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Case Study On International Business Management of Vodafone
Case Study On International Business Management of Vodafone
1 Introduction to Vodafone 2
7 Conclusion 24
References 24
In this case study, the concepts and applications of international business management are depicted
with respect to the telecom giant Vodafone. Vodafone is a large multinational company with its
operations all around the globe. Here, the aim is to explain the principles of international business
using the cases of Vodafone’s strategies and management principles in different countries.
Vodafone or Vodafone Group Plc is one of the largest telecom companies in the world. It is a
British public limited company having its head quarters in London, UK. In terms of number of
subscribers it is the 2nd largest, and in terms of revenue it is the largest telecom operator in the
world. As of December 2011, it had 439 million subscribers across 70 countries in the world. The
name Vo-da-fone came from Voice, data and phone (or fone) 40, 41. Its pervious name was Racal
Telecom and the name Vodafone came in to effect in 19913,4. In the Figure 1, the map of
Vodafone’s presence has been shown in red color. So this is a truly global company with its
presence in six continents.
Vodafone made the UK's first mobile call at a few minutes past midnight on 1 January 19853, 4, 39.
In 2000, within fifteen years, the network was the largest company in Europe and the largest of its
kind anywhere in the world. By the turn of the century, almost every second UK citizen had a
mobile – and a third of them were connected to Vodafone.
//Sasmita Mohanty (Master of Management) // Page No - 2/25
1982: The Racal Electronics Group wins its bid for the private sector UK Cellular license. It sets
up the Racal Telecomms Division and names the new network ‘Vodafone’ to reflect the provision
of voice and data services over mobile phones. Based in Newbury, the company has less than 50
employees, all in one Building.
1985: The Vodafone analogue network is the first cellular network to launch in the UK, and the
first call is made from St Katherine’s Dock in London to Newbury on 1 January 1985.
1987: There were three major milestones for Vodafone in 1987. They are:
Vodafone became recognized as the largest mobile network in the world.
Vodata is created as the ‘voice and data’ business to develop and market Vodafone Recall,
the voicemail service.
Vodapage launched, providing a paging network that covers 80% of the UK population
1988: Racal Telecomms Plc floats on the London and New York Stock Exchange.
1989: Paknet is formed as a joint venture between Racal Telecom and Cable & Wireless.
The Vodafone story is one of investment, innovation and award-winning customer service. Above
all, it’s one of growth and the ability to deliver the tremendous benefits of mobile communications,
not just in the UK but worldwide. Now, it is one of the largest companies in the world and the
second largest company listed in the London Stock Exchange. The key people in the mangmgment
today are:
The rest chapters of this report are organized as follows. In the second chapter, brief picture of
global telecommunication sector is presented and it has been compared with the figures of
Vodafone´s. In the third chapter, European operations of Vodafone are analyzed with the emphasis
on Germany, Spain and Portugal. In the fourth chapter, non-European operations of Vodafone are
analyzed with the emphasis on USA, India and Africa. In the fifth Chapter the international
marketing aspects of Vodafone are analyzed with emphasis on cultural diversity. In the sixth
chapter human resource management aspects of Vodafone are looked into. In the last chapter the
study is finished with major conclusions and references.
60
50
40
30
20
10
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011*
* Estimate.
Figure – 2: Global ICT Developments (Source: ITU World Telecommunication /ICT Indicators database)
Fixed telephone line is the old system and it in service for more than a century. But its medium and
characteristics have changed over time. Till 2005 its trend of growth used to be positive. But its
alternatives are cheaper; and people prefer to be mobile than to remain static. So, the number of
new subscribers does not increase; rather people prefer to go for its alternatives such as the wireless
and wired broadband services. Of course in some countries of Africa and Asia it has positive
growth. The following bar chart shows the density of fixed telephone lines per 100 inhabitants.
Europe is the leader in this sector and Africa is lagging others.
//Sasmita Mohanty (Master of Management) // Page No - 4/25
Fixed Telephone Lines per 100 Inhabitants in 2011
45
39.1
40
35
30 28.5
26.3
25
20 16.6
15 13.0
9.7
10
5 1.4
0
Europe The Americas CIS** World Asia & Pacific Arab States Africa
*Source: ITU World Telecommunication /ICT Indicators database
CIS** - Commonwalth of Independent States
Figure - 3: Fixed Telephone Line or Landline Statistics of Different Continents and Regions (Source: ITU)
However, the mobile cellular users have grown much faster than the fixed lines. That is due to the
cost effectiveness of the cellular operations and the ease of use without many hassles. At the end of
2011, the total number of mobile subscribers was approaching 6 billion. It is beyond the
imagination of the planners and operators a decade ago. The biggest contribution in this area comes
from the emerging economies. The following figure shows its growth trends.
