Student’s Name
Institution Affiliation

Table of Contents
Introduction. 2
Porter Five Forces Analysis Matrix. 2
PEST Analysis Matrix. 4
Opportunities and Threats (Internal) 7
Strength and Weakness (Internal Environment) 10
Financial Analysis. 13
Internal Factor Analysis. 21
TOWS Strategy Development TOWS Strategic Alternative Matrix. 24
References. 26

Verizon Communication Inc.

Introduction

Verizon Communications is the biggest supplier of wireless communications services in the United States with a market share of 33 % as of 2016. Despite having reputation of overcharging its services as compared to its competitors, Verizon Communications has continued to be a market leader in the wireless sector dominating the market share and leading the rivals in delivering competitive products for its customers. Its major competitors are AT & T with a market share of 27 % and T Mobile with a market share of 15 % followed closely by Sprint with a market share of 14 %. The major company strengths attracting a large portion of the wireless market is the wide network coverage Verizon provides compared to its competitors, and world class customer services even though the company usually targets the high income market segment compared to its competitors. It is critical to better understand the business environment Verizon Communications Inc. operates in and thus the need to conduct an elaborate and up to date Porter’s five forces analysis outlined below:

Porter Five Forces Analysis Matrix

Bargaining Power of Buyers	· Bargaining power of buyers refers to the ability of the company’s clients to coerce it to initiate certain unfavorable policies. · Customers have weak bargaining Power in Verizon communication since there company sells its products to many buyers
Bargaining Power of Suppliers	· The company has many providers of various services that it needs for its operations. Therefore, it is able to obtain its items at affordable rates.
Threat of New Entrants	· Verizon Communication Inc. constantly faces new threats from competitors due to the emergence of low cost technology in telecommunication as well as in offering technological related services (Young & Tippins, 2001).
Threat of Substitutes	· The threat of substitution of services offered by Verizon is real and increasing. Firstly, there has been an emergence of many cheap telecommunication providers. In addition, there is also the presence of internet and application based communication (WhatsApp, Snap Chat, and Skype)
Competitive Rivalry	· Verizon is currently the market leader. However, it faces a lot of competition from Sprint, AT&T, and T Mobile. The competition are in the form of price, market coverage, and services offered. Currently, the company’s competitive edge is its high network coverage and minimal dropped call rate. Unfortunately, these competitive advantages are also being fiercely encroached.

PEST Analysis Matrix

Factor	Threats or Opportunities	Impact
Political	-Increased regulations and restrictions for mergers and acquisitions to promote fair competition in the wireless industry. – All new wireless technology that companies introduce to the market must adhere to strict set of rules and regulations established by the U.S. government and other foreign governments (Siṃha, 2007). – Goods and services offered by telecom providers must adhere to strict safety and privacy regulations. – The U.S government has put in place strict regulations on tariffs and phones that can be offered and produced in the telecom industry.	– Moderate – High – High – High
Economic	– Inflation and fluctuating interests rates can have an impact on the telecom industry leading to massive migration to cheaper service providers or reduced spending in the services (Sharma & Sharma, 2014). – Most wireless companies continue to face challenges in establishing competitive prices due to recession leading to some companies increasing prices to account for the shortfall (Panagacos, 2012). – Different telecommunication companies are opting to offer limited time offers on the latest smartphones with some having exclusive rights to some phones in order to increase their market share (Institute of Chartered Accountants in England and Wales, 2016).	– High – High – Low
Social	– As the world goes global and there is increased social networking, there is need for wireless providers to provide products such as conference calls, video chats, instant messaging and other social networking features to keep up with the IT age. – The business community is moving to the mobile platform. As they migrate to the mobile digital platform it is critical for wireless service providers to provide services such as mobile phones which are synchronized with their business to enable the individual receive alert for messages, phone calls and emails on the go (Richter, 2002). –	– High – Moderate
Technological	– The rate of technology change and trends in the wireless and telecommunication sector is rapid and ever changing. It is thus critical for businesses in the telecommunication industry to invest heavily in capital, research and development of cutting edge wireless technology which is currently at 4 G. Verizon continues to invest in the development of its 5 G network but the capital costs are extensive and may affect the financial soundness of the company (Manganelli & Hagen, 2003). – The production of mobile phone handsets is evolving at a very high rate with different competing phone manufacturers producing different phone types to stay competitive with the most up to date handset. Wireless companies must keep check of these new handsets and their demand in order to provide wireless contracts with individual and enterprise customers of the gadgets (Lynch, 2009).	– High – High

