1. Case Study: Vodafone: developing communications strategy in the UK market

2. 1
At the time of the case, how do each of the four ‘industries’ (fixed line, mobile, television and broadband) compare in terms of ‘attractiveness’ using Porter’s Five Forces framework?

3. Buyers Potential entrants Supplyers Threat of new entrance
Competitive rivalry
Buyers
Threat of substitutes
Substitutes

4. Rivalry between existing competitors
Competitive rivalry
Rivalry between existing competitors
Division of competitors
there are Virgin media, Talk Talk, orange and sky as the main competitors as a competitors of fixed line
One base of mobile phone, competition was strong from orange, T-mobile
The competitors of broadband were BT, T-mobile and Virgin
Television – the main competitors are: BBC1, BBC2, ITV 1, Channel 4 and Five. Televisione service are provided by BSkyB, UKTV, Viacom and Virgin
Rapid growth in the number of competitors on every segment of sales. They start to offer “quad play”
Exit barriers are high because of high cost of infrastructure, workers, customer’s base
High rivalry - Most probably rivalry seems to be high when there is less or no brand loyalty for a specific product, little discrimination other than cost or price.

5. Buyers Potential entrants Supplyers Threat of new entrance
Competitive rivalry
Buyers
Threat of substitutes
Substitutes

6. The threat of entry Potential entrants
One leader in fixed line service - BT is already a leader of this industry providing the higher level of services
High number of competitors in mobile phone industry
High treat of new entrance in broadband industry - new companies are entering with offer of high speed imternet
High fixed cost – new company must to have little less money than in the past but fix cost are still high for new company which want to open new business
Legislation or government restrictions – Ofcom change regulations in the the UK communications industry. Ofcom give the issuance of licences to more mobile operators and also allowing MVNOs to lease network capacity
Experience and learning
Barriers of entry – after change of regulations barriers of entry are smaller because without the cost of building their own network. That leads to reduce of barriers to entry and that leads to increase in the number of competitors.
Economies of scale – new company must to have big customer base to become profitable

7. Buyers Potential entrants Supplyers Threat of new entrance
Competitive rivalry
Buyers
Threat of substitutes
Substitutes

8. Threat of substitutes This industry has a high substitute risk level
There are substitutes in the industry
New trend – using of fixed line is decreasing because considering the convenience offered by mobile connections, of being able to make a call on the move
Threat of new way of communication – that can be for example:
fixed line – mobile phones, skype on broadband, radio airwaves, phone booths
mobile phone - fixed line connections, skype on broadband, radio airwaves, phone booths; a lot of operators providing mobile phone
television – on-demand viewing, digital recorders, “catch-up” viewing via DVRs or the Internet
broadband internet – fixed line (existing copper wire telephone network), technologies of 3G and 4G
Substitutes

9. Buyers Potential entrants Supplyers Threat of new entrance
Competitive rivalry
Buyers
Threat of substitutes
Substitutes

10. The bargaining power of suppliers
Power of supplier is strong – increasing of prices by companies attract suppliers to deal with communication industry in UK.
Fixed line - Strong position of BT – the company is supplier and also service provider in fixed line industry
Mobile phone – Samsung has 26% of UK handset market, the second place has Nokia (23%) and Apple (10%)
Supplyers
Television – 12 mln households have DTTV mln homes is equipped to receive satellite – 8 mln receiving satellite signal by Sky, 4 mln homes have cable connection – most of them are clients of Virgin Media.
Low cost of switching supplier for customer
Broadband ­– Fixed broadband % market share 2011

11. The bargaining power of suppliers
Factor
Suppliers BT
Samsung
Sky
1. Quality of supplier’s products + ++
2. Size of supplier
3. Product differentiation
4. Change which will generate costs
5. Type of supplier market
Sum 7 8
Legend: - no impact, + small impact, ++ big impact

12. Buyers Potential entrants Supplyers Threat of new entrance
Competitive rivalry
Buyers
Threat of substitutes
Substitutes

13. The bargaining power of buyers
Big customer market - the main buyers from the industry are households (individuals) and businesses
Lower prices of products - after the price cut and other operating alterations which were forced on BT made Vodafone and other operators capable to buy and install network equipment in case of fixed line service
Customers often switching operators – there is low cost of switching company which provide communication service and customers are looking for the best option on the market
Buyers

14. The bargaining power of buyers
Factor
Buyers
Households (individuals)
Businesses
1. Good information of market + ++
2. Number of clients (share in total sales)
3. Product Differentiation
4. Change the client generates costs
5. Competition in the client’s sector -
Sum 6 8
Legend: - no impact, + small impact, ++ big impact

15. 2
What are the key drivers for change in the communications industry as a whole? What do you expect their impact to be over the nest five years?

