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Business Strategy of Virgin Mobile

University : UKCBC COLLEGE

  • Unit No : 32
  • Level : Undergraduate/College
  • Pages 17 / Words 4000
  • Paper Type : Assignment
  • Course Code :

    K/508/0574

  • Downloads : 301
Organization Selected : Virgin Mobile

INTRODUCTION

Long term planning which is done by management of company for attaining set objectives is known as business strategy. Every organisation need it because it is required for moving in right direction and removing confusions regarding various aspects of business which can come in the mind of stakeholders (Ang, 2011). Virgin mobile is among leading telecommunication firm of UK. This company is part of Virgin group and they are currently present in more than 10 countries. This assignment will discuss about impact of external factors like economy of a country, on the operations and performance of company. Beside this, Ansoff matrix will be used for analysing strategic position of Virgin mobile. VRIO model will be included in this project for evaluating the capabilities of organisation. Strengths and weaknesses of firm will be explained for understanding internal environment of company. Porters five force model is an important tool and it will be used for analysing competitiveness of the telecommunication sector. This assignment will also cover interpretation regar

TASK 1

P1 Influence of external factors on Virgin mobile

In business world, an organisation may have some control on their internal environment but they will always face the challenges which is arose by external factors. If a company feel that their employees are not working well then they can fire them. If company have some problems with their suppliers then they can switch to other one, but business organisation cannot control economic growth of a country (Burlton, 2015). They cannot set social trends or decide political condition of a nation. This proves that external elements can make a huge impact on the operations of firm. Below is PESTLE analysis of Virgin mobile:

Political factors – All the business organisation are failing to predict the outcome of Brexit. Their is an atmosphere of political uncertainty in Britain because government and their ministers are not happen their leader. These kind of situations affect company like Virgin mobile in negative way because this company mainly focus on prepaid customers. Although government support firms like Virgin mobile because they are serving to prepaid customers but in unstable government raises questions on the policies which is started by new ruling party.

Economical factors – Economic growth of UK is below average and inflation is also increasing in this country. Rising inflation means customers will not spend much money on prepaid mobile recharge. The result is less revenue to Virgin mobile and failure to attain their short term goals (Champoux and et.al., 2012). Poor economic growth and increasing inflation affect performance of this company in a negative way. Telecommunication industry saw an enormous growth in between 1999 to 2003 because economic condition of country was fine, but in presence scenario company is facing heat of low economic growth and rising inflation. If inflation is increasing in a country then people start spending less money of telecommunication services. It ultimately decreases profit of company and create new challenges for them.

Social factors – Use of mobile phones is continuously increasing. Young generation is using more prepaid services compared to WIFI or postpaid facility. This emerging trend is opening new opportunities for the company and it is affecting the organisation in a positive way by enhancing their profit. If a social trend support an organisation then it make a positive impact on performance of company but if trend is against the business strategy then it create more troubles for the firm and affect them negatively (Firnkorn and Müller, 2012).

Technological factors – Rapidly changing technology is creating opportunities as well as threats to all the firms who are operating in telecommunication sector. Virgin mobile basically focus on offering more services instead of concentrating on technology advancement. In present scenario, Virgin mobile is using infrastructure of EE for providing 4G services to the customers. When most of the firms are working on 5G network, Virgin mobile is stilling focusing on their 4G coverage. Lacking behind in terms of technology may create much bigger issues for the company in upcoming time because they will fail to offer new technology to customers if they would not have a 5G network. This will influence organisation's growth in negative manner because company will loose many customers who want to use latest technology (Ross and Blumenstein, 2013).

Legal factors – Government is responsible for making and controlling regulations. Their are various acts which impact companies like Virgin mobile in both positive or negative way. For example, competition laws restricts company from giving more discount to customer. Company may want to expand their market by offering heavy discount tariff plans but sometime they cannot do it because law stop them from releasing such plans. Legal hurdles make a negative influence on companies business and generate troubles for the firm at the time of making strategies (Godlevskajavan, Iwaarden,and van der Wiele, 2011).

Environmental factors – Virgin mobile understand that they are responsible for clean environment and they have taken part in various programmes which are related to promoting pollution free atmosphere. Promoting healthy environment play crucial role in improving image of company and it made a positive influence on the goodwill and valuation of enterprise. Society seek sustainable growth i.e. launch latest technology but without doing any harm to environment.

Application of Ansoff growth vector matrix for analysing growth Virgin mobile's strategic position

Market penetration – Virgin group is facing tuff competitions from rivals like Vodafone. This company is using market penetration strategy in England for increasing their market share. They are enhancing their expenditure on the advertisements and at they same they are offering heavy discount on some of their prepaid tariff plans (Kernbach, Eppler and Bresciani, 2015).

