Vodafone Case StudyBUS402 - Business PolicyGirne American University

Submitted To Emete A. Toros14 May 2010Group Members

Mehmet Akif Uçar Mission Statement / Objectives

Student ID:050211050  

Merve Özgören Nature of Demand

Student ID:050201014  

Asım Eren Çörüş External Analysis

Student ID:050205153  

İbrahim Bektaş Five Force Analysis

Student ID:050205033 Buyer Power, Barriers to Entry

Ali Us Five Force Analysis

Student ID:060211003Degree of Rivalry, Treat of Substitutes, Supplier Power

Gözde Yörük Internal Analysis

Student ID:050205103  

Ali Rıza Özer Financial Analysis

Student ID:050205144  

Umut Can EsenergülStrategy Alternatives and Choices / Conclusion

Student ID:050205045  

Table of Content

II

Cover Page  1

Group Members  2

Table of Content  3

Introduction  

Mission Statement  4

Objectives  4

Nature of Demand  4

External Analysis  6

Five Force Analysis  

Degree of Rivalry  7

Buyer Power  9

Treat of Substitutes  10

Barriers to Entry  11

Supplier Power  12

Internal Analysis  12

Financial Analysis  16

Strategy Alternatives and Choices  24

Conclusion  25

Introduction

Mission Statement

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As Vodafone company we mainly focus on mobile telecommunication service business while achieving the purpose; uniting all Vodafone strategic members and remaining leader in revenue globally and remain important player in every local market that we compete, we value our costumers to make their lives richer more fulfilled and more connected, employees to attract develop and reword out standing individuals and finally. We value World around us to make people’s life fuller with our service provided.

Objectives

Financial

Beginning of 2006, Arun Sarin took some tough decisions. He faced up to slowing growth in his core market by unveiling an impairment charge of 23 billion pound to 28 billions of punt and exited the Japanese market by selling its stake to Tokyo-based Softbank in a deal valued at 15.4 billions dollar and confirmed that after the sale it would return 10.5 billions dollar to its shareholders.

Vodafone, for example, estimates that once the initial investment had been made, less than ten percent of revenues were needed to maintain the network.

In Germany, which had one of the largest markets for mobile telephony with more then 60 million customers and a high population density, the threshold for an acceptable return on investment was estimated to be around 20% of the total market share.

Strategically

Vodafone Group Plc announces Board changes and a new organizational structure which will enable continued improvement in the delivery of the Group’s strategic goals. This structure will become effective as from 1 January 2005.

Nature of Demand

Vodafone is a global company and competing both in global and local markets. Different cultures need exactly different marketing and sale strategies. Absolutely every country has different needs and wants from a mobile communication company. For example 48% of the German users signed contract with Vodafone, however in Italy 92% of people using mobile services prefer pre paid cards.

Vodafone created a tariff option that enabled customers to roam the globe, on a special per minute rate, on the same network without having to worry about high fees. That really affected buyer decision black box. It is really attractive to talk cheaper than anything else while you are away from your country.

As it is mentioned in the case, Vodafone is not an innovator. They are the user of technology. They are purchasing the technology from

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companies like Nokia, Ericsson, Alcatel and etc and providing services to it’s customers to use that technology. From time to time, inventing new technologies sharply decreased because we are pushing the limits. Also mobile technology becoming old technology. The introduction of 3G showed really good statics at the beginning. People were excited with such a technology. Also big communication companies like Vodafone started to focus on this technology because buyer propensity to substitutes available increased in voice calling services. For example people started to use internet telephone to make their calls instead of using Vodafone cards and a cell phone. It is much easier and costs less. Suppliers (Nokia, Alcatel, and Ericsson) have invented Wi-Fi enabled mobile phones. That means people won’t be using 3G services if there is Wi-Fi zone nearby. Vodafone realized that calling and 3G operations with mobile phone will decrease as in quantity much more in near future and Vodafone started to focus on extra services like texting, ringtone download, wallpaper download and etc.

