The demand for telecommunications services has increased following an improvement in technology and the internet. This report looks at the strategic analysis of AT&T, which is an international corporation in the telecommunication industry. The report therefore, focuses on both the company’s internal and external analysis.
AT&T has more than 240, 000 employees serving over 110 million subscribers of communication services in more than 200 countries. According to the financial analysis of 2012 and 2013, there was an improvement in terms of revenue and net income from the corporation’s sales. In addition, this corporation has a stock performance of $ 39.00 and $31.74 high and low highlights respectively in a year. From the analysis, the company maintains a daily average volume of about 22.045 million.
AT&T is a leader in this industry, controlling the largest market share. As such, it enjoys economies of scale, as well as has a significant bargaining power. Since there is no easy entry of new providers, AT&T enjoys a highly consolidated market.
There is a projected expansion of the AT&T’s IP broadband services following the company’s capital expenditure on its Project VIP. The report identified that there is a high demand for cost-effective, user-friendly, and integrated communications services.
Short and Long-term Solutions
High-speed internet, wireless, data, and voice services are currently in high demand. While AT&T Inc should work on providing its services, or even its integration with the competitors’ products, such will not solve the long-term problem. However, the company will continue with its present revenue if it fails to focus on developing its products and services, expanding its market, as well as focusing on customer-oriented services.
In the short-run, AT&T can work on diversifying its communication services while identifying new markets within US and outside. On the other hand, a long-term solution would be to create, buy, or even merge with other telecommunication companies up to when it stabilizes in cost-effective, user-friendly, and integrated communications services.
AT&T Inc is a corporation that provides telecommunication services to businesses, consumers, as well as any other interested party all over the US, and across the US borders. The headquarters of AT&T Inc are in Texas, particularly in Dallas. Presently, the company has over 243, 000 employees. Some of the services that the company offers to its customers include telecommunication equipment, video services, internet services, data/broadband services, long distance services, local exchange, as well as wireless services.
At present, AT&T Inc has more than 112 million subscribers of the wireless services while the voice coverage is estimated to be provided over 230 countries all over the world. In addition, the best largest telecommunication provider that operates the United States of America’s largest wireless network has been known to be the AT&T Inc. This company managed to acquire the Leap Wireless International Inc, which was a prepaid wireless service provider. This paper will therefore look at an analysis of the company, both internal and external, as well as the strategies that the company can implement to ensure that it attains and remains competitive within the telecommunication industry.
General Assessment of Environment
AT&T operates within the incorporated telecommunications industry. Research has showed that the telecommunications industry is one of the industries that have a lot of competition due to the many and strong companies in this sector. As such, the telecommunications industry is highly concentrated by several carriers, who offer wireless, as well as fixed-line services to a wide range of customers all over the world.
Over the past years, there has been a considerable growth in this industry. However, according to the trends, such growth is likely to rise for a span of five years given the projected growth in the industry’s revenue of about 4.2% annually. A review of other trends in this industry also indicate that the provision of services to customers is likely to increase over the next five years (Conwell, 2013). This is attributable to the high influx of many telecommunications service providers in this industry. As such, each individual player will strive to provide the best and quality services to consumers. For this reason, there will be high competition, which translates to high and quality services in the telecommunications market.
In addition, there has been a lot of advancement in the telecommunications industry. For example, many devices within this sector have been improved in terms of quality as new ones join the market (Sadler, 2003). A good example of such a change can be seen with the introduction of Smartphone in the telecommunications industry. This advancement has increased the functionality, as well as increased the value added services, thereby resulting to high profit margins among the service providers (Conwell, 2013).
Overly, this industry has recorded profit margins of about 21.5% due to the increase in the number of Smartphone users, and the carrier expansion of their 4G and 3G network coverage. There is a need for a regulatory body to oversee competition among service providers and offer licenses to concerned organizations. The Federal Communications Commission, as such, regulates the telecommunications industry in order to ensure that there is no unfavorable competition within this industry. In addition, the FCC prevents any participants in this industry from enjoying market monopoly.
