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SUBMITTED BY: GROUP NO -3 AJAY KUMAR VATS(08EM-006) MANDEEP NAIN(08EM-020) SANJEEV AGARWAL(08EM-037) SHOBHIT YADAV (08EM-041)
Overview
Introduction Vodafone Acquired Hutch Essar Strategy Formulation
Mission & Vision Business Analysis : Internal & External Competitive Analysis Corporate & Business Level Strategy Industry Attractiveness v/s Business Position matrix Recommendations/Conclusion
VISION
VISION IS TO BE THE WORLD'S MOBILE COMMUNICATION LEADER - ENRICHING CUSTOMERS LIVES, HELPING INDIVIDUALS, BUSINESSES AND COMMUNITIES BE MORE CONNECTED IN A MOBILE WORLD.
MISSION
DRIVING IN A WIRELESS WORLD.
About Vodafone
Vodafone is the worlds leading international mobile communications group with
operations in 25 countries across five continents and over 200 million proportionate customers by the end of January 2007, as well as 36 partner networks. Cuurent 31 country,41country partner network,427 million customers as of 2009.
About Essar
Essar is one of Indias large corporate houses with 20,000 staff and business interests
spanning high growth infrastructure sectors of steel, oil & gas, power, telecommunications, shipping & logistics and construction. The group has built a portfolio of assets with expected revenues of US$10 billion in the year to March 2008.
Limited 1994 as Hutchison Essar Mumbai,Maharastra Mobile Telecom(GSM) Vodafone-67%,Essar-33% 10,000 March 31st 2009
Acquisition of companies that control a 67% interest in Hutch Essar Transaction consideration: US$11.1 billion (5.7 billion) Implied enterprise value: US$18.8 billion (9.6 billion)
A signed MOU between Vodafone and Bharti relating to a comprehensive range of infrastructure sharing options expected to: materially reduce the total cost of delivering telecommunication services bring mobile communications to rural areas expand network coverage more quickly
Local partners
Vodafone will make an offer to buy Essars stake at the equivalent price per share it has agreed with HTIL. Arrangements with other existing minority partners will result in a shareholder structure that meets the requirements of Indias foreign ownership rules.
Granted a Bharti group company an option to buy 5.6% listed interest in Bharti for US$1.6 billion (0.8 billion) subject to completion of Hutch Essar transaction
External Analysis
PEST Analysis Mobile Industry Analysis Opportunities &Threats Competitive advantage
PEST Analysis
(i)-Political/regulatory environment
(i)Political/Re gulatory Status
Regulatory institutions well-developed among emerging market peers: TRAI1 (regulator) features Dynamic recent consultations on 3G licensing, roaming and infrastructure sharing,MNP Clear Government targets for tele-density driving high-level policy initiatives 500m telecoms connections by 2010 (implies significant rural coverage) 20m broadband subscribers by 2010 High levels of fees and taxes have been reduced to promote affordability and increase tele-density Sharing of passive infrastructure (sites, towers) permitted and encouraged by government. TRAI is evaluating active network infrastructure sharing to underpin Tele-density targets. Termination rate reduced. Regulation-National Telecom Policy since 2004 2004 (Oct) Announcement of Broadband Policy to provide high speed always on internet service. 2005 (Nov) FDI limit increased from 49% to 74% in Telecom Sector. 2005 (Dec) ILD & NLD Annual License fees reduced from 15% to 6%. 2007 (Oct) Dual technology allowed. 2008 (Aug) Issue of 3G guidelines for spectrum allocation through auction. Foreign players allowed to bid. 2008 (Aug) Guidelines for Mobile Number Portability Service License issued
(ii)Economic Environment
Gradual economic reform has delivered major cumulative change since 1991 Reducing bureaucracy and state influence over business decisions Promoting competition by privatization and de-licensing key sectors Encouraging foreign investment into more sectors of economy
(iii) Social
The number of inhabitants in each of India (1103 million) and China (1316 million) was
over a billion persons, and together these two countries represented more than one third (37.4%) of the world's population. Demographic changes that will have a major impact on many areas of society such as social systems, consumption patterns, education, and job markets in the coming decades. People are living much longer and in better health.
Technological
Pros: Convergence of Fixed Phone is opportunity for Mobile Phone industry. Mobile phone industry was growing and fixed-line customers all had the potential to switch to mobile operators because the same services were available (More on Individual Less on official i.e.call center inbound,outbound). Cons: VoIP through ILL. WiFi/WiMAX . DSL high speed broadband. IPTV on PSTN . ILL and PRI on Copper pair & OFC. IN services popular on PSTN Lines. Some uncertainty existed in picking a type of mobile phone standard compatibility i.e.2G,2.5G,3G. Based on above Pros and Cons Technological Factors is a opportunity.
