After having been brought public in 1988, Vodafone kicked off its international expansion by acquiring minority stakes in other wireless telecom companies, following with multiple joint ventures within countries that were about to launch their cellular networks. Under the cabinet of Chris Gent as Vodafone’s CEO, the company drastically expanded the portfolio of its overseas acquisitions. Arun Sarin, who initiated the One Vodafone project, maximizing economies of scale, then succeeded him. The One Vodafone was to unify and simplify the company’s structure.
This mainly included reshaping organizational charts and integrating Vodafone as a global brand. When Vodafone’s current CEO, Vittorio Colao, took over in 2008 he established a set of clear goals for the company to pursue. These mainly focused on “improvement of operational performance, [… ] pursuit of growth opportunities, [and] increase in shareholder returns”. (Colao, 2008, cited in Grant & Jordan, 2011, p. 1 – 2) First results of Coleo’s newly adopted strategies came up positive yet the concerns arose around Vodafone’s long-term strategies in terms of its international presence.
So as to help Vodafone pursue the aforementioned goals, we were assigned a consulting mandate to evaluate the following queries: 1- Are Vodafone’s organizational capabilities correctly aligned with their current strategy? If not, how could they improve them in order to grow within the competitive market they are facing? 2- Does Vodafone’s organizational structure enable them to undertake efficient decision-making processes? If not, what kind of organizational structure should Vodafone adopt?
In order to develop a set of recommendations, the current strategy is first taken apart into its four components and for each the organizational capabilities needed are identified. In a second step, we define Vodafone’s current capabilities and determine the gaps to be closed. After having done so, we provide recommendations on how to close the organizational gaps by referring to the three leverage points, organizational structure, management preferences and leadership behavior. 2 Vodafone’s current strategy and required capabilities
To make sure Vodafone’s international strategy is consistent with its organization, the required organizational capabilities have to be determined. In order to do so, the strategy is broken into its four components, goals, product-market focus, core activities and value proposition. In a subsequent manner, the organizational capabilities necessary to fulfill each one have to be established. (Crossan et al. , 2013, p. 160) Goals Every strategy follows a certain set of goals. For Vodafone said set consists of three parts.
Firstly, top operational performance is achieved through cost cutting and superior customer service. Secondly, growth in emerging markets, mobile data services and comprehensive telecom solutions for business customers leads to the leading or the second position in every market. Lastly, Vodafone increases its shareholder returns by balancing selective investment and disinvestment. (Grant & Jordan, 2011, p. 1 – 2) To accomplish those goals, Vodafone as to continuously improve its ability to cut costs, grow in emerging markets and generate a surplus form investments and divestments in the long-term. Product-Market Focus
Operating in over 52 countries, Vodafone aims to provide high-class wireless communications and mobile services, integrated business solutions and mobile advertising (Vodafone, 2014). With its international scope and business but also private customers as clients, the definition of a “market” can vary. Markets for telecommunications can in this case either be determined by their geographical location or by their users. While corporate clients benefit from a “seamless” roaming, especially when operating globally, smaller clients get won’t acknowledge the service offered by a single, international provider.
In order to develop the right product-market focus, the right target markets have to be identified and innovation has to be fostered consecutively. Value Proposition As stated before, Vodafone aims to provide high-class services. Therefore instead of challenging its competitors on price, customer value is created through premium services and differentiation. The global scope allows the customer to benefit from high quality reception worldwide, always offered by Vodafone and without value decreasing interceptions in the network.
A strong value proposition requires the ability to offer superior data services and superior customer services, always moving one-step ahead of competition. Core Activities When operating globally, the core activities have to be established in a structure that allows the company to benefit from synergies and international integration. For Vodafone core activities focus on procurement, global development of products and services, marketing and brand development and service functions.
