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Unit 32 Business Strategy

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Introduction

In order to define business strategy, there are many models to analyze the environment of a Vodafone company. For analysis of micro environment, company is using PESTEL analysis technique. In which political, economical, social, technological, environmental and legal factors are included(Buckley, Burton and Mirza, 2016.). For analysis of micro environment, company is using VRIO/VRIN model by which company can get information related to the resources available in an organization. Ansoff’s growth matrix is also used by Vodafone company to analyze the organization’s strategic position. Vodafone has many organizational capabilities. To evaluate the competitiveness level of Vodafone company. Company using Porter’s five force model. By which company can get the information related to the bargaining power of buyers, bargaining power to suppliers, threats of new entrants, threats of substitutes and rivalry within the market. Vodafone Company is using Bowman’s strategic clock model, to analyze the strategic direction. There are many kinds of strengths and weaknesses of a company. Company can improve the level of weaknesses because it is internal factor of a company which can be controlled. If Vodafone wants to maintain its position in the telecommunication sector, then it should be analyze all the factors which influenced its structure.

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Task 1

P1 Impact and influence of macro environment

Analyze the Impact of macro environmental factors are very important factor in any organization. There are many types of factors who affect Vodafone Company directly and indirectly. PESTEL analysis is a important technique in analyzing of macro environment. In PESTEL analysis, a company concentrates on these factors like political, economical, social, technological, environmental and legal. Any company who wants to maintain its position in the market, they should analyze these factors.

  • PESTEL ANALYSIS :

Political factors: Political; factors may affect business in many ways such as increasing or decrease in tax policy, data protection law, education law, health and safety law, employment law and trade control. Impact on economy is a main and important factor in political factor. Political situation of a country can affect economy of its country. Thus, this economy affect a business indirectly. Government can change rule and regulations. The stability of a political system is also affecting the organization.

Economic factors: whenever a company makes a strategy then economic factors should be considered. Economic factors have a strong impact on any organization. It includes government policy, labor cost, interest rates and taxes. It is connected with goods and services of a product. Interest rates, taxes, exchange rates, demand and supply are the examples of this factor. It can affect inter working of any organization. Exchange rates are very complex topic in this factor, which should be considered. Recession period also affect the purchasing power of a customer which can affect an organization indirectly.

Social factors: these are the factors which are continually changing. This factor includes tastes and preferences of a customer. It may also include social media factors such as social networking sites. Lifestyles, buying habits, educational level, sex distribution, religion and beliefs are some examples of this factor.

Technological factors: these factors can be divided into two parts such as manufacture and infrastructure Incentives, automation, flexibility and improved quality of products are some examples of these factors. These factors affect an organization in both ways such as positive and negative. if company can identify these factors, then it will be benefits for its company. Company can increase its operation level through these advances.

Environmental factors: this is also an external factor that affects a company indirectly and strongly. Changes in climate, pollution and weather are the examples of this factor. A company should know about these factors.

Legal factors: legal factors can decide that what product can be sold or what type of products cannot be sold. These factors affect mechanism part of a company. Copyright law, import law, health and safety law and consumer law are the examples of this factor. These factors also have a strong impact on any organization.

Vodafone should know about these all factors to maintain its position in the market. Macro environment means a broad area which includes all these factors and these factors can be analyzed by pestel techniques. It is the best and important technique for any organization.

Using ansoff’s growth vector matrix:

It can be called by ansoff’s product market growth matrix. This matrix helps in provide ideas about how to grow a business and how to gain profitability. Commonly it can be divide into two parts such as current products or new products and current market and new market. In this model, Vodafone can use these four types of strategy such as:

  • Market penetration strategy
  • Product development strategy
  • Market development strategy
  • Diversification

Market penetration strategy is applicable on existing customers. In product development strategy, a company replaces existing products with some new creative ideas and innovations. In third strategy, Ansoff suggest taking a current product and try to find new markets for them with new distribution channels. And last strategy is diversification. There are different levels in this strategy such as:

  • Diversification into related market
  • Into unrelated market
  • Into unrelated market with new sources.

Market penetration is the safest options form the four one. In this strategy, a company increase sale of its existing product in existing market. Company knows about all the aspects related to increasing sales volume. There is no any risk factor. Next strategy is product development which is slightly more risky. Because trough this strategy, a company enters in a new market with existing product. With next strategy of market development, risk factor is greater than product development strategy and penetration strategy. In this, a company enters in a new market with new product or existing product with adding of new creative ideas or innovations. Diversification is the last strategy in this matrix and it is the riskiest factor. Because, in this strategy, a company enters in a fully new market with fully new product without knowing and understanding about the entering market.

Ansoff’s matrix can be used by following these steps:

  • Analyze the option
  • Managing the risk factor
  • By choosing the best option

Ansoff’s matrix is a tool which is used in many organization through which company can analyze the best option for growth of the business. In market penetration strategy, price decreases, increase in distribution channels and find out the rivalries in the same market. Market development strategy can be explained by these aspects such as:

  • Different customers
  • New areas
  • Foreign markets

This strategy is being successful when a company introduce new product with unique technology.

