Competitive Watch- Verizon Strategy
Content
Brief Summary of the article: Verizon s Strategy: Simple, Boring, Effective In a turbulent and attractive telecommunication industry in the United States, several players are vying to become the leader in tapping the huge market. One of the most contested segments is the wireless communication where Verizon Communication Inc. is the market leader with an approximately 91 million subscribers and followed by its closest competitor, AT&T with approximately 87 million subscribers. Another two players, SprintNextel and T-Mobile , are just merely trying to sustain in the business mainly in the prepaid subscription category with a current subscriber levels of 48 million and 34 million, respectively. Market challenger AT&T has recently gained grounds on V erizon with an exclusive licensing collaboration with Apple to enjoy the sole rights to market its most popular iPhone. Millions of brand faithful Apple fans had switched and subscribed to AT&T network to utilize the Smartphone. Prior to the iPhone venture with AT&T, Verizon was adding twice as many subscribers as AT&T but that figure has now been narrowed. Verizon s strategic response to AT&T s move is to hit back at AT&T s seemingly weak network infrastructure and 3G coverage to accommodate the large bandwidth required for the usage of iPhone. Verizon s strength has always been its excellent network coverage and it spends more than a billion dollars a year to send out a message that its network is robust and more reliable than any of its competitors. Verizon too is well positioned to compete with AT&T with its leverage on phones like Droid, which is driven by Google s Android operating system and Blackberry phones. Verizon also went offensive over AT&T s key strength when it hit out at Apple claiming t hat the iPhone is pretty but guys do not need pretty phones.
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Analysis of Competitive Strategies employed by Verizon 1. SWOT Analysis for Verizon The SWOT analysis for Verizon (refer to Appendix A) reveals that the major strength lies in its robust and reliable network coverage. According to Datamonitor, Verizon s primary network technology platform is CDMA but it also provides for GSM services as a result of the recent acquisition of Alltel. It also plans to develop and employ 4G wireless broadband networks on top of its current stronghold of 3G coverage. As a result, the company s total wireless network coverage reached approximately 288 million people, which is nearly the entire population of USA. A threat in the form of severe competition comes from its major rival, AT&T, who is gradually gaining the edge. 2. Porter s 3 Generic Strategies Analysis i) Cost Leadership: Generally, the cost is not the main driving factor in the almost saturated wireless network industry. Therefore, Verizon is not competing to become the cost leader . ii) Differentiation: The main strength associated with Verizon is in its excellent and robust
wireless network. Its network coverage outweighs its competitors tremendously. Therefore, Verizon has identified the robust wireless network services as its differentiation factor and intend to use it as a sustainable competitive advantage over it s rivals. The wireless network subscribers main concern is for an uninterrupted an d high speed data transfer rate, for which the network of Verizon is capable to deal with.
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iii) Focus:
Verizon is also in the business of landlines as well as wireless networks.
However, Verizon realizes its competitive advantage lies in the wireless services and sets out its focus to be the leading player in the wireless network segment. 3. Positioning (Trout Ries) Verizon utilizes its sustainable competitive advantage in the wireless network services as a key success factor in positioning strategy. It spends a billion dollars annually in the advertising to instill in the minds of subscribers its position in the wireless network infrastructure as the best in the country. An instance of its advertisement (as shown in Appendix B ) illustrates its nationwide 3G network coverage to be 5 times larger than its main competitor, AT&T. This has proven to be an effective marketing strategy as many subscribers are beginning to get very disappointed with the iPhone bandwidth issue on the AT&T network. In this aspect, Verizon distinguishes and propagates itself to functional positioning strategy where it seeks to solve the problems and provide ove rwhelming benefits to the subscribers.
My personal Reflection AT&T s distribution alliance with Apple s iPhone is no doubt a successful strategic maneuver considering the popular brand recognition of Apple. The iPhone has become a competitive advantage for AT&T; however it is not a sustainable competitive advantage. AT&T s wireless exclusivity with Apple s iPhone is for only a temporary period of 3 years . During that time, AT&T is expected to reap its benefits akin to BCG s cash cow factor. AT&T s reliance on iPhone only gives Apple an upper hand in brand visibility. Therefore, to stay ahead in the
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competition with Verizon, AT&T should seek out for other forms of sustainable competitive advantage such as developing its own set of comparable Smartphone or ev en to the extent of acquiring a formidable share of Apple. Verizon s marketing strategy of functional positioning and its strong advertising approach to discredit AT&T s weakness in the wireless network coverage may well be successful. However, in the process it would have as well caused indirect damage to the sales and reputation of Apple s iPhone. This could also impair any prospect of Apple opening up its lucrative iPhone business to Verizon once the exclusivity rights with AT&T expire in 2011. Verizon s earlier smack at Apple s iPhone in its advertisement where it claimed that guys do not need a pretty phone will surely add on to the damage. Therefore, Verizon should have instead just maintained its status quo on advertising its robust wireless network. Sooner or later the subscribers will realize the shortcomings of AT&T and eventually the market forces will make Apple realize that it should open up the iPhone business to the more reliable Verizon s network. Conclusion and Overview Technological advancement in the hand phone and other communication devices should drive the advancement of the infrastructure that supports it. What should be the focus point are the customers who are utilizing the new innovation. When customers are satis fied with the services provided, naturally the business will prosper. Industries employ various marketing strategies to outwit each other to gain a competitive edge. Eventually the true winner will be the ones that satisfy the needs of the customers.
