How Information Technology Can Be Used to Gain a Competitive Advantage?

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Introduction

The report aims to illustrate how Verizon Wireless Incorporation can attain a higher competitive advantage through the V Cast.

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Verizon Wireless Incorporation is a public limited company that operates within the telecommunication industry. The firm is located in the United States with its headquarters at Basking Ridge, New Jersey. The company was formed in 2000 through a joint venture between Vodafone Group and Verizon Communication Incorporation (‘Verizon Wireless’, 2009, ¶ 1). The firm deals with communication both in the domestic market and internationally. Some of the firm’s operations include telephone communication, entertainment, data, and broadband services. The firm’s customers include both individual and institutional customers such as the government and business organizations.

Currently, the firm has a human resource base of 85,000 employees. Its annual revenue is approximately $49.3 billion. One of the company’s products is V Cast. This is a wireless network that enables the transmission of entertainment content both audio and videos. V cast enables consumers to download music online (Duog, 2009, ¶ 1). This paper is a report aimed at illustrating how Verizon Wireless Incorporation should utilise computer-based information systems to target the Apple iTunes market.

In the 21st century, the telecommunication industry has experienced rampant growth. This is a result of more investors venturing into the industry. This has resulted in an increase in the level of competition and hence the level of profits. The company’s top competitors include AT&T Incorporation, Qwest Communication International Incorporation and Sprint Nextel Corporation.

In addition, rampant growth has resulted from advancements in information technology. Currently, the industry is becoming more digitalised. This has resulted in a reduction in the price of telecommunication products and services as well as an improvement in their quality (‘Telecommunication industry’, 2009, ¶ 2).

Over the past few years, the company has been performing effectively both in the domestic and international markets. The table below illustrates the trend in the firm’s financial performance during the past three years.

Item The year 2006
Amount in ‘000’
The year 2007
Amount in ‘000’
The year 2008
Amount in ‘000’
Total revenue 88,144 93,469 97,354
Gross profit 53,150 55,922 58,347
Total operating profit or loss 13,373 15,578 16,884.
Net income 6,197 5,521 6,428
Income available to common stockholders 6,197 5,521 6,428

Scope

The report identifies how the firm has addressed the Porter five forces through information technology. These include suppliers and buyers bargaining power, the threat of substitute products and entry of a new firm and rivalry in the industry. Various ways in which the firm can attain on competitive advantage are considered. However, the report does not include the cost of implementing these recommendations.

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Discussion of how Verizon Wireless addresses external forces

For a firm to be successful the management needs to develop a competitive advantage. This will enable the firm to cope with the external forces. These forces include bargain power of suppliers and customers, the threat of substitutes, the threat of a new entrant and rivalry amongst firms in the industry. One of the ways through which a firm can attain a competitive advantage is using information technology.

Supplier power

Supplier power refers to the advantage that a firm attains in supplying its products or services to the market compared with its competitors. Verizon Wireless is increasing its supplier power by integrating information technology from various companies. In its operation, Verizon utilised the Code Division Multiple Access (CDMA) while Vodafone used the Global System Mobile (GSM) communication technology which is third generation technology. To gain a competitive advantage, the management of the firm is considering changing these technologies. According to Casimir (2007, 2), one of the technologies that the management of the firm has considered in increasing its supplier power is Long Term Evolution (LTE) which is a fourth-generation technology. This technology will enable the firm to attain a higher supplier power.

Before integrating this technology in its products such as V Cast, the management of the firm has considered conducting a pilot project. The pilot project will enable the management to determine the feasibility of this technology. This is by integrating services of firms such as Motorola, Nortel, Eriksson, Nokia-Siemens, and Alcatel-Lucent.

The LTE technology will boost the firm’s competitive advantage. The effect is that the firm will be able to venture into the market for Apple iTunes effectively and gain a higher supplier power. This is since this technology can transmit a high volume of entertainment data such as videos and music.

Bargaining power of buyers

The bargaining power of buyers refers to the ability of the customers to influence the process of setting the price of a firm’s product or service. According to Yu- Chung and Anne (2007, 4), increased bargaining power of the buyer can either benefit or harm a firm. This is since consumers are price sensitive and the firm is aimed at maximising the level of profits.

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The management of the firm must maintain a good relationship with the customers. This will result in the establishment of a long-term customer relationship. To ensure that the bargaining power of the consumers is not compromised, the management of Verizon Wireless has integrated the Consumer Relation Management (CRM) software. The software has enabled effective communication between the firm and its customers. Through this software, the management obtains consumers opinions on different issues such as the price and consumers products preferences. This enables the firm to set the price of the product effectively and add the features that the consumers are demanding. The effect is that the consumers are more attracted to the firm’s products.

Threat of a substitute product and entry of a new firm

Verizon Wireless device (V Cast) faces an increased threat of substitute products from iPhones manufacturing companies such as Apple. This is because these phones have features that enable consumers to access and download music and other entertainment content. To minimise the threat of substitute products, the management of Verizon Wireless has incorporated the product differentiation strategy. This has been achieved through the incorporation of a technology that is free from Digital Right Management (DRM) requirements. This has resulted in an increased distribution of the firm’s products in the market.

This is since there are no restrictions of files to a single format. This characteristic makes it possible to burn the files to different MP3 devices. In addition, this technology does not require the consumers to convert their MP3 to a new format as is the case with iTunes. Through this information technology, Verizon Incorporation will be able to venture into the iTunes market due to its superior characteristics (Doug, 2009, 5).

By adopting the 4th generation technology, it will become difficult for other firms to venture into the industry. This is because this technology is costly to implement. After all, it is new in the market.

Rivalry amongst firms

The increase in competition has culminated in an increase in the degree of rivalry amongst firms in the industry. To counter rivalry and attain a competitive advantage, the management of Verizon Wireless has integrated electronic commerce technologies in its operation. This enables the firm to conduct its operations effectively and efficiently. According to Dan (2004, p.4), e-commerce enables a firm to conduct online marketing effectively thus reaching the global market.

Conclusion

Developing a competitive advantage is one of the strategies that can enable Verizon Wireless to exist in the long term. It will also enable the firm to venture into other markets such as the iTune market segment. This can be achieved through the incorporation of information technology in the operation of the firm.

Recommendations

The management of Verizon Wireless should consider the following in increasing the firm’s competitive advantage.

  • Incorporate current electronic commerce technologies in its supply chain to reach the global market.
  • Integrate continuous market research on changes in information technology. This will enable the firm to upgrade its current information technologies.

Reference list

Cassimir, M. (2007). Verizon adopts new wireless technology. The business of technology. Web.

Dan, H. (2004). Strategy and the internet. NBA 600. Web.

Doug, A.(2009). Verizon Wireless dips toe into DRM free music downloads. Web.

Economy Watch. (2009). Telecommunication industry. Web.

Linked Incorporation. (2009). Verizon Wireless. Web.

Yu-Chung, W. &Anne, W. (2007). Information asymmetry, bargaining power and customer profitability: an empirical investigation on bank client relation. Taipei: National Chengchi University. Web.

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Premium Papers. (2022) 'How Information Technology Can Be Used to Gain a Competitive Advantage'. 18 April.

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Premium Papers. 2022. "How Information Technology Can Be Used to Gain a Competitive Advantage?" April 18, 2022. https://premium-papers.com/how-information-technology-can-be-used-to-gain-a-competitive-advantage/.

1. Premium Papers. "How Information Technology Can Be Used to Gain a Competitive Advantage?" April 18, 2022. https://premium-papers.com/how-information-technology-can-be-used-to-gain-a-competitive-advantage/.


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