Wolpert- Verizon Wireless Strategic Analysis

Strategic Analysis of

by

Eric Wolpert

MBA-700-X2133: Strategic Management 14TW2

Dr. Patrick Udeh, Instructor

Southern New Hampshire University

March 23, 2014

Wolpert – Strategic Analysis of Verizon Wireless

Executive Summary

Verizon Wireless is the largest wireless provider in the United States. It recently became

a wholly-owned subsidiary of Verizon Communications as a result of a $130 billion buyout of

Vodafone’s 45% minority interest. The company enjoys the largest profit margin and most

revenue in the industry. The company also has the most customers with the lowest defection rate,

also known as churn.

This strategic analysis examines the company, its successes and its areas of opportunity.

It also provides insight as to why it has become a leader in the wireless industry, how it got there,

and what needs to happen for the company to maintain its competitive advantage.

2 | P a g e S o u t h e r n N e w H a m p s h i r e U n i v e r s i t y


Table of Contents

I. Strategy and the Strategic Management Process…………… 4

II. External Environment and Competitive Position………….. 7

III. Internal Environment and Competitive Position………… 10

IV. Competitive Strategy……………………………………….. 12

V. Strengthening Competitive Position……………………….. 12

VI. The Global Marketplace……………………………………. 14

VII. Corporate Strategy: Business Diversification……………… 15

VIII. Ethics, Social Responsibility & Environ. Sustainability….. 17

IX. Building the Capability to Execute Strategy………………. 18

X. Managing Internal Operations………………………………. 20

XI. Recommendations for Leadership…………………………... 22

XII.



I. Strategy and the Strategic Management Process

Verizon Wireless operates in the wireless service industry. It is now a wholly owned

subsidiary of Verizon Communications and focuses on the operation and sale of wireless

products and service over a nationwide network (About Us, 2014). The wireless industry

directly/indirectly employs more than 3.8 million people in the US (About Us, 2014). For the

year ending December 2012 there were 326.4 million wireless connections in the United States

and the market penetration is recorded at 102% (About Us, 2014). In the same year the industry

recorded revenue of $185 billion (About Us, 2014).

Stated Strategy of Verizon Wireless

Verizon Wireless has a strong strategy that has led the company to be the most profitable

wireless provider that has the largest network with the most connections with the most loyal

customer base. Its strategy is expressed by four components:

Powerful technology. Our record speaks for itself: The nation’s largest and most reliable 4G

LTE network and America’s first nationwide 3G wireless broadband network. Verizon Wireless

consistently delivers the most advanced wireless technology available (About Us, 2014).

Technology innovators. Our innovative solutions are changing the mobile landscape,

revolutionizing the way people interact with it and raising everyone’s expectations of what it can

be done. What seemed impossible yesterday is the way we live today. Imagine what we’ll do

tomorrow (About Us, 2014).

Change agents. Our investment in people and commitment to technology drive positive change

in the communities we serve. Through our core initiatives we work to improve the lives of



domestic violence victims, prioritize accessibility and take steps to ensure a sustainable future

(About Us, 2014).

Award winners. The network. Technology. Innovation. Leadership. Corporate citizenship.

Diversity. Customer care. We’re proud to be recognized for those efforts as well as the privilege

of improving the lives of the people and communities we serve (About Us, 2014).

Comparing Industry Mission Statements

The company’s mission statement is relatively verbose when compared to most other

Fortune 500 companies. It is expressed in the form of a credo which combines their vision,

mission and values in one. Verizon uses a Credo for its landline and wireless business units. It is

as follows:

“We have work because our customers value our high-quality communications services.

We deliver superior customer experiences through our products and our actions. Everything we do we build on a strong network, systems and process foundation. The quality and reliability of the products we deliver are paramount. Customers pay us to provide them with services that they can rely on.

We focus outward on the customer, not inward. We make it easy for customers to do business with us, by listening, anticipating and responding to their needs.

We know our products and can explain them to customers. We focus on fundamental execution. We are accountable and we follow through with a sense of urgency. We know that having the highest ethical standards is a competitive advantage.

We know teamwork enables us to serve our customers better and faster. We embrace diversity and personal development not only because it’s the right thing to do, but also because it’s smart business.

We are driven not by ego but by accomplishments. We keep our commitments to each other and our customers. Our word is our contract. We respect and trust one another, communicating openly, candidly and directly since any other way is unfair and a waste of time. We voice our opinion and exercise constructive dissent and then rally around the agreed-upon action with our full support. Any one of us can deliver a view or idea to anyone else, and listen to and value another’s view regardless of title or level. Ideas live and die on their merits rather than where they were invented.



We believe integrity is at the core of who we are. It establishes the trust that is critical to the relationships we have.

