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Any operating business is affected by factors, which are either arising from within the organisation (micro-environmental factors) or factors, which may be arising from outside (macro-environmental factors) (Gillespie, 2007). Micro-environmental factors are categorised using the PESTEL model. They include the following; "political, economic, social, technological, environmental, and legal factors". PESTEL analysis will help in understanding of macro-environment, which regulates the mobile operators industry in the United Kingdom.

Political Factors

These are the factors, which are with the accordance of how the government is involved in the business activities. The government may want to control the products, which may otherwise be dangerous in hands of ordinary citizens; It should also be involved in the provision of services such social amenities. The government is also involved in subsidizing some products, which are produced by individuals in order to minimize the production cost, which will be reflected in the product or services offered prices.

The political factors of mobile telephone operators industry are always that the government gets involved on the industry. As a rule there are supposed to be restrictions on the phone and tariffs that the industry can produce and all new technology must strictly follow set of government rules.  Political conditions in the UK promote deregulation. Consequently, a lot of competition has developed in the market creating for choices for the buyers. Correspondingly, deregulation from the European Union front will result to new competition in the UK market from the major mobile telephone operators in Europe (Bitchta, 2001).

Economic Factors

Economic growth, interest and inflation rates have an influence on the mobile telephone operators industry. In cases where inflation is being experienced, normally a lot of money is used in chasing just a small quantity of goods or services. The employees are constantly out seeking for high salaries bringing to unfavorable business environment. Global recession made most of the companies in the industry raise their prices. The UK economy has been put into deep recession by the global economic meltdown. Public finances in the UK have greatly been influenced by the global economic crisis.

Policy makers and investors are worried by the increasing deficit ratio on GDP in the UK, which has reached 13%. National debt rate official reports states that it is about 68% of GDP and is accelerating at an alarming rate. Four years back, the national debt ratio was only 38%, and it now seems it might exceed 100% in the next three years (Global Economic Crisis, 2010). Purchasing power of the general population has been lowered by the numerous job losses, which are currently experienced in the UK. Mobile telephone market will directly be influenced by such an economic scenario and its growth in the country will be adversely affected (Jayalakshmi, 2009). Different companies will try to keep their competition alive by providing limited time offers. In fact, this is what happening with many companies in this industry.

Social Factors

This is a composition and size of the population in part the organization is serving. Any change in size or composition of the organization determines the demand of the firm’s products. Social-cultural factors have created a great influence in the mobile telephone operators industry. According to Hofstede (2011), culture has a great influence on the buying behavior of consumers. Culture plays an important role in influencing people’s decisions, technology acceptability and how people adapt to new technology (Hofstede, 1991). On the other hand, new technologies have influenced significant social and cultural change in the UK as well as other developed economies. Particularly, the lifestyle of the young generation has greatly changed. Emergence of social sites such as Google+, Twitter and Facebook has created another medium for interaction. Such lifestyle change has led to increase demand of mobile devices and new technologies such as 3G (Ivy Thesis, 2011).

Technological Factors

Technological advances have led to the creation of new products and new services being offered to the market. Technology over the past years, since the invention of computers, has been a very dynamic factor which influences the products produced or services rendered. Mobile telephone operators depend hugely on technology. Therefore, the development of new technologies influences the overall outlook of this industry.  Consequently, companies operating in this industry employ new technology innovations to create a competitive advantage over their competitors. Therefore, it is necessary for all companies operating in the industry to be proactive in anticipating changes in technology for the company to endure in the market.

 Several changes in technology are expected to occur in this industry which will completely revolutionize this industry. For instance, internet speed is expected to change as the technology advances (Liao et al., 2009). Such changes will directly influence the market and operations of mobile telephone industry.

Environmental Factors

Mobile telephone operators industry is unlikely to be affected by environmental factors due to the fact that it does not directly or indirectly alter the environment. An issue that can be considered to be an environmental factor that affects this industry is the effect of environment on signal strength.  Some environmental conditions weaken the signals received by mobile phone devices. As a mobile telephone operator industry, you should ensure that there are enough base stations (boosters) around the region you are operating on so that your signal is not affected adversely by the environmental conditions. Consumers will always go for an operator, whose signal does not fluctuate a lot.

Economies that rely mostly on agriculture will definitely be affected by environmental conditions. This is another environmental issue, which will affect mobile telephone operators who are offering global operations. Economies that will be affected drastically be environmental conditions will contribute negatively to this industry. Therefore, it is recommended for companies offering services in such economies to be monitoring these trends and impacts on their operations.

Legal Factors

Legal factors are associated with the legal environment in which companies operate. They include deregulation measures adopted by the government. Such measures will directly affect many issues within the mobile telephone industry, such as governing rules, company’s cost and demand. Furthermore, it will also influence the level of competition within the industry. According to Gallacci (2006), mobile telephone operators industry is expected to witness a lot of deregulation in the coming years.

Vodafone Strategic Capabilities

Any company depends on its strengths and weaknesses in the process of achieving its professional goals.  Resource and competence-based strategy is an approach that concentrates on the uniqueness of a company, the crucial differences that exist between each company and its competitors. Based on this approach, Vodafone is unique and it is through its uniqueness that sustainable competitive advantages are based on.  Strengths which make Vodafone unique includes large customer base, its global scale, diversified geographical portfolio offering its operations in the Middle East, Europe, Asia Pacific, Africa and US. Its excellent signal strength makes it the most trusted service brand in India, leading presence in emerging markets, strategizing alliances with Apple iPhone, strong network infrastructure, and big presence in Japan market (Vodafone Group, 2012). These strengths give Vodafone a competitive advantage over its competitors.

Although Vodafone seems to have so many strengths, it still suffers from some weaknesses just like any other entrepreneurial company. Some of the weaknesses which affect Vodafone include business difficulties in various countries that may influence on other parts of the world operations, more than 80% of its business is generated in Europe, and negative return on assets underperform key competitors (Vodafone Group, 2012).  Protecting its unique resources as well as managing them in an effective manner will improve its strengths and eliminate some weaknesses, thus, improving the competitive position.                                                             

Vodafone Financial Position

The financial figures indicated here are as per 31st March 2011. Vodafone intangible assets were £68.6 billion, which was a decrease from the previous year (£74.3 billion) (Vodafone Group, 2012).  Plant, property and equipment also decreased from £20.6 billion to £20.2 billion. Investments in associates increased from £36.4 billion of the previous year to £38.1. Other non-current assets decreased to £7.4 billion from £11.5 of the previous year. Current assets increased to £17.0 billion from £14.2 billion of the previous year. Total equity shareholders’ funds decreased from £90.4 billion of the previous year to £87.6 billion (Vodafone Group, 2012). Short-term borrowings and long-term borrowings decreased to £38.3 billion from £39.8 billion of the previous year. Current tax liabilities decreased from £2.9 billion of the previous year to £2.3 billion. Other current liabilities increased to £15.3 billion from £14.6 billion of the previous year (Vodafone Group, 2012).       

Vodafone Core Competencies                                          

The core competency of Vodafone is managing end to end customer interactions through channels including all customer contact points, such as IT services, cross-sell/up-sell activities, retention, loyalty management, technical support, network services and acquisitions (Vodafone Group, 2012). The company is renowned globally for its employee friendly work culture, which is built on the foundation of the company time tested values of trust, simplicity and speed. 

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