Competitive Advantage Of Vodafone Over Other Telecom Players Marketing Essay

INTRODUCTION

A Company is said to have a competitive advantage if it can sustain a profit that exceeds the average of the industry .According to Michael Porter there are two basic types of competitive advantage:-

Cost Advantage:-when a company is able to deliver the same benefits as provided by their competitors at a lower cost.

Differentiation Advantage:-when a company delivers benefits that exceeds the benefits provided by their competitors.

There are 4 generic business strategies in order to gain competitive advantage over others. The four strategies are described in the figure shown below.

Differentiation Cost

COST

LEADER

DIFFEREN

TIATION

LEADER

leader

Broad

DIFFERENTIATION

FOCUSER

COST

FOCUSER

Narrow

Strategy – Differentiation

In this strategy one or more criteria used for selection by buyers in a market are chosen – and then a business plan is used to uniquely meet those criteria. Mostly companies come up with plan that associates with charging a premium price for the product that often reflect the higher production costs and extra value-added features provided to the consumer. Differentiation is about charging a premium price that more than covers the additional production costs, and about giving customers clear reasons to prefer the product over other, less differentiated products.(David Jobber)

Vodafone came up with differentiation strategy when they launched I phone service, even though they were charging their customer more than their competitors but they still got the edge over others by offering free Vodafone to Vodafone calls for life time calls and better network strength compared to other competitors.

Strategy – Cost Leadership

In this strategy company’s main objective is to be lowest cost producer in the industry. If the achieved selling price can be at least equal (or near)the average for the market, then the lowest-cost producer will (in theory) enjoy the best profits. This strategy is usually associated with large-scale businesses offering “standard” products with relatively little differentiation that are perfectly acceptable to the majority of customers. Occasionally, a low-cost leader will also discount its product to maximize sales, particularly if it has a significant cost advantage over the competition and, in doing so, it can further increase its market share.

Vodafone has started “Home Cell” tariff for its Metro Digital service. In this offer off-peak calls from a specified location (such as office) for 5 pence (8 cents) a minute were provided. By launching this they have clearly scored a cost advantage over others like O2,3,orange.

Strategy – Differentiation Focus

In this strategy company aims to differentiate within just one or a small number of target market segments. The special customer needs of the segment mean that there are opportunities to provide products that are clearly different from competitors who may be targeting a broader group of customers. The important issue for any company adopting this strategy is to understand that what customers really needs and wants – in other words that there is a valid basis for differentiation – and that existing competitor products are not meeting those needs and wants.

Vodafone introduced One Net, a hosted fixed and mobile voice service for SMEs . this move is regarded as to be very effective move for Vodafone as Vodafone’s model is to charge per user, per month and claims the total One Net solution can be 15%-20% cheaper than SMEs pay for typical services currently.

Strategy – Cost Focus

In this strategy a company seeks a lower-cost advantage in just one or a small number of market segments. The product will be basic – perhaps a similar product to the higher-priced and featured market leader, but acceptable to sufficient consumers.

Out of these 4 strategies differentiation and cost leadership strategies operates in broad range of market to get a competitive advantage over other competitors .By contrast, differentiation focus and cost focus strategies are adopted in narrow market to gain edge over others.

Why do so many people choose Vodafone?

First of all Vodafone operates in all 3 segments of market i.e they have targeted low level ,middle level and high level market which not only make it open to large market but also gives a competitive advantage over the other major telecom players .

Secondly they have put in large investments on strengthening their network so that their customers can make more calls more places and there on they can have an advantage over others by winning costumers confidence over quality and reliability of their services .

Thirdly they have reduced their effective cost by approximately 5 times in last the 3 years so that they can provide better “value for money” to their customers which in turn gives them a edge over other telecom giants.

And of lately they have kept a focused on customers services in order to maintain high standards of customer satisfaction.

In addition to above points Vodafone understands the change in market requirements with time and have always tried to come up with new innovative idea to attract more and more costumers for example:-of lately they have understood the need to penetrate in business organizations for which they have started 3 new plans which are as follows:-

For small business:- This plan concentrates at those costumers which are sole traders or those who are running a family firm or those who are working in a growing enterprise because it offers business phone and accessories at great value price for calls ,e mail and mobile broadband.

