Verizon Company - Assignment Example

Verizon 1. Verizon is a US based multinational company, which is an industry leading provider of information technology, communication solutions, security, and consulting services. The company extends its services to small and large scale business sectors, governmental bodies, and educational institutions around the world. While analyzing Verizon from a strategic management perspective, it seems that the telecommunication industry’s broad (remote) environment may be influenced by a range of factors over the next 18 months. Firstly, environmental sustainability is most likely to influence Verizon’s broad or remote environment in the near future since people are highly concerned about environmental safety these days (Environmental Leader, Para 1-4). Evidently, unlike many people believe, the global recession would not end this trend. The concept of environmental sustainability may positively or negatively impact Verizon on the basis of how the firm approaches this concept. Hence, the rising concern over the environment has forced the organization to execute more environmental friendly improvements such as data center consolidation, usage of fiber optics based networks, and hosted services (Verizon). In this context, the organization would face a series of difficulties unless it improves its investments in environment protection. Undoubtedly, eco-friendly operations would assist Verizon to adequately meet customer expectations and thereby build a sustainable business. Currently, the organization has taken a number of green initiatives, which can add value to the company’s market stature (Verizon, Para 1-6). Secondly, availability of investment capital is turning out to be a potential challenge to Verizon since the recent recession has adversely affected the global economy. As a result, the company finds it difficult to raise funds through banks and other financial institutions. As Kushnick (8) reports, tax loss issues caused Verizon to loss huge amount of money and this incident further worsened the firm’s financial issues. In this context, the organization may be forced to focus more on services like “outsourcing, strategic partnering, collaborative development, and cloud-based services” (Verizon, p.2). According to Suciu (para 1-4) E-commerce techniques are more likely to influence Verizon in the near future because online business requires fewer resources than what its physical counterparts need. The global economy has not yet completely recovered from recessionary issues and this troublesome economic environment would compel the firm to stop investing in nonstrategic activities. In order to save costs and resources, Verizon has begun to upgrade its infrastructure. The resource deficiency is also likely to impact organization’s operational efficiency negatively and hence the firm may be forced to pay special attention to power consumption and operating costs. In total, deficiency of investment capital and other operational resources would impede Verizon’s market growth over the next 18 months. As Mandel opines, technological innovations may also influence the Verizon’s growth in the short run (Para 4). The telecommunication industry is undergoing technological innovations everyday and this situation offers a bright future to the company. Since modern users always look for innovative features, the company can improve its business volume if it can provide its customers with innovative and superior quality products and services. 2. Telecommunication industry- Porter’s five forces model a. Threat of new entrants According to Kurup, threat of new entrants is relatively low in telecom industry because huge entry cost appears to be a potential entry barrier to new players (Para 1-8). As a result of recent global recession, capital markets are not so generous and therefore new entrants face difficulties in raising initial investment capital. In addition, there are numerous technical and political barriers for new entrants to obtain the ownership of telecom license. To illustrate, fledgling telecom entrants in United States must still acquire regulatory approval and licensing from the Federal Communications Commission (Federal Communications Commission). Finally, many of the new entrants lack potential operating skills and managerial experience in the telecom industry. b. Buyer power As Gupta says, bargaining power of buyers is high in telecom industry because they have increased choice of telecom product and services (3). It is evident that telecom products and services do not vary much from company to company and therefore it would be very difficult for telecom providers to distinguish between their services. As a result, customers would choose companies that offer least prices. In other words, customers have some level of bargaining power over telecom companies and it may vary between market segments. In addition, provider switching cost is comparatively low for telecom customers and hence this increased buyer power raises some challenges to Verizon. c. Supplier power Guptap oints out that although supplier efficiency is inevitable for telecom operators, there are numerous potential suppliers in the telecom industry (3). In addition, supplier switching cost is low for telecom companies and therefore organizations like Verizon has the option to change their suppliers. Furthermore, Verizon is a well established and reputed company and hence suppliers would not be ready to terminate their contracts with the firm. In short, ‘supplier power is not a threat to telecom industry’ (Seeking Alpha, Para 6). d. Availability of substitutes Non-traditional telecom industry products and services raise serous substitution threats to today’s telecommunication industry. Development of satellite related telecommunication facilities appear to be a potential challenge to telecom industry because those developments can easily substitute products and services offered by the current telecom industry. Internet can be considered as potential substitution threat to telecom sector since internet facilitates cheap rate voice calls, video calling, and other information sharing facilities. It is predicted that internet would completely replace traditional telecommunication facilities like television in the near future. e. Competitive rivalry Degree of competitive rivalry is very high in telecom industry because there are many potential telecom providers in the industry. The industry deregulation together with the emergence of receptive capital markets in late 1990s opened a way for the rush entry of new players (Investopedia, Para 20). Since price is paramount in the modern business environment, telecom operators are forced to engage in stiff price competition and this situation in turn may cause them to suffer low profits. Finally, telecom industry faces exit barriers primarily due to its specialized equipment structure. 