Figure - 4: The Trend of Number of Mobile Subscriptions and its Percentage (Source: ITU)
Though the mobile communication is quite widespread across the world, it is not so widespread as
far as its advanced versions are concerned. That means 2G or the basic mobile service is almost
ubiquitous in the world whereas the 3G and other advanced versions are not that common among
the majority. It is clear from the following figure (Figure - 4).
//Sasmita Mohanty (Master of Management) // Page No - 5/25
Figure - 5: Global 2G and 3G Presence (Source: ITU World Telecommunication/ICT indicator database)
In terms of numbers the total subscribers of global 2G and 3G markets are like this. Total number of
2G subscribers is almost 6 billion and that of the 3G subscribers is around 1.2 billion. Around 90%
of the global population is having the 2G services but the 3G is far behind in this regard with a total
coverage of 45%. In many countries people do not even take the 3G services though they are
available because of some reasons such as the cost and complexities of the system in place.
60 56.3
50
47.6
40 34.7
29.1 27.2
30
20 12.8
10
0
Europe The Americas CIS** World Arab States Asia & Pacific Africa
*Estimate
** Commonwealth of Independent States
Regions are based on the ITU BDT Regions, see: http://www.itu.int/ITU-D/ict/definitions/regions/index.html
Source: ITU World Telecommunication /ICT Indicators database
Figure - 6: Percentage of Internet Users in Different Continents/Regions (Reproduced from ITU Figures)
Europe and America have more internet users than other continents. In case of broadband access too
they are ahead others. It is clear from the diagram shown in Figure 6.
World Vodafone
Vodafone has presence in over 70 countries. Out of those 70, Vodafone operates directly in 30 and
it has partners in rest 40 countries. We show the main markets of Vodafone in terms of percentage
of customers. Vodacom is the subsidiary of Vodafone in South Africa and it also operates in
Figure – 9: Market Share of Vodafone in terms of percentage of total customers as of Dec 2011 25.
(Source: Vodafone Annual Report 2011)
In the following figure the revenue segments of Vodafone are shown in the pi charts. Despite its
huge presence in the emerging markets, Europe is still the largest money making sector. Of course
the revenue from the European sector is decreasing due to tough competitions. But the revenue of
the emerging markets are growing very fast with double digit growth rates.
Figure – 10: Revenue Segments of Different Regions25 (Source: Annual Report of Vodafone, 2011)
Vodafone have one of the largest mobile footprints in the world with more than 224,000 base
station sites. During the year 2011, their networks carried around 850 billion minutes of voice
traffic (equivalent to 208 minutes per month, per customer) and 161 petabytes of data equivalent to
downloading over 1,400 three minute video clips every second. Vodafone continue to invest around
£6 billion a year to maintain leadership of our networks. Tests show that in the Europe region,
Vodacom and Egypt, Vodafone offers peak user data downlink speeds which are on average 40%
faster than our best competitors. Their billing and customer relationship management systems are
being enhanced to enable our customers to manage a single account, with a single bill, for multiple
devices or for several people. They directly own and manage about 2,200 stores around the world
and they also have around 10,300 Vodafone-branded stores run through franchise and exclusive
dealer arrangements. In most of their local markets sales forces also sell direct to enterprise
//Sasmita Mohanty (Master of Management) // Page No - 8/25
customers. The level of indirect distribution varies between markets and may include using third
party service providers, independent dealers, distributors and retailers. The internet has also become
an increasingly powerful and cost-effective distribution channel. 51% of their European contract
customers receive their bills online. Over six million customers use their fixed broadband services
in 13 markets to meet their total communications needs. In addition, through Gateway, they provide
wholesale carrier services to more than 40 African countries. This includes business managed
services, such as secure remote network access, and revenue from mobile virtual network operators
generated from selling access to our network at the wholesale level. In the following figures it has
been depicted.
Figure – 11: Service Revenue by sectors and Customer Segments25, 26 (Source: Annual Report of Vodafone, 2011)
Vodafone work closely with some of the world’s leading companies to deliver innovative products
and services to its customers. Its agreements with Samsung, Google, Microsoft, HTC and others
have enabled it to be first to market with cutting-edge smart devices. It now distributes the Apple
iPad in the UK and to its enterprise customers in Europe. For enterprise customers, in partnership
with Microsoft it provides the Microsoft Online suite which provides hosted email, conferencing
and collaboration services. In conjunction with RIM and Nokia, Vodafone customers using smart
phones will be able to securely pay for applications via their Vodafone bill.
