Indian Telecom Industry

The Indian Telecommunications network is the fifth largest in the world and the second largest among the emerging economies of Asia. Today, it is the fastest growing market in the world and represents unique opportunities for U.S. companies in the stagnant global scenario.

Acquisition of Hutch by Vodafone

Vodafone entered India in December 2005 by acquiring a 10 percent stake in Bharti TeleVentures Limited (Bharti) which later became Bharti Airtel Limited. However, as Bharti later ruled out further dilution of its stake, Vodafone started considering other options to increase its market share in India. In 2007, Vodafone acquired 67% stake in Hutchison, one of the leading telecom operator in India, which provided its services under the brand name, Hutch. Vodafone very well understood that Hutch dog represents the network and communicated the change to Vodafone beautifully without losing the charm present in earlier Hutch ads. Later, Vodafone continued to use the Hutch dog in their commercials, but, in different way. The new Vodafone ads liked girls than boys and have changed the song. Yet, these ads resembled Hutch ads closely. Vodafone differentiates itself from other telecom operators through its value added services (VAS) and it wanted to educate the customers about it. Unfortunately, the hutch dog had its limitations and was fired from the commercials and Vodafone brought in traditional commercial with adults to stress on the VAS. These ads didnt appeal much although communicated the message very well. The ads were no more sweet and cute although they had a wider appeal owing to the young generation in the ads and the intentional humor. But just when everyone thought that these cute ads have grown into adults there came the savior ZooZoo ads by O&M. They simply did the job of communicating the various VAS in a fascinating way. The Vodafones services were personified as quirky and lively personalities named ZooZoo. The comical way of communicating the message brought in the good old connection what Hutch earlier had with people.

Porters Five Forces Model

Bargaining Power of Buyers
The buyers in the mobile telephony industry are strong. These powerful buyers can reduce the cost leaders prices, but not past the level of their closest competitor. This ensures Vodafone will continue to profit at above average returns compared to its closest competitor.

Bargaining Power of Suppliers

Suppliers of the mobile telephony industry are strong. Vodofone, by being a cost leader, operates with margins greater than its competitors, which, in turn, allows them to absorb price increases from its suppliers easier than its competitors. By being a large, focused player of the mobile telephony industry, Vodafone could hold suppliers costs down, and it could make a profit even if its competitors are making only average returns.

Potential Entrants
While the threat of new entrants is weak, Vodafone must continue to reduce costs below that of its competitors. By maintaining high levels of efficiency, Vodafone can help make the entrance into the mobile telephony industry unattractive to its potential competitors.

Product Substitutes
Vodafone faces a low threat of product substitutes. The focused cost leadership strategy that Vodafone operates under makes it difficult for a comparable substitute to be produced at a lower rate by their excellent use of economies of scale, their buying power, and their absorption of temporary price increases that come from suppliers that dont need to be passed on to the consumer.

Industry Rivalry
Vodafone faces a very high industry rivalry from its competitors because as the different mobile operators slashes its rate per call or provides any new services then they also have to provide to its customers.

Perceptual Map

According to a research, Vodafone cell-phone service providers in terms of satisfied and loyal customers are willing to pay a price premium, while Airtel leads with loyal but dissatisfied customers. We can also see that in the perceptual map that besides having the same coverage, Vodafone charges slightly higher than Airtel. The same research showed that majority of respondents chose Airtel as the company with larger subscriber base compared to Vodafone Cell-phone. This reflected the number one syndrome where the leader must have merit.

Core Competency
Vodafones primary aim is to be the world's mobile communication leader enriching customers' lives through the unique power of mobile communications and also to maintain the top position in the mobile telecommunications group.

With immense competition Vodafone has so far dominated the market by being the worlds leader in mobile telecommunications. Vodafone, being a global leader in mobile communications is a customer oriented company. By analysing Vodafones overall structure it can be understood that the reliable innovative services and the customer-centric passion for customers are the core products and are very important for the company. Vodafone's capabilities in management and research and development should also be considered their core competencies because these abilities give them a source of competitive advantage over its rivals. Acquiring and merging with companies has allowed Vodafone to grow their customer base internationally. By investing in research and development, next generation platforms for mobile telephony for both voice and data allow Vodafone to maintain a competitive advantage. Vodafone has a sustainable competitive advantage Only using valuable, rare, costly-to-imitate, and non-substitutable capabilities create sustainable competitive advantage. Vodafone had valuable, rare, costly to imitate capabilities, but these capabilities were substitutable, thus, they had a temporary competitive advantage. However, if Vodafone finds a way to successfully differentiate itself to become nonsubstitutable, it will have a sustained competitive advantage. This temporary competitive advantage has performance implications of average returns to above-average returns. (a) Valuable - Yes Because Vodafone sticks to what it knows best, mobile telephony, and has not ventured into fixed line. Telephony or providing content, they created value for their customers by being the best and most focused. (b) Rare Yes Vodafone's ability to develop innovative technology and successfully merge are rare capabilities. (c) Costly to Imitate Yes The organizational culture of Vodafone must be strong to successfully complete mergers and acquisitions, while simultaneously developing innovative technology. These capabilities have developed over time and the expertise gained will be very difficult for other firms to develop.

