Strategic Management Assignment 1
Title: Global mobile industry and its innovation process
Effective management of strategies of a business play a significant role in organisational goals and objectives. Kotler et al. (2014), strategic management is the ways of defining and applying several strategies to meet organisational goals and objectives. Palmer (2013) said strategic analysis focus on the development and implementation of business strategies in gaining sustainable competitive advantages.
2.0 Industry background
The fixed and mobile telecommunications industry is a large and important sector, generating around US$1.5 trillion of revenue. Today there are seven billion mobile users and over 650 million fixed customers. The mobile industry alone has seven billion users, generating over US$960 billion of annual service revenue every year. The majority of revenue comes from traditional calls and texts (for example, last year 7,800 billion texts were sent around the world last year). However, over the last few years the demand for data services, such as internet browsing on a smartphone, has accelerated, and today around 28% of mobile revenue is from data, up from 13% in 2009. Around 74% of mobile users are in emerging markets, such as India and Africa, reflecting the typical combination of large populations and the lack of fixed-line infrastructure. The remaining users are from wealthier mature markets, such as Europe. However, the proportion of the population with a phone – or mobile penetration – tends to be higher in mature markets (usually over 100%) and lower in emerging markets, particularly in rural areas, due mainly to lower incomes and less network coverage.
The demand for mobile services continues to grow strongly. In the last three years, the number of users increased by an average of 9% each year. In 2009 global mobile penetration was only 69%, and by 2013 it had risen to 98%. Most of the increase in users has been from emerging markets due to favourable growth drivers – young and expanding populations, faster economic growth, low but rising mobile penetration, and less fixed-line infrastructure. The other key area of growth is data, which is being driven by increasing smartphone and tablet penetration, better mobile networks, and an increased choice of internet content and applications (‘apps’).
The mobile industry is highly competitive, with many alternative providers, giving customers a wide choice of supplier. In each country, there are typically at least three to four mobile network operators (‘MNOs’), such as Vodafone. In addition, there can be numerous mobile virtual network operators (‘MVNOs’) – suppliers that rent capacity from mobile operators to sell on to their customers. There can also be competition from internet-based companies and software providers that offer alternative communication services such as voice over internet protocol (‘VoIP’) or instant messaging services.
The mobile industry is very heavily regulated by national and supranational authorities. Regulators continue to lower mobile termination rates (‘MTRs’) which are the fees mobile companies charge for calls received from other companies’ networks, and to limit the amount that operators can charge for mobile roaming services. These two areas represent around 12% of service revenue for Vodafone.
In an environment of intense competition and significant regulatory pressures, the price of mobile services has tended to reduce over time. However, with both more mobile phone users, mainly in emerging markets, and more data usage, global mobile revenue remains on a positive trend and expanded by 2% in 2013.
The fixed communications market is valued at around US$500 billion. Over the last three years, revenue from voice services has declined as the demand for traditional fixed-line calls has remained static at around one billion users. In contrast, revenue from fixed broadband or internet usage on the PC is growing with estimated 650million customers worldwide – an increase of nearly 30% over the last three years. This growth has been spread across all forms of broadband – DSL (copper), cable and fibre, and within this, there is a growing preference for the high-speed capability provided by cable and fibre (Vodafone Group Plc, 2014).
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3.0 Justify the theories and frameworks used
Many events can emerge in the external macro-environment and affect/ influence an industry powerfully. These factors can be analysed using the PESTEL framework. The macro-environmental factors analysed in the PESTEL framework are Political, Economic, Socio-cultural, Technological, Ecological and Legal factors that influence the industries in that particular country.
Image: PESTLE Analysis Tools Source: iMindMap (2016)
According to Kotler et al. (2014), the PESTLE analysis tool is one of the widely used models to analyse a business external environment. These tools analyse six challenges that come from the business’s external environment. These six factors are political, economic, social, technological, legal, and environmental factors. Johnson et al. (2015) said PESTLE is an effective tool to analyse a business’s external situations and challenges. However, Palmer (2014) this tool can analyse only a business external challenges and environment. Therefore, businesses need to depend on other tools like SWOT to analyse internal factors and challenges.
George Yip’s Framework
George Yip’s framework can also be used to identify international drivers that influence industry/ organisations. As the mobile industry is chosen for the purpose of this assignment this would enable a more in-depth understanding of the industry dynamics at a global scale. This model identifies four sets of “industry globalisation drivers” of managing for worldwide competitive advantage. These drivers are market drivers, cost drivers, government drivers, and competitive drivers (Saurav, 2009)……………
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