In another case, Vodafone is having problem at US. Customers not able to use their cell phones in Verizon Wireless network (which is owned by Vodafone itself) because it operated under a different standard. That really affects buyer propensity. For example if I cannot use my cell phone in specific areas (most of them in metropolis areas) I won’t be attracted by Vodafone’s campaigns.

There are 3 segments, Voice call users, extra service users, internet (3G) users. However you cannot separate them. Voice call users could use extra services and internet too. Vodafone cannot separate them. They have to provide all of these things to attract more customers. More services mean more customer and people will be attracted more even if they won’t use internet at all. On the other hand there are 2 types of users. Having long term contracts and customers using pre paid cards. Actually you can separate them. We can see examples of it. Vodafone is offering much more privileges to contracted customers. Selling them their Vodafone card with a cell phone asking that customer to talk some amount of minutes or have some amount of bill every month for some year. This is really good offer. However pre paid card users won’t be able to get this kind of privileges. But you cannot charge them different money. If contracted users pays 1€ for 10 minutes than pre paid card user needs to pay 1€ for 10 minutes. It doesn’t really matter if a customer is pre paid card user or having long contract. In both ways Vodafone is earning same money. However long term contracts are stable and can be forecasted easily for future budgeting, investing and advertising. That is why Vodafone is giving privileges to dedicated customers. Customers who are loyal. Like in anywhere else loyalty rewarded generously.

External Analysis

PESTEL

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Political

China mobile can never become Vodafone china. That is a reality due to investment options and the quasi-political situations of Chinese mobile telephony market.

Social-Cultural

48% of Vodafone’s customers in Germany had a contract while this kind of long-term commitment to an operator was almost unheard of in Italy.

Vodafone had trailed behind NTT DoCoMo and KDDI since its entry in 2001 in Japan due to fickle consumers.

Technological

In the US Vodafone customers still could not use their cell phones on the Verizon wireless network because it operated under a different standard.

Introduction of 3G which had a very promising start in Germany with good sales of mobile connect cards might shift the focus of the whole industry away from networks to content.

Economical

Vodafone had competitive advantage over rivals after the telecom crisis because Vodafone was the only company used shares for its acquisitions.

The mobile phone market was characterized by extremely high fixed costs that affect rivalry.

Revenue from voice traffic was flat or even declining due to competing technologies as internet calling that was fundamentally changing the telecom industry.

Legal

Regulatory constraints would require it to sell its stake in Verizon Wireless first because it was prohibited to own more than a 20% stake in two competing operators.

Opportunities and Threats

Opportunities:

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In 1999, Vodafone merged with AirTouch Communications Inc. of the USThe mobile telephony boom reached its peak.

Vodafone signed sponsorship agreement with Manchester United Football Club and Ferrari Formula 1 Team.

There were good news about Vodafone in the press; “Vodafone keeping pole position” Total Telecom Magazine; August 2003.

There were good news about Vodafone in the press; “Vodafone dominance tipped to keep rolling” Utility Week; January31, 2003.

There was good news about Vodafone in the press; “A new voice at Vodafone” The Economists; August 2, 2003 (say, Positive publicity in important magazines like …….)

Threats:

Vodafone has many big and strong competitors such as; Verizon, AT&T Wireless, Bellsouth Corp., O2, SFR, etc.

Verizon refused to adopt the single Vodafone brand Verizon Wireless is the largest mobile phone operator in North AmericaTechnology developed by companies such as Nokia, Erickson, Nortel if Wi-

Fi powered phone technology should ever become popular, it would undermine Vodafone’s current business model and could turn billions of fixed assets into worthless electronic scrap.

There are news about rivals success in the press; “Nokia takes leap into Wi-Fi phones” Wall Street Journal Europe; February 23, 2004.

The merger of AT&T with Bellsouth Corp. had put pressure on Verizon Wireless to buy of Vodafone and force it to exit the US market.