We are committed to do the right thing and follow sound business practices in dealing with our customers, suppliers, owners and competitors. Our competitors are not enemies; they are challengers who drive us to improve. We are good corporate citizens and share our success with the community to make the world in which we work better than it was yesterday.

We know that bigness is not our strength, best is our strength.

Bureaucracy is an enemy. We fight every day to stay “small” and keep bureaucracy out. We are more agile than companies a fraction of our size, because we act fast and take risks every day. We see crisis and change as opportunities, not threats. We run to a crisis, not away. Change energizes us. We work hard, take action and take personal accountability for getting things done. Our actions produce measurable results.

Everything we do is built on the strong foundation of our corporate values.

We work 24x7 because our customers depend on us 24x7. We know our best was good for today. Tomorrow we’ll do better. We Are VERIZON.”

AT&T Mission Statement

Our mission is to exploit technical innovations for the benefit of AT&T and its customers

by implementing next-generation technologies and network advancements in AT&T's services

and operations (Mission & Vison, 2014).

Sprint Mission Statement

Sprint is guided by a corporate commitment to doing the right thing as it brings the

freedom of mobility to consumers, businesses and government users with a comprehensive range

of wireless and wireline communications services (Company Info, 2014).

T-Mobile

T- Mobile’s mission statement is not obvious. A thorough examination of their website,

annual reports as well as a generalized internet search did not turn up anything specific.



It is obvious that Verizon’s Credo carefully lays out the expectations of how the

organization is to conduct its business whereas its competitors have generalized statements that

loosely define their respective businesses. Following the Credo has led to success in industry

metrics such as new subscribers, churn and financial success. Verizon’s EBITA margin for 2013

was close to 50% (2013 Annual Report, 2014). The company enjoys the highest profit, revenue,

customer base, and loyalty in the industry.

The Credo focuses on integrity, teamwork and honest communication. Change is

constant. The management team is focused on using new technology to create new market

opportunities for their customers and lines of business. The management team leads the company

to be a strong corporate citizen from supporting victims of domestic violence to having crisis

response teams that support federal and NGO disaster response teams.

II. External Environment and Competitive Position

Porter’s Five Forces Evaluation

There are numerous driving forces of change in the wireless industry. Porter’s Five

Forces model allows us to take a standard look at the playing field and evaluate company

performance across all companies within the industry.

Competition in the Industry

The wireless provider industry in the United States is an extremely competitive

marketplace with a lot of potential profit to be made. The reaction to changes in the marketplace

is lightning fast with regard to the size of the industry. Recently T-Mobile has launched its

“uncarrier” campaign which has had significant effect on the industry. In Q2 2013 T-Mobile



gained 1.1 million subscribers versus a loss of 200,000 customers the same period, previous year

(Tsukayama, 2013). This significant year-over-year change can be attributed to their aggressive

marketing campaign, the launch of the iPhone 5 in April, and a new upgrade plan which allows

customers the ability to upgrade sooner than the traditional two years (Tsukayama, 2013).

Verizon Wireless identified this movement in the market from T-Mobile which is the 4th

largest carrier and changed its strategy to address driving forces by launching the Edge Program.

This program allows customers to upgrade their device as soon as 30 days with at least half of

the device cost paid all without signing a two year agreement (Verizon Edge, 2014). This led to

Verizon leading all other carriers with a total of over 2.7 million new connections in the last six

months of 2013 (Quarterly Earnings, 2014).

Potential of New Entrants

Due to the size of the U.S., there is little potential of new entrants into the wireless

industry. Verizon’s physical assets to run a nation-wide network are valued at $209 billion

(Verizon 2012 Annual Report, 2013). This valuation does not include the cost of paying people

to run it or the cost associated with acquiring wireless spectrum. The evidence of the cost, time

and effort involved deploying a nationwide network is cost prohibitive for any new company

entering into competition with the existing wireless carriers.

Power of Suppliers

With the exception of Apple, Inc. Verizon has power over their suppliers. Apple is

known for its control over its supply and distribution chains as it produces products that are in

high demand by its customers (Gupta, Poornima & Randewich, Noel, 2013). Since Apple, Inc. is

the largest company in the world in terms of market capitalization, it would be safe to assume



that they would have the upper hand at the negotiating table with Verizon Wireless. Verizon has

a strong relationship with their suppliers. They entered into a strategic relationship with Google

and Motorola to launch the Droid lineup in 2009 to combat the exclusivity of the iPhone on

AT&T (Cheng, R., & Sheth, N, 2009).

Power of Customers

Verizon has strong leverage over their customers. The carrier is one of the most

expensive in the United States yet they added more new connections in the 4th quarter of 2013

than their two biggest competitors (PR Newswire, 2014). At this point pricing wars have not

caused customers to leave Verizon. The value proposition of a reliable network trumps low

customer cost.