From the above key indicators, Vodafone´s strategies are clear. It is now looking towards the
emerging markets quite seriously. It is also heading for fixed communication markets with its
takeover of CWW in 2012. It is clear from the figures of the last item of the above table. The
wireless market is also poised with the lack of spectrum. In the following chapters, the international
markets of Vodafone are analyzed.
As of May 2012, Vodafone is the largest telecom operator in Germany in terms of the number of
subscribers. It has a market capture of 33% (37.625 million subscribers) ahead of the native giant T-
mobile of Deutsche Telecom. It is the 100% share holder of its Vodafone brand operation in
Germany. However it provides network sharing and cooperative management to Smobil and TUI.
There are also a dozen virtual operators which use Vodafone networks.
Figure – 12: Vodafone Germany Figures25, 26 (Source: Annual Report of Vodafone, 2011)
As of May 2012, Vodafone is the second largest telecom operator in Spain in terms of the number
of subscribers. It has a market capture of 31.4% (17.68 million subscribers) behind of the native
giant Movistar of Telefónica. It is the 100% share holder of its Vodafone brand operation in Spain.
However it provides network sharing to about half a dozen virtual operators which use its networks.
In Spain Vodafone faces the greatest competition from Movistar of Telefónica. However, Vodafone
has mastered the cultural and personal needs of individuals and corporate and accordingly it targets
the customers with appropriate schemes and offers. Further points can be cleared from the
following SWOT analysis.
As of May 2012, Vodafone is the second largest telecom operator in Portugal in terms of the
number of subscribers. It has a market capture of 39% (5.9 million subscribers) ahead of the native
giant TMN of Portugal Telecom. It is the 100% share holder of its Vodafone brand operation in
Portugal. Formerly, the Vodafone Portugal was known as Telecel. Now its Portuguese headquarters
are located in Lisbon. In the following table the figures of Vodafone Portugal are shown for the
years 2010.
Its vendors and equipment manufacturers are both from Portugal and rest of Europe. It has a
strategic link with the local vendors. However it relies on the big players like NSN, Alcatel-Lucent
and Eriksson.
Chapter 4
Internationalization of Vodafone outside Europe
Vodafone is a large company with its truly global presence. Larger share of its revenue comes from
outside Europe. It is present is five continents outside Europe. Its revenue is highest in USA and
highest number of subscribers live in India. Overall, the Vodafone of today is so large due to its
operations outside Europe. It gives Vodafone several strategic advantages as well as huge number
of challenges to manage the company effectively.
In this chapter the operations of Vodafone in the large markets outside Europe have been analyzed
from the internationalization perspectives. For this work, the main markets of USA, India and
Africa have been chosen. In all these places Vodafone is emerging as a large and dominant player
with huge revenue and large customer bases.
In September 1999, Vodafone Airtouch announced a $70-billion joint venture with Bell
Atlantic Corp. Verizon Wireless was composed of Bell Atlantic's and Vodafone AirTouch's U.S.
wireless assets, and began operations on 4 April 2000. However, Verizon Communications – the
name Bell Atlantic took upon its June 30, 2000 buyout of GTE – owns a majority of Verizon
Wireless, and Vodafone's branding is not used, nor is the CDMA network compatible with GSM
phones. This relationship has been quite profitable for Vodafone, but there have historically been
three problems with it.
The first is the above-mentioned incompatibility with the GSM 900/1800 MHz standard used by
Vodafone's other networks, and the consequent difficulty of offering roaming between Vodafone's
U.S. and other networks. The other two stem from the fact that Vodafone does not have
management control over Verizon Wireless. Vodafone is thus unable to use the Vodafone brand for
its U.S. operations, and (perhaps more importantly) has no control of dividend policy at Verizon
Wireless, and is therefore entirely at the mercy of Verizon management with respect to cash flow
from Verizon Wireless. Perhaps as a consequence of these reasons, Vodafone made a bid for the
entirety of AT&T Wireless when that company was for sale in 2004. Had this bid been successful,
Vodafone would presumably have sold its stake in Verizon Wireless, and then rebranded the
Vodacom has a better growth rate despite competitions in its countries of operations. It was a great
lesson for Vodacom on how to have great strategies away from home. The brand Vodafone was the
major point behind the success of Vodacom. In the following table the key figures of Vodacome
business performances have been shown.
