Introduction
This report aims to analyze the success of Vodafone Qatar, one of the two telecom providers in Qatar. Since 2018, when the parent company of Vodafone in Europe sold its share to a government organization of Qatar named the Qatar Foundation, the company experienced a significant rise in profitability, quality of services, and the number of customers. This report aims to assess the company’s strategic management practices to determine what made the company successful and how this success can be sustained in the future. First, the report introduces the company and the industry to introduce the most important facts about the company’s development during the past five years. Second, the paper provides an analysis of the external environment using the PESTLE framework and Porter’s Five Forces. Third, the report provides internal analysis using a resource-based view framework and financial analysis. Fourth, the report summarises the finding in a SWOT matrix. Finally, conclusions about the central reasons for success and prognosis for its future are made. The report is concluded with a list of recommendations to ensure the sustained success of the company in the future.
Background Information
Company Overview
Vodafone Qatar became independent from Vodafone Europe in 2018 with the right to continue providing services under the brand of Vodafone for five years. Since its establishment, the company has been known to deliver great value to its customers in Qatar. By 2018, the company had more than 1.4 million active customers that used a state-of-the-art network (Vodafone Qatar, 2019). In 2021, the company reported having more than 1.9 active customers, which demonstrates significant growth (Vodafone Qatar, 2022). Since 2019, all the sim cards of Vodafone Qatar are 5G-ready, and the official stores of Vodafone Qatar sell several options of 5G-ready phones. Since 2018, 94% of Vodafone Qatar’s shareholders have been Qatar residents, and the company’s controlling interest belongs to government agencies. The company has a paid-up capital of QR 4.227 billion with more than 31,000 shareholders (Vodafone Qatar, 2019).
In 2018, the company’s mission was “to inspire everyone to live a better today and build a better tomorrow” (Vodafone Qatar, 2019, p.13). The company declared itself the most innovative digital company in Qatar. The company declared a first-ever profitable year in the same year with 118 million QR in net profit (Vodafone Qatar, 2019). Despite the continuous blockade and the COVID-19 pandemic, the company continued to grow its profits in 2021, as it declared a net profit of 327 million QR (Vodafone Qatar, 2022). Thus, the company made significant changes in 2018, which resulted in acquiring a significant competitive advantage.
Industry Overview
This research focuses on the performance of decision-making on all levels in telecom projects in Qatar. The telecom sector in Qatar is a duopoly dominated by two large companies, including Ooredoo and Vodafone Qatar. Both companies are primarily owned by the government, which ensures their stable performance (Ooredoo, 2021; Vodafone Qatar, 2019). While Vodafone Qatar was a branch of Vodafone, a global mobile operator, it was sold to Qatar Foundation in 2018 due to financial underperformance (Vodafone Qatar, 2019). As a result, in 2019, the company was restructured, which led to a rise in profitability of the company, increased coverage, and improved workplace culture (Vodafone Qatar, 2019). Today, Vodafone and Ooredoo have similar coverage, both introduced 5G technology, and the companies’ financial performance is stable (Ooredoo, 2021; Vodafone Qatar, 2022). However, Ooredoo provides services of a better quality for a higher price, while Vodafone is viewed as a cheaper alternative.
The telecom market in Qatar has witnessed a significant rise in recent years, and it is expected to grow in the nearest future (Yaici, 2021). The growth of the market is mainly attributed to the growth of the population and increased adoption of smartphone use (Global Monitor, 2021). Additionally, the growth of sales is attributed to increased demand for premium connectivity and increased use of content services (Global Monitor, 2021). Thus, the current trends in the market growth are positive.
External Analysis
PESTLE Analysis
PESTLE framework is a common technique utilised for analysing external environment of a firm (Rastogi and Trivedi, 2016). The framework allows entrepreneurs and investors to assess the political, economic, social, technological, legal, and ecological factors that affect the company’s success to make informed decisions about investment or development (Rastogi and Trivedi, 2016). The analysis of these six types of factors is discussed below.
Political Factors
There are two central political situations that affect Vodafone Qatar significantly. First, in 2017, due to a diplomatic crisis in the Middle East, several countries, including Saudi Arabia, the United Arab Emirates, and Egypt, stopped all their diplomatic relationships with Qatar (Ramani, 2021). This crisis ended with the blockade of Qatar’s borders by the neighboring countries. As a result, numerous businesses were forced to leave Qatar, including Vodafone. While this was expected to be a negative factor for the company’s development due to increased uncertainty, the blockade had a positive effect on the company’s performance due to the support of the government and a coordinate corporate culture change (Vodafone Qatar, 2019). The change led to improved financial performance and a growing number of customers.