Threat of Substitute Products

There is very little threat for substitute products. A smartphone combines so many

electronic devices that it could be considered the Swiss Army Knife of the 21st century. If a

person wanted to look at a viable substitute, they would have to invest in multiple electronic

devices to replace the capabilities of a smartphone. This would not be practical in most cases.

Industry Position

Based upon the Five Forces model, Verizon Wireless is the leader of the wireless

industry in the United States. The quality of the network attracts customers in droves with little

threat from new entrants, suppliers, customers or substitute products. Verizon has shown that

they are always looking for new ways to stay competitive and adapt to the changing marketplace.



Competition within the industry is the most influential of Porter’s five forces on the

company. We have seen that T-Mobile has moved the market and sparked a competitive battle

focusing on AT&T but Verizon is targeted as by association. Within the last six months the

industry has completely changed pricing structures of their phones and monthly service plans.

This new pricing structure eliminates the lucrative contract and allows customers to get a phone

much sooner than the traditional two year time period.

In order to maintain the position of industry leader, Verizon needs to reiterate why

customers choose them in the first place. These competitive advantages of network coverage and

device lineup will overshadow the pricing war and customers will confirm their value

proposition of why they are willing to pay a premium for service with Verizon. As the market

matures profitability will reign by cutting costs. Wireless companies pay large sums for device

subsidies on two-year contracts. The ability to keep a customer without a contract on a leasing

program such as the Edge promotion is the lowest cost way to keep a customer paying the same

monthly rate.

If the pricing war starts to have a negative effect on Verizon’s growth alternative

measures will need to occur. In this case it would be beneficial to increase the value proposition

by adding low cost services which would maintain the revenue stream.

III. Internal Environment and Competitive Position

The company has performed well to stated strategic objectives and performance targets.

For the fourth quarter of 2013 Verizon Wireless reported total revenue of $21.125 billion up

5.7% from the previous year (Wireless – Selected Financial Results, 2014). Its EBITA was 47%



an uptick of 22.6% from the same quarter in the previous year (Wireless – Selected Financial

Results, 2014).

The biggest strength of Verizon Wireless is the reliability and coverage of its network

and its ability to attract new customers and keep existing ones better than its competition.

Financially, it is able to have a higher EBITA margin than the competition meaning that it makes

more efficient use of its revenue and is more profitable. Verizon can use this profit to research

products and services to invent new revenue streams for future growth. The opportunities within

the areas of machine-to-machine communications are one example of a revenue stream with a lot

of potential. Verizon can use the coverage of its network and the technology in its Innovation

Centers in California and Massachusetts to win marketshare of the machine-to-machine industry.

The one aspect of weakness that has recently occurred is of a financial nature. Verizon

Communications, Inc. has agreed to purchase Vodafone’s 45% stake in Verizon Wireless for

$130 billion, taking on a huge amount of debt (Toronto Star, 2013). If the economy takes another

downturn the debt load may be too great for Verizon, especially if any pricing war with T-

Mobile heats up. The competition will ultimately improve their networks to operate on par with

the performance of Verizon Wireless. At this point Verizon Wireless will lose its largest

competitive advantage. The company will have to adapt to this threat of network equality to

ensure that they don’t lose differentiation from its competition.

Verizon Wireless’ core competency is its ability to attract new customers and keep its

existing customer base and earn more profitable money better than any competitor. This allows

the company to stay at the top of the wireless industry.



IV. Competitive Strategy

Verizon Wireless employs a broad differentiation strategy as they provide a great

customer experience, cutting edge devices, and a reliable network with the best coverage. These

tenants of its strategy allow the company to grow its customer base faster and lose customers

slower than the competition. In order to maintain this competitive strategy the company needs to

continually innovate to keep this differentiation in a highly competitive marketplace.

V. Strengthening Competitive Position

The company’s strategy is to be the largest and most reliable wireless network in the

United States. The company has focused heavily on investing in its network to the tune of $9.4

billion in 2013 alone (About Verizon Wireless, 2013). Beginning in late 2010 the company has

built out its 4G LTE network to exceed the nationwide footprint of its 3G network in less than 3

years. The company has also partnered with Motorola and Google to launch the Droid brand of

Android phones that are iconic and unique to the Verizon network (About Verizon Wireless,

2013). This lineup provides a unique smartphone experience such as the Droid Maxx with a 48

hour battery-life, unheard of in the marketplace.

