AT&T Inc. is known to be a wireless telecommunication service provider. It is ranked as the biggest telecommunication Company in United States in terms of revenue. The company was founded in 1876, by the Alexander Graham Bell- primary inventor of telephones. AT&T worked hard to be the market leader in optical communication and innovation. It continuously is on the forefront in delivering the optimal services in market and successfully adapt the ever-changing landscape of business. It had a merger with the Bellsouth Corporation, which make it the biggest telecommunication Company across the United States. AT&T has divided its operation among four main segments; Wireless division which include internet services and cell phones. Advertising solution division which deals in printing directory marketing, wireless division which deals in voice products lines for international and local services for consumers, government and businesses, and other subsidiaries segment like payphones, operating services, and other businesses (AT&T, 2019). AT&T is operating in the intense competitive industry, where competitors like Verizon, T-Mobile etc. are present. It is necessary for the company to analyze the industry and Porter five forces elements help it in evaluating the situation of the market. Here is the Porter’s five forces analysis of AT&T;
Bargaining Power of Buyers
Consumers are always demanding and demands for high quality in the lowest possible prices. This pressurizes companies to revise their pricing strategies and so to AT&T, as the prices reduction effects the profitability level in long run. The powerful and smaller the consumer base AT&T has, the dominant will be the consumers in terms of bargaining power, and will require offers, and discounts for new products. AT&T focuses on building and maintaining the large consumer base in order to reduce their bargaining power. It focuses on introducing new innovative products, so that customers will not switch to other brands and this will also reduce the defection of the existing consumers (Fernfort, 2019).
Bargaining Power of Suppliers
For the landline or wirelines businesses, the constructors of transmission lines are very important and for this, they require copper wires, and for the wireless businesses, suppliers are needed to build the network towers. The AT&T employs two main networks and the equipment suppliers; Ericson and Alcatel-Lucent, and the strategic alliance with them provided the benefits of economies of scales to AT&T. These suppliers have the great leverage and power over AT&T, as they need quality raw materials in building networks. Hence, the supplier’s bargaining power in AT&T case is relatively moderate (Rebeccali, 2014).
Threats of New Entrants
During the early days of AT&T, there were many challenges and competition from the rivals, as they had patents and threats from the new entrants were higher. But later, over the period of time, those patents got expired, and influx of new rivals was there, around 6000 entered in the industry. The requirement of capital for start-up are also very high, as building network towers are quite expensive. Currently, wireless network industry is also very saturated at almost 91%, so its riskier for the new entrants to make profit in the industry (Rebeccali, 2014).
Threats from the Substitute Products
The major services provided by AT&T is of communication and people used multiple ways of communications. AT&T woks hard to be service oriented more as compare to product oriented because of the direct substitutes available for the wireless products, which are landline or telephones. Due to the emergence of internet and technology, voice services are available like Skype, WhatsApp, Viber, etc. internet has become the alternative option for consumers of AT&T. Thus, AT&T has to increase the switching cost for the consumers (Wikiwealth, 2019).
Rivalry of Existing Players
As the telecommunication industry is highly saturated, and has many competitors, the competition level is intense in the industry. There are big giants in the industry like Verizon, T-Mobile, Sprint, etc. currently operating in the market, AT&T needs to revise its strategies in order to retain the consumers and attract new customers so that the market position will be the same and hence will be the share. It needs to acquire small competitors to reduce the competition level from the industry (Alavi, 2016).
References
Alavi, E. 2016. AT&T Strategic Analysis. [Online], Available at: https://www.slideshare.net/EbrahimAlavi1/att-strategic-analysis-64605678, [Accessed on: 16th April, 2019].
AT&T, 2019. About Us. [Online], Available at: https://about.att.com/category/all_news.html, [Accessed on: 16th April, 2019].
Fernfort university, 2019. AT&T Inc. Porter Five Forces Analysis. [Online], Available at: http://fernfortuniversity.com/term-papers/porter5/analysis/3957-at-t-inc-.php, [Accessed on: 16th April, 2019].
Rebeccali, 2014. Porter’s Five Forces Analysis: AT&T Inc. [Online], Available at: http://inb410-rebeccali.blogspot.com/2014/11/porters-five-forces-analysis-at-inc.html, [Accessed on: 16th April, 2019].
Wiki wealth, 2019. ATT – Five Forces Analysis. [Online], Available at: http://www.wikiwealth.com/five-forces:att, [Accessed on: 16th April, 2019].