Presentation on theme: "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."— Presentation transcript:
1 Case Study: Vodafone: developing communications strategy in the UK market
2 1At 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 rivalryBuyersThreat of substitutesSubstitutes
4 Rivalry between existing competitors Competitive rivalryRivalry between existing competitorsDivision of competitorsthere are Virgin media, Talk Talk, orange and sky as the main competitors as a competitors of fixed lineOne base of mobile phone, competition was strong from orange, T-mobileThe competitors of broadband were BT, T-mobile and VirginTelevision – the main competitors are: BBC1, BBC2, ITV 1, Channel 4 and Five. Televisione service are provided by BSkyB, UKTV, Viacom and VirginRapid 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 baseHigh 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 rivalryBuyersThreat of substitutesSubstitutes
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 servicesHigh number of competitors in mobile phone industryHigh treat of new entrance in broadband industry - new companies are entering with offer of high speed imternetHigh 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 businessLegislation 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 capacityExperience and learningBarriers 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 rivalryBuyersThreat of substitutesSubstitutes
8 Threat of substitutes This industry has a high substitute risk level There are substitutes in the industryNew trend – using of fixed line is decreasing because considering the convenience offered by mobile connections, of being able to make a call on the moveThreat of new way of communication – that can be for example:fixed line – mobile phones, skype on broadband, radio airwaves, phone boothsmobile phone - fixed line connections, skype on broadband, radio airwaves, phone booths; a lot of operators providing mobile phonetelevision – on-demand viewing, digital recorders, “catch-up” viewing via DVRs or the Internetbroadband internet – fixed line (existing copper wire telephone network), technologies of 3G and 4GSubstitutes
9 Buyers Potential entrants Supplyers Threat of new entrance Competitive rivalryBuyersThreat of substitutesSubstitutes
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 industryMobile phone – Samsung has 26% of UK handset market, the second place has Nokia (23%) and Apple (10%)SupplyersTelevision – 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 customerBroadband – Fixed broadband % market share 2011
11 The bargaining power of suppliers FactorSuppliersBTSamsungSky1. Quality of supplier’s products+++2. Size of supplier3. Product differentiation4. Change which will generate costs5. Type of supplier marketSum78Legend: - no impact, + small impact, ++ big impact
12 Buyers Potential entrants Supplyers Threat of new entrance Competitive rivalryBuyersThreat of substitutesSubstitutes
13 The bargaining power of buyers Big customer market - the main buyers from the industry are households (individuals) and businessesLower 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 serviceCustomers often switching operators – there is low cost of switching company which provide communication service and customers are looking for the best option on the marketBuyers
14 The bargaining power of buyers FactorBuyersHouseholds (individuals)Businesses1. Good information of market+++2. Number of clients (share in total sales)3. Product Differentiation4. Change the client generates costs5. Competition in the client’s sector-Sum68Legend: - no impact, + small impact, ++ big impact
15 2What 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 technologygrowth 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 networksIncreasing demand for mobile internet serviceGrowth of sales of smart phones and tabletsSwitching to digital television like “on-demand” viewing and digital video recordingRegulations changes in UK communication industryCost of communication fall downthe cost of using infrastructure is lower nowadays
17 Key drivers for change in communications industry: Growth in number of competitorthis market start to being accretive for new competitors through lower cost of entry and infrastructure and also because increase of demand on communication serviceSocial changes in socialitycustomers 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 expandsFixed line telephonythe UK market is decliningMobile telephonysmall 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 transmissionNew communication infrastructurecompanies 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 issuechanges 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 3How 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 operatorsrapid 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 effortsthe ability of companies to integrate new technologies, products and services with existing networks, technologies, products and servicesa 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 4Gthe industry ability to secure the timely delivery of high quality, reliable handsets, network equipment or other key productschanges in regulatory framework in which the companies operate, including the commencement of legal or regulatory action seeking to regulate the group’s permitted charging ratesthe 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 interestsThe application of rigorous capital discipline to investment decisions
24 4What 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 marketDue 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 resourcesVodafone’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 uponKnowledge 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 dataTo look for a partner to provide a strong fixed broadband offerTo 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 advantageEmerging markets – new, growing markets in Africa and in India are the opportunity for Vodafone to have more customers and profitEnterprise and total communications - growth will be driven by employees are becoming more mobile, devices more secure and the convergence of fixed and wireless communicationsNew services – by using new technology Vodafone can offer mobile commerce and operator billing