Five Force Analyses

Degree of Rivalry

Exit barriers

Vodafone group is the world’s largest cell phone provider by revenue and invested $270 billion in stock also the company competes in 26 countries and it controlled cell phone operations in 16 countries and had minority stakes in companies in ten other countries, it had more than 150 million customers and employed approximately 67.000 people around the world. Additionally the company has many acquisitions with the other companies in many countries so it is not easy to end the contract with its acquisitions and the customers mutually have long-term contracts but in the case of the Japan Telecom according to the Vodafone’s strategic decisions the Vodafone decided to divestiture it but it does not mean that they can totally close the business hence it is so hard for them to exit so both Exit Barriers and Degree of Rivalry High.

Industry concentration ratio

There is no any exact ratio but the company is in 26 countries out of 200 and biggest in the world so accordingly we can give a meaning that the Vodafone group has High Industry Concentration Ratio and Degree of Rivalry is high

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Industry growth

Vodafone vas not present in Latin America and in many African countries. Vast untapped markets lay ahead with today’s mobile penetratition of about 1.7 billion, of which Vodafone has about 3.5 million, in five years if the Vodafone could be able to touch these untapped areas they can offer service to the half of the world which is approximately 2.5 billion so there is a huge growth potential for the future and Industry Growth is High so Degree of Rivalry High.

Product differentiation

Vodafone created a tariff option that enabled customers to seamlessly roam the globe on a special per minute rate on the same network, without having a worry about high interconnection fees or different technical standards. Vodafone gives to their customers, change for connecting to their company’s IT systems and special rates for international calls on the network. In addition they have Vodafone Life which offers a service to listen free music from the internet and also you can download ringtones. Product differentiation is High so Degree of Rivalry Low.

Brand identity

Throughout the past years Vodafone has done a terrific job of building brand awareness by offering its customers great service, great value and great innovation and they never used “low prices” to attract new customers instead; it focused on creating and marketing new value-added services that enticed customers to sign up with Vodafone. Also the Vodafone group selected two globally recognized brands; it sponsored the Manchester United Football Club and the Ferrari Formula 1 team to improve awareness over the world. Globally they have appeared in 26 countries with more then 150 million customers and they aimed to collect its acquisitions under the same umbrella as “One Vodafone “and in many of the branding cases they fallow the same path to adopt them and some of the processes ended in almost one night and in some other cases it took more than 2 years to change the name from original situation to “One Vodafone”. These applications by Vodafone give power of being a challenger for local companies under the “One Vodafone” Brand identity is High so Barriers to Entry Low.

There are 3 High and 2 Low. As a conclusion, instead of Vodafone group having different product and brand identity the Degree of Rivalry is still high because of there are untapped profitable markets and growth opportunities for the firms and also to be able to compete with its competitors they should fallow the technological requirements. To reduce the degree of rivalry they should have to enter the untapped areas so they can increase their market share and they can be more a Challenger company.

Buyer Power

Buyer Volume

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Vodafone doesn’t sell just sim card. They purchase a little bit money from sim cards. They purchase their services. 3G services, voice call and Vodafone Live! Etc. Vodafone collects these services prices. Consumers, always continue to use these services. So, buyer volume is high and also buyer power is high.

Buyer Information

Vodafone is in mobile telecommunication sector. In this sector companies compete with each other aggressively by advertisements so most of the consumers are aware of pricing and existing services provided by these companies. So, buyer information is high. From here we can understand the buyer power is high.Brand Identity: Vodafone is offering to their customers, great service, great value and great innovation and they never used “low prices” to attract new customers. Vodafone wants to collect their acquisitions under the same umbrella as “One Vodafone”. Vodafone is the 11th most valuable company of the world. They sponsored the Manchester United and Ferrari Formula 1 team to improve their awareness and perception of the brand. So brand identity is high. From here we can understand the buyer power is low. Price Sensitivity: Vodafone never tried to attract new customers with low prices instead they focused on full filling the needs of customers by giving them the best quality service. However Vodafone is not immune to the pricing policies of its competitors. Which cause Vodafone to lower their tariffs? So price sensitivity is low. From here we can understand buyer power is low.Trade of Backward Integration: Vodafone do not develop their own technology. They are technology users. Technology is developed by companies like; Nokia, Erickson, Natel etc. So trade of backward integration is low. From here we can understand the buyer power is low.

