Verizon Case Study Essay Example
Verizon Case Study Essay Example

Verizon Case Study Essay Example

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  • Pages: 12 (3241 words)
  • Published: November 27, 2017
  • Type: Case Study
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Verizon Wireless is a major player in the telecommunications market as the second largest wireless provider in the United States.

Cellco Partnership, or Verizon Wireless, is a joint venture of Verizon Communications and Vodafone PLC with 67 million subscribers. It falls only four million short of AT&T, the biggest wireless provider. Majority share of 55% is held by Verizon Communications. The aim of Verizon is to cater to customer preferences and requirements including advertising.

Lowell McAdams, CEO of Verizon Wireless, emphasizes the significance of giving customers control over their individual preferences, such as location-based services and local promotions. The company prioritizes this approach to quality and product differentiation in a fiercely competitive market. This philosophy led them to reject offering the Apple iPhone as they prefer to service devices internally rather than outsourcing. Despite this

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decision, Verizon's strong market presence and existing customer base position them well in the wireless industry. Their acquisition of Alltel has the potential to make them the largest wireless carrier in the US with an additional 13 million subscribers.

To enhance its brand, where can a corporate titan like AT concentrate? Examining history gives us some insight. AT was the world's biggest corporation and faced a 13-year-long anti-trust lawsuit by the US government in 1982, resulting in it dividing into seven regional Bell companies. One of these firms, Bell Atlantic, served regions in northern Atlantic states. In 1996, Bell Atlantic merged with NYNEX during an important year for them since that is when the Telecommunications Act of 1996 was implemented. This act abolished industry limits on areas such as communications, broadcast, electricity and computing which opened up opportunities for any business to participat

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in any sector.

In order to expand their services, phone companies underwent substantial restructuring and acquisitions. Bell Atlantic acquired GTE for $58 billion, the largest independent US telephone service provider at the time, leading to the formation of Verizon Communications in 2001. Another joint venture between Verizon Communications and Vodafone Group resulted in the creation of Verizon Wireless, known as Cellco Partnership, which was valued at $90 billion. The ownership distribution was 55% for Verizon Communications and 45% for Vodafone Group.

One of Verizon's attempts to bolster its standing in the telecommunications sector was acquiring MCI for $8 billion in January 2006. This move was part of a series of growth and acquisition initiatives undertaken by major players like AT;T, SprintNextel, T-Mobile, and Verizon to stay competitive in the fierce wireless market in the United States. Currently, AT;T leads the industry as the top voice and data carrier with sales surpassing $37 billion, catering to 70 million subscribers on their "ALLOVER" network.

AT;T Mobility, formerly known as Cingular Wireless, is a company that offers a complete range of wireless voice, messaging, and data services to both consumer and business clients. It accounts for more than one-third of its parent company AT business and provides high-speed wireless Internet access through its “Broadband Connect” service. Additionally, it offers extensive international network coverage in approximately 190 countries globally. The company was previously a 60/40 joint venture between AT;T and BellSouth, which merged in late 2006. The merger prompted AT;T to conduct an extensive re-branding effort to establish AT;T wireless in the US market, as well as cut 10,000 employees from its workforce, mainly from the wireless arm.

In 2007, AT;T Mobility became

the singular US carrier to be compatible with Apple's groundbreaking iPhone. This achievement has the potential to be a significant competitive advantage for AT&T, depending on the long-term success of the iPhone. Meanwhile, Sprint Nextel has emerged as a result of the merger of two prominent US wireless companies, as they strive to stay competitive in the rapidly evolving telecommunications market.

Sprint Nextel, a wireless behemoth aiming to challenge Verizon and AT&T, was formed in 2005 by the merger of third-place carrier Sprint and former fifth-ranked provider Nextel Communications. Despite the transaction's $35 billion value, Sprint Nextel remains third in terms of US cellular subscribers, trailing AT;T and Verizon. The merger did, however, afford the companies additional assets, which they hoped would result in greater economies of scale. Unfortunately, since the merger's completion, Sprint Nextel has struggled to retain its existing customer base and secure new business.

Despite encountering numerous obstacles, including the loss of consumers and business clients, exclusion from bidding on government contracts worth billions of dollars, and declining financial conditions that resulted in significant losses in both profit and subscribers, Sprint Nextel endeavored to improve their situation by appointing former Embarq CEO Daniel Hesse as the new CEO at the conclusion of 2007. In an effort to revitalize the company, Hesse replaced key finance, sales, and marketing executives while implementing cost-cutting measures like layoffs throughout 2007 and 2008. Nevertheless, despite these alterations, Sprint Nextel continued to struggle against its competitors. Ultimately, this circumstance led to Chairman and CEO Gary Forsee's departure in early 2007.

