1 Introduction to the Brand
1.1 History
Vertu is manufacturing and Retailer Company based in the United Kingdom dealing with luxury hand-made mobile phone devices (Nuovo et al. 2008). The Nokia Company established the company in the year 1998, and its headquarters is in Hampshire in the UK. The Vertu Mobile Company serves the global market with its luxurious mobile phones (Nuovo et al. 2008). However, in the year 2012, Nokia decided to sell Vertu to Equity Group for unspecified reasons but retained 10% share of the company (Nuovo et al. 2008). Since its establishment, Vertu has created a significant customer share and at the end of the year 2013, the company had over 350,000 customers worldwide with over 500 retail outlets (Nuovo et al. 2008). The main products of Vertu are the luxury mobile phones that were developed from the concept that it will make individuals look different and fashionable. For instance, the company believed that if people can buy flashy watches costing over $20,000, nothing could stop them from purchasing luxurious mobile phones (Katz and Sugiyama 2005). The company has located its outlets in high spending cities among them including Singapore, New York, Paris, Hong Kong, Dubai, and Mexico.
1.2 Signature Phones and Materials
The common brand and model are referred to as ‘Signature' whose key pads contain roughly five carats of ruby bearing (Turnbull, Leek and Ying 2000). The other models distributed by Vertu are Constellation Quest, Ayxta, and Ascent smartphones launched in the year 2011 (Roberts and Armitage 2015). The Ascent smartphones are light, durable, and aluminum made vulcanized with either rubber or leather materials. The handsets are classy, simple, light with QWERTY keypads made of sapphire keys. The mentioned features give the Vertu mobile phones’ brand a classic taste that can distinguish an individual from a group (Roberts and Armitage 2015).
1.3 Concierge Service and Craftsmanship
1.4 Criticism
Despite the success of Vertu, it has previously faced criticism from some corners of the world. For instance, it is argued by the Wired Magazine that the Vertu Signature phones are tasteless trashes (Harbi and Grolleau 2008). Some individuals fail to see the value of purchasing a phone worth more than $20,000 while the substitute smartphones can complement some of the signature features. However, based on the financial times and classy individuals, the signature phones are technologically modest with bling that gives a sense of fashion (Harbi and Grolleau 2008).
2 Problems and Opportunities
According to Wei-chen (2010), for a company to succeed, it has to face various challenges and opportunities. The Vertu Company is not an exceptional because it faces numerous challenges in the market that affect its profitability. However, the company has used its strengths and opportunities to thrive in the competitive market. Similarly, the company is improving on its weaknesses and developing strategies that will reduce the impact of the threats in the market.
2.1 Strengths
The Vertu Company has five key strengths which help it to attain a significant market share both in the UK and globally (Roberts and Armitage 2015). Firstly, the company’s products are uniquely designed with a premium positioning. The products are classy with a taste of fashion. Secondly, the company provides exclusive customer service ‘Concierge’ and ensures that customers get a personal touch experience. For instance, the customers are allowed to subscribe to the Concierge service for the period of 12 months for free services and updates. Thirdly, the signature phones provided by the company are of high quality since they are handmade and a single craftsman assembles each signature (Roberts and Armitage 2015).
2.2 Opportunities
The Vertu Company has various opportunities that can be exploited to help the company achieve higher profitability. Firstly, there is increased in the emerging economies, and people are starting to get attracted to luxury products such as the signature mobile phones. For instance, in China, Brazil, Singapore and Dubai, the preference for luxury products is increasing and this is an opportunity for the Vertu Company (Verma 2007). Secondly, the signature mobile phones have the best Android operating systems than the Symbian operating systems used in other smartphones. The shift to faster-operating systems is an opportunity for the Vertu brands because they are all installed with Android OS.
2.3 Problems (Weaknesses and threats)
2.3.1 Weaknesses
Despite the strengths, the Vertu Company has four major weaknesses. Firstly, the company’s level of innovation does not match the current and explosive technological advancements. Therefore, technically, the Vertu phones are underpowered. Secondly, the Wired Magazine and other critiques describe the Vertu mobile phones as tasteless trash which undermines the reputation of the company (Verma 2007). Based on the Wired Magazine’s arguments, the Vertu products are of no value because they do not match the current and future explosive technological advancements. The impression that the Vertu products are tasteless has discouraged many customers from purchasing the signature mobile phones, and this impacts negatively on the company's profitability (Verma 2007).