Analysis of the Industry Environment
Porter’ 5 Forces Analysis
Threat of New Entrants
Several established companies form the major part of the telecommunication market of the United States of America. These companies enjoy the advantages of economies of scale. Considering the maturity of this industry, it is hard for new companies to enter into the United States of America’s telecommunications market (Schwartz, 2013). Some of the factors that prevent the entry of new players in this industry include limited radio spectrum, strict regulations before entering the market, high fixed costs, access to financing and capital-intensive infrastructure.
Although this industry consists of several companies, only a few of them have physical networks. Most of the time, the companies in this industry find it hard to acquire the physical networks because such networks are hard and costly to gain access. Nevertheless, the Federal Communications Commission usually offers regulation on the spectrum and bandwidth supply, thereby limiting the carriers’ supply.
In spite of the fact that the Federal Communications Commission regulates the telecommunications industry, it is hard for it to regulate a company’s dominance of the market. As such, several carriers dominate this market due to their large size. For this reason, the telecommunications industry in the US experiences a weakened buyer power. The choices that consumers in this market make are determined by prices set by the service providers, implying that the market allows for little brand loyalty. In addition, the service providers avail services to the market that are identical to their competitors. This indicates little product variation among the service providers.
Threat of Substitution
In spite of the fact that there are many players in this industry causing high competition, the industry as well suffers from outside pressures. Providers of Cables and Satellites compete to dominate. For this reason, such a scenario provides a better alternative for telecommunication subscribers away from telephone calls.
There has been a considerable consolidation within the Telecom industry with only a small number of the key players representing the largest share of the market. The fact that all the providers are offering identical products and services pushes them to sell their services at considerable low prices in order to compete favorably while trying to woo customers. However, the availability of a variety of services in the market has increased the level of competition between service providers as well as other organizations, which are not in the telecommunication industry.
From the foregoing, it suffices that the AT&T Inc is in a competitive industry. As such, there is a need for the corporation to come up with strategies that are best suited for such a market. The company is therefore, faced with a number of threats in this industry.
For example, several other companies are offering very stiff competition especially in the provision of wireless services. In addition, the US telecommunications market is under threat of becoming saturated. According to statistics, nearly 96% of the population in the United States of America stays in areas that are covered by about three telephone operators. This implies that AT&T should stretch its muscles to cope with the increasing competition considering the fact that similarity of the services and products makes it hard for the company to beat its competitors. However, in order to remain competitive, AT&T Inc provides lowly priced services, and in the end lowers the company’s margins.
According to the market trends, competition is increasing within the sector in spite of the methods that the players are adopting to deal with their competitor. This is attributable to the fact that different companies in the sector are devising new platforms to reach to customers easily.
While AT&T Inc faces the threat of being competed out, the company still has several opportunities for survival. For example, it has plans to carry out initiatives aimed at expanding its wireless spectrum in order to remain highly competitive in the telecommunication market. Such an expansion gives the company the potential of reaching many customers; thereby leading to a large customer base.
Most of the company’s recent acquisitions have been successful, which have enabled AT&T Inc to add about 43 million customers in its coverage. In addition, the company has the opportunity of investing in the growth of its wireless, as well as the wireline type of IP broadband coverage. Such an opportunity presents AT&T with the room to meet the customers’ demands to have cloud services, new mobile services, and high-speed internet access.
This company announced its 14 billion-dollar project VIP in 2013, which was aimed at the expansion as well as the enhancement of wireline IP broadband and the wireless networks. For the case of the wireless network, the company hopes to expand its 4G LTE network in order to ensure that potential customers all over the country are well covered. An increase in the company‘s cloud services will lead to an expansion of its share in the market.
The financial summary of AT&T Company for the year 2013 shows that the company had total revenue of $128.8 billion. When this figure is compared to the previous year’s revenue, which had amounted to $127.4, it is evident that there was an increase of about 1.9%. From analysis, the above revenue growth can be attributed to the high generation of revenue from the sale of wireless services within the borders of the country as well as internationally.
