Running Head: A comprehensive strategic management model for Vodafone Group

A comprehensive strategic management model for Vodafone Group

Toru Sekiguchi September 19th, 2010

Table of Contents Title Page............. i Table of Contents.................... ii Abstract...................... iv 1. Introduction... 1 2. Vision and Mission.. 2 2.1 The primary markets and customer groups... 2 2.2 The technology.. 2 2.3 The fundamental concern through growth and profitability. 2 2.4 The fundamental philosophy. 2 2.5 The public image... 2 2.6 The self-concept 2 3. The external environmental analysis........ 2 3.1 Remote environment. 3 3.1.1 Economic Factors... 3 3.1.2 Political Factors. 3 3.1.3 Technological Factors 3 3.2 Industry environment 3 3.2.1 Threat of Entry... 4 3.2.2 Supplier Power... 4 3.2.3 Buyer Power... 4 3.2.4 Threat of Substitutes.. 4 3.2.5 Rivalry 5 3.3 Operating environment. 5 3.3.1 Competitive Position.. 5 3.3.2 Customer Profiles....................................... 6 3.3.3 Human Resources.. 6 4. Internal Analysis... 6 4.1 SWOT Analysis 6 4.1.1 Strengths 6 4.1.2 Weaknesses.... 7 4.1.3 Opportunities.. 7 4.1.4 Threats 8 4.2 Financial Analysis. 9 4.2.1 Financial ratio analysis.. 9 4.2.2 Liquidity ratio 9 4.2.3 Profitability ratio 9 4.2.4 Debt management ratio 10 4.2.5 Summary of financial ratio analysis 11 5. Internal Analysis. 11 5.1 Key seven areas........................................................................................................... 11 5.1.1 Profitability...11 5.1.2 Productivity.. 11 5.1.3 Competitive Position 12 5.1.4 Employee Development... 12 ii

5.1.5 Employee Relations. 12 5.1.6 Technology Leadership 12 5.1.7 Public Responsibility... 12 6. Generic and grand strategies... 13 6.1 Generic strategies 13 6.2 Grand strategies.. 13 6.2.1 Horizontal integration, joint ventures, and strategic alliances. 13 6.2.2 Turnaround... 13 7. Strategic Analysis... 14 8. Implementation... 14 8.1 Short-term objectives.. 14 8.1.1 Drive operational performance 15 8.1.2 Pursue growth opportunities in total communications. 15 8.1.3 Execute in emerging markets... 15 8.1.4 Strengthen capital discipline........ 15 8.2 Outsourcing. 15 9. Implementation... 16 9.1 The balanced scorecard methodology. 16 9.1.1 The Application of the Balanced Scorecard to Vodafone Group 16 9.1.2 Customer Perspective... 17 9.1.3 Financial Perspective... 17 9.1.4 Learning and Growth Perspective 17 9.1.5 Business Process Perspective... 18 9.2 Balanced scorecard Analysis.. 18 9.2.1 An actual versus target KPI values.. 18 9.2.2 An actual value versus a series of the previous values of the same KPI. 19 9.2.3 Actual KPI values versus the industry norm 19 9.3 The best practice of performance monitoring system. 19 9.4 Continuous performance improvements. 19 10. Conclusions. 20 11. Bibliography... 21 12. Appendix. 24 Appendix 7.1 Evaluating Vodafone Groups Differentiation Opportunities 24 Appendix 8.1 Evaluating Vodafone Group Customer focused locally, scaled globally 25 Appendix 9.1 Vodafone Group balanced scorecard. 26 Appendix 9.2 Vodafone Group ARPU in European market. 27 Appendix 9.3 Vodafone Group and Global Average EBITDA margin 28

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Abstract Vodafone Group, which was established in 1982, is the second largest mobile communications company globally that manages ultra large-scale mobile networks in 31 countries and has a presence through partnerships in another 40 countries. The company is one of the most influential companies in mobile telecommunications industry with a significant presence in Europe, Asia Pacific, United States, and the Middle East with 341 million proportionate customer base (Vodafone, 2010a, p. 8). While Vodafone Group has the largest geographic footprint in more than 70 countries, the company has been confronted with fiercer competition in both developed and emerging markets. Developed market growth is only projected at around 1% and mobile subscriber penetration in the market is extremely higher than emerging markets. European market is the largest market for Vodafone Group but its revenue and ARPU in the market are slightly decreasing. Indian market is one of the highest growth mobile markets and Vodafone Group has more than 100 million customers in the market, 30% of its total number of customers. Mobile subscriber penetration in the market hasnt reached 50% yet. The market is expected to continuously grow and most multinational mobile operators have recently focused more on Indian market and Vodafone Group is facing extremely fierce price competition in the market. Value-added services are identified as key differentiators to maintain its customers and improve ARPU in developed market and to entice new customers in emerging markets. Its differentiation strategy represents that Vodafone Group intends to maintain the technological leadership by enhancing its ability to adapt advanced ICT and driving Group Technology initiatives in order to create value-added services to meet customers total communications needs. Vodafone Group has expended its global geographic footprint through horizontal integration, joint ventures and strategic alliances by capitalizing on its superior brand recognition. However, the company has continuously increased the debt ratio due to its aggressive global geographic expansion, and it has recently taken higher priority in investing in existing businesses to improve ARPU from existing customer base and expanding its businesses to new markets where it can expect immediate turnaround rather than high returns in the long term. The company has thus implemented turnaround strategy and initiated One Vodafone program to achieve streamlined cost effectiveness and efficiency by gaining economies of scale and scope globally to improve bottom line performance. Vodafone Groups has formulated and implemented those generic and grand strategies deliberately in accordance with its vision and mission, and external and internal environments. The company has also implemented four main strategic objectives associated with those strategies and the balanced score card methodology to disseminate the strategies widely, translate them into actions, and provide meaningful feedback in the strategic control process. Although Vodafone Group has implemented differentiation strategy, the company hasnt launched value-added services in both developed and emerging markets and it has thus facing fierce price competition. While expanding geographic global footprint and diversifying products and services, the company needs to focus more resources on value-added services as key differentiators in order to maintain sustainable growth.

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1. Introduction Vodafone Group, which was established in 1982, is the second largest mobile communications company globally that manages ultra large-scale mobile networks in 31 countries and has a presence through partnerships in another 40 countries. The company is one of the most influential companies in mobile telecommunications industry with a significant presence in Europe, Asia Pacific, United States, and the Middle East with 341 million proportionate customer base (Vodafone, 2010a, p. 8). Although Vodafone Group has been confronted with fiercer competition in both developed and emerging markets globally, the company hasnt implemented cost leadership but differentiation strategy to entice new and existing customers. It has also implemented its grand strategies that the company expands its business globally through horizontal integration, joint ventures, and strategic alliances. Due to a fierce competition in global telecommunication industry, business acquisitions and disposals, and foreign exchange rate, most of its financial ratios have been lower than the industry norm. The company thus introduced turnaround strategy that it focused on bottom line performance improvements by leveraging economies of scale and scope globally in 2007. The company has subsequently implemented One Vodafone program to achieve streamlined cost effectiveness and efficiency. The objective of this research is to assess Vodafone Groups strategic management model to formulate and implement the generic and grand strategies in line with its internal and external environments. Its vision and mission, external and internal environmental analysis, long-term objectives, generic and grand strategies, strategic analysis, implementation, and strategic control are discussed in this research.