If core activities are to be performed efficiently and effectively, it is not only necessary to balance the need for coordination and synergies with local initiatives and to adapt to industry changes, but also to have a well functioning corporation. This means, back-room systems have to run smoothly, economies in equipment purchase have to be realized and know-how has to be transferrable from one unit to another. Moreover the international scope has to be transferred into customer value and thus a competitive advantage. 3 Identifying Vodafone’s Organizational Capabilities
As the strategy has been broken down into components, it is now necessary to identify Vodafone’s existing capabilities with respect to each component. The summary of these capabilities has been annexed to the present document. Currently, there are two main capabilities that facilitate the accomplishment of Vodafone’s goals. Firstly, there is the ability to grow in emerging markets. Between the years 2005 and 2008, Vodafone had demonstrated that it was able to enter emerging markets and to grow within these markets through acquisitions in Eastern Europe, Asia and Africa.
Secondly, Vodafone possesses the ability to generate long-term profits from investments and divestments. In fact, this capability is a indispensable in order to create shareholder returns. As shown in table 1 of Grant and Jordan’s case study (2011, p. 2), Vodafone realized continuous, positive free cash flows between four and seven billion pounds during the years 2005 to 2011. As for the product-market focus, there is one main capability that can be identified with the company, the ability to identify potential target markets.
Vodafone has shown that it is constantly and actively seeking for new target markets to exploit and its ability to expand their international scope. With innovative projects in Kenya, Asia and Eastern Europe, Vodafone further established a global presence. (Grant & Jordan, 2011) Vodafone possesses four main capabilities with respect to its core activities. Firstly, as a result of its international expansion, Vodafone can transfer “seamless” connections into costumer value. The company is thus able to provide integrated solutions to businesses with international functions.
Smaller firms and private customers however don’t benefit as much from a global partner as most domestic providers offer good roaming services through partner agreements. Thanks to the large distribution of fix costs, Vodafone is able to offer promotional deals to small clients and therefore allow them to benefit from a unified provider. Secondly, by rationalizing its back-room systems Vodafone eliminates expenses that do not generate value for the costumers and strengthens the organizational structure. Thirdly, due to the international scope, economies in purchasing equipment can be realized.
Lastly, the ability to exploit learning and knowledge transfer is directly linked to the required ability to innovate new generations of voice and data services. In order to enhance these capabilities Vodafone restructured the organization in 2011 (Grant & Jordan, 2011, p. 9 – 16) Finally, with respect to Vodafone’s value proposition, the company’s main capability is being able to offer superior customer service. This capability is demonstrated by the fulfillment of three criteria: effective delivery to costumers, short response time and responsiveness to customers’ needs.
In order to fulfill these criteria, Vodafone nurtures an entrepreneurial mindset and provides each of its company with challenging missions to accomplish (Grant & Jordan, 2011, p. 8). In conclusion, Vodafone disposes of several crucial capabilities but still can improve its abilities to adapt to industry changes and to innovate new generations of voice and data services. In addition the ability to balance the need for coordination and synergies with local initiatives has not been flawless. However those capabilities are determined inside-out.
At the end it is the customer that determines how innovative Vodafone is or whether its customer service is superior (Crossan et al. , 2013, p. 161). 4 Developing New Organizational Capabilities Now that we’ve identified the organizational gaps, we develop new organizational capabilities or improve existing ones to ensure consistency in the strategy-organization linkage. To do so, we refer to the three leverage points, organizational structure, management preferences and leadership behavior.
As the available information does not provide sufficient detail on the latter, we therefore focus on the organizational structure and management processes. Organizational Structure Although the organizational structure had been redesigned in 2011, remaining weaknesses were identified. Creating geographical and functional units on the same level of hierarchy prevents efficient transfer of information and knowledge as competencies become unclear. Moreover a global strategy and business development department are contra-productive in two ways.
Firstly it opposes the necessity to adapt to cultural peculiarities and secondly it doesn’t fit the autonomous position of local subsidiaries. General strategic decisions have to be taken by a superior unit, mostly the executive board or the board of directors. The lack of clear hierarchical structures and well-defined competencies thus prevent a rapid reaction to industry changes. In order to enable efficient decision-making, opportunity recognition and a fast and free flow of information the organizational structure is to be redesign as follows. Figure New Organizational Structure
The company is to be divided into the four geographic units of Europe, Africa, Asia Pacific and Middle East. Each geographic unit consists of functional units managing the tasks for their respective area. The only functional unit operating globally remains the technology unit. This allows Vodafone to test a technology in one market and deploy it into another later on, without relying on several independent units. To facilitate the communication between the different units, the internal communications and cultural mediation unit (ICCM) is created.
