Question

The following industries are expected to experience significant change:

• Healthcare Services
• Data Security
• Renewable Energy
• Gaming
• Residential Construction
• Retail
• Transportation
• Advertising
• Insurance
• Telecommunication
• Banking

                                                                                                                                                                                           

From the list above, you are required to choose one of the industries as your industry focus; and choose one firm in your industry of choice as your firm focus.

In essay format, you are required to perform industry and firm analysis. The essay should explore/incorporate the following:

1. A discussion of the opportunities that exist in that industry.
2. Identifying the four leading firms in that industry, followed with a discussion of your opinion and analysis of why those firms are or have been industry leaders.
3. An analysis of your firm using Porter’s Five Forces Framework.
4. An analysis of your industry’s cost structure. In particular, identifying and distinguishing between fixed costs, variable costs, sunk costs, and entry costs.
5. An analysis of your industry’s demand drivers that may affect revenues.
6. Determine the structure of the market of your industry by drawing from your insights above.
7. A discussion of the factors and trends that are likely to shape that industry over the next 3-5 years.

The essay should be 10 – 15 pages using 12-point Times New Roman font, 1.5 spacing. All sources should be referenced in APA format.

The grading rubric of the project is given below.

Criteria	weight	Exemplary	Good	Satisfactory	Inadequate
		4	3	2	1
Topical Relevance	5%	Directly relevant	Somewhat relevant	Remotely related	Totally unrelated
Organization	20%	Good organization; points are logically ordered; sharp sense of beginning and end	Organized; points are somewhat jumpy; sense of beginning and ending	Some organization; points jump around; beginning and ending are unclear	Poorly organized; no logical progression; beginning and ending are vague
Content	25%	Content indicates synthesis of ideas, in-depth analysis and evidences original thought and support for the topic.	Content indicates original thinking and develops ideas with sufficient and firm evidence.	Content indicates thinking and reasoning applied with original thought on a few ideas.	Shows some thinking and reasoning but most ideas are underdeveloped and unoriginal.
Research & Development	25%	Sufficient supporting research and facts to support content and conclusions drawn.	Some details and facts are non-supporting to the content. Moderate levels of research done to support content.	Little research conducted to support content. Factual accuracies are questionable.	No research done to support content. No specific details or facts given.
Correct application of economic concepts	25%	Conclusions, inferences, and analyses are consistent with facts as well as economic concepts and theory.	Conclusions, inferences, and analyses are somewhat consistent with economic theory and concepts.	Many inconsistences with economic theory and concepts.	Numerous inconsistencies with facts and economic theory and concepts.

Answer 1

The choosen industry is the telecommunications industry

The word telecommunication is derived from the Greek work “tele” which means “far off” and the Latin word “communicare ” which means “to share”. Or in other words it refers to transmission of signals to different places with the help of telecom or telecommunication. In old days, communication between two people take place with the use of drum, letters, flags and smoke signals. And now it means high speed sophisticated submarine optical wires laid on ocean floor and by satellites which is in covering on the whole earth

OPPORTUNITY --------

Telecom operators are facing increasing challenges in the digital era. Communication tools based on the Internet, such as Weixin, Weibo and Twitter, have dramatically reduced the traditional profits of telecom operators for SMS and voice calls, and they are trying hard to avoid becoming just simple data channels in the digital era.

From the past experiences of some off the world's well-known telecom operators, the best strategy, they say, is to build up an open platform that can attract participation from hardware providers, end device suppliers, content developers and end users. Telecom operators should also lead the healthy development of this ecosystem, and the gene combination of Internet and telecom companies will become the core competitiveness.

For the three telecom operators in China, the upcoming 4G battle is crucial. Standard choosing and the timing of market entry are key strategies. Obviously, China Mobile will take the first move advantage of 4G, China Telecom and China Unicom could also consider giving up their 3G sunk costs by entering into the 4G realm to seize the future market.

