Week 7: Giving business some extra horsepower...

When I was eight years old my Dad and older brothers began teaching me about race cars. I remember learning about the brakes and suspension.  At the time, my Dad's cars had front disc brakes and rear drum so I had to learn two different methods to service each axle.  At age 10, I began working on transmissions  and eventually turning a wrench.. or two on engines.  There was Chevy 350, 396, 427 and even an occasional Dodge 440. While this was just a hobby, one thing that stayed with me was the methodical process to take in the situation and evaluate what is necessary.  There is a process to be followed.  Is the car tracked or it is a street driven vehicle?  What kind of performance is desired?  What is the car's current condition?  

What does this have to do with marketing and situational analysis you ask?  Situational analysis is an examination of internal and external factors of a business. It provides an analysis that reveals a better understanding of the factors that influence business  performance.  What kind of performance does the business desire?  What kind of performance can be achieved?  Situational analysis examines internal factors such as strengths and weaknesses, opportunities and threat.  It details the 5C's; company consumer, competitor, collaborators and context which answer questions about the business.  It also lists market attractiveness assessment to illustrate potential new markets.  The competitive advantage section compares the business to its main rival and points outs pros and cons.  At the end of the analysis, the key issues have been identified, documented and assessed. 

My situational analysis for Pharmasim was challenging.  There were a lot of moving parts that I had to be mindful about.  While it all comes together to form one body of work, I broke each component down into more manageable parts and then reassembled.  If I had to chose the most difficult part it would be the market attractiveness.  There were many variables that required review to accurately assemble this component.  Overall, I find this was a really good exercise.  I learned what is necessary to improve performance and find I have a clear path for my marketing strategy.  Now if I can just bolt a supercharger on this thing...

 

Consumer Decisions

Customer Needs

AT&T offers a wide range of valuable products and services to its customers. In each instance, AT&T's core business is to satisfy the customer's connectivity need. Whether the consumer calls family and friends, browses the internet, sends text messages, pays bills, watches digital television and even streams live video... it is all part of connectivity.  The Company's previous slogan " Your World Delivered"  focused to provide each and every customer with the connectivity to everything they find important in "their world".  This purported a customized wireless service based on individual needs of connectivity.

Benefits

To understand the benefits of AT&T products, let's construct a hierarchy of benefits ladder to illustrate the various benefit levels provided to the consumers. 

 

Emotional Benefits (TOP RUNG): Always on connectedness, communication with family and friends, prestigious brand, strong brand name, most current device product line, competitive value and let's face it... where the IPhone began.

Functional Benefits (MIDDLE RUNG): Fast data network, able to talk and browse simultaneously, nationwide coverage, emergency service with life saving accuracy, minimized call disruption, mobile internet access, email and talking voice mail

Attributes (LOWER RUNG): Competitively priced, LTE network, newest devices, continuous innovation, national coverage, E911 location service, reliable network, user features

 

Consumer Decision Making

As we all know, the cell phone market is saturated.  Most consumers that want or need a mobile phone already have one.  Therefore, a majority of the consumer decision making would be considered nominal because there is not much searching for alternative carriers.  These customers are brand loyal and the purchase (renewed contracted) decision does not require a lot of thought.  However, when consumers are dissatisfied with their current wireless carrier, the decision making becomes extended decision making.  There is high purchase involvement by the consumer and a lot research conducted to find the best carrier alternative. 

 

Week 4: Competition

AT&T contends with multiple competitors in the wireless business and the competition is increasing.  Per Federal Communication Commission regulation, we share our service areas with PCS licenses, other wireless licenses and enhanced mobile radio licenses which promote the presence of multiple competitors.  AT&T direct competitors are Verizon Wireless, T-Mobile, and Sprint.  These competitors have a similar, if not exact, business models. This characteristic is why they are AT&T direct competitors. The below chart illustrates other attributes of the companies. 

	AT&T	SPRINT	Verizon
Market Cap:	179.25B	23.56B	132.21B
Employees:	245,350	39,000	180,900
Qtrly Rev Growth (yoy):	0.02	0.00	0.04
Revenue (ttm):	127.47B	35.44B	118.26B
Gross Margin (ttm):	0.56	0.42	0.61
EBITDA (ttm):	28.19B	5.30B	32.45B
Operating Margin (ttm):	0.10	0.02	0.13
Net Income (ttm):	7.30B	-4.33B	1.56B
EPS (ttm):	1.31	-1.44	0.55
P/E (ttm):	25.84	N/A	84.62
PEG (5 yr expected):	2.08	N/A	1.78
P/S (ttm):	1.38	0.68	1.11

While AT&T has a few direct competitors it also has a lot of indirect competitors.  In the wireless division, our indirect competition is any company that offers phone apps, wireless advertising and WiFi/Internet capabilities.  Our indirect competitors do not offer the same exact service but have the ability to gain market share because of a somewhat similar product or service.  For example, Google is a good example of an indirect competitor.  They have their own phones (Android) and are expanding their presence around wireless.  It will only be a matter of time before Google buys a secondary wireless company to become a direct competitor.