M1 critically analysis of macro environment

When Vodafone company makes business strategy, then it is necessary to consider all the factors of macro environment. Business strategies are long termed decision process, which can not be change immediately. So the factors of macro environment need to be analyze.

TASK 2

P2 internal environment and organizational capabilities:

Internal environment includes current employees, corporate culture and management. Internal environment of an organization is in the hierarchical arrangements of task. There are four main components in the organizational structure such as values, heroes, rituals and social networks. Organizational capabilities mean company’s ability to meet customers need and preferences and ability to manage resources such as human resources or financial resources. There are many types of organizational capabilities which provide advantages to business, explained as follows:

  • Competitive advantage
  • Flexibility
  • Responsiveness
  • Knowledge
  • Customer relationship

It provides competitive advantage because in the organizational capabilities, company has a product with unique ideas or innovative designs. This can help in win over the competitors. Responsiveness means a company is adoptable. Company accepts the changes of customer demands. Knowledgeable workforce helps in achieving the goals of a business. But it is necessary to maintain capabilities that all the resources are properly allocated and there is best utilization of available resources. Good relationship with customers helps in growth of a business. If Vodafone Company wants to maintain its position in the market then it is necessary to maintain relationship with customers. Customers are the main component for any organization to grow or to maintain position. Relationship with customers can affect business sales, loyalty and reputation in the market.

VRIO/VRIN model: it is a model to evaluate resources of a company. It can be called complements of the PESTEL analysis, which is used in every organization to analyze the macro environment. It is a analytical technique to evaluate resources such as financial resources, human resources, material resources and non material resources. The dimensions for this model are as follow:

  • Value
  • Rareness
  • Imitability
  • Organization

Vrio model helps in decision making about the process of internal and external securing services. Value framework means is this capability valuable to the firm? There are several attempts, a company can exploit are:

  • Technological
  • Demographically
  • Cultural
  • Economical
  • Political
  • Legal

Value can be defined by the value chain of a company. By Cost of imitation, company can achieve competitive advantages due to following reasons:

  • Patents
  • Social complexity
  • Casual ambiguity
  • Unique historical conditions

Strength and weaknesses: Vodafone is a brand known company. There are many kinds of strengths and weaknesses of this company. These can be identified by SWOT analysis. Strengths of Vodafone Company are:

  • highly coverage area of market
  • Income generated
  • Marketing
  • Premium cost
  • Subscriber base
  • Brand valuation

Highly coverage area of market is the strongest strength of Vodafone Company. This company is known for its wide network cover and distribution. Income generated by this company is in millions of dollars. While other telecommunication companies are using penetration strategy of marketing, Vodafone is using differentiation marketing strategy. Every customers of Vodafone are proud to be customer of Vodafone. Brand equity and brand valuation of Vodafone is very high. No company can met this target. But in the other hand, there are some weaknesses of Vodafone company such as :

  • Dropping base of subscribers
  • Dropping brand valuation
  • Decreasing in market share
  • Poor performance

The bases of subscribers’ are continually dropping from the last four year. The company is looking at global market, which is a major problem. Company has to be focused on implement strategies and core values. Main reason behind dropping subscriber base is dropping brand valuation. These both factors are main factors to startup a business. Due to economic conditions, Vodafone is losing market share level as well. Highest generated revenue of Vodafone is from USA but, now company’s performance is poor in USA.

M2 critically evaluation of strengths and weaknesses :

These all are the main strength and weaknesses of Vodafone Company. Some other strengths of this company are :

Strengths

  • Keeping cost below
  • Higher responsive
  • Good relationship
  • Directly selling products
  • High brand equity
  • Strategic alliances
  • Renowned telecommunication company
  • Strong customer base
  • Technology
  • Strong customer acquisition
  • Brand management
  • Multiple offering system
  • Using differentiation strategy
  • Fast and wide network

Weaknesses

  • Outsources operations
  • High debt
  • Activation issues
  • Pricing controversies
  • Data connection poor

If a company can find the strength and weaknesses of its company, then it will able to survive in the market. Strength and weaknesses are internal factors which can be controlled by an organization. Thus, opportunity and threats are the external factors which can not be controlled by an organization. Vodafone is a very good telecommunication company with wide area of strength. Company has to be focused on the weakness points to achieve goals and achieve better outcomes.

TASK 3

P3 Analysis of telecommunication sector

Porter's five force model for evaluate competitive position and strengths of a company. Every telecommunication company has to be focused on porter's five force model. These forces are analyses micro environment. If there are any changes in any forces, then company has to be make changes in whole strategy. There are five forces in porter's five force model such as bargaining power of customers, bargaining power of suppliers, threat of new entrants, threat of substitute and rivalry within the market(Leonidou and et.al., 2017).

