marketing mix for uk mobile telecommunications market
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Table of Content
Introduction 1.0
Statement of Research Problem 2.0
Aim 2.1
Objectives 2.2
Rationale/Literature Review 3.0
Purpose of Literature review 3.0.1
Sequence of Review 3.0.2
History of Mobile Telephone 3.1.1
Mobile Telecommunications Industry Progression 3.1.2
Industry Key Players 3.2.0
Key Offering 3.2.1
Marketing 3.3.0
Marketing Mix 3.3.1
Product 3.3.1.1
Price 3.3.1.2
Promotion 3.3.1.3
Place 3.3.1.4
People 3.3.1.5
Process 3.3.1.6
Physical Evidence 3.3.1.7
Competitive Nature of the Industry 3.4.0
Industry Future Trend 3.5.0
Question for further Research 3.5.1
Research Method and Methodology 4.0
Research Questions 4.1.1
Justification of Method 4.1.2
Secondary Data 4.2.0
Technique for Data Collection 4.3.0
Observation 4.3.1
1
Personal Interview 4.3.2
Telephone Interview 4.3.3
Data Analysis Techniques 4.4.0
Cost 4.4.1
Limitations 4.4.2
Ethical Consideration 4.5.0
Resources Requirements 5.0
Contemporary Marketing Mix in UK Mobile Telecommunications
Industry, a case of Vodafone UK
2
1.0 Introduction
Considering the constant technological change and the impact of
increasing market forces in the UK mobile telecommunications
industry, the industry is said to be maturing at an increasing rate and it
is estimated to worth £13.6bn at the end of business year in March
2006 with an increase of 7.7% compared to the previous year (Keynote
2006). This proposal shall focuses more on the market forces as a
result of interplay of different marketing strategies and core
competencies which has made the UK mobile telecommunication
industry the battleground for some of the largest industrial groups in
the world. This indicates that many network operators have entered
the UK mobile telecommunications industry in the past decades hence
made the industry the most dynamic telecommunication market in UK
(Keynote 2006). Based on the dynamic and competitive nature of the
industry, this report shall identify and discuss key competitive
variables in the industry, industrial structure and identify the key
players in the market with respect to their recent performance.
2.0 Statement of Research Problem
Different organisations pursue different marketing objectives, some
pursue profit maximisation objective while some pursue growth and
expansion objectives and some pursue sales maximisation but most
importantly all organisation despite their objective bear in mind the
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profit objective to keep the organisation in business as a going
concern. This dissertation will critically investigate the profitability of
the acquisition of Mannesmann of Germany and the huge investment
on 3G technology to Vodafone and also shall focus on the strategic
business objectives of Vodafone group considering operating in a
turbulent and dynamic UK mobile telecommunications market and how
the firm’s marketing strategies has cope with the market forces in an
industry that is categorised as highly regulated and highly competitive
(keynote 2006). It will also seek to discuss ‘how competition has
impacted growth in the industry and why Vodafone is the leading
mobile network operator in the
UK? Marketing theories and appropriate business tools with empirical
evidences will be used to investigate these questions.
2.1 Aim: Identify the key driving forces in the industry and match the
firms marketing strategies and objectives with the commercial forces
of the turbulent and dynamic business environment it operates
2.2 Research Objectives
Analyse the general business environment
Identify the key competitive forces and market driver
Analyse the firm’s core competencies and key resources
Create a SWOT analysis for the firm
4
Critically analyse expansion profitability
Analyse the industrial structure and identify key industry players
3.0 Rational/Literature review
The importance of marketing in our day to day activity can not be over
emphasised, most organisations that operates in the global market are
successful because they are able to identify customers need, develop a
product to satisfy the needs, communicate the benefit of the product
to the customers and make them available at every point in time
(Brassington & Pettitt 1997)
3.0.1 Purpose of literature review
The purpose of this review is to examine the history and progression of
the mobile telecommunication industry in the UK with respect to
market forces and also syntheses published information about the
driving forces of the market. Also, this review will examine the
marketing mix of Vodafone UK.
