Vodafone: Out of Many, One

 

Vodafone: Out of Many, One

Introduction

Acquisition processes coupled with strategic and organizational fit are important for successful acquisition. Acquisition processes affect the outcome of acquisitions and mergers with failures in acquisitions being largely attributed to faulty integration processes. Mergers and acquisitions are unifying processes that seek to integrate merging companies into one culture. Acquisition process ranges from the time a company decides to acquire another throughout the integration (Risberg, 2003: 80).  Difference between acquisition success and failure is determined by understanding and management of acquisition processes and decisions. Vodafone adopted procession perspective shift which enabled it understand reasons behind acquisition results leading to a competitive advantage over other companies. Therefore companies need to understand parts of acquisition process to understand the whole process.

Pre-acquisition stages

Merger and acquisition process have different phases or stages due to different areas of research. Vodafone which is a technological literature is concerned with legal combination and market reaction towards actual mergers. Acquisition processes used by Vodafone are idea, acquisition justification, acquisition integration and results. Idea and acquisition justification are pre-acquisition stages while acquisition integration and results are post acquisition stages. Idea phase entails suggestion of potential companies to be acquired by Vodafone and evaluation of merging partners (Competition Commission, 2003). Acquisition of other company by Vodafone is justified by the rest of the company before the decision of sealing the deal is made. Integration therefore begins with acquisition planning.

Pre-acquisition planning entails several important decisions that Vodafone has to make prior to buying the targeted company. The objective of the transaction and degree of integration that is most effective for acquisition are outlined. Vodafone has to outline how it will choose it advisors and the speed required to implement the acquisition. The level of employee participation in the acquisition and the significance of acquired management in the new company. The integration of systems and workers as well as addressing cultural differences is addressed (Haspeslagh & Jemison, 1991).

Pre-acquisition planning is important because it simplifies communication and post-acquisition implementation process. Planning also enables writing, preparation, co-ordination and distribution of information hence effectively enabling communication of acquisition to relevant Vodafone stakeholders. Important changes that would be implemented during the acquisition process can be addressed before completion of process hence ensuring they are effectively communicated to Vodafone’s stakeholders and shareholders. Planning also will create an impression of management that is knowledgeable and professional to the company that is being acquired.

Acquisition process requires Vodafone to choose advisors in terms of strategic consultants, lawyers, various diligence experts, market researchers and internal and external communication personnel. This will require deciding on important services to Vodafone that ensure safety and success of the acquisition (Banzhaf, 2006: 268).  Acquiring these evaluation skills from will enable Vodafone shape its departments to meet the requirements and expectation of the merger.

Vodafone also has to determine how fast it wants to implement the acquisition process and for what reasons. This decision is aligned to the urgency for advantages like resource sharing, increased purchasing power, and acquisition of a competitive strategy over other companies in the technology market (Competition Commission, 2003). Speed will also be determined by long term objectives like need for global expansion which necessitate fast implementation of acquisition process.

Level of employee participation in acquisition process will also be determined based on level of autonomy and strategic interdependence. Higher level of organizational autonomy will require that top executives of acquired company be maintained by Vodafone in the new company. Lower level of strategic interdependence will also require retention of executives of acquired company (Mobile, Vodafone & WG, 2008: 22). However, lower level of organizational autonomy and higher level of interdependence will require removal of top executives of acquired company by Vodafone to ensure that objectives of the new merger are not interfered with. The acquired management by Vodafone will be expected to manage shared resources of both companies and maximize on capabilities offered to achieve the acquisition objectives and merger’s goal (Haspeslagh & Jemison, 1991).

Operation and technological systems of both companies will be integrated to ensure that effective and efficient production of required commodities is achieved. General management skills will be used in uniting required employees from Vodafone and acquired company for achievement of acquisition goals (Risberg, 2003: 76).

Therefore, pre-acquisition processes comprise acquisition objectives, acquisition overview, acquisition blueprint, and acquisition implementation. They are aimed at gathering information, assessing it, disseminating it, and monitoring, stabilization and feedback. Hence, the acquisition process is structured as acquisition planning, communication, implementation and stabilization.

Post-acquisition integration

According to Haspeslagh and Jemison (1990), post acquisition approach is based on two major concepts, strategic interdependence and organizational autonomy. The aim and objective of mergers and acquisitions is value creation (Banzhaf, 2006: 271).