2. Vision and mission While Vodafone Groups vision states that the company will be the communication leader in an increasing connected world (Vodafone, 2010a, p. 2), its mission statement isnt explicitly defined. Pearce and Robinson (2009) argued that a firms mission will state; The base type of product or service to be offered; the primary markets or customer groups to be served; the technology to be used in production or delivery, the firms fundamental concern through growth and profitability; the firms fundamental philosophy, the public image the firm seeks; and the self-concept those affiliated with the firm should have of it (p. 26). Vodafone Groups fundamental beliefs are discussed in this chapter. 2.1 The primary markets and customer groups Vodafone Group operates in both developed and emerging markets with 7% share of the global mobile telecommunications market. Eastern Europe, Western Europe, and North Americas are among the top three markets for the company by subscriber but growth has been more muted in those developed markets. In contrast, India and China are 4th and 5th largest 1

regions respectively but growth prospect remains positive in those emerging markets. The company is serving its fixed and mobile services to both enterprises and consumers around the world. 2.2 The technology The company uses both fixed and mobile network technologies, including customer devices, access and transmission network, core network, and other networks, to deliver products and services including voice, messaging, data and fix line solutions and devices to assist customers in meeting their total communications needs (Vodafone, 2010a, p .14). The company has continued to diversity and expand the services we provide to our customers to meet their total communications needs (Vodafone, 2010a, p. 16). 2.3 The fundamental concern through growth and profitability The four main objectives reflect its intention to secure survival through growth and profitability. The objectives includes driving operational performance, pursing growth opportunities in total communications, executing in emerging markets, and strengthening capital discipline. These objectives are discussed in the chapter 8. 2.4 The fundamental philosophy The companys philosophy is shown in its sustainability report as Vodafone can help to build a sustainable future by delivering products and services that enable positive economic, social and environmental outcomes for our stakeholders worldwide (Vodafone, 2010b, p. 5) 2.5 The public image While Vodafone Group is perceived as the most recognizable global mobile telecommunications operator, the company has continuously made efforts on maintaining and enhancing its reputation as a socially responsible company and it has reported the environmental and social impacts of its businesses for ten years. The company aims to provide balanced account of our performance on the socio-economic, ethical and environmental issues that are most material to Vodafone (Vodafone, 2010b, p. 1). 2.6 The self-concept The Vodafone Way defines a consistent set of values and behaviors for all Vodafone employees (Vodafone, 2010a, p. 22). The performance and potential of the employees are assessed against the standards of The Vodafone Way. The program aims to be an admired, innovative and customer-focused company operating with speed, simplicity, and trust.

3. The external environmental analysis The external environments significantly have an impact on the companys strategic management model. According to Pearce and Robinson (2009), the external environment can be divided into three interrelated subcategories: factors in the remote environment, factors in the industry environment, and factors in the operating environment (p. 94). These factors Vodafone Group is facing are discussed in this chapter.

3.1 Remote environment 3.1.1 Economic Factors Most companies have recently been confronted with slower growth than ever in the volatile and rapidly changing global markets. Vodafone Group is not the exception and it hasnt been sustainably growing in some markets. International Monetary Fund (2010) reported that European market growth is projected only at 1.0% and 1.3% in 2010 and 2011 respectively but Vodafone Group has heavily relied on slower growth and saturated European market due to extremely higher mobile subscriber penetration with more than 150% in some countries. Its revenues from the market captured 67.3% of its total revenues in 2009 but ARPU (average revenue per user) in UK, Greece, Netherlands, Spain, Italy, Germany, and Portugal where the company is operating has been slightly decreasing. In contrast, IMF (2010) reported that Indian market growth is projected at 9.4% and 8.4% in 2010 and 2011 respectively. Vodafone Group has improved performance in emerging markets in 2009 and executing in emerging markets is one of the four main objectives. Service revenues in the market grew by 14.7% in 2009, and Indian mobile market, the second-largest market around the world after China, has been perceived as its key market. 3.1.2 Political factors Political factors are also a major consideration for Vodafone Group on formulating and implementing its strategies in accordance with each country specific legal, regulatory and tax environments. The company also has to comply with an extensive range of requirements that regulate and supervise the licensing and the allocation of frequency spectrum. Vodafone (2010a) stated decision by regulators regarding the granting, amendment or renewal of licenses, to us or to third parties, could adversely affect our future operations (p. 38). For instance, EU recently introduced a multi-year spectrum policy program. India made regulations for the implementation of mobile number portability in 2009. 3.1.3 Technological Factors Telecommunication operators ability to adapt the advanced technologies has a great impact on innovative and differentiated products and services in response to the rapidly changing customer needs and market environments. Saxtoft (2008) argued that competitive advantages in the future convergent communications industry will be based on the organizational ability of communications service providers to utilize the specific mix of network data, services data and customer data available to each of the players in the market (p.71). With its ability to continuously adapt new ICT, the company has created value-added services like Vodafone 360 and Cloud Computing services. 3.2 Industry environment Most telecommunications operators in developed markets have been confronted with a fierce competition and declining revenues, and understating of competitive forces is greatly crucial to thrive and survive. Michael Porters five competitive forces are discussed in this section. Vodafone Group hasnt experienced in the extremely steep declines in revenues while operating in both developed and emerging markets and thus diversifying risks.

3.2.1 Threat of Entry Telecommunications industry is very capital-intensive business with a huge amount of capital to acquire and maintain its network infrastructure and technologies, and create new products and services. Although the huge capital requirements traditionally represents a more significant entry barrier to new entrants than some other industries, recent MVNO (mobile virtual network operators) business model lowers the barrier and small companies with differentiated products and services has been identified as new entrants. In addition, while telecommunications operators have made significant efforts to redefine their value chains to create new value-added services, Google, Amazon and other online companies have attempted to redefine industry boundaries. These companies are perceived as new competitors in telecommunications industry. 3.2.2 Supplier Power Vodafone Groups key suppliers are handset manufacturers like Samsung, Nokia and Motorola, and network equipment manufacturers like Ericsson, Alcatel-Lucent, and Nokia Siemens Networks. Those suppliers bargaining powers have weakened due to lack of technical advantages and new Chinese entrants that extremely pursue cost leadership. In contrast, Vodafone Group has enhanced its bargaining power to key suppliers while focusing on One Vodafone program to integrate business activities to leverage economies of scale and scope. 3.2.3 Buyer Power While Vodafone Group has been confronted with a fierce competition globally, its customers tend to be more price-sensitive in both developed and emerging markets. The company has still relied on European markets with significantly higher mobile subscriber penetration, and ARPU in all Vodafone operating countries in the markets have been decreasing. In Indian mobile market as its key market, ARPU continued to decline despite subscription growth. 3.2.4 Threat of Substitutes Vodafone Group has continuously diversified its product and service portfolio including traditional mobile voice and messaging, data, fixed line solution and other services such as value-added services to meet its customers total communications needs. Its mobile voice and messaging services, data, fixed line solutions, and other services accounted for 67%, 11%, 10%, 8% and 4% of total revenues respectively in 2009, and therefore substitutes for its mobile voice and messaging services have a significant impact on its business. Although mobile voice services have overtaken traditional fixed voice services, especially in emerging markets, VoIP (Voice over IP) services are identified as its substitutes in addition to fixed voice services globally. Myers expected (2010) that VoIP product revenue will climb to $578 million in 2Q2011, a 2.4% increase over 2Q2010. While there are still concerns on the reliability and quality over IP networks, more broadband customers become aware of the benefits of VoIP to enjoy the flexibility and cost-savings by using their existing broadband connection for voice services (Myers, 2010, p. 37). Vodafone Group hasnt still ultimately embraced VoIP services but growth of VoIP services has a significant impact on a decrease in its voice ARPU. Vodafone Group has focused not on cost leadership to directly compete with VoIP services but on diversifying its product and service portfolio and launching new value-added services. Its data services are 4