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References
Porter,M (1985). Competitive Advantage - Creating and Sustaining Superior Performance. New York, N.Y.,USA: The Free Press Shields,M (2010). Verizon s Strategy: Simple, Boring, Effective. MediaWeek; 6/7/2010, Vol.20 Issue 23, 26 -27, Retrieved Augu st 9, 2010, from Academic Search Premier database. Verizon Corporate Website, Retrieved August 20, 2010 : http://www22.verizon.com AT&T Corporate Website, Retrieved August 20, 2010 : http://www.att.com Valuebasedmanagement, Retrieved August 22, 2010: http://www.valuebasedmanagement.net
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Appendix A VERIZON S SWOT ANALYSIS
STRENGTH y Robust Network y Strong Domestic Wireless Segment y Growth in Verizon s FiOS television y High Speed internet subscribers OPPORTUNITIES y Strategic acquisitions y 4G wireless network
WEAKNESS y Weak performance of wireline division
THREATS y Intense competition y Economic slowdown in the US y Regulations y Increasing pension cost
Source: Datamonitor
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Analysis of Competitive Strategies employed by Verizon 1. SWOT Analysis for Verizon The SWOT analysis for Verizon (refer to Appendix A) reveals that the major strength lies in its robust and reliable network coverage. According to Datamonitor, Verizon s primary network technology platform is CDMA but it also provides for GSM services as a result of the recent acquisition of Alltel. It also plans to develop and employ 4G wireless broadband networks on top of its current stronghold of 3G coverage. As a result, the company s total wireless network coverage reached approximately 288 million people, which is nearly the entire population of USA. A threat in the form of severe competition comes from its major rival, AT&T, who is gradually gaining the edge. 2. Porter s 3 Generic Strategies Analysis i) Cost Leadership: Generally, the cost is not the main driving factor in the almost saturated wireless network industry. Therefore, Verizon is not competing to become the cost leader . ii) Differentiation: The main strength associated with Verizon is in its excellent and robust
wireless network. Its network coverage outweighs its competitors tremendously. Therefore, Verizon has identified the robust wireless network services as its differentiation factor and intend to use it as a sustainable competitive advantage over it s rivals. The wireless network subscribers main concern is for an uninterrupted an d high speed data transfer rate, for which the network of Verizon is capable to deal with.
2
iii) Focus:
Verizon is also in the business of landlines as well as wireless networks.
However, Verizon realizes its competitive advantage lies in the wireless services and sets out its focus to be the leading player in the wireless network segment. 3. Positioning (Trout Ries) Verizon utilizes its sustainable competitive advantage in the wireless network services as a key success factor in positioning strategy. It spends a billion dollars annually in the advertising to instill in the minds of subscribers its position in the wireless network infrastructure as the best in the country. An instance of its advertisement (as shown in Appendix B ) illustrates its nationwide 3G network coverage to be 5 times larger than its main competitor, AT&T. This has proven to be an effective marketing strategy as many subscribers are beginning to get very disappointed with the iPhone bandwidth issue on the AT&T network. In this aspect, Verizon distinguishes and propagates itself to functional positioning strategy where it seeks to solve the problems and provide ove rwhelming benefits to the subscribers.
My personal Reflection AT&T s distribution alliance with Apple s iPhone is no doubt a successful strategic maneuver considering the popular brand recognition of Apple. The iPhone has become a competitive advantage for AT&T; however it is not a sustainable competitive advantage. AT&T s wireless exclusivity with Apple s iPhone is for only a temporary period of 3 years . During that time, AT&T is expected to reap its benefits akin to BCG s cash cow factor. AT&T s reliance on iPhone only gives Apple an upper hand in brand visibility. Therefore, to stay ahead in the
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competition with Verizon, AT&T should seek out for other forms of sustainable competitive advantage such as developing its own set of comparable Smartphone or ev en to the extent of acquiring a formidable share of Apple. Verizon s marketing strategy of functional positioning and its strong advertising approach to discredit AT&T s weakness in the wireless network coverage may well be successful. However, in the process it would have as well caused indirect damage to the sales and reputation of Apple s iPhone. This could also impair any prospect of Apple opening up its lucrative iPhone business to Verizon once the exclusivity rights with AT&T expire in 2011. Verizon s earlier smack at Apple s iPhone in its advertisement where it claimed that guys do not need a pretty phone will surely add on to the damage. Therefore, Verizon should have instead just maintained its status quo on advertising its robust wireless network. Sooner or later the subscribers will realize the shortcomings of AT&T and eventually the market forces will make Apple realize that it should open up the iPhone business to the more reliable Verizon s network. Conclusion and Overview Technological advancement in the hand phone and other communication devices should drive the advancement of the infrastructure that supports it. What should be the focus point are the customers who are utilizing the new innovation. When customers are satis fied with the services provided, naturally the business will prosper. Industries employ various marketing strategies to outwit each other to gain a competitive edge. Eventually the true winner will be the ones that satisfy the needs of the customers.
4
References
Porter,M (1985). Competitive Advantage - Creating and Sustaining Superior Performance. New York, N.Y.,USA: The Free Press Shields,M (2010). Verizon s Strategy: Simple, Boring, Effective. MediaWeek; 6/7/2010, Vol.20 Issue 23, 26 -27, Retrieved Augu st 9, 2010, from Academic Search Premier database. Verizon Corporate Website, Retrieved August 20, 2010 : http://www22.verizon.com AT&T Corporate Website, Retrieved August 20, 2010 : http://www.att.com Valuebasedmanagement, Retrieved August 22, 2010: http://www.valuebasedmanagement.net
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Appendix A VERIZON S SWOT ANALYSIS
STRENGTH y Robust Network y Strong Domestic Wireless Segment y Growth in Verizon s FiOS television y High Speed internet subscribers OPPORTUNITIES y Strategic acquisitions y 4G wireless network
WEAKNESS y Weak performance of wireline division
THREATS y Intense competition y Economic slowdown in the US y Regulations y Increasing pension cost
Source: Datamonitor
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