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

3

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

5

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

6

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

7

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

8

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

9

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

10

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

11

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

12

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

13

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

14

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,

15

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

18

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

20

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

21

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

25