Sprint Nextel made an announcement in 2008 to close down 10% of its retail stores and 20% of distribution points.

To differentiate itself from competitors, it invested $3 billion into a network based on Intel's WiMAX protocol with hopes for increased demand in broadband services. To combine wireless broadband businesses, joint ventures were formed with Clearwire and cable companies. This was considered a significant gamble but could result in great returns if demand for these services grows rapidly.

T-Mobile USA is a subsidiary of Germany-based T-Mobile International business by Deutsche Telekom that provides wireless voice and data communication services to approximately 27 million customers within the US through their GSM network. When traveling to Europe, clients can connect to the parent company's GSM network as well.

T-Mobile USA, previously named VoiceStream Wireless, offers wireless services and T-Mobile Hotspot Wi-Fi. They supply smartphones, PDAs, and accessories from brands like Motorola, Nokia, and Samsung. In 1999, the company separated from Western Wireless before being purchased by Deutsche Telekom in 2001 along with Powertel - a GSM provider that now operates under the T-Mobile USA name. By acquiring local carriers, the business has increased its number of customers.

In order to enhance its footprint in the southern US, T-Mobile purchased SunCom Wireless for $2.4 billion in 2008, ultimately securing over one million new subscribers throughout the Caribbean and southern US region. The telecommunications sector is currently undergoing notable transformations driven by two major developments: a movement towards wireless services and away from wireline services, and consolidation. These trends are significantly reshaping the industry of Wireless Network Operators.

With the advancement of technology, traditional telephone companies are becoming outdated. Evidence of this can be seen in recent acquisitions by ALLTEL and Sprint, as they purchased Wireless and Nextel Communications respectively. This has resulted

in all wireless carriers worldwide being connected to wireline carriers. To survive, wireline carriers must now include wireless operations within their businesses. The industry is predicted to see further mergers and consolidations.

The industry has undergone significant changes due to the development and adoption of new technologies, particularly in network systems. This evolution has been rapid, transitioning from analog to first-generation digital and then to second-generation (2G) and 2.G intermediate systems. Despite expectations that 3G (third-generation) technology would be the "killer ap" offering converged voice, data, and video services, its implementation has been slower than anticipated due to increased bandwidth and content demands.

Although 3G networks were slow to launch in Asia and Europe, they are now ready to fully realize their potential. However, when compared to newer technologies like Wi-Fi (also known as 802.11b), 3G may seem inadequate. Wi-Fi has become popular for its speedy wireless internet provision in hotspots including coffee shops, airport lounges, and city parks. As a result, the requirement for wider geographic coverage has resulted in the need for WiMAX networks.

WiMAX is predicted to gain popularity among wireless Internet users, even though it faced some competition at the beginning. While AT;T and Verizon make use of 3G networks for their advanced phones, T-mobile has a stronghold on hotspots and SprintNextel leads in WiMax technology. In December 2006, there were 229.6 million American wireless subscribers, and it is anticipated that this number will increase to 276 million by the year's end, highlighting general environmental issues.

The US has achieved a wireless calling culture with a 90% penetration level, making it customary to communicate with anyone, anywhere, anytime. Verizon and other competitors face the

daunting task of upgrading their networks to the 4G platform. Despite spending over $8 billion yearly maintaining and expanding their network that currently operates on CDMA technology and supports up to 3G, Verizon announced a partnership with Vodafone in September 2007 aimed at converting their networks to LTE -the 4G standard.

LTE boasts impressive speeds, with the potential for 100Mbps downloads and 50 Mbps uploads, greatly surpassing current standards. To switch to LTE, GSM network must migrate from CDMA format. Despite the rapid advancements in telecom technology, legal concerns remain a prevalent issue in the industry.

In 2006, journalists uncovered that the NSA had conducted a surveillance program without obtaining a warrant. This program involved gathering call records from major telecommunications companies. As a result of this revelation, concerns were raised about how these companies protect individuals' privacy from being monitored. The disclosure also put these companies in legal jeopardy and caused customers to lose confidence in them. Moving forward, telecommunication firms will need to find a way to balance their obligation to help the government combat terrorism while respecting their subscribers' right to privacy.

