1 ehrma strategic management by dr. harold d. harlow

11

EHRMAEHRMA

Strategic ManagementStrategic Management

ByBy

Dr. Harold D. HarlowDr. Harold D. Harlow

22

Strategic Management Strategic Management Defined:Defined: Set of managerial decisions and Set of managerial decisions and

actions that determines the long-run actions that determines the long-run performance of a firm.performance of a firm.

Set of managerial actions and Set of managerial actions and decision,separate from operations, that decision,separate from operations, that determines the future determines the future profitability/success of the firm.profitability/success of the firm.

33

Managers Two Primary Managers Two Primary ResponsibilitiesResponsibilities

Operational WorkOperational Work Actions and plans less than one year.Actions and plans less than one year. Daily and weekly activities to “get the work of the Daily and weekly activities to “get the work of the

business done well”business done well” Strategic WorkStrategic Work

More than one year future orientation.More than one year future orientation. Often crowded out by operational work.Often crowded out by operational work.

The most important work is strategicThe most important work is strategic. Although . Although not usually urgent in most environments, not usually urgent in most environments, essential to the future profit making potential of essential to the future profit making potential of the firm.the firm.

44

Business PolicyBusiness Policy

Defined:Defined:

General management orientation General management orientation that looks inward for properly that looks inward for properly integrating the firm’s functional integrating the firm’s functional activitiesactivities..

55

Four Phases ofFour Phases ofStrategic ManagementStrategic Management

Basic financial planningBasic financial planning Forecast-based planningForecast-based planning Externally-oriented planning Externally-oriented planning

(strategic)(strategic) Strategic management(Choose Strategic management(Choose

functional strategies to support firm functional strategies to support firm and SBU strategies)and SBU strategies)

66


Benefits:Benefits:

• Clearer sense of strategic vision for the firmClearer sense of strategic vision for the firm

• Sharper focus on what is strategically Sharper focus on what is strategically importantimportant

• Improved understanding of a rapidly changing Improved understanding of a rapidly changing environmentenvironment

77


Not always a formal process can be ad hoc:Not always a formal process can be ad hoc:

Where is the organization now? (Not where do we Where is the organization now? (Not where do we hope it is!)hope it is!)

If no changes are made, where will the If no changes are made, where will the organization be in 1 year, 2 years, 5 years, 10 organization be in 1 year, 2 years, 5 years, 10 years?years?

What specific actions should management What specific actions should management undertake? What are the risks and payoffs undertake? What are the risks and payoffs involved?involved?

88

Global Stategic IssuesGlobal Stategic Issues

European UnionEuropean Union (EU)(EU) Economic integration of 15 member countriesEconomic integration of 15 member countries

North American Free Trade AgreementNorth American Free Trade Agreement (NAFTA)(NAFTA) Improved trade among 3 member countriesImproved trade among 3 member countries

MercosurMercosur Free-trade area among Argentina, Brazil, Uruguay, and Free-trade area among Argentina, Brazil, Uruguay, and

ParaguayParaguay

Association of South East Asian NationsAssociation of South East Asian Nations (ASEAN)(ASEAN) Attempting to link members into a borderless economic Attempting to link members into a borderless economic

zonezone

99

E-CommerceE-Commerce

7 Trends:7 Trends:

Internet forcing companies to transform Internet forcing companies to transform themselvesthemselves

Market access and branding are changing, Market access and branding are changing, causing causing disintermediationdisintermediation of traditional of traditional distribution channelsdistribution channels

Balance of power shifting to the consumerBalance of power shifting to the consumer

Competition is changingCompetition is changing

1010

7 Trends (continued)7 Trends (continued)

Pace of business increasing drasticallyPace of business increasing drastically

Internet purchasing corporations out of Internet purchasing corporations out of their traditional boundariestheir traditional boundaries

Knowledge becoming a key asset and Knowledge becoming a key asset and source of competitive advantagesource of competitive advantage

1111

Adaptation to Changing Adaptation to Changing Environmental ConditionsEnvironmental Conditions

Strategic flexibility:Strategic flexibility:

Demands a long-term commitment to the development Demands a long-term commitment to the development and nurturing of critical resourcesand nurturing of critical resources

Demands that the firm become a Demands that the firm become a learning organizationlearning organization

1212

Learning OrganizationsLearning Organizations

Defined:Defined:

An organization skilled at creating, An organization skilled at creating, acquiring, and transferring knowledge acquiring, and transferring knowledge and at modifying its behavior to reflect and at modifying its behavior to reflect new knowledge and insights.new knowledge and insights.