Product Differentiations

Vodafone created a tariff option that enabled customers to seamlessly roam the globe on a special per minute rate on the same network, without having a worry about high interconnection fees or different technical standards. Vodafone gives to their customers, chance for connecting to their company’s IT systems and special rates for international calls on the network. So product differentiation is high. From here, we can understand the buyer power is low.

Substitutes Available

Customers can use fixed-line telephones and internet telephones. And their aims are very high to substitutes. So, substitutes available is high. From here we can understand the buyer power is high.

Conclusion

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We have 4 low sign and 3 high sign. Normally, buyer power is low. Because, Vodafone always stronger than their consumers.

Threat of Substitutes

Buyer propensity to substitutes

By the improving of sophisticated internet opportunities revenue from voice traffic was flat or declining and the competing technologies as internet calling was fundamentally changing the telecom industry. Also Nokia had just presented its first Wi-Fi powered that did not need the traditional mobile network but a wireless LAN hotspot. Also Skype is another important consideration which allows people to talk over internet that’s why Buyer Propensity to Substitutes High so Threat of Substitutes High.

Relative price performance of substitutes

People are able to talk from internet by paying very low prices or they mutually can talk free by using Skype also fixed line telephones are cheaper compared to the mobile phone charges so when people are able to reach internet and fixed line telephones thus the importance of mobile telecommunication is declining. The Relative Price Performance of Substitutes High so Threat of Substitutes High.

As a conclusion, both of them are high which means substitute products affect the company negatively in terms of growing by profit so the Vodafone group needs to decline the communication charges for not losing its existing customers.

Barriers to Entry

Access to Input

Vodafone’s network equipment suppliers are Alcatel, Nokia, and Siemens. These companies are network equipment suppliers. So, who wants to enter to this sector; they cannot find easily their inputs. So, access to input is low. From here, we can understand the barriers to entry is high.

Government Policy

Vodafone is a global company. For that, government policy doesn’t effect to Vodafone. But, if anybody wants to enter to this sector, they will be ready to low government policies. Government policy is low as, Vodafone can enter the different countries and continents easily. So, government policy is low and also barriers to entry is low.

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Economic of Scale

Vodafone effect to economy extremely high. They sell their services to consumers. If this sector doesn’t have the big scale, how Vodafone buy so many companies’ shares? Or, why did buy? So, economics of scale is high and also barriers to entry is high.

Capital Requirement

Mobile telecommunication sector is need to so much money. Who will plan for enter to this sector; they must have so much money for set up the all systems, open the retail shops etc. So, capital requirement is high. From here we can understand the barriers to entry is high.

Brand Identity

Vodafone is offering to their customers, great service, great value and great innovation and they never used “low prices” to attract new customers. Vodafone wants to collect their acquisitions under the same umbrella as “One Vodafone”. Vodafone is working on 26 countries. Vodafone is the 11 th most valuable company of the world. Vodafone is a global brand. They sponsored the Manchester United and Ferrari Formula 1 team to improve their awareness and perception of the brand. Who wants to enter to this sector, they have to venture this situation. Brand identity is so important for this sector. So, brand identity is high and also barriers to entry is high.

Supplier Power

Importance of Volume to Suppliers

The case indicates that we do not develop technology. Technology is developed by companies such as Nokia, Ericksson, Nortel. The Vodafone group has more then 150 million customers so it absolutely affect these companies hence this situation so important for suppliers accordingly Importance of Volume to Supplier is high and Supplier Power is Low.

Differentiation of Input

The companies such as Nokia, Ericksson, Nortel has strong power when they come up with a new product like in the case of Nokia which had just presented its first Wi-Fi powered phone that did not need the traditional mobile network but a wireless LAN hotspot so when they came up with such as technologically different product the suppliers are able to force the company to change its current business model. Therefore Differentiation of Input is high and Supplier Power is high.

