Introduction
Marketing is the process by which a product or service originates and is then priced, promoted, and distributed to consumers. In large corporations the principal marketing functions precede the manufacture of a product. Marketing involves different things like market research and product development, design, and testing. Marketing concentrates primarily on the buyers, or consumers. After determining the customers’ needs and desires, marketers develop strategies that are designed to educate customers about a product’s most important features, persuade them to buy it, and then to enhance their satisfaction with the purchase. Where marketing once stopped with the sale, today businesses believe that it is more profitable to sell to existing customers than to new ones. As a result, marketing now also involves finding ways to turn one-time purchasers into lifelong customers (Beckman & Davidson 1967).
Marketing includes planning, organizing, directing, and controlling the decision-making regarding product lines, pricing, promotion, and servicing. In most of these areas marketing has overall authority and it affects the decisions that concern the abovementioned different areas; in others, as in product-line development, its function is primarily advisory. In addition, the marketing department of a business firm is responsible for the physical distribution of the products, determining the channels of distribution that will be used, and supervising the profitable flow of goods from the factory or warehouse (Beckman & Davidson 1967).
Marketing is about satisfying customer wants and needs and in the course of doing so facilitating the achievement of an organization’s objectives. By paying attention to customer wants and needs, organizations are more likely to achieve their objectives in the marketplace. Of course, organizations have to compete with each other and so also have to satisfy customers’ wants and needs at least as well as their competitors. Fortunately, organizations can do this in different ways (Proctor 2000). Of all the forces affecting modern marketing, perhaps none is more important than globalization. Local companies that never even considered international competition now find foreign competitors stocked on shelves right alongside their own products. Some economists argue that local companies should be protected from such competition through legislation that regulates the flow of goods through trade barriers and other measures.
Others oppose such regulation, arguing that it only raises prices for consumers. Globalization, however, is only one force changing the way companies market their products or services. Another involves changes in the very interests and desires of consumers themselves. Consumers today are more sophisticated than those of past generations. Competition also has sharply intensified, as the number of firms engaged in producing similar products has increased. Another force affecting modern marketing is the influence of the consumer rights or consumer protection movement. Environmental concerns have also affected product design and marketing, especially as the expense of product modification has increased the retail cost. Even the way a firm handles itself in public life has become significant. No longer may a corporation cloak its internal decisions as private affairs (Proctor 2000). 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 John Kay 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. Although it is futile to try to describe the state of affairs in telecommunications alliances because they change on a regular basis, examining some of the major attempts and events provides insight into this industry’s dynamics and future. There had been three primary global alliances that include Concert, Global One, and World Partners. These alliances illustrate different approaches to globalization. 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 (Culpan 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 (Harrison, Hitt & Ireland 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 (Harrison, Hitt & Ireland 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 (Luftman 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 (Luftman 2003). The Middle East magazine (December 2003, p.46) states that despite the sustained downturn in the global telecoms sector, a host of new tenders for mobile licenses are in the process of being launched in the Middle East. Iran, Algeria, and Jordan all plan to issue their second or third GSM licenses, introducing more competition into the industry and generating much needed revenues for the respective governments. However, the governments involved will certainly be aware that they are unlikely to recoup any thing like the same level of license fees that accompanied the first tranche of GSM licenses. The new licenses may be attractive to private companies both inside and outside the region, but the optimism and available capital, which buoyed the sector a few years ago, are gilt a memory. While greater competition is being injected into national markers, relatively little effort had been put into integrating services in the Middle East until recently. In September, however, Fastlink of Jordan and MTC Vodafone of Kuwait struck a deal whereby multimedia messages (MMS) can now be sent between the two networks. It is the first cross-border facility of its type in the region. Bashar Arafeh, Fastlink’s marketing and mobile data services director, thinks the deal could be a prelude to connecting all cellular networks across the region ensuring that swapping multimedia messages becomes an easy part of everyday life, similar to the way most people consider sending an SMS without a thought. In addition, Motorola has signed a m contract with MTC Vodafone to expand network capacity and coverage within Kuwait.
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 www.hoovers.com
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 (Kamalipour & Mowlana 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. 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 (Nugent 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 (Nugent 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
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. To be sustainable, these capabilities must be difficult to imitate and should support the organization’s business strategy. Organizations that stress the development of key capabilities are better able to achieve and maintain a position of advantage despite turbulent environmental impacts on the business. The development of key marketing capabilities has been identified as one of the primary ways firms can achieve a competitive advantage (Proctor 2000). In this context, firms must develop processes that allow them to collect information about market opportunities, develop goods and services to meet the needs of targeted customers in selected markets, price these products according to market information, communicate product advantages to potential customers and distribute products to customers. Organizational capabilities play an important part in achieving a competitive advantage marketing capabilities are the integrative processes designed to apply the collective knowledge, skills and resources of the firm to the market-related needs of the business, enabling the business to add value to its goods and services, adapt to market conditions, take advantage of market opportunities and meet competitive threats (Proctor 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. 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 (Proctor 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.
Sources of sustainable competitive advantage
The basic logic of the resource-based view (RBV) is relatively simple. It starts with the assumption that the desired outcome of managerial effort within the firm is a sustainable competitive advantage (SCA). Achieving an 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 (Fahy 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 (Fahy 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 (Fahy 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 (Fahy 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. 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.
Credit:ivythesis.typepad.com
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