An Analysis of Vodafone's International Strategy

Vodafone is a multinational telecommunications company that is UK-based and has its headquarters in Newbury, London. The company takes pride in being a leading telecommunications group with some of its markets in, Europe, Asia and Africa where it sells network services, mobile entertainment and connections, mobile phones, wireless products and business solutions. Vodafone is able to cover such a significant market share through joint ventures, associated undertakings, subsidiary undertakings and investments. Currently, the company operates in 26 countries and has presence in 55 more countries through partnerships with other networks. The company’s customer base has around 444 million people across the world and over 19 million customers in The UK (Vodafone).

Vodafone was a combined investment between an electronic company in the UK, Racal Electronics, and a telecommunication business in The US, Millicom but was later allowed to be one of the UK’s wireless phone licences. Vodafone, then chose to disintegrate itself from Racal Company but later again joined another company, Air Touch Communication. The company’s brand, Vodafone, was announced in March 1984 citing its objective of targeting people frequently on the move including business executives, journalists and sales representatives (Panibratov 2016, p. 109). The first phone call was made on 1st January 1985 from St. Katherine’s Dock to the headquarters in Newsbury. By 1987 it was recognized as the world’s largest mobile network and was floated on the London as well as New York Stock Exchange (Vodafone). Vodafone was a name under Racal Telecommunications Plc until the 1991 de-merge when Vodafone Group was listed independently on the Stock Exchanges of London and New York (Curwen & Whalley 2013, p.128). The company has grown significantly since then employing more than 13,000 people in the UK and many more across the globe.

Vodafone Group’s International Strategy

Vodafone Group operating outside its domestic market has a need for an international strategy. An international strategy is the way through which an organization sells its products externally to markets that are not domestic (Verbeke 2013, p .4). The strategy is important in ensuring that international markets yield new opportunities and for the company to meet its objectives. The application of an international strategy can result in some benefits for the organization. Such benefits include an increase in market share as the company strategically moves into new frontiers and grows its brand name (Aswathappa & Dash 2013, p.73). Improved economies of scale are an added benefit as a result of labour that is cheap as is found in most developing countries (Collis 2014, p.54). Availability of such labour allows for mass production of products at a low cost. The economies of scale can also significantly improve as a result of availability of critical resources used in the production process (Gong 2013, p.5). Moreover, the availability of a larger customer base that increases consumption of the product significantly increases profitability (Hu et al. 2016 p.12). The type of strategy to be used by a company is influenced by the company’s capabilities which include its technical capacity, planning and existing policies that can be used to achieve its objectives (Panibratov 2016, p. 110). Another influencing factor is the company’s resources which include the human resources and finances available to implement the strategy and of the product (Neelankavil & Anoop 2016, p.146). The choice of strategy is also influenced by its current position internally (Aswathappa & Dash 2013, p.75). Internal position shows how well the company is doing within its domestic market. Understanding the position helps to decide whether to use the same approach globally or there is need to make the strategy different.

The term global strategy is applied to cover the three strategies that companies can use; global, multinational and international (Peng 2014, p. xxii). A global strategy is applied when the company considers all regions as one market and sells the same product using the same policies or with minimal variation. The competitive advantage is mainly developed on a global scale and usually with the same source (Birkinshaw 2016, p.325). On the other hand, a multinational strategy is applied when the organization has markets outside its home country that need specific strategies for each. The need for individual market strategy can be due to market peculiarities such as competition, culture and demand (Furrer 2016, p.3). The company in this instance recognizes that there has to be tailor made products and services so as to effectively reach the targeted consumers. A multinational strategy is informed by updated market information collected from local stakeholders (Andersen & Hallin 2017 p.54). An international strategy is mainly used when the company’s objectives are primarily home market related although there are overseas activities.

Vodafone Group applies the multinational strategy since it not only serves the United Kingdom but also more than 22 countries across the world. Considering the uniqueness of each market, the company is not able to apply a general strategy. The telecommunication needs vary across regions and countries and as such, the needs in Europe are different from those in Africa. Since Vodafone Group International was formed, it was until 1994 that it bid for an internal licence that would open its boundaries (Vodafone). The company has mainly implemented a multinational strategy. The company did not just expand its services to other countries but instead developed companies and products specific to the new regions it moved into (Birsy 2017, p. 47). Even as it continues to expand as a giant in the telecommunications field, it has to maintain a multinational approach for it to not only make profits but also to have a competitive edge. The multinational strategy is heavily influenced by the type of product offered that cannot be generalized as well as the divergent customer base. Influencing further are the differing laws within the countries that Vodafone operates in. Use of a multinational strategy for Vodafone has proved to be successful so far.