(d) Non-substitutable No Vodafone's mobile telephony is substitutable, as evidenced by the high turnover throughout the industry.

BCG Matrix

Vodafone lies in the Star category as its generating good revenue, still companies have to do huge investment and the industry has not yet matured. So keeping all such factors in mind BCG matrix has been drawn.

SWOT Analysis
Strengths
The main strength of Vodafone within the telecommunications market lies in its brand image and recognition. Vodafone, having established a global presence and having invested highly in marketing a differentiated image by promoting a Vodafone life style, currently enjoys a differentiating advantage that, if exploited properly, can offer a lead in competition.

Weaknesses
The expansion of Vodafone has been completed at the expense of direct control of its operations. The company grew through a process of acquisitions of national

telecommunications companies (e.g. the acquisition of the third biggest Czech mobile phone

operator, Cesky mobile) rather than organic growth. This increased its subscribers base quickly, offering direct market knowledge and immediate additions of customer bases at the expense of direct effective control of the subsidiaries. At the same time though, it implicitly imposed a centralized operational structure for the group, nominating the UK headquarters as the leading business unit running a much centralised marketing and handset procurement at group level. This has resulted in the neglect of local markets and local differences, allowing market share to be gained by smaller local competitors.

Opportunities
The telecommunications market, even though highly saturated in some regions offers great potential due to the increasing no. of consumers. It offers great opportunities through a careful market segmentation and exploitation of particular profitable segments. Different strategies should be pursued like simple phones and simplified pricing plans to the ageing population and more updated, sophisticated solutions for younger generations. The expanding Boundaries of the market could provide further opportunities by allowing Vodafone to enter more aggressively into fixed line service and to better enjoy the benefits of its high investment in 3G technology. Moreover the company has undertaken its first steps in establishing strategic alliances to develop customized solutions for end users.

Threats
The European part of Vodafones market is characterized by existing high levels of competition. Major brands such as Airtel are exploiting the price sensitivity of customers and in this way they are building a stronger presence in the market. Indirect competition is also increasing further, through the presence of Skype and other related (not only voice) Internet based services. Some marketers also argue over the benefits of zoozoo over the revenue of the company since Zoozoo is becoming a brand in itself and customers dont relate it to as Vodafones Zoozoo. Also, they are of the view that Zoozoo being a type of alien creature attracts mainly kids who do not play any role in the selection of telecom service provider.

TOWS Matrix
Internal factors Strengths (S) 1. Wide geographically present 2. Dominance in cellular market 3. Global brand strength SO Strategies 1. Vodafone should use its geographical presence to increase customer base 2. Vodafone being a dominant player in cellular market, it can make strategic alliance with others to provide added services to its customers 3. Focus on market development ST Strategies 1. It can use its global brand image to counter new emerging brands 2. To distinguish its services in highly competitive environment, Vodafone can come up with innovative products/services Weaknesses (W) 1. Centralized Control 2. Limited exposure in emerging market

External factors

Opportunities (O) 1. Low tele-density in India 2. Research and development of new technologies 3. Strategic alliance 4. Untapped areas

WO Strategies 1. Vodafone should use new technologies like 4G to increase its market share 2. Decentralization of control to make its policies, strategies area specific and gain access to yet untapped areas

Threats (T) 1. Highly competitive market 2. Emerging low cost brands 3. Overshadowing of brand by Zoozoo

WT Strategies 1. It will have to adjust cost of service to counter the threat of low cost brands 2. Focus on opportunities in emerging markets

3. They should tweak the campaigns in order to make Vodafone as the hero of the ad. Besides strengths and opportunities available to Vodafone, it needs to develop strategies taking into accounts its weaknesses and threats as well.