External Analysis for Verizon

In its present iteration and business model, Verizon Inc. represents one of the top carriers for cellular phone service in the United States. A combination of its diversified business model, capabilities in terms of interlinking its technological and business-level operations, and its focus on providing high qualities of data services help the firm achieve and maintain its ongoing competitive advantage. Given that its key rivals include such telecommunications giants as AT&T, T-Mobile, and Sprint, its combined abilities in this respect identifies a high level of achievement for the firm. The company’s estimated annual revenue of $126 billion also identifies the firm’s relative success in terms of using its intrinsic strengths as a way of generating and maintaining an effective strategic approach to its operations (“Profile…” 1). At the same time, the company’s strategic strengths and associative weaknesses also need to be viewed from the perspective of external analysis. This includes the application of a PESTEL-based model as well as a competitive environment-based framework. These models allow us to understand the firm’s strategic approach from a broader perspective.

The key political factors likely impacting the broader mobile telecommunications industry in the firm’s global and domestic environment include the potential for various governments to adopt policies that will impact the industry’s market, opportunities, and underlying infrastructure (“Verizon PESTEL…” 4). Examples in this context include planned strategies by various governments to broaden the cellular phone marketplace in the context of their national economies and environment, their similar proposals to improve and expand existing infrastructure and to make substantial improvements in internal WIFI networks. At one level, these events may improve the ability of multiple firms to operate within both domestic and international markets. Market expansions will create new opportunities for various companies: both U.S.-based firms as well as those companies operating within various national markets. Similarly, technological and infrastructural improvements will also serve to expand the range of services and products offered by various firms. These same conditions, however, may also result in increasing market parity: conditions that may make it difficult for larger firms to retain a competitive advantage over smaller and emerging companies (“Verizon PESTEL…” 4).

The primary economic drivers impacting the industry are closely related to political-related variables. First, a combination of improved economic conditions, an increase in the levels of disposable income now available to consumers, and an increased diversity in terms of smartphones and related products now makes these devices increasingly available to an increasingly diverse consumer segment. Secondly, patterns of niche development in terms of the industry’s related technology are also creating conditions in which consumers will specifically seek out specialty types of devices. These same trends also interlink with simultaneous expansion of the industry in both domestic-U.S. and global market contexts. Finally, these trends are decreasing the gaps between available technology provided by various rivals and carriers. Industry competitors potentially benefit from the first two variables, even as they might also be negatively impacted by increased parities among individual companies.

Key social-related trends impacting the industry include the following. First, smartphones, tablets, and related devices increasingly represent popular items among varied demographics and social classes. This same trend is also resulting in a corresponding increase in terms of mobile-based technology, and among diverse apps and platforms that users can select after purchasing a device. Finally, broader technological developments are also resulting in increased demands for quality among diverse consumer groups. Industry competitors face potential challenges deriving from the broader expansion of related technology and services, and from the potential for an increased number of market entrants to further segment the field. However, newer entrants may be less capable of addressing consumer demands for improved technology. These conditions, consequently, may favor better-established firms with access to a higher level of technology, infrastructure, distribution, and related advantages that support the domain of quality within the industry.

Multiple technology-related variables potentially impact the industry in diverse ways. Examples include the proliferation of new technologies that help support the development of better-quality devices, the impact of broader technology development on niche products and services, as well as the rapid increase in technology development (“Verizon PESTEL…” 5). Technological development serves to drive and improve the products and services introduced by multiple firms: a set of conditions that tends to benefit most firms even as it also tends to create market parity. The emergence of niche markets as a result broader trends of technological development, conversely, tends to benefit two specific types of firms: those featuring a larger-scale model capable of acquiring smaller specialist service-driven companies, and those smaller firms that provide specialty forms of service or options and their primary business driver (Rashed and Hassan 142). Increased growth, development and expansion of technology represents a factor that tends to generate broader market parity. As multiple companies have equal access to the same essential technologies and products, they also face a situation in which technological differentiation alone cannot serve as a market driver.

The environment actually presets a major threat to Verizon’s business. When the environment is at its lowest, so are the sources that Verizon needs in order to create more technology. At the same time, the growth and change from macroevolution bring renewable energy sources and helps the business. In the end, it just ends up being this cycle where nature is detrimental to the cell phone business in some ways, but extremely helpful in others (“Verizon PESTEL…” 6).

