Verizon and Porter's Five Forces Model

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

IT Culture

IT Control Center

Verizon's Matrix Approach

IT is an important part in Verizon's structure and organization as a communications company.  The right IT structure will allow cost reduction and effective control of inventory, marketing, finance, and the company's management overall.  Verizon assigns an IT department that connects all operations that have to do with technology.  Verizon's structure closely resembles the matrix approach, because every department operation that deals with IT must go through the IT department for processing and consent.  However, there is collaboration across units in a project type of set-up.  Everything from budgeting, capacity, to processing new projects must go through the IT department central station.  but IT personnel are temporarily assigned to different projects when necessary.  In return, this approach makes it easier to control cost, duplication, and communication, but still keeps Verizon's operations agile.

Verizon's "Early Adopter" Philosophy

The LTE Innovation Center and Verizon Experience Center designed to collaborate on new technologies

Verizon's philosophical approach to IT is technology innovation failure or "Early Adopter" approach.  Verizon is always willing to try new technologies.  It makes all the necessary research and analysis and then bring forward their innovation.  Although they are willing to take risks, they make sure that their new product or service has a high chance of success.  We can see their boldness with innovation in their new LTE Innovation Center which aims to provide non-traditional products and services through 4G-related technologies.  Verizon has moved on from their 3G-network and is going for bigger technologies that will change electronics, automobile industries, appliances, and mobile devices.

 The LTE Innovation Center Video

Business Initiatives

Verizon not only uses IT systems to control costs, inventory, infrastructure, collaboration and integration, but they also offer their custom IT systems to their customers in the business and corporate branches.  Verizon is known to partner with companies that offer IT management systems such as vmware, Accenture, McAfee, Cisco, EMC 2, Juniper Networks, Polycom, Tandberg and Akamai (Akamai provides fast access to all applications for all types of IT systems below).

The business initiatives IT systems used and offered are:

For Supply-chain Management:

Verizon has custom supply chain managed software to control supply, costs, inventory, daily sales functions and administration and provide backup and networking between suppliers and buyers.  Verizon recently partnered with GXS to add to its IT system’s efficiency.  GXS is considered, “One of the world’s largest high-performance integration services platforms that allow you to integrate with trading partners around the world, no matter their size, location, language, or technical capabilities.”(Verizon.com). In other words, the GXS system enables clear communication and tracking of a product or service from the originator to the end customer.

For Customer Relations Management:

Juniper Networks and Verizon partnered to provide a fast networking system that allows faster access to provide solutions for customer service.  Verizon also partnered with McAfee security software to protect the company’s and the customer’s information from going out and any harmful applications from going into their systems.  Verizon is able to securely store customer information and activities for marketing, analysis, and sales.

For E-Collaboration:

Verizon partnered with Cisco and Polycom to improve communication and collaboration systems.  This allows the company to share information easily between departments and even with their customers anytime and anywhere. Also for  E-collaboration management, Tandberg was incorporated to provide video and mobile conference products and services.

For Enterprise Resource Management:

Verizon partnered with Accenture’s SAP application management service to bring software for supply chain, customer, and e-collaboration management together.  "This new service is about one thing - easing our customers' IT management load so they can get the best bang for their SAP application buck," commented Joe Crawford, executive director - IT solutions, Verizon. "Our decade-plus track record managing and hosting Web-based applications and delivering IT and security consulting services to multinationals makes this a natural evolution for us."  VMWare also partnered with Verizon to provide management systems that control resources, costs, and savings for the company.

Top-Line Initiative

Verizon's focus goes in hand with the top-line iniative because of constant revenue increase by creating new products (FiOs packages, Webex PC Now, internet and back up security), targeting new customer segments (multicultural channels, and customer support diversity), and offering more services in the areas of communication for residential, business, corporate, and government (homeland security).  Verizon is taking hold of all areas of communication and creating products and services that will attract customers and increase profits.

Visited Websites:

Verizon Partners

Verizon WebEx

Verizon Supply Chain Management

Verizon SAP Solutions

Verizon New Products and Services

Focus and Differentiation

Rule The Air Campaign- replaces slogans "Can you hear me now?" and wireless logo reflecting Verizon's goal for new technologies, gadgets, and domestic and global expansion.

There are different methods that company's can apply to stay on top of competition and continue to make or increase profits.  According to Michael Porter's three generic strategies, Verizon follows mainly two of the strategies--focus and differentiation--to have competitive advantage over other communication companies.

"We'd like to own the rights to distribute any piece of content, an example of that would be, we will pay for the rights to distribute it, then package it, and bundle it and market it to people...we do not want to be gatekeepers."- Chairman and CEO Ivan Seidenberg on Charlie Rose interview.

Verizon focuses on communication segments from domestic lines, wireless, business, and global lines.  Verizon does not want to focus in creating their own shows, writing their own games, or making movies.  It does not create media and claim it; instead their focus is in how to deliver such information/media to people and also to create the right applications to make this information easily accessible. 

Verizon is unlike companies like T-Mobile, Nextel, Sprint, cable and internet companies, who focus on a certain segment of communication.  Instead, Verizon follows the differentiation strategy as it stands out from all other communication companies providing diverse products and services in all areas of communication ranging from vast networks, 3G-networks, high-speed internet, undersea cable technology (connecting countries globally), wireless providers, fiber-optic communications, high-definition channels, and telphone and TV services and products.  Verizon even differentiates itself in customer service by tending to multi-cultural communities and several languages.  There are employees in multiple departments that are able to provide customer support in six different languages which allows Verizon to reach more customers and mainter customer relationships.

Another factor that also adds to Verizon's competitive edge is that their products and services are known for better quality and efficiency; therefore, their prices do not have to be based on the lowest cost possible, instead prices are set relative to their value but competition prices are also considered.