An Introduction To Vodafone Economics Essay

Vodafone group PLC is a British multinational mobile network operatorheadquarter in Newbury, England. It has formed in 1984 as a subsidiary of recal electronics PLC. It became an independent company in 1991 and changed its name to Vodafone group PLC on 2000.Vodafone is a world leading mobile telecommunications company. Vodafone provides a wide range of

Communication services, including voice calls, SMS text messaging, MMS picture and video messaging, internet. Access and other data services Vodafone is the world largest telecommunication network company with 146 subsidiaries

Vodafone directly own and manage about 2,200 stores around the world and they also have around 10,300 Vodafone-branded stores run through franchise and exclusive dealer arrangement, An industry with 5.6 billion customers with growth driven by increasing global demand for data services and rising mobile penetration in emerging markets.

TYPES OF ORGANIZATIONS

An Organization is a group of people that working together towards a common goal. There are 2 types of Organizations.

Private Sector

Public Sector

Private Sector

It is the part of national economy that is not directly controlled by the government. It provides more job opportunities for the people. So they will give a good support to the government. Private Sector includes sole traders, partnerships, joint ventures, limited companies, Co-operatives, clubs and societies.

Sole Trader ship

It has no complexities, with minimum interference of statutes, which is run by a single individual with his own capital, the decisions too being taken by himself. The most common business unit of the world is these. The main reason for this is that, ability of this business to be carried on without the necessity for adherence to rules.

Partnerships

It is a legal relationship between two or more individuals who are working together to achieve a specific goal. They should have an intention to earn profits, Collective responsibilities and a common destiny or goal.

Joint ventures

It is a short term association of a few persons in order to accomplish a specific task. Generally they do not use a business name. The joint venture is dissolved when the specific task is accomplished. This is a short term business type.

Incorporate Companies

In Sri Lanka institution registered under the companies ACT NO.7 OF 2007 is considered as an incorporated company. It includes Limited Companies, Companies limited by guarantees, unlimited companies, Offshore Companies, Foreign Companies.

Public Sector

It is the part of an economy that is directly controlled by the government. Public Sector is the largest sector of any economy in the country. It provides basic goods or services that cannot be provided by the private sector. It includes Gov. Departments, Gov. Corporations, and Gov. Companies. It is also known as State Sector or the Government Sector.

Responsibilities of stakeholders

Stakeholders are individuals, groups or organizations that have an interest in the activities and behavior of a business. They can be internal stakeholders, like employees and partners, or external, such as customers, suppliers, government or the media for example. All stakeholders can influence as well as be influenced by Vodafone.

Every Stakeholder has responsibilities towards the Vodafone to achieve vodafone’s goals and objectives.

Owners and share holders

As the owner of a business, it is the responsibility to pay for employees and provide them with proper benefits, including sick time and health insurance. Aside from payment and benefits, responsibilities of an entrepreneur include listening to employee concerns keeping employees in good working conditions, and hiring and firing employees when needed.

Managers

The manager must be able to ensure that all requirements of his department are met on time and motivate employees to perform at their highest capabilities. He must also know exactly what each of his staff is capable of and give them work that they can complete effectively while also challenging them to achieve more.

Staff and employees

They have to perform their tasks carefully, keep business and professional secrets confidential. They have to follow the supervisor’s instructions and improve their abilities and skills. They have to be honest and polite to the company.

Customers

After using goods or services they have a responsibility to give feedback to the company. Customers have to provide clear and correct information about their needs and wants. And they have to give the correct information required. They have to be loyal and honest to the company.

Identify Vodafone profile

Mission statement;

“To enrich customers lives through the unique power of mobile communication”

Vision statement;

“To be the world’s mobile communication leader”

Goals

Goals are the clearly stated objectives of the company, Vodafone has stated six global strategic goals

Delight our customers

Built the best global Vodafone team

Leverageglobal scale and scope

Expand market boundaries

Be a responsible business

Provide superior shareholder returns

Values

Values are the beliefs of an individual or a group. Vodafone has four core values described internally as passions’

For customers

For results

For Vodafone people

For the world around Vodafone

Vodafone growth

Vodafone’s Key revenue performance indicators

Vodafone group PLC has shown their growth of revenue in this table.

We also aim to lead the tablet segment, which is growing rapidly. We were the first operator to launch an Android Honeycomb tablet with the Samsung Galaxy Tab 10.1v and we have started to distribute the Apple iPod 2. During the year we introduced the Vodafone K4605 USB stick which provides theoretical peak data download speeds of 42.2 Mbps using 3G/HSDPA technology and a 4G/LTE USB stick which has the potential for faster download speeds. We also launched Vodafone WebBox and Vodafone TV services (Annual report-2011 page23).

