Vodafone – Measuring the Success of the Strategy Essay
Avoidance brand resulting from the sponsorship. Our Strategy Our business strategy and our CAR strategy are Inseparable. Meeting society needs creates enormous opportunities to grow our business. Expanding our business In emerging markets such as Africa and India Is extending access to communications to people who rarely had the opportunity to use a phone before. And our responsible approach to issues like privacy and content builds trust and grows our customer base in mature markets. CAR strategy
Our vision for 2010 is to be one of the most trusted companies in the markets where we operate. Our five year CAR strategy – developed in 2005 and continually evolving – is designed to help us realize this vision. It sets clear priorities to: Capture the potential of mobile to bring socio-economic value in both emerging economies and developed markets, through broadening access to communications to all sections of society Deliver progress against stakeholder expectations on the key areas of climate change, a safe and responsible Internet experience, and sustainable products and services
Ensure our operating standards are of a consistent and appropriate level across the Group. This strategy Is based on our assessment of the key CAR-related opportunities and risks for our business. These are priorities through our issues management and risk assessment. Our brand essence Avoidance’s brand essence is: Red: For the passion and spirit that drives us. Rock Solid: We are dependable and empathetic. People can trust us. Restless: We’re always challenging ourselves to improve. A strong CAR strategy is crucial to our Rock Solid brand essence. It also helps us to live up to our values. Our values
Our values (or Passions) describe the way Avoidance people are expected to behave within the business: Passion for customers: “Our customers have chosen to trust us. In return, we must strive to anticipate and understand their needs and delight them with our service. ” Passion for our people: “Outstanding people working together make Avoidance exceptionally successful. ” Passion for results: “We are action- relented Ana Arleen Dye a easels to De ten Des . T ” Passion Tort ten world around us: “We will help the people of the world to have fuller lives – both through the services we provide and through the impact we have on the world around us.
In May 2006, we formulated a five point strategy which served us well for more than two years. We have broadly maintained or improved share against our largest or reference competitors in most of our markets and delivered on our key cost targets. We have increased the share of revenue from non-core mobile services from 10% to 15% and we also successfully increased our exposure to higher growth markets. Our dividend policy resulted in an average annual increase of in dividends and our capital structure policy has proved right for the business, particularly in the current market context.
However, a number of challenges have evolved. Elasticity on core voice and messaging services remains below one, competitive and regulatory pressures continue to be strong, and recently we have not met our expectations in some markets. We are clearly entering into a more difficult macro economic environment. These factors led the Board to conclude that we should review whether the strategy established in May 2006 remained appropriate for the current environment.
The fundamentals of Avoidance and our industry continue to be attractive; the sector leaders continue to be able to generate strong cash flow. In terms of revenue respects, whilst prices are likely to continue to decrease in Europe, the scope for usage growth remains significant, as demonstrated in markets such as the US and India. Mobile data is also proving to be in high demand: effective communications drive productivity benefits, meaning businesses and individuals need more, not less, of our services.
A greater range of data devices and portable computers, at increasingly lower costs, are enlarging the addressable market. On the cash cost side, only about a third of our operating costs are fixed, and about a quarter depend on growth in voice minutes and data traffic. We controlled these costs well over the last two years. The remaining component of costs, some 40%, is market driven, providing significant scope for us to adapt in the event of greater economic pressures. Overall, our current European capital intensity of around 10% of revenue already contains a component of investment for growth.
Avoidance has three key attributes which strongly differentiate us from our competitors: firstly, our scale in technology with which we continue to drive network and IT savings through consolidation and centralization of core activities; secondly, our strong presence in the enterprise racket, in large corporate as well as in small and medium sized businesses; and finally, our brand, especially in consumer pull markets. Our strategy will now be focused on four key objectives: drive operational performance, pursue growth opportunities in total communications, execute in emerging markets and strengthen capital discipline.
We will drive operational performance through customer value enhancement, rather than revenue stimulation, and cost efficiency. Value enhancement involves maximizing the value of our existing customer relationships, not Just the revenue. We ill shift our approach away from unit pricing and unit based tariffs to propositions that deliver much more value to our customers in return for greater commitment, incremental penetration of the account or more balanced commercial costs. This will require a more Oligopolies approach to commercial costs to ensure our Investment Is focused on those customers with higher lifetime value.
In essence, we are confident that by targeting our offers, we can deliver more value to our customers and have a better financial outcome for Avoidance. Customer value enhancement replaces revenue stimulation. Cost efficiency requires us to continue to deliver scale benefits through optimization of operating and capital expenditure. We have a significant number of cost programmed across the Group which we expect to reduce current operating costs by approximately El billion per annum by the 2011 financial year to offset the pressures from cost inflation and the competitive environment and to enable investment in revenue growth opportunities.
As a result, on a like for like basis, we are targeting broadly stable operating costs in Europe and for operating costs to grow at a lower rate than revenue in MAP between the 2008 and 2011 uncial years. Capital intensity is expected to be at or below 10% over this period in Europe and to trend to European levels in MAP over the longer term. On growth opportunities, the three target areas are Mobile data, Enterprise and Broadband. We have already made significant progress on mobile data, with annelids revenue of E. Billion, but the opportunity remains significant with the penetration of data devices still relatively low in Europe and almost nil in emerging markets. In enterprise, we have a strong position in core mobile services and we have built a lid presence in 18 months in multi-national accounts through Avoidance Global Enterprise. Our strategy is to leverage this strength to expand our offerings into the broader enterprise communications market locally, serving SoHo and Seems with shared platforms and services, supported by our local sales forces.
For broadband, we continue to adopt a market by market approach focused on the service, rather than the technology, and targeted at enterprise and high value consumers as a priority. We are already represented in most of the key emerging markets where significant growth is expected in the coming years. Our principal focus now will be on execution in these markets, in particular in India, Turkey and our African footprint following our recent agreement to acquire control of Voodoos. We will also seek to maximize the mobile data opportunity.
There are few potential large new markets of interest to us and we will be cautious and selective on future expansion. The final objective is capital discipline. We remain committed to our low single A rating target, which we consider to be appropriate in the current environment, and comfortable with our liquidity position. Our focus is on free cash flow generation and ensuring appropriate investment in our existing businesses. We see increasing dividends as the primary reward to shareholders. Given our credit rating and the current level of cash flow and dividends, this leaves limited debt capacity.
We see in-market consolidation as a positive for our industry and we would support consolidation. As previously mentioned, our focus is principally on our existing emerging markets rather than expansion and any significant acquisition would likely need to be funded through portfolio disposals. We remain focused on value creation for our non- controlled assets. Verizon Wireless is one of the leading assets in an attractive market and we are increasingly co-operating on terminals, enterprise and future technology to deliver further value for the Group.
Our updated strategy repositions us appropriately in the current environment. We need to improve execution in our excellent Duskiness’s Ana allover on our cost targets. We wall pursue growth communications and focus on our existing emerging markets, with only selective and cautious footprint expansion. Finally, we must strengthen our approach to capital discipline. Our priority is free cash flow generation and we will continue to target E lion to E billion of free cash flow per annum, excluding license and spectrum payments and any potential CUFF tax settlement.
GOAL INVESTMENT PLANS The planned $2 bin cape in the next two years announced by Avoidance, following the acquisition, may not bring in good results if they want to gain significant market share as its rivals-Breath and Reliance have decided to increase their cape during the fiscal 2007 itself. Reliance may plough in $2. 5 bin in fiscal 2007-08, while around $2. 5 bin could be the investment from Breath Retailer. Avoidance’s target to achieve 0-25% market share by 2010-11 and market penetration of more than 40% may be realistic.