Verizon SWOT Analysis & Recommendations

Verizon Communications Inc., Verizon Wireless, SWOT analysis, strengths, weaknesses, opportunities, threats, telecommunications case study and recommendations
A Verizon office building in Great Neck, New York in 2012. A SWOT analysis of Verizon Communications, Inc. reveals the importance of competition, diversification, and global expansion in the telecommunications industry, partly through the services of Verizon Wireless. (Photo: Public Domain)

Verizon Communications, Inc. has major strengths that support business growth and stability in the telecommunications market and the mass media market, although the business must address its weaknesses, as well as the opportunities and threats in its external environment, as evaluated in this SWOT analysis. The SWOT analysis model identifies the most significant internal strategic factors (strengths and weaknesses) and external strategic factors (opportunities and threats) relevant to the company. Verizon can support its decision-making and strategic development processes by using the results of the SWOT analysis of its business. As one of the biggest players in the information and communications technology and services industry, the company can use its market position as a way of supporting further business growth. For example, Verizon Wireless can capitalize on its popularity and leading U.S. market position to introduce new services. However, the company must regularly adjust its business strategies to address shifts in the strengths, weaknesses, opportunities, and threats (SWOT) determined in this analysis.

Considering the rapid advancement of information and communications technologies, it is beneficial to use a SWOT analysis of Verizon Communications, Inc. and other analytical tools to match the company’s strategic approaches with the internal factors and external factors notable in the business. Such matching increases the likelihood of success in implementing strategies, especially for business growth and expansion. Potential growth and expansion are considerable, especially because of the company’s current market position and popularity. For example, as a leading provider of wireless telecommunications services, Verizon Wireless can further expand its operations, even in new markets outside the United States. The company’s managers can optimize success rates in such endeavor by using relevant internal and external measures and indicators, such as the ones shown in this SWOT analysis.

Verizon’s Strengths (Internal Strategic Factors)

This component of the SWOT analysis identifies Verizon’s strengths, which are internal strategic factors that support business stability and growth. The company can use its strengths to protect its business from the adverse external factors in the telecommunications industry. The following strengths of Verizon Communications, Inc. enable the business to remain a major firm in the market:

  1. Strong brand image
  2. High economies of scale
  3. Relatively high quality of services

Strong brand image is a major internal strategic factor that empowers the company to effectively compete in the information and communications technology and services market. Verizon’s generic strategy and intensive growth strategies show that this strength is mainly based on the emphasis on quality as a differentiating factor against competitors. In addition, the company benefits from high economies of scale, which are a strength that optimizes efficiencies in providing services to target customers. For example, an expansive wireless telecommunications infrastructure enables Verizon Wireless to optimize its efficiency and, thus, its profits. In relation, the relatively high quality of services serves as a selling point for the company’s products. The company attracts quality-sensitive customers. This approach is evident in Verizon Wireless advertisements that highlight quality of service. These strengths indicate capabilities and competitive advantage as significant factors in this component of the SWOT analysis of Verizon Communications, Inc.

Verizon’s Weaknesses (Internal Strategic Factors)

Weaknesses or internal strategic factors that limit or reduce business success are evaluated in this component of the SWOT analysis of Verizon Communications, Inc. Weaknesses can make it more difficult to grow the business and address competition in the telecommunications market. In this regard, Verizon must improve its processes and capabilities to minimize the following weaknesses:

  1. Low diversification
  2. High cost of infrastructure
  3. Inability to compete based on price

The internal factor of low diversification is a weakness that increases the company’s exposure to market-based risks. For example, because Verizon Wireless represents one of the biggest revenue streams of the business, risk exposure to the wireless telecommunications market is high. Another weakness is the high cost of the company’s infrastructure. Even though it supports the strength of high quality in services, the infrastructure entails higher costs for development and maintenance. In relation, such high cost makes it difficult for the company to compete based on price. In the case of Verizon Wireless, the company cannot readily offer low prices to compete against the prices of competitors like Sprint. In this regard, the company’s strategy for high quality also creates considerable weaknesses. Based on this component of the SWOT analysis, it is beneficial for Verizon Communications, Inc. to prioritize addressing the weakness of low diversification.