3.0.2 Sequence of review
This review will begin with the history of mobile telecommunication in
the UK then discuss the progression to the 21st century and the market
forces. Next is identify major player of the industry and the key
offering of the market, also discuss the business environment and the
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nature of the competition in the industry. Finally, anticipate the worth
of the industry in another five year and what the market forces will be
then.
3.1.1 History of Mobile Telephone
Mobile phones were originally used in the 1940s after the II world war
in vehicles such as taxi cab radios, two way radios in police cruisers;
Agar (2003) claimed that the success of this car radio telephony and
AT & T highway service between New York and Boston in 1947 was the
beginning of mobile telephony success story. The first fully automated
MTA (Mobile Telephone System A) was commercially lunched by
Ericsson in Sweden in 1956 but have a disadvantage of weight as it
weighs 40kg, although in Europe, radio telephony has been in use
since 1926 in Germany between Berlin and Hamburg on first class
passenger train (Wikimedia 2007). But it was just in 1995 the mobile
telecommunication became low cost, rich in features, and the mode of
communications world wide (Tom Farley 2005).
In 1971, ARP network was lunched in Finland and was considered a
zeroth generation (0G) which provides slightly wider network coverage
compared to the early and proprietary network. Following this was the
first generation (1G), this are handheld mobile phone known as
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Motorola DynaTAC8000X which was a phone based on cellular network
with multiple based stations located relatively close to each other.
Next on the scene is the second generation 2G which includes the
GSM, iDEN, IS-136 and IS-95 technology, it was used massively across
the world. (Wikimedia 2007). But the third generation technology 3G
has proven to be more sophisticated and has challenged the 2G
technology, the sequence of this generation indicates increasing
capacity (higher transmission speed) and richer message (Dunnewijk
T., & Hulten S. 2006)
3.1.2 Mobile telecommunication industry progression
The mobile network operation began in 1985 in the UK with Vodafone
and Cellnet (now Telefonica 02), the market was then categorised as
duopoly market structure until two other network operators were also
licensed in the early 1993 (Cave & Williamson 2006). Despite the
entrance of these two network operators, Vodafone and Cellnet still
maintain 40% each of the total market share and were considered to
have strong market power (Valletti & Cave 1996) which also was one
of the reasons for the intervention of Ofcom. The government
developed a policy to regulate the pricing system by creating a
competitive marketing environment which allows the interplay of
different marketing strategies from the existing operators and the new
entrants. The UK market is not an exception of European mobile
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telecommunication as the mobile phones became increasingly used for
business and personal activities worldwide (Tom Farley 2005). Table 1
show the percentage increase in the use of mobile telephone across
Europe.
Table 1 Fixed and Mobile phones connections in percentage of
population 1993-2002
Sources: ITU, yearbook statistic, telecommunications service 1993-
2002
The industry is well regulated but however, in an attempt to figure out
whether the industry progression is standard created market or market
created standard, economist have argued that free market system of
high competition is the best guarantee for technological progress and
market growth while some government advocates argument negates
this argument (Harald Gruber 2005). For the purpose of this study, the
contemporary market forces and strategies adopted by different
network operators will be critically examine as the industry over the
past decade has been reshaped by commercial forces and
Main telephone lines 40 51
Public payphones 2 2
Cellular mobile subscribers 2 76
1993 2002European Union -25
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technological change (keynote 2006). So this dissertation work shall
also anticipate five years future market trend and weather or not
commercial activities and rapidly changing technology will still be the
industry driving forces
3.2.0 Industry Key Players
Though there are five network providers in the UK, but there are others
known as the mobile virtue network operators (MVNOs) that buy bulk
airtime from network providers and resell them to subscriber’s e.g.
