Management theory and practice—Vodafone Environmental Analysis Essay Example

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Management Theory and Practice-Vodafone Analysis

External Operating Environment- Vodafone

Vodafone Australia is a mobile phone company owned by Vodafone Hutchinson Australia Pty ltd. It operates Vodafone branded stores that were previously run by GSM, Inside Mobile, First Mobile and Digicall. Before the merger, the company was run by Vodafone Group plc with 50 percent ownership (Allen, 2011). The latter is operational in 21 countries and partners with 40 other countries. The company’s market capitalization is AUD $12 billion and is in direct competition with Telstra (Kaynak et al. 2014). The external operating environment looks at issues such as globalization and international involvement, technology, relationship between the various external stakeholders, social responsibility and cultural advantage, economic and political-legal environment. These factors influence how Vodafone will cope with the dynamics of communications technology, desire for workplace inclusion and diversity, and the need to integrate the various cultures for organization harmony and brand penetration (Kotler, Berger & Bickhoff, 2010.

Globalization and International Involvement

The concept of globalization is held on the premise that no nation is self sufficient. International trade between nations has increased in volume, efficiency and scale since 1970s (Henry, 2011). Hitt et al. (2008) argue that the effect of globalization has been lowered manufacturing costs, comparative and absolute advantages and factor endowments. Vodafone has realized increased returns in capital intensive and labor intensive activities due to its presence in different countries with varying levels of socio-economic development. According to Amason (2011), making entry into the international market requires strategic alliances and joint ventures. This allows for access to technology and materials though shared ownership limits profits and control. Vodafone Group merged with Hutchinson Telecommunications Inc., an Australian company in 2009. It was renamed as Vodafone Australia ltd in which it was able to hit half of Telstra’s 9.3 million subscribers.

management theory and practice--Vodafone Environmental Analysis

Image: Courtesy of Vodafone Group Ltd

Figure 1: Vodafone Australia, North Sydney, New South Wales

In 2010, Vodafone Hutchinson Australia shifted Vodafone to globalization level by engaging on a growth strategy initially organic to external in context. One Vodafone initiative was adopted to help integrate, coordinate and restructure its various systems in 500 outer metropolitan and 900 metropolitan sites (Ibbott, 2007).

Technology and Physical Environment

Information technology has been the focal point of industry skills standards, labor market intelligence and career awareness. Companies in the communications sector have invested heavily in lifelong development and training to innovation and growth of internet and mobile technologies. In 1995, Vodafone became the first operator to offer prepaid packages which does not need customers to sign long-term contracts. It had signed a ‘roaming’ agreement with Telecom Finland in 1992 to allow for home billing for use of different networks. The company opted for group-wide GSM/UMTS 900/2100 MHZ coverage standards as opposed to the American CDMS standards. Vodafone Australia Ltd also launched the Sharp GX-10 handsets and had the large capacity to negotiate with network equipment suppliers (Ibbott, 2007). In July 2010, Vodafone Australia spent AUD $550 million on G networks by rolling out the 1400 UMTS-850 base stations. They also launched Smart 4 Turbo, 4G mobile broadband and Smart 4 power phones with high price and connectivity. The pricing strategies are attractive to customers outside ultrafast access to mobile internet.

The aspect of environmental conservation and preservation has attracted the demand by various groups to lower noise, radiation and disposal of mobile phones (Tallman, 2007). Environmental compliance by Vodafone is due to the demand by the Australian department of Health and Environment that electronic gadgets be inspected. The company has also applied Total Quality Management in ensuring environmentally sound parts and products before use by consumers.

Stakeholder Relationships

Stakeholders have a great role in business stability and profitability. Some of the key stakeholders are the shareholders, government, suppliers, competitors, regulators and local authorities. They influence merger and acquisition decisions as well as licensing operations of the company (Harrison & Caron, 2013). Vodafone’s major shareholders were wary of AT&T wireless takeover beyond 38 billion pounds. The refusal to adopt a single Vodafone brand had edged out Verizon, an American main shareholder which was so strained. Suppliers and customers perceive growth and acquisition of Vodafone as a wider focus in management and coordination of business at a global scale. Japanese customers were disappointed with the sale of Japan Telecom Vodafone stake to Softbank at $15 billion. Amason (2011) learns that stakeholder engagements can have conflicting interests in a way that customers may have interests as suppliers of technologies. The Australian federal government provides the regulatory and economic playing field in ensuring that the company has complied with local tax and regulations (Henry, 2011). For example, Vodafone Australia had to comply with tax revenue claims by the Tasmanian government over the failure to remit tax returns in 2010.

Economic and Political-Legal Environment

The economic and political landscape embraces the economic systems, natural resources, infrastructure, government stability, economic communities, and incentives and control of international trade. According to Yoo (2008), international management functions pose environmental challenges to international management. In 2009, the Australian government injected AUD $112 million to cushion communications, business services and financial sectors as a means of protecting homegrown companies. Global competition made companies to be rational and act as though their investments were zero. Economic decisions were based on existence of infrastructure and not reasons for investment. The performance of European and American economies after 2008/09 recession saw the end of high fixed costs negatively affected Australian communications sector performance.

