Summary of a Case

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September 26, 2012

Assignment on Verizon’s case

Submitted to
Tahmina Akhter
Lecturer
Department of Finance
University of Dhaka

Group: 14

Mehnaz Tabassum 15-023 Jasmin Jahan Rifa 15-077 Fatema Ferdous 15-091

Iffat Enam 15-093 Eshrat Karim Eve 15-173

Department Of Finance
B.B.A. 15TH BATCH
UNIVERSITY OF DHAKA

SEPTEMBER 26, 2012

SUMMARY OF THE CASE

This case is about Verizon Wireless which is a Telecommunication Service provider of United States. In the wireless telecommunications industry, one metric above all others determines a company’s profitability: customer churn, or the number of subscribers who leave a service within a given time period.

The risk of churn increased significantly in the United States after November 2003, when the federal Communications Commission allowed wireless subscribers to take their numbers with them when they switched to a new provider. Over the next few years, Verizon Wireless was the clear winner emerged in the battle to limit customer defections. Its churn rate was 0.87% a month, implying that 12% of the customers were leaving the service each year which is lower than the churn rate at its competitors.

Verizon’s low churn rate has enabled the company to grow its subscriber base faster than rivals, which allows the company to achieve economies of scale by spreading the fixed cost of building a network over a large customer base.

There are several reasons for Verizon’s success like investing heavily in building a high-quality nationwide wireless network, right technological change, allowing subscribers to connect to internet etc. So the case is all about the reason for the success of Verizon Communications and its business strategy.

CASE DISCUSSION QUESTIONS

Question no: 01

Do Verizon have a distinctive competency? If so, what is the source of that competency?

Yes, Verizon have a distinctive competency compared to other companies in the Mobile telecommunications industry. For the distinctive competency Verizon was successful in lowering its churn rate. The sources of the distinctive competency of Verizon Wireless are:

• In its early years, the company invested heavily in building a high quality nation-wide wireless network. It has the largest coverage area of any wireless provider and successfully differentiated its quality of service. Customer report clearer connections and fewer dropped calls on the Verizon network than any other network.

• A technological advantage has also played into this advantage. Verizon is one of two wireless U.S. companies that took a chance and bet on a new wireless technology known as CDMA. CDMA is less costly to install than a competing wireless technology, known as GSM, and is well suited in providing broadband services, such as wireless connection to the internet.

• Utilizing the broadband capabilities of its CDMA network, in 2005, Verizon was the first wireless provider to offer a nationwide broadband service that allows subscribers to connect on the internet.

• Verizon has also invested heavily in its customer care function. In addition, Verizon’s automated software programs analyze the call habits of individual customers.

Question No.-02

How do Verizon’s customer services capabilities and coverage affect the quality of its service offerings?

Verizon’s initial cost structure is high because of the following reasons:

• Verizon put a large amount of capital into the building of their nationwide network.

• It is also expensive for the company to have so...
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