1313

Learning OrganizationsLearning Organizations

Four Main Activities:Four Main Activities: Solving problems systematicallySolving problems systematically Experimenting with new approachesExperimenting with new approaches Learning from their won experiences and Learning from their won experiences and

that of othersthat of others Transferring knowledge quickly and Transferring knowledge quickly and

efficiently throughout the organizationefficiently throughout the organization

1414

Evaluation and Control

and Control

Strategic Management Model

Strategy Formulation

Strategy Implementation

Mission

Objectives

Strategies

Policies

Feedback/Learning

Environmental

Scanning

Societal Environment

General Forces

Task Environment

Industry Analysis

Structure Chain of Command

Resources Assets, Skills

Competencies, Knowledge

Culture Beliefs, Expectations,

Values

Reason for existence

What results to accomplish by when Plan to

achieve the mission & objectives Broad

guidelines for decision making

Programs

Activities needed to accomplish a plan

Budgets

Cost of the programs Procedures

Sequence of steps needed to do the job

Process to monitor performanceand take corrective action

Performance

External

Internal

Evaluationand Control

1515

Basic Model of Basic Model of Strategic ManagementStrategic Management

Four Basic ElementsFour Basic Elements

1616

Environmental ScanningEnvironmental Scanning

Defined:Defined:

The monitoring, evaluating, and The monitoring, evaluating, and disseminating of information from the disseminating of information from the external and internal environments to external and internal environments to key people within the firm.key people within the firm.

1717


1818


Identify strategic factorsIdentify strategic factors SWOT AnalysisSWOT Analysis

Strengths, Weaknesses Strengths, Weaknesses Opportunities, ThreatsOpportunities, Threats

Internal EnvironmentInternal Environment• Strengths & WeaknessesStrengths & Weaknesses

Within the organization but not subject to short-run control of Within the organization but not subject to short-run control of managementmanagement

External EnvironmentExternal Environment• Opportunities & Threats Opportunities & Threats

External to the organization but not subject to short-run External to the organization but not subject to short-run control of managementcontrol of management

1919

Strategy FormulationStrategy Formulation

Defined:Defined:

Development of long-range plans for Development of long-range plans for the effective management of the effective management of environmental opportunities and environmental opportunities and threats in light of corporate strengths threats in light of corporate strengths and weaknesses.and weaknesses.

2020


Mission StatementMission Statement Purpose or reason for the organization’s Purpose or reason for the organization’s

existenceexistence Promotes shared expectations among Promotes shared expectations among

employeesemployees Communicates public image important to Communicates public image important to

stakeholdersstakeholders Who we are, what we do, what we’d like to Who we are, what we do, what we’d like to

becomebecome

2121


Maytag CorporationMaytag Corporation

Mission StatementMission Statement

To improve the quality of home life by To improve the quality of home life by designing, building, marketing, and designing, building, marketing, and servicing the best appliances in the servicing the best appliances in the world.world.

2222


ObjectivesObjectives

The end results of planned activityThe end results of planned activity• What is to be accomplishedWhat is to be accomplished• Time in which to accomplish itTime in which to accomplish it• Quantified when possibleQuantified when possible

2323


Goals vs. ObjectivesGoals vs. Objectives

A goal is an open-ended statement of what A goal is an open-ended statement of what one wants to accomplish with no one wants to accomplish with no quantification of what is to be achieved quantification of what is to be achieved and no time criteria for completion.and no time criteria for completion.

2424

Goals & ObjectivesGoals & Objectives

Corporate goals and objectives include:Corporate goals and objectives include: Profitability (net profits)Profitability (net profits) Growth (increase in total assets, etc.)Growth (increase in total assets, etc.) Utilization of resources (ROE or ROI)Utilization of resources (ROE or ROI) Market leadership (market share)Market leadership (market share)

2525

StrategiesStrategies

Defined:Defined:

A strategy of a corporation forms a A strategy of a corporation forms a comprehensive master plan stating comprehensive master plan stating how the corporation will achieve its how the corporation will achieve its mission and objectives. It maximizes mission and objectives. It maximizes competitive advantage and minimizes competitive advantage and minimizes competitive disadvantage.competitive disadvantage.