mainly used to connect the Internet and its substitutes are broadband services and fixed Internet services. Vodafone has embarked on fixed broadband service especially in developed markets to offer fixed-mobile converged services to differentiate its services from other fixed or mobile operators. In developing markets, fixed broadband services and Internet services are not identified as substitutes for mobile Internet services any more since mobile Internet services have overtaken fixed broadband services. Its fixed broadband services are identified as complementary services to deliver fixed-mobile converged services. The company has generally started with mobile services and then added fixed services in all market the company has entered into. According to Marvrakis and Saddi (2009), the previously pure mobile operator is now following a total communications strategy which includes mobile (cellular), broadband (fixed) and wireless; it has been offering combined services, with fixed, mobile and broadband services under a single bill (p. 42). 3.2.5 Rivalry Vodafone Group is operating its business in more than 70 countries and the general competitive landscape differs in developed and emerging markets. However, the switching cost is low in both markets and the differentiation strategy is essential for the company to keep its customers from rivals. European market, the largest markets for Vodafone Group, has been saturated due to extremely higher mobile subscriber penetration. Value-added services are identified as key differentiators and the company has launched Vodafone 360, and Cloud computing services in the market. In contrast, Indian is one of the highest growth mobile markets globally and the company accounted for approximately 30% of its total number of subscribers globally. While the mobile subscriber penetration in Indian markets hasnt reached 50%, Vodafone Group and other mobile communications companies are facing extremely fierce price competition due to lack of differentiated services. 3.3 Operating environment 3.3.1 Competitive Position The companys geographic footprint in more than 70 countries affords its huge economies of scale and scope and ensures that Vodafone Group has diversified revenue base to cope with recent economical recession as its emerging market operations helped cushion the poor performance in Europe and Turkey (Obiodu, 2010, p. 4). The Vodafone brand is perceived as one of the most recognizable global telecommunications brands and the company has capitalized on the brand recognition to enter into new markets. The company is also a market leader in developing products and services. It hasnt implemented cost leadership but differentiation strategy while leveraging its strong brand recognition and diversified geographic footprint. However, the company has faced fiercer competition across most of global markets than ever. Its major multi-national competitors are France Telecoms Orange, Deutsche Telekoms T-Mobile, and Telefonicas O2. The company also has to compete with domestic mobile operators like TMN in Portugal and KPN in Netherlands in European market. Its performance in European market is worse than its rivals especially in Germany, Italy and Spain. The company is also facing fierce price competition in Indian market. It presently comes third behind Bharti Airtel and Reliance. 5

3.3.2 Customer Profiles While diversifying its markets and product and service portfolio, it has expended its customer base globally and served its products and services to both consumers and enterprises. Traditional voice and messing services have been already commoditized globally and they are affordable enough for most people living in the countries where Vodafone Groups is operating. 3.3.3 Human Resources Vodafone Group employs around 85,000 people and its employees are identified as a source of competitive advantages to improve existing customer relationships locally. Vodafone Group (2010a) stated that we rely on our people to maintain and build on our success and to deliver excellent service to our customers, and we aim to attract, develop and retain the best people and to realize their full potential (p .22). The Vodafone Way program can help all employees align with a common set of values and behaviors in order to be an admired, innovation and customer-focused company operating with speed, simplicity and trust. Employee turnover rate has been stable at 13%, 13%, and 15.2% in 2010, 2009 and 2008 respectively.

4. Internal Analysis 4.1 SWOT Analysis 4.1.1 Strengths The largest geographic footprint Vodafone Group has the largest geographic footprint in more than 70 countries and it has extremely gained economies of scale and scope to maximize cost efficiency and effectiveness. In addition, it can diversify business risks in response to the volatile and rapidly changing environments globally. European mobile telecommunications market has been saturated and most European telecommunications operators have been confronted with significant challenges to thrive and survive due to the economic slowdown in the market. Vodafone Group is not the exception and EBITDA in European market declined by 2.0% in 2009. However, the company has improved performance in emerging markets and EBITDA in African and Indian mobile markets increased by 35.3% and 12.6% respectively in 2009. Ability to adapt the advanced ICT Vodafone Groups ability to continuously adapt advanced ICT ensures that its customers are able to stay connected to the people and the information that are central to their lives via voice, text, instant messaging, e-mail, music, communities, news, and applications both social and work related whenever, wherever (Read, 2009, p.12). The company thus created Vodafone 360 and Cloud Computing services and it in turn can greatly improve customer experience, and eventually gain and maintain its competitive advantages. Vodafone 360 represents the new service standard to take everything back in Vodafone and superimpose proprietary ownership over all service aspects. It was the first time for a mobile communications company to create an experience which can compete with Apple iPhones excellence and superior user interface. Vodafone Group announced a strategic partnership with Decho Corporation to create a series of Could Services for both enterprise and consumer markets.

Group Technologies Vodafone Group has driven the Group Technology initiative to achieve time-to-market and maintain cost efficiency. The company has managed and controlled group-wide projects to orchestrate the move toward significant coordination and identify and disseminate best practices to focus on expansion of service capacity while replicating business models across a number of countries. Hitt, Ireland and Hoskisson (2008) argued that the purpose of Group Technology will be to lead the implementation of standardized architecture for business process, information technology and network systems (p. 345). The initiative has supported the third generation (3G) network rollout, the enhancement and expansion of Vodafone Live service to most of European countries, and development of Vodafone Groups business offering on a global base. Strong brand recognition The Vodafone brand is perceived as one of the most recognizable global telecommunications brands and the company has capitalized on the brand recognition to enter into new markets. It migrated many domestic mobile communications companies to a global brand, Vodafone (Vo voice, da data, and fone phone). According to Schept (2010), Vodafone is ranked at 10th position in BrandZs top 100 most valuable global brand ranking, and its brand value is $44,404 million in 2010. Vodafone has implemented a dual branding strategy designed to give all constitutes, employees, customers, and trade-partners a period of time so people can intellectually get it (Capon, 2009, p. 169). In Germany, the company used D2/Vodafone, then Vodafone/D2, and it just dropped the D2 to become Vodafone while involving brand advertising and sponsorships. 4.1.2 Weaknesses Financial instability Most of key financial ratios including liquidity, profitability, and debt management are reported lower than the industry norm. The company has recently lost flexibility in its global expansion due to a continuous increase in long-term debt. Underperformance in key markets The company is seriously affected by the economic slowdown in the European markets which the company captured 67.3% of its total revenues in 2009. The market growth is projected only at 1.0% and 1.3% in 2010 and 2011 respectively and ARPU in most countries has been slightly decreasing. Weak domestic position According to Kendall (2010), Vodafone UK has captured 23.3 % of UK domestic market share and has fallen behind O2 UK in 4Q2009. Orange UK and T-Mobile UK captured 20.1% and 20.9% in the same period respectively, and if the proposed merger between Orange and TMobile is occurred, Vodafone UK will fall into the third position in its domestic market. 4.1.3 Opportunities Value added products and services Value-added products and services that can meet individual customer needs and widen the scope of its relationship with its customers are essential for telecommunications operators to 7

