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VERIZON COMMUNICATION
INTERNAL FACTOR ANALYSIS SUMMARY

 

   
       
INTERNAL FACTORs WEIGHT RATING WEIGHTED SCORE COMMENTS
STRENGTHS        
Network superiority 0.15 4 0.6 Competitive advantage
Focus on customers 0.15 5 0.75 Leverage the power of technology to make customers’ lives better, help businesses be more productive and transform society in ways never thought possible.
Consistent execution 0.1 4 0.4 New technology investment and New product development
Product offering 0.05 5 0.25 Wide range of retail and wholesale products
Network service quality 0.05 5 0.25 Preferred service provider
         
         
         
WEAKNESS        
Internal control 0.05 3 0.15 Internal control over financial reporting
Wireline segment 0.05 2 0.1 Wholesale business that has stagnant
Faster technology transfers 0.1 3 0.3 Money supply issues
Customer loyalty 0.15 4 0.6 Ever changing needs, taste and preferences
Technology investment 0.15 5 0.75 Strategic decision based on long term cash flow planning
         
TOTAL SCORES: 1   4.15  

 
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Interpretation and explanation of Internal factor analysis summary (IFAS) table

 

IFAS (Internal Factors Analysis Summary) is the technique to evaluate the internal environment of the company and performance of company in these environments. We mainly consider strength and weakness as two internal factors of the company. IFAS represents the above table with appropriate factors taken from the Verizon’s Chairman’s Letter section of the annual report (2013). Above table list these factors in the first column and explanation of these in the last ‘Comments’ column. Weight column assigns the weight to the factors ranging from 0 and 1. The sum of all weights must equal to 1. Rating column is an integer between 1 and 5.
 

This is basing on the efficiency of the company’s response to the chosen factor as appeared from the discussion in the annual report 2013 of Verizon. For each factor a weighted score is computed by multiplying the rating with weight. Sum of all weighted scores represents the value showing how well the Verizon is operating in its internal environment. This value will range from 1 to 5, with 3 being the average quality of response to the environment, and 5 meaning excellent efficiency. Our computed score of 4.15 is above average quality of response to the environment. This explains how well the Verizon is operating in its internal environment. Above score may be improved by changing combination of weight and rating based on management approved suggestions for each of the mentioned factors.
 

VERIZON COMMUNICATION
EXTERNAL FACTOR ANALYSIS SUMMARY

 

     
         
EXTERNAL FACTORS WEIGHT RATING WEIGHTED SCORE COMMENTS
OPPORTUNITIES        
Next generation video 0.075 3 0.225 Digital video (ON DEMAND)  delivery
CLOUD COMPUTING 0.050 4 0.200 On demand delivery of functionality
CONNECTED CARS (SMART CARS) 0.075 2 0.150 New market opportunity
HEALTHCARE 0.050 4 0.200 Finding solution to share sensitive, confidential medical information quickly, reliably and securely.
Opening new markets 0.025 5 0.125 Leverage assets in the areas of healthcare, education and energy management.
Education sector 0.025 4 0.100 How to incorporate mobile and broadband technologies into classrooms in a way that improves how students learn and teachers teach.
New products 0.200 5 1.000 Develop new products by technology innovation
         
THREATS        
Challenging macroeconomic environment 0.075 3 0.225 Country Risk or economic slump
Innovation 0.090 4 0.360 Sustaining growth and competitive advantage
Patent litigation 0.050 2 0.100 Legal Risk
Copper lines to Optical Fibre 0.025 2 0.050 Obsolete technology management
Competition 0.075 4 0.300 Potential of Market Share loss
Customer loyalty 0.060 5 0.300 Changing Taste and preferences of customers
Market Risk 0.075 3 0.225 Interest rates and Foreign Currency Risk
Inflation rates 0.050 2 0.100 Economic destruction
         
TOTAL SCORES: 1.000   3.660  

 

Interpretation and explanation of External factor analysis summary (EFAS) table

 

EFAS (External Factors Analysis Summary) is the technique to evaluate the external environment of the Verizon and performance of company in these environments. We mainly consider opportunities and threats as two external factors of the company. EFAS represents the above table with appropriate factors taken from the Verizon’s Chairman’s Letter section of the annual report (2013). Above table list these factors in the first column and explanation of these in the last ‘Comments’ column. Weight column assigns the weight to the factors ranging from 0 and 1. The sum of all weights must equal to 1.
 

Rating column is an integer between 1 and 5. This is basing on the efficiency of the company’s response to the chosen factor as appeared from the discussion in the annual report 2013 of Verizon. For each factor a weighted score is computed by multiplying the rating with weight. Sum of all weighted scores represents the value showing how well the Verizon is operating in its external environment. This value will range from 1 to 5, with 3 being the average quality of response to the environment, and 5 meaning excellent efficiency. Our computed score of 3.66 is just above average quality of response to the external environment. This explains how well the Verizon is operating in its external environment. Above score may be improved by changing combination of weight and rating based on management approved suggestions for each of the above mentioned factors.

 

From the above analysis of IFAS and EFAS, it is evident that Verizon is more efficient with its internal environment compared to external environment. High weight age and low rating for factors such as smart cars in the Opportunity section and Patent litigation, Copper lines to Optical Fibre and Inflation rates needs to be reviewed. Either this weight or rating combination is not correct or there is serious problem with the Verizon’s efficiency with external environment. It appears that company got stuck in availing opportunity with regard to smart cars or Legal risk, old technology legacy (copper lines) and Inflation appears to be major threat for the existence of the company from the external environment.
 

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