Vodafone market share

The table below sets out the amounts of total cash dividends paid or, in the case of the final dividend for the 2011 financial year, proposed, in respect of each financial year.

Financial year

Devident per ordinary share

2007

6.76%

2008

7.51%

2009

7.77%

2010

8.31%

2011

8.90%

(see page 21 for further information)

We can clearly identify the market share of the Vodafone group has increased rapidly year by year. The good will of the vodafone has increased by providing perfect service for thie customers and could have create loyal customers.

Different types of economic systems

Capitalism (market economy)

Capitalism is an economic system in which the means of production are privately owned and the firms mainly target profits, in competitive markets. it is known as market economy because it is seek to maximize satisfaction or profit through own decision regarding consumption or production.

Characteristics

all resources are owned by individuals

The decisions about the allocation of those resources are made by individuals without government intervention

No significant economic role for government is necessary.

The concept of supply and demand plays a role in determining the pricing structure

A market economy encourages competition.

The U.S. is most commonly example for market economy which had many provisions that facilitated and protected the market economy’s characteristics..

Advantages:

The market gives producers an incentive to produce goods that consumers want.

The market provides an incentive to acquire useful skills.

The price system encourages producers and consumers to conserve scarce resources.

Disadvantages

(1) A private market economy may be quite unstable (unemployment, inflation, growth)

(2) Business may simply satisfy the wants they have created through advertising.

(3) Prices may affect to the consumers

(4) Markets just do not work in some areas such as public goods, and national defense

Socialism (command economy)

Characteristics

The government creates a central economic plan for all sectors and regions of the country.

The government allocates all resources according to the central plan. The goal is to use the nation’s capital, labor and natural resources in the most effective way possible

The central plan sets the priorities for production of all goods and services. The goal is to supply enough food, housing and other basics to meet the needs of everyone in the country.

Cuba, North Korea, China, Russia and Iran are the most commonly examples of command economies. Russia’s Go plan has been the most studied. It was also the longest running, lasting from the 1930s until the late 1980s. Advantages

The govt. Will ensure a more equal distribution of income and wealth

Essential goods/services will be provided to the community

The govt. Can determine which goods are produced.

1. There is little consumer choice.

2. Little variety of goods and services

3. Loss of individual freedom

4. Leads to allocate and productive inefficiency

5. Subsidies on essential goods and services quickly lead to shortages.

Mixed economy

A mixed economy is an economic system that incorporates aspects of more than one economic system. This kind of economic system has both privately-owned and state-owned enterprises or that combines elements of capitalism and socialism, economic systems.

Characteristics

private sector business activity encouraged.

taxes used to collect revenue to pay for state goods and services.

The government also provides services such as education, health, military defense, legal and infrastructure to society.

The government plays an important role in resolving economic problems faced by society

advantages

less inequality of income because intent of government is to have a balanced economic growth of an economy.

allows individuals to run their business and make profits

Goods and services are produced to benefit the society rather then to benefit the economy.

Fiscal policy

Fiscal policy is the use of taxes and government spending to control the economic activity of a country.the government uses this policy to continue,

Economic growth

Price stability

Full employment

Expansionary fiscal policy

Before the government spending increase and before the tax rate reduction or both GDP is low because the price level of the economy is low. After increase G and reduction T, GDP is high because increase of the AD. Shifting the graph to the right. (AD to AD1 )This is accomplished by increasing aggregate expenditures and aggregate demand through an increase in government spending or a decrease in taxes. Expansionary fiscal policy leads to a larger government budget deficit or a smaller budget surplus.

Crowding out effect

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Contractionary fiscal policy

Before the tax increase and government spending decrease or both GDP is high because price level is high. After increase tax and decreased government expenditure increased AD is low, GDP is low and price level is low. Contractionary Fiscal Policy creates budget surplus shifting the graph to the left(AD1.to AD)

.

monetary Policy

Monetary Policy consists of change in money supply to influence interest rates and thus the total level of spending in the economy. Monetary policy tools are,

Open market operations

This is the most important instrument to control the money supply and demand of the economy.FED buying bonds from banks and public to expand monetary policy by increasing bank reserves. FED selling the bonds to the bank and public to tight the monetary policy by reducing the bank reserves.

Reserve ratio

It is Designed to change the amount of required reserves. FED raises the ratios to cantrction the monetary policy. It means bank loose the reserves and reduce the ability of the creating money. FED lowers reserve ratios to expan the monetary policy, banks gain tha reserves and ability to create money.

