Verizon Communication Inc. is one of the biggest wireless communication network and service provider in the telecommunication industry of United States. It is known to be one of the highly reputed and expensive companies in the industry. It has dominated the market share on its strength of vast network coverage and best customer service provider. Verizon tends to cater the higher income customers and provide the best quality products or services as per their needs. It is more costly than its competitors like Sprint but maintain the brand value with the high quality and customer services (Verizon, 2019). The Porter’s five forces analysis of the Verizon helps in revealing the strongest and powerful horizontal risks and threats from the competition in the industry and vertical risks derived from suppliers and buyer. Here is the detailed analysis of the Verizon Communication’s five forces analysis;
Bargaining Power of Buyers
The bargaining power of buyers is quite moderate in case of Verizon Communications. The more information consumer will have about the product or services, more power he will get for negotiation, as comparison will be easy with other firms’ product or service offerings. Consumers can easily switch to other networks, without any hassle with the same number with in an hour, which makes it difficult for the Verizon to retain the consumers and satisfy them properly. Verizon Communication Inc. continuously involve in finding the new ways to be profitable while providing the best quality services to consumers (Depersio, 2018).
Bargaining Power of Suppliers
The bargaining power of the suppliers in the telecommunication industry is low because of the numerous suppliers for products or raw materials as compared to the buyers. This clearly reflects to the fact that suppliers have less control on prices. The products require by the Verizon Communications are fairly standardized and less differentiated, which makes the switching cost low. Verizon Communications Inc. purchase the raw materials from the various suppliers in very low prices. it has different suppliers for every different geographic location which makes it supply chain effective and efficient. It focuses on building the strong relationship with he supplier to gain more benefits (Murphy, 2018).
Threats of New Entrants
Threats from the new entrants is low in the telecommunication industry, because of the big 4 companies dominating the industry which are; AT&T, Sprint, T-Mobile and Verizon. It is necessary to have strong network and connections in the industry in order to maintain the top position. Verizon Communications Inc. is successful in building the strong relationship with the providers of cellular phone and get the best services and products in affordable prices. It is difficult for the new firms to build the relationship like this in the short span because of the fact that their credibility is not established yet (Ryan, 2019).
Threats from the Substitute Products
Threats from the substitute products is perhaps one of the biggest challenge or risk faced by Verizon, and still facing. This is because of the existence of big companies like AT&T, Sprint or T-Mobile in the industry and Verizon has to compete that these firms are not the best substitute of Verizon products. However, consumers always prefer the cheap and good quality products or services and may switch to other products if they find one. The switching cost is low which makes it easier for the customer to look for the alternate solutions. However, the loyal customers never switch and still prefer Verizon over any other company (Depersio, 2018).
Rivalry of Existing Players
This factor of the porter analysis helps in determining the competition intensity against the Verizon Communication Inc. the rivalry effects the industry of telecommunication by imposing different challenges on firms and maintain the position or market share. There is very low product differentiation in telecommunication industry due to the same variables of rivalry. Firms compete on the basis of strategies, advertising, marketing, and quality. Verizon wireless usually attract the consumers through quality of the services. It provides different offers, and services early before the competitors so that it would be the first one to introduce in the market. There are many big names like T-Mobile, AT&T, etc. who will take immediate actions after seeing the rivals doing better (Smithson, 2017).
References
Depersio, G. 2018. Analyzing Porter’s Five Forces on Verizon (VZ). [Online], Available at: https://www.investopedia.com/articles/markets/012616/analyzing-porters-five-forces-verizon-vz.asp, [Accessed on: 22nd April, 2019].
Murphy, E. 2018. Verizon Communications Inc Porter Five Forces Analysis. [Online], Available at: https://www.essay48.com/term-paper/6251-Verizon-Communications-Inc-Porter-Five-Forces, [Accessed on: 22nd April, 2019].
Ryan, 2019. Senior Project: Verizon Communications. [Online], Available at: https://sites.google.com/site/ryanturnershuproject/buyer-power, [Accessed on: 22nd April, 2019].
Smithson, N. 2017. Verizon Five Forces Analysis (Porter’s) & Recommendations. [Online], Available at: http://panmore.com/verizon-five-forces-analysis-porters-recommendations, [Accessed on: 22nd April, 2019].
Verizon, 2019. About Company. [Online], Available at: https://www.verizon.com/about/, [Accessed on: 22nd April, 2019].