Introduction
Michael Porter’s theory of potential risk assessment was developed to assess possible adverse events that could affect the business. The analysis is carried out under five factors, or the so-called forces. An analysis of Porter’s Five Forces will allow seeing the risks that will affect future profits, assess the intensity of competition in a niche in a new country, and understand whether it is worth entering it (Isabelle et al., 2020).
Verizon Communications Inc. is a telecommunications company that provides telecommunications services in the United States. Verizon dominates the market with its extensive coverage network and reputation for first-class customer service (Hasanov, 2020). The company aims to serve higher-income users than the competitors’ target audience. Porter’s Five Forces analysis will show how ready a company is to enter a market in a new country. The analysis will be conducted based on the company’s presumed entry into the Canadian market.
Competition in the Industry
Competition is relatively high when providing services to mobile operators. Verizon’s biggest rival, which could put significant pressure on the new market, is Bell Mobility. Both companies have a similar customer focus as they claim a high market share (Matz et al., 2020). Due to this similarity, direct competition between these companies is inevitable when entering the same market.
Some other companies can compete with Verizon. Among them, it is worth highlighting Rogers Wireless, which constantly monitors the influx of new customers, and Telus / Koodo, which conducts aggressive bidding to gain market share. Verizon’s coverage network has been the industry’s most robust in the US since the early 2000s, but its competitors have invested a lot to catch up (Marques, 2019).
Since the company’s gap with competitors is not large, it is likely that by increasing its capacity, it will be able to catch up with Verizon. The rest of the operators constantly add new data transfer capabilities, indicating their serious intentions. However, the company has all the necessary resources to expand its influence in a new country since this operator has a strong brand that can win over many users.
Power of Customers
Buyers have significant market power in the wireless industry. Companies regularly hold various promotions to lure customers from competitors and provide preferential programs for their users. In the new country’s market for Verizon, such threats will be pretty serious.
For example, Bell Mobility holds many promotions that allow the whole family to connect multiple accounts or exchange an old device for a new one. Such competitive offers can significantly undermine the position of a new company in this market that is just about to conquer the market. Other significant competitors, such as Rogers Wireless, offer their users various kinds of installments for gadgets as well as leasing them, which is a good and cheap offer (Yeganeh, Salahi, and Pourmina, 2019).
Telus/Koodo offers unlimited data storage and communication services. Each competitor has unique features that make them different. Because of this, Verizon will have to develop a new approach to new customers to explain why they should switch to their services. The company is known for its stable network in most regions and favorable user plans and services. As these advantages fade, the company must look for a new advantage.
Potential of New Entrants into the Industry
New companies that may appear to pose little threat to the company in question. A significant investment would be required to set up a communications service company, and such capital investment may not be feasible, especially given the risks. In addition, a wireless company has to go through a maze of government regulations before it can start making money. If the new company can cover the costs and meet the rules, the next step is to create a brand that can compete.
Verizon is one of the first organizations in its industry to have built a strong, trusted brand. Considering the above, there is a slight chance that a new organization that provides communication services may be formed in the market. However, the situation is significantly different when entering a new market in another country. A local company becomes a new competitor, in which case the above provisions become relevant. The company must look for ways to stand out and win people’s trust because a strong brand will not be enough.
Power of Suppliers
Suppliers, in the case of the company in question, do not have much influence on its operations because their numbers are high. The organization purchases various equipment from its vendors to spread communication methods and improve technologies in this area. Verizon has a wide range of providers to choose from. The number of well-established, well-known organizations with which suppliers can cooperate is small.
Due to this current situation, Verizon influences vendors. This allows Verizon to dictate its terms when doing business with contractors and doing what will benefit them, not suppliers. In Canada, the company should have no problems with suppliers since it will be profitable for most of them to enter a new promising market while cooperating with other telecom operators. In this case, it can be concluded that the strength of suppliers has minimal effect on the company’s capabilities.
The Threat of Substitute Products
When entering a new country market, the threat of replacement is Verizon’s biggest concern. Companies such as Bell Mobility, Rogers Wireless, Telus/Koodo, and their services cannot wholly replace Verizon, as each has its characteristics and differences. However, despite Verizon’s advantages and increasing strength, its customers can be drawn to other companies through lower prices or the introduction of lucrative offers. With the concurrence of favorable conditions, such as the country’s financial performance, economic factors, and the company itself, Verizon may have a good chance of successfully entering the foreign market. However, the company will have to work hard to provide users with services similar to those of its competitors, not at inflated prices.
Conclusion and Discussion
It is worth noting that a digital giant like Verizon has enough resources and capabilities to develop its influence in the Canadian market. However, the action of Porter’s five forces has its influence, which is worth paying attention to when drawing up a strategic development plan in a new country. For the company, there are specific threats mentioned above.
In this regard, Verizon must take several organizational measures to avoid losses in the new country. First, an important aspect will be creating unique loyalty programs that could lure regular customers of other operators. This won’t be easy because the market for network service providers in Canada is formed. However, in addition to large companies that cover the country’s entire territory, many local providers cannot provide sufficient coverage.
One winning strategy for developing into a new market in such a case may be to focus on poaching the clients of these firms. In such a case, market absorption can occur more smoothly if prices are not significantly higher. Thus, it can be concluded that Verizon should be introduced to a new market because the effect of Porter’s five forces is not strong.
Reference List
Hasanov, I. (2020). Learning and development policies in Verizon Communications Inc. Young Scientists, 9. Web.
Isabelle, D., Horak, K., McKinnon, S., and Palumbo, C. (2020). Is Porter’s Five Forces Framework Still Relevant? A study of the capital/labour intensity continuum via mining and IT industries. Technology Innovation Management Review, 10(6). Web.
Marques, L. F. F. (2019). Equity Research-Verizon Communications Inc (Doctoral dissertation, Universidade de Lisboa (Portugal)). Web.
Matz, A. P., Fernandez-Prieto, J. A., Cañada-Bago, J., and Birkel, U. (2020). A systematic analysis of narrowband IoT quality of service. Sensors, 20(6), 1636. Web.
Yeganeh, H., Salahi, A., and Pourmina, M. A. (2019). A novel cost optimization method for mobile cloud computing by capacity planning of green data center with dynamic pricing. Canadian Journal of Electrical and Computer Engineering, 42(1), 41-51. Web.