Mobile Internet and big data will create tremendous opportunities for telecom operators. Mobile internet is expected to be booming in the following three years. Telecom operators control the last mile for all mobile devices to access the Internet, and therefore will share the future profit from the mobile internet market. Currently, telecom operators are advised to enhance customer loyalty and increase the migration cost for changing the mobile numbers and switching service providers. A large user base is the key to winning market share in the mobile internet arena, and telecom operators are able to secure a huge number of low-end users through subsidizing low-cost Android-based devices.

THE FOUR LEADING COMPANIES IN THIS INDUSTRY----

AT& T

Verizon Communications

Nippon Telegraph and Telephone

Comcast

Verizon’s formation

STRATEGY FOR THE GROWTH OF VERIZON---------

The mergers that formed Verizon were among the largest in U.S. business history, culminating in a

definitive merger agreement, dated July 27, 1998, between Bell Atlantic, based in New York City, and

GTE, which was in the process of moving its headquarters from Stamford, Conn., to Irving, Texas.

GTE and Bell Atlantic had each evolved and grown through years of mergers, acquisitions and

divestitures. Each had proven track records in successfully integrating business operations.

Prior to the merger, GTE was one of the world’s largest telecommunications companies, with 1999

revenues of more than $25 billion. GTE served approximately 35 million access lines through subsidiaries

in the U.S., Canada and the Dominican Republic, and through affiliates in Canada, Puerto Rico and

Venezuela. (Access lines are the individual landline connections from a customer’s premises to the

telecommunications network.) GTE was a leading wireless operator in the U.S., with more than 7.1

million wireless customers and the opportunity to serve 72.5 million potential wireless customers.

Bell Atlantic was even larger than GTE, with 1999 revenues of more than $33 billion. It served 43 million

access lines, including 22 million households and more than 2 million business customers. It also

managed one of the world’s largest and most successful wireless companies, with 7.7 million Bell

Atlantic Mobile customers in the U.S. and international wireless investments in Latin America, Europe

and the Pacific Rim. Bell Atlantic’s Directory Services was the world’s largest publisher of directory

information, including operations in Europe.

Wireless investment and growth

Through 2015, Verizon has made more than $110 billion in network investments in wireless. This is in

addition to major spectrum purchases.

In August 2008, Verizon Wireless expanded to many rural markets by completing its purchase of Rural

Cellular Corp. for $2.7 billion in cash and assumed debt.

In January 2009, Verizon Wireless completed its purchase of Alltel from Atlantis Holdings LLC, expanding

the company’s network coverage to nearly the entire U.S. population. (Alltel had been formed in 1983,

with the merger of two independent telephone companies: Allied Telephone in Arkansas and Mid-

Continent Telephone in Ohio. By the time the transaction with Verizon was announced in June 2008,

Alltel was a wireless company with approximately 13 million customers.) Verizon Wireless paid

approximately $5.9 billion for the equity of Alltel. Immediately prior to the closing, the Alltel debt

associated with the transaction, net of cash, was approximately $22.2 billion.

In December 2011, Verizon Wireless announced agreements to purchase Advanced Wireless Spectrum

(AWS) licenses from SpectrumCo – a joint venture of Comcast, Time Warner Cable and Bright House

Networks – and from Cox TMI Wireless. The spectrum licenses under the two agreements covered 93

percent of the U.S. population, and the purchased closed in August 2012.

Acquisitions

Over the past decade, Verizon has made a number of acquisitions to build its portfolio of next-

generation communications services.

On February 14, 2005, Verizon announced an agreement to acquire MCI Communications Corp. in order

to enhance its ability to deliver the benefits of converged communications, information and

entertainment across the country and around the world. Qwest Communications later announced its

own bid for MCI, but in May 2005 the MCI Board endorsed an amended bid by Verizon. The merger

closed on January 6, 2006, in a transaction valued at approximately $8.5 billion.

In May 2007, Verizon announced an agreement to acquire Cybertrust, a privately held provider of global

information security services.

In January 2011, Verizon announced an agreement to acquire Terremark Worldwide Inc., a global

provider of managed IT infrastructure and cloud services, for a total equity value of $1.4 billion. The

transaction closed in April 2011, and accelerated Verizon’s strategy to deliver a portfolio of highly

secure, scalable on-demand solutions to business and government customers globally – building on the

global network capabilities that Verizon gained through its acquisition of MCI.

