Review of Management Practices

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Due to regulatory problems as well as other challenges that prohibit one telecom service provider from accumulating monopolistic advantages, the telecom business in Europe and other areas of the world is becoming increasingly competitive. Customers' costs for switching service providers are getting lower in Europe, for instance, thanks to the Three Roaming Regulations. Vodafone has been forced to expand its activities in other geographical areas as a result. To set itself apart from its rivals, the corporation has also been compelled to invest a sizable amount in 4G licenses, the newest technology. This paper evaluates the telecom business industry as well as considers how Vodafone is operating in this industry. The paper implements PEST, SWOT and Porters 5 forces to evaluate Vodafone’s business industry. Porter’s generic strategies have been used to evaluate Vodafone’s alternative future strategy. In conclusion Vodafone is better of adopting differentiation strategy since this strategy can be employed on a wider market.


The telecommunication industry has undergone significant changes over the past few decades, resulting in significant changes in the way people communicate. Yet, some telecommunication companies have shown significant growth compared to others. Vodafone is one of the telecommunication companies that have recorded substantial growth in the past few decades. With more than 4 billion mobile customers around the world, Vodafone as emerged as the leading company with 7% share of customers all over the world (Vodafone, 2016). Headquartered in the United Kingdom, and currently located in more than 13 countries, Vodafone has more than 9 million subscribers (Depamhilis, 2003). The company has not only benefited from the fact that many people in today’s world are choosing to communicate using mobile phones compared to fixed phones, but also from the financial status of its shareholders, which allowed it to acquire other companies in the telecommunication industry. In 1999, for instance, Vodafone acquired AirTouch for a reported fee of $45 billion (Lipin & Mehta, 1999). In developing countries like India, Vodafone has acquired significant stakes in companies such as Airtel (ET Bureau, 2015). Partnering with Microsoft and Yahoo also proved to be an essential business strategy, since it helped Vodafone with their quest to launch instant messaging services to people’s mobile phones.

Vodafone is also innovating at a significant level, currently offering their customers 4G communication technology. In Europe, for instance, more than 46 million Vodafone customers are enjoying 4G communication technology, offered by Vodafone (Kollewe, 2016). However, a significant number of the company’s subscribers, especially in emerging markets, are still using 3G and 3.75G. Frequent innovations, mergers and acquisitions as well as other business activities have seen Vodafone growing in terms of their sales income. In 2016, for instance, Vodafone recorded a 2.7% rise in first quarter earnings (Kollewe, 2016). Revenue increased by 2.3% in 2015 to £41 billion (Kollewe, 2016). The basic concept of this paper, therefore, is to provide a clear analysis of Vodafone’s business model, strategies the company has adopted in the past five years as well as their success, and potential strategies Vodafone is likely to adopt. This paper also provides a recommendation of the most appropriate strategy Vodafone should adopt in the future.

Evaluating the Telecom Business Environment using PEST, SWOT and Porter’s 5 Forces

The business environment of a company is comprised of a series of layers: macro environment, industry, competitors and markets (Johnson 2005). Macro environment is the most general layer and is comprised of factors affect all companies operating in that environment. The industry is comprised of companies producing similar products and fighting for the same customers. Companies are, therefore, required to adopt different characteristics as well as produce different types of products and services in order to attract customers in a certain industry. PEST, Porters Forces and SWOT analysis are three models used to analyze Vodafone’s business environment.

PEST Analysis

Being a multinational corporation, Vodafone is headquartered in the UK, and owns subsidiaries in a significant number of countries. As a result, the company has to work in corporation with laws, customer demands and trends in different countries. However, Europe has emerged as the most significant market for Vodafone with 46.8 million customers (Kollewe, 2016). Furthermore, the company’s parent country, the UK is part of the UK, which means, analyzing this market is very important.


Business activities of Vodafone are subject to laws and regulations established by countries it is operating in. In Europe, a significant number of countries have adopted the EU regulatory framework for electronic communication, which provides a series laws that need to be implemented by telecommunication companies operating in this region (European Commission, 2016). The aim of the EU’s regulatory framework for electronic communication to ensure telecommunication customers are benefiting from services provided by telecommunication companies. In the past decade, this framework saw telecoms services prices reducing by 30% (European Commission, 2016). EU aim to use this framework to create a flexible, simple, technology neutral environment. However, while customers might be benefiting from such laws framework, Vodafone finds them to be very challenging. For instance, Vodafone is currently required to consider Three Roaming Regulations, which were adopted by EU in 2007, 2009 and 2012 with an aim of introducing caps on roaming fees until 2022 (Cachin, Heene & Pelkmans, 2015). This regulation helps the EU to promote competition and market integrity in the telecommunication industry and at the same time allow customers to roam from one company to another without paying hefty prices.

