Verizon PESTEL/PESTLE Analysis & Recommendations

Verizon Communications, Inc. maintains its market position as one of the biggest telecommunications firms through strategies that tackle opportunities and threats based on external factors in the remote or macro-environment of the information and communications technologies and services industry. These external factors are determined through external analysis tools like the PESTEL/PESTLE analysis model. The PESTEL/PESTLE analysis model identifies the opportunities and threats based on political, economic, social or sociocultural, technological, ecological or environmental, and legal macro-environmental factors or trends affecting the industry environment. In this case, such external factors influence various areas of Verizon, including its operations in the wireless telecommunications market through Verizon Wireless. For example, the company can grow its revenues by expanding the operations of Verizon Wireless to exploit opportunities based on the widespread development of information and communications networks around the world. Thus, this PESTEL/PESTLE analysis shows that addressing the opportunities and threats based on the external factors in the remote or macro-environment ensures Verizon’s continued growth and profitability.

The results of this PESTEL/PESTLE analysis of Verizon Communications, Inc. can guide strategic management efforts. Managers can evaluate business performance and market conditions through this external analysis. For example, an analysis of the macro-environmental factors in the wireless telecommunications industry provides information for the evaluation of the performance of Verizon Wireless. The external factors in the remote or macro-environment have varying degrees of significance to the company. It is essential to develop and implement strategies accordingly, based on the conditions of the industry environment, to ensure that Verizon’s development accounts for the opportunities and threats in the target markets of the business.

Political Factors on Verizon’s Business

In this component of the PESTEL/PESTLE analysis, the effects of governments on Verizon and the industry environment are considered. Governmental policies and actions can impose limits or create opportunities for business growth in the remote or macro-environment. In this case of Verizon Communications, Inc., the following political external factors are notable in the information and communications technologies and services industry:

1. Governmental move to open markets (opportunity and threat)
2. Increasing governmental support for infrastructure development (opportunity)
3. Increasing governmental support for free public Wi-Fi hotspots (opportunity)

The move of governments to open markets to globalization is a political external factor that creates opportunity for business growth. For example, based on this macro-environmental factor, the company can grow by expanding the operations of its subsidiary, Verizon Wireless, while taking advantage of the opening of developing markets to globalization. The same external factor presents a weak threat in terms of the potential of other firms to globally compete against the company. In relation, the increasing governmental support for infrastructure development, including telecommunications infrastructure development, adds to the growth and expansion opportunities in the firm’s remote or macro-environment. On the other hand, this external analysis identifies business opportunity based on increasing governmental support for free public Wi-Fi hotspots. Such support presents opportunity for Verizon Wireless to expand and promote its services by cooperating with governments for such public hotspots. Thus, political external factors create opportunities for growth and expansion in the industry environment, as shown in this component of the PESTEL/PESTLE analysis of Verizon.

Economic Factors Relevant to Verizon Communications, Inc.

The influence of economic trends on Verizon and its remote or macro-environment is determined in this component of the PESTEL/PESTLE analysis. The conditions of the telecommunications industry environment depend on the situation of the economy. In this regard, Verizon Communications, Inc. must strategically account for the following economic external factors:

1. Increasing disposable incomes in developing countries (opportunity)
2. High economic growth rates of developing countries (opportunity)
3. Decreasing information asymmetry (threat)

The increasing disposable incomes in developing countries are a macro-environmental factor that leads to opportunities in the industry environment. For example, Verizon Wireless can exploit this economic external factor by establishing operations in developing countries to target customers in the wireless telecommunications market. The high economic growth rates of developing countries also contribute to this opportunity for growth and expansion. On the other hand, the decreasing information asymmetry is attributed to customers’ ability to compare products based on the widespread availability of information, especially online information that empowers customers in influencing the remote or macro-environment. This external factor is a threat because it increases the bargaining power of customers against service providers like Verizon Wireless. Thus, this external analysis highlights the availability of online information as an enabling factor for customers to impose their demands on the company. Verizon’s generic strategy for competitive advantage and intensive strategies for growth help exploit the opportunities identified in this component of the PESTEL/PESTLE analysis.

