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Impact on the Macro Environment

University: UKCBC College

  • Unit No: 32
  • Level: Undergraduate/College
  • Pages 14 / Words 3500
  • Paper Type: Assignment
  • Course Code: k/508/0574
  • Downloads: 2

INTRODUCTION

Business strategy refers to the plan made by the owner of an entity to develop its work and achieve its goals and objectives. In this report, there is the telecommunication industry and from which Vodafone has chosen. It is one of the renowned companies in Europe. Its headquarters is in Newbury, England. This company is one of the best providers of Telecommunication.

This report will discuss the impact and influence on the macro environment. It will study about PESTLE model for environmental analysis on Vodafone. It will explain the internal environment and its capabilities in the prevailing entity. It will illustrate about competitive environment faced by the UK telecommunication sector by using Porter’s five forces model. It will study strategic directions taken by businesses to improve the entity.

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TASK 1

P1 Impact and influence of macro environment on the Vodafone

Macro factors are those, which are not controllable by Vodafone or any other business. For determining the influence of these factors on business, PESTLE Analysis is done. Its impact on Vodafone is also discussed under this.

Political Factors 

The political factors are more important but sometime this proves to be complex to work with it. In many countries, political instability is there which affects Vodafone very much. If company is doing the business in that country which has continuous changing rules in irregular interval period in that case entity has faced many challenges while doing its operation. Firm in which this regularly happens directly impact on earning of the business. The country facing political problem in that case situation of war can occur. For example, from the current conflict in Europe has great impact on entity. Its direct impact on the profits as well as on its working.

Economic Factors 

in the business, these factors matter a lot. There are many economic situations faces by the company and these are: recession, depression, inflation and many more. At the time of inflation, entity's owner has to reduce price remove employees working there. This increases situation of unemployment (Yu and et.al., 2017). In recession time, people have lost more income because market has not enough money and its capacity of the business also decreases also affect business. If company knows how to face these circumstances, which will affect the entity then in that case, it can become the successful organisation and earn more income in any situation. Many a time, small entities face serious challenges while economic factors are prevailing in the business. It could be financial or any other.

Social Factors 

Its impact on the business varies according to the place, culture, belief and values. Like in some countries, person’s culture impacts the business. It is the duty of company to make changes according to places. Lifestyle of people is different and it makes influence on the company working. Solution for this is to observe the place where business is operating and then after knowing working area, it must apply all the policies which is required. Rules are that much flexible which can be adjusted according to the place in which the firm is working. For example, Vodafone is firm of Europe which is operating with making changes in policies by seeing local factors in which it is working.

Technological Factors 

All companies which has to follow technological changes to make its work easier (Howie and et.al., 2018). Vodafone is an entity, which provides its services with adding something new features in it. Firm implements the recent trends and technological advancements, which makes the work easier. This firm is doing its business by following technological advancements so that objectives can be achieved and move ahead from competitors. Products of Vodafone are based on technology. By using all new technology, company can increase its potential and reach on the top. If company is not following the recent trends of technology then it will affect the business and will lack behind from others.

Environmental Factors 

Consumers want that owners of the company while working follow responsibilities towards society. If image of entity is good in front of the society then it represents the chances of becoming more successful. For attracting more customers, employees have to look after its working conditions or working area must be clean so that it will make good impression in front of others (Jaworski, 2018). Vodafone works in diverse environment. In order to maintain status of the company always follow duties which are necessary for organisation. If you need the best assignment help at the best price. Please Contact Us.

Ansoff's Growth Matrix 

This Matrix is developed by H.Igor Ans off in 1957. This matrix focuses on growth. For thinking of development of entity this technique is used. It includes four components, which will help in making company develop more. It helps firm for overall development. These components are discussed below:

  • Market Penetration - in this, Vodafone is increasing its market coverage by launching its new products at low prices. Firm know its capabilities and development for contributing the entity to grow. For this, various promotional efforts are asked to follow so that company can achieve its goals. Some of them are TV, social media to follow its objectives of company. For increasing sales, organisation has to use different methods for making it to reach its top position (Song and et.al., 2018). Company can earn maximum profits by covering large area of market. If company is not making or establishing its business then in that case strategy must be changed according to demand of the firm.
  • Product Development - In telecommunication industry, all firms are selling same products and services in that case competition will increase. For selling those services innovations is needed which will differentiate from the other competitors. More clients will attract by this and try to make it more attractive. It is one of the important features that will reach the company to the top.
  • Market development - in the telecommunication industry, Vodafone is one of those companies, which is targeting different markets in local as well as abroad. People will more buy the product which has same products with different features. This will provide new opportunities to help the company to grow (Yu and et.al., 2017). For this various marketing methods or techniques for increasing sales. There are some techniques like using more selling methods to increase sales. Entity can use different market segment so that more people can be targeted. Firm use marketing mix for analysing the product.
  • Diversification- It means selling of the different products to diverse customers. This is riskier because companies are working in the same industry and will help to do something new with products. Advantage of this is to make the company which can survive in any of the situation. It can help the company to sell products and services in any of the circumstances. These all factors help the company to earn more profits. The more will be sales; popularity of the company will increase.