Market development – Under this strategy, an organisation launch their existing product or service new market so they can earn more revenue by increasing their number of customers. Virgin mobile entered in South African market in 2006 and launch many existing products like EDGE, 3G services in this country. This strategy helped company in reducing their dependency from their domestic market.

Product development – Virgin group started offering mobile internet through LTE which is a completely new service. This company already has sound presence in domestic market and launching a new service is giving them additional benefits. Virgin mobile give high importance to innovation and this is the main reason that they are launching new products in present market.

Diversification – Diversification is a strategy which contain highest risk. When an organisation enter in new market and start selling completely new product for the purpose of business, then it means that they are adopting diversification strategy (Reinhardt and Stavins, 2011). When Virgin mobile started their operations in Canada, they launched their mobile phone. Canada was a new market for them and mobile phone was a new product which they were not selling earlier. This was a risky move but it helped them in getting attention of customers.

TASK 2

P2 Assessment of internal organisation of environment

The parent company of Virgin mobile is Virgin group. This organisation does lack any kind of resources, whether it is financial, technology, human resource etc. Virgin mobile get the advantage of having strong parent company because they understand that in case they need support for fighting big and unpredictable challenge then their parent organisation will assist them.

Strategic Capability

It can be defined as the combination of resources and skills, which is possessed by a company, that is used by a organisation for attaining long term goals and competitive advantages (Killing, 2012). Every organisation has some strengths along with weaknesses. Capability means the power contained by an enterprise at the time of deploying the strategies which they have have constructed. It can be related to financial, HR, technology etc. resources. Strategic capability can be divided in three part for better analysation i.e. leadership and management, innovation and business architecture. First one is related to strategic thinking and intuition. If an organisation have great leaders and fine board of management then they it work as a strength of company and assist them in moving forward in right direction.

Creativity and uniqueness is an important part of innovation. If an organisation want to increase their strategic capability then they have to focus on bringing uniqueness in their products and services. Company's like Virgin mobile has used innovation for strengthening their position in the market. Synergy creation and ability to adapt are few concepts which concentrate on business architecture. Adaptability is a crucial part of strategic capabilities because if a company cannot change according to time then it means that they are not capable of surviving for long time. An organisation may have different power, using them in a synchronised manner assure that their strategic capability is high (Segers and Inceoglu, 2012).

VRIO analyses of Virgin Mobile

Viro analysis is an effective technique through which resources of a particular organisation can be evaluated. Under this model it is identified that what all are the sources of enterprise which are rare, imitable and has high value. In order to identify the same factors about the resources of Virgin group VIRO analysis is conducted below:

Value – The selected enterprise is a part of telecommunication industry in which there is great political intervention. It is providing diversified services to its customers within the legal framework which has created high brand value of the firm (Li, Zhou and Si, 2011). The financial records of the firm are strong enough that further develops its worth in the electrical engineering business. As it is experiencing continuous growth the shareholders of Virgin group are developing interest in investments.

Rareness – if the operations and management of the refereed enterprise is analysed than it is found that its most rarest resource is the cabin crew of the same. Delivering products as per the need of the customer is the most effective capacity of Virgin mobiles. High quality of products are being made available which are supported with control cost helps them in capturing greater market share. Wide range of mobile phones are supplied which attracts customers of different segments and hence the overall sales are increased. By focusing on quality and cost Virgin has become master of developing brand value.

Imitability – The most important and effective resource of Virgin mobile is the brand name of the same. Its unique leader and image developed over the period of time is virtually impossible to be copied (London and Hart, 2011). The past records of this firm shows that it is carrying out its operations with daring attitude and is continuously working on bringing innovation utilising the emotions synonymous which is another rare feature of this brand. At initial stage of development leaders of virgin group developed productive culture in its work force which now helps same in achieving the competitive advantage in the industry.

Organisation - Though there are various resources of the organisations which are rare and inevitable but still there is high chance that the other enterprise copy the working strategies of the Virgin group. Apart from the development of effective culture fro the very first day other values may get effected with the rise in competition in the telecommunication industry.

Strengthens and Weaknesses of Virgin mobile

Strengths

Affordable plans – Virgin mobile offer tariff plan at very low price. They are known as a brand who provide fine service without charging much price. This allow them to attract millions of customer and grab high market share.

Part of Virgin Group – If a company have parent like Virgin group then most of their problems already get solve because they know that if they face any issues then their parents company, which hold position among most successful groups in the world, will save them. It provide confidence to the employees and management which ultimately result in attaining aggressive targets.