However, the growth in revenue for the wireless services was also contributed by the considerable rise in the number of U-verse subscribers, sale of data, wireless services, as well as the sale of Smartphone. The amount of operating expenses for this company for the year 2013 amounted to $98.3 billion. During the year 2012, the operating expenses for the country had been recorded as $114.4 billion. Evidently, there was a 14% drop in the expenses for the company between 2012 and 2013. Such results were as a result of the difference in the company’s real performance benefit strategies against its estimated expenditure for the year. As such, for the year 2013, the company registered a significantly low amount as far as the operating capital was concerned, and gained strong revenues.
The combination of the gain of revenue and the proceeds from the budget estimates resulted to high net income. Thus, in 2013 AT&T Inc had a net income of $18.2 billion, which was $11 higher compared to the income registered during the previous year. The operating activities during the year amounted to $34.8 billion, which was $4.4 lower compared to the 2012’s record of $39.2. The company had paid high cash tax during the year, had timed its liability payments poorly, as well as financed highly for the mobile devices in preparation for the launch of its Next Program. Such events played a significant role in the company’s registration of such amount from the company’s operating activities.
During the year 2013, the capital expenditure for the company amounted to $21 billion, which was $2 billion higher from the capital expenditure of the previous year. Such an increase was unexpected especially based on the projected expenditure for the VIP project. The company had laid such projection in preparation for the expansion project, as well as to help the company in completing its VIP project. As well, during the year 2013, the company purchased back 366 million shares; an equivalent of 6% higher than its outstanding shares.
The repurchasing of these shares influenced the closing price, as well as increased the total earnings for the shares. Considering the wireless service provision, the company registered a 4.8 % revenue growth during the year 2013. Ever since then, AT&T Inc has continued to enjoy a considerable increase in revenue as far as the sales of Smartphone is concerned. For this reason, there has been an increase for revenue received from data services. In addition, the company’s U-verse TV service subscription, and the high-speed internet provision led to an increase in the company’s customer base by nearly 3 million within the year. Evidently, the U-verse TV service has significantly contributed to the company’s wireline share.
Value chain analysis and Resource based view (VRIN analysis)
Products and Services
AT&T Inc. offers its services and products with the aim of ensuring that people all over the world remain connected, on the go, at home, or even at their workplace. As such, the company provides a number of services and products to its customers all over the US and outside. These services and products come with extensive networks.
Customers are in the position of bundling their services due to the availability of the Consumer Services. Such services allow consumers to enjoy competitive pricing options. Under this category, AT&T Inc offers TV services, data services, messaging services, wireless services, voice services, and wired services. In order to provide such services to the consumers, the company avails devices such as tablets, Smartphone, and cell phones that are internet-enabled and can access Wi-Fi network. In addition, AT&T provides broadband network, whose current coverage is over 18 Million subscribers. The broadband network consists of the wireless, U-verse, and DSL connections. Through such a range of broadband options, AT&T is able to cover many customers in the United States of America.
The U-verse package is a recently launched consumer services that gives consumers the opportunity to get entertainment through connecting their in-house systems of entertainment. In addition, the U-verse provides the customers with internet access at a high speed, DVR, applications, and in-home Wi-Fi. Through the consumer services, subscribers can enjoy the services of Digital Life Home Security and Management, which monitor one’s home security, along with controlling locks, thermostats, light, and many more.
Small Business Services
AT&T manages small business services that are aimed at enhancing the capacities, as well as the effectiveness of the small business enterprises. Such a goal is achieved by ensuring that these small businesses are connected throughout such that no single aspect of the business is left out. As such, the company uses the small business services as a platform for the businesses to enjoy diverse applications, use mobile devices to connect with potential stakeholders, as well as share the business’s data strategies. AT&T Inc has provided sufficient network that offers the required level of security to the small businesses through the company’s innovative strategies. In addition, the company provides cloud computing and file protection to small businesses under the Small Business Services.
