Introduction
Vodafone is a United Kingdom based company founded in the year 1984. It has invested in many telecommunication companies, in different parts of the world. This means that its services are used in many countries in the world. It specializes in the provision of telecommunication services such as the voice calls and the messaging system services.
Currently, the company is ranked as the largest in the world in terms of revenue. This is mainly attributed to the idea that it has invested in other telecommunication service providers in the world that have over the years been making huge profits.
However, in terms of subscribers, Vodafone is ranked second in the world after the China Mobile. As at 2010 it was estimated that the China Mobile Company had over three hundred million subscribers.
The objectives of the paper
This paper will try to look at the Prahalad and Hamel’s core competence issues and ideas. That is, the issues that have been raised by the two people in regard to strategic management in corporate companies and organizations. The paper will further look at how Vodafone has made use of these ideas to remain ahead of its rivals in the United Kingdom and the world at large.
Vodafone has been chosen as a case study for this paper because it is the leading telecommunication company in the world in terms of revenue and subscribers. In the last section of the paper, the contributions made by Prahalad and Hamel in the field of strategic management shall be addressed.
This will involve looking at some of the available theories so that the points can be well illustrated. In the end, a conclusion of the points raised will be given so that a common ground regarding this topic can be achieved.
Prahalad and Hamel’s core competencies
According to these two people the company should have a clear outline of what it wishes s to achieve in a given duration of time. They say that this is very important because it can be used to gauge the growth of the company over time.
They have given examples of two companies, GTE and NEC, which were the greatest rivals in the 1980s and early 1990s. They say that NEC was a smaller company compared to GEC in the early 1980s. However, due to proper planning and organization, they have observed by the late 1980s NEC had out done GEC in terms of sales.
On the other hand, they argue that in order to remain competitive in the market, a company needs to diversify and improve on its products. Such a move they argue may go a very long way in making sure that the company remains relevant in this competitive world.
For instance, we find that the NEC top management decided to make semi conductors as its main core product. As a result, the company had to make sure that it makes the best semi conductor at a very low cost. This went a long way in making its presence felt in the market in spite of the existence of other players.
In order to have a competitive advantage over their rivals, the companies should integrate multiple streams of technologies and have in place a team that is able to coordinate the production of goods in the company. Moreover, they have claimed that production of smaller items able to perform similar tasks makes the company remain at a competitive edge than its rivals.
The company’s ability to establish an effective communication is another way of establishing competence. According to them, the company should be able to know the needs of its clients. This can only be possible if it has created an effective line of communication with clients. Moreover, they have observed that it is important for the concerned companies to establish subsidiaries in different parts of the world.
They argue that such a move will increase revenue because there will be no tax levied on such goods. As a result, the products will be cheap and hence accessible to many. They have also noted that it is very critical to establish a research and development center.
This according to them will help the company address the needs of the people effectively. The research and development centers are meant to help the company develop goods and services that are easily accepted in the market.
The employees who are the main players in the success of the company should not be ignored. In fact, in order to increase their input in the company they need to be paid better wages than the rival companies. This will reduce the chances of another company poaching the experienced staff. Besides monetary issues, employees should be given a good working environment.
Many companies have often blamed their employees of laxity while it is the one that fails to provide the necessary environment for them to work under. These are some of the issues that some companies have ignored. As a result, their company does not record any significant growth as others who have adopted the above strategy.
According to them, the core competencies are characterized by a number of factors. Firstly, the company must be prepared to provide a wide variety of markets for goods and services. That is, by way of diversifying products and services the company stands a better chance of conquering the markets than its rivals with a single product.
Secondly, the core competence of the company should ensure that customers have a positive perception of goods and services. The value of the products must perceived by the customers just as designed in the company. They should see the benefits of the designed products. This means that the clients who buy such products should enjoy the benefits that come with purchasing such other than regret buying it.
Lastly, they have argued that core competencies should be difficult to be imitated by other organizations. According to them, a company cannot claim to have core competencies if other companies can easily copy and imitate what they claim to be their core competencies.
They acknowledge that although the rival company may copy some features, it should not be possible for such company to get the inner details of such core competencies.
The application of Prahalad and Hamel’s core competencies in Vodafone
Based on what Prahalad and Hamel have said as the core competencies of an organization, Vodafone has adopted most of them, and this can be explain why the company has remained as one of the major players in the telecommunication industry. According to Scholz (2008), the company has an every- year plan where its growth is evaluated based on its performance in the previous years.
He has observed that, the company’s top brass has to make sure the goals set are realized by allocating each department its own goals. The head of the department further delegates the set goals to each person within his or her department. This means that every person within the company has set goals that have to be realized at the end of the year.
