SWOT Analysis for Verizon Wireless

I. Introduction & Scope

I do field marketing for Motorola and promote their cell phones. This SWOT analysis will consider strengths, weaknesses, opportunities, and threats for cellular service provider Verizon Wireless. This will be useful to me as I attempt to sell Motorola products to Verizon and its customers. This analysis focuses on the US market for wireless service. Indeed, the analysis for emerging markets is different, as these markets present more opportunities for growth, but there is less profit potential in terms of total dollars (Harrison). Moreover, the service providers in international markets are not necessarily the same as those in the United States. In light of these factors, and the fact that my sales territory for Motorola is based in the United States, this analysis will be confined to the domestic market.

II. Secondary Market Research Findings

Several trends have recently emerged in the wireless service market, both in the market as a whole and in the specific markets Verizon Wireless serves. Below is a summary of my findings from secondary market research.

Market trends. The market for wireless services continues to grow exponentially (Communications Law). Market penetration for cellular voice service is 95% in the United States. Currently, more than half of spending on wireless services takes place in the consumer market segment, but the business market segment also continues to expand (albeit not as quickly) (Company Profile).

Usage Trends. Increased broadband capabilities allow for the sharing of massive quantities of data in a way that, just years ago, was never thought possible. Moreover, customers are increasingly reliant upon their mobile devices for functions traditionally provided by desktop and laptop computers, such as checking email (including reviewing large documents for business); capturing, viewing, editing, and sharing videos and photographs; downloading, enjoying, recording, editing and storing music; and exchanging instant messages. Thus, data use continues to skyrocket. Revenues for voice services are decreasing, but this is offset by an even faster increase in revenues for data services (Company Profile).

Device Trends. Smartphones are increasingly common in all segments of the wireless market. This is probably a result of the increased desire to utilize mobile devices to perform the data-intensive functions discussed in the “Usage Trends” section. For some customers, the decreasing prices and increased availability of smartphones may also encourage increased use of data (Company Profile). Indeed, a mobile phone customer who is not terribly savvy in their own right might utilize data services simply because they are so accessible.

Service Provider Trends. There has been an influx of low-cost, lower-service, often prepaid service providers in the market for wireless service (Consumer Reports). These providers often advertise plans with lower commitment requirements than the conventional plans offered by established providers, and attempt to attract customers by offering wireless service for a flat fee, or with no contract. These new market participants also often allow the customer to purchase a device upfront, without a contract, or even allow a customer to use a device they already own. Conventional carriers, including Verizon, however, have responded by introducing prepaid plans designed to compete in this segment of the market (Consumer Reports).

Regulatory Trends. Recently, the Federal Communications Commission—the Federal agency with the authority to regulate the wireless services industry—has focused heavily on increasing competition among wireless service providers (Communications Law). It has also sought to increase broadband spectrum availability, as licenses to utilize broadband spectrum allow wireless service providers to provide connectivity for their customers. One initiative ostensibly designed to further both of these goals has been the public auction of licenses for the use of the federal electromagnetic spectrum. Such initiatives are expected to continue. On the upside for service providers, the FCC has recently focused on new ways to increase spectrum availability and has allowed for efficient sharing of spectrum among service providers. It has also encouraged the development of innovative new sources of the spectrum, such as those provided via satellite (Communications Law).

III. Strengths

Service Area. Verizon Wireless has the largest service area of any conventional wireless carrier, both in terms of the geographical scope of its wireless network and the presence of brick-and-mortar stores. This is Verizon’s distinct advantage over its most direct competitor, AT&T. The superior geographical reach of Verizon’s wireless service is well-publicized across multiple channels of communication via Verizon’s advertising campaign. Thus, many customers—particularly in otherwise underserved geographical areas—will default to choosing (and staying with) Verizon because it is the only carrier offering reliable wireless service in their area.

Verizon compliments this distinct advantage by focusing on ensuring that it has many brick-and-mortar sales and service outlets. It does this not just in urban areas, but also in the more rural areas where the Verizon network often offers superior reliability and geographical reach. This helps the company attract and retain customers, particularly the less sophisticated demographic of customers more common in rural areas. Indeed, customers who are less experienced with technology will tend to prefer a wireless service provider that allows them to visit a storefront to get a device, buy or change their plan, or troubleshoot their device or service. Verizon has built an infrastructure of retail establishments that helps them continue to target these customers.

Brand Recognition. Verizon Wireless leads the industry in brand recognition. Verizon and AT&T are the best-known providers of wireless services in the United States, and Verizon is increasingly recognized as having the largest service area, as discussed above. The fact that essentially all wireless customers have heard of Verizon in and of itself makes customers more likely to choose Verizon as their service provider. As the demand for data services increases, Verizon’s brand recognition will remain unchanged. This strength is somewhat less significant because it is shared by AT&T.