For medium sized and large sized business:- This plan concentrates at organization more than 100 to 1000 employees .This aims at providing low call cost and flexible working with in a integrated network. This plan also aims at transforming the business communication with solutions that makes communication more agile and more productive than ever before.

For Public Sector:-Vodafone has been working with public sector for more than last 20 years as they are approved supplier in OGC(Office of Government Commerce) frame work. Vodafone has transformed the public service delivery by providing more flexibly and efficient working solutions.

Besides targeting the business sector they have also started new services on which none of their competitor has focus on yet, like disability services .They were quick enough to notice the increasing complexity in technology and introduced new phone which are easy to use which in turn has opened a all new market for them ,for those who like their things to be simple or are disabled this offer by Vodafone is very lucrative.

VODAFONE MARKET SHARE

v

NUMBER OF CONNECTIONS

2005

2006

2006

2007

2008

2009

Total

United Kingdom

67,680,000

67,437,525

68,066,300

70,626,527

74,375,797

76,067,605

3 (Hutchison)

GBRHU

3,358,000

3,473,925

3,386,000

3,633,527

3,883,597

4,410,105

O2 (Telefonica)

GBRCN

15,981,000

16,340,600

16,814,300

17,751,000

19,075,200

20,416,500

Orange

GBROR

14,858,000

14,958,000

14,951,000

15,097,000

15,756,000

15,850,000

T-Mobile

GBRME

17,158,000

16,361,000

16,730,000

16,734,000

17,124,000

16,675,000

Vodafone

GBRVF

16,325,000

16,304,000

16,185,000

17,411,000

18,537,000

18,716,000

Contract

United Kingdom

22,100,360

22,113,120

22,546,152

24,096,237

26,883,502

30,578,828

3 (Hutchison)

GBRHU

1,880,480

1,945,398

1,953,462

2,164,714

2,435,002

2,993,888

O2 (Telefonica)

GBRCN

5,502,000

5,686,200

5,873,800

6,298,000

7,015,000

8,698,500

Orange

GBROR

4,977,430

4,891,266

4,731,000

4,970,000

5,722,000

6,298,000

T-Mobile

GBRME

3,439,000

3,248,000

3,611,000

3,821,000

3,861,000

4,109,000

Virgin Mobile (Virgin Media)

—

—

—

—

435,700

712,300

Vodafone

GBRVF

6,301,450

6,342,256

6,376,890

6,842,523

7,414,800

7,767,140

Prepaid

United Kingdom

45,579,640

45,324,405

45,520,148

46,530,291

51,243,295

51,306,777

3 (Hutchison)

GBRHU

1,477,520

1,528,527

1,432,538

1,468,814

1,448,595

1,416,217

O2 (Telefonica)

GBRCN

10,479,000

10,654,400

10,940,500

11,453,000

11,388,000

11,718,000

Orange

GBROR

9,880,570

10,066,734

10,220,000

10,127,000

10,034,000

9,552,000

Tesco Mobile

—

—

—

—

—

1,800,000

T-Mobile

GBRME

13,719,000

13,113,000

13,119,000

12,913,000

13,263,000

12,566,000

Virgin Mobile (Virgin Media)

—

—

—

—

3,987,500

3,305,700

Vodafone

GBRVF

10,023,550

9,961,744

9,808,110

10,568,477

11,122,200

10,948,860

Vodafone has second largest market share in UK telecom market .As per the details shown in the table above total number of connection provided by Vodafone(19,114,000) are second largest, next to O2 (21,299,300).Vodafone is planning to buy T-mobile which would give them sole market share of around 40% after which they will be the market leaders by far leaving O2 behind(financial times).Table shown below compares all the network provider on basis of number of connections provided in last 5 years of time spam .From which we can easily interpret that Vodafone in UK is second largest network at the moment and as per their plan if the T-mobile take over by Vodafone takes place they are going to the largest network in UK market leaving other telecom players far behind them.