Analysis of Verizon Communications
Verizon Communications formed by the merger of two big and successful companies, Atlantic Corp. and GTE Corp., is the largest telecommunication company. The company serves large part of the market in United States. However the company faces certain strengths and weaknesses which affect the way company formulate its strategies.
Internal Analysis:
The IFE (Internal Factor Evaluation) matrix summarizes the major strengths and weaknesses of Verizon Communications.
KEY INTERNAL FACTORS WEIGHTS RANKING SCORE
Strengths
1. Employee satisfaction. .05 3 .15
2. Well positioned company. .15 3 .45
3. Increase in revenue and EPS. .10 3 .30
4. Offering fiber-optic lines. .20 4 .80
5. Largest directory
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2. Verizon Communications is not able to achieve its objective of becoming the market leader in delivering innovative, integrated communications solutions to its customers (management).
3. The company widely covers most of the territories in United States but its telecommunication services are not being expanded globally in other parts of the world in comparison to its competitors (marketing).
4. Verizon's financial position is not very impressive. The company has $49 billion debt load. Moreover the Gross Profit Margin of 2003 has decreased to 0.67, which was 0.70 in 2002 (financial/accounting).
5. Verizon Communications is not well placed against its competitors like AT&T who offer services using technologies like TDMA (time division multiple access) (production).
FINANCIAL RATIOS
FINANCIAL RATIOS 2003 2002 2001
Liquidity Ratios
Current Ratios 0.68 0.79 4.49
Quick Ratios 0.64 0.73 0.55
Leverage Ratios
Debt to Total Asset Ratio 0.27 0.31 0.37
Debt to Equity Ratio 1.35 1.63 1.97
Long Term Debt To Equity Ratio 0.23 0.26 0.26
Times Interest Earned Ratio 0.11 0.22 0.17
Activity Ratios
Inventory Turnover 52.8 44.95 34.14
Fixed Asset Turnover 1.61 1.59 1.28
Total Asset Turnover 0.4 0.4 0.39
Accounts Receivable Turnover
Average Collection Period
Profitibility Ratios
Gross Profit Margin 0.67 0.7 0.38
Operating Profit Margin 0.11 0.22 0.17
Net Profit Margin 0.45 0.06 0.005
Return On Total Assets 0.18 0.02
In business, market structure plays an important role, which helps to shape the competitive landscape for businesses at all levels. Each business industry will naturally form a market structure that comes in numerous forms: Perfect competition, monopolistic competition, oligopoly, or monopoly. Verizon Wireless is a well-known communications company and large enough to affect the market. Oligopoly is defined as a market in which only a few firms dominate, and judging from Verizon competition there are only a few firms involve: T-Mobile, AT&T and Sprint. With only few competitors involve the barrier to entry is high, but there still lies a large pool of customers. The barriers are high because of the amount of money that has to into the infrastructure
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In order to identify Verizon's core competencies, a SWOT and Five Forces analysis was performed. The SWOT analysis showed internal strengths in technology diversification, a large and talented employee resource pool, and an expansive network footprint. Internal weaknesses were revealed that centered on post merger issues such as corporate culture issues, impending workforce retirements, and a lack of systems or process consolidation. External opportunities include the potential to further capitalize on incumbent status, diverse markets, long distance, and brand identity. Finally, external threats include government regulation, substitution, and a weak economy.
Verizon is a major telecommunication provider in the United States. The company is the market leader, with $110 billion revenue and $2.4 billion in profit (MSN Moneycentral, 2012). Verizon has steady revenue streams that are largely based on a subscription model. It has several business segments, including wireless (63.3% of revenues) and wireline (36.7%) (2011 Verizon Annual Report). Most of this report will therefore focus on the wireless business, not only because this is the largest business that the company operates but because it is a rapidly growing and evolving business as well, a function of the rapid pace of smartphone adoption in America.
Due to wide coverage and most efficient customer service Verizon has become the largest Wireless communication company in U.S.
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“As a leader in communications, Verizon's mission is to enable people and businesses to communicate with each other. We are also committed to providing full and open communication with our customers, employees and investors”
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