Strategic interdependence

Strategic interdependence is based on strategic fit and how interdependent Vodafone and the other firm are with regards to capability transfer and resource sharing. Interdependence extent is determined by how value creation is obtained by Vodafone. In case of low interdependence, Vodafone’s value is created through value capture and financial gain. Value capture entails shifting stakeholder or shareholder value from the other firm to Vodafone’s stakeholders. Financial gain is acquired due to ownership of the other firm by Vodafone. In case of high interdependence then Vodafone realizes it value through value creation. This long term phenomenon therefore results to resource sharing, functional transfer skills, general management skill transfer, and combination benefit between Vodafone and the other merging company (Haspeslagh & Jemison, 1991).

In resource sharing value is created through combination of the two companies operating level. This creates diversity for both and provides operation techniques that were otherwise limited to either of them hence increasing the merger’s competitive advantage. Value creation in functional skills transfer is through mobility of skilled employees and sharing of information, knowledge and technological know-how (Competition Commission, 2003). Considering Vodafone is a technology company then its value is increased by availability of advanced technology from the other merging company as a result of merging. General management skill transfer creates value through improved insight, coordination and control in the merger. Vodafone merging with the other company creates diverse management which aims at coordinating the diverse resource available to the merger for its profitability. Diverse management therefore means higher rates if creativity and innovation for the new company hence increasing its competitive advantage.  Leveraging cash resources, borrowing capacity, and added purchasing power which result from combination benefits by two companies creates value for the merger. Therefore the merger has a larger volume of skilled workers, more assets which therefore add value to it (Banzhaf, 2006: 265). Large base of assets leads to more borrowing capacity for expansion due to larger base of collateral.

High level of interdependence that result to transfer and resource sharing will require appointment of top executives from outside the acquired company since an insider is considered a disruption. Executives from outside the acquired company are considered to bring about synergetic gains for both Vodafone and the acquired company. This new top executives are not biased to an old way of doing things and can easily overcome resistance from the acquired company therefore efficiently achieving goals of the merger (Siehl & Smith, 1990: 178).

Organizational autonomy

Organizational autonomy determines the organizational fit and extent to which the boundary of acquired company’s culture by Vodafone is preserved or eliminated. Organizational culture of the entire merger is negatively affected when the boundary of the acquired company are disrupted. If the strategic capability of the acquired company is deeply instilled in the merger’s culture, then loss of autonomy which threatens the merger’s boundary can cause destruction on both culture and strategic capability of merger. Therefore, acquired firms can be protected through high levels of organizational autonomy in cases where strategic capabilities are deeply embedded in company’s culture. However, in situations where company’s strategic capabilities are not involved in company’s culture then low levels of organizational autonomy are required since boundary protection is not needed (Haspeslagh & Jemison, 1991).

High levels of organizational autonomy means great tolerance of corporate difference, low levels of organizational change and increased possibility of top executive retention. Therefore Vodafone which is the acquiring company is likely to retain top executive leaders of the acquired company rather than appoint an outsider to manage it. However, low levels of organizational autonomy entails high levels of post acquisition change since Vodafone will have minimal interest in maintaining core competencies of acquired company in its configuration.

Therefore, these two factors of organizational autonomy and strategic interdependence ensure that preferred acquisition integration approaches of absorption, preservation, symbiosis, and holding are achieved (Risberg, 2003: 70). Absorption ensures that Vodafone management has the courage and zeal to ensure its acquisition vision and objectives are carried out. Vodafone management will focus on keeping source of acquired benefits intact through preservation. This will ensure that it has the power for more acquisitions in future if needed (Anwar, 2003: 281).  Simultaneous boundary preservation, permeability, and gradual process of both companies in the merger are ensured through symbiosis. Value creation by Vodafone is through financial risks, sharing of resources and general management capability rather than integrating which is ensured by holding integration approach. This ensures that separate companies in the merger retain their own specific and unique brand which increases pool of consumers for the new merger since existing customers that were loyal to each of the companies separately can still associate and identify with them (Siehl & Smith, 1990: 180).

 

 

Vodafone’s international strategy

Following an analysis of the organizational structure and capabilities at Vodafone, the company uses a global strategy. The vision of Vodafone was to come up with a universal brand through the use of a phone that had the ability of working anywhere in the entire globe. In a bid to attain this, Vodafone provided a standardized product to the consumers. The product had a similar technology regardless of the location. Theoretically, through providing a similar basic product universally, the company would be able to capitalize on its brand name in addition to capitalizing on the streamlined product process (Haspeslagh & Jemison, 1991).