To complement the Terremark acquisition, Verizon acquired CloudSwitch, an innovative provider of

cloud software technology, in August 2011.

In July 2012, Verizon acquired Hughes Telematics. The transaction expanded Verizon’s capabilities in the

automotive and fleet telematics marketplace and helped accelerate growth in emerging IoT

applications. Verizon’s strategy to simplify the IoT and accelerate its adoption includes the launch in

2015 of ThingSpace, an IoT platform designed to assist developers create, test, manage and market their

IoT-based solutions aimed at major vertical markets, such as energy, health care and connected cities.

In November 2013, Verizon acquired the assets and operations of upLynk, a leading technology and

television cloud company. In December 2013, Verizon announced an agreement to acquire EdgeCast, an

industry leader in content delivery networks. In January 2014, Verizon and Intel Corp. announced an

agreement for Verizon to purchase the assets of Intel Media, a business division dedicated to the

development of cloud TV products and services.

Those three businesses were integrated into the Verizon Digital Media Services (DMS) organization,

which uses world-class technology to help companies prepare, deliver and display digital media content

including video, web pages, applications, mobile ads and live events on any screen.

Divestitures

At the same time Verizon has made significant network investments and acquisitions, the company has

shed non-strategic assets and investments to focus on nationwide wireless, global enterprise and

wireline broadband services concentrated in Northeast and Mid-Atlantic states.

Verizon sold wireline access lines in Alabama, Missouri and Kentucky in 2002 and in Hawaii in 2005.

In January 2007, Verizon announced the spinoff of wireline businesses in Maine, New Hampshire and

Vermont to FairPoint Communications, Inc. This transaction closed on March 31, 2008.

In May 2009, Verizon announced the spinoff of wireline businesses in Arizona, Idaho, Illinois, Indiana,

Michigan, Nevada, North Carolina, Ohio, Oregon, South Carolina, Washington, West Virginia and

Wisconsin, and in portions of California bordering Arizona, Nevada and Oregon — to Frontier

Communications Corp. This transaction closed on July 1, 2010. The total value to Verizon and its

shareowners was approximately $8.6 billion.

In February 2015, Verizon announced another agreement with Frontier to sell Verizon’s local exchange

business and related landline activities in California, Florida and Texas for approximately $10.5 billion,

including the assumption of $0.6 billion of indebtedness from Verizon by Frontier. This transaction to

close at the end of the first quarter of 2016.

In addition to these wireline transactions, Verizon divested directory publishing and certain international

assets.

In 2006, Verizon spun off its U.S. print and Internet Yellow Pages directories company to Verizon

shareholders. The spinoff resulted in a new public company called Idearc, later called SuperMedia Inc.

Verizon also sold its interests in telecommunications providers in the Dominican Republic, Puerto Rico

and Venezuela in three separate transactions to América Móvil, a wireless service provider throughout

Latin America, and a company owned jointly by Teléfonos de México (Mexico’s leading full-service

telecommunications company) and América Móvil. The sale of Verizon Dominicana closed in December

2006, and the other transactions closed in early 2007.

In another recent strategic transaction of note, in March 2015 American Tower Corp. acquired the

exclusive right to lease, acquire or otherwise operate and manage many of Verizon’s wireless towers for

an upfront payment of $5.1 billion, which also included payment for the sale of 162 towers.

PORTER'S FIVE FORCES MODEL FRAMWORK---------

Michael Porter developed his Five Forces model in 1979. He felt the existing tools to examine market forces, such as the SWOT analysis that considers a company's strengths, weaknesses, opportunities, and threats, were insufficient and lacking in scope.

