Strategic Management Assignment
Essay Preview: Strategic Management Assignment
Report this essay
Vodafone Case Study AnalysisAston Business SchoolStrategic Management BSM929Group Assignment 001Word count: 2213Table of ContentsSection 1 – Introduction 3Section 2 – Evaluating industry attractiveness 3Section 3 – Pestle Analysis 9Section 4 – Conclusion 12Section 5 – References 14Section 1 – IntroductionThis report has three main aims. Firstly, it will compare and evaluate each of the four components of the communication industry in terms of its industry attractiveness. Porter’s 5 Forces framework is used here as the framework provides a good analytical tool in which to analyse the communication industry. It will highlights industry attractiveness and shows what factors are influencing this attractiveness. Secondly, this assignment will identify the key drivers of change in the communications industry by using a PESTLE Analysis and finally using the results of the PESTLE Analysis it will discuss the impact that the key drivers will have on the communications industry over the next five years. Section 2 – Evaluating industry attractivenessIn this section an industry analysis is undertaken by using Porter’s 5 Forces model. There are several limitations to Porter’s 5 Forces. Firstly, the model analyses current industry attractiveness but pays little attention to longer term market trends. Secondly, it focuses too heavily on market factors; hence factors with long term competitive advantage like industry innovation are missed in this framework. Whilst, these limitations cannot be ignored, it does not mean the model is not useful. Indeed, Wheelen and Hunger (2012) argues that Porters model helps organisations to better understand the industry they are operating in and so the model is used in this report to highlight industry attractiveness. Section 2.1 – Competitive rivalry Table 1 illustrates the five main factors that define competitive rivalry within the four communication industries: competitor balance, industry growth, fixed costs, exit barriers and differentiation.Based on competitive rivalry, the least attractive industry is the telephone industry as this is experiencing a negative growth and competitors are beginning to leave this sector. Television in contrast is the fastest growing industry among the four which is in turn attracting more competition, highlighting its attractiveness. The number of competitors is growing especially in the mobile and broadband industries; however, the communication industry should still be viewed as an oligopolistic market, as the few key players hold the majority of the market share. The four industries share similarities, such as the presence of high fixed costs and high exit barriers, due to the large investments in infrastructure and fixed assets, as well as the high redundancy costs. Excluding the Television industry, the services offered by the other three industries are scarcely differentiable. This suggests that the communication industry is characterised by a low degree of brand loyalty toward a specific service provider, making competition almost entirely price based; however, operators have started to offer (quad play) bundled services, which, according to Virgin annual report (2012), are more likely to increase customer loyalty. Therefore, showing that the communication industry is highly competitive.
Table 1: Industry competitivenessCompetitive rivalryFixed LineMobileTelevisionBroadband InternetCompetitor Balance(2011, 2013 for Mobile)BT 43%Virgin Media 13%Other direct 24% Other indirect 30%O2 24%Vodafone 17%Orange 15%EE 9%T-Mobile 9%Virgin 8%Three 7%BBC ONE 20.6%ITV 15.1%BBC TWO 6.6% Channel 4 5.8%Channel 5 4.4%BT retail 29%Virgin 20% TalkTalk 18%Sky 18%Orange 3%O2 3%Other 8%Industry Growth rate (2006-2011)-15%+8.63+16%+6.25%Fixed CostsHighHighHighHighExit BarriersHighHighHighHighService DifferentiationLowLow-mediumHighLowCompetitive rivalryHighHighHighHighTable 1 – Source of data: OFCOM reports, 2011-2013Section 2:2 – Substitutes: In each of the four industries substitutes are affecting industry attractiveness. In the Telephone industry there is a strong correlation that households will rely on using Mobiles. This substitution makes the telephone industry less attractive because competitors will leave and focus on more lucrative pay monthly consumers. Although, the Mobile industry is more attractive than the telephone industry, this industry is also suffering due to substitutes. Increasing usage of instant messaging and emailing is making this industry less attractive because consumers are conscience of their using data allowances meaning firms are capturing less revenue.