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Table of Content
Cover Page 1
Group Members 2
Table of Content 3
Introduction
Mission Statement 4
Objectives 4
Nature of Demand 4
External Analysis 6
Degree of Rivalry 7
Buyer Power 9
Treat of Substitutes 10
Barriers to Entry 11
Supplier Power 12
Internal Analysis 12
Financial Analysis 16
Conclusion 25
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Introduction
Mission Statement
Objectives
Financial
Vodafone, for example, estimates that once the initial investment had
been made, less than ten percent of revenues were needed to maintain the
network.
In Germany, which had one of the largest markets for mobile telephony
with more then 60 million customers and a high population density, the threshold
for an acceptable return on investment was estimated to be around 20% of the
total market share.
Strategically
Nature of Demand
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is really attractive to talk cheaper than anything else while you are away
from your country.
There are 3 segments, Voice call users, extra service users, internet
(3G) users. However you cannot separate them. Voice call users could use
extra services and internet too. Vodafone cannot separate them. They
have to provide all of these things to attract more customers. More
services mean more customer and people will be attracted more even if
they won’t use internet at all. On the other hand there are 2 types of
users. Having long term contracts and customers using pre paid cards.
Actually you can separate them. We can see examples of it. Vodafone is
offering much more privileges to contracted customers. Selling them their
Vodafone card with a cell phone asking that customer to talk some
amount of minutes or have some amount of bill every month for some
year. This is really good offer. However pre paid card users won’t be able
to get this kind of privileges. But you cannot charge them different
money. If contracted users pays 1€ for 10 minutes than pre paid card user
needs to pay 1€ for 10 minutes. It doesn’t really matter if a customer is
pre paid card user or having long contract. In both ways Vodafone is
earning same money. However long term contracts are stable and can be
forecasted easily for future budgeting, investing and advertising. That is
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why Vodafone is giving privileges to dedicated customers. Customers who
are loyal. Like in anywhere else loyalty rewarded generously.
External Analysis
PESTEL
Political
China mobile can never become Vodafone china. That is a reality due to
investment options and the quasi-political situations of Chinese mobile telephony
market.
Social-Cultural
Vodafone had trailed behind NTT DoCoMo and KDDI since its entry in 2001
in Japan due to fickle consumers.
Technological
In the US Vodafone customers still could not use their cell phones on the
Verizon wireless network because it operated under a different standard.
Economical
Vodafone had competitive advantage over rivals after the telecom crisis
because Vodafone was the only company used shares for its acquisitions.
The mobile phone market was characterized by extremely high fixed costs
that affect rivalry.
Revenue from voice traffic was flat or even declining due to competing
technologies as internet calling that was fundamentally changing the telecom
industry.
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Legal
Opportunities:
Threats:
Vodafone has many big and strong competitors such as; Verizon, AT&T
Wireless, Bellsouth Corp., O2, SFR, etc.
Verizon refused to adopt the single Vodafone brand
Verizon Wireless is the largest mobile phone operator in North America
Technology developed by companies such as Nokia, Erickson, Nortel if Wi-
Fi powered phone technology should ever become popular, it would undermine
Vodafone’s current business model and could turn billions of fixed assets into
worthless electronic scrap.
There are news about rivals success in the press; “Nokia takes leap into
Wi-Fi phones” Wall Street Journal Europe; February 23, 2004.
The merger of AT&T with Bellsouth Corp. had put pressure on Verizon
Wireless to buy of Vodafone and force it to exit the US market.
Degree of Rivalry
Exit barriers
Vodafone group is the world’s largest cell phone provider by revenue and
invested $270 billion in stock also the company competes in 26 countries and it
controlled cell phone operations in 16 countries and had minority stakes in
companies in ten other countries, it had more than 150 million customers and
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employed approximately 67.000 people around the world. Additionally the
company has many acquisitions with the other companies in many countries so it
is not easy to end the contract with its acquisitions and the customers mutually
have long-term contracts but in the case of the Japan Telecom according to the
Vodafone’s strategic decisions the Vodafone decided to divestiture it but it does
not mean that they can totally close the business hence it is so hard for them to
exit so both Exit Barriers and Degree of Rivalry High.
There is no any exact ratio but the company is in 26 countries out of 200
and biggest in the world so accordingly we can give a meaning that the Vodafone
group has High Industry Concentration Ratio and Degree of Rivalry is high
Industry growth
Vodafone vas not present in Latin America and in many African countries.
Vast untapped markets lay ahead with today’s mobile penetratition of about 1.7
billion, of which Vodafone has about 3.5 million, in five years if the Vodafone
could be able to touch these untapped areas they can offer service to the half of
the world which is approximately 2.5 billion so there is a huge growth potential
for the future and Industry Growth is High so Degree of Rivalry High.
