Verizon Communications Inc Discussion

IV: Success Factors and Risks
A:
Verizon, like any other business seeking to thrive in an increasingly competitive marketplace has in place financial and strategic priorities which, in essence, guide the company’s operational and strategic decisions. To ensure competitive advantage, Verizon makes use of a differentiation strategy. It is important to note that this strategy comes in handy as the business seeks to keep the various external forces that may in some way affect its profitability at bay. In adopting this particular strategy, the company seems determined to not only defend its market share but also enhance its brand image. Verizon’s selling point in this case is quality as it seeks to not only win new customers, but also keep the existing ones. It should be noted that the company ensures this generic strategy is adopted across all its business units and activities – with Verizon Wireless adverts, for instance, being seen to largely focus on the company’s wireless services quality. The company, according to Clegg, Schweitzer, and Whittle (2016), has also heavily invested in infrastructure, and continues to embrace new technologies so as to ensure that it carries on the high-quality narrative. The company’s personnel, and particularly its customer service representatives, are also well trained – with the company, from time to time, implementing training programs to further enhance the competency of its staff. To successfully deploy this strategy, Verizon has to, amongst other things, engage in customer accounting through cost analysis and customer profitability analysis; and competitor accounting via competitor performance appraisal and cost assessment (Clegg, Schweitzer, and Whittle, 2016). For its adoption of this strategy, Verizon manages to charge a premium for its services. This effectively means that for the same ground covered by competitors, the company earns more. The better quality of the company’s services also enhances customer royalty, with loyal customers choosing to stick with the company instead of switching to the competition.
B:
There are various ways through which Verizon could capitalize on non-financial factors. To begin with, Verizon could further seek to enhance the capabilities of its human resources by offering additional training particularly in the areas of change management and technology. The industry in which Verizon operates, as Hill, Schilling, and Jones (2016) point out, is prone to constant changes as businesses seek better and more efficient ways of servicing the needs of their clients. Resistance to chance could, in essence, impede the company’s ability to adapt to new market conditions. On this front, the company could also spur creativity in its workforce by amongst other things implementing encouraging teamwork and stimulating better employee relations. Further, the company could seek to ensure that it further enhances employee motivation by reviewing its employee compensation policies. This would enhance employee loyalty and lead to a reduction in employee turnover rates.
Technology is also another non-financial factor that Verizon could seek to capitalize on. A study Verizon sponsored four years ago came to the conclusion that companies that adopt new technologies early enough are likely to have fast mover advantages, in that they are likely to lead in not only the generation of revenues, but also in the further expansion of their market share (Verizon, 2017). First mover advantages are often difficult to beat, effectively meaning that by embracing better applications and methods, Verizon would be far ahead of the rest of the competition. Further, in addition to erecting entry barriers, continuous improvement in the realm of technology could help Verizon revolutionize its operations and become more effective in the delivery of its services to customers.
Next, reputation is also of great relevance as far as the company’s capitalization on non-financial factors is concerned. Over time, Verizon has been awarded a number of awards based on its commitment to superior service. Recently, Verizon was ranked the best in wireless network performance and quality in the whole of the United States in 2017 (Verizon, 2017). The company also has excellent reputation as an equal opportunity employer. Recently, it was awarded “a 100% rating on the Disability Equality Index (DEI) demonstrating the value of our diverse and inclusive experiences for employees, customers and suppliers.” Verizon could continue this reputation by amongst other things being more visible on the CSR front. While the company already has excellent CSR reputation, it could further build on the same by selecting a specific cause and following up on it. Areas of interest could include, but they are not limited to, Cancer Treatment, HIV Aids Cure and Prevention, Enhancement of Literacy Levels in Africa, etc. The company must also uphold principles of sustainable development. This it could do by, for instance, focusing on a specific aspect of Sustainable Development Goals, i.e. by offering practical solutions for climate. The goodwill that results from such an engagement is likely to generate new markets for Verizon’s products.
C:
On the basis of its adoption of the differentiation strategy, Verizon effectively exposes itself to price-based competition. This is more so the case given that the company has invested in higher-quality infrastructure – effectively meaning that it has a higher threshold with regard to how low prices can be driven. It is also important to note that Verizon prides itself in having a highly qualified team of employees charged with driving its mandate. While the company has managed to keep employee turnover rates low over time, the company’s inability to involve employees in the implementation of policies that affect them could prove detrimental to its ability to maintain a motivated workforce. Recently, approximately 36,000 employees of the company went on strike “as a contract dispute entered its ninth month…” with Verizon “seeking rule changes that would make it easier to outsource work…” (Scheiber and Chen, 2016). Employee unrest could get in the way of the organization’s ability to effectively execute its mandate and meet its objectives. Lastly, the issue of low diversification could hurt Verizon’s future financial performance. In essence, the Wireless business remains Verizon’s single most significant revenue stream. Any sort of disruption to this particular revenue stream would be disastrous to the company.
V. Projections
A:
In 2016, Verizon experienced a 4.3% drop in revenues, largely due to sluggish performance in wireless service and a seven week strike by its workers which stalled its operations. The mobile industry is unlikely to experience decline in the year 2017. This is more so the case given that, as it has been pointed out in Deloitte’s Global Mobile Consumer Survey (GMCS), the amount of time U.S. consumers spend interacting with their devices has been on the increase. Further, the sales of smartphones continue to soar. Given that Verizon intends to continue its focus of affordable and high-quality voice and data services, it is likely to defend its market share. It should also be noted that given its superior network infrastructure, Verizon is not likely to incur massive capital investment on the same going forward. The company, in my opinion, is, therefore likely to experience a net income growth rate of a hypothetical 15% for the first two years under consideration (2017 and 2018). The only costs the company is likely to incur as far as the development of its infrastructure is concerned relate to the transition from network equipment based on hardware to functions with software as their basis. It is for this reason that I revise the growth of net income for 2019 by 3 basis points.
B:
As can be seen from the quarterly statements in the appendices, the company has not had a decline in the net income figure since the last first quarter of 2017. With the main cause of last year’s net income decline (i.e. workers strike) out of the way, the company could be on its way to better performance. The company’s differentiation strategy is also likely to pay off with no competitor in sight to successfully execute a low cost strategy. The company’s overreliance on a single revenue stream is also unlikely to significantly affect its performance in the short-run, with most US consumers making more use of their mobile devices, and spending more time online. For this reason, the company could experience a 20% increase in the net figure income this year. The only risk the company would have to contend with is political risk (given the global and regional geo-political concerns), for which I revise my 2017 projections downwards, by 5 basis points, in a worst case scenario alternative.
C:
It is important to note that for the most part, the percentage projections highlighted above are largely hypothetical and have no quantitative basis. However, the discussions informing the projections are based on actual facts regarding the company, its historical performance and factors that could affect its future performance. In the final analysis, the exercise is beneficial in that it offers us a generalist view of where the company is headed.



