SWOT on "SWOT for Verizon Communications, Inc"

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Verizon SWOT Analysis

Verizon Communications (NYSE: VZ) is one of the world's leading providers of wireless and wireline-based communication services including broadband, data, network access and global internet protocol (IP) Services. In their latest full fiscal year the company reported revenues of $110, 875 million with an operating profit of $12,880 million during FY2011 (Verizon Investor Relations, 2012). At present the company has 192,000 employees and operates in 150 nations both in a franchised and direct selling model (Verizon Investor Relations, 2012). The strengths, weaknesses, opportunities and threats (SWOT) of Verizon are the basis of this analysis.

Strengths

Verizon continues to have a commanding market presence globally with one of the most profitable brands in the telecommunications industry (Brown, 2010). The strength of their brand has given the company the ability to manage customer churn more effectively than competitors, reducing the relative churn rate of customers by 56% over the last three years while competitors have seen churn rates increase by over 67% (Verizon Investor Relations, 2012). The combination of the Verizon brand stability and customer loyalty has given the company a unique level of stability in a very turbulent global telecommunications market (Zoakos, 2002).

Another significant strength of Verizon is their ability to orchestrate and complete alliances, mergers and questions quickly. They have also been one of the few telecommunications companies to pioneer the development of effective shared-risk mergers that drastically reduce the downside risk of being an industry consolidator, a role they continue to take on globally (Peaks, Arbogast, O'Keefe, 2009). The well orchestrated acquisition of Alltel by at&T that Verizon played a central role in is a case in point (Seidenberg, 2002).

Verizon also is moving aggressively into new markets including cloud computing using their core strengths in mergers and acquisitions. An example of this strength is the company's recent $1.4B acquisition of Terremark (Ya, 2011). Verizon continues to aggressively and successfully pursue an inorganic growth strategy by concentrating on mergers and acquisitions to bring greater cloud-based innovations to their customers (Gorski, 2005). Verizon continues to also seek out opportunities to define advanced e-commerce encryption standards globally, looking to become the global e-commerce platform at the infrastructure level for enterprises (Everett, 2012).

Weaknesses

In evaluating the financial structure of Verizon, it's clear they are heavily reliant on long-term debt to finance their current operations and continued growth plans. The costs of capital for Verizon are inordinately high given this era of low interest rates, and this can be attributed to their continued focus on buying into new markets and financing infrastructure across short, high risk timeframes (Verizon Investor Relations, 2012). Verizon likes to grow fast and bets against the interest rate structures of markets that they can expand faster and attain profitability more effectively than per businesses -- seeing innovation as the catalyst of this growth (Seidenberg, 2002). Capital structure is a clear weakness of the company.

Another weakness is the continued labor problems the company has faced in the past and is going through today as evidenced by their current labor class action lawsuits (Verizon Investor Relations, 2012). This is a strategic weakness as competitors continue to use these lawsuits to portray the company as insensitive to minorities, prone to practice racism and exclusivity in hiring practices (Zoakos, 2002).

Verizon is continually challenged with the growing base of environmental laws and regulations which are also changing the strategies the companies rely on for achieving sustainability. Verizon has gone for years without a specific sustainability plan in place, and has been fined in the more stringent countries who expect higher levels of environmental compliance on their part (Brown, 2010). This weakness if not addressed could cost the company access to foreign nations whose green or sustainability initiatives are decades ahead of the United States (Verizon Investor Relations, 2012).

Opportunities

The most significant opportunity for Verizon today is the exponential growth of the cloud computing market globally, and their highly profitable enterprise customer base. The majority of Verizon's recurring revenue and lowest cost base of customers to serve are in its enterprise base (Verizon Investor Relations, 2012). The… READ MORE

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