Discount rate

Interest rate charge by FED on the loans they granted to commercial banks.

Easy money policy (Contractionary monetary policy)

It is the monetary policy that seeks to increase the size of the money supply by buying securities, lower the reserve rate and lower the discount rate. These all directly impact the interest rate.FED increase bank reserves by purchasing securities and at the lower rate bank can keep more money in the volute and create money.

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It is the monetary policy that FED seeks to reduce money supply in the market by selling securities, increasing the reserve rate, and rising the discount rate. It is causes to reduce bank reserves and volute money at banks. It is decrease money supply in the economy. In the curve shifted to the left (Ms1 to Ms2)

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http://www.economicsonline.co.uk/Business_economics/Telecoms.html

Fiscal policy impact to the Vodafone UK

Because of the UK statutory tax rate reduced to 26%, effective from 1 April 2011 and the impact on the year end tax balances. EBITDA increased by 8.0% with the EBITDA margin increasing by 0.7 percentage points, reflecting higher service revenue.

A shareholder in the Company who is an individual resident for UK tax purposes in the United Kingdom is entitled, in calculating their liability to UK income tax, to a tax credit on cash dividends we pay on our shares and the tax credit is equal to one-ninth of the cash dividend. The tax free allowance – all income earners are allowed to earn an amount of income before they start to pay tax., the personal tax free allowance in the UK for 2011-2012 was £7,475.

Monetary policy impact to the Vodafone UK

According to the Vodafone annual report, 45.9bn revenue performs in 2011 and it is 3.2% growth in compared with 2010. It is because the UK government expands the monetary policy by buying Bonds from people and it caused to money supply increased. People has more money to spend on Vodafone services and products there for the demand of the mobile customers are increased by 14.5% to 370.9 m.

International trade

The economic interaction among different nations involving the exchange of goods and services, that is, exports and imports. The guiding principle of international trade is comparative advantage, which indicates that every country, no matter their level of development, can find something that it can produce cheaper than another country.

As a multi national company, Vodafone Global Enterprise manages the communication needs of over 560 of our largest multinational corporate customers. It provides a range of managed services which bring together every aspect of a customer’s telecommunications infrastructure, both fixed and mobile,(Annual report Vodafone group-2011)

Advantages by international trade for Vodafone

Quality of the product has been increased because of high competition with foreign businesses

Having an open economy Growth of high technologically methods using by Vodafone group

Increased company reputation world wide

Market share has been increased

Disadvantages

smart phones and the tablet market begins to take off.

markets remain competitive and the economic environment, particularly across southern Europe, is challenging.

Foreign Industry regulators continue to impose lower mobile termination rates and lower roaming prices.

The combination of competition and regulatory pressures.

Increase prices of the Vodafone products because of tariffs.

Emerging markets

Definition

The term emerging markets is commonly used to describe an economy with a GDP per capita substantially below the advanced world average and typically with a growth potential above the global average. According to the World Bank’s definition an emerging markets country has a Gross National Income (GNI) per capita less than approximately USD 9,000.(growing markets)

The most exciting emerging markets are, BRICs( Brazil, Russia, India, China), Mexico, South Africa, Clombia, Hungary, Indonesia, Turkey, Poland, Malaysia,Chile,peru, Thailand.

Barriers to entering emerging markets for UK businesses

Differences in language and culture are important barriers to entering fast-growing markets like the BRICs.

Global trade has always been vital to the UK

UK firms looking to export for the first time continue to face too many barriers that put them at a competitive disadvantage to their overseas competitors.

capital is drives many businesses to take on the risks of doing business in emerging markets.

Considering about the success of Vodafone’s in emerging markets, The number of customers using mobile services in emerging markets such as India and Africa has grown rapidly over the last ten years, increasing by over 17 times, compared to nearly 130% in more mature markets such as Europe. increased revenue market share in India and Turkey. Approximately 75% of mobile customers are in emerging markets such as India and China.

EU crisis

This week BCC met with a delegation from APEX, the Brazilian trade and investment promotion agency. It is clear that there are vast opportunities in the country, as indeed there are in the other emerging markets, which UK firms are yet to take full advantage of. BCC’s latest research confirms that the EU remains the most popular destination for UK exports. Just under half of Chamber exporters see the large and faster-growing ‘BRIC’ economies of Brazil, Russia, India and China as the best prospective markets for increasing business over the next twelve months. Unfortunately, exporters to the fast-growing BRIC markets are the most likely to encounter barriers that hold back sales.

Poster

Conclusion

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