reshape its competitive environments. Vodafone Group has focused on creating value-added services to improve ARPU from existing customers and simultaneously entice new customers. Fixed-mobile convergence Data services are expected to drive converged services rather than traditional voice and messaging services. The company intends to move into the fixed voice and broadband markets. It has either acquired the Internet service providers in some countries or formed partnerships in the other countries where acquisitions are not feasible or not cost efficient. Mobile broadband The total global mobile broadband subscriber base will increase eight-fold over the forecast period; at a CAGR of 50% from 186 million subscribers at the end of 2008 to 1.4 billion at the end of 2013 (Roberts, 2009, p. 11). The company has rolled out 3.6Mbps and 7.6Mbps HSDPA services and planed to deploy LTE to launch much higher speed mobile broadband services in European market. Emerging market growth The Indian mobile telecom industry is one of the highest growth industries globally. While mobile subscriber penetration in most of developed market has approached 100%, the penetration in Indian market hasnt reached 50%. Gupta (2010) argues that India will gain almost 135 million new mobile connections in 2010 (p. 2). 4.1.4 Threats Exposure to economic slowdown and maturing markets While the company has heavily relied on its revenues from the European market, the recent economic slowdown in the market has affected Vodafone Group. Its market growth is projected only at 1.0% and 1.3% in 2010 and 2011 respectively. Mobile subscriber penetration rate in most of the market have already approached 100% and those markets have been saturated, and ARPU in most countries in the market have been slightly decreasing. Fierce competition While most mobile communications companies have been confronted with the impact on the recent economic slowdown and most of developed markets have been saturated, competition in developed markets is intensifying globally. Most multi-national operators have turned their focus to emerging markets and competition in the markets is also intensifying globally. Consequently, customers have been more price-sensitive in both markets and the company has faced significant pressure on its price globally. Regulation While expanding its business globally, Vodafone Group has to cope with each local regulation, some of which are not favorable to its operations. Obiodu (2010) argued that mandated reductions in mobile termination rate (MTRs) have been a key irritant for Vodafone and its peers, and there are also concerns on how regulators will interpret future developments such as for VoIP or for future licenses (p. 6).

4.2 Financial Analysis 4.2.1 Financial ratio analysis Vodafone Groups financial performances are analyzed by utilizing the liquidity, profitability and debt management ratios, compared to the industry norm cited from Hoovers, Strategic Analytics, and Ycharts. 4.2.2 Liquidity ratio Current ratio Current assets normally are comprised of cash, accounts receivable, inventories, and marketable securities. Current liabilities include accounts payable, short-term notes payable, current portion of long-term debt, accrued taxes, wage, and other accrued expenses. The current ratio indicates the extent to which current liabilities are covered by those assets expected to be converted to cash in the near future (Brigham and Houston, 2009, p. 88). The current ratio is calculated by dividing current assets by current liabilities. The current ratios of the company have been reported much lower than the industry norm, as shown in Table 4.1. Cash and cash equivalents only captured 37.4% and 19.4% of total current assets in 2009 and 2008 respectively. The company stated our key sources of liquidity in the foreseeable future are likely to be cash generated from operations and borrowing through long term and Short-term issuances in the capital markets as well as committed bank facilities (Vodafone, 2010a, p. 38). While increasing net cash flows from operating activities by 14.2%, short-term borrowings increased by 52.9% in 2009. While current assets have increased by 33%, current liabilities have also increased by 25% in 2009. Current assets are rising faster than current liabilities, and the company thus has slowly improved the short-term liquidity.
Account Current assets Current liabilities Current Ratio 31 March 2009 13,029m 27,947m 0.47 31 March 2008 8,724m 21,973m 0.40 31 March 2007 12,813m 18,946m 0.68 Hoovers N/A N/A 0.89

Table 4.1 Vodafone Group current ratio

4.2.3 Profitability ratio EBITDA margin ratio EBITDA, Earnings before Interest, Taxes, Depreciation and Amortization, to sales ratio is a measure of cash flows from the entitys operations. A robust network infrastructure is a source of competitive advantages for mobile communications companies but they generally report large losses due to hugely spending capital expenditures to construct the network infrastructure. EBITDA enables the companies to discuss their profitability of core business operations while deducting the huge amount of interest, taxes, and capital expenses. EBITDA margin ratios are stable but relatively lower than the industry norm due to the impact of business acquisitions and disposals, and foreign exchange associated with its global expansion, as show in Table 4.2.
Account Revenue EBITDA 31 March 2009 41,017m 14,490m 31 March 2008 35,478m 13,178m 31 March 2007 31,104m 11,960m Strategy Analytics N/A N/A

EBITDA Margin

35.5%

37.1%

38.5%

41.0%

Table 4.2 Vodafone Group EBITDA margin ratio

Return on Common Equity (ROE) ratio DuPont analysis is used to conduct a deeper analysis of ROE ratios, and highlight the influence of the profit margin, total assets turnover, and the equity multiplier. ROE ratio has been reported slightly lower mainly due to lower profit margin than the industry norm, as shown in Table 4.3. The lower profit margin in 2009 and 2007 came from the huge amount of the goodwill associated with its operations and joint ventures, impaired by 5,900m and 11,600m respectively. While continuously expanding its geographic footprint globally through horizontal integration, joint ventures, and strategic alliances, it also has implemented One Vodafone program to improve the bottom line performance.
Account Revenue Net income Profit Margin Total Assets Total Assets Turnover Total Equity Equity Multiplier ROE Table 4.3 Vodafone Group ROE ratio 31 March 2009 41,017m 3,080m 7.5% 152,699m 0.26 84,777m 1.8 3.5% 31 March 2008 35,478m 6,756m 19.0% 127,270m 0.27 76,471m 1.7 8.7% 31 March 2007 31,104m (5,222m) -16.7% 109,617m 0.28 67,293m 1.6 -7.5% Hoovers N/A N/A 15.8% N/A 0.3 N/A N/A 10.8%

4.2.4 Debt management ratio The debt ratio measures the percentage of funds provided by noncurrent liabilities and equity. Ehrhardt and Brigham (2009) argued that creditors prefer low debt ratios because the lower the ratio, the greater the cushion against creditors losses in the event of liquidation, and stockholders, on the other hand, may want more leverage because it magnifies expected earnings (p. 123). As shown in Table 4.4, the debt ratio of the company has increased due to business acquisitions and disposals, and of foreign exchange rates since more than 50% of net debt has been denominated in Euro in accordance with its global geographic expansion. The company stated our key sources of liquidity in the foreseeable future are likely to be cash generated from operations and borrowing through long term and Short-term issuances in the capital markets as well as committed bank facilities (Vodafone, 2010a, p. 38).
Account Noncurrent liabilities Noncurrent liabilities + Equity Debt Ratio 31 March 2009 39,875m 124,752m 32.0% 31 March 2008 28,826m 105,297m 27.4% 31 March 2007 23,378m 90,671m 25.8% Ycharts N/A N/A 17.2%

Table 4.4 Vodafone Group debt management ratio

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4.2.5 Summary of financial ratio analysis Most of financial ratios analyzed in this section are reported lower than the industry norm. Its profitability ratios are reported relatively lower than the industry norm generally due to the impact of business acquisitions and disposals and foreign exchange associated with its global geographic expansion. An increase in short-term borrowings has been relatively higher than an increase in the cash flows from operating activities, and its debt ratio has increased due to business acquisitions and disposal, and foreign exchange rates. The company has acknowledged its liquidity risks and it has subsequently implemented One Vodafone program to improve cost effectiveness and efficiency. The company, however, is facing further challenges in taking higher priority in investing in existing businesses to improve ARPU from existing customer base, generating cash from its existing assets, and expanding its business to new countries where Vodafone Group can expect immediate turnaround rather than high returns in the long term.