There is a significant environmental worry about the telecommunications sector, which involves the possible consequences of cutting-edge technology on people's well-being. The prolonged usage of mobile phones has generated apprehensions about detrimental health outcomes, even though there are no conclusive evidences linking cell phone use to negative health effects. This matter should be a top priority for companies functioning in this industry. In Verizon's 10k report released in February 2008, an elementary assessment of risk factors portrays that the telecom field is teeming with persistent hazards and difficulties that require

constant attention.

Verizon's current business endeavors in the telecom industry can be analyzed through Porter's five forces framework. The factors apply to buyers who face intense competition and large sales volumes. As of December 31, 2007, Yahoo Finance reports that Verizon served around 65.7 million customers on its wireless network which covered approximately 263 million individuals.

Verizon has a large client base, however, each customer's purchasing power is insignificant and poses no danger to the company. Furthermore, Verizon's service plan requires a two-year commitment which leads to substantial fees for customers who want to change providers. This means that buyers are unable to affect prices and are usually bound by their rate for an extended period of time.

Wireless services suffer from a dearth of direct complementors. Laws in different states forbid using cell phones while driving, unless using a handheld device. This has made cell service an essential complementor to Bluetooth hands-free devices. However, sales of Bluetooth devices do not affect the sale of phone plans. To create more complementors among its business clients, Verizon offered bundled services comprising voice, data, video and wireless options as well as broadband connectivity offerings.

Verizon endeavors to create a comprehensive solution for its clients' communication requirements, effectively acting as a one-stop shop. However, the telecommunications industry presents notable hindrances to new entrants. As a result, Verizon, being a nationwide provider, has considerable resources at its disposal, including access to "The Network," allowing clients to communicate from almost any location.

New competitors have emerged in the communication services industry due to the emergence of new technologies and services. This has resulted in blurred traditional boundaries between different types of communication services such as

local, long-distance, wireless, cable, and internet. However, the substantial impact of economies of scale makes it challenging for new entrants to provide national service. The company's annual 10k report acknowledges this challenge posed by competition which includes significant rivalry in the market from cable companies, wireless service providers, satellite providers, electric utilities, VOIP service providers and other telephone companies.

According to Edgar Online, Verizon acknowledges the significant threat posed by competition and must constantly seek innovative ways to offer calling plans, affordable services, and superior customer service to remain competitive. Although no single buyer wields substantial pricing power in the market, Verizon's service is highly price elastic, so alterations in service offerings can yield significant response in the market. Technological advancements are rapidly changing the field of communication, but currently, wireless communication tools such as cell phones still lack any practical alternatives. Despite the potential future competition from free service providers like Skype, cell phones remain a staple of American and global culture for now.

Verizon's annual 10k report reveals that the company relies on key suppliers and vendors to supply equipment for their business operations. Any delays or failures to provide equipment or services could negatively impact the company's ability to execute their business strategy and comply with FCC licenses for their wireless network construction. Despite having pricing power in dealings with suppliers, Verizon's need for highly specialized technological equipment limits the number of potential suppliers, making it crucial to maintain strong relationships. Thus, the threat from suppliers is moderate. On the other hand, Verizon Wireless is the leading domestic wireless carrier with the highest total revenue and operating income, as revealed in their Internal Analysis

Strengths.

(Verizon 10k) It is clear that Verizon strives to achieve both profit-driven revenue and high-quality customer service, as demonstrated by its record of having the lowest "churn" in the industry, meaning the fewest number of customers who terminate their contracts before the agreed-upon end date. Verizon leads the industry with a 1.

At 0% churn rate, the leader is not sprint but the second-ranked AT&T with a 1.7% churn rate. Meanwhile, Sprint lost over 1.3M customers in 2007, resulting in the highest churn rate of the top four at 2%.

Verizon has once again shown their consistency in customer satisfaction by ranking highest in the American Customer Satisfaction Index, with a rating of 4%. This demonstrates their ability to provide superior services to their customers. Additionally, Verizon's employee culture and training are highly regarded, as they ranked fourth in best training and were the only wireless firm in the top ten US and Canadian firms as ranked by Business Ranking Annual, 2009.

Verizon Wireless is not only highly regarded for its training program, but was also ranked as the eighth best large company for information technology by the same publication. The company's significant investment in employee training and recognition as a top workplace reflects its commitment to investing in human capital, which often yields substantial returns. Moreover, a content workforce leads to enhanced productivity, resulting in stronger revenues and profits relative to competitors. Lastly, Verizon Wireless' cellular service extends to over 200 million US customers and represents the first nationwide broadband phone service based on both CDMSA and EV-DO platforms.