Porter's Five Forces model seeks to determine a company's threats from competition. It examines three potential horizontal threats, meaning threats from actual competitors, and two potential vertical threats, meaning supply chain threats that could put the company at a competitive disadvantage. The horizontal threats considered are industry competition, the threat of new entrants, and the threat of substitutes. The vertical threats considered involve the bargaining power of suppliers and buyers

The following are analysis of porter's strategy on Verizon communications

1. Industry competition------

The threat of competition in the wireless industry is fierce. Verizon's biggest and most longstanding rival is AT&T. The typical customer profile for the two companies is similar, and AT&T claims the highest market share in the industry behind Verizon. Additional competition comes from T-Mobile, which has a smaller market share but, as of 2016, is adding customers more quickly than any other carrier, and Sprint, which has launched aggressive price promotions to turn around its sagging market share.

Verizon's coverage network has been the strongest in the industry since at least the early 2000s, but its competitors have invested much capital into catching up. The coverage difference between Verizon and its competitors is smaller than ever, and the gap could disappear completely within five to 10 years as other companies add towers and advance their technologies. [2]  If this happens, Verizon must find a new way to set itself apart from its competitors.

2.Buyers' Bargaining Power----+

Buyers have significant bargaining power in the wireless industry. Switching carriers is easy and inexpensive, and Verizon's competitors constantly run promotions offering perks specifically to customers who switch from Verizon. For example, Sprint ran a campaign in late 2015 and early 2016 to cut Verizon customers' bills by half. The promotion even covered the cost of terminating a Verizon contract early. [3] 

Customers can switch to another carrier within an hour or less while keeping the same phone number and experiencing no service interruption. Verizon must continue to give its customers reasons to stay. Up to this point, the company has done so by touting its superior network and its lower rates of dropped calls and texts. As these advantages wane, the company must seek a new edge.

3.The Threat of New Entrants-----

New entrants to the marketplace pose a very low threat to Verizon. The cost of establishing a wireless company and building a network that can compete with a low-budget carrier, much less an industry behemoth such as Verizon, is substantial. Additionally, a wireless service company must navigate a labyrinth of government regulations before earning a dime.

Even if a new player can bear the cost and get past the regulations, next comes the process of building a brand name that can compete. Verizon has been around since the early days of the industry and has spent years building its name. It is unlikely that a new company can arrive on the scene and clear the necessary hurdles to compete with Verizon.

4.Suppliers' Bargaining Power----

Verizon's suppliers have little bargaining power and represent an insignificant threat to the company. Verizon calls on suppliers for products to help build and expand network infrastructure and for components to manufacture physical products. The number of suppliers Verizon has to choose from is huge. By contrast, the number of companies as big and deep-pocketed as Verizon that these suppliers have the opportunity to do business with is not large. This asymmetry places most of the leverage firmly in Verizon's hands. Verizon can negotiate from a position of power, and in most cases, it can switch from one supplier to another without much trouble if necessary.

5Threat of Substitutes-----

The threat of substitutes is perhaps the biggest one Verizon faces. The company would argue that service from AT&T, T-Mobile, or Sprint is not a perfect

substitute for Verizon service, as these companies offer less extensive coverage and, according to consumer surveys, inferior customer service. However, the chasm is narrowing between Verizon's network and those offered by competitors, and lower prices are a constant looming temptation for Verizon customers. If financial winds shift in an ugly direction and the economy goes through a repeat of 2008, many customers might be tempted to let Sprint cut their wireless bills in half or to take advantage of similar promotions that competitors undoubtedly will be running.

INDUSTRY COST STRUCTURE -----------------

The telecom sector is characterised by very large investment costs. The precise

percentage of total costs attributed to investments depends of course on the definition of

investments and of telecom activities (e.g. whether research, marketing or similar

activities are included). Although some sources claim investment, and investment-related

costs to be as much as 90 percent of the costs of production most estimates based on

financial data, however, vary between 60 and 75 percent.

Thus, by all measures the telecom sector is comparatively capital intensive.

The remaining share is almost all attributable to capital expenditures.

demonstrates that primary activities (agriculture and mining and quarrying) are the most

capital intensive. In telecom and other network based utilities (electricity, gas and water)

wage shares are at about 1/3 (and therefore capital shares at about 2/3), while all other

industry groups are having substantial higher wage shares.