2626


3 Types of Strategy3 Types of Strategy

Corporate strategyCorporate strategy

Business strategyBusiness strategy

Functional strategyFunctional strategy

2727


Corporate StrategyCorporate Strategy StabilityStability GrowthGrowth RetrenchmentRetrenchment

2828


Business StrategyBusiness Strategy Competitive strategiesCompetitive strategies Cooperative strategiesCooperative strategies

2929


Functional StrategyFunctional Strategy Technological leadershipTechnological leadership Technological followershipTechnological followership

3030

Hierarchy of StrategyHierarchy of Strategy

Corporate Strategy

Business(Division Level)

Strategy

FunctionalStrategy

3131

PoliciesPolicies

Defined:Defined:

Broad guidelines for decision making Broad guidelines for decision making that link the formulation of strategy that link the formulation of strategy with its implementation.with its implementation.

3232

Strategy ImplementationStrategy Implementation

Strategy Implementation

Programs

Budgets

Procedures

3333

Initiation of StrategyInitiation of Strategy

Triggeringevent

•New CEO

•External intervention

•Threat of change inownership

•Performance gap

•Strategic inflection point

Stimulusfor change

instrategy

3434

Strategic Decision MakingStrategic Decision MakingStrategic Decisions Strategic Decisions

RareRare

ConsequentialConsequential

DirectiveDirective

3535

Strategic Decision MakingStrategic Decision Making

3636

Strategic Decision MakingStrategic Decision Making

3838

StrategyStrategy

Basic ConceptsBasic Concepts

3939

Who Makes Strategy?Who Makes Strategy?

General Management Function. General Management Function. Top level managers develop strategy of the Top level managers develop strategy of the

firm.firm. Not operations activityNot operations activity Must be allowed adequate time and Must be allowed adequate time and

resources to be successful.resources to be successful. Key point: Operational work tends to crowd Key point: Operational work tends to crowd

out strategic management work. out strategic management work.

4040

What is Strategy?What is Strategy?

Strategy has three levels:Strategy has three levels: Firm levelFirm level Business level or Strategic Business Unit Business level or Strategic Business Unit

LevelLevel Functional or departmental level.Functional or departmental level.

Directional goals to guide future decision Directional goals to guide future decision makingmaking

Formal planning sessions may occurFormal planning sessions may occur

4141

Strategy Questions Strategy Questions What is the current strategy, implicit or What is the current strategy, implicit or

explicit? explicit? What assumptions have to hold for the current What assumptions have to hold for the current

strategy to be viable? strategy to be viable? What is happening in the larger, social and What is happening in the larger, social and

educational environments? educational environments? What are our growth, size, and profitability What are our growth, size, and profitability

goals? goals? In which markets will we compete? In which markets will we compete? In which businesses? In which businesses? In which geographic areas? In which geographic areas?

4242

Strategy Strategy Questions-Continued Questions-Continued

To what customers or users? To what customers or users? How will the selling/buying decisions be made? How will the selling/buying decisions be made? How will we distribute our products and services? How will we distribute our products and services? What technologies will we employ? What technologies will we employ? What capabilities and capacities will we require? What capabilities and capacities will we require?

Which ones are core? Which ones are core? What are our management capabilities and capacities?What are our management capabilities and capacities? Is our “corporate culture” supportive of our strategy?Is our “corporate culture” supportive of our strategy? What will we make, what will we buy, and what will we What will we make, what will we buy, and what will we

acquire through alliance? acquire through alliance? What are our options? What are our options? On what basis will we compete On what basis will we compete

4343

WhyWhy

Proven significant gains in performance Proven significant gains in performance from explicit strategy developmentfrom explicit strategy development

Different functional areas may have Different functional areas may have different strategies.different strategies. Dysfunctional suboptimal decisions Dysfunctional suboptimal decisions

dependent on functional manager dependent on functional manager professional orientation. professional orientation.

What is needed is a “What is needed is a “guiding strategic guiding strategic handhand” for each business function.” for each business function.

4444

Where strategy comes from?Where strategy comes from?

