The five forces model helps companies understand the relative attractiveness and competitive pressures of an industry. Every company especially one with leading competition in its industry, like Verizon, takes into consideration balancing the five forces: buyer power, supplier power, threat of substitutes, new entrants, and rivalry between existing competitors.
Buyer Power
Buyer Power is high, especially in this technological area because there are many choices in products and services when it comes to communications. For Verizon's wireless industry, there are many competitors such as AT&T, T-Mobile, Spring, Nextel, among others, that offer similar services. Therefore, in order for Verizon Wireless to attract and maintain customers they must offer top of the line wireless devices, networks, and affordable prices. The best way to reduce buyer power is by gaining competitive advantage , which Verizon thrives in doing. Verizon gains markets due to its philosophical approach to be the first to try new technologies. Customers perceive this confidence and quality in their products and services and choose Verizon.
Supplier Power
Supplier power is high when companies do not have many supplier choices to buy from. Verizon puts a great importance on their suppliers; therefore, they have their own organization, The Strategic Sourcing Organization, to handle the negotiation and purchase of products and services from suppliers. In this way, Verizon lowers supplier power and has many diverse supplier options that will provide quality products at an affordable price.
Threat of Substitute Products or Services
For Verizon, the threat of substitute products or services is not as high as other communication companies, because they are working to go beyond traditional technologies. Especially with their new LTE Innovation Center (Refer to IT Culture below), Verizon is taking the lead in creating new technologies. A way Verizon reduces substitute threats is in using switching costs--discouraging customers to go anywhere else--offering bundle packages, introducing new products and services, making contracts, and showing customers that their technology is teh best choice.
Threat of New Entrants
Verizon became the new entrant for other communication companies, when it targeted all areas in the telephone, landline, wireless, internet, broadband, and cable segments of communication. Due to Verizon's first-mover advantage, the threats of new entrants are higher, because companies will try to imitate or provide similar services in order to gain competitive advantage. Nonetheless, Verizon's most powerful entry barrier is its custom IT systems through their strong partnerships and technology, keep competition out.
Rivalry Among Existing Competitors
Communication companies ranging from cable, land and wireless services that compete with Verizon
Verizon has many competitors in all its areas of communication; however, in the wireless industry one stands out. Competition and rivalry are at an all time high between wireless providers. The most popular providers are Verizon, AT&T, Sprint, and T-Mobile. However, the strongest rival for Verizon is AT&T. Both companies spend millions of dollars battling in commercials against each other. Verizon has more customers and revenue than AT&T. Both companies are going for the same goals: to expand their networks, to work with 3G and 4G networks, to introduce new phone applications and devices. Regardless of their close competition, Verizon continues to be the top provider and competitor due to its outstanding prices, network, products and services.
Verizon's 3G coverage greater than AT&T
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