Problem statement
Verizon Communications Inc. is “the largest local-phone operator and the largest wireless company” (Rosenbush 52). InfoWorld also calls it “the nation’s leading provider in wireline and wireless communication” (unpaged) while Bonocore calls it “the largest wireless local telephone company in the United States” (29). The analyzed case study offers an opportunity “to reinvent the market” and establish the company’s dominance there by means of rolling out “fiber-optic connections to every home and business in its 29-state territory over the next 10 to 15 years” (Rosenbush 52). However, this strategy is called “financial Waterloo” due to its high cost and novelty of the approach unchecked by practical use and this arouses a dilemma: to risk winning the new market of innovative services or to apply a more restricted strategy.
List of alternatives
Basically, there are two main alternatives that Ivan Seidenberg faces.
- The first is to persist in his ambitious plans of rolling out fiber-optic connections in the USA.
- The second is to adopt a more restricted strategy, like that of SBC and Qwest Communication International, which “announced partnership with satellite-TV service EchoStar Communication” (Rosenbush 55).
Analysis of the alternatives
The application of the innovative strategy of fiber-optic lines, evidently, has a great number of strong points. The main pros are as follows: in case of success, Verizon Communications is sure to dominate the new market as it will outstrip its rivals. The company will be the first to offer consumers absolutely new services (like TV) and this is sure to attract new consumers and strengthen motivation of the existing ones (Backer & Organization for Economic Co-operation and Development 125). New strategy will help to compete with cable companies more effectively, leaving them far behind. New strategy will enable Verizon to provide new services to the consumers thus increasing revenues and creating new streams of revenue.
However, there are also significant weak points of the alternative fancied by Seidenberg. First, the strategy is expensive and the company will have to spend $12.5 billion “into capital expenditures this year” (Rosenbush 57). However, it is known that there the company has $54 billion debt and such expenditures are risky. Besides, there is certain tension in labor situation and the trade unions representing employees that can become even more aggravated with the introduction of new services and the need to reeducate the employees so that they could become professional in new sphere.
An announcement of partnership with a certain satellite-TV service can become an alternative to the radical strategy. It shows great promise in terms of the weak point of the fist alternative. Such partnership will allow Verizon to provide its consumers with TV service and it will “allow them to combine voice, video and data on a single bill” (Rosenbush 55). This approach will bring result sooner and its application will demand reduced expenditures that will help to invest more in the discharge of the debt and the company will get an opportunity to invest money in human resources issues.
As for the cons of the alternative, its main weak point is that Verizon will not be among the pioneer in the sphere as this approach has been applied by Qwest Communication International already and Verizon will hardly be able to get the dominance in the sphere.
Recommendations
The innovative strategy of the use of fiber-optic connections seems promising in terms of new revenue sources, consumer attraction, and the opportunity to dominate the new market. Financial pressure and problems with discharge of debt can be solved by selling of some assets of the company. Besides, research in marketing sphere is necessary to determine if market is ready for such radical innovations. Finally, labor situation demands careful consideration and new plans for cooperation with trade unions are necessary.
Works Cited
Anonymous. “Verizon Communications”. Info World. (2000).
Backer, Koen de, and Organization for Economic Co-operation and Development. Open Innovations in Global Networks. USA: OECD Publishing, 2008.
Bonocore, Joseph. Commanding Communications: Navigating Emerging trends in Telecommunications. USA: John Willey and Sons, 2001.
Rosenbush, Steve. “Verison’s Gutsy Bet”. Business Week (2003): 52-62.