Social/Sociocultural Factors in Verizon’s Business Environment

This component of the PESTEL/PESTLE analysis of Verizon Communications, Inc. deals with social conditions and trends. Sociocultural trends significantly impact the behaviors of customers and employees, thereby also influencing firms and the remote or macro-environment of the telecommunications industry. The following sociocultural external factors are notable in Verizon’s industry environment:

1. Increasing adoption of mobile devices (opportunity and threat)
2. Increasing use of online mobile services (opportunity and threat)
3. Increasing demand for high quality in products (opportunity)

The increasing adoption of mobile devices maintains opportunities for companies to grow their operations in the wireless telecommunications market. This sociocultural external factor corresponds to increasing demand for wireless telecommunications services, such as those from Verizon Wireless. In relation, the increasing use of online mobile services is a macro-environmental trend that further contributes to the increasing demand for such wireless telecommunications services. However, these two external factors present threats by making the remote or macro-environment more attractive to more firms, thereby potentially increasing competition, which is determined as a major external force in the Porter’s Five Forces analysis of Verizon Communications, Inc. On the other hand, the company has growth opportunities based on the increasing demand for high quality in products. For example, Verizon Wireless can improve its market presence and customer loyalty by emphasizing high quality in promoting its services. The factors in this part of the external analysis should help guide the evolution of Verizon’s organizational culture. Thus, there are major business growth opportunities in this component of the PESTEL/PESTLE analysis.

Technological Factors in Verizon’s Business

In this component of the PESTEL/PESTLE analysis, the effects of technological trends on Verizon and the remote or macro-environment are evaluated. For instance, this external analysis considers how technologies determine the infrastructure and capabilities of Verizon Wireless in the wireless telecommunications industry environment. Technologies also affect the other areas of the business. Verizon Communications, Inc. must develop strategies to deal with the following technological external factors:

1. Widespread development of information and communications networks around the world (opportunity)
2. Security threats via network or information technologies (threat)
3. Rapid advancement of information and communications technologies (threat and opportunity)

There are opportunities for global business growth and expansion based on the technological external factor of the widespread development of information and communications networks around the world. For example, Verizon Wireless can invest in operations in new markets to expand its business, based on the availability of new wireless telecommunications infrastructure in various areas in the United States and other countries. However, security threats are a macro-environmental factor that present business challenges. For instance, these security threats have the potential to weaken the integrity and stability of the network and information technologies of Verizon Wireless. On the other hand, the rapid advancement of information and communications technologies helps facilitate business growth in the industry environment by enabling firms to improve their technological performance. The emphasis on technology in Verizon’s vision statement and mission statement can support growth and expansion based on this technological trend. Nonetheless, the same trend is identified as a threat in this part of the external analysis. For example, rapid technological advancement can disrupt the remote or macro-environment. This disruption can open the market to new players and substitutes. Therefore, this component of the PESTEL/PESTLE analysis shows the importance of capitalizing on technology to grow Verizon Communications, Inc., and the importance of continuous improvement to strengthen the business.

Ecological/Environmental Factors

The influence of the natural environment on the remote or macro-environment is determined in this component of the PESTEL/PESTLE analysis of Verizon Communications, Inc. Ecological conditions and trends are determinants of the industry environment, especially with regard to the natural resources available to firms. In this case, Verizon’s business is subject to the influence of the following ecological external factors in the information and communications technologies and services industry:

1. Natural disasters that could destroy or damage infrastructure (threat)
2. Increasing availability of renewable energy (opportunity)
3. Increasing emphasis on business sustainability (opportunity)

This part of the external analysis identifies natural disasters as a significant threat to business, in terms of potential damage to infrastructure, such as the telecommunications infrastructure that supports the services of Verizon Wireless. This ecological external factor has the potential to reduce or stop the company’s operations. On the other hand, the remote or macro-environment presents opportunities based on the increasing availability of renewable energy. This macro-environmental factor can improve firms’ sustainability efforts. For example, Verizon’s corporate social responsibility strategy can include this external factor to support corporate citizenship programs. Such sustainability efforts and corporate citizenship programs also address the increasing emphasis on business sustainability in the industry environment. The combination of the ecological external factors in this component of the PESTEL/PESTLE analysis should prompt Verizon Communications, Inc. to exploit opportunities for its corporate social responsibility fulfillment.