Vodafone Group’s International operations And Management Structure

Vodafone Group Plc organizational structure is hierarchal with a board at the top that is charged with general administration of the company’s ventures. Governing the board, are specific rules and regulations of the Vodafone Group. The chairman of the board has authority towards the leadership, governance and operations of the board of 13 members to ensure effectiveness and agenda setting (Vodafone). While the Chief Executive Officer (CEO) also sits on the board, he is in charge of the group’s business as well as implementing the Board’s policy and strategy. The board members serve either as: the CEO, Nominations and Governance Committee members, Audit and Risk Committee members or the Remuneration Committee members. Under this is the executive committee that focuses on financial structure, strategy, competitive performance policies, organizational development and succession planning (Vodafone).

The Firm’s Strategic Use of Alliances, Mergers, and Acquisitions

The company has acquired many subsidiary companies over the years. Some of these subsidiaries include: Gateway Group (Pty) Ltd, Vodacom Congo, Vodacom Group Ltd, Vodafone Albania, Vodacom Tanzania, Vodafone Europe B.V and Ghana Telecommunications Company Limited. A subsidiary company involves one whose functional unit of a regional company that is situated outside its home country (Ciabuschi et al. 2016, p.2). Different multinationals interact differently with their subsidiaries (Lohr 2014, p.29). There are factors that influence the organizational practices by subsidiaries. These include the host country’s organizational profile such as the regulatory requirements, cognitive as well as normative institutions (Lohr 2014, p.29). Another major factor influencing the kind of organizational practices is the context of relations within the multinational company such as dependence levels, identity and trust (Hoenen & Kostova 2015, p.107). The factors stated can lead to ceremonial subsidiaries that have cognitive and normative profiles that are generally favourable. Ceremonial subsidiaries, however, have a high regulatory institutional framework causing them to fail to internalise (Ambos et al. 2016, p.282). Minimal subsidiaries are usually resistant to practice and have a low dependence on their parent company due to lack of identification and low trust as well as having cognitive and normative profiles that are unfavourable (Birkinshaw 2016, p.217).

Another probable type of subsidiary is an active subsidiary has a deep adoption. Active subsidiaries are characterized by cognitive and normative institutions that are most favourable as well as high trust and identification from the parent company (Buckley & Ghauri 2013, p.47). Assent subsidiaries seem to have issues with implementation capability (Moore et al. 2015, p.62). They are characterised by unfavourable normative and cognitive institutional profiles and a high dependence on the parent company (Frynas 2015, p.222). There are challenges associated with the parent company (HQ) and subsidiary relations. One of these challenges is managing the gap between the expectations of the HQ and the subsidiary company’s performance (Lohr 2014, p.29). Another challenge is the management of the nested tiered relationships found across several layers of the organization. Additionally, the HQ-subsidiary relations are challenged by proper alignment of these relationships in different subunits enshrined in diverse social contexts (DöRrenbäCher & Geppert 2016, p.77).

Vodafone group’s subsidiaries operate under the group’s name; Vodafone. Vodafone operates autonomous subsidiaries that are in the high responsiveness, and low integration quadrant (Philis 2017, p. 55). The autonomous subsidiaries have constricted markets with the primary purpose of serving their local markets and taking into consideration the unique market needs. As a result, they usually have good research and development facilities with the potential of generating value-added activities or solutions that could benefit the Vodafone Group network. Autonomous subsidiaries enjoy a high trust level and identification from the parent company as well as a high level of purchasing related activities. They are also able to argue more on local issues to governments than the parent company would (Jowell et al. 2015, p. 298). Operating in a very competitive business field, the subsidiaries cannot rely on the Multinational Corporation (MNC) (Dzedek 2018, p.117). They have to develop comprehensive frameworks to work under.