As a result, each department is held responsible if has not achieved the set goals. He argues that reports are usually produced at the group level although the senior managers can access them before other members. He has noted that it is the duty of the senior managers to call the departmental heads to enquire why the established targets have not been met.
According to him, the company has recently introduced a policy where its members of staff are paid bonuses at the end of the year based on their performance in the entire period. Therefore, there is increased competition amongst staff as each tries to achieve the set benchmark. This he says explains why the company has continued to record significant growth year in, year out in terms of revenue and customers base.
In addition, Vodafone has diversified its mode of operations. This is according to Gruber (2005) who has stated that mobile phone companies are known for providing calling and messaging services. However, Vodafone has moved a notch higher and has introduced a number of services to its clients, not only in United Kingdom but to the rest of the world where it operates.
For instance, he has observed that the company introduced internet services to its customers with internet enabled mobile phones. He argues that this is a major milestone to the company because there will be an increase in revenue from the internet besides the one from voice calls and the messaging system.
In addition, he has stated that, the company has introduced the fixed data internet service. This entails providing internet services for use in the computers. This according to him has not only forced the other providers to lower their internet charges but also increase their penetration in the market.
The company in the year 2007 introduced an exclusive service to its clients operating under the Safaricom brand in Kenya; it was the MPesa service where people were able to send and receive money using their mobile handsets. According to Amason (2011), this service was designed by Vodafone in the United Kingdom but was tested in Kenya where it has revolutionized the mode of sending and receiving money.
This he says earned the company much respect all over the world. He says that the company has continued to be honored by many organizations for such an achievement. The idea of diversifying the products and services offered to the customers has been well illustrated by Prahalad and Hamel.
According to Amason (2011), Vodafone has heeded to the advice given by Prahalad and Hamel. He has observed that the company has moved a step further and introduced numerous tariffs to cater for the different classes of people in the society. He notes that this is a strategic move to capture the poor and the rich in the society.
As a result, he has claimed that the company has continued to record an increase in the number of subscribers all the years it has been in operation. Its rivals have been forced back to the drawing board to look for modalities on how to counter the move by the Vodafone Company. Therefore, he argues that having a proper guideline on how the company should be operated and run is very important.
Vodafone has created a good working environment for its employees. This is according to Dodd (2002) who argues that the company has a policy of rewarding its top performing staff. He says that this is a positive move aimed at improving the performance of the employees. Moreover, the company has allowed its employees who wish to further their studies to do so.
He says that the company has a policy of providing financial assistance to such staff and consequently promoting them once they are through with their studies. This he says has enabled a good number of its staff devotes all their energy to the company as a sign of appreciation to what it has done to them. This has gone a long way in propelling the company to greater heights of success.
In order to meet and address the needs of its clients fast and effectively, Vodafone has introduced a customer care number where its customers can call and share the issues and the problems they may be having. As Prahalad and Hamel argue, it is very important to have a communication line between the company and its clients.
As Hitt (2009) notes, the company records all the queries from its customers so that the problems raised can be addressed immediately. This gives Vodafone a competitive advantage because the problems raised by one customer are addressed so that they do not recur in future. As a result, subscribers will always be satisfied with the kinds of services being offered to them by the company and hence remain within the network.
This will prevent such subscribers from contemplating any attempts of moving away from the network because, the other networks may not be providing quality services as the one being provided by the Vodafone Company.
The company has also introduced a reward system for its subscribers. This is according to Hitt (2009) who says that the subscribers earns points depending on the amount of airtime they spend calling within or outside the network. He says that the company policy is to give back to its customers.
He argues that after a subscriber has accumulated a certain number of points he or she is allowed to redeem them to earn talk time, free data or even free messages across all networks within the United Kingdom. He argues that all these services are offered so that the company can retain and add in its customer base. He argues that this service has been spread to all the countries where Vodafone operates or its subsidiaries.
In addition, Amason (2011) has argued that the company has also gone a notch higher and introduced a service for its client to borrow credit in case they run out of the one they have. This service has been welcomed by many people because they do not have to worry of running out of credit along the road. He says that a person is required to dial a specific number to select the amount he or she want credited to the mobile handset.
However, he notes that this is not a free service because one has to repay the advanced credit within a stipulated time. An interest of ten percent is charged on every credit advanced. This has made Vodafone make millions of money from these advances.
As a result, it has continued to grow in terms of revenue and has been ranked as the leading telecommunication company in the world. We can say that Vodafone Company has fully utilized the points given by Prahalad and Hamel in the Core Competence of the Corporation.
Evaluation of Prahalad and Hamel’s wider contribution to the field of strategic management
Prahalad and Hamel have been regarded as the pioneers of strategic management. This is because most of their writings in the early 1990s have inspired many companies to adopt their way of thinking.
