QUESTIONS
The Vodafone’s key performance indicators (KPI) table reflects that recession has made some impact on their performance during 2009 when compared to their prior performance report of 2007 and 2008. The economic downturn has affected Vodafone’s performance in the areas of service, data revenue, and operating profit. Both service and data revenue keep declining even though the number of mobile customers has increased by 42.1m. The lower growth in the usage and decrease of new customers from 39.5m to 33.6m could have reduced the service and data revenue by 0.3% and 25.9%. However, Operating profit has increased from £10,075 to £11,757m, but the percentage of sales has dropped from 5.7% to 2.0%. The financial result indicates that the overall performance of Vodafone has become worse in 2009 due to the impact of the recession.
Explain how it could be that operating profit rose in 2009 while service revenue fell by 0.3%.
The service revenue was declined by 0.3% in 2009 when compared to 2007 and 2008 due to the economy and a strongly competitive environment. But restructuring the charges and substantial offset growth in data could have created high demand for their services and could have increased the operating profit from £10,075 to £11,757m. The increase of 302.6 million proportionate mobile customers and their £1 billion cost reduction programme increased their operating profit in 2009. This £1 billion cost reduction programme additionally reduced their pressure of cost inflation and helped them to invest in revenue growth opportunities. These benefits are clearly visible in the financial year 2009, and over 65% was expected to be achieved in the 2010 fiscal year (Colao 2009).
Why might Vodafone be concentrating its expansion abroad?
Vodafone after years of rapid growth plans to expand its market overseas as the revenue in Asia and the Middle East was up by 15%, much of that coming from other countries. Moreover, Chairman’s statement clearly indicates that European markets have a very strong growth in mobile data. On the other hand, Vodafone has generated strong revenue growth in India from their brand and commercial offers and substantial investment in network coverage hence expanding their service might help them to reduce the dependency on particular countries. Vodafone might want to increase its market share by finding new markets for their existing products and services through focusing on extensive marketing. In order to expand their services abroad and to avoid expensive buyouts as well as heavy investments, they have they have outlined plans to seek new agreements with local operators. Dealing with local operators will enable their group to provide connectivity to their international customers effortlessly and cost effectively.
What steps is Vodafone taking to ensure that it retains its competitive edge?
Following are the steps taken to retain its competitive edge;
Vodafone is mainly led by product and focuses on the customers hence the company plans to utilize the technological advances to develop new products and services.
Vodafone will provide innovative products with embedded SIM cards to connect directly to higher speed mobile data networks to enhance their customer’s communication capability.
Vodafone to increase the workforce flexibility, control costs they plan to promote services for small and medium business.
Vodafone looks to add value to the services it offers to the customers.
Vodafone doesn’t limit its service with the mobile phone, text messaging but offers advanced services including mobile connect data.
References
Bond, John. “The annual report of Vodafone Group Plc (the ‘Company’) for the year ended 31 March 2009.” Vodafone Group Plc (2009).
Colao, Vittorio. “from Vittorio Colao, Chief Executive, Vodafone Group Plc” (2009).