Second, the war in Ukraine positively affect Qatar’s economy due to increased interest in liquidized natural gas (LNG) produced in Qatar (Wallace and Foxman, 2022). European Countries made several limitations on oil and natural gas from Russia due to its invasion in Ukraine (Wallace and Foxman, 2022). As a result, European countries became highly interested in Qatar’s LNG, which positively affected the demand for Qatar’s products, as it is the largest producer of LNG in the world (Wallace and Foxman, 2022). While increased demand for Qatar’s LNG did not have a direct effect on Vodafone Qatar, it served as an encouragement for the oil and gas sector to expand its production, which, in turn, encouraged more people from abroad to emigrate to Qatar (Wallace and Foxman, 2022). Thus, the number of potential customers of Vodafone Qatar is expected to increase. At the same time, the war can lead to extensive political instability in the world and disruptions of political and economic ties between different countries. Thus, it may be a significant threat.
Economic Factors
There are several economic factors that affect Vodafone Qatar that should be mentioned. First, Qatar experienced a significant economic decline due to the blockade in 2017, which negatively affected the telecom sector due to a decrease in demand for services (Vodafone Qatar, 2019). Even though the blockade ended in 2021, there are still tensions that negatively affect Qatar’s economy (Wallace and Foxman, 2022).
Second, the COVID-19 pandemic had a significant negative impact on Qatar’s economy due to decreased demand for oil and gas (PWC, 2021). Even though the demand has increased since the crisis of 2020, the further spread of the virus may lead to new restrictions on travel, which will decrease the demand for fuels.
Third, Qatar experienced a significant economic rise due to the growing demand for LNG associated with the war in Ukraine (Wallace and Foxman, 2022). Fourth, the telecom industry is experiencing a significant rise due to population growth and increased demand for premium telecon services (Global Monitor, 2021). Thus, even though the company is affected by some negative economic factors, the current economic climate is favorable for the company’s development.
Social Factors
Even though there are numerous social factors that may affect the company, this report focuses on three most influential ones. First, people around the world started using smartphones more often due to the pandemic (Serra et al., 2021). Mobility restrictions led to increasing use of online delivery services, messengers, and social media (Serra et al., 2021). As a result, Qatari residents demand developed a need for improved coverage and stability of the connection to stay connected all the time (Vodafone Qatar, 2022). Second, the customers view Vodafone Qatar as a cheaper and more flexible alternative for young adults in comparison with Ooredoo (Vodafone Qatar, 2022). Since the majority of Qatar’s population is young males, Vodafone Qatar may become a more favorable option that its competitor. Third, Qatar’s economy has been greatly affected by the growth of the construction and hospitality sectors associated with FIFA World Cup 2022 (Al-Dosari, 2020). The rapid development of the sector led to growing migration to Qatar, which increased the population of the country. However, since the World Cup will be over in 2022, the growth of these sectors may slow down, which will may slow down population growth as well.
Technological Factors
Development of technology has a high effect on Vodafone Qatar since it is a high-tech firm. There are two trends that affect the telecom industry of the world in general and Vodafone Qatar in particular. First, the emergence of 5G technology encouraged Vodafone Qatar to make significant investments in the development of its networks, which required significant funds (Vodafone Qatar, 2022). However, the introduction of 5G technology increased positively affected the demand of customers for the company’s services, which positively affected Vodafone Qatar’s revenues (Vodafone Qatar, 2022). Second, the development of connectivity software, such as messengers, video conference software, and contact tracking software for the prevention of the COVID-19 pandemic also positively affect mobile internet use. Thus, technological factors favour the growth of the company.
Legal Factors
Vodafone Qatar operates in a strict legal environment. The company operates under intense surveillance of the government, which restricts its expansion attempts and the formation of prices (Vodafone Qatar, 2022). In particular, the company has to offer competitive prices with Ooredoo to ensure that no monopolistic prices are established. Trying to offer the same prices as Ooredoo would lead to penalties from Qatar’s anti-monopoly authorities. Second, the government has increased influence on the board of directors, which restricts their freedom concerning expansion initiatives and collaboration with international actors. Thus, the legal environment is not favorable for expansion and significant changes in the business. However, since the government owns the majority of the company’s share, it supports Vodafone Qatar both financially and legally when it comes to licenses, taxes, and fees.