The Three Roaming Regulation is preventing Vodafone from implement its appropriate pricing strategy. As part of the Three Roaming Regulation, telecom companies operating in Europe are required to provide Euro-tariff, which means calls made within Europe will be charged at 24 eurocents. In 2011, for instance, Vodafone was not able to implement its pricing strategy, which would have seen the company extend its one-off connection fee scheme to a new data roaming plan (Cachin, Heene & Pelkmans, 2015). In countries such as Ireland, Vodafone has been forced to endure various charges as the company continues to be non-compliant with EU’s new Roaming Regulations (Cachin, Heene & Pelkmans, 2015). Apart from that, the EU telecommunication market is largely influenced by the spectrum liberalization, which identifies markets and not regulators as the most significant agents in deciding efficiency of a spectrum. The EU in 2005 proposed for a spectrum reform, which would allow spectrum holders the flexibility of the use the spectrum is put, as well as the ability to improve spectrum bands (Lomas, 2012). This has significant impact on the telecommunication market since regulators not only decides the spectrum that should be implemented, but will also control how various companies can use them.


GDP, inflation rates and other economic aspects of the markets Vodafone operates are very important. The UK, which is Vodafone’s largest market, has seen its GDP grow by 5.7% (Sentance, 2016). This growth is being propelled by UK’s population increasing use of smartphones, as well as the increasing competition between telecommunication companies. In terms of inflation rates, the UK has seen consumer prices rising with 1.2% in 2016, which is quite high compared to the previous year’s inflation rate of 0.9% (Sentance, 2016). Rise in inflation affects telecommunication companies significantly since customers cut on their spending. According to Sentence (2016) pound has fallen with 20pc against both the United Stated Dollar and Euro. Consumer spending power in the UK has always been boosted by the zero inflation rates.

Increase in inflation rate, therefore, is likely to wipe out consumer spending power. In addition to, the UK is not likely to improve their wage growth of 2.5pc due to Brexit and the economic uncertainties associated with it. Another significant economic factor is the economic crisis. In Europe for instance, the euro zone crisis affected Vodafone revenues significantly. During the crisis, Vodafone saw its revenues, which are generated from texting, calling and sending data falling with about 1.6% in Europe (Milmo, 2012). Countries like Spain, Portugal, Italy and Greece, were severely hit by this crisis (Milmo, 2012). The euro zone crisis also saw Vodafone stocks on the FTSE 100 dropping with 4.9% to 178.2p (Milmo, 2012). Competition in the telecommunication industry is also playing a significant role. The UK is regarded as one of the largest telecom market in Europe, but also very competitive. Competition is also being influenced by steady falling in consumer prices and expansion of various networks.


The UK and other parts of the world where Vodafone operates are facing demographic changes that are unprecedented. Consumption patterns, social systems, job markets and even education in different parts of the world are changing significantly. Data compiled by Eurostats (2016) predicts that by 2050 the number of children in Europe will reduce by 15 million, compared with 2005. This means the working age population will reduce significantly while the number of people retiring from jobs expanding. However, while countries in Europe are likely to register a decrease in population, countries in Africa and Middle East will continue to grow in terms of population. Another important factor to consider is change in lifestyle. Currently, a significant population in the UK and other parts of the world where Vodafone operates is characterized with people living their lives on the internet. Currently, more than 40% of the world population is not only connected to the internet, but is demanding better technological innovations (Internet Live Stats, 2017). In addition to, many customers are now using larger and higher data processing smartphones. This change in lifestyle is pushing telecommunication companies to provide their customers with better bandwidth spectrums.