3. In the words of Michail, a firm has three levels of external environment and it includes market structure, industry structure, and institutional and social context (43). An organization is greatly related to its three levels of external environmental in various perspectives. AS Barker tells, the first level, market structure, mainly includes customers and competitors (166). Undoubtedly, any organization would like to keep better relationship with its customers as the customer segment constitutes primary income source for any business. Furthermore, customers play a central role in determining a firm’s level of profitability. Hence, organizations’ strategic management gives specific importance to customer expectations, and alters its operational policies on time to meet customer satisfaction. According to Michail, industry structure addresses a firm’s microeconomic environment that includes suppliers, distribution channels, technological developments, and skills and knowledge (43). Industry structure can have a key role to play in determining a firm’s long term sustainability. A company’s microeconomic environment reflects its growth opportunities and threats or the extent to which it can grow over a particular period of time. Top executives take industry structure into account while framing strategic management policies since many industrial forces including technological status and distribution capabilities are most likely to influence business growth. Michail (107-108)also points out that institutional and social context represents governmental regulations, ethical dimensions, and social aspects (p.43). According to Rhode, firms pay specific attention on institutional and social context as part of their corporate social responsibility. In today’s business environment, firms would go out of business unless they strictly adhere to ethical notions and social dimensions. Hence, companies make special investments in market research programs in order to explore social interests. In total, a firm keeps connected with its three levels of external environment in a way the external forces would promote the firm’s business growth. At the first glance, it may seem that shareholders are the most important stakeholder group in the Verizon’s operating environment. However, this perception is wrong and the fact is that customers represent the most significant stakeholder group in the operating environment of Verizon. Although shareholders are the major beneficiaries of Verizon, the company would not sustain its market growth unless it prioritizes customer needs and requirements. All other stakeholder groups including suppliers, employees, investors, banks, and third party interest groups are secondary to customers. A customer is a person who actually purchases a Verizon product or subscribes to a Verizon service and hence contributes to the organization’s revenues. Therefore, it is the prime responsibility of Verizon to identify customer needs and thereby design operational strategies to meet those needs. Referring to Upson, Ketchen, Connelly & Ranft, it is clear that customer tastes and preferences are changing everyday and hence Verizon cannot confront with stiff market competition unless it is compatible with prevailing market trends. Hence, the firm management has to give great emphasis on customer tastes so as to serve the interests of other stakeholder groups including shareholders. 4. From the view point of Powell, by saying resource based view of a firm, it is meant that the firm is viewed in terms of its resource position. According to Ireland, Loskisson & Hitt, a firm’s internal resources may include its core strengths, capabilities, and distinctive competencies that assist the firm to gain competitive advantages over its market rivals (13). As per this concept, a firm’s competitiveness is evaluated on the basis of its resource strengths and capabilities. In other words, resource based view of a firm assists an individual to analyze the way the firm’s resources are combined and how these resources make the firm different from one another. Since every firm is comprised of different resources, a resource based view would be beneficial to assess the firm’s core market competencies. A resource based view would help stakeholders and investors to scrutinize a firm’s actual capabilities in order for taking potential investment decision. In addition, this concept may assist the top management to evaluate the firm’s competitive market position frequently. The idea of resource based view is also helpful for effective resource management, which is necessary to transform a short term competitive advantage into long term business sustainability. Kraaijenbrink, Spender and Groen reflect that organizational resources mainly include all tangible and intangible assets, organizational processes, human capital, firm attributes, knowledge, and information. Traditionally, investment capital is considered as a firm’s most valuable asset since the organization cannot grow up to the next stage of business unless it keeps adequate funds. In the words of Humphreys, modern business sectors give prime importance to human capital, because workforce determines a firm’s total productivity and profitability. In addition, organizational processes are also valuable. No matter how effectively an organization is equipped with financial capabilities and human resources, it would remain unprofitable if organizational processes are not structured well. Intangible assets including goodwill, industry ranking, and customer loyalty are of great value as these resources are capable of promoting business growth. Finally, effective flow of information is necessary to promote operational efficiency whereas knowledge is a crucial factor for thoughtful resource allocation and maintenance. In my opinion, human capital is the most important resource in Verizon as productive employees are valuable asset of any organization. Since Verizon is a multinational telecom provider, the company needs to effectively integrate a range of complex supply chain activities and offer quality services to its customers. Active employee participation is necessary to manage value chain operations and thereby provide customers with competitive services. For a telecommunication firm, frequent technological innovations are essential to confront with the cut-throat market competition and ensure long term business sustainability. In order to enhance technological innovation, the company has to maintain an efficient research and development team that is capable of identifying various value chain needs in time. Furthermore, an efficient and experienced top management team is vital to run the Verizon’s day to day activities successfully. 