5. Long-term objectives 5.1 Key seven areas It is an ultimate goal for a for-profit organization to maximize the wealth of its shareholders to achieve sustainable growth and profitability in the long-term rather than to maximize short-run profit maximization. According to Pearce and Robinson (2009) to achieve long-term prosperity, strategic planners commonly establish long-term objectives in seven areas (p. 199). The seven areas are discussed in this section. 5.1.1 Profitability The ability to sustainably grow its business relies on attaining acceptable level of profits. Although Vodafone Group has been confronted with fierce price competition globally, it hasnt offered cheaper price than other competitors. It has relatively focused its resources on new valueadded services to entice both new and existing customers. 5.1.2 Productivity The One Vodafone program was targeted at achieving 2.5 billion of annual pre-tax operating free cash flow improvements in Vodafone Groups controlled businesses. The company transformed 16 core independent national operating companies into a united operation with a high degree of similarity with regard to product, brand, position, advertising strategy, personality, packaging, and look and feel (McLoughlin and Aaker, 2010, p. 251) in order to achieve significant economies of scale and scope. Global Supply Chain Management (GSCM) has identified the best practices across Vodafone Groups mobile operations globally in order to harmonize business process that contributes to further reduction of procurement costs. GSCM is becoming a major contributor to significant cost reduction through a unified approach using global price books, global framework agreements, a standardized approach to e-auctions, and the introduction of low cost regional sourcing. The e-auction in Vodafone Turkey helped achieve 42% of price reduction to deploy new network. As part of the introduction of low cost regional sourcing, Vodafone Group established China Sourcing Center in March 2007 to have access to and accelerated development of low cost suppliers in order to build direct relationships with best suppliers around the world, and sourced a total of 200 million from China in fiscal year 2007 and 2008. 11

5.1.3 Competitive Position Vodafone Group is the second largest mobile operators globally by subscriber base and revenue behind China Mobile that focuses on its domestic Chinese market. While the company has maintained the largest or second largest position in most countries where the company is operating, it hasnt clearly mentioned its plan to overcome China Mobile globally. 5.1.4 Employee Development Although organizational structure has been continuously improved in response to market environmental changes, the company is committed to helping all employees reach their full potential through ongoing training and development. Vodafone (2009) stated that it provided an aggregate of 230,000 days of training, an average of three days per employee, and in our most recent people survey, 71% of employees rated their opportunities to develop their skills and knowledge as good or very good (p. 23). 5.1.5 Employee Relations Vodafone Group has embraced diverse workforce and offers equal opportunities for all aspects of employment and advancement, regardless of race, nationality, sex, age, marital status, disability, religious or political belief, to understand expectations of its diverse customers globally and have required skills and competences to create the innovative and differentiated products and services that can meet their expectations. 5.1.6 Technology Leadership Vodafone Group has continuously improved its network and ICT capability to enhance its products and services. Vodafone Group (2010a) stated that to ensure we continue the best possible quality of service to our customers we are proactively evolving our infrastructure through a range of initiatives (p. 19). The company is a pioneer in products and services to enhance customer choice and user experience. The company has intended to maintain the technological leadership position globally by enhancing its ability to adapt advanced ICT and driving Group Technology initiatives. 5.1.7 Public Responsibility Vodafone Group has continuously reported its environmental and social impacts since 2000. According to Vodafone Groups sustainability report (2010b), Vodafone can help to build a sustainable future by delivering products and services that enable positive economic, social and environmental outcomes for our stakeholders worldwide (p. 5). Sustainability challenges are identified as a key stimulus for innovation and the company has established dedicated business units to develop and promote products and services that enable more efficient and effective healthcare, access to basic services through mobile payment solutions, and machine-to-machine application to bring substantial carbon and energy cost savings. Many of those services are significantly visible in emerging markets.

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6. Generic and grand strategies 6.1 Generic strategies The general philosophy stated in the mission statement must be translated into a holistic statement of the firms strategic orientation before it can be further defined in terms of a specific long-term strategy (Pearce and Robinson, 2009, p. 203). Generic strategies are core ideas and Vodafone Group has implemented differentiation strategy. Differentiation strategy is designed to appeal customers with a special sensitivity for a particular product attribute, and by stressing the attribute above other product qualities, the firm attempts to build customer loyalty (Pearce and Robinson, 2009, p. 204). Although Vodafone Group has been confronted with fiercer competition in both developed and emerging markets, it has not implemented cost leadership but differentiation strategy. The company has focused on creating new value-added services to diversify its business portfolio in order to entice new and existing customers. 6.2 Grand strategies Grand strategies indicate the time period over which long-range objectives are to be achieved, and a grand strategy can be defined as a comprehensive general approach that guides a firms major actions (Pearce and Robinson, 2009, p. 211). Vodafone Group, involved with multiple geographic locations, customer groups and services and product portfolio, has combined several grand strategies: horizontal integration, joint venture, strategic alliance, and turnaround. 6.2.1 Horizontal integration, joint ventures, and strategic alliances The company has expanded its global geographic footprint through horizontal integration, joint ventures, and strategic alliances in compliance with each local culture, norm, and regulatory requirements. The company has maintained a significant fixed and mobile presence globally in Europe, Africa and Central Europe, and Asia Pacific and Middle East. It has equity investments in 31 countries including a 65% stake in South Africas Vodacom Group, and a 70% stake in Ghana Telecom. In 2000, Vodafone Group teamed up with Verizon Communications to form a joint venture, Verizon Wireless, and the company owns 45% of the venture. In 2009, Vodafone Australia completed its merger with Hutchison 3G Australia and they established a 50:50 joint venture. Vodafone Group has formed strategic alliances with both telecommunications and non-telecommunications businesses. The company built partnership with Jersey Airtel to launch mobile services on Jersey India under the brand name AirtelVodafone. The company also built strategic partnerships with Acer, Dell, HP, and Levnvo to incorporate in the manufacturing level to implement a built-in Vodafone SIM supporting HSDPA technology, with Citigroup to launch global mobile transfer service, and with Yahoo! to develop mobile advertising solutions. 6.2.2 Turnaround Turnaround is a strategy of cost reduction and asset reduction by a company to survive and recover from declining profits (Pearce and Robinson, 2009, p. 224). The company has continuously increased the debt ratio due to its aggressive global geographic expansion, and it has recently taken higher priority in investing in existing businesses to improve ARPU from existing customer base and expanding its businesses to new markets where it can expect immediate turnaround rather than high returns in the long term. The company has thus 13

implemented turnaround strategy and initiated One Vodafone program to achieve streamlined cost effectiveness and efficiency to improve bottom line performance.

7. Strategic Analysis A company can achieve sustainable growth to thrive and survive its business when it possesses competitive advantages against its competitors globally and locally. Pearce and Robinson (2009) argued that the two most prominent sources of competitive advantages can be found in the businesss cost structure and its ability to differentiate the business from competitor (p. 246). Global telecommunications industry is greatly fragmented industry. The company has implemented differentiation strategy but it definitely requires sustainable advantages in order to continuously provide unique values to its subscribers. A company can gain competitive advantages by creating more values than its competitors in the value chain. Vodafone Groups value chain activities are discussed in Appendix 7.1. While the company has relatively focused more on demand chains such as service, marketing and sales, and outbound logistic to provide buyers with something uniquely value (Pearce and Robinson, 2009, p. 250), the company has centralized supply chains to weaken the bargaining power of suppliers to achieve cost and operational efficiency. The huge capital requirements traditionally represented a more significant entry barrier to new entrants in telecommunications industry but recent MVNO business model lowers the barrier and small companies with differentiated products and services have been identified as new entrants. Vodafone Group has heavily invested in Group Technology and improvements of its ability to adapt the advanced technologies globally to create innovative and differentiated products and services. To diminish the bargaining power of substitute products and services, the company has continued to diversify its product and service portfolio and offered a wide range of products and services including value-added services to meet its customers total communications needs.