Vodafone’s business environment is largely being impacted by technological factors due to the nature structure and nature of telecommunication industry. Currently, the communication environment is seeing an increase in new and better technologies, which can be used to communicate both effectively and efficiently. WhatsUp and Skype, for instance, are new communication technologies that allow people from different regions to communicate effectively using the internet at a very low cost. Even though, technologies like voice and data services are important to Vodafone, such technologies are likely to lose their advantage as more people are now using WhatsUp and Skype services at a higher rate compared to normal telecommunication services. This issue has already started showing with the telecommunication companies worldwide in 2014 losing approximately $386 billion due to newer, effective and more affordable technologies (Heinrich, 2014). Ovum, a research company based in London provided that with Skype, WhatsUp and other new technologies being unveiled, there will be significant pressure on Vodafone and other telecommunication companies to remain profitable in this business environment (Heinrich, 2014). Newer technologies are likely to case decline in revenues as Vodafone is likely to lose revenues generated from international calls and decrease in a roaming fees. Voice-over-the-internet-protocol is currently becoming every customer’s method of communication while WhatsUp, WhereverTV, Hulu and Skype are providing people with communication technologies that are much cheaper. In addition to, smartphone developers are advancing their devices, which make it easier for customers to use other communication services.

Porter’s Five Forces

Vodafone business seems to have been boosted by Europe in 2016 for the first time since 2008. With a first quarter earnings of £11.6 billion (2.7% growth) and an increases in dividend payout to shareholders of 2%, Vodafone seems to be enjoying its growth in Europe (BBC, 2016). Yet, while Vodafone’s seems to be realizing significant growth, competition in the telecommunication industry is also intensifying. Currently, the UK and Europe telecommunication industries have seen a significant number of companies entering the market, while other companies have gained significant market share. Table 1 shows factors that are currently influencing Vodafone’s market growth.

Threats of new entrance (Low)

License fees required are significantly high

Companies need significant amounts to enter telecom market.

Regulatory issues make it difficult to enter this industry

High cost of infrastructure

Technology changes taking place at a rapid pace.

Consumers bargaining power (High)

Switching prices are low

Competitors lack product differentiation

High competition leading to low prices

Suppliers bargaining power (Medium)

Major suppliers are very few in both UK and Europe telecom markets.

Networks are outsourcing services at an expedited rate.

Platform used are common

Competition among rivalries (High)

High competition from companies like O2, Virgin Media, Talk Talk, WhatsUp, Skype etc.

UK/Europe markets are open for competition due to favoring legislations like Three Roaming Regulation.

Lack of brand loyalty from customers.

Substitutes (Medium - high)

Fixed phone users are slowing declining

WhatsUp, Skype, Hulu

Facebook and other social networks

Only a few companies can afford 4G and DSL licensing

Table 1: Porters 5 forces analysis of Vodafone’s business environment

Both the UK and Europe telecom industry are described as oligopoly due to the nature of the markets. However, barriers to entry, such as high licensing costs, and regulatory issues make it difficult for new companies to enter the market. Despite both EU and UK regulating the broadband networks, new entrants are still required to pay hefty costs in the telecommunication industry. Furthermore, with the implementation of various regulations, customers find it easy to switch from one telecommunication company to another. In addition to, customers are failing to show loyalty to a certain mobile phone service provider. This issue seems to be affecting Vodafone significantly despite their innovations. In 2016, for instance, a number of Vodafone customers launched complain despite the company’s heavy expenditure (£1 billion) on R&D to provide their customers with better services (Palmer, 2016). This issue is likely to be caused by competition in the industry, which has seen Vodafone’s competitors providing better services to their customers. According to Palmer (2016) Three and O2 have seen fewer complaints compared to Vodafone.

SWOT Analysis

In 2014, Vodafone reported revenue of $17.3 billion (£10.2 billion) in the quarter that ended in June (Palmer, 2016). The strong pound currency was one of the reasons for Vodafone’s revenue growth. In addition to, Vodafone has been investing heavily in R&D, as well as ensuring its customers are getting the best services. Strong presence all over the world has also the reason for Vodafone’s high success. Yet, while the company continues to record significant growth, Vodafone is still being faced with significant challenges. Table 2 shows SWOT analysis of Vodafone.


Large number of subscribers: 435 million subscribers worldwide.

Business is geographically diversified

Vodafone has a network that is advanced and is comprised of latest technology.

Vodafone brand is widely recognized.


There is cut throat competition everywhere.

Failure to locate in the US is a weakness

European economy where Vodafone is largely situated is sluggish.


High investment in emerging markets like India.

Merger and acquisition. For instance, in Germany, Vodafone can acquire Deutschland as well as the Spanish cable.

Provincial of LTE and 4G networks, which are still lacking worldwide.


Vodafone major market, Europe is saturating thus limiting the company’s revenue growth.

Regulatory issues: Roaming regulations for instance.