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Presence of Substitute Input

There is no related information in the case of Vodafone.

Threat of Forward Integration

The companies such as Nokia, Ericksson and Nortel do not provide telecommunication opportunities like Vodafone they are just the producers of the technology and not the users in telecommunication business. So Threat of Forward Integration High and Supplier Power is Low.

As a conclusion, there are 2 Low and 1 High. The Vodafone group has strong volume to squeeze suppliers’ margins and the suppliers need to produce their products almost according to needs of the technology that the Vodafone has used.

Internal Analysis

VRIO

Billed same as in home country while in same network. Free roaming. Offering Vodafone Live! Service Offering 3G (fast data transfer) Provide customers to connect to companies IT systems. Sponsorship with Manchester United FC and Ferrari Formula 1 team.

Pricing customers same as in home country while in same network. Free roaming.

Valuable?It is valuable. Most of the potential customers could be attracted by this service. Using voice communication with low prices or prices as same as in using voice communication locally will bring more customers.

Rare?It is rare. No other company offering this kind of service. That is why Vodafone remain leader in international calls.

Costly to Imitate?It is costly. To let customers use their sim cards in wide range while they are still billed same as in home country. Definitely it is costly to imitate

Organization?Organization done great job here. Uniting all Vodafone branches and sign agreements with other operators from other countries to extend their capacity.

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Valuable YESRare YESCostly to Imitate YESOrganization YESSustained competitive advantage

Offering Vodafone Live! Service

Valuable?Yes it is valuable. Vodafone live! Service provides ringtones, wallpapers and application to its customer.

Rare?No it is not rare. Probably all other mobile communication companies offering these kind of services.

Costly to Imitate?No it is not costly. This service doesn’t need much investment because it is basically a virtual shop.

OrganizationThis service will give extra benefits because it is given by Vodafone. Absolutely yes.

Valuable YESRare NOCostly to Imitate NOOrganization YESTemporary Competitive Advantage

Offering 3G services

Valuable?It is valuable. 3G is enables people to transfer data with their mobile phones. With 3G people can use Video Call and connect to internet.

Rare?It is not rare. Most of the mobile communication service provider companies offering 3G to its customer.

Costly to Imitate?It is costly however all the companies need to invest into 3G technology to keep doing business in sector. So it is not costly.

Organization Vodafone is the pioneer in 3G technology.

Valuable YES

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Rare NOCostly to Imitate NOOrganization YES

Temporary Competitive Advantage

Provide customers of agreed companies to connect to companies IT Systems and have privileged pricing with international calls.

Valuable?It is valuable. It is really good service for businessman or any employee that needs to connect their ERP program while they are away from headquarters.

Rare?It is rare. Because international calls are too costly these days. Vodafone keeps companies as their customer by giving them price discount.

Costly to Imitate?It is costly. To give price discount in international calls needs high investment and agreement costs.

Organization?Absolutely organization worked a lot here. To agree with rival network providers to extend their coverage.

Valuable YESRare YESCostly to Imitate YESOrganization YESSustained Competitive Advantage

Sponsorship with Manchester United FC and Ferrari Formula1 Team

Valuable?It is valuable. Both are the most well known sports team globally. There are many fans of both Manchester United FC and Ferrari Formula1 Team. That helped Vodafone to have extreme global awareness.

Rare?It is not rare. There are several other companies being sponsor to well known sports team.

Costly to Imitate?It is not costly to imitate. If the company be sure that advertisement will bring new customers. Than it is not costly

Organization?There is nothing organization is doing. In this situation.

Valuable YESRare NO

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Costly to Imitate NOOrganization NOStrengths and Weaknesses

Strengths:

In 2006, Vodafone Group PLC was the world’s largest cell phone provider by revenue.

