2.3 Evaluating the impact of competition policy and other regulatory mechanisms on the activities of Vodafone 6
LIST OF FIGURES
Business environment is regarded as the multifaceted framework that engrosses several factors that provides opportunities for growth and poses threats as well. Due to rising competition and upsurge in the international trade, the business environment is now becoming more complex and intricate (Wantao and Ramanathan, 2012). Those forces, which are external to the conforming boundaries of the company, are very critical in identifying its achievement or failure. It is quite difficult for the firm to manage the instability and this problem is being turning out as an enduring reality. When any organization, with an aim to extend their businesses, enters into the international markets, the environment in which they operate becomes more convoluted (Cheng and et.al., 2007). Attributing from this fact, the present research report speaks in volume about the business environment of Vodafone and TESCO. Further, it will examine different dimensions of its operating environment.
With a view to determine the purpose of Vodafone and Tesco, it is very critical to understand their mission and key objectives. Both the companies are headquartered in UK and are operating in the international markets (About Us - Mission Statement & Core Values, 2013). Vodafone is related with the telecom industry and on the other hand, Tesco deals in food retailing and is the multinational retailer of food and other grocery items all over the world.
Mission and key objectives of Vodafone
The Vodafone’s mission statement speaks about its reasons for existence in the market, which basically eloquent the type of business they are being involved in. the mission statement of the business reflects the viewpoint of their senior level managers in regards with the future of the firm (Vodafone Group Sustainability Report, 2011). The main mission of Vodafone is “To become the leader of telecommunication in this rapidly and ever-changing linked world”.
The key objectives of the company are as follows:
Ø To be among the top five telecom brands all around the globe.
Ø To maintain a leadership position in the market.
Ø To extend the business prospects in the mounting markets of Asia and Africa.
Ø To introduce more initiate innovation in mobile usage by introducing more sophistication (Holton and Abboud, 2012).
Mission and key objectives of Tesco
The mission of the company is to become one of the most valued business organizations in the world. They also aspires to become the most innovative and modern company that adapt their operations as per the requirement of customers (Tesco Competitive Analysis 2005, 2011).
The main objectives of Tesco are explained below:
Ø Achieving maximum sales target
Ø To grow and maintain the top most position in the market
Ø To remain market leader for extended period of time
Ø To outshine the competitors
Comparison of both the organizations
A vast difference can be noticed in the purpose of both Vodafone and Tesco. Tesco is a multinational food and grocery retailer, which has its store in more than 14 countries of the world. The main purpose of Tesco is to maximize the sales and thereby, increasing the number of potential customers (Swidi and Mahmood, 2011). On the other hand, Vodafone is a profit making organizations, which aims to achieve higher profits margins with increasing number of satisfied customers. Tesco deals in food retailing so the main aim is to provide quality food in order to retain the existing customers and to attract the valuable clients in the near future. In contrast with Tesco, Vodafone is related with Telecom industry and thus, the man aims is to provide affordable and innovative services so as to outshine the competitors in the market (About Us - Mission Statement & Core Values, 2013).
Stakeholders are being defined as the persons who are greatly affected by the operations of the organizations. They revolve around the business and have some or the other interest in the functioning of the company (Kennerley and Neely, 2003). In this competitive and highly globalized business environment, it becomes essential on the part of each and every business to pay lieu attention on all its stakeholders with a view to persuade them towards their organizations.
Stakeholders of Tesco
The stakeholders of Tesco can affect its business both in a positive and negative manner. Some of the stakeholders of the company are suppliers, community, financers, government, owners, service providers, customers, management, competitors and employees (Whysall, 2005). All the stakeholders mentioned above have their own significance in meeting out the objectives of Tesco. When speaking in regards with the supplier and customers, they have very influential role to play in the firm, as Tesco is required to carry out their operations as per their needs and preferences (Stakeholder Management, n.d). Management of Tesco is also important because they are the one who employ potential staff and influences the decision making process. In addition to this, competitors also need to know about the working and decisions of the company, as through this they can implement and amend their strategies.