SWOT Analysis

Opportunities and Threats (Internal)


	–
	–
1. Opportunities	– Increased demand for audio-video conferencing provides a ready market for Verizon to further penetrate the networking sector. – There is opportunity to tap in the vibrant VOIP business to tap the growth of American businesses. – There is room for Verizon to expand its presence to the international market through acquisition or direct penetration to the markets (Krantz, Thomason, & Financial Times Management, 1999). – Verizon can invest in product diversification as the number of online products demanded by customer’s increases. – There is wide room for expansion of Verizon wireless services and products to the international market (Ishikawa & Saisho, 2013). – The company launched Verizon Fios for cable connections and Fios TV which has vast opportunities for growth and expansion within the U.S. market and globally. – There is a future forecast of demand for 5 G network as the market continuously seeks faster and more reliable networks which can transfer large data sets in seconds. There is also opportunity of improving data services to accommodate emerging technologies such as 360 degrees photos and 3 Dimension videos. – The customer service component of Verizon has capacity for improvement to cater for the new customer demands from Verizon customers. – There has been an increase in demand for mobile service communication. – There has been an increase for internet services, which Verizon can provide using its wide telecommunication network (Gottschalk, 2011). – The company can use it landline network to mount security surveillance cameras and venture into this market. – Due to its wide network coverage, the company can enjoy economies of scale in the provision of its services. – Verizon can also offer other services such as mobile money transfer, which can enable it to gain market dominance.
2. Threats	– Increased competition in the saturated United States Telecom and Wireless sector can lead to the decline in Verizon’s market share (Baron, Benoliel, & Pincus, 2010). – Finances to fund expansion to foreign markets and its 5 G network introduction is set to drive the Verizon bottom line thinner in the next few years. – FCC regulations on product safety and privacy among other government regulations and policies can affect Verizon and other competitors operations. – Market cannibalization with offering of VOIP and wireless offerings may significantly affect Verizon operations.
	Strength and Weakness (External Environment)
Strengths	1. Verizon has a unique business model which is dynamic with the ever changing network needs of customers. Due to the rising data demand, Verizon started offering fiber optic connections to homes and businesses. The market has embraced this new approach due to the high speeds and efficient data connection offered by the service (Hyndman, 2012). 2. Verizon Wireless has invested heavily in the 4 G LTE network covering a large percentage of the United States. The increased demand for speed in wireless connections has increased the number of 4 G network users with Verizon accounting for a significant percentage of the 4 G subscribers at 107 million. 3. The company has introduced the voice over LTE which enables voice and data transmission services supporting Wi-Fi calls and native video calls in 4 G enabled phones (Hutt & Speh, 2007). 4. Verizon Wireless has invested heavily in research and development with the company in the process of developing the first 5 G network which will increase data transfer and speeds increasing LTE speeds by over 50 %. 5. The company has a work force of 170,000 employees who are skilled in various disciplines to ensure provision of efficient services and continuous improvement of the firm (Riahi-Belkaoui, 2000). 6. Verizon has invested heavily in wireless infrastructure to enable good performance in major metrics including network speed, network reliability, text performance, call and data performance as compared to competitors (Davies & Crawford, 2011). 7. Verizon has invested heavily in building its brand. The Verizon brand currently ranked 6^th globally in terms of brand equity showing the extensive payback of improving the company’s brand (Hightower, 2008). 8. Verizon also has efficient collaboration between its different business units between Verizon Fios which offers fiber connection, the Wireless platform and Verizon Enterprises which provides business solutions streamlining the business operations and improving the business and customer value from the products and services offered. 9. Verizon has a good reputation of strong network coverage covering over 107 million subscribers. 10. The company has invested heavily in laying out 4 G infrastructure compared to its competitors AT & T and T mobile (Davies & Crawford, 2014). 11. The Verizon brand has a good reputation making it easy to sell Verizon products and services. 12. Verizon offers alternative solutions such as fixed line, mobile telephony, broadband, fiber connections, digital TV, and network services which has enabled the company to diversify and increase its revenue pool (Davies & Crawford, 2011).
WEAKNESSES	1. Verizon has not spread its wings outside the United States and as a regional company its opportunities for expansion are limited. Over dependency on the U.S. market can pose a threat of poor capitalization of Verizon assets and financial capacity may lead to the company receding in revenue generation in case the U.S. market shrinks or undergoes recession. 2. The company offers its products and services at a premium fee which may see it lose its market share to competitors offering similar services at lower prices. 3. Increased competition from AT & T, T Mobile and Sprint who have slowly built a strong network rivaling the Verizon network and in a few years they might catch up with new wireless technologies that are being developed (Cottrell, 1998). 4. The company is only a regional operator with limited presence outside the U.S. an issue that might affect the company’s operations if the U.S. was to undergo recession or increased interest rates and inflation.