Verizon has the advantage of being the pioneer in wireless broadband. Their greatest strength according to the VRIO analysis

is their powerful balance sheet, enabling them to compete with anyone in reinvesting revenue and cash flow into R;D and other internal capital markets. This resource is invaluable, unique, and difficult to replicate in the industry.

Verizon possesses a significant advantage in the market due to its supernormal profits, which provide greater flexibility in making high-risk, high-reward decisions. As one of the top-ranked companies for customer satisfaction in any industry, Verizon serves as the benchmark for its competitors. This places Verizon at a distinct competitive advantage, as other wireless service providers must strive to meet its standard. The rarity of this position is reinforced by the fact that only one firm can hold the title of being the best.

Verizon has established itself as a top service provider by prioritizing customer needs and preferences, and it is unlikely that they will compromise their commitment to service despite challenges in maintaining a leading position. Furthermore, Verizon's reputation for investing in employee development attracts top talent to the company. This is especially evident in Verizon Wireless's workforce.

Ranked fourth overall in America and Canada, this training firm is highly regarded in the Wireless industry for its exceptionally skilled and motivated workforce. Such assets are invaluable for any business and are particularly rare in the Wireless telecom market. However, Verizon does have two notable weaknesses. Firstly, their phone devices are dependent on the CDMA/EV-DO technology standard.

According to estimates, the majority of the world's wireless phones, 3.0 billion, utilize the GSM standard, whereas less than 250 million are on CDMA. Even though both standards can support mobile broadband, the GSM phones are the ones fully compatible with the 3G standard and can

make use of its entire speed. Verizon faces tough competition since most cellular telephones worldwide follow the GSM standard, including those of their rivals AT&T and T-Mobile. This situation leaves Verizon with no choice but to change the status quo. Furthermore, Verizon barely exists in the international market.

Verizon cannot utilize international phones in the US because they do not accept the commonly used standard for foreign cellular devices. This limits their potential in a market that is estimated to have an 80-85% penetration rate (S&P Net Advantage). Additionally, Verizon Communications, their parent company, generated 96.7% of their revenue in the US last year.

Verizon has comprehensive underwater cabling but lacks cellular resources overseas. This makes them miss out on a valuable and rare resource that is expensive to replicate, particularly GSM/GPRS accessibility. We think that implementing the GSM/GPRS standard would help Verizon Wireless access the world market. With 3.

B-customers may find that using GSM/GPRS technology is the only way forward. As demonstrated in this report, Verizon has a strong financial position and substantial capital to invest in areas that will generate the most competitive advantage. The question remains - where should they focus their investments? Should Verizon continue expanding its domestic service provider network or upgrade its technology to be compatible with newer platforms? Alternatively, should they venture into the international market? While each strategy has its merits, Verizon must prioritize offering the most technologically advanced service. Consequently, upgrading from its current 3G platform to a newer 4G network would be a wise choice for Verizon.

Verizon's primary approach to business is distinguished by its emphasis on offering differentiated products and exceptional customer service. A key

aspect of this approach is ensuring that the products provided are of superior quality. Achieving this requires Verizon to remain up-to-date with the evolving technologies within the industry, necessitating an upgrade of its service platform. By doing so, Verizon can allocate the remaining financial resources to additional investments and decisions.

The 2008 annual 10k report for Verizon Inc. can be found on Edgar Online, as of August 15th, 2008, at the following URL: http://yahoo.brand.edgar-online.The Yahoo Finance website provides a link to the Verizon Company Profile on August 15, 2008. The link is located at om/DisplayFiling.aspx?dcn=0001193125-08-042027;. The information is enclosed in a paragraph tag.

Verizon has completed the MCI merger, according to Marguerite Reardon's article on yahoo.com/q? s=VZ>.

The closure of the Verizon-MCI merger was reported on Cnet News on August 15, 2008 with a source link to http://news.cnet.com/Verizon-closes-book-on-MCI-merger/2100-1037_3-6003498.

Visit http://www.allbusiness.com for information related to business. This website uses .

Net advantage offers an industry survey at http://www.netadvantage.standardpoor.com/NASApp/NetAdvantage/showIndustrySurvey.do?code=tws for managing customer operations at a company.

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