Formal planningFormal planning Ad hoc by consensus of firm managersAd hoc by consensus of firm managers External-Reaction to environmentExternal-Reaction to environment Internal-Firm Resources available Internal-Firm Resources available

4545

When is ( New) Strategy Needed?When is ( New) Strategy Needed?

When firm performance does not meet When firm performance does not meet expectations.expectations.

When firm is changed in some significant When firm is changed in some significant way.way. New managers New managers Firm is sold or merged with another firm.Firm is sold or merged with another firm.

When paradigmic changes occur in When paradigmic changes occur in business model.business model.

4646

Firm Level StrategiesFirm Level Strategies Growth Growth

Mergers and AcquisitionsMergers and Acquisitions Organic (Depends on Industry Life cycle and Organic (Depends on Industry Life cycle and

competitiveness)competitiveness) Vertical or Horizontal Integration Vertical or Horizontal Integration

• Economies of Scale or ScopeEconomies of Scale or Scope

Disinvestment / Retrenchment Disinvestment / Retrenchment

4747

Mission Mission

Rationale for the firm: Its reason for Rationale for the firm: Its reason for existance.existance.

Needed to drive the firm to the Needed to drive the firm to the intermediate goals and objectives intermediate goals and objectives

Specific within a certain time period.Specific within a certain time period. Specific about competition and markets to Specific about competition and markets to

be captured. be captured.

4848

VisionVision

An overriding very long range view of the An overriding very long range view of the firm and where it might be in 10-20 years.firm and where it might be in 10-20 years.

Corporate vision is a short, succinct, and inspiring statement of what the organization intends to become and to achieve at some point in the future, often stated in competitive terms.

Vision refers to the category of intentions that are broad, all-inclusive and forward-thinking. It is the image that a business must have of its goals before it sets out to reach them. It describes aspirations for the future, without specifying the means that will be used to achieve those desired ends.

4949

Mission and Vision Answer the Mission and Vision Answer the Strategic QuestionsStrategic Questions

Who are we? Who are we? What do we do? What do we do? Why are we here? Why are we here? What kind of company are we? What kind of company are we? What kind of company do we want to What kind of company do we want to

become? become? What kind of company must we become to What kind of company must we become to

survive and prosper in our communitysurvive and prosper in our community

5050

Emergent Strategy Emergent Strategy

MintzbergMintzberg Strategy is a plan, a "how," a means of getting from Strategy is a plan, a "how," a means of getting from

here to there. here to there. Strategy is a pattern in actions over time; for Strategy is a pattern in actions over time; for

example, a company that regularly markets very example, a company that regularly markets very expensive products is using a "high end" strategy. expensive products is using a "high end" strategy.

Strategy is position; that is, it reflects decisions to Strategy is position; that is, it reflects decisions to offer particular products or services in particular offer particular products or services in particular markets. markets.

Strategy is perspective, that is, vision and direction. Strategy is perspective, that is, vision and direction.

5252

EBBC EBBC Introduction to Introduction to

StrategyStrategyVodafone EgyptVodafone Egypt

Ian Gray, Chairman, Vodafone Ian Gray, Chairman, Vodafone EgyptEgypt

17 November 200717 November 2007

5353

If you do not know If you do not know where you are going – where you are going –

you will never get there!you will never get there!

5454

Have a plan!Have a plan!

Failure to plan Failure to plan = =

Planning to fail !Planning to fail !

5555

Market ledMarket led Customer focusedCustomer focused Competitor awareCompetitor aware Employee drivenEmployee driven

Key Drivers for Key Drivers for SuccessSuccess

5656

Strategy issues ref Strategy issues ref Vodafone EgyptVodafone Egypt

ContentsContents1.1. EgyptEgypt

2.2. Vodafone EgyptVodafone Egypt

3.3. StrategyStrategy

4.4. SummarySummary

5757

Demographic facts

US$953 (US$4,400 US$953 (US$4,400 adjusted for PPP)adjusted for PPP)(1)(1)

77.5m (1.8% 77.5m (1.8% p.a. growth)p.a. growth)

GDP per capitaGDP per capita

PopulationPopulation

Egypt – good macroeconomic Egypt – good macroeconomic environmentenvironment

17%

28%

5%

6%

44%

397+

238 - 397

159 - 238

84 - 159

< 84

E

B

C

D

US$ per month

A

B

Income distribution

(1) 2005 estimates, (2) Estimate for 12 months to June 2006 Source: CIA World Fact book, 9th Euromoney Arab Financial Forum