Virgin Mobile. The five network providers are Vodafone, 02, Orange, T-
mobile and Hutchinson 3G according to their market share (Keynote
2006). There are eight mobile companies in the UK but Vodafone will
be the case study for this dissertation. Vodafone Group, a UK own
company became the largest mobile telecommunication company and
the 4th largest company in the world after acquiring Mannesmann of
Germany for $183bn which gave the company a competitive edge and
prospect in the global market (BBC 2000). The mobile
telecommunications market in the UK can be characterised as
oligopoly because four companies namely Vodafone, 02, Orange and T-
mobile have 87% of the market share (Mintel 2005). Since then, there
have been new entrants like Mobile World of Carphone Warehouse
3.2.1 Key Offering
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Over time, the attention of network operator’s have shifted from
speech (voice calls) provided by the 0G, 1G and 2G technology to
added services like data transmission, video, VIOP, internet access.
GPRS, CDMA (code division multiple access) are a 2.5G radio
technology which permits two radios to share frequency channel and
allows transmission of data. The 3G phone system such as UMTS and
CDMA2000 1xEV-DO enables live streaming of radio and television
(Wikimedia 2007). Subscribers can now listen to radio, watch TV (Sky
Online TV), check weather forecast and download data from the
internet with the 3G technology
3.3.0 Marketing
Network operators after making services available need to price,
distribute and promote their service in an effective manner such that
customers can get whatever service they want and when they want it.
This is known as marketing activity (Kotler & Armstrong 1999). Various
attempts have been made to find a perfect definition for the
contemporary marketing activities which is claimed to be more than
ordinary selling and advertising by many authors. Marketing is a social
and managerial process by which individuals and groups obtain what
they need and want through creating and exchanging products and
value with others (Kotler & Armstrong 1999). Another useful definition
is that of AMA (American Marketing Association) which defines
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marketing as the process of planning and executing the conception,
pricing, promoting and distribution of ideas, goods and services to
create exchange and satisfy individual and organisations objectives
(AMA, 1985). Authors like Brassington & Pettitt (1997) are of the
opinion that the AMA definition is ambiguous and does not make
reference to the customers. The most widely accepted definition is that
of the CIM (Chartered Institute of Marketing) UK which defines
marketing a managerial process which identifies, anticipate and
supplies customer’s requirement efficiently and profitably. This
definition has seen marketing as a social and management process
which indicate that marketing activity is not all about providing
services but providing services with customers concern.
Different organisations pursue different marketing objectives; some
have the objectives of increasing market share in a particular region
while some objective is to develop a new product either for a niche
customer group or a potential market. It is with this objective that
organisations develop a marketing strategy which could be either to
increase product availability, cut prices or spend more money on
promotion and advertising (Kotler & Armstrong 1999). The UK mobile
telecommunications industry is said to be face with stiff competitive
(BBC 2007). The implication of this is that there is aggressive interplay
of different marketing strategies in the industry; as the market
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expands more and more organisations strive for larger market share
with respect to their profit maximisation objectives
3.3.1 Marketing Mix
Marketing mix was first defined by Borden (1964) as the combination
of four major tools of marketing, otherwise known as the 4Ps’ (product,
price, promotion and place). CIM (2004) defined marketing mix as the
combination of tactics used by business to achieve its objective by
marketing it products or services effectively to a particular target
customer group. Booms & Bitner (1981) added people, process and
physical evidence to the 4Ps to make it 7Ps. A network operator
objective in the UK might be to have the largest market share in the
pay as you go segment of the market or to provide wider network
coverage (i.e. its Product/Service). While what charge for it is the price
and how it communicate the service benefit to subscribers is through
advertisement.
3.3.1.1 Product
It can be inferred from section 3.2.1 that the product organisations in
the mobile telecommunications industry offers to customers is
effective means communication which can be voice, data transmission,
video or live television from mobile phone. Constant changing
technology is responsible for development and improvement in mobile
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telecommunications services. This improvement can be pointed out
from the use of analog system in the 1980s to the GSM in the 1990s,
now the 3G technology provides added service such as e-mail, radio
DJ, live TV, MMS, video call to mention a few (Tom Farley 2005).