The wireless industry in the U.S. is extremely competitive. Just like any sports team

offense and defense need to be used together to maintain a competitive advantage over other

companies. Due to the maturing of the wireless market in the U.S. Verizon Wireless has

concentrated on offering new products and services that new and existing customers can

purchase. In a defensive move to T-Mobile’s self-proclaimed pricing war, the company recently

released the More Everything plan which introduced value-added services like cloud backup



through Verizon Cloud and concentrated account management through Family Base (More

Everything Plan, 2014). Family Base gives consumers control over usage to avoid overage fees

from using too much data. They have also streamlined operations through Verizon Lean Six

Sigma. This internal program deals with operational efficiency to streamline and energize

operations across both wireless and wireline business segments (Freifeld, 2013). The

combination of new products and services and operational efficiencies resulted in a 1.7%

increase in operational expenses vs. a 6.8% increase in operational revenues between 2012 and

2013.

Complementary Strategic Options

Verizon Wireless has pursued complementary strategic options over the past few years.

The company has branded itself to become not just a cellphone company but a technology

company. There is a current store redesign to focus on various aspects of the “mobile lifestyle”

(Smith, 2013). The zones focus on music, fitness, home, business and mobile connectivity

(Smith, 2013). This is shifting focus away from cellphones and towards profitable accessories. A

focus on accessories will ensure that revenue growth will be maintained in the event of a pricing

war over rates of monthly service.

The company has also partnered with other Verizon Communication, Inc. subsidiaries

such as Hughes Telematics and Terremark to design and develop services for Enterprise and

Government customers that utilize automation and cloud based services (About Us, 2014). New

product offerings through new services will help to ensure a positive revenue growth for the near

future.

Looking Towards the Future



Recommendations for future complementary strategic options are to focus on machine-

to-machine connectivity for home and businesses. By continuing to be a market innovator,

Verizon Wireless will remain at the top of the industry. Machine-to-machine connectivity

promises multiple connections per account as businesses and consumers keep tabs on various

assets including buildings, vehicles, and people. According to Parks Associates, “Widespread

consumer and enterprise adoption of broadband Internet service, wireless routers, and devices

with mobile connectivity means the ingredients are there for the M2M market to take off. Plus,

mobile network operators have unique assets that position them to take advantage of the growing

M2M market (Presswire, 2013). A focus on the many (connections)-to-one (account) proposition

makes machine-to-machine communications a viable next step in the growth of Verizon

Wireless. The company’s competitors are still focusing on building out their 4G LTE networks

that they don’t have the resources available to design “the next big thing.” Having a long time

free of competition in the research and design of new products and services is a big advantage as

the company will be bringing new technology to market before their competitors creating market

exclusivity.

VI. The Global Marketplace

Verizon Wireless does not own any wireless networks outside of the United States. The

company uses strategic alliances with various wireless providers to ensure coverage for

customers that travel internationally. Verizon Wireless provides coverage in over 200 countries

with varying roaming rates (Global Services, 2014).

Even though the company does not have any wireless assets outside the United States,

great strides have been made to provide a great customer experience for the customer who



travels internationally. The company has gained recognition for its coverage through its

partnerships. For the past four years they have been chosen as the best wireless service in the

world by readers of the Global Traveler magazine (About Verizon Wireless, 2014).

One of Verizon’s main competitors in the global coverage market is T-Mobile where the

company offers free data roaming in over 100 countries with a low per minute rate of 20 cents

(Global Coverage, 2014). Verizon Wireless could work with their strategic partners to negotiate

lower roaming fees to maintain a competitive advantage over T-Mobile. Verizon

Communications, Inc. operates in over 130 countries. Now that Verizon Wireless is wholly-

owned by its parent company, establishing an international presence may be easier now that all

of the cash flow from the wireless business is at Verizon’s disposal. This money could be used to

either further existing partnerships or actually establish a physical presence in other countries.

VII. Corporate Strategy: Business Diversification

Verizon Wireless uses partnerships with its affiliated companies of its parent company

Verizon Communications. In addition to the sale of wireless devices and service, the company

has recently branched out into offering a diverse line of products involving the Cloud. Verizon

Cloud is a “freemium” service as it allows customers to have a limited amount of Cloud storage

space for their devices with the option to increase the available amount for a monthly service

charge. Verizon Wireless has also made a significant investment to widening the offering of

various accessories. Verizon now offers over 1100 different accessories on their website (All

Accessories, 2014). Some of the more unusual offerings include a garage door opener, door

locks, remote-controlled drones and scales for weighing a person (All Accessories, 2014).

Verizon Wireless’ focus on the diverse products has contributed to an increase in revenues for

the total year of 2013 vs. 2012. Service revenues in particular increased 8.3% while equipment



such as accessory and phone sales only increased by 1.1 percent (Wireless- Selected Financial

Results, 2014). As Verizon Wireless is reported as a part of Verizon Communications, more

insight is not available as to the breakdown of the additional revenue gained from the additional

products. Since revenues are growing, it can be assumed that the diversification is not hurting the

company.