Legal Factors

This component of the PESTEL/PESTLE analysis deals with the influence of laws and legal systems on Verizon and its remote or macro-environment. Laws and regulations impose restrictions and requirements on companies, such as requirements on the operations of Verizon Wireless in the telecommunications industry. The legal external factors in the industry environment of Verizon Communications, Inc. are as follows:

1. Competition law (threat and opportunity)
2. Increasing regulation of telecommunications services (threat)
3. Increasing consumer protection (threat and opportunity)

Competition law, also known as anti-trust law or anti-monopoly law, is a legal external factor that imposes a threat and opens an opportunity in the industry environment. This macro-environmental factor is a threat that hinders the growth and expansion of business. For example, Verizon Wireless is prohibited from engaging in mergers and acquisitions that bring the telecommunications market closer to a monopoly. Nonetheless, this legal factor helps keep growth opportunities by limiting the size of large competitors. On the other hand, security issues have prompted the rise in the regulation of telecommunications services. The increasing regulation imposes a threat on the remote or macro-environment, in terms of potential limits to the company’s operations. For instance, regulations can restrict the services of Verizon Wireless, for the purpose of minimizing data and personal security issues. In relation, consumer protection creates increasing pressure on the industry to address such issues. Still, this external analysis shows that increasing consumer protection can boost business growth by supporting consumer confidence in the industry. Therefore, this component of the PESTEL/PESTLE analysis points to compliance as a basic step to minimize the negative influence of legal external factors on Verizon.

Summary & Recommendations – PESTEL/PESTLE Analysis of Verizon Communications, Inc.

Summary. Markets for information and communications technologies and services present a variety of opportunities and threats that influence Verizon’s business development. This PESTEL/PESTLE analysis identifies external factors that create opportunities for growth and expansion in the global industry environment. Optimization of such growth and expansion is possible through the strengths of high economies of scale, strong brand image, and high quality of services identified in the SWOT analysis of Verizon Communications, Inc. Thus, the company has the potential to effectively address the most significant opportunities in its remote or macro-environment. For example, Verizon Wireless has the capabilities to address market opportunities based on economic, political, social, and technological macro-environmental factors. Exploiting such opportunities can mitigate the effects of many of the threats shown in this external analysis.

Recommendations. It is prudent to take action to support international business growth and expansion, based on the macro-environmental factors identified in this external analysis. Given the results of the PESTEL/PESTLE analysis on the opportunities and threats relevant to the industry environment, it is recommended that Verizon Communications, Inc.:

1. Expand operations to other markets to address opportunities based on political, economic, sociocultural, and technological external factors. Expanding the operations of Verizon Wireless is a major opportunity in this case.
2. Enhance security measures to address security threats via network or information technologies.
3. Increase utilization of renewable energy to improve sustainability and corporate citizenship status.

References

• Gillespie, A. (2007). PESTEL analysis of the macro-environment. Foundations of Economics, Oxford University Press, USA.
• Housing Industry Association (2011). An Introduction to PESTLE Analysis. HIA Ltd.
• Murphey, M., & Gause, R. (1974). UCF Research Guides. Industry Analysis. PESTLE Analysis. Business Horizons, 17(5), 27-38.
• United States Federal Communications Commission – Annual Mobile Wireless Competition Report.
• Verizon Communications, Inc. – Annual Report.
• Verizon Communications, Inc. – Form 10-K.
• Verizon Wireless – Official Website.
• Yüksel, İ. (2012). Developing a multi-criteria decision making model for PESTEL analysis. International Journal of Business and Management, 7(24), 52.