AT&T is a leader in telecommunication services, including cell phones, wireless, U-verse, digital TV, high speed internet, DSL, and home phone. The company currently has lost its exclusive i-Phone contract with Apple, and one of its main competitors, Verizon, has come out with the 4G network. These all cause AT&T to lost customers. Now the company is trying to acquire T-Mobile to further expand its market. The deal is valued at $39 billion.
A.General Environment Analysis
Definition: the general environment is focused on the future and can be analyzed by considering the STEEP framework: Social/demographic, Technological, Economic, Environmental/geographic and Political/legal/governmental factors at play, and then predict how those trends will affect AT&T in the next several years.
•Younger generation is more inclined to use cell phones with extravagant wireless plans, leading to greater telecommunications consumption •The demand for smart phone applications is increasing tremendouslybecause of the increasing young age structure and raising IT literacy
•Increases in the amount of entertainment content offered through cell phones make innovation a must for telecommunication companies to survive in a fast-changing environment
•The economic crisis decreases consumer discretionary spending, forcing companies to offer more economical alternatives to maintain sales volume
Environmental (physical environment):
•Increased environmental awareness among customers will likely be an opportunity for companies to gain further sales/benefits (e.g. recycling old cell phones)
•Increased concerns about piracy and digital rights management issues make the offering of entertainment content through new media legally complicated and costly
Overall Assessment: The changing customer needs highlighted in the social/demographic section will offer AT&T the most opportunity. For example, Nielsen data shows that users ages 13 to 24 text disproportionately more than those in other age groups. And in the US, the number of mobile users accessing the Internet will jump from 73.7 million in 2009 to 134.3 million in 2013, a CAGR of 17.7%. AT&T needs to respond to changing customer needs and technology improvements in order to remain competitive. And because of the economic situation, it will be challenging for AT&T to provide both high quality and low cost services.
Definition: An industry is a group of firms producing products that are close substitutes. In the industry analysis, use Porter’s five forces model (threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products, and rivalry among competing firms) as a tool for analyzing the industry in which AT&T competes; evaluate the attractiveness of the industry according to the power of the five forces relative to the firm.
Threat of New Entrants (or barriers to entry): Low to Medium
•It is difficult and expensive to compete again big name companies like AT&T, Verizon, Sprint, and Virgin Mobile •the telecommunications industry is in a slow cycle market, firms in this industry have competitive advantages that are shielded from imitation, and imitation will be costly and take a long time
Supplier Power: High
•Suppliers like Apple has a big influence in the industry because it can always make its exclusive to a specific company (just like how they made i-Phone exclusive to AT&T before), this can directly affect companies’ market share in telecommunication industry
Threat of Product Substitutes: Medium to High
•Although there are only a few big companies competing in the telecommunication industry, they all provide similar products and services
Buyer Power: High
•High price sensitivity among consumers constrained by economic crisis • Low...