Opportunities for Verizon Communications, Inc. (External Strategic Factors)

This component of the SWOT analysis specifies the most significant opportunities for Verizon’s business. Opportunities are external strategic factors that can support growth and business improvement in the telecommunications industry and in other industries. In this case, Verizon’s managers must develop strategies to exploit the following opportunities in the external environment:

  1. Global growth and expansion
  2. Business diversification
  3. Stronger network externalities

Global growth and expansion is an opportunity based on the widespread development of information and communications networks around the world. For example, Verizon Wireless can expand its offerings to other countries to capitalize on such technological trend (Read: PESTEL/PESTLE Analysis of Verizon Communications, Inc.). Another opportunity is business diversification, which directly addresses the corresponding weakness of the company’s low diversification. This opportunity involves developing new business or entering new industries and markets as a way of spreading risk and reducing overdependence on one or a few markets, such as the company’s dependence on the wireless telecommunications market in the United States, through the operations of Verizon Wireless. In addition, the opportunity to strengthen network externalities is based on the positive effect of a larger consumer base on the value of the company’s services. For instance, Verizon Wireless can further boost the value of its services by increasing its customer base and market share. A larger market share is more likely to encourage even more customers to use the company’s wireless telecommunications services. Consequently, opportunities for growth, stability, and stronger competitiveness are emphasized through the external strategic factors in this component of the SWOT analysis of Verizon.

Threats Facing Verizon (External Strategic Factors)

The threats against business stability and growth are identified in this component of the SWOT analysis of Verizon Communications, Inc. Threats are external strategic factors that could hamper or decrease the performance of the telecommunications business. Strategic decision-making processes at Verizon must address the following threats in the business environment:

  1. Competition
  2. Security threats via network or information technologies
  3. Natural disasters that could destroy or damage infrastructure

Competition is a strong external force, as determined in the Porter’s Five Forces analysis of Verizon Communications, Inc. Competitors threaten the company through their strategies and aggressiveness. For example, firms in the wireless telecommunications services market threaten Verizon Wireless through their continuous technological improvement and their aggressive marketing strategies. On the other hand, security threats via network or information technologies are an external factor that can bring down the business. For instance, a successful breach against the wireless telecommunications network assets of Verizon Wireless can prompt subscribers to reduce or stop their usage of the company’s services. Moreover, natural disasters like earthquakes can significantly damage the company’s technological assets and reduce business performance. The company recognizes this natural environmental concern in its annual reports with the U.S. Securities and Exchange Commission. Based on the external factors in this component of the SWOT analysis, Verizon must consider enhancing its competitive advantage, network security measures, and technological redundancy measures.

Summary & Recommendations – SWOT Analysis of Verizon Communications, Inc.

Summary. This SWOT analysis of Verizon Communications, Inc. presents the most significant internal and external factors based on the characteristics of the business and the conditions of the information and communications technology and services industry, the telecommunications market and the mass media market. The operations of Verizon Wireless are especially exposed to threats, although the company has considerable opportunities to expand its wireless telecommunications services to new markets. The company has the strengths needed to grow and remain strong in the market. However, the main issues relevant to the business are the weakness of low diversification, the opportunity to globally grow and expand, and the threat of competition.

Recommendations. The following recommendations directly address the main issues determined in this SWOT analysis of the business. Also, considering the increasing use of wireless telecommunications services, strategic emphasis on Verizon Wireless is advisable. In this case, it is recommended that Verizon Communications, Inc.:

  1. Diversify its business through further acquisition of firms in related industries, to spread risk and reduce dependence on the information and communications technology and services industry, the telecommunications market, and the mass media market.
  2. Globally expand, such as by offering Verizon Wireless services to new markets outside the United States, capitalizing on strong brand image and the increasing use of wireless telecommunications services.
  3. Strengthen competitive advantage by maximizing quality of services and continuing to highlight high quality in marketing strategies.