8. Implementation 8.1 Short-term objectives Short-term objectives are measurable outcomes achievable or intended to be achieved in one year or less, and specific, usually quantitative, results operating managers set out to achieve in the immediate future (Pearce and Robinson, 2009, p. 305). Short-term objectives help implement the generic and grand strategies while making long-term objectives become a reality, raising issues and potential conflicts within an organization, and assisting strategy implementation by identifying measureable outcomes of action plans. In the annual report for the year ended 31 March 2010, Vodafone Group (2010a) reported four main objectives: drive operational performance, pursue growth opportunities in total communications, execute in emerging markets, and strengthen capital discipline (p. 8). Each short-term objective is discussed in this section.

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8.1.1 Drive operational performance The company has intended to enhance customer values in order to maximize the value of existing customer relationships. The company has implemented not cost leadership but differentiation strategy and it focuses on creating new value-added services to entice both existing and new customers globally. Employees are identified as a source of competitive advantages to improve existing customer relationships locally and the company has maintained high performance benchmark for employee engagement. 8.1.2 Pursue growth opportunities in total communications Vodafone Group has targeted three key areas for growth mobile data use, broadband, and enterprise services (Obiodu, 2010, p. 7). Vodafone Groups successful smart-phone penetration growth ensures that its smart-phone users have paid more for data services than its traditional phone users. It has aggressively launched mobile broadband offering across its key markers, and data revenue grew by 19.3% and is now over 4 billion (Vodafone, 2010a, p.7). In the enterprise markets, it also intends to increase the penetration of data devices, deliver its broadband service, and strengthen its core mobile services. 8.1.3 Execute in emerging markets Vodafone Group focuses on selective expansion within the markets while executing mergers and acquisitions in key emerging markets. India, Africa, and the Middle East are now key areas for growth. It improves business performance in these markets by selling own-branded, lowcost handsets, reducing the cost of entry for mobile communications and encouraging more customers to come on to the network (Obiodu, 2010, p. 7). 8.1.4 Strengthen capital discipline Vodafone Group has focused on its free cash flow generation to maintain an appropriate investment in new and existing businesses and markets. While launching new and value-added services globally to improve existing customer satisfaction, increase ARPU, and decrease churn rate, it has divested loss-making units in Japan, Sweden, Belgium, and Switzerland (Obiodu, 2010, p. 7). The company also has already achieved 1 billion cost reduction program a year ahead of schedule but it has initiated further 1 billion cost reduction program by the 2013 financial year by leveraging its global scale and scope. Two-year working capital reduction, outsourcing IT functions and network sharing agreement are in place as a part of the program. 8.2 Outsourcing The company has definitely identified its network infrastructure and its operations, IT, and supply chain, data centers and other back office activities as non-core while customer relationships as core business activities. While those non-core business activities are outsourced to external parties or Vodafone Group headquarters to maximize cost effectiveness and efficiency by leveraging economies of scale and scope globally, it has focused their resources on customer relationship management locally, as shown in Appendix 8.1. Vodafone and Orange have established their network joint venture in the UK to deploy and own their combined ratio network. Their initial scope was limited to 3G network but they are expected to expand their existing network sharing deals to including the costs of engineering, maintenance, and technology, in a move which is expected to save Vodafone (and Orange presumably) around US$1.45 billion a year (Cellular-news, 2009, para. 1). 15

9. Strategic control 9.1 The balanced scorecard methodology Vodafone Group has implemented the balanced scorecard methodology to create additional values. EFM Software argued (2009), there are several reasons why the company decided to use the balanced scorecard and eventually developed eighty and even up to one hundred key performance indicators: There was a need for operational performance measurement and feedback. The increasing complexity of systems and organization as a consequence of its rapid growth led to decreasing coherence between different management reports. The business dynamics cause continuously changing external factors which in turn influence the decision making.

In the interview conducted by Pointon (2005), the former CEO at Vodafone Australia, Grahame Maher mentioned the values of the balanced scorecard: As for the BSC the beauty of that theory is that everything in the business should be measured and not just the accepted financial measures. The BSC has a natural flow which says the flow is PEOPLE then PROCESS then CUSTOMER and then finally FINANCIAL measures as they are just outcomes of the other stuffs. This is completely consistent with the values based approach which puts people as the most important focus (para.14). In another the interview conducted by Supply Chain Standard (2006), the head of services at Vodafone Global Supply Chain explained the values of the balanced scorecard as in terms of building the community to maximize performance, we are well down the track on structuring an integrated SCM organization and are to implement a balanced scorecard reflecting not just savings but the total value add to Vodafone of the SCM function (para. 2). In addition to internal performance management objective, the company has externally reported some of its KPIs in its interim management statement on a regular base. 9.1.1 The Application of the Balanced Scorecard to Vodafone Group In Vodafone Groups report (2010a), Vittorio Colao, Chief Executive at Vodafone stated the four main objectives: drive operational performance, pursue growth opportunities in total communications, execute in emerging markets, and strengthen capital discipline to drive shareholder returns. The four main objectives are now decomposed into strategic objectives, and performance measures are created for each strategic objective, as shown in Appendix 9.1. In its annual report for the year ended 31 March 2010, Vodafone reported the a number of KPIs used by The Board and the Executive Committee to monitor Group and regional performance against budgets and forecasts as well as to measure progress against our strategic objectives (Vodafone, 2010a, p. 24). Those KPIs are categorized as VF defined in Appendix 9.1. To completely align with each strategic objective, a total of five KPIs are relatively proposed, and categorized as Proposed in Appendix 9.1.

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9.1.2 Customer Perspective The customer delight index, churn rate, and revenues from emerging markets, and the number of proportionate mobile subscribers are identified in line with each strategic objective in the customer perspective. Mobile technologies have evolved and its customers use their mobile phones not only to call but also connect the Internet, watch television, play music and take pictures. The company has focused on customer value enhancement to maintain their loyalty and trust. According to Vodafone (2010d), the Customer Delight Index measures the levels of customer satisfaction: Our Customer Delight Index (CDI) measures levels of satisfaction and dissatisfaction among consumer and business customers. It helps us to monitor our progress against our goal to delight our customers. The CDI results are reviewed quarterly at board level to identify priorities for improvement. In addition, a Customer Experience Committee meets monthly to review issues affecting customer satisfaction and put action plans in place. Employee incentive programs are partly dependent on meeting customer satisfaction targets (para. 4). Churn rate is especially crucial for the company that has heavily relied on saturated European market where competition is fierce and where net acquisition costs of customers can be high, including both direct and indirect marketing costs and other costs such as customer equipment study (Stainthorpe, 2009, p. 2). The churn rate is one of the key measures to assess the actual performance against the strategic objective. The objective execute in emerging markets represents that while the company has maintained its strong presence, it focuses on expansion within the market. Revenues from emerging markets are key measures to definitely evaluate their actual achievements in the markets against the objective. Finally, the number of proportionate mobile customers is the high-level measure to ensure that the company has encouraged more customers to come on to its network globally. 9.1.3 Financial Perspective EBITDA margin, free cash flow, and return on common equity (ROE) are identified in accordance with each strategic objective in the financial perspective. A company in telecommunications industry generally reports large losses due to hugely spending capital expenditure to construct the infrastructure. EBITDA margin enables to analyze the profitability of core business operations while deducting the huge amount of interest, taxes, and capital expenditures. Free cash flow generation is a critical source of its growth while establishing its entities through horizontal integration, joint ventures, and strategic alliances globally. In addition, free cash flow can support higher dividends and in turn contribute to maximizing shareholders values. ROE represents the actual return earned by shareholders and is the best measure to directly assess its actual performance against the strategic objective drive shareholder return as an ultimate goal for the company. 9.1.4 Learning and Growth Perspective ARPU, data revenue, fixed revenue, and the number of enterprise mobile voice connections are identified in accordance with each strategic objective in the learning and growth perspective. Vodafone Group has implemented differentiation strategy that it focuses on creating new valueadded services to increase ARPU. ARPU can be therefore considered as one of the key measures of its innovation. While traditional voice and messaging services captured more than 75% of its 17