3.3.1.2 Price
Kotler & Armstrong (1999) describes price from customer’s perspective
as the amount of money they are able to pay to obtain a product. From
an organisations perspective, price is a flexible element of marketing
mix which can be manipulated to encourage patronage or indicate high
quality and desirability for a product (Brassington & Pettitt 1997 pg
25). In the UK mobile telecommunications industry, a firm’s pricing
decision is largely dependent on interaction with other network
operator and also constrained by regulatory decisions (Harald Gruber
2005 Pg. 171), since the industry is characterised as oligopoly because
87% of the market share is being controlled by four firms. It is
therefore necessary for the government to regulate the price of calls
and other service so that the interest of customers can be protection.
Cave & Williamson (1996) opined that competitive nature of the
industry has forced down the prices of calls and other services since T-
mobile and Orange has entered the market in 1992, and now there are
five network operators, while the number of MVNOs and service
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providers can not be determined because some are not actively in
business (Mintel 2005)
3.3.1.3 Promotion
This basically means the activity that communicates the merit of the
product and persuades target customers to but it (Kotler & Armstrong
1999 pg 49) the promotional mix includes advertising, sales promotion,
personal selling, public relations and direct marketing. TV and internet
advertising are common in the mobile telecommunications industry.
Organisations main objectives for promotions are to expose, create
attention, customer comprehension, attitude change and behaviour
towards their products (Bamigboye 2001). This is a very important
contribution because it emphasis why and how promotional activities
are embarked on and its contribution to sales and turnover.
3.3.1.4 Place
Place is referred to as the mode of getting product/services to
customers. The UK mobile telecommunications market has different
mix of distribution, Vodafone and 02 market their service trough
separate service providers which manage dealers, supply mobile
phones and issue bills (Keynote 2006). This has since been abolished
and services are now being provided to customers directly or trough
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retailers (e.g. carphone warehouse and phones4u) and MVNOs (mobile
virtue network operators)
3.3.1.5 People
The people employed in an organisation to carry out certain
production/service task are determinant of the quality of service the
customers receive. If high skilled staffs are employed, they will
products good product and services to the customers vies visa (CIM
2004). Though, this mix is said to be applicable more to the service
industry like the telecommunications industry as compared to
consumer products market. Brassington & Pettitt (1997) pointed out
that the relationship between customers and people that provide
service for them matters for business success as it improves customer
relation.
3.3.1.6 Process
These are processes services are delivered to customers which have
impact on how an organisation is perceived by customers. This can
include the after sales support, customer service and quick response to
complains, keeping customers informed (CIM 2004). These processes
are sometimes noticeable in an organisation’s culture. Brassington &
Pettitt (1997) also view process as mechanism or ways of business
activities which creates customer confident. From this two definitions,
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it can be concluded that a good process can lead to repeated
purchase, lock in and increased transaction.
3.3.1.7 Physical Evidence
This is known as the image of the organisation through its physical
presence. This can include premises, logo, staffs appearance and
official cars (CIM 2004). A network operator like Vodafone, posses’
physical evidences such as retail shops, head quarters, mast and
radios, staffs etc. This can be seen as tangible evidences that makes
customer know they are dealing with a business entity.