Telstra operators offered roaming on the Next 3G networks (850 MHZ) which was also score to new market entrants. For example, investing in Germany and Singapore could meet the threshold for acceptable return on investment and a market share of about 20 percent. Floyd (1997) notes that the political environment of countries in Europe such as Albania, Greece, Hungary, Ireland, Netherlands, Sweden and Spain demand more than 50 percent ownership in local subsidiaries, associates or partners. Egypt also accepts 67 percent subsidiary while Australia and New Zealand have 100 percent subsidiaries. Competitive markets have high churn rates and handset subsidies of 30 percent in the UK and 19 percent in Germany (Tallman, 2007). The government has the mandate to resolve and direct any dispute to send clear messages to investors. For example, the Rs 3,700 Crore tax demand by the Indian government in 2012, forced Vodafone India to account for pricing dispute transfer with tax authorities. This also affected the placement of Vodafone Australian plc in terms of tax compliance.

The local authorities maintain that sale of call centre business needed to have considered the transfer pricing adjustments. Applicable to the relevant officers, Vodafone Group Plc Board of Directors adopted Code of Ethics. Zysman and Newman (2006) argue that Relevant Officers are also mandated to uphold Honest and Ethical Conduct, Disclosures, Accountability and Reporting, compliance and Waivers. Meeting the political concerns and demands of the various countries is a tall order for Vodafone. Some of these nations such as China and Bahrain have political settings different from that practiced in Australia and commonwealth countries. China is largely communist while Bahrain is an autocratic Islamic state (Zysman & Newman, 2006). It becomes difficult for Vodafone to exercise true intellectual and property rights in these countries. To succeed in such countries it had to enter into Joint venture with China Mobile (Hong Kong) Ltd and MTC-Vodafone Bahrain as investment and partner respectively.

Social and Cultural Advantage

Ethical and Social responsibility is evident in firms that practice greater accountability, transparency and integrity. Rao et al. (2009) opine that individual ethics result from peer influences, family, life experiences, situational factors and personal and moral values. The presence of regulations, laws and official publications have deeper ramifications in meeting shareholder obligations. According to socio-economic theorists, humans exist in communities with moral dimensions to motivate for not just financial returns and sustainability but social benefits (Kaynak et al. 2014). Vodafone has an obligation to comply with desired behavior with regard to environmental, social and economic performance. It has set the Foundation as social and network investment programs with both local and global reach. These social investments have supported disaster relief through funded projects across the globe (Tallman, 2007).

management theory and practice--Vodafone Environmental Analysis 1

Image: Courtesy of Vodafone Group ltd

Figure 2: Vodafone Australia supporting cultural, educational and sporting outings

The culture of people around the world varies depending on symbols, values, belief systems and practices. The moral-rights perspective takes ethical behavior as one that respects cultures and fundamental rights of people (Harrison and Caron, 2013). Vodafone Australia ltd is dedicated in building diversity and international integration with respect to cultural and physical presence in Asia Pacific, Australasia and Polynesia, Malaysia and Singapore. Emerging economies have cultural and population advantage to get Vodafone Australia the right customer numbers for increased profitability. For example, China and India have an outward culture that is fond of technology and international network with Australian companies (Colley, 2010). Vodafone Australia should increase entry and persistence in promotion and advertising in China and Malaysia.

Reference List

Allen, D 2011, Vodafone Ends New 3 Mobile Customer Registrations, Gizmodo Australia. Canberra.

Amason, A 2011, Strategic Management: From Theory to Practice, Routledge.

Colley, A 2010, VHA in major 3G upgrade. The Australian. Sydney.

Floyd, C 1997, Managing Technology for Corporate Success, Gower Publishing, Ltd.

Harrison, J & Caron SJ 2013, Foundations in Strategic Management, Cengage Learning.

Henry A 2011, Understanding Strategic Management, Oxford University Press.

Hitt, MH Ireland, RD & Hoskisson R 2008, Strategic Management: Competitiveness and Globalization, Cases, Volume 2, Cengage Learning.

Ibbott, CJ 2007, Global Networks: The Vodafone-Ericsson Journey to Globalization and the Inception of a Requisite Organization, Palgrave Macmillan.

Kaynak, E Mockler R & Dologite, DG 2014, Multinational Strategic Management: An Integrative Entrepreneurial Context-Specific Process, Routledge.

Kotler P Berger R & Bickhoff, N 2010, The Quintessence of Strategic Management: What You Really Need to Know to Survive in Business, Springer Science & Business Media.

Rao CA Rao BP & Sivaramakrishna K 2009, Strategic Management and Business Policy, Excel Books India.

Tallman, SB 2007, A New Generation in International Strategic Management, Edward Elgar Publishing.

Yoo, Y Lee JN & Rowley C 2008, Trends in Mobile Technology and Business in the Asia-Pacific Region, Elsevier.

Zysman, J & Newman, A 2006, How Revolutionary was the Digital Revolution?: National Responses, Market Transitions, and Global Technology, Stanford University Press.