16. Key drivers for change in communications industry:
Rapid changes in technology
growth of IP allowing voice, data and video to be digested. The dynamic nature of technology will keep operators findings ways to stay ahead of competitors by developing new technologies such as the IP, digitising high-speed distribution of voice, data and video over multiple networks
Increasing demand for mobile internet service
Growth of sales of smart phones and tablets
Switching to digital television like “on-demand” viewing and digital video recording
Regulations changes in UK communication industry
Cost of communication fall down
the cost of using infrastructure is lower nowadays

17. Key drivers for change in communications industry:
Growth in number of competitor
this market start to being accretive for new competitors through lower cost of entry and infrastructure and also because increase of demand on communication service
Social changes in sociality
customers want to have multiple services provided by on supplier like “quad play” – fixed line telephony, mobile telephony, television and broadband internet. Consumer need for converged services: Consumer needs change from time to time and even some firms will try to create the needs for the consumers thereby pushing the industry towards finding ways to satisfy these needs as the market expands
Fixed line telephony
the UK market is declining
Mobile telephony
small reduction of voice minutes but 3G mobile phone is regarded as one of the key products of telecommunication industry because it entails the quicker and higher quality of data transmission
New communication infrastructure
companies can change it’s fundamental infrastructure in order to switch to alternative technologies defining the devices best and flexible.

18. Impact of the key drivers on the next five years
changes in society leads to changes in consumer needs. In the near future clients going to want the newest technology, hi-speeds internet, new smart phones, on-demand television and they going to want it from one communication company. Like that customers will be pay only one bill and they will not need to look throught the market to find the best option.
Socio-cultural issue
changes in technological industry was strongly highlighted. Every year companies present us new technology and new equipment. The dynamic nature of technology will keep operators findings ways to stay ahead of competitors.
Technological issue

19. 3
How do you expect the UK communications industry to converge in the next 3-5 years? How attractive will it be?

20. How do you expect the UK communications industry to converge in the next 3-5 years?
The communications industry in UK is highly competitive. Significant technological improvements have led to faster data networks and product innovation to improve the customer experience. 4G, or long term evolution (LTE) is the next stage of mobile network development. Going forward, further network upgrades are expected to significantly enhance the user experience through a combination of both faster networks and wider high speed network coverage.

21. How do you expect the UK communications industry to converge in the next 3-5 years?
increased competition, from both existing competitors and new markets entrants, including mobile virtual network operators
rapid changes to existing products and services and the inability of new products and services to perform in accordance with expectations, including as a result of third party or vendor marketing efforts
the ability of companies to integrate new technologies, products and services with existing networks, technologies, products and services
a lower than expected impact of new or existing products, services or technologies on the future revenue of companies,

22. How do you expect the UK communications industry to converge in the next 3-5 years?
industry ability to expand theirs spectrum position, win 3G and 4G allocations and realize expected synergies and benefits associated 3G and 4G
the industry ability to secure the timely delivery of high quality, reliable handsets, network equipment or other key products
changes in regulatory framework in which the companies operate, including the commencement of legal or regulatory action seeking to regulate the group’s permitted charging rates
the impact of legal or other proceedings against companies in the communication industry

23. Global scale advantage and close attention to cost efficiency
The sucessfful implementation of Vodafone’s strategy to generate liquidity or cash flow from non-controlled interests
The application of rigorous capital discipline to investment decisions

24. 4
What should Vodafone’s strategy be to achieve its goal of being ‘The Communication Leader in an Increasingly Connected World’?

25. The key Vodafone’s competitive advantage
Vodafone has the capability to compete in opposition to its competitors through a highlighted strategy. Vodafone’s competitive strategy works in their competitive configuration but requires to be continuously updated to remain at the forefront of the technology segment. On the other hand Vodafone must watch competitors who will rapidly force progress on their services and technologies offered recently.
Vodafone’s position on the market
Due to Vodafone’s determined resources such as human resources, innovation and knowledge or competency which are mainly imperative for them to stay at the forefront of their competitors, it takes benefits of the competitive advantage.
Vodafone’s resources
Vodafone’s most important vague resource referred to their competencies and experience in the industry and their global presence and these things describe the company as a grand asset and a name anyone can trust upon
Knowledge and experience

26. How to become ‘The Communication Leader in an Increasingly Connected World’?
The success of a communication company or entire industry comes from their advanced and consistent investments, continuous innovation and its main focus on the customers.
Competition has been very hard for Vodafone - in terms of strong competition in European market Vodafone has a good market share and advanced customer bases in UK and other developed countries but they require to focus more on developing marketing framework to remain stable and winner of the market.
Target the best market segment - Companies are rarely capable of supplying or selling to an entire market and this is big opportunity for Vodafone. The organization will be able to concentrate on supplying a product to segments that will find it beneficial and whom will be willing to buy such a product.

27. How to become ‘The Communication Leader in an Increasingly Connected World’?
Vodafone has tree options of future strategy on UK market:
To continue the current course of focusing on mobile voice and data
To look for a partner to provide a strong fixed broadband offer
To invest in its own fixed voice and broadband network through LLU directly or through an acquisition

28. How to become ‘The Communication Leader in an Increasingly Connected World’?
New four growth area which was included in Vodafone corporate strategy:
Data service – Vodafone notice the increasing consumer demand for the mobile internet and other services related with this and wont to used it to have a competitive advantage
Emerging markets – new, growing markets in Africa and in India are the opportunity for Vodafone to have more customers and profit
Enterprise and total communications - growth will be driven by employees are becoming more mobile, devices more secure and the convergence of fixed and wireless communications
New services – by using new technology Vodafone can offer mobile commerce and operator billing