As of February 21, 2014 Verizon Communications Inc. completed the purchase of

Vodafone PLC’s 45% stake in Verizon Wireless, making the company a wholly owned

subsidiary. Future financial reporting after the completed purchase may lead to further insight

into the financial impact caused by the company’s diversification.

In the years to come, Verizon and Verizon Wireless seem poised to move forward as a

true telecommunications conglomerate. Lowell McAdam, CEO of Verizon Communications,

recently appointed Marni Walden, COO of Verizon Wireless, to lead the newly formed Product

Development and Management organization. This new entity “will leverage all of Verizon’s

assets to develop innovative products quickly across the company’s wireless, wireline, IP and

cloud networks and platforms” (Press Release, 2014). This new organization will add to the

competitive advantage of the Verizon organization. Verizon Wireless will benefit with more

service offerings to increase its revenue of its largest revenue stream; monthly service revenues.

A proposal for future business diversification would be for the company to use the power

of its network and its cloud computing to venture in the booming industry of EMR or electronic

medical records. As of January of 2013 the top 10 EMR management companies controlled

64.8% of the industry - a decrease of 3 percent in just three months (McCormack,2014). This



trend means that there is no clear universal provider and Verizon could use the power of its

network and name recognition to gain marketshare into this field.

In 2009 the Health Information Technology for Economic and Clinical Health Act was

signed into law. This act included $19 billion in incentives for healthcare offices to adopt EMRs

with a mandate for healthcare providers to become “meaningful users” by 2015 (McCormack,

2014). Verizon Wireless’ entry into the EMR industry will give access to provide not only SaaS

(Software as a Service) solutions but additional growth to wireless connections as healthcare

providers would look to portable electronic devices such as tablets or laptop computers to access

the EMRs. This industry will lead to positive growth in both the service and equipment revenues

for Verizon Wireless.

VIII. Ethics, Social Responsibility, and Environmental Sustainability

Summarize the corporate ethics statement, statement about social responsibility, and

sustainability statement. If none exist, report what you believe are these unwritten statements or

code of conduct based on what the company says about itself. Be sure to answer the following

questions:

Verizon Wireless has a Credo which establishes the culture, ethics, and expected conduct

of the company. The core values of the company are integrity, respect, performance excellence

and accountability (Code of Conduct, 2014). The company by and large does live by their Credo.

They have won numerous awards recognizing the company as a workplace that is concerned

with working mothers, veterans and military, IT excellence, LGBT equality and diversity (About

Us, 2014).



Verizon Wireless does have a proactive social responsibility statement “At Verizon

Wireless, we use our resources to improve the lives of individuals and the communities we serve.

With our network, our people and our financial support, we’re building a better world, one

connection at a time” (About Us, 2014). With programs such as Hopeline, which supports

victims of domestic violence, the company does exhibit their statement in action. Verizon

Wireless also has a crisis response team that responds to natural disasters to support first

responders and residents that are in need (About Us, 2014).

Verizon Wireless follows environmentally sustainable business practices. The company

participates in a device recycling program that has kept over 850 tons of electronic waste out of

landfills (About Us, 2014). The company also is energy conscious. The company has over 100

stores that are LEED certified and over 100 that are Energy Star certified (About Us, 2014).

There is no question that Verizon Wireless is a good corporate citizen. There is some

room for improvement in the realm of its sustainable practices. The company mentions that they

have over 100 locations that are LEED certified; this is less than 10% of the 1700 corporate retail

locations (About Us, 2014). Verizon Wireless could also implore their resellers to take on energy

efficiency and sustainability as a central role as representatives of their company. This would

align with the overall goals of the company to “build a better world, one connection at a time.”

IX. Building the Capability to Execute Strategy

The company hires talent across six functional areas; customer service, finance, network,

professional, sales, and technology (Our People, 2014). Focus on education and experience is

highlighted in job descriptions with most positions requiring a college degree. Verizon has been

honored with many awards involving workplace diversity of various cultural backgrounds and



acceptance of working moms as well as current and veteran military members (Our People,

2014). This ensures that the workforce has many ideas from a variety of backgrounds to ensure a

well-rounded organization.

Once employed, significant training and educational opportunities are provided to

employees. Up-front tuition assistance is provided for relevant college curriculums to aid career

development. Many classroom and online training modules are held to educate employees in

changes to the wireless and corporate environment. The company was ranked the top of 125

companies for the second year in a row by Training Magazine (Freifield, 2013). This award

defines the company as excelling in employee development across multiple disciplines.

Continuous training ensures that the company will remain nimble enough to drive the technology

market and maintain a strong competitive advantage by having the best trained staff in the

industry. The company also has a centralized database of employee methods and procedures to

ensure that everyone is on the same page when conducting company activities. A company that

is inventing the future of communications is dependent on a strong, intelligent workforce to

remain competitive. The multifaceted employee base is arranged in a way to maximize the talent

for the benefit of the entire organization.