TASK 2

P2 Vodafone internal environment and its capabilities

Strategic Capability means:

Strategic capability means business abilities which are working on the survival of the entity. It is uses of the resources which is like assets, resources and market position which is helping the firm make decisions on the basis of this (Wilden and et.al., 2018). There is no method for measuring this. It makes an organisation to able the company to become financially independent. Many businesses try to measure strategic performance of the company. Parties are interested in knowing information of firm. These are investors who want to know current position of business for sake of investing money on it. In this, government agencies are interested in knowing abilities of business which they are monitoring It relates to strategy which is implemented on the company in order to achieve the path of success.

VRIO analysis:

For measuring the strategic capabilities of business, certain model is used such as VRIO model. This model was developed by Barney, J, B in 1991 in its work named as "Firms Resources and Sustained Competitive Advantage” (Wilden and et.al., 2018). Its motive was to analyse internal factors which prevailed in business. Resources are limited and have to use it economically. It helps in making the resources utilized for the future. This also helps in reducing wastage of resources. VRIO Model is improved version of VRIN. In these four questions arise in this model are: Valuable, Rare, costly to imitate. These are factors which is helping firm to fulfil all the competitive advantage of company. These are explained below:

This model is used by the company to improvise product and make it more interesting from others. Many firms are making similar products and for moving ahead from competitors adding other features or additional features which will make more attractive from others. 

strategies of others firms and after that firm will set its own (Jaworski, 2018)

TASK 3

P3 Using Porter's Five Forces Model for evaluation of UK telecommunication sector

Porters five models is the technique used to analyse competition of business. It is one of the model which helps to determine the prevailing competition in the business. It consists of five forces like threat of the new entrant, threat of substitutes, bargaining power of the customers and bargaining power of suppliers.

  • Bargaining power of the suppliers -  it is one of the leading industries in the telecommunication industry. This industry has strong base of suppliers. He plays role of cost leader because it is using the more profit margin on the products than its competitors (Howie and et.al., 2018). Firm has reached its position by charging more profit margins. He is able to generate enough profits which can make him stable in the market. If he is making the costs down also it can make more profits than its competitors can. If in any case firm only one supplier has and that also refuse to sell the goods to the firm in that situation firm has to slow down the production due to utilize the material in the best manner. Costs are increased by firm of its products so that he can contact to another supplier. It is beneficial for the company to work with old suppliers only because new supplier can charge him more than earlier. It will increase its costs of an organisation.

As the Vodafone company has good reputation in the market, many of the suppliers intends to develop contractual relationship with Firm.

  • Bargaining power of the customers - customer is king of market and it can influence the costs of the others firms. It depends on the customers to rise the selling of the product or to down it. It has power to make prices down according to its requirements. Income of the buyer will decide prices of product because he is the only one medium which can generate him revenue (Felix, Rauschnabel and Hinsch, 2017). As compared to its closest competitors, Vodafone is ensuring profits in more than average returns. Buyers are more sensitive towards the prices and that's why the prices of the products are charged wisely. If Vodafone is charging more prices in that case he/she can shift to other firm. In this firm has to make sure that people can retain its capacity is increase. Due to prices or any other reason if customers is moving to other place then chances of loss are increased.

As telecommunication industry is very big, customer have many option ,On telecommunication sector switching cost for customer is low, therefore bargaining power of buyer is high.

  • Threat of substitutes- there are fewer chances for substitution of product in the company. Strategy which is operating in the business makes it more critical to make similar products. It is using the focused cost leadership which prevent the company from its substitutes. Like there are also more companies which are providing similar services given by Vodafone. Some of them are British telecommunication company which is also selling same type of services but the difference is cost which make it differentiate from the others (Bauman and et.al., 2018). If prices of one increases it will affect the sales of the other.
  • As there are giant companies those who are financial viable have potential to launch substitute product ion the market. This activity can be conducted by an organisation in order to reduce competition.
  • Rivalry with the existing the competitors- pricing strategy of the firm is also helping the competitors to make it ahead from the contenders. Due to this, it is going hard by the firm to compete with it. There are many rivals of the firm which can take advantage of any situation.
  • As telecommunication sector is very big , Vodafone has to face stiff competition from apple and Samsung company.
  • Threat of the new entrant - in the Vodafone is well established firm so chances of entering of the other company are less. By providing quality of services to the industry, it can fail all the competitors from the path.
  • Telecommunication requires huge capital investment, therefore, there are less chances of entry new competitors in an industry.

