• Subject Name : Accounting and Finance

Extending Boundaries of Blue Ocean Strategy

Table of Contents

External Analysis.

PESTEL Analysis.

Five forces analysis.

Strategy canvas.

Blue Ocean.



Executive Summary of American Telephone and Telegraph Analysis

The main purpose of this report is to provide a significant understanding and insight into the external environment of the company AT&T. In this report, an effectual external analysis has been performed in regard to analyze the external environment of the company and the factors associated with it. Various analysis concepts and models have been utilized such as PESTEL analysis, Porter's five forces analysis, strategy canvas, and blue ocean to depict the valuable findings effectively. AT&T is a multinational telecommunication company based out of the United States and is the leading company across the world proving internet, wireless, and network services worldwide. The company uses effectual strategies to compete in the market by applying efficient innovation and technology to ensure effectiveness for a longer-term. Since the industry environment is highly competitive, it is important to look and gain insightful knowledge about the tactics AT&T has used to increase effectiveness and sustainability for future businesses.

External Analysis

The external analysis of telecommunication giant American Telephone & Telegraph (AT&T) is as follows:

PESTEL Analysis

The external environmental analysis of AT&T can be evaluated by using the method of PESTEL analysis which primarily focuses on the macro-environmental factors of the organization. It provides significant assistance in understanding how the political, economic, social, technological, environmental, and legal aspects which have been affecting the business of the organization.

Political: The political factor of an organization plays a vital role in determining organizational effectiveness. Relating to such fact, governmental regulations and public policy impact the interests of shareholders of telecommunication industries, but it also provides abilities to meet customers’ requirements by developing suitable resolution for them. According to the AT&T Financial Report, (2020), the company has stated that it participates actively in every public policy dialogues in order to share perspectives that related to policies of telecommunication, media, and other related fields consecutively (AT&T Financial Report, 2020). Besides, the company supports political bodies and candidates who are having positions that align with the company’s core goals and objectives (AT&T Financial Report, 2020).

Economic: Based on the understanding of the various industry and company reports, it has been acknowledged that slowing economy can have an adverse effect on the revenue generation ability for AT&T (AT&T Financial Report, 2020). As stated on the AT&T INC. 2019 Annual Report, the corporate taxes of the US which is required to be increased has affected the organization based on the economic activities of the country. Besides, the usage of internet services within the organization has been affecting the organization in order to enter into the market to facilitate the scale of the financial market effectively (AT&T INC. 2019 Annual Report, 2019). This signifies sustainability issues of the organization.

Social: According to AT&T, (2015), it has been understood that the company is investing hugely to ensure environmental sustainability within their manufacturing and commitment towards safeguarding environment and communities (AT&T, 2015). The company has effectual conflict minerals practice, execution of a human rights policy, and public reporting on occupational security management systems and plant code of conduct (AT&T, 2015). 

Technological: With the emergence of social media services and the demand for live video streaming and online video contents, technological innovations are adoptable by the company and are affecting the organization profitably (AT&T, 2020). With the acquisition of Time Warner Inc. in 2018 has escalated the efficiency of technological aspects in the market of media and entertainment as well (Bruner, Innes and Passer, 2017).

Environmental: AT&T is committed to building an environmentally sustainable operation that brings value to the societies and future (AT&T, 2020). The company leverages its media channels to promote environmental issues and provide possible solutions to conserve such effectively. Besides, AT&T also invested massively in building environmentally sustainable facilities, convoy energy-efficient hybrid vehicles, and encouraged recycling of its used production materials (AT&T INC. 2019 Annual Report, 2019).

Legal: The Company has been dealing with several lawsuits which are enduring and is affecting the business negatively. In 2019, the Federal Trade Commission in the US has filed a lawsuit for slowing internet speed of customers despite the fact that customer availed the unlimited data plan which has led the company to pay $60 million (Lancaster, 2019). This indicates the sustainability issues of the organization.

Five Forces Analysis

Bargaining power of buyers: Consumers demands for high-quality services and products at the lowest possible prices which make the company to revise or alter their strategies of pricing (AT&T Financial Report, 2020). Concerning such fact, AT&T follows and focuses on meeting and satisfying consumers’ needs and demands. The reduction in pricing policies affects the organization in terms of profitability in the long run (AT&T Financial Report, 2020).