References
Clegg, S.R., Schweitzer, J. & Whittle, A. (2016). Strategy: Theory and Practice (2nd ed.). Thousand Oaks, California: SAGE
Deloitte’s Global Mobile Consumer Survey - GMCS. (2016). Global Mobile Consumer Survey: US Edition. Retrieved from https://www2.deloitte.com/us/en/pages/technology-media-and-telecommunications/articles/global-mobile-consumer-survey-us-edition.html
Hill, C.W., Schilling, M.A. & Jones, G.R. (2016). Strategic Management: Theory and Cases – An Integrated Approach (12th ed.). Mason, OH: Cengage Learning
Scheiber, N. & Chen, B.X. (2016). In Verizon Strike, Blue-Collar Stress Hits the Sidewalk. Retrieved from https://www.nytimes.com/2016/04/14/business/verizon-workers-strike.html
Verizon. (2017). Our Company. Retrieved from http://www.verizon.com/about/

















Appendix

2015
‘000’
2016’
‘000’
% Change

2017
‘000’
2018
‘000’
2019
‘000’

Net Income
17,879,000
13,127,000
(36.20)

15,096,000
17,360,000
16,839,000


Verizon’s consolidated statement for each of the next three years




Quarterly Performance

2017 Q2
‘000’
2017 Q1
‘000’
% Change
2016 Q4
‘000’
2016 Q3
‘000’
% Change

Net Income
4,362,000
3,450,000
20.91
4,495,000
3,620,000
19.47





Best/Worst Case Scenario for 2017

2015
‘000’
2016
‘000’
% Change

Best Case
Scenario
‘000’
(2017)

Worst Case Scenario
‘000’
(2017)

Net Income
17,879,000
13,127,000
(36.20)

15,752,000
14,964,000