Figure 1: Stakeholders of Tesco
(Source: Whysall, 2005)
Stakeholders of Vodafone
The Stakeholders of Vodafone includes employees, shareholders, government, other network operators, investors, partners, investors, society and media. All these persons have their own interest and reasons to be in association with the company. There are basically two categories of stakeholders i.e. internal and external (Nüchtern, 2008). The Internal stakeholders comprise of employees, shareholders and management. All staff members of the company aspire to become part of the company for extended period of time in order to have bright and rewarding future. The shareholders want fair and timely payments of dividends. The external stakeholders of Vodafone include, customers, government, supplier, investors etc. In terms of customers, the company provides network. Further, it renders them a platform so that they can remain in touch with their family and friends. In return, customers expect uninterrupted services at justified price and want their service provider to be very genuine in all aspects (Stakeholder Management, n.d).
Vodafone and Tesco have numerous responsibilities in regards with all groups of stakeholders. Both the companies are required to provide amicable and healthy working environment to all their staff members. In the same way, they too have some obligation towards the society (Dixon, 1998.). Tesco and Vodafone need to ensure that their operations do not hamper the lives of all people. They are also required to abide by all the laws and rules being formulated by the respective government. Both the companies have a responsibility to exhibit transparency in all its accounts so that it becomes possible for the shareholders to access all information whenever required. Since, Vodafone is a public limited company; they are needed to publish its reports such that their investors and general public have comprehension about the accounts.
The company is operating under free economy. Further, government has many interventions in the operations and functioning of Vodafone. Nevertheless, large control is exerted from the European Union. As per the BBC news, in the last three months of 2012, the economy of the UK was shrunk by 0.3%. In addition to this, there is fueling fears that the country will again step in to the period of recession (Straume, 2003). This will majorly impact the working of all organizations whether related to telecom or any other retail sector. As a result of recent economic slowdown, the market growth rate of UK telecommunications industry was quite stagnant. Further, the international revenue of the nation was also decreased because of the fluctuating exchange rates. The global slowdown has drifted the whole economy of the UK to 0.9% down. However, due to London Olympics, it was boosted again. Finally, the introduction of internet has successfully altered the taste and preferences of the all customers in relation with the mobile services. However, in free economy, the resource allocation is quite just (Explain how economics system attempt to allocate and make effective use of resources, n.d.).
2.2 Impact of Fiscal and Monetary Policy on Organization
Fiscal policy is being defined as that policy, which makes use of expenditures of government and taxation in order to create an influence on the economy. The fiscal policy largely affects the level of aggregate demand, economic activity, distribution of income and resource allocation pattern (Fiscal policy v/s monetary policy, n.d). In contrary, the monetary policy involves the interest rate and its influence on aggregate demand in an economy. Both, fiscal and monetary policies have some way or the other influence on the working of the organizations. Further, they also exert some pressure on the company. The first and foremost purpose of fiscal policy is to identify how much amount is required to be spend by the government and how much they will raise the level of income. On the other hand, monetary policy provides an opportunity to exercise control on the economic activities and majorly influence the business decisions of the companies. The fiscal and monetary policies of the UK influence Vodafone in various ways in the year 2013. Some of the impacts are given below:
v In the year 2013, it there is any slight fall in the income tax level of the nation, than it will surely have a bad effect on the operations of Vodafone (Straume, 2003). This is because of the fact that the government of UK collects tax from the two main sources i.e. producers and people. The whole population of UK is required to pay the income tax two times, while, the producers need to pay the income tax three times. In such as scenario, if there is any reduction in the level of income tax then the government of UK will charge more service tax from the service providers. This is because; they are required to maintain the level of income coming in. Consequently, Vodafone will need to disburse more amount of custom duty.
v The hedge theory will be applicable, if there is any increment in the value of pound. In this situation, different rate will be applied on the amount being borrowed by Vodafone from banks as compared to the rate at which the firm is required pay back (Meade and Vines, 1988). In turn, the company will change high rates from the customers and there are more likely chances that they may switch towards other services providers, which provide them services at lower rates as compared to Vodafone.
v In the year 2013, the liquidity in the market will fall, if there is any slight reduction in the interest rates. All companies and people will pay more attention in regards with securing their money, which in turn paves the way for fluctuations in the market.