 

Not so long ago AT&T was concentrated on wireless and wire line consumer markets.  Our customers were distinctly identified by devices, service features and plan pricing.  Our competitors each have unique offerings that differ slightly while still offering similar service.  However, the entire base market is converging.  We are still focused on bringing it all together for our customers with innovative smart phones and next generation TV services but we also have a distinct focus on IP growth.  As the world moves increasingly faster towards IP based solutions we have additional priorities. We will lead the next wave of growth to meet the demand for higher speed broadband access.  Our IP will enable full access everywhere, all the time and in every device to meet customer needs.  We see a dramatic increase in video and live streaming that will test network capacities.  We believe this is where all markets will converge into single devices that must be able to do it all.  In the future, the current smartphones won't be so smart.  The new market will demand intelligent devices connected to a cloud based solution and IP will be king.  AT&T has the most powerful IP backbone in the industry to support the future demand.  AT&T is not just going to be a segment leader but rather the corporation that leads the world into the communication future.  

Week 3: Q&A with an AT&T Insider

 

Why is AT&T performing above break-even?

AT&T increased total wireless subscriber base to 107 million and continued to lead all major U.S. wireless providers in smartphone penetration and average revenues per wireless contract subscriber. Our mobile data revenues grew 17.8 percent to a $27 billion annualized run rate. We also had increases in other products such as U-Verse.  We posted the largest annual increase in total AT&T U-verse TV and broadband subscribers to date bringing the total to more than 8 million. Additionally, U-verse revenues grew 37.9 percent at a $10 billion annualized run rate.
 

Overall AT&T revenues grew over $127 billion, the highest total in the company's history which adjusted earnings per share increased 8.5 percent.  Cash from operating activities topped $39 billion, up 12.8 percent from the previous year.

 

 Why is AT&T doing better than planned?

As consumers increasingly embrace the mobile life, teams across the company are exploring new ways to put smarter applications and seamless connectivity, literally, in the palms of consumer hands.  This has led to an unprecedented social media video explosion.  Subscribers are using data at an exponential rate which has bolstered awareness of the new LTE network.
 

Why is AT&T doing better than last period?

 A year ago AT&T identified several issues the company faced.  Our number one priority was to add spectrum, the airwaves that carry our customers’ mobile communications. We also said we would accelerate our company’s shift to growth businesses. Additionally, it was made clear that AT&T would take steps to further improve capital structure and return value to our shareowners.  As such, we continue to increase revenue while driving down operational costs. 
 

 How do social trends impact AT&T?

AT&T is a leading innovator in the technology sector.  AT&T works diligently to make the products that customers can use to enhance their daily life.  It is no surprise that customers are connecting to the internet... and staying connected.  This social trend has been on the rise for a decade but Facebook, Twitter and Linkedin have put on the afterburners and data usage is approaching stratospheric levels. As more and more social media outlets emerge, the need for mobile internet access will exponentially grow. 
 

What are some of AT&T environmental factors?

AT&T has strong competition from good reliable companies.  The company offer customer value products that continue to test AT&T innovation and marketing sense.  Another large environmental factor is the government.  AT&T spent $4 billion dollars on a deal, while somewhat risky, to solve the companies spectrum needs for the foreseeable future.  Unfortunately,  the DOJ thought this deal may stifle consumer options in the wireless arena.  As such, the deal fell through but the $4 billion was committed regardless.  Not many companies can spend $4 billion let alone spend it and not get anything in return except a tax receipt.  Another environmental factor AT&T experiences is with the handheld devices.  As newer, better, faster phones are released quicker to consumer, AT&T must be dynamic is supporting the customer needs.  Not that long ago customers were locked into a 2 yr. contract and the same phone.  Since the smartphone makers to releasing new products sooner AT&T had to adapt its marketing scheme, planning, customer care relationships very quickly to ensure customer satisfaction. 
 

Marketing can be as much as an art form as it is a science.  The science will demonstrate if the company is meeting its objectives.  The science will reveal true breakeven and more importantly... profit.  However, there is an art to all this.  The brand manager doesn't just  look at numbers on performance statement.  The brand manager will conduct situational analysis and then look at the industry.  There are even the occasional inventions that analysis and research just go out the window.  Remember the story about a small company that built the first personal computer while working out of a garage because they could? Even thought others had research data that stated they shouldn't...