3.4.0 Competitive Nature of the Industry
According to BBC (2001) The UK mobile telecommunications industry is
faced with stiff competition as more and more network operator are
providing additional service, the broadband and the 3G technology has
generated a lot of competition in the past years. Also the industry
competition is said to steer by commercial forces (Keynote 2006). Most
network operators in the UK are either merging or acquiring other
operators, service providers or applications solutions provider,
Telefonica O2 acquired Cellnet, Vodafone acquired Mannesmann. Also,
the UK office of fair trading in its goal ‘to make market work well for
customers’ has always encouraged competition in the mobile
16
telecommunications industry and other industries in order to bring
down price and expand the market (Economic review 2005)
3.5.0 Industry Future Trend
It can be inferred from the forgoing that the industry is driving by
technology considering the era of 0th generation mobile phone to 1G
analog and 2G GSM, now the 2.5G and the 3G have allowed people to
communicate like never before. Shortly after the development of the
3G technology, the 4G standards and specification was defined to be
Millie-wave LAN with 200Mbps (Dunnewijk T., & Hulten S. 2006)
3.5.1 Question for Further Research
After examining the contemporary marketing mix in the mobile
telecommunications industry, the dissertation will anticipate ‘‘whether
or not the current marketing mixes in the industry will be applicable in
the next decade considering the changing technology and commercial
activities’’
4.0 Research Method and Methodology
A qualitative methodology will be used for this research work. This will
enable a proper in-depth studying of Vodafone as a case study; identify
the marketing objectives of the firm, use appropriate tools to
17
investigate why it is the leading firm in the mobile telecommunications
industry in the UK and forecast the industry forces in the next decade.
4.1.1 Research Questions
How competition has impacted growth in the industry and why
Vodafone is the leading mobile network operator in the UK?
4.1.2 Justification of method
To achieve the objectives outlined in 2.2 several method of data
collection will be employed ranging from telephone interview,
observation, documentation review and case studies
The reason for using these particular methods is explained below:
To identify all the stakeholders in the industry and explain the
objectives and interaction of all the stakeholders in the industry.
To identify the rationale for regulation by the office of
communication (Ofcom) and explain the aims and nature of
constantly changing regulation
To give a detailed history and progression of the industry and
evaluate the impact of regulations on price and competition
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Ascertain current issues that are impacting the mobile
telecommunications industry in the UK and consider possible
solutions
Identify success of specific initiative by stakeholders e.g. industry
player and Ofcom.
Consider the relationship of UK mobile telecommunication with
other European countries and the rest of the world
4.2.0 Secondary Data
Secondary research method will also be used for this study in other to
obtain necessary background information which will help to monitor
the trend and progression of the mobile telecommunications industry
and also build credibility for the research work. This implies that
various theories, techniques and appropriate literatures will be
reviewed and critically evaluated. Data/information will be gathered
from The Robert Gordon University, other Universities within and
outside UK if necessary, electronic journals, newspapers, magazines,
internet search engines and directories and commercial bibliography.
All this secondary sources of data will be used to write the literature
review.
4.3.0 Technique for Data collection
19
A multi source form of data collection will be adopted for this research
work in order to provide wide range of data from different institution
and identify differing opinions. Though interview will be conducted with
managers of Vodafone but observation and documentary review will
also be used as data collection technique. Also, primary and secondary
data will also be gathered in order to match different author’s opinion
about contemporary marketing mix and the marketing mix that is
applicable to the mobile telecommunications industry in the UK. The
techniques for data collection for this research work include:
4.3.1 Observation: The observation method allows the investigator to
collect data through personal observation (Panneerselvam R. 2006). A
good example is an investigator that wants to collect data about staff
welfare in an organisation. Such investigator will speak with employees
from different levels of the organisation; observe their behaviour and
responses in order to make conclusions about the staff welfare in such
organisation. Another good example is when stock broker and
speculators observe the performance of a particular firm before
making capital investment decision.
4.3.2 Personal Interview: There are five different types of personal
interview namely, door-to-door interview, executive interview, mail
intercept survey, self administered questionnaires and purchase
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intercept technique. The executive interview will be adopted for the
purpose of this research work. This method of interview requires the
interviewer to go to the residents of each selected industrial
executives and obtain response for the items in the questionnaires by
direct interviewing with the executive in respect of business issues
such as customer preference and goods (Panneerselvam R. 2006).