Legal-based variables play a major role as well. The tendency for larger telecommunications companies that rely upon cluster and acquisition-based operation models impacts the increasing risk for antitrust-based legislation aimed against these practices (“Verizon PESTEL…” 7). While these actions represent theoretically based variables, they also represent a likely event. In cases where the U.S. government decides to enact antitrust legislation against a larger firm, smaller companies might benefit as the activity might result in their increased ability to compete against better-established rivals. 

When it comes to Verizon and the five forces, they all tie in together and the cell phone service competition. There are many different rivals against Verizon. With AT&T, Sprint, and T-Mobile to name a few of Verizon’s rival companies, there is an extremely high rivalry between the companies. One of the main reasons for high competition is the discontinuation of contracts. With the discontinuation of contracts, the customers are free to switch service providers as they choose. When rival companies are advertising in attempts to get customers to leave Verizon, Verizon then has to fight to keep their customers (“As Phone Contracts…”). 

The threat of customers substituting Verizon for other cell phone companies is high as well, tying in with the overall rivalry. Sales are rapidly declining for Verizon, and they are losing customers as well. In the first six weeks of 2019 alone, Verizon lost close to 400,00 customers. While they did gain some new customers in that the time, the net decline of customers from January to April 2019 was around 289,000 (Fang).

Technology is constantly changing. Not only does Verizon have to keep up with new technology growth, but with that growth comes new companies. The cost goes up for phone service over time as well, with the little added cost to the company itself. With the extra money coming in, cell phone service becomes a whole more profitable. Not only that but as technology advances, so do the sales of that technology.  Studies show that in 2018, 1.56 billion cell phones were sold worldwide, compared to the 139 million sold in 2008, just ten years before (Gartner). With the higher profit level and the higher demand for service, more people are trying to get in on the cell service business, and either opening their companies while existing companies finding ways to increase sales and enter the competition. 

Especially with new competition, and all of the changes, there are many things that Verizon has had to do to not only be successful but stay successful. One of the main ways that Verizon stays successful is by focusing on “agility, efficiency, and performance.” A few of the things they do to work on efficiency are making sure their technology stays up to date, and that their staff is able to effectively communicate. By improving technology, things run faster smoother. By making sure their staff is able to communicate, things run smoother not only with all of the employees but with customer service as well (Verizon 6 Areas of Focus).

As for the External Factor Evaluation Matrix of the company, Verizon has done fairly well with opportunities, competitive profile, and threats. One of the main ways that Verizon effectively does all of these is through their plans. By creating new cell phones plans and revamping current ones, customers are given new opportunities to afford things they may have not been able to before, and those who could already afford them are given more of an opportunity to choose which plans and devices they want. These cell phone plans have a lot to do with the current plans of their competitors, and so Verizon has had to profile the competition, their plans, and their profit margins. The threat of rival companies causes them to be constantly profiling other cell phone companies. With the ever-changing world of technology, Verizon is already losing customers, and would only continue to do so if they did not keep tabs on competitors, and find ways to improve their services. (Fang)

In the end, Verizon has been an extremely successful company. With a fairly decent PESTEL set up, some of the top technology, and great opportunities, the company’s success level is not a surprise. While Verizon has lost some customers, they have managed to hold on even with the technological changes, new companies, and higher turnover rates.

Works Cited

Rashed Azim, and Azizul Hassan. “Impact Analysis of Wireless and Mobile Technology on Business Management Strategies.” Information and Knowledge Management, vol. 3, no. 2, 2014, pp. 141-153).

Fang, Brian. “Why Verizon Is Losing More Cellphone Customers than Ever.” The Washington Post, WP Company, 20 Apr. 2017, www.washingtonpost.com/news/the-switch/wp/2017/04/20/why-verizon-is-losing-more-cellphone-customers-than-ever/?noredirect=on&utm_term=.4f44c66faf38. 

“As Phone Contracts Die, Competition Comes to Life.” 2015. BetaBoston, www.betaboston.com/news/2015/08/19/as-phone-contracts-die-competition-comes-to-life/. 

Verizon PESTEL Analysis: PESTEL Analysis and Recommendations. New York: Panmore Institute, 2018.

“Profile: Verizon Communications.” Reuters, 2019. https://www.reuters.com/finance/stocks/company-profile/VZ.N.

“6 Focus Areas for Business Success.” About Verizon, 15 Mar. 2017, www.verizon.com/about/news/6-focus-areas-business-success?fbclid=IwAR0T65MGlS1SbLf5BabXIT2zg6HkRyqshaBkHyC23HLe5Hug0s91RVmmbvY. 

-- “Our Company.” 2019. https://www.verizon.com/about/our-company.