Financial Analysis

Income Statement	31/12/2014	31/12/2015		Percent Change
Revenues	$127,079	$131,620	1	3.57%
Cost of Goods Sold	28,306	29,438	1	4.00%
Gross Profit	98,773	102,182	1	3.45%
Total Operating Expenses	106,894	98,460	-1	-7.89%
EBIT	20,185	33,160	1	64.28%
Interest Expense	4,915	4,920	1	0.10%
EBT	15,270	28,240	1	84.94%
Tax	3,314	9,865	1	197.68%
Non-Recurring Events	0	0	#DIV/0!	#DIV/0!
Net Income	11,956	18,375	1	53.69%


Balance Sheet	31/12/2014	31/12/2015		Percent Change
Assets
Cash and Equivalents	$11,153	$4,820	-1	-57%
Accounts Receivable	13,993	13,457	-1	-4%
Inventory	1,153	1,252	1	9%
Other Current Assets	3,200	2,751	-1	-14%
Total Current Assets	29,499	22,280	-1	-24%
Property Plant & Equipment	89,947	83,451	-1	-7%
Goodwill	24,639	25,331	1	3%
Intangibles	88,531	103,311	1	17%
Other Long-Term Assets	0	10,267	#DIV/0!	#DIV/0!
Total Assets	232,616	244,640	1	5%

Liabilities
Accounts Payable	16,680	19,362	1	16%
Other Current Liabilities	11,307	15,690	1	39%
Total Current Liabilities	27,987	35,052	1	25%
Long-Term Debt	110,536	103,705	-1	-6%
Other Long-Term Liabilities	88,275	80,183	-1	-9%
Total Liabilities	226,798	218,940	-1	-3%

Equity
Common Stock	424	424	0	0%
Retained Earnings	2,447	11,246	1	360%
Treasury Stock	1,111	550	-1	-50%
Paid in Capital & Other	9,694	5,622	-1	-42%
Total Equity	13,676	17,842	1	30%

Total Liabilities and Equity	240,474	236,782	-1	-2%

Company Valuation

0	2015
Stockholders’ Equity – (Goodwill + Intangibles)	($103,816)
Net Income x 5	$89,070
(Share Price/EPS) x Net Income	$408
Number of Shares Outstanding x Share Price	$397,400
Method Average	$95,765




0	2014
Stockholders’ Equity – (Goodwill + Intangibles)	($93,410)
Net Income x 5	$53,430
(Share Price/EPS) x Net Income	$442
Number of Shares Outstanding x Share Price	$208,500
Method Average	$42,240

Earnings Per Share

	Common Stock Financing and Debt
	*Recession (2014)*	*Normal (2013)*	*Boom(2015)*
EBIT	$20,185	$31,944	$33,160
Interest	4,915	2,667	4,920
EBT	15,270	29,277	28,240
Taxes	3,314	5,730	9,865
EAT	11,956	23,547	18,375
# Shares (millions)	3,974	2,866	4,085
EPS	$3.01	$8.22	$4.50

Complete Part II to Construct the Projected Financial Statements.

