5 Forces Model of Verizon

As of late 2004, Verizon is already considered the world's largest telecommunication company with annual revenue of $67.8 billion. Their continued plans are leading toward acquisition and development of fiber technology, which will allow it to offer cable TV services. Apparently they are still apprehensive regarding business customer and plan to extend add-ons again into the private sector, which worked for them in 2003.

The bargaining power of suppliers is low because of the presence of powerful buyers who are able to direct terms to the suppliers who are generally small firms. Besides these suppliers of tires, parts, electronic, mechanical equipment are small players and may have only one or two clients (ancillaries).

Bargaining Power of Suppliers: The bargaining power of suppliers in the industry is low. There are numerous suppliers in this industry, and the large department stores have the ability to negotiate for the lowest prices. In addition, the switching costs are low, as the products are not highly differentiated. There are a large volume of purchases in the industry, allowing the department stores to exert even more power over the suppliers.

Bargaining power of buyers is medium-high because of the low switching costs and wider spectrum of similar products selling at competitive prices due to the influence of developing countries

Bargaining power of supplier: High levels of competition among suppliers act to reduce prices to producers. This is a positive for Ford Motor Company. Standardization of parts allowed Ford to reduce dependency on fixed supplier/vendor which goes into producer’s favor.

Verizon is a major telecommunication provider in the United States. The company is the market leader, with $110 billion revenue and $2.4 billion in profit (MSN Moneycentral, 2012). Verizon has steady revenue streams that are largely based on a subscription model. It has several business segments, including wireless (63.3% of revenues) and wireline (36.7%) (2011 Verizon Annual Report). Most of this report will therefore focus on the wireless business, not only because this is the largest business that the company operates but because it is a rapidly growing and evolving business as well, a function of the rapid pace of smartphone adoption in America.

As we begin to strategically plan for our business, it is important for us to take a deep dive into our competitive environment to understand where we are strong competitively and where we are weak competitively. An analysis of the forces driving industry competition using M.E. Porter’s Five Forces Model will assist us in determining where the power lies in a business situation as we begin to plan. We must understand how they work in our industry and how they affect our particular situation. Whatever the collective strength of these forces is, our job as the strategists of the organization is to

Bargaining power of buyers: Businesses and individuals all fall under the customer's category for this industry. Big customers do get volume discounts and can negotiate prices with sales representatives. However smaller customers have to take what is being offered to them. The only say they have is that they can switch between the players, but due to intense competition, the prices offered are generally the same across the service band.

“As a leader in communications, Verizon's mission is to enable people and businesses to communicate with each other. We are also committed to providing full and open communication with our customers, employees and investors”

Verizon Communications is not well placed against its competitors like AT&T who offer services using technologies like TDMA (time division multiple access) (production).

C.3. Bargaining power of suppliers: Medium. There are enough competitors in the market that market shares are relatively even.

Your Decision: Is the bargaining power of suppliers high, moderate, or low for your industry: Moderate

Define: Pressure suppliers can put onto their customers by increasing prices, decreasing the quality of items, and minimizing availability

Bargaining power of buyers -Buyers are not in concentrated groups and do not buy in large amounts. However, within the entertainment industry, customers have a lot of alternatives and have no switching cost. However the introduction of DVDs, influenced customers to purchase DVDs since the cost is almost the same cost of rentals. This makes buyer power moderate (Xie & Lin, 2008).

- Suppliers’ bargaining power: The company does bargains with the suppliers, suppliers are first carefully selected by carrying out bidding then a fixed price is set by multi consent then material is provided by the supplier.