Product differentiation
Brand identity
Throughout the past years Vodafone has done a terrific job of building
brand awareness by offering its customers great service, great value and great
innovation and they never used “low prices” to attract new customers instead; it
focused on creating and marketing new value-added services that enticed
customers to sign up with Vodafone. Also the Vodafone group selected two
globally recognized brands; it sponsored the Manchester United Football Club and
the Ferrari Formula 1 team to improve awareness over the world. Globally they
have appeared in 26 countries with more then 150 million customers and they
aimed to collect its acquisitions under the same umbrella as “One Vodafone “and
in many of the branding cases they fallow the same path to adopt them and
some of the processes ended in almost one night and in some other cases it took
more than 2 years to change the name from original situation to “One Vodafone”.
These applications by Vodafone give power of being a challenger for local
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companies under the “One Vodafone” Brand identity is High so Barriers to Entry
Low.
Buyer Power
Buyer Volume
Vodafone doesn’t sell just sim card. They purchase a little bit money from
sim cards. They purchase their services. 3G services, voice call and Vodafone
Live! Etc. Vodafone collects these services prices. Consumers, always continue to
use these services. So, buyer volume is high and also buyer power is high.
Buyer Information
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Product Differentiations
Substitutes Available
Conclusion
We have 4 low sign and 3 high sign. Normally, buyer power is low.
Because, Vodafone always stronger than their consumers.
Threat of Substitutes
People are able to talk from internet by paying very low prices or they
mutually can talk free by using Skype also fixed line telephones are cheaper
compared to the mobile phone charges so when people are able to reach internet
and fixed line telephones thus the importance of mobile telecommunication is
declining. The Relative Price Performance of Substitutes High so Threat of
Substitutes High.
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Barriers to Entry
Access to Input
Government Policy
Economic of Scale
Capital Requirement
Brand Identity
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Supplier Power
Importance of Volume to Suppliers
Differentiation of Input
The companies such as Nokia, Ericksson, Nortel has strong power when
they come up with a new product like in the case of Nokia which had just
presented its first Wi-Fi powered phone that did not need the traditional mobile
network but a wireless LAN hotspot so when they came up with such as
technologically different product the suppliers are able to force the company to
change its current business model. Therefore Differentiation of Input is high and
Supplier Power is high.
As a conclusion, there are 2 Low and 1 High. The Vodafone group has
strong volume to squeeze suppliers’ margins and the suppliers need to produce
their products almost according to needs of the technology that the Vodafone has
used.
Internal Analysis
VRIO
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• Pricing customers same as in home country while in same network. Free
roaming.
Valuable?
It is valuable. Most of the potential customers could be attracted by this service.
Using voice communication with low prices or prices as same as in using voice
communication locally will bring more customers.
Rare?
It is rare. No other company offering this kind of service. That is why Vodafone
remain leader in international calls.
Costly to Imitate?
It is costly. To let customers use their sim cards in wide range while they are still
billed same as in home country. Definitely it is costly to imitate
Organization?
Organization done great job here. Uniting all Vodafone branches and sign
agreements with other operators from other countries to extend their capacity.
Valuable YES
Rare YES
Costly to Imitate YES
Organization YES
Sustained competitive advantage
Valuable?
Yes it is valuable. Vodafone live! Service provides ringtones, wallpapers and
application to its customer.
Rare?
No it is not rare. Probably all other mobile communication companies offering
these kind of services.
Costly to Imitate?
No it is not costly. This service doesn’t need much investment because it is
basically a virtual shop.
Organization
This service will give extra benefits because it is given by Vodafone. Absolutely
yes.
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Valuable YES
Rare NO
Costly to Imitate NO
Organization YES
Temporary Competitive Advantage
• Offering 3G services
Valuable?
It is valuable. 3G is enables people to transfer data with their mobile phones.
With 3G people can use Video Call and connect to internet.
Rare?
It is not rare. Most of the mobile communication service provider companies
offering 3G to its customer.
Costly to Imitate?
It is costly however all the companies need to invest into 3G technology to keep
doing business in sector. So it is not costly.
Organization
Vodafone is the pioneer in 3G technology.
Valuable YES
Rare NO
Costly to Imitate NO
Organization YES
Valuable?
It is valuable. It is really good service for businessman or any employee that
needs to connect their ERP program while they are away from headquarters.
Rare?
It is rare. Because international calls are too costly these days. Vodafone keeps
companies as their customer by giving them price discount.
Costly to Imitate?
It is costly. To give price discount in international calls needs high investment
and agreement costs.
Organization?