The company is configured in a matrix format as a division of Verizon Communications,

Inc. This matrix format has multiple departments such as HR, IT, Finance, Marketing, and

Administration servicing the various business units of Verizon Wireless such as Retail Sales,

Business and Government, Enterprise, Customer Service, and Network. This format works best

for a large company and this organization is a great example of how departments can be shared

across various business units, creating a matrix structure. This structure provides the most

efficient use of the support departments. In this instance an employee in Network, Retail Sales,



or Customer Service would contact the same IT department to replace a broken keyboard on

their terminal. This provides a significant cost savings as a IT department does not need to be

staffed for each business unit.

Now that Verizon Communications has full ownership of Verizon Wireless, departments

such as Human Resources and Marketing may be consolidated to function as an operation of the

entire conglomerate. A consolidation in the Marketing department specifically would help to

ensure a common brand across the entire organization.

X. Managing Internal Operations

In addition to its industry-leading network, the company focuses on the customer

experience. Employees are encouraged to sell with integrity and solve any issues on the first call

to customer service. This mantra leads to a happier customer who will tell others and stay loyal.

To achieve a high level of customer satisfaction, much is expected of an employee at

Verizon Wireless. Information systems are used to mine various reports of customer data to

ensure that the company has the best opportunity to maximize each customer experience. The

company uses their own customer database that is shared across the sales and customer service

lines of business. This unique system allows any employee to access customer’s accounts

without regard to physical location or change in job function. The system has evolved so that

most customer facing transactions in a retail store can be completed on an iPad. This provides for

a more intimate customer experience which has led to an increase in average monthly revenue

per account (ARPA) in the past three years. ARPA has risen 14.4% to $153.93 since 2011

(Verizon 2013 Annual Report, 2014).



Motivation

Verizon Wireless provides aggressive targets for its employees and offers performance-based

incentive compensation. In all sales roles, a commission structure is present that can easily

exceed twice the base pay of certain positions. Commission payments are continually aligned

with the changing products and services that the company provides. For all other employees, a

short term incentive program is issued based upon the performance of the company as well as the

overall customer experience perception.

In addition to the financial aspect of motivating employees, the company has a culture

that is set by the aforementioned Credo. This can be experienced by their customers when they

visit a corporate store or call customer service. This culture provides a healthy work environment

that embraces diversity for the benefit of each employee.

Executive Compensation

The chart in Figure 1 displays the compensation packages for the top three executives for

Verizon Communications, Inc. Since Verizon Wireless is now a strategic business unit of


Figure 1. Executive Compensation. Source: 2014 Verizon Proxy Statement p.43


Verizon Communications, only Verizon Wireless’ President and CEO Dan Mead’s

compensation is publically available. He serves a dual role as Executive Vice President for

Verizon Communications. Executive compensation at Verizon is highly variable. The base salary

is designed to be around 10% of total compensation while the rest is contingent upon the

performance of the company. For 2013, Dan Mead’s base salary was $880,769 with total

compensation exceeding $7.1 million.

Dan Mead’s compensation was very similar to the head of AT&T mobility, Ralph de la

Vega. AT&T has a similar variable structure where 8% of the total compensation is guaranteed

annual salary and the rest is at risk. Mr. de la Vega’s base salary was $895,000 with a total

compensation of $7.3 million (2014 AT&T Proxy Statement, 2014). Dan Hesse, CEO of Sprint

had a banner year of total compensation of $49 million, but most of the total was an incentive

payout of stock options for him to stay at the helm for the next five years under the new owners

of Sprint, Softbank (Davis, 2014). With the exception of the one-time payment, Dan Hesse’s

compensation was around $11 million (Davis, 2014). This seems to be an anomaly since Verizon

Wireless and AT&T are significantly larger companies in terms of revenue and customer base.

As margins tighten due to pricing wars and a slowdown in technology advancement, it

would not be surprising for the incentive-based pay taking hold across more parts of the

business. This would hold employees accountable for their performance and reward those who

perform to the high expectations the company sets forth.

XI. Recommendations for Leadership

One of the most important things that Verizon Wireless needs to do is to continuously

invest in innovation. We can look to Apple, Inc. to see where investors can be scared about the



lack of the next best thing. In 2013, Apple’s stock hit a high of $700.09 on September 21, 2012

(Finance: Apple, 2014). In 18 months the stock has plunged 24% to a price of $532 on March 21,

2014 (Finance: Apple, 2014). This loss of market value can have serious implications on a

company by not having available funds to staff departments and to conduct expensive research

and development. Verizon Wireless is in an interesting predicament where they are not makers

of hardware. The company is reliant on the innovation of other companies to bring iconic devices

to market to attract customers. Verizon Wireless’ role is to ensure that the network that these

devices run on is as close to perfection as possible.