Weaknesses

Operational issues – This company often face issues related to poor network connection which create a negative image of company (Pugh and Bourgeois, 2011). Some people argue that network of Virgin mobile is weak in many areas and there are various issues regrading speed. Poor image is prime reason then company is failing to retain many customers.

High dependency on partners – Virgin group does not have own network, they are dependent on EE which means that pricing and quality of service in not completely in their hand. High dependency stop this company from increasing their market share because they cannot decide tariff plans and other strategies without having any discussion with their partners.

TASK 3

P3 Evaluate the competitiveness of UK’s telecommunications sector

In a market, numerous companies are worked with an aim to rapidly grow and diversify in a certain time period. Large population, flourishing economy and low penetration rates make telecommunication market of UK more competitive and attractive. In past decades, there was a monopoly in telecom market but after globalisation the industry was allowed to give license easily in mobile and fixed lines. It is known as evolution of telecommunication sector that renders an ample range of products and services, greatly influence prices and change customers' experience. Although, UK government’s aim is full competition in all sectors of telecommunications market, i.e. infrastructure and services. The process has involved both privatisation and liberalisation, with the latter aimed explicitly at promoting market entry. It increases intense competition between associations who provides networking or telecom services.

In order to recognise, competitiveness in telecommunication sector of UK there can be used Porter's five forces model; the tactics helps to understand future impact of competitive forces and revealed their causes and underlying roots of current market position of the industry which renders a framework to anticipate competition over time (Killing, 2012). Porters' five forces model is used as a key source of market success of the firm. Forces which are involved in this model affect company's market position and decide its profitability level. Following elements of this model are described as under -

Bargaining power of customers – It entails with the number of customers' that a company has. There are certain factors which decides bargaining power of buyers, i.e. if clients are powerful and if clients are weak. In present scenario, number of mobile phone and networking service users is increasing at fast pace which represents telecom sector has high bargaining power of customers. On the other hand, enhancement of distribution channels through which people can direct buy network and data service from companies and removal of intermediaries attract towards company. Therefore, due to high bargaining power of buyers there is a risk of reducing sales and profitability of the company as if large group of customers' demanded low rate products with effective quality. In this sense, firm is forced to fulfil consumers' needs and wants which may affect their production costs and decrease profits as well.

Bargaining power of suppliers – This elements refers that if a company has high number of suppliers then it cannot gain desired profit margins whereas low number of suppliers helps in decreasing production costs of the organisation. The multinational organisation, Virgin mobiles directly deals with its customers; there is less involvement of intermediaries. It comes as no surprise that suppliers power of the company is low which helps it in grabbing high competitive advantage. The telecom operators used their own raw material in order to produce goods and services (Li, Zhou and Si, 2011). As low number of suppliers helps in reducing churn rates, tapping potential buyer, generate innovative offerings and aggressive marketing because there can be done optimal utilisation of available resources.

Threats of new entrants – As telecom industry of UK allows license to every individual; it led competition from new arrivals within industry. Due to external environmental factors there is may exist certain barriers in entry of new companies but this threaten is not constant and always change with market conditions. Telecommunication sector of UK constitute with four major giants, i.e. O2, Vodafone, T-mobile and Orange; these firms aren't compete on prices thus it gives a favourable change to Virgin Mobile to easily perform in industry. Along with this, developing mobile sites and give licensing for spectrum offers an opportunity to VM group to provides low costs services and attain competitive edge over its rivals. On the other hand, Easymobile, Tesco-Mobile, Fresh and others increase fierce competition for Virgin Mobiles therefore, firm is required to revise its strategies and policies.

Threats of substitutes – Substitute products often have large threat on existing products and services within telecom industry; these substitutes has a wide impact on current offerings of company in respect of price cutting and covering large market share (London and Hart, 2011). In UK, there are numerous substitutes available in telecom industry which gives choice to customers to select best one; it led demand elasticity. In Telecom sector, voice over internet protocol, i.e. SKYPE and Google Talk poses a vast threat on mobile communication as it provides free internet talks and video calls to customers. Enhancement of using such alternatives increase fear to loss sales revenues of Virgin Group. In UK, all telecom operators are providing 4G and 5G data services at lower rates creates a common framework for sector and increase competition between telecom providers.

Competitive rivalry – It involves if competition among two and more companies increase; it leads zero profit margins. All business associations try to overcome with this situation and obtain high defensible edge over their rivals. As the era of UK telecommunication sector is too wide, thus Virgin Mobiles face various challenges which its competitors, i.e. Vodafone, EE Limited, British Telecom etc. Although, intense rivalry may effects company's market position in several ways, i.e. decreasing prices and market share. If more firms produces similar products then they compete with each other in order to increase their sales and gain higher customer satisfaction level; it led tough competition among telecommunication sector or UK. Apart from this, to gain competitive edge companies driven up prices of their products that can put them into trouble because many people will switch their brands.