Economies of Scale

Economies of scale reflects the opportunities for reduced unit costs with increased output.

They provide efficiency advantages for large units of production and new entrants will

find it difficult to compete with already well established firms with large scale

production. If production of a certain service involves considerable economies of scale,

new firms will find it difficult to compete with existing firms that have a well established

large scale level of service supply. Furthermore smaller companies will tend to merge

into larger units to remain competitive. Therefore, an unregulated market is likely to

result in a very limited number of large scale suppliers.

DEMAND DRIVERS-----

Telecommunication demand drivers are the customers

I would like to share a live eg that recently happened in india

Jio was introduced in india in 2016 , he chose to give away free internet calling to everyone in the country , people were reluctant to use it in the start however due to increased free services from jio everyone in the country started using jio every single person , this drove out competitors into huge losses unbearable losses and changed the entire market of the telecommunications industry

All the loyal vodafone idea airtel customer got driven by the free services and in no time lost business and customer

FACTORS ANF TRENDS THAT ARE LIKELY TO SHAPE THE INDUSTRY IN NEXT 3 TO 5 YEARS------

We strongly believe Telecoms are essential for our society and its development – they connect us in many ways at many locations around the globe. Telcos have been mastering this for decades. However, this excellence, comes at a great cost and the burden of great responsibility, being the main driver of our digital world. We, as subscribers, are hard on Telecoms as we would not accept a second of downtime and we would, if possible, get the entire service for free.

1.Telecommunication Industry will fully unleash the power of 5G----

It is expected that pioneering players in the telecommunications industry will enable 5G in-between 2018 and 2021. Chasing the G’s appears to be a good strategy as in each new wireless standard telecoms see opportunities for revenue growth. But one should not only focus on speed increase: 5G detaches the network infrastructure hardware and software, thus enabling new possibilities such as ad-insertion, cashing and high-quality content delivery.

The demanding market for mobile live streaming and broadcasting requires fast and reliable wireless connections. 5G seems promising for the live broadcasting industry since it is expected to provide a faster, more reliable, secure and agile wireless technology. 5G also promises to bring the trustworthiness, scalability, security and universal mobility across the telecommunications industry, which would boost several services, directly connected to IoT. As superior mobile broadband, 5G aims to empower massive IoT, offering the network capacity and performance in numerous applications of IoT in the most diverse contexts. In the graph below, you will find some market predictions on the future of 5G and IoT in percentages and numbers… big numbers.

2.Premium Content and Cross-Industry alliances in the Telecommunication Industry-----

Telecoms want to get back on the front row: in other words, less being the underlying vessel for delivering voice and data services, but more about managing and providing exclusive content. We could soon expect that Telcos would own the companies that are producing entertaining content, for example, popular TV shows, live sports games, etc.Many of the Telecommunication companies are heavily focused on investments in high-quality broadcasting content, yet this trend comes with a cost. And the price is usually calculated in billions. Diversifying your portfolio of services is good, yet every spending should bring your company the desired outcomes, without damaging your vision and values. It appears that telecom players, who stayed focused on the telco-native infrastructure updates took the better decision as subscribers did not favor being bound to a single content provider.

3) Optimize with no compromise

Telecoms continue to struggle with decreasing revenues and have to make tough decisions. It recently came out that a well-known European telecom is planning to cut around 7,000 jobs to stay efficient. Furthermore, rumors have it that the goal is to employ some 2,000 young staff. This is an ongoing problem, which many telecommunication industry players have been facing in the past years

4) Let’s commoditize Augmented Reality and Virtual Reality for Telecommunication Industry

Augmented Reality (AR) is gaining more power and popularity every day. The core purpose of AR is to empower digital visualizations on real images. Many trendy games are using it to make the user experience even more enriching and real. Face filters on Instagram, Snapchat and Facebook are some of the simplest examples of the everyday usage of AR. Augmented Reality had one of its peaks in 2016 when Niantic released Pokémon Go , which later turned into a blockbuster. We expect this trend to grow bigger in the upcoming years, thus creating a demand for more sophisticated applications. This will enlarge the provider’s devices and gadgets’ portfolios. Smartphone users will start embracing Augmented Reality more than ever. We expect the majority of AR usage to involve creating viral content through smartphone cameras.