Ecological Factors
Environmental sustainability is imbedded in the strategic management of the company, as the board of directors see increased importance in the matter (Vodafone Qatar, 2022). As modern society becomes increasingly concerned with the environment, the company grows in accord with the sustainability demand of the customers.
Porter’s Five Forces
Porter’s five forces is a common framework utilized for determining how external stakeholders affect a company’s performance (Bruijl and Gerard, 2018). The model analyses external environment in terms of the threat of new entrants, the threat of substitution, bargaining power of suppliers, bargaining power of customers, and competitive rivalry. Even though the model was introduced in the 1980s, it is still applicable to modern reality (Bruijl and Gerard, 2018). Porter’s five forces analysis is provided below.
Threat of Substitution: Low
The only substitute to mobile connectivity is land internet connection and land phones. Moreover, mobile phone calls can be substituted with online messengers, such as Viber, Skype, and WhatsApp. However, in order to use such messengers, the customers still need a mobile internet connection, which is provided by Vodafone Qatar and Ooredoo. Stationary internet connection and stationary phones cannot provide the same mobility. Thus, the threat of substitution is low.
Threat of New Entrants: Low
Qatar government controls which companies enter the telecom market, and it is not likely to invite new telecom providers, as it is satisfied with the current state of the industry. Moreover, entry into the telecom industry requires significant resources and admission of significant risks. Therefore, the threat of new entrants is low.
Bargaining Power of Suppliers: High
The growth of the company is highly dependent on high-end equipment that is provided by a limited number of suppliers (Vodafone Qatar, 2022). These suppliers are located in Europe China, which makes Vodafone Qatar dependent on imported goods. The war in Ukraine and the COVID-19 pandemic have disrupted supply chains around the world, which implies that list of suppliers may grow shorter. As a result, the bargaining power of the existing suppliers grows stronger. Thus, the bargaining power of suppliers was estimated to be high.
Bargaining Power of Customers: Moderate-to-High
Even though the competition is not very strong, as there is only one true competitor, the bargaining power of the Customers is higher than moderate. The problem is that Ooredoo provides slightly better services for a slightly higher price. If Vodafone Qatar decreases the quality or increases the prices even a small amount, it is very likely that the company will experience a significant decline in demand because there is a better alternative for almost the same price. Thus, the bargaining power of customers was assessed to be moderate to high.
Competitive Rivalry: Moderate
Vodafone Qatar operates in a duopoly, which implies that there is only on true competitor. Both Ooredoo and Vodafone Qatar have similar coverage and similar quality of services. Moreover, the government controls the decisions of both companies, which limits the competitive rivalry between the companies. However, it should be noticed that the rivalry cannot be seen as low because Vodafone Qatar is forced to keep up with Ooredoo in terms of innovations and prices. Thus, the competitive rivalry was assessed to be moderate.
Internal Analysis
Financial Performance
The company’s performance is one of the key performance indicators that help to assess how successful a company is. Analysis of financials also helps to assess the resources the company has to afford further development. In other words, judging from the resource-based view, money is one of the key resources of any company. This section of the report uses the analysis of dynamics in key financials and ratios to assess the financial health of Vodafone Qatar. Key financials and ratios are provided in Table 1 below.
Table 1. Financial performance of Vodafone Qatar
The analysis of financial performance demonstrates that the company’s gross profit and net profit margins were growing steadily between 2018 and 2021. This demonstrates that the company’s sales were growing faster than the expenses. Thus, the company managed to manage its assets effectively to generate profits. This is confirmed by asset turnover ratio, which grew from 0.24 in 2071 to 0.37 in 2021. Growing asset turnover, ratio demonstrates that the company’s managers can use the assets effectively to generate sales.
The analysis of dynamics in the current ratio of Vodafone Qatar demonstrates that the company’s performance in terms of liquidity varied during the past five years. During the past five years, the company’s current ratio varied between 0.39 and 0.69, which is significantly below the benchmark of ‘1’. A current ratio below ‘1’ may mean that the company does not have enough current assets to cover its current liabilities, which may be a sign of concern.
It should also be mentioned that the company’s debt-to-assets ratio was gradually decreasing for the past three years, which demonstrates that the company’s dependence on debt for financing its assets was declining between 2019 and 2021. In 2021, only 33% of the company’s assets were financed by debt, which is optimal. In summary, the financial performance of Vodafone Qatar was strong. However, liquidity may be a sign of concern.