Since 1999, Vodafone had invested $270 billion.Vodafone is operating in 26 countries.Vodafone has capability to transform and adapt itself to the dramatically

changing market environment.In 2005, Vodafone was the leading mobile phone operator in the worldVodafone had more than 150 million customers worldwide.Vodafone is in list on the stock exchanges of New York, London and

Frankfurt.In 2004, Vodafone’s market capitalization was $165, 7 billion.In 2004, Vodafone was the eleventh most valuable company in the world. Vodafone had ₤564 million as cash dividend in financial year 2002/2003.In FY2004, Vodafone’s free cash flow exceeded ₤8 billion.Vodafone hosted the first ever mobile phone call in the UK in 1985.Vodafone signed the world’s first international roaming agreement with

Telecom Finland.Vodafone is the first operator in the UK to offer “pre-paid” packages to its

customers.Vodafone took over the Mannesmann’s D2 mobile phone business and it

was Germany’s largest take over ever.In 1999, in terms of market capitalization, Vodafone found itself ten largest

companies in the world.Vodafone acquired Ireland’s Eircell.Vodafone increased its stake in Spanish AirTel Movil. Vodafone used shares for its acquisitions.Vodafone has unique marketing and technological capabilities.Management and managerial activities are very good in Vodafone.Vodafone launched its first truly global communication campaign in the

2001.Leadership position on cost and time to market are competitive

advantages of Vodafone.Annual pre-tax operating profit by ₤2.5 billion by FY2008.Under the One Vodafone, there are currently 8 programs (Networks, IT,

Service platforms, Roaming, Customer, Handset portfolio, MNC accounts, Retailing).

Vodafone is the 8th largest retailer in the world taking together our stores that are owned or franchised.

Vodafone live! Multimedia service was launched on Sharp GX-10 handsets branded for Vodafone.

Vodafone has a power to buy technology.Vodafone is the world’s largest mobile telephone operator.Vodafone had ₤24.1 billion as gross fixed assets in balance sheet.Vodafone has advanced network infrastructure.

Weaknesses:

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Vodafone sold Vodafone’s stake in Japan Telecom to Softbank.Vodafone has lost long takeover battle of ‘AT&T Wireless’ to American rival Cingular Wireless.Vodafone was operated in matrix format.Vodafone don’t develop technology.In FY2003 Vodafone suffered a loss of $15, 5 billion.

Financial Analysis

Liquidity Ratio

Current Ratio

Values can be converted into cash; short-term debt divided by the medium is the ratio. The current rate increase, the increase indicates solvency. This rate, short-term debt payment capacity of enterprises to measure and net working capital is used to determine the proficiency level.

 YEARS CURRENT ASSET CURRENT LIABILITIES CURRENT RATIO1995 308,00 442,50 0,70 1996 341,30 583,30 0,59 1997 495,20 1.013,20 0,49 1998 590,80 1.432,30 0,41 1999 791,50 1.529,90 0,52 2000 2.517,00 4.441,00 0,57 2001 17.690,00 12.377,00 1,43 2002 9.438,00 13.445,00 0,70 2003 8.591,00 14.293,00 0,60 2004 13.149,00 15.026,00 0,88

In 2001 years, the current ratio of the Vodafone Company has increased because current asset increased and Vodafone started to investment. They have slowed down mergers between companies and instead focused on growing internally.

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Quick Ratio

An indicator of a company's short-term liquidity. The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. The higher the quick ratio, the better the position of the company.

  CURRENT ASSET --     YEARS INVENTORY CURRENT LIABILITIES QUICK RATIO1995 297,50 442,50 0,67 1996 324,50 583,30 0,56 1997 475,50 1.013,20 0,47 1998 561,90 1.432,30 0,39 1999 746,80 1.529,90 0,49 2000 2.327,00 4.441,00 0,52 2001 17.374,00 12.377,00 1,40 2002 8.925,00 13.455,00 0,66 2003 8.226,00 14.293,00 0,58 2004 12.691,00 15.026,00 0,84

According to this calculation Vodafone have ability pay short term obligations with most liquid assets in all years. In 2001, Vodafone Company’s reached high the quick ratio rate. And at the end of 2001 the quick ratio rate has decreased gradually. As a result of this, the quick ratio decreased ability to repay debts.