Bargaining power of suppliers: Since the company deals in telecommunication services, it is important for AT&T to construct transmission lines for the landline and wireless businesses, thus, suppliers are required to erect the network towers effectively (AT&T Financial Report, 2020). The company utilizes two key networks and its equipment suppliers such as Ericson and Alcatel (AT&T Financial Report, 2020). The strategic alliance amongst them provides the benefits of economies of scales to the company efficiently (AT&T Financial Report, 2020). Concerning such fact, these suppliers have massive influence and authority over AT&T as they have understood the company is need of quality raw materials in building network towers that ensure efficiency (AT&T Financial Report, 2020). Thus, the bargaining power of suppliers in the case of AT&T is moderate.

Threats of new entrants: Initially, the company had faced numerous challenges in terms of competition form its competitors as they had patents and the threat of new entrants were relatively higher. But, gradually after the patents expired, the arrival of 6000 competitors has been witnessed as they entered the market (AT&T INC. 2019 Annual Report, 2019). Since the building of network towers is expensive, it is estimated that threats of new entreats are relatively low as they would require high funds for such executions. In present, the wireless network industry is been saturated at over 90%, thus, the threats of new entrants for AT&T is lower as new entrants will not take risk of penetrating such market to make a profit (AT&T INC. 2019 Annual Report, 2019).

Threats from the substitute products: AT&T prime aim is to provide telecommunication services and consumers used various communications service providers (AT&T Financial Report, 2020). With the rapid growth of internet technology, seamless voice services are provided by firms like WhatsApp, Skype, Viber, and others (AT&T Financial Report, 2020). These services by numerous information technology and internet firms are posing as substitute products for consumers who were dependant on telecommunication services like AT&T. Thus, the threat from the substitute product is high and challenging.

Competition of existing players: The competition in the telecommunication industry is intense and many players competing with each other in terms of growth and grasping consumers. Telecommunications giants like T-Mobile, Verizon, Sprint, etc. are growing in the market, thus, indicates, there is a strong rivalry among players (AT&T Financial Report, 2020).

The impact of sustainability will be on the factor of threat from the substitute product as creating a positive perspective of the company within the minds of consumers by creating and encouraging sustainability towards the environment and its products will help ensure organizational effectiveness in terms of customer retention and generating new customer base effectively (AT&T Financial Report, 2020).

Strategy Canvas

A strategy canvas is an effective tool to compare market competitors as per their performance on several key success factors to determine the prime differences. It helps organizations to formulate competitive strategies to fix the loopholes or identified differences and improve the business process to lead within the highly competitive market.

The key critical success factors in the industry are as follows:

  1. Cost curve: It is the curve in the graphical representation of the strategy canvas to show how customers recognize competitors’ comparative performance across the critical success factors in the industry. It has been understood that Verizon and T-Mobile are performing well in the aspect of cost; however, they are not up to the mark in regard to after-sales service where AT&T is leading. Besides, companies like Verizon and T-Mobile are weakly differentiated and have engaged a massive space within the market that leads to hardships in generating profits due to intense market rivalry.
  2. Internet speed: Internet speed is a major factor any consumer seeks constantly within the telecommunications industry. According to the graphical representation, AT&T has the highest internet speeds as compared to the other two companies. Since the company uses and adopts innovative technologies, it helps those providing effectual services to its subscribers (AT&T Financial Report, 2020). The company that has the best and effective internet speed consumers attracts such companies more leading to generate massive profits.
  3. Voice clarity: Another critical success factor in the telecommunication industry is the quality of voice and reliability of the network. Consumers seek for telecommunication service that offers effectual voice clarity and network reliability at every possible location. AT&T has relatively good voice clarity as compared to its rivals as the company invests highly in strengthening its network and implementing advance technologies that help improve communications quality (AT&T Financial Report, 2020).