The provision of the Small Business Services, as outlined above, helps the concerned businesses to connect effectively with their employees, thereby cutting costs. Moreover, such connection leads to the expansion of the stakeholders’ mode of communication due to the availability of data and voice services.
The Enterprises Services provided by the AT&T Inc offer data and voice communications in wireless form through the company’s extensive network. As such, companies subscribed to this type of service get advanced networking solutions as well as planning, and a variety of mobile options to choose. For this reason, the company, through the provision of the Enterprises Services offers businesses the opportunity to enjoy a number of voice options, business applications, cloud services, and network security. In addition, the company provides several options to businesses allowing them protection in the process of connecting employees.
New Products and Services
This company has a future implementation plan that focuses on upgrading its mobile devices. The Next Plan, as designed by AT&T aims at offering competition to Verizon and T-Mobile’s identical plans. In the pan, the company has laid out strategies such that its customers can subscribe to monthly payment for the device. Such installments allow one to get a new device free after paying for the first one for a period of 20 months. This upgrade will ensure that all the customers have the freedom to stay updated with all Smartphone technologies. Such a plan is aimed at increasing the number of Smartphone users (Jost, 2010).
The company’s 4G LTE serves customers all over the nation through the connection enabled by mobile phones, as well as other internet-enabled devices. The combination of the 4G LTE connectivity and the LTE devices ensures that the customers get faster connectivity with high downloading speeds. Such services therefore, enhance the customer’s experience in entertainment and the mobile networks considerably. The present coverage of the AT&T’s LTE network is over 290 million customers. However, the company still projects high coverage with time.
The concentration of the AT&T’s wired services is on approximately 23 states. However, the company still provides long distance voice and broadband services to customers. This company is not limited to the 23 states noted above. It has licenses to provide services to all the 50 states, as well as in the Virgins Islands of the United States of America and the Puerto Rico. This allows the country to serve over 111 subscribers of wireless services in the US. In addition, AT&T Company provides voice services to about 226 international countries. For the case of data roaming, the company covers over 210 countries, ensuring that all customers are connected. Moreover, the company’s global reach is presently serving business corporations as well as other enterprises available in six continents.
AT&T Company enjoys a bigger share in the provision of wired and wireless network due to the competitive advantage that it has over its competitors. Moreover, the services and products that the company provides are valuable, inimitable, and rare to find. However, the AT&T also suffers from several weaknesses. For example, over the past few years, the company has registered a decline in its wire line business. Such a decline is attributable to a decrease in the demand for the product. As such, the company is tasked with a duty to find new avenues for revenue. Moreover, their adjustment and the expansion of the 4G and the wireless networks have caused a decline in AT&T’s free cash flow. Following recent estimates, it is evident that 40% of the company’s retail customers use iPhone.
Even though the company had a one-time potential to offer iPhone to its customers, it adversely affected the company’s profits since the provision of iPhone sales is accompanied by enormous subsidies. In addition, the company has witnessed a few challenges in maintaining its network security.
In spite of the noted weaknesses, AT&T Company also has strong points. To begin with, AT&T is a significant player in the United States of America’s, as well as international telecommunications industry (Pearce & Robinson, 2007). With a market share of about 33.0%, the company is able to enjoy economies of scale, as well as significant bargaining power. The expansion that the company has had recently has allowed it a wide range of customers for its wireless and wired network. The expansion also saw it extend its customer base to over 200 countries, thereby allowing diverse sources of revenue. The AT&T Company has an established brand recognition as well as awareness in many countries, which is an advantage to the company in terms of revenue creation.
