Introduction
Surveys of entrepreneurs throughout the world reveal that the two biggest problem areas are marketing and finance. The problems in finance include obtaining start-up capital, financing growth, cash flow management, and financial control. Of these, it is particularly difficult for the entrepreneur to obtain the initial funding needed to build a prototype or start initial production of the product. The second problem area particularly marketing is separate and yet tied to the financial problem. It is related in that the lack of a marketing plan, accurate determination of market size, and reliable sales forecasts often precludes the entrepreneur from obtaining the initial seed capital funding. Also, the slowness or even lack of sales resulting in part from the poor marketing effort or poor sales estimates frequently is the cause of the cash flow problems ( 1994).
Sound marketing is a necessary component for developing the new product or service for the market as well as successfully selling, nurturing, and growing the company in this market. Contributing to the problem is the misguided belief that many entrepreneurs have that everybody needs their innovation. Most entrepreneurs feel their new creation is something that everyone wants and needs and have no concept of market reality. This is, of course, often the demise of the new venture because one marketing/entrepreneurial axiom is that you cannot be all things to all people. An entrepreneur needs to determine appropriate market segments and then design and implement a marketing plan to successfully market the segments identified ( 1994).
Marketing knowledge is particularly lacking in entrepreneurs that come from a technical background. These entrepreneurs, having no marketing understanding, frequently believe that the only thing necessary for success is having the best possible product. Sometimes this product is so over-engineered that the market does not want all the options or quality offered, which is reflected in an increased price. In addition, such marketing concepts as target marketing, price thresholds, distribution margins, manufacturer representatives, and sales promotion techniques are often foreign to the entrepreneur, as are the techniques for developing and implementing a successful marketing plan, accessing published data, implementing a primary research project, and developing sales forecasting, all so important to successful marketing ( 1994).
Not only marketing is important to entrepreneurs it is also important to different people who wants to have a business. It is vital for a business to grow and develop because it provides a starting point for the company to make his/her business to be successful. The paper will discuss about the telecommunications industry. The paper will also discuss about a background of Vodafone group PLC. The paper will discuss what is meant of claims that Marketing capabilities are sometimes distinctive, sometimes reproducible and that the importance of the distinction for strategy is this; only distinctive capabilities can be the basis of sustainable competitive advantage. Lastly the paper will distinguish the sources of sustainable competitive advantage for Vodafone.
Background of the company
One company belonging to the Telecommunications industry is Vodafone. This is one of the companies that people come to for their communication needs. A close examination of strategic alliances in the telecommunications industry reveals that most of such alliances are pure play alliances; that is, ventures in which partners offered unlike products, technologies, and markets. These markets are usually in the same market segments, such as content, communications, and applications. Verizon Wireless is an example of such a pure play alliance between Bell Atlantic/GTE and Vodafone Air Touch, a joint venture established to compete head-on with AT&T in the U.S. wireless market. Another type of alliance is converging alliances which means two companies from different industries collaborating because of converging technologies, enabling innovative services ( 2002). Telecommunication companies also seek to overcome entry barriers by completing cross-border mergers and acquisitions. Founded in the United Kingdom in 1984, Vodafone Air Touch is the world’s largest mobile phone group (, & 2001).
By giving Vodafone immediate access to over 360,000 customers in nine western US states, this acquisition allowed the firm to overcome entry barriers quickly. The deal is further evidence that Vodafone Air Touch is anxious to achieve national coverage in the U.S. Late in 1999, Vodafone made a 5.3 billion hostile takeover bid for Mannesmann AG, an old-line industrial company that reinvented itself as a telecommunications powerhouse. At the time, this was the largest hostile takeover bid on record. After its completion, this transaction dramatically extended Vodafone’s global reach (, & 2001). Vodafone provides a service that gives business information based on a user’s location, such as the nearest restaurant. The wireless device a phone can even provide directions to a business that has been selected by the customer. Vodafone recently announced a million user trial for m-payments in the United Kingdom, Germany, and Italy. Customers will be able to make credit or debit payments on a mobile platform, authorizing them with a PIN code ( 2003). The payment system itself is an open standard and the cost of the call is the only fee charged by Vodafone. The Vodafone example represents an important change in the financial payments industry that impacts the consumer and the merchant, the mobile operator, the content provider, and anybody else along the value chain. An even more disruptive change can soon follow. Such a concept could replace existing payment tools and move the society closer to the notion of a cashless society ( 2003).
The first table will show the annual income statements of the company. Amounts are in millions of dollars.
Year
Revenue
Gross Profit
Operating Income
Total Net Income
Mar 2006
41, 319
(7,601)
(15,153)
(23,081)
Mar 2005
78, 018
17,136.5
(15,729.1)
(25,896.4)
Mar 2004
61,285.4
25,745.8
(21,605.8)
(14,841.5)
*Taken from
The table shows that the company is not doing well financially. It can be due to the rise of competition and the emergence of new players in the telecommunications industry. It can also be due to the financial problems experienced in the country. Although it is not doing well financially it is competing well and enjoying success in the different markets it has through the different groups belonging to Vodafone.