Due to their autonomy, they enjoy power to make independent decisions as they have a low management level coordination by the parent company. The autonomous subsidiaries, however, are bound by the group’s policies that are viewed as common behaviour for all subsidiary companies (Mackinnon et al. 2014 p.82). The subsidiaries have to work within the parent company’s core values, principals and policies that include privacy of information. The principal subsidiary companies have share capital composed of indirectly held ordinary shares. The operations of the subsidiary groups have an effect on the Group’s profits and assets. Most of the subsidiary companies are either or indirectly owned by the Group.

The headquarters while maintaining some control over the subsidiaries, allows them room to make decisions such as customization of the products offered to the customers. For example, the rates of mobile phone calls per second vary from among regions and packages. The subsidiary companies are given leeway to undertake their own market research independently, understand their competitors’ strategies and develop programs that are consumer friendly. In most instances, the subsidiaries undertake segmentation, targeting and positioning to develop specific packages for specific groups of consumers. These range from corporates, students and low income consumers.

The subsidiaries while maintaining the brand values are also governed by the rules and regulations of the country where it is registered and operates from (Cox et al. 2013 p. 154). The sharing of strategies and information is done mainly between countries in one region. Due to the diversity of the business and cultural environment that the subsidiaries operate in, global changes are difficult to implement. A good example is M-Pesa which is the world’s most successful mobile money transfer programme by Safaricom, a subsidiary of Vodafone. Despite its success in Kenya, it has not excelled in other regions.

Vodafone owes some of its success to mergers and acquisitions that have greatly increased its share market. The most significant acquisitions were the acquisition of the German telecommunication firm, Mannesmann by Vodafone AirTouch, a Vodafone Group subsidiary in 1999 (Gaughan 2017, p.10). It has been cited as the biggest take-over in the telecommunications sector in the world (Gunning 2017, p.159). German as compared to other European countries had a relatively lower merger activity that could be attributed to governance institutions that barred hostile take overs (DePamphilis 2015, p.51). Mannesmann’s Chairman then, Klaus Esser, initially resisted the bid offered at 100 billion euros and so did the employees. After a period of negotiations that turned hostile, the shareholders eventually agreed to the takeover at 190 billion euros. Vodafone held 50.5% shares while Mannesmann’s held 49.5% shares of the new company. During the takeover period, the value of both companies’ stocks rose significantly in the expectation that shares would keep rising. As a result of this acquisition, the company had nearly doubled by 2000 propelling the company to be the world’s largest company in mobile telecommunications. The acquisition despite propelling Vodafone had some effects. Shortly before this acquisition, Mannesmann had acquired Orange which is another telecommunications company at quite a high premium. After the acquisition, they had to sell some large parts decreasing its attractiveness. The acquisition also made the EU and German undergo a takeover reform to cushion them against hostile takeovers (Dignam & Galanis 2016, p. 392). Other acquisitions include; Cable & Wireless Worldwide Plc, and very recently, operations of Liberty Global in Czech Republic, Romania and Hungary at a value of 18.4 billion pounds.

Vodafone Group’ Social Responsibility Strategies

Being one of the world’s leading telecommunication companies, Vodafone has a duty to better the lives of the more than half a billion people living within and around their area of operation. The betterment of these people’s lives is achieved through corporate social responsibility. Companies should not be just profit making tools but also have a duty of being responsible citizenships (Tai & Chuang 2014, p.117). Corporate Social Responsibility (CSR) is a term referring broadly to the actions undertaken by corporations and businesses voluntarily to promote both environmental and social goals. Additionally, this is done for minimization of any potential environmental and social costs that could be associated with the company’s operations (Clapp & Rowlands 2014 p.42). The bigger a company is, with many suppliers and sub-contractors, the easier it is to circumvent CSR (Ruhmkorf 2015, p.98). Currently, there is an increase in the tendency to contemplate commercial and social issues at circumpolar level. These issues include exchange of experiences, creation of contact networks and enhancement of the business role in circumpolar cooperation regionally (Poussenkova 2016, p. 181). CSR, however, has a different meaning to different organizations with each being at liberty to design its program (Amaeshi et al. 2013, p. 7).