2.3.2 Threats
The Vertu Company is faced with two major threats in the market which affect its profitability (Helms and Nixon, 2010). Firstly, there are many counterfeit products on the market. The counterfeits are branded as Vertu's brands, but they are not the original products from the company. Therefore, the companies producing the counterfeit products are affecting the company's productivity. Secondly, the established smartphones are posing a major challenge because they have integrated and incorporated some of the key features such as the Android OS (Helms and Nixon, 2010).
3 MACRO Analysis
3.1 Boston Consulting Group (BCG) model (Vertu Phones are Dogs)
The BCG Growth model is growth share matrix strategy that a company uses to gauge its market share and profitability. According to BBB, the BCG growth matrix model was developed in the early 1970s to help in the classification of the product portfolio in the market (Lindgardt et al. 2009). The matrix classified the product portfolio into four categories namely Stars, Cash Cows, Question Marks and the Dogs. Figure one demonstrates the BCG growth matrix model.
Figure 1: The BCG Growth Matrix Model
Source: Lindgardt et al. (2009)
Under the Dogs product portfolio, the products do not have a big future. The production cost is very high making the products be cash drainers, but they do not generate much cash. The products in this category have a low market share. With this regard, the Vertu phones are Dogs because they are cash drainers, and they only fetch a little cash. The production cost of the signature phones is very high. The Vertu Phones also do not have a big market share as compared to the mainstream mobile phone manufacturers.
3.2 PESTEL Model
The PESTEL is a business model that helps to analyze the external factors that influence the marketing operations of the company. The PESTEL models stand for Political, Economic, Social, Technological, Environmental and Legal Factors. Figure 1 demonstrates the PESTEL Model (Yüksel 2012).
Figure 2: Pestel Model
Source: Yüksel (2012).
Politically, the UK is relatively stable and provides the conducive environment for Vertu’s operations. However, as the company intends to expand, other regions of Asia such as Syria are posing a political threat due terrorist attracts. Economically, factors such as currency fluctuations influence the profitability of Vertu. Additionally, the inflation rates and higher interest rates affect the purchasing of the Vertu mobile phones. As noted earlier, the Vertu products are luxurious and expensive. Therefore, the purchase of the Vertu phones depends on the status of the economy. Environmentally, the world is shifting to greener energy to reduce the environmental impact. Additionally, there is rapid and explosion of innovations and technological advancements. For Vertu Company to remain competitive, the company has to adopt and incorporate the changing technology into its products. Such technology includes the Android OS.
Socially, the world is shifting from traditional operations to technology-enhanced operations. This provides an opportunity to Vertu to explore the market. Additionally, the emerging social classes that embrace fashionable and luxurious products provides an opportunity for Vertu to expand its market share. Lastly, all business operations are governed by various legislation based on the country of operation. Vertu Company has to adhere to such regulations including payment of taxes, acquisition of business permits and adherence to other business governing laws. Failure to follow such rules can lead to severe implications including business closure or sanctions.
3.5 Critical Analysis
As noted on the BCG and the Pestel analysis, the Vertu Company has both merits and demerits in its operations. For instance, the company is recognized for its luxurious signature mobile phone brands. However, the company does not enjoy a large market share and the returns acquired from the sale of its products is low. Therefore, the Vertu Phones have been classified as ‘Dogs’ in the BCG Growth Matrix Product Portfolio (Lindgardt et al. 2009). It implies that the cost of producing the signature mobile phones is very high but the returns are lower bearing in mind that the mainstream smartphone producers are adopting similar technologies. The Vertu products are therefore cash drainers and based on the Wired Magazine; the Vertu mobile phones are useless trash (Harbi and Grolleau 2008).
3.6 Conclusion
4 MICRO Analysis
4.1 Vertu’s STP and TOWS
The STP stands for Segmentation, Target Group, and Positioning. The TOWS is an acronym of SWOT, which is the rearrangement of the words: Threats, Opportunities, Weaknesses, and Strengths. Tables 1 and 2 provide a comprehensive summary of Vertu’s STP and TOWS.
Source: Helms and Nixon (2010).