5. SWOT analysis is a strategic tool used to analyze a project’s or an organization’s strengths, weaknesses, opportunities, and threats. Here, strengths and weaknesses pertain to the firm’s internal environment whereas opportunities and threats are connected to external environment of the organization. This technique is primarily used to identify favorable and unfavorable factors involved in achieving a project’s or concern’s short term objectives. In other words, it can be stated that SWOT analysis is greatly useful to set an organization’s objectives. For a successful business firm, strengths and opportunities will be of greater value than weaknesses and threats. Value chain analysis is a conventional management tool that benefits organizations to distinguish between its value chain operations that are able to create value and those are not. The value chain analysis is described as a “theory used to define a framework that focuses on the interfaces between functions-specifically, those that affect the customer’s value” (Ferrand, Xu and Roberts, 131). The idea of value chain analysis is greatly beneficial for business houses because an organization achieves above average investment returns only when the value it creates exceeds the costs experienced to create that value. This management tool may assist a firm to assess its real cost position and thereby execute a well suited business level strategy. SWOT analysis and value chain analysis tools are closely related. Both of these techniques may assist an organization to accurately point out its core competencies. While the SWOT analysis aids the firm to identify its internal strengths and weaknesses, the value chain analysis helps the company distinguish between its operations that create value and those do not. Both of them assist the organization to identify its core strengths over its market competitors. Finally, an organization uses SWOT and value chain analysis tools to effectively make out its resource requirements. SWOT analysis Strengths Undoubtedly, strong global market position and a robust network are major potential strengths of Verizon. The company is well reputed mainly due to its prominent customer services and this strength benefits the firm to achieve greater customer loyalty. An extensive line of products together with 4G network assists the company to provide superior quality services to its customers (Verizon Wireless, Para 2-3). Furthermore, Verizon brand is well recognized in the market and hence the company does not have to take huge promotional efforts. Weaknesses From a detailed evaluation, negative networking capital is identified to be the major potential weakness of Verizon. In addition, Verizon has high price voice plans as compared to its major market competitor Sprint. The Verizon 3G network does not allow users to transfer voice and data simultaneously (iPhoneHacks, Para 15). Another major weakness of the company is that its franchise stores operate independent of the parent company and follow their own operational policies. Lack of bandwidth expandability is another weakness. Opportunities It seems that Verizon has further consolidation opportunities in the industry and therefore it can improve its competitive market position through acquisition of other domestic operators. Development of audio-conferencing access is another potential opportunity for Verizon (Verizon, Para 1). In addition, rapidly emerging market segments in South Asian countries raise a range of opportunities for the organization. Finally, increasing demand for wireless broadband may well serve the developmental interests of Verizon. Threats In the view of Benner, frequent technological changes raise some potential threats to Verizon’s market competence as modern customers are highly sensitive to technological performance. Intense competition in the wireless sector is also a notable challenge to the organization. Moreover, security issues such as mobile malware would also cause serious difficulties to Verizon. 6. Generally, generic level competitive strategies are of five types including low cost leadership, broad differentiation, best cost provider strategy, focus/niche strategy based on low cost, and focus strategy based on differentiation (Richard D. Irwin, Inc). Low cost leadership is a generic level competitive strategy through which a firm strives to be the market leader by offering the lowest price. Under broad differentiation strategy, an organization attempts to differentiate its product offerings from those of rivals in ways that would attract a broad range of buyers. The best cost provider strategy tries to provide customers with more value for the money they pay by integrating low cost attributes with upscale differentiation. In case of niche strategy based on low cost, the organization focuses on a narrow market segment and raises competitive challenges to rivals on the basis of lower cost. Finally, firms practicing focus strategy based on differentiation particularly pay attention to a niche market segment and offer customized products or services to targeted audience. Unlike other generic competitive strategies, niche strategies based on low cost and differentiation focus on a narrow buyer segment so as to effectively concentrate on customer needs. Low cost leadership and best cost provider strategy give specific focus on buyers’ financial interests whereas the broad differentiation strategy tries to expand the firm’s customer base. When price competition among rival market players is more common or the specific commodity or service is standard and readily available from several sellers, low cost leadership strategy would be most effective. In addition, this strategy would work best in conditions where buyer bargaining power is high, marketer switching cost is low, or there are less possibilities of achieving product differentiation. The major drawback of this generic strategy is that it may be easily and inexpensively imitated by rival firms. However, if there are potential ways to differentiate a product, the broad differentiation strategy would be the best suggestible one. It must be noted that the strategy would fail if