Absolutely organization worked a lot here. To agree with rival network providers
to extend their coverage.
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Valuable YES
Rare YES
Costly to Imitate YES
Organization YES
Sustained Competitive Advantage
Valuable?
It is valuable. Both are the most well known sports team globally. There are
many fans of both Manchester United FC and Ferrari Formula1 Team. That
helped Vodafone to have extreme global awareness.
Rare?
It is not rare. There are several other companies being sponsor to well known
sports team.
Costly to Imitate?
It is not costly to imitate. If the company be sure that advertisement will bring
new customers. Than it is not costly
Organization?
There is nothing organization is doing. In this situation.
Valuable YES
Rare NO
Costly to Imitate NO
Organization NO
Strengths and Weaknesses
Strengths:
In 2006, Vodafone Group PLC was the world’s largest cell phone provider
by revenue.
Since 1999, Vodafone had invested $270 billion.
Vodafone is operating in 26 countries.
Vodafone has capability to transform and adapt itself to the dramatically
changing market environment.
In 2005, Vodafone was the leading mobile phone operator in the world
Vodafone had more than 150 million customers worldwide.
Vodafone is in list on the stock exchanges of New York, London and
Frankfurt.
In 2004, Vodafone’s market capitalization was $165, 7 billion.
In 2004, Vodafone was the eleventh most valuable company in the world.
Vodafone had ₤564 million as cash dividend in financial year 2002/2003.
In FY2004, Vodafone’s free cash flow exceeded ₤8 billion.
Vodafone hosted the first ever mobile phone call in the UK in 1985.
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Vodafone signed the world’s first international roaming agreement with
Telecom Finland.
Vodafone is the first operator in the UK to offer “pre-paid” packages to its
customers.
Vodafone took over the Mannesmann’s D2 mobile phone business and it
was Germany’s largest take over ever.
In 1999, in terms of market capitalization, Vodafone found itself ten
largest companies in the world.
Vodafone acquired Ireland’s Eircell.
Vodafone increased its stake in Spanish AirTel Movil.
Vodafone used shares for its acquisitions.
Vodafone has unique marketing and technological capabilities.
Management and managerial activities are very good in Vodafone.
Vodafone launched its first truly global communication campaign in the
2001.
Leadership position on cost and time to market are competitive
advantages of Vodafone.
Annual pre-tax operating profit by ₤2.5 billion by FY2008.
Under the One Vodafone, there are currently 8 programs (Networks, IT,
Service platforms, Roaming, Customer, Handset portfolio, MNC accounts,
Retailing).
Vodafone is the 8th largest retailer in the world taking together our stores
that are owned or franchised.
Vodafone live! Multimedia service was launched on Sharp GX-10 handsets
branded for Vodafone.
Vodafone has a power to buy technology.
Vodafone is the world’s largest mobile telephone operator.
Vodafone had ₤24.1 billion as gross fixed assets in balance sheet.
Vodafone has advanced network infrastructure.
Weaknesses:
Financial Analysis
Liquidity Ratio
Current Ratio
Values can be converted into cash; short-term debt divided by the medium
is the ratio. The current rate increase, the increase indicates solvency. This rate,
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short-term debt payment capacity of enterprises to measure and net working
capital is used to determine the proficiency level.
In 2001 years, the current ratio of the Vodafone Company has increased
because current asset increased and Vodafone started to investment. They have
slowed down mergers between companies and instead focused on growing
internally.
Quick Ratio
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CURRENT ASSET --
CURRENT
YEARS INVENTORY LIABILITIES QUICK RATIO
1995 297,50 442,50 0,67
1996 324,50 583,30 0,56
1997 475,50 1.013,20 0,47
1998 561,90 1.432,30 0,39
1999 746,80 1.529,90 0,49
2000 2.327,00 4.441,00 0,52
2001 17.374,00 12.377,00 1,40
2002 8.925,00 13.455,00 0,66
2003 8.226,00 14.293,00 0,58
2004 12.691,00 15.026,00 0,84
LEVERAGE RATIO
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YEARS TOTAL DEBT TOTAL ASSET DEBT TO ASSET RATİO
1995 588,30 1.406,30 0,42
1996 731,60 1.755,10 0,42
1997 1.585,40 2.414,50 0,66
1998 2.111,50 2.507,70 0,84
1999 2.709,00 3.633,60 0,75
2000 10.815,00 153.175,00 0,07
2001 23.612,00 171.394,00 0,14
2002 26.573,00 160.001,00 0,17
2003 28.050,00 159.585,00 0,18
2004 28.010,00 142.932,00 0,20
The debt to equity ratio shows that Vodafone Company has been
aggressive in financing its growth with debt. This can result in variable earnings
as a result of the additional internal expenses. . Upper acceptable limit of the
debt to equity ratio is usually 2:1, with no more than one-third of debt in long
term. A high financial leverage or debt to equity ratio indicates possible difficulty
in paying interest and principal while obtaining more funding.
