Vodafone External Environment

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Industry Environment by using Porter’s Five Forces

Figure 1: Porter’s five forces model
Porter’s five forces analysis is a framework that is used for the industry analysis and business strategy development. This analysis determines the competitive intensity and therefore attractiveness of a market. A change in any of the forces normally requires a company to re‐assess the marketplace.

The competition between operators and the rivalry are high. These competitors want as much of the market share as possible. Switching costs for consumers are low, so operators are easily attract them through lower pricing and better service offerings. With a low level of product differentiation and this further brings up the level of rivalry. Substitutes

There is a low threat of product substitutes. Substitute products for the mobile phone industry could be considered fixed-line phone products. Switching costs are low but the advantage goes to the mobile phone industry because there is a greater chance of switching to mobile phones from fixed-line phones than the other way around.

The threat of buyers can be considered low. The individual buyer has no impact on the price of the products or services offered. Buyers will look out for higher quality, greater levels of service, and lower prices offer by operators.

Supplier’s power in some aspects is high. Suppliers can have a big impact on the price of products and the condition of the deal they make with the provider. Indicatively, Vodafone’s global presence means it has significant purchasing power allowing it to secure exclusive deals with phone manufacturers. Yet Vodafone is keen to develop its own, branded phones in an attempt to break the power of Nokia on the market, thus at the same time reducing the firm’s dependence and making its offerings more complete.

New Entry
In the industry that is highly regulated and protected by significant barriers and high initial fixed cost requirements. The threat of entry is fairly low and is highly influenced by the economy of scale of the existing companies.

Analysis of market
The P.E.S.T.L.E analysis is a framework that is used to scan the external market in which a company operates. P.E.S.T.L.E stands for the following factors: political, economic, social, technological, legal and environment which play an important role in the value creation opportunities of a company’s strategy.

Political factors
Telecommunication licences are tightly controlled and access to the spectrum is limited by government. Building the infrastructure needed to support the network usually requires permission from the authorities.

Economic factors
The cost of bidding of licences is very high and this with the cost of building the network will require a lot of revenue to break even. There are constant price wars between the operators and there are very few markets where there is monopoly controlling the mobile market.

Social factors
Society is concerned about under 18s being at risk. Parents may have concerns about their children being contacted (using mobile phones) by paedophiles or other adults and adult content being available via mobile phones to under 18s. Further issues related to 'social' include the rise of mobile phone theft.

Technological factors
A great deal of technological change has been changed and will continue to do so. Mobile phones were originally used for telephone conversations are able to text messaging. As technology developed, it has become possible to swap information between mobiles and other devices via Bluetooth technology.

Legal factors
Laws regulating businesses e.g. The Sales of Goods Act 1974 stating all products must be fit for the purpose they are intended. Laws are created to regulate particular industries; examples include the ban on using a phone while driving.

Environmental factors
Vodafone have established a...
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