On the other side, B2B Augmented Reality apps will significantly change the way people perform their jobs: for example, imagine an engineer being able to find a broken FO link within a bunch of cables by simply holding up a smartphone and opening a specific application. This will significantly decrease the time required to perform troubleshooting, finding problems and fixing them. The end customer will be satisfied and the whole process will be more efficient.

Telecoms will also start using Virtual Reality (VR) technologies to reinforce their customer experience. Many Telcos have been struggling in this area for quite some time now. VR-powered platforms will assist them in providing unique entertainment experiences and will help them differentiate their products and services. For example, the X telecom company could use Virtual Reality to demonstrate its new product/service to customers. This is a rather interactive way of presenting a new premium smartphone device or releasing a new game app.

5) Ongoing Regulations for the Telecommunications Industry

The Telecommunications industry has been facing many regulation challenges due to the nature and complexity of the surrounding environment. Last year, the EU dropped down all roaming charges. This new policy, however, had significant pitfalls for the telecoms. Such trends in regulations will continue in the upcoming years as well. The hottest topic, circling around media nowadays is the GDPR regulations . According to critics, making your telecom GDPR-compliant will cost you millions. Yet, failing to comply with it, will bring even more headaches. All telecoms need to protect the personal data of their customers, to keep them from falling in frauds or being exposed to undesirable ads.

6) Machine Learning and Artificial Intelligence for the win

Artificial Intelligence (AI) and Machine Learning (ML) are two of the hottest concepts circling around the world in the past year. These two will also play a crucial role in telecoms development since they will help in automating and bettering many back-office operations and trivial customer interactions. Customer service chatbots, speech recognition, and voice services for customers as well as predictive maintenance are already in use of some of the biggest telecoms around the globe. They sensed the benefits of bringing such technologies to their usage. Here is what AT&T say in their Annual report about automation and AI :

“We intend to continue our focus on cost reductions, driving savings through automation, supply chain, benefit design, digitizing transactions and optimizing network costs. In addition, the ongoing transition of our network to a more efficient software-based technology is expected to continue driving favorable expense trends over the next several years.”

AT&T Inc. Annual Report

“We are implementing AI to help us to identify where these breakpoints are, and help to repair those in an automated way without human intervention. This goes for hardware failure, software failures.”

Dr. Mazin Gilbert | AT&T

Seeing the bigger picture makes it clear that telecoms are spending fortunes on customer support, maintenance, and better infrastructure. Trends in AI and Machine Learning will continue to impact these cost centers. An example of web farm migration, read here.

7) In-Flight Connectivity kicks in------

In-flight connectivity is becoming a game-changer for airline companies. Just as connectivity is transforming our daily lives, connected aircraft will redefine the way airline customer service operates. Research shows that the ability to use your smartphone while traveling by plane is among the top three considerations people have when choosing an airline.

However, IFCS (in-flight connectivity systems) are also highly exposed to threats and breaches due to planes being a high-target of cyber-attacks. Thus, such service should be extra-secured, centrally managed and with a lot of specific billing and content management functionalities, applicable for in-aircraft usage. At first glance, the volumes expected from airline travelers could be easily neglected by some telecoms, but smart players with established agile products/services enablement methodologies would win this one and would be better positioned.

8) Digitization in customer support for improved efficiency

Customer support is the most common service clients are looking for when calling their telecom’s call center. The whole process can be slow and unpleasant for both sides. Not to mention sometimes the issue remains, even after the call. Digitization in Customer Support is the final game-changing trend we will discuss in this article. For example, future analytics-based digital support centers are already in use by one global telecom. The telco set up a sophisticated system to track and foresee problems of customers. This new approach gives users self-service capabilities to solve questions and difficulties on their own, which reduced the number of support calls by 90%. These systems typically provide three levels of support.