TASK 4

P4 By making the use of the Bowman's strategy clock model, Porter strategy model and Hybrid strategy model and using them to analyse the strategic direction of the Vodafone

There are various models used in analysing strategy of Vodafone that is explained below:

  • Bowman's strategy clock model - this method is used by firm for analysing strategy by marketing strategy. This represents relationship between price and customers. It is diagrammatic representation. This helps companies which help in making the competitive position in market (Banerjee, 2017). It is divided into 8 strategies which are made by firm and these are Hybrid, loss of market share, monopoly pricing, risky management, focused management low price, differentiation. It will tell about the model minimisation of the pricing which is helping the firm to reduce cost of it. In some market which is making the product and selling it on their own prices. They will set prices in which they want. People have to purchase the product which is selling by one seller only.
  • Hybrid strategy model -it is one of the models, which is helping the firm to build strategic direction. It is used by the multinational companies which are using this model. Its focus on the low-cost services and giving different benefits. It helps organisation to achieve objectives (Yu and et.al., 2017). It helps company in cost leadership. Its strategy to sell the products and services lower than market price. It is one of the methods to cover market. Firm is paying the prices which are selling the products with more additional features which are making product more attractive. This will make customers to buy products at willing prices.
  • Porter's generic strategy of marketing: Porter's generic strategy is that market survival strategy with concept of how companies face competition in market and take competitive advantages. In this, three strategies are involved such as cost leadership strategy, differentiation strategy and focus strategy (Baker, 2016). In the context of Telecommunication Company, their products are same but their way of marketing, pricing policy, positioning of their product or services into customer's mind have a great impact in its capacity of survival in this competitive market. Vodafone is the telecommunication company. In the context, company uses some strategies of porter's generic strategies that are suggested and are as follows:
  • Cost leadership strategy: Cost leadership strategy is as the name suggests leading a market on the basis prices. Demand will be high when prices are low and demand will be low when prices are low. Therefore, companies focus on high level of output production for taking benefit of economies of scale which reduces cost with an increase in level of production. In these, two strategies are involved such as penetration and skimming strategy. In penetration, low prices are charged at initial stage of any new product or services and gradually increment is done after market capturing. In skimming strategy, high prices are charged at initial stage and gradually decrease is done. Penetration strategy is adopted for taking competitive advantages on the basis of low prices and skimming is adopted for taking early bird advantages (Ashley and Tuten, 2015).

In the context of Vodafone Telecommunication Company, it has adopted penetration strategy for taking market capturing and competitive advantages. Lower prices increase demand of their services. Initially, it captured market and then gradually increases prices for recover initial losses. Skimming strategy is not appropriate for this company due to cut through competition; this company cannot charge more prices.

  • Differentiation strategy: According to differentiation strategy, some different features or extra services are added into the present services and plan to take a competitive advantage. Some premium feature may increase the price of product/services. In the context of Vodafone, it can't differentiate their product/services so much from other product/services in this industry as the product is more likely same for all.
  • Focus strategy: According to Focus strategy, companies have to focus on that areas other than price and differentiation of product on the basis of which they can get competitive advantage (Yu and et.al., 2017). Focus areas on which companies should emphasis are network strangeness, network coverage, accessibility in remote areas, brand loyalty, high customer base, good customer care services etc.

In the context of Vodafone Company, this firm has emphasised on accessibility in remote areas, increasing customer base and also on above-mentioned points. Companies are emphasising on niche marketing, which means identifying a new or hidden market segment through surveys and researches in market. Telecommunication communication companies can focus on their positioning strategies for niche segment up to some limited extent.

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Presently Vodafone is using the mix of segmentation strategies to segment its offerings in mobile network services, enterprise services and broadband services accordingly. It uses geographical, demographical and psycho graphic segmentation. Innovation strategy has been used by an organisation which has assisted Vodafone in gaining competitive advantage.

CONCLUSION

From this report, it is concluded that Vodafone is using various concepts and theories to show path of strategic analysis. It has discussed porters five forces model, which are used by the

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