where most of its revenue comes from is already saturated leaving no room for growth (Burrows 2016).
Table1; Summarized Vodafone’s SWOT analysis
| Strengths · Internationally recognized brand · Strong Financial position · Regionally diversified business | Weakness · High customer Churn rate · Misuse of customer data |
| Opportunity · Increasing mobile Usage in emerging market · Increase demand for data Services | Threat · Competition · The fast changing technology · Saturation of Europe market |
2.1.3 Porter’s competitive Intensity Framework
According this model there are five forces namely Suppliers’ power, Buyers’ power, and competition rivalry, threat of new entrant and threat of substitution, that determine the competitive intensity of an industry. (Kerin et al 2014).These five forces affect Vodafone competitiveness and performance as explained.
Buyers ‘power (High)
Vodafone operates in markets where competition is high and there is low cost in switching brands. Also, there is no differentiation of product and services offered. This give buyers high bargaining power hence the ability to influence the price downward which can have negative effects on Vodafone’s performance.
Suppliers’ power (medium)
There are few major suppliers in the telecommunication industry and the products or services they provide does not have substitutes. However, by being one of the world largest companies, most suppliers always look up to Vodafone for business and as such it is able to hold the suppliers cost down. Suppliers’ power can therefore be assessed as medium.
Threat of new entrant (low)
The telecommunication industry is highly regulated and the licensing fee is very high. Equally, the capital required is very high. Therefore, Vodafone operate in an industry with low threat of new entrant.
Threat of Substitutes (low)
Vodafone services face very low threat of substitutes since landline which has remained to be the only substitute has been declining. Low threat of substitute allows Vodafone to retain a profitable market share.
Competition Rivalry (high)
The telecommunication industry has quite number of competitors with similar services and products. The competition is therefore very high. This has affected Vodafone performances. For instance, In the UK market, Vodafone has been dislodged from its position as market leader to position three (Statista 2016).
2.3 Macro-environment Analysis
2.3.1 PEST Analysis
PEST is an external environment analysis tools that is used to understand how the external factors namely Political, economical, social and technology affect an organization (Kerin et al 2014). Below is Vodafone’s Pest analysis.
Political
Political environment in some of the markets where Vodafone operates has continued to put financial pressure on the company. For instance, in India, the company have had major legal battles with the government relating to taxation and such cases have eaten the company revenue (Vodafone 2015).
Economic
The markets in which Vodafone operate has remained economically unstable (Vodafone 2015). It is well known in theory that during recession, most consumers either cuts their spending on discretionary goods or postpones the purchase decision (Kamakura and Du 2012). Since Vodafone benefits from discretionary spending, the demand for its existing or new products and services is likely to be affected by the unstable economic conditions.
Social
There are two major social factors that are and will affects Vodafone’s performance. First, there is an increase in social media usage worldwide. For instance, in the Asia-pacific, social media users increase by 17 percent annually (Chaffey 2016). Secondly, access to the internet is on the rise in the emerging markets (Vodafone 2011). These social situations have increased the demand for Vodafone’s data services making it the fastest growing revenue segment for the company. For instance, in 2015, the company increased the data users by 21 percent to 114 million which represent two thirds of its customers base (Vodafone 2016).
Technology
Vodafone performance is also subjected to technological factors. Technological advancement gives the company an opportunity to improve quality of it services. Take the 3G for instance, Vodafone has been able to increase the coverage of the 3G and 4 G technology in all the markets it operate which has helped improved the speed of it data services(Vodafone 2016).
3.0 Vodafone’s Marketing Mix and It Contribution to Achievement of Superior Performance
Marketing mix is terms used to describe factors that are controlled by the company to influence customer purchase decision. These factors are price, product, promotion and place (Mindtool 2016).
Price
Vodafone products and services are sold at an average price. However, the company has customized the prices for its products and services to meet the need of almost all customers. For instance, in its Voice and messaging services, the company charge customer depending on the plan they chose either monthly or Pay as you go (Vodafone 2016). Vodafone pricing has contributed to its superior performance in several ways. First, the average price ensure its products and services are competitive in the market. Secondly, the customized price ensure the company meet the need of almost all customers and this help it in acquiring and retaining large customers base.
Product
Vodafone offer wide ranges of products which include voice and messaging services, data/broadband services and mobile handsets (Vodafone 2016). It relies heavily on innovation and technological advancement to ensure it offers the latest products with the latest features in the market and this helped increase sale. For instance, through 4G technology, it has improved the quality of its service which has attracted a 21 percent increase in data users (Vodafone 2016).
Promotion
Vodafone’s performance can be partly attributed to its promotion activities. The company is known to use celebrity such as Beckham to endorse its brand and this has not only increased awareness about its products and services but also strengthen its brand.
Place
Vodafone’s performance can also be attributed to its distribution network. Currently, the company has over 2100 stores which it directly own and over 7600 Vodafone branded franchise stores. Equally, the company has established strong online presences which improve access to its products while at the same time reducing costs associated with running physical stores (Vodafone 2016).
Conclusion
Vodafone has so far managed to achieve superior performance due to a number of reasons which include its ability to keep cost low while charging average prices, regional diversification which minimizes risk, its competitive marketing mix and favoring environment. Although the company has recorded superior performance in the past, analysis of its marketing environment shows the company is not in a very good position in the market and this is likely to have negative impacts on its future performance. Some of the factors that put Vodafone in a not so good position include high customers churn rate, mismanaged of customers’ data, over concentration in Europe and Asia market, Saturation of the Europe market where it generated most of its revenues from and increased competition from existing players. Improvements are therefore required in several areas of the company’s operation in order to continue recording superior performance. Areas that need reform include customers’ relationship management so as to address the high customer churn rate, Security of customers’ data to avoid misuses of such data as well as improve its competitive advantages so as to beat the ever increasing competition. In addition, the company need to rethinks its marketing strategies as the European market where it mainly concentrates has become saturate. It’s right time the company develop strong marketing strategies to support its business in other markets especially in the United State as well as in the emerging markets where it operates so as to continue enjoying significant growth.