Comparison of Batelco and MTC Vodafone
For such a relatively small state, Bahrain enjoys a modern telecommunication system that supports the service industry and promotes its growth. In 1968, Bahrain became the site for the first satellite earth station of Intelsat’s satellite network in the Middle East ( & 1994). Bahrain has historically been in the centre of regional trade, benefiting from its geographical situation and its natural resources. Today the emirate has turned its attentions to the trade in money and tourists in order to be ahead of the game in the 21st century. Bahrain has a telecommunication company that created a huge impact in its history. Its telecommunication company Batelco, was established in 1981 and was the first telecommunications company in the Middle East to be awarded the International Standards Organization (ISO) certification, for the quality of its services. Batelco began installing the million Gulf Submarine Fiber Optic Cable in 1996 which will link Bahrain to Kuwait, Qatar and the United Arab Emirates, providing high-grade digital transmission links between the four Gulf States and the world ( 1997).
Bahrain went online in November 1995 through Batelco’s network at a time when many other Middle Eastern countries were reticent about the consequences of being connected to the unregulated worldwide Internet system. Within a year there were around 3,000 local subscribers and several Bahrain-based World Wide Web page design companies. Like many companies worldwide Bahraini firms are using the Internet to publicize and market their products and services: banks, insurances companies, even Bahrain International Airport, have web pages. Batelco also provides an online directory of information about Bahrain and its tourist attractions ( 1997). MTC Vodafone has a worldwide reach and it reaches more places while Batelco is currently serving only the market in Bahrain. Batelco started earlier than MTC Vodafone thus Batelco has more experience in the telecommunications industry and it has a higher understanding of how the industry works.
Marketing capabilities as being distinctive and reproducible
Even the relatively few long-lived firms that stick to narrow product lines, such as fine china and jewelry have many assets, including brand names, distributor relationships, skilled craftsmanship and design, and marketing capabilities. This is not to suggest that long lived firms necessarily own a very broad range of assets or have employees who perform many functions, just that their overall business system encompasses many distinctive elements ( 2003). Microsoft is a more complex entity now than it was in the 1970s both because its sells more products, owns more technologies, and has employees who perform more functions, and because more customers, subcontractors, and suppliers of ancillary goods and services have developed resources tied to the Microsoft system. Increased heterogeneity naturally follows increases in the volume of a firm’s business. As firms grow they add customers, employees, locations, and suppliers that are to some degree different. And more volume permits the specialization that increases the heterogeneity of their activities: For instance, larger firms can afford to separate bookkeeping from their financial control function. Heterogeneity also can contribute in subtle way s to a firm’s survival ( 2003).
In a firm with strong marketing capabilities and customer relationships, the loss or diminution of the superiority of its product will reduce but not necessarily eliminate its profits. Stockholders don’t have to close operations; the marketing assets buy time for the firm to recoup the loss of its product advantages. Multiple product lines, technologies, and organizational capabilities afford far greater protection than simply having a lot of cash on hand or having access to financial markets ( 2003). Maintaining large cash balances as insurance reduces profitability. These reserves earn low returns and can make a firm a target for takeovers. And whereas a single-product firm may have easy access to equity and debt markets in good times, these sources of funds can become prohibitively costly when changes in demand or competition threaten the firm’s profitability ( 2003). Marketing capabilities bring competitive advantage to an organization and it helps in bringing a firms status up.
It is no longer sufficient to have the most established brand, the lowest costs or the best customer service. Every business is vulnerable to a competitor who uses information to overturn the established order in the market. Wherever people look, they will see businesses that were once leaders in their fields wiped out, sometimes almost overnight, by a competitor who has managed to harness information in order to secure a competitive advantage. Harnessing accurate and instantaneous information about the sales of their products enables organizations to gain a significant competitive advantage. More often than not, it is also sustainable strategy, as the initial competitive advantage leads to others ( & 1998). Competitive advantage should be built on the basis of core competencies. Through the identification of its distinctive competencies and the relating of them to its core products, a firm can develop purposeful plans utilizing those capabilities. New capabilities can be acquired if required to achieve the greatest sustainable advantage. If a firm identifies its core competencies incorrectly this will result in the firm overlooking attractive opportunities and lead it to pursuing poor ones. In searching for a competitive advantage, businesses often develop capabilities in key functional areas ( 2000).
Risk is part and parcel of business life and risk sharing with other organizations is one way of dealing with problems that risk brings. Risk arises in different ways. For example, the disappearance of market boundaries in the information industry illustrates this. Telecommunications, consumer electronics, entertainment media, publishing and office equipment industries have all come together so that the industry is an amalgam of other industries. Individual firms trying to compete for the attention of customers encounter problems where there is a widening of the range of customer requirements and technologies available to satisfy customer requirements ( 2000). The kind of products required often exceeds the design, manufacturing and marketing capabilities of a single company. It is often not cost effective for an individual firm to develop internally the full range of skills and capabilities required to compete effectively. Indeed, such skills and resources are more cheaply available through alliances with other firms which can contribute their own core competencies ( 2000).