Based on the STP on Table one, the Vertu Company has segmented its products only on the luxury mobile phones. Regardless of the perception that the high net worth individuals can purchase all its products, Vertu Company will continue to record reduced sales because the majority of the customers are either middle-income earners or low-income earners. Therefore, targeting the high-end customers will always categorize Vertu's product portfolio as ‘Dogs' under the BCG growth matrix model (Katz and Sugiyama 2005).
The cost of producing the Vertu phones is very high compared to its market share and segmentation. Positioning the Vertu's products as luxury discourages the middle-class earners from developing an interest in them and this narrows the market share. Additionally, based on the TWOS in Table 2, Vertu's phones are technically underpowered due to the limited innovation as compared to the mainstream smartphone competitors. Additionally, the company has invested heavily in producing the signature phones using limited innovation, and this has affected its sales revenue because of the low market share. There is also a threat of counterfeits that can significantly reduce the company’s profitability.
5 Competitive Analysis
The key competitors of Vertu are Goldvish, Gresso, Mabiado and the other mobile smartphone manufacturers. As noted under the TWOS analysis, Vertu has limited innovation which the competitors are maximizing on (Helms and Nixon, 2010). For instance, the competitors are trying to incorporate all the technologies used by the Vertu while using cost efficient production techniques. Therefore, the Vertu Company has no competitive advantage on the market despite branding its products as luxurious. The competitors, for instance, the Mobiado and the smartphone manufacturers such as Samsung and Apple are not hand-assembling their products, but instead, they use machines to reduce costs. Therefore, the competitors have a cost advantage over the Vertu Company, which incurs higher production costs due to the use of craftsmen in the entire process of manufacturing its phones. It, therefore, implies that the competitors can price their high-tech mobile phones lower compared to Vertu, and this does not only increase sales revenue but also increases the market share for the competitors. Based on the BCG growth matrix, the competitors' mobile phones can be categorized as the "Cash Cows" due to reduced production costs but fetch higher returns (Helms and Nixon, 2010). Based on this competitive analysis, the Vertu Company has no competitive advantage in the mobile phone industry.
5.2 Unique Selling Proposition (USP)
The USP stands for the unique selling proposition which is developed by the company based on its market segmentation, target group, and positioning. As indicated in Table 1, the target group of the Vertu Company is the high-end net worth individuals. The market segmentation is the luxury mobile phones with a positioning of luxury phones. Therefore, the unique selling proposition of Vertu is the luxury mobile phone devices with unique concierge customer services (Helms and Nixon, 2010). To maintain its net worth customers, the company has introduced the 12-month concierge subscription which enables its net worth individual customers to experience a personal touch and 24-hour support from the company. The company has introduced the concierge customer service in all its 500 retail outlets to maintain the existing customers as well as attracting the potential customers. Additionally, the company makes use of hand assembling and craftsmanship in the production of its signature phones to meet the specific needs of its customers (Helms and Nixon, 2010).
6 Conclusion and Recommendations
The Vertu Company can take various steps to increase its market share and reduce the higher production costs. With this regard, this paper provides three key recommendations. Firstly, the company should invest more on research and development to increase its level of innovation to match with the current and future technologies. By increasing the level of innovation, the company will be in a position to compete favorably with its competitors. Secondly, the company must formulate a strategy that will help it to reduce the cost of production. For instance, the company can introduce machines to work on the assembling of its products and get rid of hand-assembling and craftsmanship. The introduction of the machines in the assembling of the mobile phone devices will help the company to attain a cost advantage. Thirdly, the company should target not only the high net worth individuals but also introduce products that can target the middle earning individuals and this will help the company in attaining a larger market share. In conclusion, the Vertu Company needs to revisit its marketing strategies and incorporate the suggested strategies for it to be competitive in the market. More importantly, the company should maximize on its opportunities and the strengths to increase its market share.
7 References
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Katz, J.E. and Sugiyama, S., 2005. Mobile phones as fashion statements: The co-creation of mobile communication’s public meaning. In Mobile communications (pp. 63-81). Springer London.
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Roberts, J. and Armitage, J., 2015. Luxury and Creativity: Exploration, Exploitation, or Preservation?. Technology Innovation Management Review,5(7).
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Yüksel, I., 2012. Developing a multi-criteria decision-making model for PESTEL analysis. International Journal of Business and Management, 7(24), p.52.
