Vodafone Case Study

BUS402 - Business Policy

Girne American University

Submitted To Emete A. Toros

14 May 2010

Group Members

Mehmet Akif Uar

Mission Statement / Objectives

Student ID:050211050
Merve zgren

Nature of Demand

Student ID:050201014
Asm Eren r

External Analysis

Student ID:050205153
brahim Bekta
Student ID:050205033
Ali Us

Five Force Analysis

Buyer Power, Barriers to Entry
Five Force Analysis

Student ID:060211003
Gzde Yrk

Degree of Rivalry, Treat of Substitutes,

Supplier Power
Internal Analysis

Student ID:050205103
Ali Rza zer

Financial Analysis

Student ID:050205144
Umut Can Esenergl

Strategy Alternatives and Choices /

Conclusion

Student ID:050205045

II

Table of Content
Cover Page

Group Members

Table of Content

Introduction
Mission Statement

Objectives

Nature of Demand

External Analysis

Five Force Analysis

Degree of Rivalry

Buyer Power

Treat of Substitutes

10

Barriers to Entry

11

Supplier Power

12

Internal Analysis

12

Financial Analysis

16

Strategy Alternatives and Choices

24

Conclusion

25

III

Introduction
Mission Statement
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
peoples 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 Groups
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

IV

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
companies like Nokia, Ericsson, Alcatel and etc and providing services to
its 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 wont 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 wont be attracted
by Vodafones 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 wont 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 wont 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 doesnt 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
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 Vodafones 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.

VI

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:
In 1999, Vodafone merged with AirTouch Communications Inc. of the US
The 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 America
Technology developed by companies such as Nokia, Erickson, Nortel if WiFi powered phone technology should ever become popular, it would undermine
Vodafones 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 worlds 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

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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
Vodafones 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
Industry growth
Vodafone vas not present in Latin America and in many African countries.
Vast untapped markets lay ahead with todays 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 companys 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.

VIII

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
Vodafone doesnt 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.

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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 companys 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
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 thats 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
Vodafones 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 doesnt 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.

Economic of Scale
Vodafone effect to economy extremely high. They sell their services to
consumers. If this sector doesnt 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.

XI

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.

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.

XII

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.
Valuable YES
Rare YES
Costly to Imitate YES
Organization YES
Sustained 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 doesnt need much investment because it is
basically a virtual shop.
Organization
This service will give extra benefits because it is given by Vodafone. Absolutely
yes.

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Valuable YES
Rare NO
Costly to Imitate NO
Organization YES
Temporary 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
Rare NO
Costly to Imitate NO
Organization 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?

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Absolutely organization worked a lot here. To agree with rival network providers
to extend their coverage.
Valuable YES
Rare YES
Costly to Imitate YES
Organization YES
Sustained 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 YES
Rare NO
Costly to Imitate NO
Organization NO
Strengths and Weaknesses

Strengths:
In 2006, Vodafone Group PLC was the worlds 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 world
Vodafone had more than 150 million customers worldwide.
Vodafone is in list on the stock exchanges of New York, London and
Frankfurt.
In 2004, Vodafones 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, Vodafones free cash flow exceeded 8 billion.

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Vodafone hosted the first ever mobile phone call in the UK in 1985.
Vodafone signed the worlds 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 Mannesmanns D2 mobile phone business and it
was Germanys largest take over ever.
In 1999, in terms of market capitalization, Vodafone found itself ten
largest companies in the world.
Vodafone acquired Irelands 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 worlds largest mobile telephone operator.
Vodafone had 24.1 billion as gross fixed assets in balance sheet.
Vodafone has advanced network infrastructure.

Weaknesses:
Vodafone sold Vodafones 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 dont 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,

XVI

short-term debt payment capacity of enterprises to measure and net working

capital is used to determine the proficiency level.

YEARS
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004

CURRENT ASSET
308,00
341,30
495,20
590,80
791,50
2.517,00
17.690,00
9.438,00
8.591,00
13.149,00

CURRENT LIABILITIES
442,50
583,30
1.013,20
1.432,30
1.529,90
4.441,00
12.377,00
13.445,00
14.293,00
15.026,00

CURRENT RATIO
0,70
0,59
0,49
0,41
0,52
0,57
1,43
0,70
0,60
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.
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.