service revenues in 2009, data service is targeted as one of three key areas for growth, and therefore the data revenue is a key measure to directly evaluate its growth objective. The company has expanded fixed broadband customer base to meet their total communications needs. It has only fixed broadband services in its fixed service portfolio, and it is also identified as one of three key areas for growth. Fixed revenue represents the growth objective and is considered as a key measure. The last one of three key areas for growth is the enterprise services. While the enterprise service revenues are not independently reported in the annual report, the main enterprise service is an enterprise voice service and the number of enterprise mobile voice connections can be thus considered as a key measure of its growth objective. 9.1.5 Business Processes Perspective The employee turnover rate, annual capital expenditure, and operational efficiency ratio are identified in accordance with each strategic objective in the business process perspective. The company stated that we rely on our people to maintain and build on our success and to deliver excellent service to our customers, and we aim to attract, develop and retain the best people and to realize their full potential (Vodafone, 2010a, p .22). The employee turnover rate is one of the key measures to evaluate its performance against the strategic objective maintain high performance benchmark for employee engagement. As a part of cost reduction programs, the two-year working capital reduction program is initiated and the working capital itself is the best measure to directly evaluate the actual performance against the targeted working capital. Although the company has extended the cost reduction programs to a further 1 billion cost saving by 2013, 1 billion includes both the capital and operating expenditures and it is difficult to focus on either capital or operating expenditure. However, the objective of the cost reduction program is to improve its operational efficiency and, the number of subscribers versus the number of own employees ratio can be used alternatively. 9.2 Balanced Scorecard Analysis Both the absolute values and ratios are generally identified as measures associated with the strategic objectives and presented in the balanced scorecard, and they can be analyzed in several ways. The balanced scorecard analysis involves: Comparing an actual value of a KPI to a target value of the same KPI in order to assess whether the strategic objective is being met, Comparing an actual value of a KPI to a series of the previous values of the same KPI in order to ensure how the strategic objective has an impact on financial and non financial positions, and evaluate trends over time, and Comparing the actual values of a KPI to the industry norm to understand the relative position in the industry. Some of key measures are analyzed in each way in this section. 9.2.1 An actual versus target KPI values Vodafone has generally stated the guidance for its expectations for coming quarters or fiscal year and values released in the guidance can be considered as its target values. Vodafone (2008) stated the guidance as free cash flow in the range of 5.5 billion to 6.0 billion, an increase of 0.3 billion (Vodafone, 2008, p. 1). Free cash flow generation has been considered as a critical 18

source of its growth through the mergers and acquisitions, joint ventures, and strategic alliances globally. Consequently, the actual value was 5.72 billion, between 5.5 billion to 6.0 billion, and the company achieved only the minimum target, a total of 5.5 billion. 9.2.2 An actual value versus a series of the previous values of the same KPI While new value-added services are considered as a lever to increase ARPU, ARPU in all European countries where Vodafone Group is operating have been slightly decreasing as shown in Appendix 9.2. ARPU includes both voice and data revenues and a decrease in voice revenues have subsequently had a great impact on a decrease in ARPU. Although its data revenues have increased, its voice revenues have decreased much quicker than data revenues. Execute in emerging markets comes from the fierce competition in European market. 9.2.3 Actual KPI values versus the industry norm EBITDA margin ratio of the company are stable but lower than the industry norm due to the impact of business acquisitions and disposals and foreign exchange associated with its global geographic expansion strategy, as shown in Appendix 9.3. The global average EBITDA margin is cited from Strategy Analytics wireless operator performance benchmarking (2009). 9.3 The best practice of performance monitoring system Vodafone Group has already implemented the balanced scorecard methodology to monitor its performance against predefined KPIs in accordance with not only the financial perspective but also the other three perspectives. The company has built performance monitoring systems locally and globally, functionally and cross-functionally, and internally and externally. The best practice of the performance monitoring system is Vodafone Global Supply Chain Management System implemented globally, cross-functionally, and both internally and externally. The company has put in the infrastructure and built the global SCM community (Supply Chain Standard, 2006, p. 1). The infrastructure with common processes and data established with a group-wide platform can help the company simplify the end-to-end SCM process, establish commonality in performance analysis, and implement group-wide visibility to its performance. The community enables all stakeholders in the supply chain process, regardless of organizations, to have a common language to improve operational effectiveness. In addition, Vodafone Group has implemented the end-to-end visibility to its performance beyond Vodafone Group, and as a result, Vodafone Group can create performance reports including the end-to-end aspects, identify shortcomings throughout the SCM processes even beyond Vodafone Group, and find, analyze and optimize performance degradation immediately with all internal and external stakeholders. 9.4 Continuous performance improvements Once an organization has built a coherent set of performance measures and monitoring systems, the final step is to continuously improve organizational performance. TQM is a management concept that stresses continuous improvement through people involvement and measurements to focus on customer satisfaction, and is the application of human resources and quantitative methods to improve all the processes within an organization.

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Vodafone Group has implemented TQM to continuously improve organizational performance. Skills and competence development is considered as a key source of competitive advantages and it is of considerable value to continuously invest in people along with continuous focus on efficient and effective organizational structures, regular review of peoples performance and potential, diversity and inclusion, and development of high potential employees.

10. Conclusions While Vodafone Group has the largest geographic footprint in more than 70 countries, the company has been confronted with fiercer competition in both developed and emerging markets. Developed market growth is only projected at around 1% and mobile subscriber penetration in the market is extremely higher than emerging markets. European market is the largest market for Vodafone Group but its revenue and ARPU in the market are slightly decreasing. Indian market is one of the highest growth mobile markets and Vodafone Group has more than 100 million customers in the market, 30% of its total number of customers. Mobile subscriber penetration in the market hasnt reached 50% yet. The market is expected to continuously grow and most multinational mobile operators have recently focused more on Indian market and Vodafone Group is facing extremely fierce price competition in the market. Value-added services are identified as key differentiators to maintain its customers and improve ARPU in developed market and to entice new customers in emerging markets. Its differentiation strategy represents that Vodafone Group intends to maintain the technological leadership by enhancing its ability to adapt advanced ICT and driving Group Technology initiatives in order to create value-added services to meet customers total communications needs. Vodafone Group has expended its global geographic footprint through horizontal integration, joint ventures and strategic alliances by capitalizing on its superior brand recognition. However, the company has continuously increased the debt ratio due to its aggressive global geographic expansion, and it has recently taken higher priority in investing in existing businesses to improve ARPU from existing customer base and expanding its businesses to new markets where it can expect immediate turnaround rather than high returns in the long term. The company has thus implemented turnaround strategy and initiated One Vodafone program to achieve streamlined cost effectiveness and efficiency by gaining economies of scale and scope globally to improve bottom line performance. Vodafone Groups has formulated and implemented those generic and grand strategies deliberately in accordance with its vision and mission, and external and internal environments. The company has also implemented four main strategic objectives associated with those strategies and the balanced score card methodology to disseminate the strategies widely, translate them into actions, and provide meaningful feedback in the strategic control process. Although Vodafone Group has implemented differentiation strategy, the company hasnt launched value-added services in both developed and emerging markets and it has thus facing fierce price competition. While expanding geographic global footprint and diversifying products and services, the company needs to focus more resources on value-added services as key differentiators in order to maintain sustainable growth.