Whenever the global strategy is involved, there is a need to familiarize with the culture in different regions so as to ensure manufacture of products with features that match the needs of different people. It was unfortunate that Vodafone did not recognize the fact that consumers from various locations prefer different features. In Japan, Vodafone was basically selling to the younger people who never travelled much. Therefore, they did not give a great consideration to the universal portability of the phones provided by Vodafone. On the contrary, the Japanese consumers had a greater interest in features such as cameras and games. Retrospectively, it was imperative for Vodafone to have been keener on local preferences (Competition Commission, 2003). On this note, there was delayed introduction of phones that used the 3G technology in allowing the users to teleconference and watch video clips since the company wanted to launch this technology after developing a phone that could function outside and inside Japan.

Vodafone has upheld a strategy of concentrating on an international mobile communications as well as offering network coverage, which would enable the consumers to communicate through the use of mobile services and products. Vodafone invested in a strategy that was increasingly reliant on margin improvement and revenue growth from offering enhanced services to the customer base (Haspeslagh & Jemison, 1991). There are a number of components that were encompassed the strategy. First, the company wanted to increase data and voice revenues via an escalated marketing focus. This would be achieved through the highly established and high-quality customer base. Second, operational leadership in the industry would be extended via a maximization of the scope and scale benefits. In addition, there was the utilization of partner network agreements. This was through escalating businesses’ equity interests where there was existing shareholdings as well as the Vodafone’s brand promotion. Lastly, Vodafone would extend service differentiation in addition to investing in promoting and distributing Vodafone easy to use, branded, and customer propositions for data and mobile voice. Vodafone makes further disposals or acquisitions of business whenever the circumstances permit.

Since mid-2001, the company has engaged in many consensuses with other nations’ network operators where initially, there was no equity stake. Through Partner Network Agreements’ terms, the company was able to cooperate with the counterparts in marketing and developing universal services through the use of dual brand logos. By the year 2003, the company was already operating in eleven countries, which was acknowledged as a first foothold in the markets. This is a perfect example of a classic win-win situation since in additio9n to gaining novel market insights with guaranteed minimal risks; the company was also able to assess the partner’s quality. This enabled Vodafone to identify potent takeover targets. On the other hand, the partners benefitted by learning from the unique technological and marketing capabilities used at Vodafone (Siehl & Smith, 1990: 178).

The acquisition strategy at Vodafone was highly selective and it always followed a similar pattern. The first thing was identification of at least two major players at a national level. There was an intentional avoidance of incumbent mobile operators, which were associates with state-owned telecom monopoly. Vodafone did not want to relate to a bureaucratic inertia but preferred entrepreneurially- minded and flexible challengers. Vodafone invests deeply in the challenger mind-set. In this regard, the employees are culturally aligned so as to sustain the entrepreneurial and challenger mind-set. Therefore, the local entity is given autonomy (Mobile, Vodafone & WG, 2008: 20).

As far as pricing, identity, and branding are involved, Vodafone adheres to a diverse strategy. This is achieved through individual pricing models, creating its identity, and branding. The company’s identity in the marketplace is achieved through numerous models. There are various considerations and factors that are analyzed before selecting the way to be adapted. These include the local brand’s strength, the overall fit between the acquired business procedures and the company’s processes. But basically, all this narrows down to management judgment that played a key role in Bellsouth, Telecel, Omnitel, and DT.

Whenever Vodafone engaged in rebranding, the national brand was guarded until the takeover battle’s dust had settled. Consequently, the company launched the phased rebranding campaign carefully so as to ensure that the novel subsidiary was brought under the company’s umbrella effectively. Basically, the name Vodafone was added to the inventive corporate brand. In this regard, David Haines, a former manager at Coca-Cola, was appointed as the global brand so as to coordinate the branding efforts. It is worth noting that this was a strategic move since David has global management skills and, therefore, the company was assured of efficient management. The rebranding of other companies was done gradually and the pro9cess would take more than two years. As a result, customers never noticed the process and quickly adapted to the novel logo following the extensive branding campaigns. Mostly, this was in conjunction with a novel global product’s or services launch mobile networking, enabling internet access and emailing through a laptop, and Mobile Connect Card.