Projected Income Statement	31/1/2015	31/1/2016	31/1/2017
Revenues	$131,620	$145,000	$154,000
Cost of Goods Sold	29,438	32,000	37,000
Gross Profit	102,182	113,000	117,000
TOTAL Operating Expenses	69,022	72,000	72,000
EBIT	33,160	41,000	45,000
Interest Expense	4,920	5,100	5,200
EBT	28,240	35,900	39,800
Tax	9,865	12,400	15,300
Non-Recurring Events	0	0	0
Net Income	18,375	23,500	24,500


Projected Balance Sheet	31/1/2015	31/1/2016	31/1/2017
Assets
Cash and Equivalents	$4,820	$5,400	$6,200
Accounts Receivable	15,416	12,100	8,400
Inventory	1,252	1,500	1,800
Other Current Assets	792	800	1,200
Total Current Assets	22,280	19,800	17,600
Property Plant & Equipment	83,451	80,000	105,000
Goodwill	25,331	28,000	32,000
Intangibles	8,338	8,338	8,338
Other Long-Term Assets	105,240	113,000	119,400
Total Assets	244,640	249,138	282,338

Liabilities
Accounts Payable	26,314	32,000	43,000
Other Current Liabilities	8,738	9,200	13,000
Total Current Liabilities	35,052	41,200	56,000
Long-Term Debt	103,705	115,000	135,000
Other Long-Term Liabilities	88,041	87,904	94,000
Total Liabilities	226,798	244,104	285,000

Equity
Common Stock	424	424	424
Retained Earnings	18,375	41,875	66,375
Treasury Stock	(7,416)	(7,416)	(7,416)
Paid in Capital & Other	6,459	6,459	6,459
Total Equity	17,842	41,342	65,842

Total Liabilities and Equity	244,640	285,446	350,842

Ratios
Historical

	Historical Ratios
	31/1/2015	31/12/2014
Current Ratio	0.64	1.05
Quick Ratio	0.60	1.01
Total Debt-to-Total-Assets Ratio	0.93	0.97
Total Debt-to-Equity Ratio	12.71	12.27
Times-Interest-Earned Ratio	7	4
Inventory Turnover	24.48
Fixed Assets Turnover	0.59
Total Assets Turnover	0.54


Gross Profit Margin %	78%	78%
Operating Profit Margin %	25%	16%
ROA %	8%	5%
ROE %	103%	87%

Projected

	Projected Ratios
	31/1/2015	31/12/2016	31/12/2017
Current Ratio	0.64	0.48	0.31
Quick Ratio	0.60	0.44	0.28
Debt-to-Total-Assets Ratio	0.93	0.98	1.01
Debt-to-Equity Ratio	12.71	5.90	4.33
Times-Interest-Earned Ratio	7	8	9
Inventory Turnover	24.48	5.81	27.41
Fixed Assets Turnover	0.59	0.63	0.58
Total Assets Turnover	0.54	0.58	0.55


Gross Profit Margin %	78%	78%	76%
Operating Profit Margin %	25%	28%	29%
ROA %	8%	9%	9%
ROE %	103%	57%	37%