4.3.3 Telephone Interview: This is similar to the executive interview as
same responses are required of the interviewee but only that this is
done over the phone and no one-on-one contact with the interviewee
(Panneerselvam R. 2006). This is considered to be a cost effective and
dominant method because:
Total elimination of travel time of the interviewer
Cost of travelling is also eliminated
Greater possibility of reaching the customers all over the
geography
Interview time is shorter when compared with other methods
Possibility of random selection of respondents
While the disadvantages of the telephone interview are:
Exclusion of potential respondent that do not have telephone
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No visual contact
Body languages can not be noticed
Interview may discontinue due to connection problem
4.4.0 Data Analysis Technique
The data analysis techniques that are adopted for this research work
are tabulation of frequency of event, cross case search for data
gathered and creating a flow chart if required. Responses from all the
questions in the questionnaire will be analysed and interpreted and will
be attached to the appendices of the research work so that the reader
can have in depth understanding of the question and solution
suggested to them.
4.4.1 Cost: Since this research work is being conducted by
questionnaires, executive interview and telephone interview, it is not
associated with huge cost. Also, the secondary data cost little or
nothing to gather
4.4.2 Limitations: It is anticipated that there will be impossible to speak
with major executives of Vodafone Group Plc and some other key
22
competitors in the industry but an alternative interview will be
conducted for branch managers and store managers if possible.
4.5.0 Ethical Considerations
This research work poses some ethical problems as some sensitive
information might not be disclosed by interviewee as some sensitive
information can cause chaos depending on how competitors and other
stakeholders perceive it. However, anonymity will be offered to
interviewees
5.0 Resources Requirements
This research work requires large amount of information from office of
communications, the European telecommunications commission, and
other government statistics about the industry and the general
economic performance. Also, information will be gathered from The
Robert Gordon University library and New York University in order to
compare how competitive both markets are and point out what the
driving forces are in both markets.
Travel to London, Edinburgh and New York will be budgeted as
information from these sources is crucial to the success of this
dissertation.
23
BBC News (2006) Vodafone joins broadband brigade [online] London
Available from: http://news.bbc.co.uk/1/hi/business/6135428.stm
[Accessed 18 April 2006]
Brassington F., Pettit S., 1997 Principle of Marketing, Great Britain
Pitman Publishing.
Cave M. & Williamson P. 1996 Entry, Competition, and Regulation in UK
Telecommunications Oxford review of economic policy vol. 12 Oxford
University press
Dunnewijk T. & Hulten S. 2006, A Brief History of Mobile
telecommunications in Europe. United Nations University
Economic Review 2005, is competition always desirable? Volume 23
University of Southampton, Raithby, Lawrence & Company Ltd,
Leicester
Harald Gruber 2005. The Economics of Mobile Telecommunications UK
Cambridge University Press
Key note (2005) Mobile Telecommunications [Online]-UK Available
from: http://www.keynote.co.uk/kn2k1/CnIsapi.dll?
nuni=60093&usr=11802srv=02&alias=kn2k1&uni=1168295355&fld=
K&noLog=1&NotInWorkset=1&key=742 [Accessed on 1 April 2007]
Kotler P. & Armstrong, G., (1999) Principles of Marketing 8th ed. New
Jersey 07458. Prentice Hall
24
Mintel Group (2005) Mobile Phones and Network Providers [Online] – UK,
Available from:
http://academic.mintel.com/sinatra/academic/my_reports/display/id=114641&anc
hor=atom#atom0 [Accessed on 23 April 2007]
Panneerselvam R. 2006. Research Methodology, Eastern Economy
Edition. India Prentice Hall
Tom Farley 2005. Mobile Telephone History, California Private line
Publishing
Valleti, T. & Cave, (1996), Competition in UK Mobile Telephone ITS
Conference paper, Seville.
Wikipedia Foundation inc. 2007 Mobile Telephone History, US
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