Marketing capabilities are distinctive among companies and people in the different companies. Some companies have evident marketing capabilities while others have a little capability. Vodafone has an evident and unique marketing capability this is shown thru their success in the foreign markets. People recognize the company and know the company’s different products and services. Marketing capabilities are reproducible among companies. Even if one company lacks marketing capabilities it can be reproduced through it gaining marketing knowledge and ideas. Marketing capabilities can also be enhanced through learning new marketing techniques and practices. Gaining marketing capabilities can help a company to have competitive advantage over rival firms. Marketing capabilities help make sure that the risk taken by a company will not go into waste and will create good things for the company.
Sources of sustainable competitive advantage
Achieving a Sustainable Competitive Advantage (SCA) allows the firm to earn economic rents or above-average returns. In turn, this focuses attention on how firms achieve and sustain advantages. The resource-based view contends that the answer to this question lies in the possession of certain key resources, that is, resources having the characteristics of value, appropriability and barriers to duplication. An SCA can be obtained if the firm effectively deploys these key resources in its product markets. Therefore, the RBV emphasizes strategic choice, charging the firm’s management with the important tasks of identifying, developing and deploying key resources to maximize returns. The list of resources in any given firm is likely to be a long one ( 2001).
One of the principal insights of the resource-based view of the firm is that not all resources are of equal importance or possess the potential to be a source of sustainable competitive advantage. Much attention has focused, therefore, on the characteristics of advantage-creating resources. The inability of competitors to duplicate a given firm’s bundle of resources or their deployment is one of the defining issues within the resource-based view of the firm and one that has been the subject of much attention. Resource heterogeneity is a fundamental assumption within models of imperfect competition and the RBV is concerned with understanding the persistence of this heterogeneity. Rareness can be considered as one of the key characteristics necessary before a resource has the potential to generate sustainable competitive advantage ( 2001).
A firm’s resources are a source of sustainable competitive advantage if they possess the three key characteristics of market value, appropriability and barriers to duplication. A further trait gaining some attention in the literature recently has been durability of the resource. For example, the life span of technological resources is getting much shorter due to the pace of innovation, though resources such as corporate and brand reputation appear to be much more durable. However, as long as a resource is valuable, appropriable and resists duplication it enables the firm to attain a sustainable competitive advantage. Should the resource be durable, the advantage may last for a longer period subject to the efforts of competitors to duplicate it. A sustainable competitive advantage arising from resource heterogeneity can be expected to lead to superior performance levels or rent. However, to ensure that the level of such returns is not overstated it is also necessary to take account of the cost of resource deployment ( 2001).
The resource-based view assumes the existence of firm heterogeneity and resource heterogeneity within firms as well as the possibility of sustained superior performance or economic rent. It provides a set of insights into the relationships between key resources available to the firm, managerial choices with respect to those resources and the levels of competitive advantage and performance attained by the firm in the marketplace. One of its key insights is that not all resources are of equal importance in terms of achieving a sustainable competitive advantage. Rather, it is only those resources that possess the characteristics of value, appropriability and barriers to their duplication by competitor ( 2001).
The company’s source of competitive advantage includes it being an innovator and pioneer in the telecommunications industry. It was one of the pioneers of the industry that is why it has competitive advantage. Another source of competitive advantage for the company is its notoriety and reputation. The company is known even in US markets. People buy its products because they believe that the company offers the best products and their products are tried and tested. Lastly a source of sustainable competitive advantage is its distinct marketing strategy. It forges alliances with different companies and telecommunication industries all over the globe for it not to have difficulty in entering new markets.
Summary and Conclusion
Telecommunications enables people to send and receive personal messages across town, between countries, and to and from outer space. One company belonging to the Telecommunications industry is Vodafone. This is one of the companies that people come to for their communication needs. Vodafone is one of the world’s largest mobile phone groups. It is one of the 10 largest companies in the United Kingdom. Vodafone provides a service that gives business information based on a user’s location, such as the nearest restaurant. The wireless device a phone can even provide directions to a business that has been selected by the customer. If compared to another telecommunications company. MTC Vodafone has a worldwide reach and it reaches more places while Batelco is currently serving only the market in Bahrain. On the other hand Batelco started earlier than MTC Vodafone thus Batelco has more experience in the telecommunications industry and it has a higher understanding of how the industry works.
Not only marketing is important to entrepreneurs it is also important to different people who wants to have a business. It is vital for a business to grow and develop because it provides a starting point for the company to make his/her business to be successful. Marketing capabilities are important for companies. Even if one company lacks marketing capabilities it can be reproduced through it gaining marketing knowledge and ideas. Marketing capabilities can also be enhanced through learning new marketing techniques and practices. Gaining marketing capabilities can help a company to have competitive advantage over rival firms. Marketing capabilities help make sure that the risk taken by a company will not go into waste and will create good things for the company. The company’s source of competitive advantage includes it being an innovator and pioneer in the telecommunications industry. Another source of competitive advantage for the company is its notoriety and reputation. Lastly a source of sustainable competitive advantage is its distinct marketing strategy. With proper marketing management and proper use of the different competitive advantage it has, the company can gain success.
References
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