Internal Factor Analysis

Strengths	Weight	Rating	Weighted Score
Verizon Inc. has a structured management which ensured it makes strategic decisions	0.90	10	9.00
It has a strong internal audit team that ensures its finances are properly utilized	0.80	9	7.20
It uses a professional recruitment policy based on merit, which ensures its employees are competitive and skillful	0.75	8	6.00
It has computerized most of its systems which enables it to reduce cases of fraud and also its operational costs (Gallagher & Andrew, 2000).	0.80	9	7.20
It has an independent board of management, which ensures they do not have any conflict of interest in the management of the company.	0.89	9	8.28
The company files its audited financial statements with the government, which ensures that its operation are kept under scrutiny to minimize possible cases of fraud.	0.75	8	6.00
The company’s CEO is experienced in management and has been appointed based on his credentials, which ensures that he provides adequate leadership (Glueck & Jauch, 1984).	0.87	9	7.40
Verizon has an internal research department, which it uses to determine the most appropriate technology and to update its systems with the most recent trends in the industry (Holt, 2008).	0.65	7	4.62
The company uses a hierarchical systems of leadership which ensures there is consistent flow of information from seniors to juniors and vice versa.	0.71	8	5.33
The company management and training programs ensure that it has adequate success systems for its employees.	0.81	9	7.33


Weaknesses	Weight	Rating	Weighted Score
The use of a structured management system by the Verizon leads to bureaucracy and delays in decision making.	7.00	6	40.60
The company’s internal research team does not engage in adequate research. As a result, Verizon is always late in adopting the latest technologies	7.00	6	40.60
Verizon Inc. has a lot of employees, which makes its management expensive.	8.00	7	53.60
The transfer of information in the company is also affected by its diversified operations systems.	8.60	7	63.64
Due to the size of Verizon Inc. the company incurs a lot of avoidable overheads, which reduces its competitiveness.	6.00	5	30.00
Verizon Inc. management’s is conservative and risk averse. As a result, the company has missed out many opportunities that require an organization to take a risky decision, such as being the first to implement technology (Hillier, Grinblatt, & Titman, 2012).	6.50	6	40.95
Verizon Inc. has continued to hold on in the provision of communication service through the wired system although this method of communication is expensive and has low incomes.	7.30	6	45.99
Verizon Inc. lack of specialization in any communication method has made it not to maximize in the revenue it earns in mobile communication (Guffey & Loewy 2014).	6.00	5	30.00
Verizon’s Inc. overreliance on shareholder’s capital has resulted in the company having little capital from retained earnings since it pays most if its issues most of its profits as dividends.	8.00	7	56.00
Verizon’s huge debts have made it to spend most f its incomes to repay current and long-term liabilities.	8.00	7	56.00
Total IFE Score	0.00		525.72

TOWS Strategy Development
TOWS Strategic Alternative Matrix

	External Opportunities	External Threats
Internal Strength	Maxi-Maxi Strategy · Verizon should use its huge market base to be the market leader in the introduction of new mobile services such as mobile payment (Bender & Routledge, 2014). · The company should use its wide infrastructure to increase the services it offers, such as introduction of mobile payment. · Verizon can enjoy economies of scale by providing similar services to its wide consumers (Coombs, Hobbs, & Jenkins, 2005). · Verizon can diversify its business, by providing complementary services such issuing small credit and loans to its customers (Bierman, 2010). ·	Max-Mini Strategy · With its huge capital, the company can buy competitors to secure its market. · Verizon should acquire talented personnel from rival companies in order to have the latest knowledge and best skills to promote its business. · Verizon can offer huge discounts to its customers in order to minimize competition (Gallagher & Andrew, 2000)
Internal Weaknesses	Mini-Max Strategy · Verizon can improve its mobile and telecommunication service to attract more customers (Aronson, Schwartz, & ICMA Training Institute, 1996). · The company can take advantage of the increase in IT incorporation by partnering with IT experts to offer services that were exclusively in their network (Chartered Institute of Management Accountants, 2013). · Verizon can offer customized services to its customers based on their age, preferences, and gender.	Mini-Mini Strategy · Verizon can restructure its personnel and operations and ensure it is lean. · Verizon can computerize most of its services, especially those of customer care to reduce its operation costs. · Verizon can sign long-term contracts with its customers by offering post pay services (Chadwick, 1999). · Verizon can improve the clarity of its telecommunication service to avoid threats from competitors.

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