Perception of Quality. Customers, particularly in the consumer market segment, regard the service Verizon provides as a top-quality product. Thus, some customers will be predisposed to choose Verizon as a wireless service provider because it is considered a premium provider. The significance of this strength, too, is diminished insofar as it is shared with AT&T.

IV. Weaknesses

Price. Though Verizon is perceived as offering a superior product, its service is more costly than most other options. Thus, price-sensitive customers will have a disincentive to choose Verizon as their wireless service provider. For mid-range to high-end customers, Verizon still must compete on service with AT&T. For customers who are somewhat price sensitive but live in a rural area where other service providers are not reliable and/or accessible, however, the price weakness may not be as significant.

Direct Competitor has a Distinct Advantage in a Key Growth Area: Data. AT&T, as Verizon’s primary direct competitor in the wireless services market, has the distinct advantage of allowing customers to utilize data and voice features simultaneously. This weakness is particularly significant in the context of the meteoric rise in data usage. This is particularly so insofar as customers continue to place an increased premium on data capabilities, and a decreased premium on voice services. This weakness has the potential to totally offset Verizon’s strength insofar as it has a larger service area.

Similarly, many reports indicate that the speed and quality of Verizon’s services are inferior to AT&T’s in urban markets. This is problematic insofar as urban customers are likely more technologically savvy and have higher expectations from wireless service providers. It is also an issue because of the significant sizes of urban markets. For all of Verizon’s ability to attract customers in rural areas, those rural populations may be insufficient to adjust for the large urban markets of customers that are not choosing Verizon because of the decreased reliability of their services there.

V. Opportunities

Resources to Acquire Increased Broadband Spectrum. Given recent FCC initiatives to increase broadband spectrum availability and Verizon’s significant resources as a large, global company, Verizon is poised to re-focus their acquisitions strategy. It certainly makes sense for Verizon to maintain a superior geographical reach, but Verizon should also take advantage of its significant financial resources to acquire an increased depth of coverage as well. This way, the company can avoid becoming irrelevant in urban markets, while maintaining their advantage when it comes to breadth of coverage. Smaller companies do not have the financial resources to do this, but Verizon’s size and resources give it the opportunity to insulate itself as a dominant player in the market.

Regulators’ Willingness to Allow Innovation and Sharing. The FCC’s recent willingness to allow experimentation and innovation in the acquisition and sharing of the broadband spectrum is another opportunity for Verizon. The company should seek new partners in key markets that they can share spectrum with. Sharing spectrum allows Verizon to increase its capacity. Although sharing agreements will prevent Verizon from increasing its capacity as much as it would if it acquired spectrum by itself, sharing does not create the appearance of reduced competition which the FCC has recently attempted to avoid, and thus reduces the chance that government regulators will target Verizon for enforcement.

Moreover, Verizon should invest in joint ventures with research and development companies devising new products and new ways to provide a broadband spectrum. This will allow Verizon to be the first to utilize and offer enhanced capabilities once they become available. This will also increase the quality of Verizon’s service while not appearing to reduce competition, because the total broadband spectrum will be increasing, and will also capitalize upon the growing data market.

VI. Threats

Low cost, low service competitors. New providers on the market for wireless services are competing on price in a way that may be unsustainable for Verizon in the long term. Customers who are very price-sensitive may become a lost cause.

Direct Competition. AT&T as a direct competitor has remained aggressive in its marketing and acquisitions. Thus, for the mid-range and high-end customers, they will remain a threat to Verizon’s long-term profitability, and focused upon fighting for market share.

Limited control over regulation and spectrum availability. To some extent, the entire wireless services industry is at the mercy of the FCC, other government regulation, and the potential that there are limits to the availability of broadband spectrum.

Works Cited

"Communications Law: The Relentless Pursuit of Broadband Competition." 2013 Insights: Regulatory. Skadden, 2013. Web. 22 Feb. 2014. <http://www.skadden.com/insights/regulatory-1>.

"Company Profile." Investor Relations. Verizon Wireless, n.d. Web. 20 Feb. 2014. <http://www.verizon.com/investor/industryoverview.htm>.

Harrison, Virginia. "Verizon bets big on U.S. wireless market." CNNMoney. Cable News Network, 3 Sept. 2013. Web. 22 Feb. 2014. <http://money.cnn.com/2013/09/03/technology/verizon-us-market/>.

"U.S. Cell Phone Carriers Ratings." Consumer Reports. Consumer Reports, 2013. Web. 22 Feb. 2014. <http://www.consumerreports.org/cro/electronics-computers/phones-mobile-devices/cell-phones-services/us-cell-phone-carriers-ratings/ratings-overview.htm>.