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LEVERAGE RATIO

Debt to Total Asset Ratio

Debt to total assets ratio shows the proportion of a company’s assets which are financed through debt. If the ratio is less than one, the company’s assets are financed through debt. If the ratio is greater than one, the company’s assets are financed through debt. Vodafone Company’s ratio is less than one so company’s assets are financed through debt. But Vodafone’s Company with high debt ratio could be in danger.

 YEARS TOTAL DEBT TOTAL ASSET DEBT TO ASSET RATİO1995 588,30 1.406,30 0,42 1996 731,60 1.755,10 0,42 1997 1.585,40 2.414,50 0,66 1998 2.111,50 2.507,70 0,84 1999 2.709,00 3.633,60 0,75 2000 10.815,00 153.175,00 0,07 2001 23.612,00 171.394,00 0,14 2002 26.573,00 160.001,00 0,17 2003 28.050,00 159.585,00 0,18 2004 28.010,00 142.932,00 0,20

We are looking to years by to dept ratio is decreasing this is good for Vodafone company. This year in 2000 debt decrease more than other because Vodafone company selling product and paid debt so Vodafone Company can investment.

Debt to Equity Ratio

The debt to equity ratio shows that Vodafone Company has been aggressive in financing its growth with debt. This can result in variable earnings as a result of the additional internal expenses. . Upper acceptable limit of the debt to equity ratio is usually 2:1, with no more than one-third of debt in long

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term. A high financial leverage or debt to equity ratio indicates possible difficulty in paying interest and principal while obtaining more funding.

Debt to Equity =

 YEARS TOTAL DEBT TOTAL EQUITY DEBT TO EQUITY1995 588,30 818,00 0,72 1996 731,60 1.023,50 0,71 1997 1.585,40 828,60 1,91 1998 2.111,50 850,00 2,48 1999 2.709,00 924,30 2,93 2000 10.815,00 142.360,00 0,08 2001 23.612,00 147.782,00 0,16 2002 26.573,00 133.428,00 0,20 2003 28.050,00 131.534,00 0,21 2004 28.001,00 114.931,00 0,24

Vodafone Company’s total debt equity increased between the years 1995 to 1999. It looks very good after this year. We are decreased ratio chart dept to equity ratio in 2000 because Vodafone Company has paid the debts. This is very good for the company because after 2000 dept to equity keep increasing because total dept increasing and the total equity keep declining. If it keep increasing during the next years it is not a good thing for the company.

Activities Ratio

Total Debt Total Equity

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Total Asset Turnover

The Total Asset Turnover is measures a company's effectiveness in generating sales revenue from investments back into the company. There is no set number that represents a good total asset turnover value because every industry has varying business models.

Total Asset Turnover =

  SALES TOTAL ASSETTOTAL ASSET TURNOVER

1995 1.153,00 1.406,30 0,82 1996 1.402,00 1.755,10 0,80 1997 1.749,00 2.414,50 0,72 1998 2.470,80 2.507,70 0,99 1999 3.360,00 3.633,60 0,92 2000 7.873,00 153.175,00 0,05 2001 15.004,00 171.394,00 0,09 2002 22.845,00 160.001,00 0,14 2003 30.375,00 159.585,00 0,19 2004 33.559,00 142.932,00 0,23

Total Assets for Vodafone generally is high that is good for the company. Vodafone company’s total asset turnover is increased to 1995 from 1999 because of Vodafone company has been more effective using investment but after years it has been not effective using asset.

Fixed Asset Turnover

A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment - net of depreciation. A higher fixed-asset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues.

Sales Total Asset

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Fixed Asset Turnover =

  SALES NET FIXED ASSET FIXED ASSET TURNOVER1995 1.153,00 1.101,50 1,05 1996 1.402,00 1.422,10 0,99 1997 1.749,00 1.926,60 0,91 1998 2.470,80 1.911,50 1,29 1999 3.360,00 2.852,10 1,18 2000 7.873,00 150.851,00 0,05 2001 15.004,00 156.375,00 0,10 2002 22.845,00 153.462,00 0,15 2003 30.375,00 154.689,00 0,20 2004 33.559,00 133.980,00 0,25

Vodafone Company’s fixed asset turnover increased between the years 1995 to 1999 because a higher fixed asset turnover ratio shows that the Vodafone Company has been more effective in using investment in fixed asset to generate revenues.