Increasing number of cheaper telecommunication services like WhatsUp.

Table 2: Vodafone’s SWOT analysis

Having a large number of subscribers has helped Vodafone remain profitable in the telecommunication market. A wider geographical presence and the company’s huge amounts of capital also put Vodafone at an advantage. However, Everywhere Vodafone locates seems to have a competition of some sort. Telecom service providers like MTN and Airtel are also working significantly hard to gain geographical presence worldwide. In UK, companies like O2 and Three network are providing Vodafone with cut throat technology while in South Africa Vodafone has to fight for market shares with Vodacom, MTN, Telkom and Cell C. Threat of substitutes is also very eminent with WhatsUp, Hulu and Skype among technologies currently being used by many people for communication purposes.

Strategies Adopted by Vodafone in the Last 5 Years

Vodafone has implemented different business strategies in the last five years. Some of the strategies are penetrating through emerging markets; invest in innovation and R&D; create alliances. The company aims at becoming one of the largest brands in the world, a business aspect the company hopes to achieve by expanding its presence around the world through dual branding exercises. In the telecommunication industry, Vodafone is currently the second largest service provide. The company has also shown its prowess by providing its customers in UK and Europe with 4G and LTE networks, a business strategy that has seen the company grow in terms of revenue in these markets.

Investing in emerging markets

Vodafone has made significant strides as far as gaining worldwide market exposure is concerned. Despite having a larger market in Europe and UK, the company has managed to gain exposure in India and other emerging markets. In India, for instance, Vodafone and Airtel are the largest communication service providers. This strategy has emerged successful considering that the company’s revenues have increased in the past few years. According to Thomas (2016), investment in emerging markets saw Vodafone marking its first full year growth in terms of revenues and core earnings in 2015 due to investments in India. Apart from India, Vodafone has also emerged as the largest service provider is South Africa. With up to $24.4 billion reported from emerging markets, Vodafone seems to be enjoying its service expansion in these markets (Thomas, 2016). Currently, the company is hoping to add more African countries include Ghana as part of its markets. Expanding in emerging markets has also been a response to the slow growth of the European market Organic revenues in 2015 rose by 1.4% to £9.2 billion due the company’s investment in India and South Africa (Thomas, 2016).

Innovation and R&D

Providing customers with the latest technology has proved to be a significant business strategy for Vodafone, especially in UK and other parts of Europe. With Europe’s telecommunication market saturating, providing customers with 4G and LTE networks is required to retain customers. In 2013, when Vodafone’s coverage was limited, the company took an important step of purchasing a significant amount of 4G frequency spectrum (Thomson, 2013). Currently, Vodafone possesses more than 85% of the UK’s mobile service subscribers using 4G network (Thomson, 2013). Investing heavily in latest technology has also seen Vodafone increase its service subscribers in smaller communities. By purchasing a larger amount of 4G, Vodafone has also managed to maintain its customer is most parts of Europe. The company also offers its customers inclusive roaming at no extra charges. Currently, Vodafone is offering 4G services to 40 European countries (Thomson, 2013). Therefore, even though, the European economy is stagnating, Vodafone still has a significant market share in this region.


In 2016, Vodafone extended its strategic alliance with Huawei, a business strategy that will see the two companies provide better services to enterprise customers (Huawei, 2016). Critically, strategic alliance has been part of Vodafone’s entry to various markets. In India, for instance, Vodafone has created a strategic alliance with ICICI Bank, which the country’s largest bank in the private sector (Indian Infolone, 2016). This alliance was mainly to help Vodafone provide the Indian customers with mobile money transfer as well as payment services through their phones. Strategic alliance with ICICI Bank proves Vodafone with the opportunity to venture into the banking business, as well as the money transfer business. This means, Vodafone will be providing its customers with more than just the normal telecommunication services. This alliance has also been described as a unique innovation, which will allow Vodafone to provide a significant number of people in India with easier and cheaper ways of accessing their funds. This service has already been launched in countries like Kenya and has proved to be successful.

Vodafone’s Potential Future Strategies based on Porter’s Generic Strategies

The intensity of competition in the telecommunication industry is making it difficult for Vodafone. As a result, Vodafone has been forced to implemented different strategies to survive in the industry. However, competition in the telecommunication industry is not lessening any time soon, and is likely increase in the future. Vodafone, therefore, will need to consider alternative strategies in order to survive in this industry. Vodafone need to consider Porter’s generic strategies, which have been implemented by other companies in other industry. According to Porter, companies that implement one of his strategies are likely to benefit from higher returns on investment compared to companies that employ hybrid strategies (Eldring, 2009, p.11). Porter’s generic strategies model was developed after a significant investigation between different strategies and their relationship between cumulative volume of production/market share and return on investment (Eldring, 2009, p.11). Figure 1 show a graph produced from this investigation.