Bargaining power of consumer : This force refers to pressure of consumers on the products. This is the most important forces that affect the competitive advantage. It affects the environment for seller and influence the ability of seller to gain profitability. Strong consumer can affect the industry b y giving more competitiveness and decrease profit margin for the seller. Buyer power will be high if these following points are strong :

  • buyers switching cost
  • threat of backward integration
  • price sensitive
  • well educated
  • undifferentiated production
  • high volume
  • availability of substitutes

buyer power will be low if these points are weak :

  • less concentration of buyers
  • switching costs are high
  • not price sensitive
  • uneducated
  • highly differentiated products
  • low sales volume
  • unavailability of substitutes
  • small portion of seller sales

Bargaining power of substitutes : it is also a main factor who influence the competitive level of company. There are some factors included such as degree of differentiation of imputes, strength of distribution channels, employee solidarity and supplier competition. Bargaining power of suppliers in telecommunication sector is more considerable factor compare to other factors. But Vodafone company have a high bargaining power of suppliers due to operates in great primeter. This company easily maintain this factor by lowering its price and making high profit margin. In UK, the bargaining power of suppliers are quite low because of lower availability of suppliers and diversification(Welford,2018.).

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Threats of new entrants : Vodafone faces appreciable threats of services and products which they provide. The economic scale of Vodafone company is very high and impressive thus, there is no requirement to make changes in the price. In UK, every telecommunication company has to apply for licenses to FCC for approval to start their business. It is very complex part and process to enter in new market and start their business(Jamasb, Thakur, and Bag, 2018.).

Threats of substitutes : due to powerful and effective scale of management, company does not need to pass down the cost. Social networking sites have taken place as substitute ion telecommunication sectors.

Rivalry within the market : competition level is cut throat in telecommunication sectors. Vodafone is facing higher level of rivalry due to lower price provide by its competitors. Porter's forces of rivalry within the market is affects the competitive environment and also affect the profitability level of an organization. Intensity of rivalry is low because of low fixed costs, low exit barriers, highly differentiated products and fast growth of industries. Intensity of rivalry is high because of fixed costs are high, brand loyalty is insignificant, size of competitors are equal and growth of industry is slow(Welford, 2018.).

M3 dividing of appropriate strategy :

Vodafone company is making strategy to gain edge and maintain its position in the market. By introducing new and creative ideas in the existing product can provide high profitability of margin.

Task 4

P4 Bowman's strategy clock model :

Vodafone is using many types of strategies to gain high competition edge and maintain its position in the market. Bowman's strategy is a tool which is used in every organization for designing the marketing strategy to analyses the competitive level in the market(Jamasb, Thakur, and Bag, 2018.). It has eight competitive directions for edge. Generally, this model is based on porter's five force model but it expands the idea of porter's strategy. This model allows company to find out the factors which will company can use to stay above the competition. Eight directions in this model are :

  • low added value
  • low price
  • hybrid
  • differentiation
  • focused differentiation
  • increased price
  • high price/ low price
  • standard price

The first direction is low price/ low added value. Vodafone does not choose this direction to maintain its position in the market. Company used this direction when product of company is lack differentiated value. Vodafone keep focus on customers rather than price of products due to being a leader in the telecommunication sector. In second direction, company keep the prices on very low volume to attract new customers. Mainly in this direction, company use under cutting competitors via lowering cost of their products. In third direction, company produce products with some specialization on low cost(Jamasb, Thakur, and Bag, 2018.). To gain high range of edge in the market, company use differentiation strategy. By this strategy, company produce product in the new market with creative and innovative ideas. In 6th position, company keep higher prices of their product on risk factor. If this higher cost is acceptable by the customers, than company enjoy the profitability ;level and if customers do not accept the higher cost, than it will lose their existing customers. 7th position is applicable only in monopoly market. Which does not exist in today's competitive market. In the Last position of bowman's strategy, company will lose its market share due to pursue this market strategy.

To gain edge in the competitive market, Vodafone has to be analyze all the directions of Bowman's strategy.

M4 producing strategic management plan :

For healthy business innovation is a cornerstone. Company should not work only on existing business but promote the business by making strategic plans which incrses its market share and maintain it. Retain, maintain, expand educate and invest is the main factors that helps in achieving goals of business.

Conclusion

From the above report, it is concluded that business strategies are key essential part for every organization. Report included many strategies to analyze the competitive level in the market. To analyze macro environment, company can use PESTEL analysis(Leonidou and et.al., 2017). For the analysis of micro environment, company can use VRIO/VRIN model. Furthermore, Vodafone is using BOWMAN'S STRATEGIC CLOCK MODEL to analyze the strategic direction and position in the market.

References

  • Buckley, P. J., Burton, F. and Mirza, H. eds., 2016.The strategy and organization of international business. Springer.
  • Jamasb, T., Thakur, T. and Bag, B., 2018. Smart electricity distribution networks, business models, and application for developing countries. Energy Policy. 114. pp.22-29.
  • Leonidou and et.al., 2017. Internal drivers and performance consequences of small firm green business strategy: The moderating role of external forces.Journal of business ethics,140(3), pp.585-606.
  • Naor, M., Druehl, C. and Bernardes, E.S., 2018. Servitized business model innovation for sustainable transportation: Case study of failure to bridge the design-implementation gap. Journal of Cleaner Production. 170. pp.1219-1230.
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