Profit Analysis

Net Profit Margin

Gross profit margin is the amount that remains from sales after cost deductions of goods sold, expressed as a percentage.

Profit Margin =

Sales Net Fixed Asset

Net Income Net Sales

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  NET INCOME NET SALES PROFIT MARGIN1995 135,7 1.153,00 0,12 1996 187,2 1.402,00 0,13 1997 357 1.749,00 0,20 1998 407 2.470,80 0,16 1999 594 3.360,00 0,18 2000 542 7.873,00 0,07 2001 9.885,00 15.604,00 0,63 2002 16.155,00 22.845,00 0,71 2003 9.819,00 30.375,00 0,32 2004 9.015,00 33.559,00 0,27

In 2001 the profit margin of the Vodafone Company has increased because they did profit by reducing cost of expenditures and between 2001 to 2003 the Vodafone group chose internally growing instead of investing for acquisitions so between these years the revenue is quite high.

Return an Investment

Return an investment =   NET INCOME TOTAL ASSET RETURN ON INVESTMENT1995 135,7 1.406,30 0,10 1996 187,2 1.755,10 0,11 1997 357 2.414,50 0,15 1998 407 2.507,70 0,16 1999 594 3.633,60 0,16 2000 542 153.175,00 0,00 2001 9.885,00 171.374,00 0,06 2002 16.155,00 160.001,00 0,10 2003 9.816,00 159.585,00 0,06 2004 9.015,00 142.932,00 0,06

Net Income Total Asset

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In 1999, the return of investment of the Vodafone has increased because of they had May acquisitions with the other companies and these acquisitions become benefit able.

Strategy Alternatives and Choices

Vodafone PLC Company is still remaining leader in telecommunication business. They are the 11th most valuable company today. Their strategy about unifying all Vodafone branches into One Vodafone succeeded. The main aim is to lower fixed and marketing costs. In future Vodafone aims to remain leader while providing more high quality services to their loyal customers while fulfilling their needs.

However with recent technological improvements, mobile technology becoming old. Internet taking over voice calling and texting. Wi-Fi taking over 3G. In near future Vodafone needs to diversify into new markets with new businesses.

Also in near future, competitors could increase because global arena is getting tougher everyday. There might be new companies come into play at challenge Vodafone. Since costs are getting lower day by day and customers seek cheaper services.

As we said, mobile technology is dying. If there won’t be new technologies come into play (related with mobile industry) customers will lose their excitement and have high propensity to substitutes like internet calling and Wi-Fi systems.

Vodafone can diversify into internet providing business in near future. Setting up a global internet provider will have absolute advantage.

Like in example of Gillette, establishing Braun shaving machinery brand to keep company alive because World is changing. Or else Vodafone can go backward integration and establish their own cell phone brand. There are various options that Vodafone can choose. However in near future all balances will

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change and Vodafone will need to decide on new strategy or new market to compete in to survive in this environment.

Conclusion

Currently, Vodafone is one of the best companies in World as in revenue, prestige and management. Through time Vodafone achieved a lot. At 2005 they have changed their organization which quite hard thing to do. However they are harvesting all the risks they have taken at those days. Now Vodafone have over 150million customers. Globally Vodafone have the highest market share for connecting people. However being such a big company is not related with problems they are facing and they will face. Now Vodafone is having too much competition from local competitors. Also as it is written in case, Vodafone needed to sell its Japanese branch in order to stay alive. However Vodafone is the most known telecommunication brand globally, reaching 150million customers, offering privilege services with best quality and earning a lot of profit. Probably in future they have new plans and new risks to take. With this kind of management strategy it is so odd to think that they will fail. I think they are doing quite fine and will do quite fine in future and shareholders probably happy about their investment.

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