It is composed of one manager from every geographic unit. The ICCM also acts as a channel for internal communications and monitors synergies and manages the coordination between different units where necessary. The new structure allows maximizing efficiency in procurement, global developing of technology and new products or services, marketing and brand development as well as common service functions. The reduced complexity further keeps administrative costs low and permits additional growth. Management Processes
Changes in management processes have the potential to act as a leverage point to develop new capabilities. These processes are separated in three components: decision-making processes, operational processes and performance assessments and reward processes. Each of these components contributes to the development of new capacities. (Crossan et al. , 2013, p. 172) In order to increase the ability to innovate new generations of voice and data services, the company has to give the authority and latitude necessary to the Research & Development department to take decisions on their own.
Being able to take decisions and find innovative solutions increases employee satisfaction as well. Empowered employees feel as if their contributions matter and productivity increases. The company thus has to accelerate the approval of innovative ideas and enable projects to get fast tracked. Furthermore, the creative and innovative actions of employees are to be recognized and rewarded. For most employees financial rewards are insufficient and sometimes even contra-productive. When design a incentives, opportunities for self-development, recognition of achievement etc.
Have to be equally considered. (Crossan et al. , 2013, p. 176) In order to properly react to industry changes, Vodafone has to consider the dynamics in the changes of the environment. Along with a dynamic environment, it is crucial to monitor its competition regularly and identify possible threats and new entrants early on. 5 Feasibility Assessment The suggested changes in organizational structure and management processes allow Vodafone to develop the organizational capabilities necessary to transform its international scope into a distinct competitive advantage.
In order ensure the effective realization of the proposed measures, the implementation of each step has to be according to the required time frame. Changes within the decision-making process can be conducted over a short period of time. Modifications in operational processes and performance assessments take a little more time to be established. In order to ensure a successful outcome, all actions have to be constantly monitored and communicated within the whole corporation. 6 Conclusion Over the years, Vodafone has shown it was capable to outrank competition and to generate large revenues.
Nevertheless by ensuring consistency in the strategy-organization linkage, untapped potential can be realized. Improving and developing capacities, redesigning the organizational structure and modify management processes allow Vodafone to close existing inconsistencies. A detailed analysis of Vodafone’s organizational capabilities has yielded the following results. It is able to effectively cut costs and innovate new generations of voice and data services but needs to constantly improve those qualities, while capabilities such as balancing the need for coordination and synergies with local initiatives, adapting to industry changes and offering superior data services are required and need to be developed. In order to achieve the envisioned capabilities, we suggest a redesign of the organizational structure and several adjustments within the management processes.
The company is to be divided into geographical units on the first and into functional units on the second hierarchical level. Simultaneously a new department for internal communications and cultural mediation is to be created and the technology unit is kept on a global scope.
Moreover, research & development requires more decisional autonomy and a fast track for innovative and important projects has to be established. Finally, all measures have to be constantly monitored and evaluated to ensure their effectiveness. Bibliography Crossan, M. M. Rouse, M. J. Fry, J. N. Killing, J. P. (2013). Strategic Analysis and Action (8th ed). Toronto: Pearson. Grant, M. , J. , Jordan, J. (2011). Vodafone: Rethinking international strategy. Foundations of Strategy. Appendix A – The ICCM – Unit B – Recommendations for management processes
New Capabilities to be Developed Decision-making Process Operational Processes Performance Assessment and Reward Processes Ability to innovate new generations of voice and data sevices Give more decisional empowerment to the R&D department Reduce time approval for innovative ideas and enable fast track projects Reward creative and innovative actions and work Adapting to industry changes.