the mode of differentiation is not in line with customer expectations. The best cost provider strategy may work best only if the organization has adequate resources and experience to integrate upscale product attributes at a lower cost. Finally, a focus strategy would be the best recommendable one when multi-segment rivals struggle to serve customized needs of the target market niche. The major limitation of this strategy is that the niche market segment may be quickly crowded with eager and aggressive rivals; this situation in turn would cause to split profits into many ways (Richard D. Irwin, Inc). It seems that Verizon mainly follows two generic strategies including focus strategy and differentiation strategy to gain competitive advantages over other telecom providers. Since there are many ways to differentiate its products and services, the company follows the broad differentiation strategy. In addition, the organization has focused business interests in some domestic regions of United States. 7. Management theories indicate that industry life cycle impacts an organization’s choice of competitive strategy and growth strategy. The industry life cycle has four phases such as introduction, growth, maturity, and decline. During each of these phases, an organization needs to alter its generic level competitive strategy and growth strategy since each product life cycle stage is characterized with different market environment. In order to clearly understand this difference, it is better to analyze various generic strategies and growth strategies pursued by Verizon over various stages of industry life cycle. Currently, Verizon is in the maturity phase. Introduction is an organization’s initial market development phase where the firm strives to promote its products and services among targeted population. While analyzing the corporate history of Verizon, it is clear that the company adopted a focus strategy based on differentiation during its introduction phase so as to effectively popularize its products and services among a small group of buyers. Here, the company did not have adequate resources to focus on a broader market segment. By following a focus strategy, Verizon tried to make its products and services easily recognizable to telecom customers. In addition, the company pursued the diversification growth strategy to introduce its new products and services in a new market segment. Like introduction phase, growth phase also requires a significant amount of capital investment. In the growth stage, an organization takes extensive efforts to differentiate its products offerings from those of existing competitors and thereby create a unique image for the company. Here, an organization may adopt any generic competitive strategy based on its core competencies and market conditions. Verizon followed a broad differentiation competitive strategy over the growth phase as the company had increased product lines. At the same time, the firm adopted a market development growth strategy to spread its growth into new market segments. In the maturity phase, the life cycle curve becomes flat and market growth indicates a lower rate. The company continues its differentiation strategy in this phase too together with a newly designed focus strategy. Currently, other telecom providers including Sprint are stealing the market share of Verizon and this situation notably lowers Verizon’s growth rate. Hence, the company really struggles to retain its market status and pursues a penetration growth strategy to market existing products and services in existing markets. In the decline phase, firms may focus more on niche market segments since they would lack core competencies and advantages to cover a wider geographical area. 8. Functional strategies must be consistent for successful strategy implementation. A functional level strategy indicates a short term plan designed for a key functional area of an organization. Firms generally design functional level strategies to meet particular objectives of a key functional area. Various management concepts reflect that functional level strategies must be in line with grand strategy and long term objectives. If those strategies are varying, the firm would face difficulties in meeting its long term objectives effectively. While evaluating Verizon’s strategic management, it seems that the company’s top management pays specific attention to make its short term objectives consistent. Verizon’s management specifically ensures that none of its functional level strategies or short term objectives interrupts the functioning of other. In order to achieve this, the top management seeks suggestions of various departmental heads before framing short term objectives for the company. In addition, period of inter-related short term objectives must be consistent; otherwise this situation may adversely affect the firm’s operational efficiency or cause the firm to raise additional funds. In case of Verizon, the management assesses the feasibility and potentiality of its short term objectives and continuously evaluates them to understand whether it is necessary to alter or improve the objectives. Since short term objectives are particularly related to the organization’s functional efficiency, functional level strategies have an important role to play in achieving short term objectives. When functional level strategies are consistent, the short term objectives would also be consistent. Verizon’s management holds the view that its short term objectives should be consistent in term of attainability. In other words, that company will not support short term objectives, attainability of which is subjected to some future situations. Finally, Verizon also gives emphasis to estimated expenditure of achieving particular short term objectives. The firm management is of the view that expenses involved in accomplishing short term objectives must be consistent because such a condition is vital to ensure that the company does not want to raise additional funds to meet its short term objectives. Works Cited Benner, Mary. “Financial market reactions following technological discontinuities: A non-event study in two industries.” (2006): 1-50. Web. 25 June 2012. Baker, Michael J. Marketing Theory: A Student Text. USA: Cengage Learning EMEA, 2000. Print. Environmental Leader. “Verizon expands sustainability program to reduce global carbon footprint.” (2010). Web. 25 June 2012. Federal Communications Commission. “Report and order and order on remand and further notice of proposed rulemaking.” (2003). 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