Economic facts

Economy steadily improving since Economy steadily improving since July 2004July 2004

Strong growth in tourism and Suez Strong growth in tourism and Suez Canal revenuesCanal revenues

Increasing FDI and significant Increasing FDI and significant acceleration of privatisationacceleration of privatisation

Inflation rate at circa 10%; stable Inflation rate at circa 10%; stable exchange rateexchange rate

50% aged 20 or less50% aged 20 or less

58% of population58% of populationLiteracyLiteracy

Population distributionPopulation distribution

~6% per annum~6% per annum(2)(2)GDP growthGDP growth

5858

Mobile continues to outgrow Mobile continues to outgrow fixedfixed

Fast growing mobile marketFast growing mobile market 21% penetration; 27% YoY growth21% penetration; 27% YoY growth(1)(1)

99% population coverage (8% of land mass)99% population coverage (8% of land mass) mostly prepaid; SIM only with no handset mostly prepaid; SIM only with no handset

subsidiessubsidies low blended minute rates (<5€c)low blended minute rates (<5€c) few mobile HVCs generating high ARPUsfew mobile HVCs generating high ARPUs

Egyptian telecom market overview Fixed vs. mobile revenue

57 52 46 44

43 48 54 56

0

10

20

30

40

50

60

70

80

90

100

Dec 2002 Dec 2003 Dec 2004 Dec 2005

Fixed revenue Mobile revenue

(%)

Source: Company data and analyst consensus estimates, (1) 3 months to September 2006

Slow growing fixed marketSlow growing fixed market 14% penetration; 6% YoY growth14% penetration; 6% YoY growth(1)(1)

Only 2.5m PCs; Only 2.5m PCs; 120,000 DSL 120,000 DSL connectionsconnections

Regulator influenced Regulator influenced by politics and must by politics and must approve tariffsapprove tariffs

5959

20%4%

Two player market with a Two player market with a recently launched 3recently launched 3rdrd entrant entrant

Vodafone controlled; with Vodafone controlled; with Telecom Egypt as strategic Telecom Egypt as strategic partnerpartner(1)(1)

Launched November 1998Launched November 1998

Customers 7.8mCustomers 7.8m(2,3)(2,3)

Twelve months revenues Twelve months revenues LE6.8bnLE6.8bn(3)(3)

Vodafone Egypt Mobinil Etisalat

Joint Venture ORASCOM/ Joint Venture ORASCOM/ Orange Orange

Launched May 1998 (with Launched May 1998 (with early lead of 100,000 HVCs)early lead of 100,000 HVCs)

Customers 8.1mCustomers 8.1m(2,3)(2,3)

Twelve months revenues Twelve months revenues LE6.0bnLE6.0bn(3)(3)

UAE controlled; with local UAE controlled; with local partnerspartners

Launched April 2007Launched April 2007

Paid LE16.7bn (US$2.9bn) Paid LE16.7bn (US$2.9bn) for 2G/3G licence (3.4% of for 2G/3G licence (3.4% of Egypt GDP)Egypt GDP)

Ownership

(1) Vodafone Egypt remaining free float 0.44%, (2) Active customers, (3) September 2006Source: Vodafone & Mobinil company data and Egyptian Government data

VodafoneGroup55%

TelecomEgypt45%

ORASCOM31%

Free Float37%

Orange32%

Etisalat66%

National Bank of Egypt20%

Egypt Post10%

CIB4%

6060

Promising outlook with rapid Promising outlook with rapid mobile market growthmobile market growth

Macro-economic environmentMacro-economic environment economy improving since 2004economy improving since 2004

Mass market appealMass market appeal mobile moving to mass market mobile moving to mass market

“necessity”; no longer a luxury product“necessity”; no longer a luxury product

Reduced entry and usage barriersReduced entry and usage barriers entry handset now around US$20entry handset now around US$20 prepaid tariff reductions prepaid tariff reductions lower customer activation chargeslower customer activation charges

Drivers for hitting the “S” Curve Total mobile market penetration

46

8

13

18

78

11

18

23

0

4

8

12

16

20

Dec2002

Dec2003

Dec2004

Dec2005

Dec2006

0

5

10

15

20

25

Source: Company data

Mobilepenetration (%)

