Internal Environment

The internal capabilities of a company will determine the stage in the value chain. Using the Mckinsey generic value chain, we have the following stages:

Technology Development - Product design – Manufacturing – Marketing – Distribution - Service

Technology development: This can also be referred to as Research and Development. Vodafone places a lot of importance on this because the company has achieved economies of scale with this. The technology and infrastructure platform is replicated in all the countries of operation , it is known that sharing fixed costs across all countries of operation can contribute to cheaper operations. Setting up a service centre in India is which is central to the group operations also helped in achieving economies of scale.

Product Design: Vodafone’s products are technology based and so product design is linked to technology development. The fact that the company designs their products ensures that they determine the functionalities, characteristics, aesthetics and quality.

Manufacturing / Distribution: This can be closely linked to Vodafone’s supply chain. Network construction and maintenance is outsourced particularly in emerging markets like China and India. Purchase of equipment, software and handsets are centralized and economies of scale has been achieved through this because the company strikes direct deals with the manufacturers of the various products. Vodafone sits at a pivotal position in the supply chain linking the end consumer with a complex pyramid of supply. The company sources equipment for networks and handsets from third party manufacturers, source components and assembled products from other suppliers.

Marketing / Service: Vodafone advertises through TV, billboards, other media outlets, stores, press releases etc and global audiences are attracted through this various means. The global brand of Vodafone provides economies in advertising and brand development across borders. The company therefore has a sales force that has studied the products and have a good understanding of them. Vodafone therefore packages, brands, prices, advertise, markets and sells their products to the consumers.

It can be seen from the above that the value chain of Vodafone is purely focused on achieving economies of scale in its global operations. This model has proven to be quite efficient in achieving economies of scale for the company.

Vodafone’s Financials

From the numbers above, it can be seen that Vodafone’s performance was on the decline between 2005 and 2007 but there was a pick up from 2008 and this has been consistent up to 2009. The decline was largely due to the roll out of the international strategy and huge payout for licenses which did not catch up immediately.

The pickup in 2008 came about due to focus on the expansion into emerging markets like India and African countries, increased influence in technology development and presence in the corporate market and increase in mobile data revenue. There was also a huge emphasis on the optimization of economies of scale.