Strategic management refers to the plans laid down by the senior management team as a path to follow in order to achieve the desired goals. This according to Hitt (2009) entails the utilization of readily available resources so that what the company intends to achieve is realized. He says that an organization needs to have its vision and objectives from the day it began its operations.
Woods (2001) argues that Prahalad and Hamel have brought about some ideas that are very useful in the field of strategic management. According to him, the management team should have a vision of how they want the company to be after a number of years. For instance ten years. He says that this is paramount because it helps such people to have proper planning as they intend to achieve such a goal.
This is also another way of ensuring that the company stays ahead of its competitors because of prior planning. Furthermore, Prahalad and Hamel have brought about the issue of influence within the industry. According to Gruber (2005), a company that wants to remain ahead of its competitors should invent policies that will affect the other players in the market to follow the same trend.
That is it should redefine new ways of conducting business. In his remarks, he has said that Prahalad and Hamel see a successful business as a rule maker for the others other than the rule taker. They say that this gives the company a more bargaining power compared to others in any kind of business competition.
The other contribution by Prahalad and Hamel in the field of strategic management has been the issue of dangers posed by the upcoming competitors. According to Harrison (2010), the company has to keep on improving the services it offers to its client in order to retain them.
He has noted that the new players in the market are offering their services at a cheaper rate in order to poach customers from the already established companies. To counter this effect, Prahalad and Hamel had recommended that, the company needs to introduce other services that will be exclusive for their clients alone. This they said would go along the way in ensuring that customers do not move to other competitors.
Another point given by Prahalad and Hamel in regard to strategic management has been the issue of downsizing. They have noted that some companies spend a lot of money in salaries. Owing to the improvement in technology, he says that these companies need to embrace technology which is would help the company cut down its expenses.
Strategic intent
This is used to refer the objectives of the company as continues with its operation in a given area. According to Harrison (2010), the company ought to have a guideline that will help in the day to day running.
Prahalad and Hamel argued that strategic intent involves an active management process that zeroes in on the organization’s attention on the essence of winning, motivating the members of the public by way of informing them the importance of their target. In addition, they have said that it is very important for the company to set up a chasm between the ambitions and the resources.
According to them if a company wants to achieve a long term success, it is important for it to remain consistent by sharing the intent within the organization. They say this is a good way of driving a company to greater heights of success.
Strategy as related to stretch and leverage in the business environment
Prahalad and Hamel have argued that proper planning within an organization can make it the rule maker other than the rule taker. They say that some of the best performing companies in the world today have had big ambitions that they have managed to accomplish. They say that these companies have found a less intensive way to meeting their targets.
It is at this point that they say that leverage complements the strategic allocation of resources. They claim that this is only possible if the resources are concentrated around the strategic goals, making sure that the resources are accumulated in an efficient way.
In addition, this can happen through complementing some resources with others, as well as taking care of resources whenever possible. According to them, this can happen through the recovery of resources from the market place as fast as they can.
Theories
A number of theories have been brought forward to explain the strategic management debate. Some of them include the quantitative approach, the system perspective, and the human resource approach. According to Amason (2011), the human resource approach theory emphasizes that people should be managed by way of looking and understanding their psychological make up and needs.
This means that the company should not provide services or goods that are not of any interest to the people. In the Quantitative approach theory, he argues that the management perceives making decisions based on the opinions of the senior managers.
This is a very efficient way because it allows ventilation by all people concerned. The systems theory views an organization as made of inter related parts that have to be involved in every step of decision making by the company. This is because failing to involve one part of the system may result in a negative impact on the company.
Conclusion
Management of a business corporation requires people with thorough knowledge on how it should be run. We have found that Vodafone has become the world leading Telecommunication Company because of proper planning by its senior management team.
It would, therefore, be necessary for other companies involved in this kind of business to try and get some concepts on how well they can run their businesses. Such a move would go along the way in making sure that they improve on their performance in the future.
Reference List
Amason, A., 2011.Strategic Management: From Theory to Practice. New York: Routledge.
Dodd, A., 2002.The essential guide to telecommunications. New Jersey: Prentice- Hall, Inc.
Gruber, H., 2005.The economics of mobile telecommunications. Cambridge: Cambridge University Press.
Harrison, J., 2010. Foundations in Strategic Management. Mason: Cengage Learning
Hitt, M., 2009. Strategic management: competitiveness and globalization: cases. Mason: Cengage Learning.
Scholz, C., 2008. Human Resource Management in Europe. Oxon: Routledge.
Woods, A., 2001. Strategic management: a fresh approach to developing skills, knowledge and creativity. London: Kogan Page Limited.