Figure – 18: Vodafone Africa Figures25, 26 (Source: Annual Report of Vodafone, 2011)
Weaknesses:
Low R&D expenditures in India
Unequal and under penetration in the vast majority of the parts
Rural India unable to relate to the brand and Vodafone does not do anything to reach them
Poor network coverage in the rural areas
//Sasmita Mohanty (Master of Management) // Page No - 19/25
Opportunities:
Emerging markets of India and expansion opportunities
Innovation in India can give Vodafone a global advantage
Product and services expansion is very much encouraging
Growing data business in data and 3G services
VAS as a means to increase revenue with a small investments
Growing Enterprise solution market
Large capital can be raised by listing Vodafone on Indian Stock Exchange(IPO)
Tower sharing business with Indus Towers
Threats:
Highly competitive market
Still lags behind major competitors in terms of price and coverage
Extremely high penetration rates in key city and urban markets
Spat with Indian Government over the tax issues related to the merging with Hutch
Several unpopular moves as mentioned in the 2G scams of 2008
Chapter 5
Global Marketing and Other International Strategies of Vodafone
Marketing is an integral part of every business. In international business management the role of
marketing is even more important due to the challenges of the cultures. In the domestic country the
products are designed and presented as per the trends of the country in which both the service
provider and customers are having the same culture. They understand the values of products and
services quite clearly. However the cross cultural challenges are t be faced in the international
business. So, the marketing plays a significant role to reduce that gap.
Vodafone has a mature and professional marketing team to handle the marketing aspects. They hire
the local experts to provide the right choice. Depending on the cultures and preferences their
advertising is different. For example, in some countries the electronic marketing is the dominant
one and in some other the print media is the front runner of marketing. Accordingly Vodafone has
appropriate marketing tools and methods in place.
Vodafone uses the local values and local cultures to harness proper marketing equipments and
products. It uses separate techniques for separate products and services. For example it uses the
‘helping dog’ for its mobile marketing in India where as for broadband it takes the help of
celebrities to market the services. Vodafone employs great marketing talents and use them for the
right kind of marketing.
Vodafone uses its own network as well as the established mobile and static networks for its
marketing campaigns. In the new initiatives it is collaborating with other service providers such as
the O2 for advanced advertising networks. This is a good idea for the whole marketing concept and
others are also looking forward to it.
Advertising is the visual part of the marketing. It is done in several methods as mentioned in the
previous sections. Vodafone chooses the proper advertising methods and themes to strike the
attention of the customers. TV is the dominant mode of advertising for Vodafone. It sponsors
Football, Cricket and many other games for its advertisement campaigns. Then follows the print
media or the newspapers and magazines for these advertisements. Then comes the online
advertisements through the internet. It also uses the social networking tools such as the Facebook
and LinkedIn.
5.3.1 Branding
The brand Vodafone is a big brand among the telecom operators in the world. According to the
Total telecom analytics group the brand value of Vodafone is 30.674 billion USD. It is the biggest
brand among the telecom operators. But is does not spot in the 100 biggest brands list of Interbrand.
However, Vodafone is a well known brand across the world now.
Chapter 6
Global Human Resource Management of Vodafone
HRM is an important aspect of global management of any international company. Vodafone has a
good HRM department to handle these issues. It has own small HRM in the individual countries of
operations. The presence of nationals is very much important to handle the cultural issues which are
integral parts of marketing, advertising and many other aspects.
In the following figure the presence of employees in different countries have been shown. It is clear
that the numbers of employees are proportional to the revenue being generated by Vodafone.
Surprisingly, it does not have too many employees in India, despite having largest number of
customers. It is also surprising that Vodafone is reducing its number of employees gradually.
Figure – 19: Vodafone Africa Figures25, 26, 27 (Source: Annual Report of Vodafone, 2011, 2010, 2009)
The number of employees does not give the clear idea about the tasks being performed by the
workers. In the following figure it is clear what the tasks are and what percentages of the work force
are involved in them. As sheen in the following pi chart most of the people work in the customer
care and administration. That shows the Vodafone’s care for the customers.
Figure – 20: Vodafone Africa Figures25, 26, 27 (Source: Annual Report of Vodafone, 2011)
In this case study, all the common features of international business have been analyzed. The main
aim of the selection of Vodafone for this study is to have a company that really deals with the
customers at the grass root level in very diverse cultural scenarios. Of course every issues of
internal business is very difficult to include in small case studies. But the prime figures and
important strategies have been covered in this report. International scenarios of seven countries
have been included and brief ideas of some other countries too have been included in this study.
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