Reportedcustomers (m)

6161

ContentsContents

1.1. Egypt Egypt

2.2. Vodafone EgyptVodafone Egypt


4.4. SummarySummary

6262

‘‘Core Purpose’Core Purpose’

To connect people and To connect people and communitiescommunities

Accelerating the advancementAccelerating the advancement

of Egyptof Egypt

6363

Outbound Outbound voicevoice 70%70%

Inbound voiceInbound voice 11%11%

VisitorsVisitors 10%10%

Data Data (including (including SMS)SMS)

4%4%

Activation Activation fees and otherfees and other 5%5%

100%100%

Revenue EBITDA

Vodafone Egypt is growing Vodafone Egypt is growing rapidlyrapidly

(1) % of total revenue, (2) Active customers Source: Company data, Egyptian LE (IFRS)

Revenue components H1 FY06/07(1)

47 44 41 43

0

20

40

60

Minutes Customers Revenue EBITDA

(%)

(2)

YoY% growth H1 FY06/07

0.0

2.0

4.0

6.0

8.0

FY01/02 FY02/03 FY03/04 FY04/05 FY05/06

(LEbn)

38% CAGR

0.0

1.0

2.0

3.0

4.0

FY01/02 FY02/03 FY03/04 FY04/05 FY05/06

35

55

75

95EBITDA EBITDA margin

(LEbn) (%)

44% CAGR

6464

40

45

50

55

60

65

Sep 2002 Sep 2003 Sep 2004 Sep 2005 Sep 2006

(%)

35

40

45

50

55

60

65


(%)

MobinilVodafone Egypt

Vodafone Egypt is Vodafone Egypt is outperformingoutperforming

(1) Active customers, (2) Both operators were released from liability to pay 1800 spectrum fees in Sep 2006 – LE100m impact excl. from Mobinil EBITDA. LE92m impact incl. in Vodafone Egypt depreciation


Customer share (%)(1) Revenue share (%)

EBITDA share (%)(2) EBITDA margins (%)(2)

40

45

50

55

60


(%)

35

40

45

50

55

60


(%)

6565

0.0

2.0

4.0

6.0

8.0


Customers (m)

0.0

0.5

1.0

1.5

2.0


(LE)

Growth in prepaid with reduction Growth in prepaid with reduction in minute ratein minute rate

(1) Active customers, estimated prior to October 2003 Source: Company data

Contract

Prepaid

• Low outbound minute rate: 30pt (<4€c)

• Customer growth slowing indicating maturity

• Growth accelerating from late 2004

• Tariff options increased and price per minute reduced to encourage usage

Prepaid vs. contract closing customer split(1) Outbound minute rate evolution

ContractPrepaid

6666

300

400

500

600

Sep-02 Sep-03 Sep-04 Sep-05 Sep-06

200

250

300

350

Minutes ARPU (LE)

0

20

40

60

Sep-02 Sep-03 Sep-04 Sep-05 Sep-06

0

20

40

60

Minutes ARPU (LE)

Driving usage through positive Driving usage through positive elasticityelasticity

(1) Active customers, estimated prior to October 2003 Source: Company data

Prepaid outbound MOU vs. total ARPUContract outbound MOU vs. total ARPU

Monthly MOUMonthly ARPU

Prepaid vs. contract closing customer split(1) Outbound minute rate evolution

ContractPrepaid

Monthly MOUMonthly ARPU

0.0

2.0

4.0

6.0

8.0


Customers (m)

0.0

0.5

1.0

1.5

2.0


(LE)

6767

9487

60

70

80

90

100(%)

90

79

60

70

80

90

100

(%)

9082

60

70

80

90

100

(%)

94 91

60

70

80

90

100

(%)

Voice quality Network availability

Call continuity Sending/receiving SMS

11%

Vodafone Egypt outperforms on Vodafone Egypt outperforms on customer satisfactioncustomer satisfaction

Source: Network Satisfaction Tracker (Logic Consulting Group). October 2006

Vodafone Egypt Mobinil

Vodafone Egypt vs. Mobinil

6868

Sep 2006

75

80

85

90

95

100

May 2005

Jul2005

Sep 2005

Nov 2005

Jan 2006

Mar 2006

May 2006

Jul 2006

Cost management is critical in Cost management is critical in low ARPU environment low ARPU environment