The telecommunications industry is now pivoted on the wireless communications. The sale of AT&T Inc’s landline companies came at the best time in order to boost the expansion of the wireless network. Following this sale, and the allocation of the corporation’s resources, it offers proof of a stable financial growth. Despite the increase in the corporation’s capital expenditures, AT&T Inc maintains a considerably high amount of dividends amounting to about 5.7%, which is higher than Verizon’s payout of 4.45%. Outlined below are three financial ratios of AT&T Inc in comparison with Verizon’s.
|Financial ratios or AT&T and Verizon for 2012 and 2013|
|AT&T Inc||Verizon Communications|
From the ratios, it is evident that payables turnover for both companies increased from 2012 to 2013. On the other hand, the receivables and the working capital for Verizon improved while AT&T registered a decline. Form the ratios; it is evident that AT&T faces competition threat from Verizon Communications.
AT&T Inc focuses on the provision of high quality, innovative as well as reliable services that enable people to remain connected. The corporation, as such adopts the use of advanced and next-generation technology to offer new solutions to its wide range of clients. For example, the 4G network is the most used and largest network throughout the US. As such, the corporation prides itself in availing communications to its customers and ensuring enhanced customer service that exceeds that of its competitors such as the Verizon.
Grand strategies in any company offer the direction that a company should take in terms of the future actions (Pearce & Robinson, 2007). Long-term objectives on the other hand refer to the outcomes that a business longs for in order to achieve given goals. The AT&T Inc has a potential to dominate the wireless network for about 2 to 5 years. In order to achieve the projected market share, the corporation can adopt any of the following strategies.
Concentrated Growth Strategy
The corporation ought to focus on ensuring its growth by defining its market combination, as well as concentrating on its wireless and wire line services. Such kind of grand strategy serves any firm effectively in that it has low risk association (Clark, 2011). The primary focus of the AT&T Company has been largely in the provision of communication services both in the aspect of data and voice products, internet messaging as well as in long distance communication.
As such, the organization should ensure that it focuses on the services it provides to ensure that it remains competitive in the market. The advantage of such a strategy is that it aims at the convergence of the type of technology and innovation it uses, as well as the exploitation of expertise (Clark, 2011). This will help AT&T Inc to possess a larger market, along with increase its current quotas.
Market Development Strategy
The other area that AT&T Inc can strategize concerns the development of the market for its products and services. Market development is defined as the identification of any new avenues for which the current services and products can find use within the firm’s customer base. In addition, market identification includes the adoption of new markets. The identified market areas can be differentiated in terms of either demographics or regional location. Such a type of strategy is significant especially when looking at the implementations of costs and risks within a company. As such, AT&T will be able to achieve market development if it designs new uses for its products and services.
The corporation can therefore, upgrade its television and cable infrastructure in order to give room for new innovations such as in the telephone service, internet access as well as in digital cable services. In addition, the wireless services can be expanded to include the access to broadband internet, which also can be improved to enhance the video technology. As such, the wireless technology can be a suitable solution especially to customers who are yet to adopt the cable television service. If the AT&T ensures that all the identified communications services are provided, the corporation will transform into a “one-stop” platform where any communication need can be attended to despite the consideration of the technology that it is affiliated to.
Product Development Strategy
In this aspect, the company can work towards offering high-risk services involving high implementation costs. Such a strategy aims at the development of products that are suitable for the current markets. In addition, the product development strategy can take the consideration to add new features to products that are already in the market as well as, varying the existing products. As such, the AT&T can work on improving its existing products and services, and ensure they focus on meeting the needs and customers demands.
From the foregoing, it is evident that the important element that AT&T ought to consider is ensuring that the products and services that are available in the market for the customers are of high quality and aimed at meeting the needs of the customers while focusing on revenue growth. For this reason, the corporation should put more emphasis on the product development strategy if it has to maintain a large market share within the telecommunication industry. However, the corporation should put equal emphasis on the other strategies as a boost to the company’s strategic goals.
Strategic Implementation Plan
In order for the corporation to enhance a competitive position both in the United States of America’s market as well as outside, AT&T Inc should ensure that it focuses on the right strategy (developing its products and services within the customers’ demands) and sets distinct objectives to achieve in the end.
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