Figure 1: Graph showing relationship between cumulative volume of production and return on investment (Eldring, 2009, p.10).

Porter believed that companies that implement different strategies are likely to benefit differently. For instance, companies that implement cost leadership strategy will benefit from high returns on investment since they will be able to access a larger market share. Companies that implement either differentiation or focus strategies are likely going to have a smaller market share but will still have high returns. However, companies that are unwilling to implement any of the strategies are likely to fail in the market or succeed if the structure of the industry is favorable (Moon, 2010, p.9). Similarly, companies without properly defined strategy will only succeed if competitors have also failed to define their market strategies. Critically, it can be argued that most competitors in the telecommunication industry are “stuck in the middle” as shown in figure 1.

Vodafone need to consider implementing strategies that are associated with Porter’s generic strategies model. Implementing differentiation strategy for Vodafone involves developing products and services that offer customers additional features. The result from this strategy is value creation for both existing and new customers. Vodafone will benefit from this strategy as income will be generated by charging extra prices for each added feature. For instance, in its home market, Vodafone provide its customers with different networks. The company has added 4G (LTE) to the networks it provides its customers in both UK and other parts of Europe. Customers using 4G are required to pay more in terms of data subscription compared to customers using other networks.

Cost leadership is another strategy that can be employed by Vodafone. Cost leadership means gaining profits by reducing production costs and at the same time charging average prices. By reducing production cost, and charging average prices for their products and services, it is very likely that Vodafone will increase its market share in a wider market. The results to this strategy are reasonable amount in terms of profits from every sale Vodafone makes. According to Porter (2008), having a low-cost position in the market is important since it allows the company to yield returns that are above average even with competitors present. Cost leadership can be important to Vodafone, also because it can defend the company against powerful buyers who have the ability to drive prices down.

The third strategy: focus generic strategy will require Vodafone to focus their attention to a particular group of buyers, product segment or a geographical market. This means targeting a particular group of customers, enterprise, for instance, and using their entire resources to make sure this group of buyers is well served. Adopting this strategy, Vodafone should be able to serve a narrow target better than its competitors. Companies that implement this strategy, according to Porter (2008) may find themselves either implementing a low cost or differentiation strategy to remain marketable to the group of customers they are targeting. In the UK, for instance, focus strategy will mean providing services that mostly attract the premium and enterprise customers. This is similar to differentiation since Vodafone will be required to provide services that will attract most customers in this group.

While Porter’s generic strategies are important, it is recommended that Vodafone implement differentiation strategy in the future. Implementing differentiation strategy on a wider market scope will help Vodafone increase their market share and generate high income in the process. The company has already started implementing this strategy in its home country with the introduction of 4G (LTE) network. This is proving to be successful considering that Vodafone has more than 46 million customers in Europe using 4G. Acquiring a significant amount of 4G network has provided Vodafone with a competitive edge in Europe, and has also provided the evidence that providing different services from competitors can be advantageous.

Vodafone possesses significant amounts, which it can use for R&D as well as innovation processes. Critically, many companies in the telecommunication industry understand the importance of differentiation. However, only a few possess the needed resources to implement features that will different them from their competitors. Having significant amounts of resources at their disposal, therefore, affords Vodafone the advantage differentiate itself from its competitors by providing customers with services that are not only different but are better than its competitors.


Telecom business environment both in Europe and other parts of the world is becoming intensely competitive. In Europe, regulation such as the Three Roaming Regulations is making it difficult for any one telecom service provider to emerge a winner in the industry. The aim of such regulations is to prevent a single company from acquiring monopolistic advantages in the market. As a result, Vodafone has been forced to expand in other regions to acquire profits. Currently, India and South Africa have become Vodafone’s important markets with other countries like Ghana and Turkey slowly identifying as Vodafone’s prominent market destinations. In the future, however, Vodafone should consider differentiation strategy since it can be implemented on a wider market. Providing different customers with different services and product features has proved to be an essential market strategy and can help Vodafone acquire a significant market share.


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February 09, 2023

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