Power of Suppliers
Switch providers are Limited i.e. Nokia ,Ericsson, ZTE etc. Tower Providers are also very Limited. Mobile Handset Providers Dependency, Nokia, Samsung, Motorola, Sony,LG etc.
Power of Buyers
Buyers Demand is More features, minutes and texts, for less money. Buyers are becoming increasingly sophisticated and make use of the wider range of services that mobile operators have to offer including broadband, data Availability, MMS and 3G compatible services. Mobile Phone Industry Products are undifferentiated and standardized. Switching to another operator is not costly or Switching cost Low, Churning rate is High.
Threats of Substitutes
Voice Call on Mobile Substitute is Internet calling services through VOIP, Walky Phones, Fixed Lines. SMS-IM Messaging, Email Internet-Broadband on PSTN,EVDO Wireless Broadband, USB Broadband Switching costs are low but the advantage goes to the mobile phone industry because there is a greater chance of switching to mobile phones from fixed-line phones. Reason behind this substitute products price is not lower, and its quality and performance capabilities are negligible compared to mobile phone products. Threat of Substitute is Low.
Pushing TV through their IP pipes Retailers are entering the business in the form of the virtual operator network concept. New operators are in the process of Licensing from TRAI. Threat of New entrant is Low. Because the mobile phone operators must compete for spectrum licenses, hence existing operator can easily identify their competitors in the individual markets.
Opportunities
Emerging markets (Demographic)
Threats
and expansion abroad Innovation Product and services expansion Growing data business and 3G auctioning VAS as a means to increase ARPU Growing Enterprise solution market (10.2% in 2009 anticipated) Tower sharing business with Indus Towers
Lower cost competitors or imports Price wars Falling ARPUs from 247-
Experienced Firm. Leverage global competencies. Creating synergies around the globe. Strong R&D leads through Innovation in Technology.
Internal Analysis
Internal Analysis
Strengths
Experience and knowledge in the mobile phone business. Strong ability to manage change and acquisition. Global brand strength High geographical reach
Weaknesses
Financials
Profitability Ratios: operating margin was 1.2 percent higher than the
competitor average in 2000 Liquidity Ratios: Vodafone has traditionally operated with low liquidity and less inventory than its competitors, and has maintained above average profitability. Leverage Ratios: debt ratios were above industry averages. Vodafone was in a superior financial position compared to its competitors, with substantial assets and high operational efficiency.
Core Competencies
Value: Created value for their customers by being the best and most
focused Vodafone's ability to develop innovative technology and successfully merge are rare capabilities. Develop Synergies Through Technology sharing. Dominance at point of purchase / consumption through Visibility. Costly to Imitate
level strategy. Vodafone is heavily focused on acquisitions, including Hutchison, to open cost advantages through economies of scale.
level strategy through their exclusive focus on the mobile telephony industry. Because Vodafone did not have the distractions that faced their competitors (such as fixed-line telephony) they are able to save money and pass the savings to their customers or maintain a profit even when their closest competitor is only achieving average returns. Vodafone maintained a broad competitive scope and focused on cost for their competitive advantage.
Competitive strength
- Relative brand strength (marketing) - Market share - Market share growth - Customer loyalty - Distribution strength and production capacity - Record of technological or other innovation - Quality
GE Matrix Analysis
Mobile Market Attractiveness - Market size - Market growth rate - Market profitability - Pricing trends - Competitive intensity / rivalry - Overall risk of returns in the industry - Entry barriers Over all Market attractiveness Industry Strengths - Relative brand strength (marketing) - Market share - Market share growth - Customer loyalty - Production capacity - Technological or other innovation - Quality Over all Industry Strengths Medium Medium + Low + + + Medium + + Medium Low Low Low Medium Medium
Low
Up or Out
Invest
Business Position
High
Medium
Selective Growth
Up or Out
Harvest
Mobile Industry
Up or Out
Harvest
Divest
Low
Competition is intensifying from existing and new players Significant price erosion Customers have far greater choice in communications Growing demand for broadband Emerging markets delivering significant growth Continued significant regulatory pressure Mobile business model is changing
Cost reduction Revenue stimulation Deliver strong growth in emerging markets Maximize shareholder returns from affiliates Capture new sources of revenue Innovative total communications solutions
Recommendation: In India the focus should be on cost reduction and revenue stimulation
Reduce cost structure Leverage regional scale Outsourcing Shared services Overhead reduction Stimulate voice usage Substitute fixed minutes Enhance customer value Innovative bundling Vodafone At Home Vodafone At Office HSDPA enabled services