Another reason of competitive rivalry is increasing global market presence as telecom sector is growing rapidly and attaining customers at international market (Pugh and Bourgeois III, 2011). At this time, there would be tough competition because all firms wants to seize large market size; for this they acquire effective marketing strategies to capture customers' eye and also provide products and services at lower rate which can affect profitability and sales of Virgin mobiles in an adverse manner.

Henceforth, the preceding discussion enlighten the influence of each component of Porters' five forces model on business growth and developments. Virgin Mobile is facing fierce competition in UK market which may hinder its operations; so that the firm is required to innovate attractive services and be lean and mean in its functional areas. This will supports the firm to survive onslaught of rivalry. It can be pertinent to point that UK's telecommunication sector is large as to be ahead at competitive curve Virgin Group has to be remain successful and profitable.

TASK 4

P4 Bowman’s strategy clock model to analyse strategic direction

Virgin Mobiles has strategically positioned itself by adapting changes in current markets. The firm is trying to invest more in resources thus to broadening its areas for gaining more revenues. VM has attained high market growth in UK by applying various tactics and strategies that enables it to obtain large defensible edge over the world. In this sense, Bowmen's strategy clock model help companies to collect information over the market, i.e. current market position and competitors. Its a marketing model which was founded by economists Cliff Bowman and David Faulkner; according to them competitive edge is a more powerful elements which can be attained through product and strategic positioning at marketplace.

There is eight positions of Bowmen's strategy clock model

Position 1: Low price and low added value - Its a specific option in which firms do not need to compete with each other. The segment is a bargain basement and most of the firms do not want that position. Here products and services of the firm are not differentiate or unique and buyers gain very low value as well as prices of product is also remain low. In other words, may be product quality is inferior but prices are enough capable to convince buyers to purchase products and services of the company (Ross and Blumenstein, 2013). Although, the reason behind this is to keep competitive and can compete with other service providers.

Position 2: Low prices – A firm can choose this option for its products and services as if it want to be cost leader. When a business organisation, operate under this position profits rates are quite low thus managers have to sell high volume. Virgin group is a cost leader and enable to sell high volumes in order to make its strategic marketing position. It supports company to sustain for long term in target market and attain its goals and objectives as well.

Position 3: Hybrid – It encompasses those firms which offers low costs products to its customers but perceives high quality rather than its rivals. In hybrid, strategy is a issue but organisations are capable to build an effective marketing reputation by offering fair prices of reasonable products and services.

Position 4: Differentiation – Business organisations which have different customers' base usually perceived high value. In order to to do, firms are required to either driven up their costs and sustain themselves by obtaining high profit margins; they can also cut down their prices and grab high market share (Reinhardt and Stavins, 2011). Therefore, branding is one of the effective strategy which allows Virgin Mobile to become leader by perceived quality. There a many competitors who provides attractive products at cheap rates.

Position 5: Focused differentiation - This strategy involved high risk and under this organisation set the more costs without provide anything in additional in context to the perceived value. If in case consumers are able to purchase goods at high cost on continuous basis then in this case profit level can be higher. Under this, exclusive as well as luxury brands focus on the high quality at high cost.

Position 6: Risky high margins - Firms using this kind of strategy charge the maximum cost for goods under which the perceived value of consumers is mediocre. In addition to this, consumers will reduce their loss and look towards better quality.

Position 7: Monopoly pricing - It refers to classic monopoly costing and in market where only single firm provide services and products. Under this, monopolist set cost which they want. In many countries, monopolies are more regulated in order to prevent them from set costs as they want.

Position 8: Loss of market share - It is like disaster in any kind of competitive market. Set standard and middle- range cost for product and service with the minimum perceived value is unlike to be win over the many customers which want the better or significant options (Segers and Inceoglu, 2012).

Henceforth, position 6, 7 and 8th is not viable competitive strategies as if prices are higher then perceived value of products must be also high because customers will not pay high amounts for low value products. Apart from this, by looking at various positions of value and price Virgin can select the best one as per market scenario and competitors that make sense for company's competencies. Although, Bowmen's strategy is a powerful way of sustaining competitive edge within market driven economy.

CONCLUSION

After this entire discussion, it get comprehend that formulation of effective or adequate business strategies is crucial for every business organisation so as to remain successful and competitive over the world. The report has stated impact of macro environment on growth and success of telecom companies; the analysis can be done through PESTLE model whereas strategic positioning of the company is analysed through Ansoff Matrix. Apart from this, VIRO model has been used thus to address strategic capabilities of the company as to improve them properly. However, Porters' five force model will help managers to recognise their competitiveness over the market.

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