Group 2 Members: 許偉容、吳雅筑、李泓儒 內部因素跟 Verizon 比較 Company: AT&T 外部因素跟交通產業做比較 Internal Strategic Position External Strategic Position Financial Strength(FS) Value (+) Environmental Stability (ES) Value (-) EPS 5 Technological changes -2 Leverage 5 Rate of inflation -2 Liquidity 3 Barriers to entry -3 Working capital 2 Competitive pressure -4 Cash flow 3 Price elasticity of demand -4 Average 3.6 Average -3 Internal Strategic Position External Strategic Position Competitive Advantage (CA) Value (-) Industry Strength (IS) Value (+) Market share -3 Growth potential 5 Product quality -2 Profit potential 5 Product life cycle -3 Financial stability 4 Customer loyalty -2 Technological skills 3 Control over suppliers & distributors -2 Ease of entry into market 3 Average -2.4 Average 4 How we rate these factors: 1. Financial Strength (FS) We compare AT&T and Verizon. Return on investment: EPS Growth Verizon AT&T 2011 -5.69% -80.36% 2012 -63.60% 89.39% 2013 1213.94% 171.20% The growth rate of EPS of AT&T is quite stable. Leverage: Debt to Total Assets Ratio Verizon AT&T 2011 24.00% 23.94% 2012 23.00% 25.65% 2013 34.00% 26.92% Debt to Total Assets Ratio of AT&T is stable, but that of Verizon may be more attractive. Liquidity: Current Ratio Verizon AT&T 2011 1.01 .74 2012 .79 .71 2013 2.63 .66 More stable than Verizon. But it may reveal that AT&T has less operating funds. Working capital: (Current Assets) - (Current Liabilities) Verizon AT&T 2011 178 -7907 2012 -5721 -9081 2013 43944 -11799 Obviously, AT&T has negative working capital. Cash flow: Cash and cash equivalents, end of period Verizon AT&T 2011 13362 3045 2012 3093 4868 2013 53528 3339 AT&T has less cash. We think AT&T makes lots of investment and it is still positive, so it is rated 3. 2. Environmental Stability (ES) We compare telecom with transportation industry. Explanation Technological changes To telecom, a slightly late start of following new trend is serious, while to transportation it takes much more time to conduct a project. Rate of inflation Neither of them would be seriously affected by inflation, since they are daily necessities. Barriers to entry Both of them take large initial investment which most companies can’t provide. Rated average -3. Competitive pressure Sometimes people have no choice for transportation because of time, distance, routes, and etc. However, even telecom industry is somehow under oligopoly, because all services are so similar, consumers may shift to other carriers when others have lower price. Price elasticity of demand The same as those mentioned in “Competitive pressure”. 3. Competitive Advantage (CA) We compare AT&T with Verizon. Variables Market share Explanation Product quality We think AT&Ts’ product quality is not so good as Verizon’s, but better than average, so we give it -2. Product life cycle AT&T’s product life cycle is equal to Verizon’s as their contracts with customers always are one or two years. Customer loyalty AT&T’s churn rate is low, but Verizon is We think AT&T’s market share is as big as Verizon’s, so we give it -3. lower than it. So, we give AT&T -2. Control over suppliers & distributors Both AT&T and Verizon can control suppliers and distributors because they all do the vertical integration. 4. Industry Strength (IS) We compare telecom industry to transportation industry. Variables Growth potential Explanation Due to the development of 4G and IOT, telecom industry has more space to growth. Profit potential Transport industry needs government’s subsidiary to cover its loss, so we think telecom industry perform well. Financial stability Both of them have low elastic demand, so their financial situation is quite stable. Technological skills Both of them have to own some specific skills to do the work, so we give it 3. Ease of entry into market Both of them have high entry barrier, so we give it 3.