Break even or better on Break even or better on activationsactivations

No unprofitable tariffsNo unprofitable tariffs

Utilise and build on Group Utilise and build on Group buying powerbuying power

Front line accountabilityFront line accountability

Marginal cash cost per Marginal cash cost per marginal customermarginal customer

Every piaster mattersEvery piaster matters

100

56

(13)(10)

(4) (17)

0

20

40

60

80

100

Total revenue

Inter-connect

costs

Other direct costs

Acquisition & retention

costs

Operating expenses

EBITDA

(%)

(%)


Cost principles Margin breakdown H1 FY06/07

Network utilisation

6969

Being part of Vodafone Group Being part of Vodafone Group offers many benefitsoffers many benefits

Brand Brand Buying powerBuying power Market intelligence (product innovation, technical support, market Market intelligence (product innovation, technical support, market

trends)trends) ResourceResource People developmentPeople development

Australian call centreAustralian call centre Professional IT servicesProfessional IT services International help deskInternational help desk

… and in return from Vodafone Egypt

Benefits from Vodafone Group …

7070

(1) Revenue excluding sales tax, (2) Various charges including national training fund, telecom fund, NTRA fees (excl. 2G licence fees) Source: Company data

Vodafone Egypt generates Vodafone Egypt generates healthy cash flowshealthy cash flowsFree cash flow FY05/06

100

33

22

(7)(18)

(20)

(11)

(22)

0

10

20

30

40

50

60

70

80

90

100

Revenue(1) Governmentcharges(2)

Direct costs Operatingexpenses

Capexfree cash

Corporatetax

Free cashflow

(%)

Operating

flow

7171

ContentsContents

1.1. Egypt Egypt

2.2. Vodafone Egypt Vodafone Egypt


4.4. SummarySummary

7272

Small price premium

Managing market competitiveness

Unrelenting focus and attention Unrelenting focus and attention on six key areas on six key areas

5

4

1

2

3

6

Image and quality

Values based culture

Best team

Consistency

7373

Company Vision Strategy & Company Vision Strategy & ValuesValues

Profitable Growth Based on Value and Profitable Growth Based on Value and DifferentiationDifferentiationGrow market at appropriate costGrow market at appropriate cost

Focus on valueFocus on valueGrow adjacent market Grow adjacent market

Network quality and coverageNetwork quality and coverage

First to market with key productsFirst to market with key products

Excellence in customer serviceExcellence in customer service

Relevant brand for the people of EgyptRelevant brand for the people of Egypt

Synergies from the GroupSynergies from the Group

Cost conscious cultureCost conscious culture

No compromise on qualityNo compromise on quality

Experienced management teamExperienced management team

Hiring the bestHiring the best

Emphasis on trainingEmphasis on training

Profitable Growth

Brand Preference

Cost Containment& Synergies

ManagementCapabilities

7474

Market LeadershipMarket LeadershipOur Objective is Building a Strong Our Objective is Building a Strong

Vodafone BrandVodafone BrandTo delight our customers and build our market leadership without having To delight our customers and build our market leadership without having

to compete on pricing.to compete on pricing.

Our brand is a global one yet with a local tone that keeps it close to our Our brand is a global one yet with a local tone that keeps it close to our

customers hearts.customers hearts.

We have the best marketing talents from the local market and industry We have the best marketing talents from the local market and industry

knowledge through our links into the Vodafone Group.knowledge through our links into the Vodafone Group.

Our tools to build that strong brand is to excel and communicate in the Our tools to build that strong brand is to excel and communicate in the

following areas:following areas:

Superior CoverageSuperior Coverage

Better Sound QualityBetter Sound Quality

Excellent Customer CareExcellent Customer Care

Leadership in Customer Relevant Product InnovationLeadership in Customer Relevant Product Innovation

7575

From Strategy to Operational From Strategy to Operational PlansPlans

Tasks

Behaviour

Processes Resourcing

Market led Customer focused Competitor aware Employee driven

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1 ehrma strategic management by dr. harold d. harlow

Documents

strategic work

strategic management

ehrma strategic management

harlow slide

changing environment

sbu strategies slide

important work

year future orientation