In the recent past, there has emerged a new form of philanthropy referred to as philanthro-capitalism. Philanthro-capitalism mirrors the way of doing things in the business world by having donors investing not only money but also ideas and time (Salamon 2014, p.554). There are arguments on philanthro-capitalism with champions of this approach suggesting that the private sector can fill the gap left by weakened governments through giving. On the other hand, critics argue that philanthropy cannot substitute for governmental social welfare support (McGoey 2014 p.110). Despite the varied schools of thought, businesses can create value both economically and for the society in ways that are mutually benefitting (Lensen et al. 2018, p. xxvii).

Vodafone’s Ability to Implement Corporate Social Responsibility

According to Idowu and Leal Filho (2009), Vodafone understands that the world and its customers are becoming more sensitive towards environmental issues. The public and various stakeholders demand for companies that provide environmentally harmless products and services (Agarwal 2017, p. 92). In its Corporate Social Responsibility, Vodafone has taken steps to adapt to this new trend (Vertigans et al. 2016, p. 94). One of the main measures taken is to ensure that decision making is always a consultative process (Idowu et al. 2014, p. 82). The Group’s CSR team works with other stakeholders such as customers’ representatives, NGO’s, governments’ agencies, Vodafone employees, and investors in assessing the environmental and social risks and opportunities for various projects.

Additionally, the Group is convinced that technologies in communication are an influential social good with the ability to enhance lives and livelihoods. In addition to this, they believe mobile technology can bring about a revolution in education access, financial services and healthcare (Vodafone). Vodafone Group’s CSR is focused on three important goals on global transformation. The company believes have a great potential for delivery of tangible socio-economic benefits not only for their customers but also for the greater community. Each of these goals is derived from and is meant to be achieved through the company’s long term objectives cognisant of the power of the mobile in transformation of lives. The company’s CSR efforts focus on:

The empowerment and connection of women in the company’s emerging markets;

Drive for innovation and efficiency in the company’s products, services and networks

Enabling reduction of emissions by customers

Assisting in the equipping of young people with crucial skills needed for their prosperity in a digital place of work as well as increasing employment opportunities for the younger people

Corporate responsibility has a significant role in helping the company meet its global strategic objectives (Mallin 2016 p. 164). The Group has a web based CSR communication platform on its website that expresses their concerns and their activities (Adi et al. 2015, p.256).

The Group’s sustainable business strategy is based on the company’s commitment to ensuring responsible behaviour in all aspects. These aspects include acting with integrity, ethically and lawfully in their area of operation. The company is strongly committed to proper corporate transparency. The commitment is evidenced through programmes that address four key areas are at the focal point of powerful public debate. These key areas include:

A detailed and transparent annual disclosure on tax amounts paid to governments globally.

The approach implemented in ensuring respect for the customer’s rights to freedom of expression and privacy.

The working relations with partners, suppliers and peers targeted at driving ethical and responsible behaviour as well as high standards.

Open and transparent response to public concerns about the company’s operations such as health and mobile masts.

Vodafone’s CSR approach can be termed as explicit as it is based on the company’s views. The strategy is also pegged on the company’s objectives. The Vodafone Group, however, implements a local strategy for each subsidiary (Idowi et al. 2015, p.138). The main CSR areas for the Group are women empowerment and connection, reduction of emissions and equipping young people with skills. CSR focus areas of the subsidiaries differ from one subsidiary to another (Crane et al. 2014, p.36). Vodafone Ghana for example, focuses on health, education, culture and communities (Vertigans et al. 2016, p.226). The Vodafone Group’s subsidiary in Tanzania, Vodacom Tanzania Ltd runs its CSR through a foundation called Vodacom Tanzania Foundation. The major focus is on girls and women’s health improvement, better education access and the creation of new enterprises (Hoskisson 2018, p. 56). The foundation partners with local NGOs and other partners. Some of the projects implemented include fighting for eradication of obstetric fistula, education of girls on sanitary hygiene and building and equipping of classrooms (Vodacom Tanzania 2018). In Vodafone Albania, CSR focuses on reduction of carbon emissions, increase of electronic waste management capacities, responsible utilization of natural resources and increased adoption of alternative energy among others (Vodafone Albania). With the exception of reduction of emissions, these goals too vary from the Group’s goals. Vodafone Albania implements most of the projects directly without the involvement of NGOs.

