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 partnerChina Mobile. However, newly industrialized countries offer
Vodafone more stability for its investment because the average GDP is much greater than that of Chinas 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 companys 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
ventures 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.