If the growth of technology in the last five years is any indication of future growth,

Verizon Wireless certainly has its work cut out for them. In order to ensure that the company

maintains its competitive advantage of network superiority and iconic devices, the company

should concentrate on elaborate strategic partnerships to design the next evolution in the wireless

industry. Visionary titans such as Steve Jobs and Bill Gates have changed the way that society

functions. It is up to Verizon to continue their legacy and truly evolve the wireless environment.

Stronger investment in their Innovation Centers in Waltham and San Francisco will trailblaze the

way into the future.

Concentration in emerging industries such as the medical field, transportation, or

distribution provides a wide range of opportunities. Google is working on a driverless car. Why

not take the next step and utilize the power of a network to work on automated trucking or other

types of transportation which could eliminate accidents due to human error?

The future is undefined. It is up to companies like Verizon Wireless to take the next step

in the progression of society and the human experience in a wireless world.



References:

2014 Proxy Statement, Verizon Communications, Inc. 2014 Retrieved from http://www.verizon.com/investor/DocServlet?doc=2014_proxy_statement.pdf

2014 AT&T Proxy Statement, AT&T, Inc. 2014 Retrieved from http://www.att.com/Investor/ATT_Annual/2013/downloads/notice_2014_annual_meeting_proxy.pdf

About Verizon Wireless. Verizon Wireless Website 2014 Retrieved from http://www.verizonwireless.com/aboutus/company/awards.html

About Us, Verizon Wireless Website 2014 Retrieved from http://www.verizonwireless.com/aboutus/commitment/sustainability.html

All Accessories, Verizon Wireless Website 2014 Retrieved from http://www.verizonwireless.com/accessories/allproducts/

Cheng, R., & Sheth, N. (2009, Oct 29). Motorola's droid makes its debut. Wall Street Journal. Retrieved from http://ezproxy.snhu.edu/login?url=http://search.proquest.com/docview/399123360?accountid=3783

Code of Conduct, Verizon Wireless 2014 Retrieved from http://www.verizonwireless.com/dam/aboutus/pdfs/Code_of_Conduct.pdf

Company Info, Sprint Inc Website 2014 Retrieved from http://www.sprint.com/companyinfo/scm/supplierdiversity/policy.shtml

Davis, Mark “Sprint CEO Dan Hesse had a $49 million payday last year” The Kansas City Star March 7, 2014 Retrieved from http://www.kansascity.com/2014/03/07/4873870/sprint-ceo-dan-hesse-had-a-49.html

Finance: Apple Inc. Google.com 2014 Retrieved from https://www.google.com/finance?q=NASDAQ:AAPL

Freifeld, L. (2013). Verizon's #1 calling. Training, 50(1), 26-28,30,32. Retrieved from http://ezproxy.snhu.edu/login?url=http://search.proquest.com/docview/1323501300?accountid=3783

Global Coverage. T-Mobile Website 2014 Retrieved from http://www.t-mobile.com/coverage.html#globalcoverage

Global Services, Verizon Wireless Website 2014 Retrieved from http://www.verizonwireless.com/wcms/global.html

Gupta, Poornima; Randewich, Noel. Apple could be losing control of wireless carriers, component suppliers. San Jose Mercury News 2013 Retrieved from http://www.mercurynews.com/ci_22467203/apple-could-be-losing-control-wireless-carriers-component


http://www.mercurynews.com/ci_22467203/apple-could-be-losing-control-wireless-carriers-component

http://www.mercurynews.com/ci_22467203/apple-could-be-losing-control-wireless-carriers-component

http://www.verizonwireless.com/wcms/global.html

http://www.t-mobile.com/coverage.html#globalcoverage

http://ezproxy.snhu.edu/login?url=http://search.proquest.com/docview/1323501300?accountid=3783


https://www.google.com/finance?q=NASDAQ:AAPL

https://www.google.com/finance?q=NASDAQ:AAPL

http://www.kansascity.com/2014/03/07/4873870/sprint-ceo-dan-hesse-had-a-49.html

http://www.kansascity.com/2014/03/07/4873870/sprint-ceo-dan-hesse-had-a-49.html

http://www.sprint.com/companyinfo/scm/supplierdiversity/policy.shtml

http://www.verizonwireless.com/dam/aboutus/pdfs/Code_of_Conduct.pdf



http://www.verizonwireless.com/accessories/allproducts/

http://www.verizonwireless.com/aboutus/commitment/sustainability.html

http://www.verizonwireless.com/aboutus/company/awards.html

http://www.att.com/Investor/ATT_Annual/2013/downloads/notice_2014_annual_meeting_proxy.pdf

http://www.att.com/Investor/ATT_Annual/2013/downloads/notice_2014_annual_meeting_proxy.pdf

http://www.verizon.com/investor/DocServlet?doc=2014_proxy_statement.pdf


M2M: The next billion mobile connections - essential analysis of the growing wireless M2M industry. (2013, Mar 14). M2 Presswire. Retrieved from http://ezproxy.snhu.edu/login?url=http://search.proquest.com/docview/1316721019?accountid=3783