Blue Ocean

By creating value innovation of the new market space through excelling on the established critical success factors concerning the aspects on which the rivals have performed awful and by creating a new critical success factor that depicts unidentified customers needs and requirements (Leavy, 2018). Relating to such fact, the concept of blue ocean strategy is to concurrently search of segregation and low cost to form new market space and generate demand for a company’s product and services effectively (Agnihotri, 2015). According to a study by (Agnihotri, 2015), states that strategy canvas is not only to identify value innovations within the competitive market but also to look into other innovation factors to ensure organizational profitability and growth (Agnihotri, 2015). The study also suggests that strategy canvas is not only applicable for value innovation purposes but all types of possible innovation as well (Agnihotri, 2015). Concerning such fact, the identified blue ocean market space based on the strategy canvas is the offers and tariffs factors within the telecommunication industry. It can be identified by looking at the strategy canvas that the market competition among the three competitors like AT&T, Verizon, and T-Mobile is comparatively low as compared to other factors. Tariff on calls, internet, wireless, and telephone connections are of major concern any consumer always looks for (AT&T Financial Report, 2020). Besides, offers and discounts are other factors that require serious attention to create a new market space. It has been identified by looking at the strategy canvas that, the factors of tariffs and offers are Blue Ocean where the market competition is relatively low as compared to other aspects. By formulating and implementing a strategy of reasonable and attractive tariffs plans and offers, such as $35 monthly plan with unlimited internet and calls to any network across the world (AT&T Financial Report, 2020).

Conclusion on American Telephone and Telegraph Analysis

Strategy plays a key role in augmenting organizational effectiveness and helps retain the market position within the competitive market efficiently. By looking at the factors of external analysis concerning the PESTEL analysis and Porter's five forces analysis, it has been identified that AT&T has numerous strengths and opportunities lying within that has the ability to increase the effectiveness of the company in those areas where it was lacking. The strategy canvas and blue ocean market space has provided significant information regarding the key differences among the company’s competitors and value differentiation to formulate strategies to bring efficiency and competitiveness within the organization. With the assessments of industry and business reports of AT&T, it has been identified that the company has huge opportunities to enjoy a monopoly in the market in terms of social, technological, and environmental factors of the organization. Since the company invests highly in sustainability factors; there is an opportunity to create a new market place of attractive tariff and offers plans that will hit other rivals in regard to profitability and sustainability. However, with growing substitute products in the market, there is a threat of consumers switching to substitute products that will lead to decline the profitability and organizational growth drastically.

References for American Telephone and Telegraph Analysis

Agnihotri, A., 2015. Extending boundaries of Blue Ocean Strategy. Journal of Strategic Marketing, 24(6), pp.519-528.

AT&T Financial Report, 2020. Financial Report 2020. [online] Investors.att.com. Available at: <https://investors.att.com/financial-reports/quarterly-earnings/2020>

AT&T Financial Report, 2020. Financial Report 2020. [online] Investors.att.com. Available at: <https://investors.att.com/financial-reports/quarterly-earnings/2020>

AT&T INC. 2019 Annual Report, 2019. AT&T INC. 2019 Annual Report. [online] Investors.att.com. Available at: <https://investors.att.com/~/media/Files/A/ATT-IR/financial-reports/annual-reports/2019/complete-2019-annual-report.pdf>

AT&T, 2015. AT&T Expands Eco-Ratings To Include Tablets, Social Factors | AT&T. [online] About.att.com. Available at: <https://about.att.com/story/att_expands_eco_ratings_tablets_social.html>

AT&T, 2020. AT&T Corporate Profile. [online] About.att.com. Available at: <https://about.att.com/pages/corporate_profile>

Bruner, R., Innes, M. and Passer, W., 2017. American Telephone & Telegraph (AT&T): The AT&T/McCaw Merger Negotiation. Darden Business Publishing Cases, 1(1), pp.1-39.

Lancaster, A., 2019. AT&T Agrees To $60M Settlement With FTC Over Data Throttling | The Recorder. [online] The Recorder. Available at: <https://www.law.com/therecorder/2019/11/05/att-agrees-to-60m-settlement-with-ftc-over-data-throttling/?slreturn=20200724151052>

Leavy, B., 2018. Value innovation and how to successfully incubate “blue ocean” initiatives. Strategy & Leadership, 46(3), pp.10-20.

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