The analysis of the company, its objectives and external environment reveals a conflict between Vodafone’s objectives and its business setting. As stated previously, its objective to pursue market share places the company in direct competition with the industry leaders, Telstra and Optus. However, given the already high level of market penetration and the saturated nature of the industry, it is unlikely that Vodafone’s market share will rise.
Furthermore, Vodafone’s strengths lie in providing expertise services and technologies to smaller niche markets and it is in this light that another contrast can be seen between it and its pursuit of broader market share. Thus, a change is needed in Vodafone’s objectives and strategies to ensure that its strengths are aligned with any potential market opportunities. It can be seen that the firm’s future profitability is jeopardized given its current poor performance. Corrective actions must be taken to combat rivalry and improve its competitive position in terms of market share and revenues.
Upon looking at the major issues facing the industry, a possible course for this corrective action has been identified with wireless business solutions targeted at the small to medium business niche (see appendix 5). The importance of this business niche is compounded by high levels of rivalry and the maturing markets, both of which lead to possible price wars. In this situation, Vodafone does not have the cash flow or market share to sustain its competitive position and thus benefits from pursuing markets not covered by either Telstra or Optus.
The BCG growth matrix (appendix 5) shows that wireless applications possess ‘Star’ potential with a high competitive position and an ability to generate enough revenue to maintain its market share. The matrix also shows that mobile services fall under the ‘cash cow’ category as a valuable source of revenue for Vodafone, but with little chance for future growth. Thus, it is suggested that Vodafone pursue a two- pronged corporate growth strategy, which seeks to develop the small to medium business niche with wireless technology as well as build brand loyalty amongst existing consumer mobile services markets.
The objective for the former is to provide innovative solutions for the mobile office and to make wireless applications the predominant product of choice within this niche. Meanwhile, the objective for the latter is to build long-term customer relationships and is measured through increases in revenue per client. The benefit of wireless technology is that it allows for telecommunications without the burden of cable infrastructure or using wires and chords.
The latest use of such technology is called “Bluetooth” which forms a data connection between electronic devices such as a mobile phone and a computer through a short- range radio link. However, there are obstacles to overcome in the development of such applications. Firstly, the technology and service behind it needs to be more user friendly so that consumers can switch from landlines to wireless services with greater ease. Secondly, there have been concerns over data security with the potential for outside parties to access confidential information while it is in transmission.
These shortcomings must be monitored and dealt with by Vodafone’s product innovation teams. On a business level, the two- pronged strategy requires Vodafone to engage in competitive behaviour, targeting its business niche with a focused differentiation approach and the consumer markets with a differentiation approach. Focused differentiation involves concentrating on meeting the needs of the businesses and creating a sense of uniqueness through offering their expertise in wireless technology.
Here, bypass attack tactics can be employed to boost the perceived benefits of wireless services while simultaneously rendering competitor’s offerings as unnecessary and obsolete. On the other hand, differentiation aims for Vodafone to appear unique from its competitors with the suggested use of guerilla tactics to achieve this. This tactic enables Vodafone to intermittently attack competitors, saving the company financial resources compared to a continuous attack. The realisation of the above-described two-pronged strategy involves installing and completing programs, budgets and procedures.
These three activities must involve open communications at Vodafone and integrating efforts between senior and middle management as well as staff members to ensure the success of the strategy. Three programs have been devised based upon the identification of crucial activities needed for strategy implementation. The first is a restructuring program to establish a wireless business division, which services and monitors the business target market. This division needs to be given a high level of priority and be integrated into the company structure as one of its core business units.
The division should be focused on continued analysis of market needs, generating wireless innovations to meet these needs and superior service to assist in solving business problems. The second is an advertising and promotional program to a) heavily position wireless technology as superior to landlines in terms of its benefits to the business sector and b) appeal to existing retail consumers to build brand loyalty. The third is a training program aimed at educating staff on wireless technology and how to best cater to the needs of business consumers.
This training program should be regularly conducted, updated and given to all levels of company members. The establishment of these programs must take budget constraints into consideration. Given the large size and cash flow availability of Vodafone, it can be said that the budgets here allow for the best avenue for strategy implementation to be pursued. Nonetheless, consideration needs to be given in regards to the costs of setting up wireless infrastructure, setting up a new wireless business division, training staff and advertising and promotions.
These costs then need to be compared against expected revenues to generate a forecast on returns of investment. One method for obtaining expected revenue figures is to look at the pricing levels and performance of US or UK wireless technology firms. A budget can then be established by dividing the costs and revenues over the 3-year life span of this strategic plan to look at how resources will be distributed for each of the programs.
The budget should take into consideration here the higher start up costs expected in the first year of the plan and the lowered costs towards its end due to company synergies and progression along a learning curve. Finally, procedures need to be formally written to ensure that the day-to-day operations of the company are in accord with the strategy. Firstly, procedures need to focus on how the continued monitoring of the target market will be done. Here, it is recommended that regular surveys be conducted; feedback from sales and service staff are recorded and that consumer complaints are noted and acted upon.
Secondly, issues surrounding how business consumers will be serviced need to be addressed. To ensure superior service, it is recommended that clients be served by the same staff member/s each time, an information system is setup to record client details, timely check ups on clients are conducted and that an online troubleshooting service be initiated. Thirdly, procedures for the carrying out of advertising and promotional activities are needed. A time line for these activities must be drawn so that deadlines can be seen.