Chapter 8

MULTINATIONAL
STRATEGY
Vodafone and the triad telecom market
1 Given the competitiveness of the environment, how much opportunity exists for Vodafone in the
international mobile phone market?

As seen from the case data, the international opportunities in this industry are great. One reason is because the market is
going to continue growing and updating itself with new technology that may allow Vodafone to increase its revenue per
subscriber and carve itself a larger portion of the market. The number of mobile phone users in the United States will
increase sharply during this decade, and new technology will allow for expansion in all three triad markets. The key to
success in this industry is to have a presence in all major markets, primarily the triad countries and others where the cost of
mobile phones is within reach of the average person. China, for example, could be an important market because of its large
population, but the market is highly competitive and favors local mobile companies. In 2010, Vadafone sold its 3.2 percent
stake of investment to the joint venture partner—China Mobile. However, newly industrialized countries offer Vodafone more
stability for its investment because the average GDP is much greater than that of China’s and there is less political
instability. Examples include Singapore, Malaysia, and Taiwan. Indeed, in 2003, Mobile signed a partner network with M1,
one of the largest mobile companies in Singapore and a similar partner network agreement with Telekom Malaysia in 2006.
In addition, Australia and New Zealand are important target markets. By focusing on these more affluent markets and
offering both state-of-the-art products and competitive prices, Vodafone has a very good chance of outdistancing the
competition. And Vodafone has expanded its operation in Australia through purchases of retail network, and deployment of
latest mobile technology, etc.

2 What type of generic strategy does Vodafone employ? Defend your answer.

Vodafone uses a focus strategy that is geared toward identifying market niches and meeting the needs of the mobile
customers in these target groups. Notice that one of the guidelines it follows in most of its acquisitions is to be the major
stakeholder (or at least hold a substantial ownership position) but also to have a partner which can help the company deal
with the challenges in the local market. As the case notes, the company held over 50 percent of the shares in most of the
European countries in which it operates, plus a large percentage of Verizon in the United States. Another generic strategy
has been to pay for its acquisitions through equity, which saved it from the technology crash of the early 2000s. So the
company targets selected markets in which there is little risk and provides innovative products at competitive prices in order
to compete effectively.

3 What form of ownership arrangement is Vodafone using to gain world market share? Explain.

Vodafone uses two basic approaches. The most common is the international joint venture, which is seen by the company’s
decisions to acquire an ownership position in a local company but have a local partner hold the remainder of the ownership.
An example is its minority stake in Verizon Wireless, which is now the largest US mobile telephone operator in America. In
some cases, however, Vodafone opts for total ownership and purchases the entire company, usually when it believes it does
not need a local partner. An example is Airtouch Communications, where Vodafone acquired the entire firm. In both cases,
of course, the ownership arrangement is designed to help Vodafone continue to increase its market share in that geographic
region.

4 On what basis would a firm like Vodafone evaluate performance? Identify and describe two.

Vodafone uses a number of bases on which to evaluate performance. One is market share. Note that the firm keeps track of
how many subscribers it has by multiplying its ownership position in a venture by the venture’s total subscription base.
Another is overall worldwide market share. Finally, the firm evaluates its performance by its success in setting a footprint in
all major markets.