The Corporate Social Responsibility implemented by the Vodacom Group is local and is the most suited strategy for this company. Taking into consideration the diverse areas of operations that the Group operates in as well as the differing development levels, it is only prudent that each subsidiary designs and implements its own CSR programme. Such freedom allows the company to be strategic enough to provide life-changing projects that suit the customers and the community. Important to note is that some of these CSR strategies fall within broad themes. For example, the Group’s focus is empowerment of women which Tanzania implements as well as Vodafone Italy that is striving towards gender equality.

Conclusion

In conclusion, the Vodafone Group, being a multinational company has in place sound strategies that have enabled the company to grow continuously. Having autonomous subsidiaries relieves the management of the need to micro-manage many other companies. The company also gains a competitive edge by having tailor made products specific to different consumers in different areas. Another strategy that has propelled the Group is the use of acquisitions and mergers to grow its customer base and strengthen its brand name. Vodafone Group has the capacity to effectively implement these strategies for prosperity. As a worldwide company with a massive market, Vodafone has therefore paid large sums of money to be able to control large foreign wireless service providers. Notably, in an attempt to improve its marketing approaches, the firm has ensured the implementation of Vodafone Vietnamese marketing approach which has ensured the company does not repeat the mistakes it made in Japan which led to their forceful exit. Apparently, in Japan, Vodafone seemed to have concentrated more on the positive outcomes of using its large scale to expand the same brands and images of phone worldwide instead of concentrating on advancing the modern trends. The firm is therefore very keen on avoiding the mistake. The company, therefore, focuses on depending on the available marketing scheme of Mobifone, which was successful in attracting various customers with its new strategy.

There is no doubt that the noticeable progress has been made over the last years since the implementation of Vodafone. The executive leaders and shareholders of the company should therefore focus on Vodafone’s future growth and expansion. Moreover, the company should continue to provide the various services it provides including messaging and data. The multinational approach has changed the profile of the Vodafone Company impacting positively and negatively on the mobile service. The different approaches have also influenced the organization’s decision making hence ensuring the firm meets the growing needs of data services. Moreover the strategy has evaluated the company and their position in the global market. New technological chances have also been obtained and the competition faced in the worldwide market has been discussed. Internal and external forces influencing the activities of the firm have also been explained in the approach.

References

Agarwal, A. (2017). Vodafone: heads I win, tails you lose. [Online] Available at:

http://sk.sagepub.com/cases/vodafone-heads-i-win-tails-you-lose.

Amaeshi, K., Nnodim, P., & Osuji, O. (2013). Corporate social responsibility, entrepreneurship,

and innovation. New York, Routledge.

Adi, A., Grigore, G., & Crowther, D. (2015). Corporate social responsibility in the digital age.

Ambos, T. C., Ambos, B., & Birkinshaw, J. M. (2016). Perspectives on headquarters-subsidiary

relationships in the contemporary MNC.

Andersen, T. J., & Hallin, C. A. (2017). Global strategic responsiveness exploiting frontline

information in the adaptive multinational enterprise. London, Taylor and Francis.

Aswathappa, K., & Dash, S. (2013). International human resource management: text and cases.

New Delhi, Tata McGraw-Hill.

Birkinshaw, J., 2016. Multinational corporate evolution and subsidiary development. Springer.

Birsy, T, C. (2017). The Vodafone Global networks. Basingstoke, Hampshire, Palgrave

Macmillan.

Buckley, P. J., & Ghauri, P. N. (2013). International business and strategy: cases and readings.

London, Routledge.

Ciabuschi, F., Forsgren, M. and Martín, O.M., 2016. Value creation at the subsidiary level:

testing the MNC headquarters parenting advantage logic. Long Range Planning, 30, pp.1-15.

Clapp, J. and Rowlands, I.H., 2014. Corporate social responsibility. The essential guide to

global environmental governance. Routledge: London, pp.42-44.

Collis, D. (2014). International strategy: context, concept and implications. Great Britain,

Wiley.

Cox, H., Clegg, J., & Ietto-Gillies, G. (2013). The growth of global business. London, Routledge.

Crane, A., Matten, D., & Spence, L. J. (2014). Corporate social responsibility: readings and cases in a global context. London, Routledge.

Curwen, P., & Whalley, J. (2013). Telecommunications strategy cases, theory and

applications. Hoboken, Taylor and Francis.

Depamphilis, D. M. (2015). Mergers, acquisitions, and other restructuring activities: an

integrated approach to process, tools, cases, and solutions. San Diego, Academic Press.