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11. Bibliography Brigham, E. F., & Houston, J. F. (2009). Fundamentals of Finance Management, Concise Edition (with Thomson One Business School Edition). Florence, KY: South-Western College Publishing. Capon, N. (2009). Capons marketing framework. London, UK: Wessex Publishing. Cellular News. (2009). Orange and Vodafone to Expand Network Sharing Partnership. Retrieved Mar-31, 2010 from http://www.cellular-news.com/story/35351.php EFM Software (2009). Case: Vodafone. Retrieved August 1st, 2010 from http://www.efmsoftware.nl/totalqualitymanagement/casesvodafone/?lang=en Ehrhardt, M. C., & Brigham, E. F. (2009). Corporate Finance: A Focused on Approach. Florence, KY: Cengage Learning. Gupta, A. (2010). Trends in 2010: India telecom market. London, UK: Ovum. International Monetary Fund (2010, July 7). World Economic Outlook Update. Retrieved September-14, 2010 from http://www.imf.org/external/pubs/ft/weo/2010/update/02/pdf/0710.pdf Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2008). Strategic management: competitiveness and globalization. Florence, KY: Cengage Learning. Hoovers. (2010). Vodafone Group Plc: Comparison data. Retrieved May-14, 2010 from http://www.hoovers.com/globaluk/sample/co/fin/comparison.xhtml?ID=ffffcksxttxssyjkxy Kendall, P. (2010). Wireless Operator Performance Benchmarking Q4 2009. Santa Fe, NM: Strategy Analytics. Mavrakis, D., & Saddi, M. K. (2009). Mobile Network APIs: Enabling Web services, operator app stores and developer communities. London, UK: Informa UK. McLoughlin, D., & Aaker, D. A. (2010). Strategic Market Management: Global Perspectives. Hoboken, NJ: John Wiley and Sons. Myers, D. (2010). Service Provider VoIP Equipment and Subscribers: Quarterly Worldwide and Regional Market Share, Size, and Forecasts. Campbell, CA: Infonetics Research. Naagarazan, R. S., & Arivalagar, A. A. (2009). Total Quality Management. New Delhi, India: New Age Global. Obiodu, E. (2010). Vodafone. London, UK: Ovum.

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Pearce, J.A., & Robinson, R. B. (2009) Formulation, Implementation and Control of Competitive Strategy (10th ed.). New York, NY: McGraw-Hill. Pointon, D. (2005). An interview with Grahame Maher Vodafone Australia: People before Profits. Retrieved August 1st, 2010 from http://www.fastmeetings.com.au/case-studies/vodafone-maher-interview.htm Read, T. J. (2009). The IT Value Network: From IT Investment to Stakeholder Value. Hoboken, NJ: John Wiley and Sons. Roberts, M. (2009). Future Mobile Broadband: HSPA & EV-DO to LTE Networks, Devices & Services (3rd ed.). London, UK. Informa UK. Saxtoft, C. (2008). Convergence: User Expectations, Communications Enablers and Business Opportunities. Hoboken, NJ: John Wiley and Sons. Schept, K. (2010). Top 100 most valuable global brands 2010. London, UK: BrandZ. Stainthorpe, A. (2009). Mobile Churn and Loyalty Strategies: How to retain valuable customers (2nd ed.). London, UK: Informa UK. Supply Chain Standard. (2006). Winner: Vodafone. Retrieved August 1st, 2010 from http://www.supplychainstandard.com/Articles/1206/Winner+Vodafone.html Vodafone. (2007). Vodafone Group Plc: Analyst and Investor Day. Retrieved September-13, 2010 from http://www.vodafone.com/etc/medialib/attachments/company_presentations/2007.Par.74819.File .dat/Germany_UK_Investor_Day_presentation_web.pdf Vodafone. (2008). Interim Management Statement for the Quarter Ended 31 December 2008. Retrieved August-7, 2010 from http://www.vodafone.com/start/media_relations/news/group_press_releases/2009/ims_q3.html Vodafone. (2010a). Vodafone Group Plc: Annual Report for the year ended 31 March 2010. Retrieved September-13, 2010 from http://www.vodafone.com/static/annual_report10/downloads/vf_ar2010.pdf/ Vodafone. (2010b). Vodafone Group Plc: Sustainability Report for the year ending 31 March 2010. Retrieved September-13, 2010 from http://www.vodafone.com/etc/medialib/cr10/pdf.Par.17290.File.dat/vodafone_sustainability_rep ort.pdf Vodafone. (2010c). Learning for the long term. Retrieved September-18, 2010 from http://www.vodafone.com/working_nation/the_skills_of_work/learning_for_the_long.html Vodafone. (2010d). Corporate Responsibility: Customers. Retrieved September-18, 2010 from 22

http://www.vodafone.com/start/responsbility_uk/customers. html Ycharts. (2010). Wireless Communications Industry Stock Charts. Retrieved May-14, 2010 from http://ycharts.com/industries/Wireless%20Communications/charts

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12. Appendix Appendix 7.1 Evaluating Vodafone Groups Differentiation Opportunities

Technology Development Human Resource Management General Administration Group Technology and agility to adapt the advanced technologies to create innovative and differentiated products and services. The Vodafone Way program to help all employees align with a common set of values and behaviors. Vodafone's commitment to help them reach full potential through ongoing training and development. The Vodafone Way program to increase customer focus with speed, simplicity, and trust. Awarded Global Supply Chain Management driving One SCM to leverage economies of scale and scope to significantly reduce procurement cost (global price book, global framework agreement, standardized approach to e-auction, and low cost regional sourcing). One SCM to Better Multiple Focus its Locate a great centralize and Understanding customer resources on number of manage most of of the strategic interfaces to local own and Vodafone values of IT to deliver its customer branded Group's perform its products and relationship stores to relationships business services (web, management provide with its operations mail, (micro customer suppliers. more telephone and segmentation, services efficiently and self-service real-time (2,100 own A consistent effectively. portal). marketing, stores and supplier and direct 7,600 branded performance One Vodafone Vodafone 360 distribution stores management program to to deliver a plus aligned globally). process in place transform 16 superior partners). to assess operating integrated 24-by-7 financial companies into customer Leverage the customer stability, a united experience. most support technological operation. recognizable hotline and and commercial global door-to-door criteria, delivery telecommunic mobile phone and quality ations brand. replacement management in Germany. requirements Diversify its and corporate product and responsibility. service portfolio.

Procurement

Inbound logistic

Operations

Outbound logistics

Marketing and Sales

Services

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Appendix 8.1 Evaluating Vodafone Group Customer focused locally, scaled globally

Note: from http://www.vodafone.com/etc/medialib/attachments/company_presentations

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Appendix 9.1 Vodafone Group balanced scorecard Perspective Strategic Objectives Drive operational performance through customer value enhancement Maximize the value of existing customer relationships Maintain its strong success in key emerging markets Encourage more customers to come on to the network Target and its offers and services globally, not use the lower price than others Maintain appropriate investment in new and existing business and markets Drive shareholder return Create new value-added services globally One of three key areas for growth (mobile data use) One of three key areas for growth (broadband services) One of three key areas for growth (enterprise services) Maintain high performance benchmark for employee engagement Two-year working capital reduction program Drive 1 billion cost reduction program Measures Customer delight index Churn rate Revenues from emerging markets Proportionate mobile customers EBITDA margin Free cash flow ROE ARPU Data Revenue Fixed revenue Enterprise mobile voice connections Employee turnover rate Working capital Operational efficiency ratio (subscribers / own employees) Category VF defined VF defined Proposed VF defined VF defined VF defined Proposed VF defined VF defined VF defined Proposed VF defined Proposed

Customer

Financial

Learning and Growth

Business Processes

Proposed

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Appendix 9.2 Vodafone Group ARPU in European market

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Appendix 9.3Vodafone Group and Global Average EBITDA margin

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