Other Tangible and Intangible Resources
Vodafone Qatar has highly developed 2G, 3G, and 4G networks with almost 90% coverage of the country (Vodafone Qatar, 2022). The company started to develop 5G network in Qatar; however, at this point, it covers only major areas of large cities and needs further development. Moreover, Vodafone Qatar has a broad chain of retail stores that sell mobile devices and contracts all over Qatar (Vodafone Qatar, 2022). The company has no considerable assets outside of Qatar. Currently, all the company’s assets, are estimated at 6.84 billion QR with a market capitalization of 7.03 billion QR (Vodafone Qatar, 2022). This estimation includes both tangible and intangible assets.
Vodafone Qatar has valuable intangible resources that should be acknowledged. First, the company has a highly professional upper management team that steered the company out of the financial crisis. Since the establishment, Vodafone Qatar demonstrated negative profits until 2018, when the new management team conducted a coordinate strategic change. As a result, the company’s profitability became positive in 2018 and was growing ever since (Vodafone Qatar, 2019). Second, the company has a well-established brand that is associated with high quality and flexibility, which is favored by younger adults. However, it should be noticed that in 2023, Vodafone Qatar will be forced to change the name of the company, which will lead to rebranding (Vodafone Qatar, 2022). Such rebranding is associated with risks that may affect the company’s performance negatively. Third, the company has a highly effective workplace culture focused on the customer, which helps the company to achieve its goals (Vodafone Qatar, 2022). Finally, the company has a large R&D department that ensures that the company is one of the most innovative ones in the country. In summary, the success of the company during the past four years is associated with the effective use of its tangible and intangible resources.
Summary of Analysis
The summary of internal and external analysis was conducted a SWOT matrix, which allows to see all strengths, weaknesses, opportunities, and threats in one chart. The SWOT matrix for Vodafone Qatar is provided in Table 2 below.
Table 2. SWOT Analysis
Conclusions and Recommendations
Conclusions
The external and internal analysis suggests that Vodafone Qatar will remain successful in the coming years. The company experienced significant difficulties before 2018, as it was generating negative profits. Before 2018, the company’s corporate culture was disruptive, Vodafone Qatar had worse coverage and provided lower-quality of services, and the government did not help the company. However, after Vodafone sold all its rights to the Qatar Foundation, the situation improved significantly. The new management appointed by the Qatar Foundation managed to conduct a culture change and make coordinate changes in the operations, which allowed the company to become profitable and competitive. The new management team was able to overcome the negative effects of the blockade, which led to one of the hardest hits on Qatar’s economy in general and the telecom sector in particular.
Since 2018, the external and internal situation has changed for the better, as it may be seen in the SWOT analysis. There are numerous positive factors and only a few negative factors that affect Vodafone Qatar. The company will continue to be successful for three main reasons. First, the company has one of the greatest management teams in the world, which was demonstrated in the culture change and operations of 2018. Since then, the management team has not changed in its core, which implies that Vodafone Qatar’s ability to overcome difficulties and make radical management decisions remains. Second, Vodafone Qatar is supported by the government, which has ultimately infinite resources to help the company stay successful despite any internal and external factors. Finally, people are growing to be more dependent on connectivity and their demand for telecom services grows due to a rise in internet use. These three factors assure that Vodafone Qatar will remain successful during the nearest five years.
There are two threats that may disrupt the company’s success in the future that should be considered. First, the war in Ukraine may escalate, which may lead to severe disruptions in the supply chains. The assessment demonstrated that the company is highly dependent on a limited number of suppliers, which is a significant threat. In case the war escalates, Vodafone Qatar may experience difficulties in maintaining its network, which will lead to decreased quality of services and customer satisfaction. Second, Vodafone Qatar will face rebranding in 2023, which is associated with significant uncertainty. This endeavor will affect one of the central strengths of the company, which is a well-establish brand. Thus, these threats need to be addressed to sustain success.
Recommendations
The list of recommendations for the company to sustain change is provided below.
- Ensure the satisfaction of management, as it is the central driving force of the company’s success;
- Diversify the supply chain to prevent any disruptions in case of escalation of the War in Ukraine or new waves of the pandemic;
- Improve liquidity to ensure that the company has enough funds to cover its current expenses;
- Collaborate with stakeholders with rebranding to ensure that the new brand of Vodafone Qatar does not have any negative effects on the company.
Reference List
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