Dignam, A. J., & Galanis, M. (2016). The globalization of corporate governance. Farnham,

England, Ashgate.

Doole, I., Lowe, R., & Kenyon, A. (2017). International marketing strategy: analysis,

development and implementation. Australia, Cengage Learning.

DöRrenbäCher, C., & Geppert, M. (2016). Multinational corporations and organization theory:

post millennium perspectives.

Dzedek, L. R. (2018). Initiatives by subsidiaries of multinational corporations: an empirical

study on the influence of subsidiary role context.

Frynas, J. G. (2015). Global strategic management. Oxford University Press.

Furrer, O. (2016). Corporate level strategy: theory and applications. Abingdon, Oxon,

Routledge.

Gaughan, P. A. (2015). Mergers, acquisitions, and corporate restructurings. John Wiley & Sons

Inc.

Gong, Y. (2013). Global operations strategy: fundamentals and practice. Berlin, Springer.

Gunning, J. (2017). Ethics, law and society. Volume I. Milton, Taylor & Francis.

Hoenen, A.K. and Kostova, T., 2015. Utilizing the broader agency perspective for studying

headquarters–subsidiary relations in multinational companies. Journal of International

Business Studies, 46(1), pp.104-113.

Hoskisson, R. E. (2018). Strategic management and CSR. Mason, Ohio, South-Western.

Hu, Z., Hu, Z., Chen, X., & Yang, Z. (2017). Research frontiers on the international marketing strategies of Chinese brands. [Online] Available at: http://www.tandfebooks.com/isbn/9781315616766.

Idowu, S. O., Kasum, A. S., & Mermod, A. Y. (2014). People, planet and profit: socio-economic

perspectives of CSR.

Idowu, S. O., & Leal Filho, W. (2009). Global practices of corporate social responsibility. London, Routledge.

Jowell, J. L., Oliver, A. D. H., & O'cinneide, C. (2015). The changing constitution. Oxford,

Oxford University Press.

Lohr, N. (2014). Foreign market subsidiary mandates: a select and temporary MNC

phenomenon? Wiesbaden, Springer Gabler.

Mackinnon, R., Hickok, E., Bar, A., & Lim, H.-I. (2014). Fostering freedom online: the role of

internet intermediaries.

McGoey, L., 2014. The philanthropic state: market–state hybrids in the philanthro-capitalist

turn. Third World Quarterly, 35(1), pp.109-125.

Moore, C., Bruce, M., & Birtwistle, G. (2015). International retail marketing. Hoboken, Taylor

and Francis.

Neelankavil, J. P. R., Anoop. (2016). Basics of international business. [S.L.], Routledge.

Panibratov, A. (2016). International strategy of emerging market firms absorbing global

knowledge and building competitive advantage. Florence, Taylor and Francis.

Philis, H. M. (2017). Vogafone’s restructuring Activities: Academic Press advanced finance

series. Elsevier Science Limited.

Poussenkova, N., Nikitina, E., Loe, J.S., Wilson Rowe, E., Wilson, E. and Fjaertoft, D., 2016.

Corporate social responsibility. Russian Analytical Digest (RAD), 181.

Salamon, L. M. (2014). New frontiers of philanthropy: a guide to the new tools and actors

reshaping global philanthropy and social investing.

Ruhmkorf, A. (2015). Corporate social responsibility, private law and global supply chains.

Tai, F.M. and Chuang, S.H., 2014. Corporate social responsibility. Ibusiness, 6(03), p.117.

Verbeke, A. (2013). International business strategy: rethinking the foundations of global

corporate success.

Vertigans, S., Idowu, S. O., & Schmidpeter, R. (2016). corporate social responsibility in Sub-

Saharan Africa sustainable development in its embryonic form. Cham, Springer International Publishing.

Vodafone. Sustainability strategy. [Online] Available at:

ww.vodafone.com/content/index/about/sustainability/sustainablebusiness2017.html

Vodafone. History. [Online] Available at:

http://www.vodafone.com/content/index/investors/about_us.html

Vodacom Tanzania. Social responsibility. [Online] Available at:

https://vodacom.co.tz/en/vodacom_foundation_aboutus/

Vodafone. Social responsibility. [Online] Available at: https://www.vodafone.al/vodafone/Social_Responsibility_1918_2.php