McCormack, Melissa. Compare Electronic Health Records Software Software Advice, Inc. 2014 Retrieved from http://www.softwareadvice.com/medical/electronic-medical-record-software-comparison/#market-share

Mission & Vision, AT&T Website. Retrieved from http://www.corp.att.com/attlabs/about/mission.html

More Everything Plan. Verizon Wireless Website 2014 Retrieved from http://www.verizonwireless.com/wcms/consumer/shop/shop-data-plans/more-everything.html

Our People,Verizon Communications, Inc. Website. 2014 Retrieved from http://www.verizon.com/jobs/workinghere_ourpeople.html

Press Release “Verizon Projects Higher Margins and Sustained Revenue Growth in 2014” Verizon Inc.2014 Retrieved from http://www.verizon.com/investor/news_verizon_projects_higher_margins_and_sustained_revenue_growth_in_2014_02242014.htm

Quarterly Earnings. Verizon Communications, Inc. 2014 Retrieved from http://www.verizon.com/investor/quartelyearnings.htm

Smith, Karen. Grand Opening of Verizon Destination Store at Mall of America® Verizon Wireless News Center 11/20/13. Retrieved from http://www.verizonwireless.com/news/article/2013/11/verizon-destination-store-grand-opening.html

Tsukayama, H. (2013, Aug 08). T-mobile, spurred by new plans, adds 1.1 M customers (posted 2013-08-08 17:19:38). The Washington Post. Retrieved from http://ezproxy.snhu.edu/login?url=http://search.proquest.com/docview/1418564662?accountid=3783

Verizon 2012 Annual Report. Verizon Communications, Inc. 2013 Retrieved from http://www.verizon.com/investor/DocServlet?doc=vz_ar_2012.pdf

Verizon 2013 Annual Report. Verizon Communications, Inc.2014 Retrieved from http://www.verizon.com/investor/DocServlet?doc=2013_vz_annual_report.pdf

Verizon caps strong record of success in 2013 with fourth consecutive quarter of double-digit earnings growth. (2014, Jan 21). PR Newswire. Retrieved from http://ezproxy.snhu.edu/login?url=http://search.proquest.com/docview/1490660884?accountid=3783

Verizon Edge Website. Verizon Wireless. 2014 Retrieved from http://www.verizonwireless.com/wcms/consumer/devices/edge.html

Verizon to buy vodafone's $130-billion wireless stake. (2013, Sep 02). Toronto Star. Retrieved from http://ezproxy.snhu.edu/login?url=http://search.proquest.com/docview/1429234104?accountid=3783




http://www.verizonwireless.com/wcms/consumer/devices/edge.html



http://www.verizon.com/investor/DocServlet?doc=2013_vz_annual_report.pdf

http://www.verizon.com/investor/DocServlet?doc=vz_ar_2012.pdf



http://www.verizonwireless.com/news/article/2013/11/verizon-destination-store-grand-opening.html

http://www.verizonwireless.com/news/article/2013/11/verizon-destination-store-grand-opening.html

http://www.verizon.com/investor/quartelyearnings.htm

http://www.verizon.com/investor/news_verizon_projects_higher_margins_and_sustained_revenue_growth_in_2014_02242014.htm

http://www.verizon.com/investor/news_verizon_projects_higher_margins_and_sustained_revenue_growth_in_2014_02242014.htm

http://www.verizon.com/jobs/workinghere_ourpeople.html

http://www.verizonwireless.com/wcms/consumer/shop/shop-data-plans/more-everything.html

http://www.corp.att.com/attlabs/about/mission.html

http://www.softwareadvice.com/medical/electronic-medical-record-software-comparison/#market-share

http://www.softwareadvice.com/medical/electronic-medical-record-software-comparison/#market-share




Wireless – Selected Financial Results. Verizon Communications, Inc. 2014 Retrieved from http://www.verizon.com/investor/DocServlet?doc=vz_fs_pdf_2013_4q_new.pdf

Wireless- Selected Financial Results. Verizon Communications, Inc. (2014) Retrieved from http://www.verizon.com/investor/app_resources/ucmstatic/vz_fs_pdf_2013_4q.pdf (page 4)


http://www.verizon.com/investor/app_resources/ucmstatic/vz_fs_pdf_2013_4q.pdf

http://www.verizon.com/investor/DocServlet?doc=vz_fs_pdf_2013_4q_new.pdf

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