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Strategic Management Assignment

Essay by   •  February 28, 2017  •  Coursework  •  2,938 Words (12 Pages)  •  428 Views

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Vodafone Case Study Analysis

Aston Business School

Strategic Management BSM929

Group Assignment 001

Word count: 2213

Table of Contents

Section 1 -  Introduction        3

Section 2 - Evaluating industry attractiveness        3

Section 3 - Pestle Analysis         9

Section 4  - Conclusion         12

Section 5 - References        14

Section 1 - Introduction

This 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 attractiveness

In 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 competitiveness

Competitive rivalry

Fixed Line

Mobile

Television

Broadband Internet

Competitor 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 Costs

High

High

High

High

Exit Barriers

High

High

High

High

Service Differentiation

Low

Low-medium

High

Low

Competitive rivalry

High

High

High

High

Table 1 - Source of data: OFCOM reports, 2011-2013

Section 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.

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