XVII

CURRENT ASSET -YEARS

1995
1996
1997
1998
1999
2000
2001
2002
2003
2004

INVENTORY
297,50
324,50
475,50
561,90
746,80
2.327,00
17.374,00
8.925,00
8.226,00
12.691,00

CURRENT
LIABILITIES
442,50
583,30
1.013,20
1.432,30
1.529,90
4.441,00
12.377,00
13.455,00
14.293,00
15.026,00

QUICK RATIO
0,67
0,56
0,47
0,39
0,49
0,52
1,40
0,66
0,58
0,84

According to this calculation Vodafone have ability pay short term

obligations with most liquid assets in all years. In 2001, Vodafone Companys
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.

LEVERAGE RATIO
Debt to Total Asset Ratio
Debt to total assets ratio shows the proportion of a companys assets
which are financed through debt. If the ratio is less than one, the companys
assets are financed through debt. If the ratio is greater than one, the companys
assets are financed through debt. Vodafone Companys ratio is less than one so
companys assets are financed through debt. But Vodafones Company with high
debt ratio could be in danger.

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YEARS
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004

TOTAL DEBT
588,30
731,60
1.585,40
2.111,50
2.709,00
10.815,00
23.612,00
26.573,00
28.050,00
28.010,00

TOTAL ASSET
1.406,30
1.755,10
2.414,50
2.507,70
3.633,60
153.175,00
171.394,00
160.001,00
159.585,00
142.932,00

DEBT TO ASSET RATO

0,42
0,42
0,66
0,84
0,75
0,07
0,14
0,17
0,18
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
term. A high financial leverage or debt to equity ratio indicates possible difficulty
in paying interest and principal while obtaining more funding.

Debt to

Total

Equity =

Debt
Total
Equity

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YEARS
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004

TOTAL DEBT
588,30
731,60
1.585,40
2.111,50
2.709,00
10.815,00
23.612,00
26.573,00
28.050,00
28.001,00

TOTAL EQUITY
818,00
1.023,50
828,60
850,00
924,30
142.360,00
147.782,00
133.428,00
131.534,00
114.931,00

DEBT TO EQUITY
0,72
0,71
1,91
2,48
2,93
0,08
0,16
0,20
0,21
0,24

Vodafone Companys 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 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.
Sales
Total

Total Asset Turnover =

Asset

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1995
1996
1997
1998
1999
2000
2001
2002
2003
2004

SALES
1.153,00
1.402,00
1.749,00
2.470,80
3.360,00
7.873,00
15.004,00
22.845,00
30.375,00
33.559,00

TOTAL ASSET
1.406,30
1.755,10
2.414,50
2.507,70
3.633,60
153.175,00
171.394,00
160.001,00
159.585,00
142.932,00

TOTAL ASSET
TURNOVER
0,82
0,80
0,72
0,99
0,92
0,05
0,09
0,14
0,19
0,23

Total Assets for Vodafone generally is high that is good for the company.
Vodafone companys 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 fixedasset turnover ratio shows that the company has been more effective in using
the investment in fixed assets to generate revenues.

Sales
Net Fixed

Fixed Asset

Turnover =

Asset

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1995
1996
1997
1998
1999
2000
2001
2002
2003
2004

SALES
1.153,00
1.402,00
1.749,00
2.470,80
3.360,00
7.873,00
15.004,00
22.845,00
30.375,00
33.559,00

NET FIXED ASSET

1.101,50
1.422,10
1.926,60
1.911,50
2.852,10
150.851,00
156.375,00
153.462,00
154.689,00
133.980,00

FIXED ASSET
TURNOVER
1,05
0,99
0,91
1,29
1,18
0,05
0,10
0,15
0,20
0,25

Vodafone Companys 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.

Net Income
=
Net Sales
NET INCOME
NET SALES
135,7
1.153,00
187,2
1.402,00
357
1.749,00
407
2.470,80

Profit Margin

1995
1996
1997
1998

PROFIT MARGIN
0,12
0,13
0,20
0,16

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1999
2000
2001
2002
2003
2004

594
542
9.885,00
16.155,00
9.819,00
9.015,00

3.360,00
7.873,00
15.604,00
22.845,00
30.375,00
33.559,00

0,18
0,07
0,63
0,71
0,32
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

1995
1996
1997
1998
1999
2000
2001
2002
2003
2004

Return an
NET INCOME
135,7
187,2
357
407
594
542
9.885,00
16.155,00
9.816,00
9.015,00

Net Income investment =

TOTAL
ASSET
RETURN ON INVESTMENT
Total
Asset
1.406,30
0,10
1.755,10
0,11
2.414,50
0,15
2.507,70
0,16
3.633,60
0,16
153.175,00
0,00
171.374,00
0,06
160.001,00
0,10
159.585,00
0,06
142.932,00
0,06

XXIII

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 wont 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.

XXIV

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
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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