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YEARS TOTAL DEBT TOTAL EQUITY DEBT TO EQUITY
1995 588,30 818,00 0,72
1996 731,60 1.023,50 0,71
1997 1.585,40 828,60 1,91
1998 2.111,50 850,00 2,48
1999 2.709,00 924,30 2,93
2000 10.815,00 142.360,00 0,08
2001 23.612,00 147.782,00 0,16
2002 26.573,00 133.428,00 0,20
2003 28.050,00 131.534,00 0,21
2004 28.001,00 114.931,00 0,24
Vodafone Company’s total debt equity increased between the years 1995
to 1999. It looks very good after this year. We are decreased ratio chart dept to
equity ratio in 2000 because Vodafone Company has paid the debts. This is very
good for the company because after 2000 dept to equity keep increasing because
total dept increasing and the total equity keep declining. If it keep increasing
during the next years it is not a good thing for the company.
Activities Ratio
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TOTAL ASSET
SALES TOTAL ASSET TURNOVER
1995 1.153,00 1.406,30 0,82
1996 1.402,00 1.755,10 0,80
1997 1.749,00 2.414,50 0,72
1998 2.470,80 2.507,70 0,99
1999 3.360,00 3.633,60 0,92
2000 7.873,00 153.175,00 0,05
2001 15.004,00 171.394,00 0,09
2002 22.845,00 160.001,00 0,14
2003 30.375,00 159.585,00 0,19
2004 33.559,00 142.932,00 0,23
Total Assets for Vodafone generally is high that is good for the company.
Vodafone company’s total asset turnover is increased to 1995 from 1999
because of Vodafone company has been more effective using investment but
after years it has been not effective using asset.
A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio
measures a company's ability to generate net sales from fixed-asset investments
- specifically property, plant and equipment - net of depreciation. A higher fixed-
asset turnover ratio shows that the company has been more effective in using
the investment in fixed assets to generate revenues.
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FIXED ASSET
SALES NET FIXED ASSET TURNOVER
1995 1.153,00 1.101,50 1,05
1996 1.402,00 1.422,10 0,99
1997 1.749,00 1.926,60 0,91
1998 2.470,80 1.911,50 1,29
1999 3.360,00 2.852,10 1,18
2000 7.873,00 150.851,00 0,05
2001 15.004,00 156.375,00 0,10
2002 22.845,00 153.462,00 0,15
2003 30.375,00 154.689,00 0,20
2004 33.559,00 133.980,00 0,25
Profit Analysis
Gross profit margin is the amount that remains from sales after cost
deductions of goods sold, expressed as a percentage.
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1999 594 3.360,00 0,18
2000 542 7.873,00 0,07
2001 9.885,00 15.604,00 0,63
2002 16.155,00 22.845,00 0,71
2003 9.819,00 30.375,00 0,32
2004 9.015,00 33.559,00 0,27
In 2001 the profit margin of the Vodafone Company has increased because
they did profit by reducing cost of expenditures and between 2001 to 2003 the
Vodafone group chose internally growing instead of investing for acquisitions so
between these years the revenue is quite high.
Return an Investment
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In 1999, the return of investment of the Vodafone has increased because
of they had May acquisitions with the other companies and these acquisitions
become benefit able.
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Like in example of Gillette, establishing Braun shaving machinery brand to
keep company alive because World is changing. Or else Vodafone can go
backward integration and establish their own cell phone brand. There are various
options that Vodafone can choose. However in near future all balances will
change and Vodafone will need to decide on new strategy or new market to
compete in to survive in this environment.
Conclusion
Currently, Vodafone is one of the best companies in World as in revenue,
prestige and management. Through time Vodafone achieved a lot. At 2005 they
have changed their organization which quite hard thing to do. However they are
harvesting all the risks they have taken at those days. Now Vodafone have over
150million customers. Globally Vodafone have the highest market share for
connecting people. However being such a big company is not related with
problems they are facing and they will face. Now Vodafone is having too much
competition from local competitors. Also as it is written in case, Vodafone needed
to sell its Japanese branch in order to stay alive. However Vodafone is the most
known telecommunication brand globally, reaching 150million customers,
offering privilege services with best quality and earning a lot of profit. Probably in
future they have new plans and new risks to take. With this kind of management
strategy it is so odd to think that they will fail. I think they are doing quite fine
and will do quite fine in future and shareholders probably happy about their
investment.
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