Case analysis of Vodaphone and its global stratgey

Exercise – Vodafone
Voice Data fone
A British multinational telecommunications company HQ in London

When solving the case, we need to look at:
What is the case question?
How do we understand the case company?
What does theory tell us?
What are the strategic implications?

Case question:
They are not making enough value of their international operations
How to operate globally?
Centralized or decentralized?
Local adaptation or global integration?
What industry is Vodafone operating in?
Highly regulated
Many competitors
Porter 5 forces:
Rivalry among competitors: lower price pressure, fragmented, global player  HIGHER
Threat of new entrants: high  many startups /low  entry costs, regulated – pointing towards more liberalization  HIGH LOW
Bargaining power of suppliers: mobile phone producers  LOWER HIGHER
Bargaining power of buyers: low switching costs for consumers/ disloyal customers, lock in mechanisms, higher requirements from consumers  HIGHER (?)
Threat of substitutes: new players (Google) offering new technology(Skype, Viper), new consumer behavior, Wifi (more use, e.g. in coffee shops)  HIGH

Industry Internationalization Chart: FDI flow varies from low to high  High (a lot of cross-border investments), Export/Trade flows varies from low to high  Relatively low (use wifi instead if international roaming now, threats of substitutes makes the export importance less impoartant).

Attractiveness of industry: based on the analysis, high FDI, but amount of cross-border export/import does not necessarily influence how we perceive this porters five forces analysis

How has the strategy changed over time?
New focus: cutting costs
Global integration 2004: XXX Vodafone  then more cutting costs
1984 ---------------------------------------------------------------------------------------------------- 2010
Local adaptation in the start (1994)
Today: not really local adaptation or global integration, but maybe leaning a little bit more towards global integration

Challenges:
Competitors: how is the competitor landscape changing – companies can use the same strategies and methods, and the only competitive force is competing on price
E.g. startups, hardware/software firms like Google/Apple ect, established companies – bundeled products, e.g. TDC (DK)
Commoditization: cannot differentiate the product itself, but only compete on price
Poor profits

Drivers for Global Integration
What are the potential benefits Vodafone can exploit with standardizing their operations and being a global company?
Cost cutting – more standardized and by doing this they can achieve:
Economies of scale/scope - types of economies of scale/scope, how can they cut costs: cut marketing costs (saying Vodafone is the same in UK as Austrralia), technology development (test in one market and if it is a success implement it in other countries) central purchasing (hand-sets), (bargaining power of buyers) support centers/call centers, user benefits (get the same service everywhere)

Drivers for Local Adaptation
Market differences – customer demand, regulations, competition intensity
Mergers
Local innovation  Ability to quickly response to market demands
Culture differences, people in some countries may not use their telephone the same way, e.g. in the US you pay to receive phone calls thereby creating more incentives to call out.

Strategic recommendations:
Should Vodafone move towards a more global integration or local adaption (or something else)?
Global integration  economies of scale/scope
In this type of industry, Vodafone does not have to adapt as much as other products, more standardized product
Local Integration
Local Adaptation – due to country irregularities

Goal: Where do we want to position Vodafone? Should they try to move in any direction or are they positioned the right place today? Where are Vodafone today? “ONE Vodafone” in 2004 and started standardizing – what economies of scale can they achieve or gain? What more extra benefits can Vodafone exploit by moving towards global integration?

Challenges: if they move towards local adaptation their costs will increase, so find a way to choose the regions where local adaptation is very important, and as a general move towards global integration

Possible solution: Mobile industry very commoditized, so create more bundles to differentiate  product (back end of the company) would become standardized (processes regards to the product: globally integrated) , and services (front end of the company) more locally adapted. Create value added for consumers by differentiate on the services

Challenges in pursuing both/two types of strategies: may risk being stuck in the middle, and consumers may not understand they company’s strategy and communication.