At the beginning of August in 2001, Vodafone launched the 1^st truly universal communications campaign. This campaign was aimed at reinforcing the brand awareness and an international brand identity. While moving towards a single universal brand, Vodafone wanted to emphasize the message that the name represents great innovation, great value, and great service. The company acknowledged that if these attributes were synonymous with the company’s name, brand preference would be achieved and there would be an increase in the market share.

The slogan “How are you?” was used to communicate the homogenous corporate identity and brand (Anwar, 2003: 276).  So as to ensure that the global aspirations at the company were maintained, the company sponsored Ferrari Formula 1 and Manchester United Football Club, which are globally recognized brands. This played a great role in promoting the company’s awareness as well as the brand’s perception. Vodafone’s brand was also supported through local marketing communications program and sponsorship contracts (Haspeslagh & Jemison, 1991).

The company uses a strategy where there is a focus on satisfying the customers through the use of advanced technology. Furthermore, the company is continually investing in new products. In UK, Vodafone aims at maintaining revenue market leadership for every customer, consumer satisfaction, and network quality (Mobile, Vodafone & WG, 2008: 18). The company specializes in a product led and customer focused so as to achieve this. In this regard, there is continuous development of services and products that use advanced technologies. For instance, youths engage in wide research before purchasing a mobile phone so as to identify only the best services they can afford for their money. So as to ensure that the company maintains market leadership, it is guided by a number of marketing objectives. The company is keen on ensuring the existing customers are retained and it also increases new data service infiltration. Vodafone is also apt in introducing the best services and novel technologies. There is also a desire to keep promoting and expanding the brand and attracting new customers (Anwar, 2003: 280). This is mainly achieved through offering the best services to the existing customers so as to ensure that they bring in new customers and by using strategies such as advertising and promotion. Adhering to these objectives requires the company to continually update the array of services and products offered so as to ensure that the company is always ahead of the competitors.

Vodafone is a principal leader in the global mobile communications market. It has more than 200 million consumers globally with operations in twenty five different countries. To ensure that stakeholders’ requirements are fulfilled, the company invents in products and brands through using various technologies. Vodafone also engages in partnership so as to promote its brands. For instance, in 2005, the company partnered with Kenya’s safaricom, the international development department in UK and Africa’s commercial bank.

Vodafone has invested in a product that can operate anywhere globally. Their product can perform various functions including exchange ring tones, play games, chatting, receiving and sending pictures, making video calls, capturing pictures, and send up current news on sports, weather, and news. Vodafone would want to extend its business to mature persons, youngsters, professionals, executives, and senior citizens. In this regard, there are varying price package that fits every age group. These packages have value added on them and this assists in fulfilling the customers’ requirements (Haspeslagh & Jemison, 1991). The company also provides monthly price plan packages as well as pay-as-you-go package. There is also an online top-up facility that s exceptionally convenient for use any time a client is in need. The company also invests in experienced customer care experts and places products where customers can view them easily as they are purchasing. Vodafone also has communication and connection with prestigious icons such as David Becham and this increases the company’s value. Advertisements are mainly done through magazines, billboards, media outlets, and TV.

References

Anwar, ST 2003, ‘CASES Vodafone and the wireless industry: a case in market expansion and global strategy,’ Journal of Business & Industrial Marketing, vol. 18 iss. 3, pp. 270-288.

Banzhaf, J 2006, ‘Case 22: Vodafone: Out of Many, One,’ ESSEC Business School, pp. 263- 278.

Competition Commission 2003, ‘Vodafone, O2, Orange and T-Mobile: Reports on references under section 13 of the Telecommunications Act 1984 on the charges made by Vodafone, O2, Orange and T-Mobile for terminating calls from fixed and mobile networks,’ London, February.

Haspeslagh, PC & Jemison, DB 1991, Managing Acquisitions, The Free Press, New York.

Haspeslagh, PC & Jemison, DB 1991, Managing the Merger: Making it work, Prentice Hall, New York.

Mobile, C, Vodafone, H & WG, T 2008, ‘54; Title: Application Scenarios for LTE-Advanced Relay; R1-082975; Jeju,’ Korea, pp. 18-22.

Risberg, A 2003, ‘Shared and multiple realities in acquisitions,’ Nordiske organisasjonsstudier, Vol. 4, No. 1, pp. 58-82.

Siehl, S & Smith, D 1990, ‘Avoiding the loss of a gain: retaining managing executives in an acquisition,’ Human Capabilities Management, vol. 29, iss. 2, pp.167-185.

 

 

 

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