v It is also expected in the year 2013 that if the level of unemployment in United Kingdom increases, those customers who are once using the services of Vodafone will either switch towards other less expensive service providers or they may stop using all telecommunication facility. Due to this, the revenue of the firm will fall significantly. Along with this, the share prices of the organizations will also decrease due to emergence of such situation (Weiss, 2008).
v If government of UK start spending more on the public in the year 2013, than there will be a large increase in the level of government expenditure. In this case, it is more likely that government will charge more from the people in the form of taxes and it will be difficult for Vodafone to retain their most valued customers, as higher rate of income tax will directly affect the pockets of general public. Further, the rate of service tax will also increase up to a certain level. Thus, attracting, convincing and retaining the potential customers to remain associated with the company will be very tedious task for the company (Meade and Vines, 1988).
2.3 Evaluating the impact of competition policy and other regulatory mechanisms on the activities of Vodafone
The main purpose of competition policy lies in improving the process of competition in the market arena. It also ensures that the ultimate beneficiaries are only the customers of the company. Other regulatory mechanism and competition policy will have a significant impact on all the activities of Vodafone (Ayyagari and et.al., 2008). This can be attributed from the fact that the main aim of competition policy is to improve such factors that helps in increasing the competitiveness of the organization in an open market economy. Following are the impacts that competition policy will have on the activities of Vodafone:
· It helps in promoting innovation and efficiency through broadening the choices.
· It also helps the customers by allowing them an option to choose from various network operators available in the market (Drexl, 2011).
· The competition policy and other regulatory mechanisms significantly contribute towards the competitiveness of the economy as a whole.
The national business environment of the UK is being shaped by the two main forces i.e. liberalization and globalization. There are various companies who depend on global trade to increase their national income. Due to the emergence of technology, transportation and communication has increased significantly, which has made the operations quite easy for the firms operating in international markets like, Vodafone. Due to this, prosperity among all the nations has also increased abruptly (Samuelson, 2005). Seeking help from the international trade, company can also increase their operations and make it feasible for them to connect with the international markets in a better way. In addition to this, the rate of allowing foreign direct investment has also increased in various states, which has provided a supporting hand to Vodafone in establishing stores at different locations and to carry out a successful business. Further, an increment in the European Union’s free trade agreements was also seen, due to which it become easy for the firms to trade freely with the companies of other nations (Nicolau, 2005).
The business operations of Vodafone avail many benefits and threats from the global factors. The international trade is being controlled by the international body known as WTO. In regards with the telecommunication industry it watches over the whole process of standardization. World Trade Organization has incorporated an agreement known as GAIT (General agreement on tariffs and trade); a multilateral agreement, which has an aim to regulate the international trade (Sledge, 2011). It further, helps in reducing the trade barriers, which has significantly supported Vodafone in carrying out business at global level. Even the developing economies like BRIC offer immense scope for expansion to the company. Other than this, the developing economies like, Brazil, Russia, India and China (BRIC) also renders plenty of opportunities to Vodafone. This can be articulating from the fact that if in these countries, the rate of Foreign Direct Investment in regards with the telecom sector increases then the company might enter into the markets of these nations, which will subsequently helps in widening the scope of the organization (Sledge, 2011).
4.3 Impact of Policies of EU on UK business organizations
The European Union acts as a controlling body of competition law within its scaffold of EU for all its member nations. Many functions are being performed by this body; however it basically takes into consideration the issues in regards with the authorization, access, service and global data protection etc. (Archer, 2008). Free trade between the member nations and stability within the Telecom market can be facilitated through the policies of European Union. All these factors, brings enormous opportunities at the doors of Vodafone, however it may pose some serious threats related to competition as well. All the policies of EU have an aim to mitigate the standardization gaps. With this, ease of access to superior technology has become quite easy, however, it is again is true for all member nations of EU (Dutta, 2011).
Thus, from the above fact, it can be articulated that the business environment has major influence on the operations and functioning of Vodafone. Further, there are many global factors, which are impacting its business activities to a great amount.
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