AT&T & Verizon: Giants of Bell Systems - Coursework Example

 AT&T and Verizon – Giants of the Bell Systems Introduction Both AT&T Inc. and Verizon Communications Inc. are part of the Fortune 500. Based on the 2013 and 2014 top Fortune 500 ranking data, AT&T and Verizon ranked 11 and 16 respectively (Ranking the Brands, 2014; Fortune, 2013). In 2015, Verizon managed to improve its Fortune 500 ranking up to rank 15 after it acquired AOL (Fortune, 2015a). Despite being the 2nd biggest mobile operator in the United States, AT&T’s ranking suddenly dropped from 11 down to 12 (Fortune, 2015b). Both AT&T and Verizon were quite active in their decision to acquire other related companies (Fortune, 2015a). Given the huge differences in these two (2) companies’ business performance and revenues, this essay will purposely analyze the relevance and significance of several economic indicators such as employment and unemployment rate, gross domestic product, inflation rate, consumer price index, consumer confidence index, and producer price index. Eventually, several highly recommended strategies were clearly outlined in order to provide the top management of these two (2) companies some ideas on how they can maximize their revenues in the upcoming years. Economic Indicators Relevant to the Case of AT&T and Verizon Employment and Unemployment Rate Both AT&T and Verizon offer products and services that are related to wireless or wired broadband networks and telecommunications (Waters, 2014). Economic indicators such as employment and unemployment rate could somehow explain why there is an increase or decrease in the sales, profit, and revenues of AT&T and Verizon (AAII, 2015). Normally, if the employment rate is high, more people in the United States can have more money to purchase certain products and services offered by these two (2) telecommunication companies. On the contrary, assuming that the unemployment rate is high, it means that more people will have no fixed income which is necessary to enable them to pay extra money for their telecommunication needs. When this happens, more people would stick to their old mobile gadgets rather than purchasing a new model sold by both AT&T and Verizon. Gross Domestic Product (GDP) As a coincident and procyclical indicator, the gross domestic product (GDP) can be used in determining whether or not the U.S. economy is going up. Using GDP information, AT&T and Verizon can easily predict the status of the U.S. economy. As such, each time the U.S. GDP increases, both AT&T and Verizon could experience a sudden increase in the total monthly sales. On the contrary, each time the GDP decreases, both AT&T and Verizon could experience a sudden decrease in their total monthly sales. Information related to GDP can be very useful for companies like AT&T and Verizon. First and foremost, the GDP report can make their managers easily forecast the possibility of having a strong market demand within the next couple of months. As soon as these companies were able to predict an increasing market demand for their products and services, both AT&T and Verizon can decide whether or not there is a need for them to put up new stores in different geographic region. Using their monthly sales record, both AT&T and Verizon can predict which among the items they are selling are more in demand. Therefore, each time the GDP is high, the top management of both AT&T and Verizon can easily prepare more stocks on their fast moving items. All these can contribute to the increase in their monthly sales and revenues. Inflation Rate Inflation rate normally gauges the prices of goods and services sold in the market. Often times, a very high inflation rate means that a dollar can purchase less products and services as compared to times when the inflation rate is much lower. Every time the inflation rate is high, the salary or income a person would receive each month would have a much lesser purchasing value. When this happens, more people would try to purchase only the most important products or services they need in order to survive. For example, it is possible that each time the inflation rate is high; more people would make use of their money to purchase food items and beverages rather than to purchase a new mobile gadget from either AT&T or Verizon. This could mean a business opportunity loss for these two (2) companies. Within this context, it is safe to conclude that the ability of FED to control inflation rate could mean having a more stable price index (Grey, 2002, p. 118). In the United States, inflation rate should range only between 0 to 2.5% (Grey, 2002, p. 118). Consumer Price Index (CPI) Consumer price index (CPI) is pertaining to the market price changes that occur in the consumer items that are being purchased by each household (International Labor Office, 2004, p. 236). Similar to what has been discussed under the subheading ‘inflation rate’, the higher the CPI could mean that members of the household would be forced to re-examine the volume of goods or services they purchase each month. Although the gadgets or tools used in mobile or internet connection can be considered as something very important in our everyday activities, one cannot deny the fact that basic commodity such as food and shelter remains the most important. For this reason, more people would unlikely purchase a new product and services offered by both AT&T and Verizon each time the CPI is high. This could negatively affect the short-term business performance of both companies. Consumer Confidence Index (CCI) Consumer confidence index (CCI) is another economic indicator that can be use to guide investors when deciding which company they should invest their money. Based on household surveys, a high CCI could help public investors identify companies most people have positive perception and confidence level. Using the recently reported CCI figure, people could easily measure how most people in general could feel about the current economic performance and how it would be like within the next 6 months (Barnes, 2015a). Both AT&T and Verizon can take advantage of using the CCI figure each time they try to predict or determine consumer spending within the next few months. Usually, a high CCI value means a higher consumer spending and consumption, expenditures, and retail sales (Barnes, 2015a). Since the CCI household survey can be conducted within a specific region or geographical boundaries, the top management of AT&T and Verizon is expected to be able to predict consumer spending in different regions (Barnes, 2015a). Producer Price Index (PPI) Producer price index (PPI) is all about the prices’ weighted index based on the producer level. Often times, PPI is referring to the prices of products and/or telecommunication or internet services sold by both AT&T and Verizon. One thing good about taking the PPI figures into consideration is that this value can help these companies determine the future CPI (Barnes, 2015b). Likewise, the PPI values can also be used by these two (2) companies each time they intend to positively cause significant changes in the market (Barnes, 2015b). Highly Recommended Strategies To be able to maximize AT&T and Verizon’s revenues, the top management of these two (2) companies should consider the following strategies: 1. Make it a habit to regularly check and monitor economic indicators that could affect their short-term and long-term business performance; 2. Create an organizational culture that gives importance to all economic indicators that could play a significant role in their business decisions (i.e. in group meetings, reports, etc.); 3. Educate or provide in-house training to all AT&T and Verizon’s staff regarding the concept and significance of each identified economic indicators to their long-term business goals; 4. Encourage the top managers of AT&T and Verizon to make important decision-making using the economic indicators mentioned earlier; 5. Establish or set clear organizational goals; and 6. Continuously monitor the companies’ monthly sales performance per item or service. Conclusion Economic indicators are useful information that could guide the top management of Fortune 500 companies when making important business decisions. Aside from being able to presume how the consumers would patronize the products and services they sell in the market, economic indicators are equally useful in determining how these companies could easily attract more consumers to purchase their products and services and more public investors to invest in their company. Likewise, economic indicators are useful tools that can inform us clearly about what is going on in the U.S. economy. In practice, the top management of both AT&T and Verizon are strongly encouraged to consider and put the recommendations highlighted above into practice. However, to be able to make full use of these economic indicators, the top management of both AT&T and Verizon should be aware that economic indicators can be acyclic, countercyclic, or procyclic by nature. As such, the top management of both AT&T and Verizon should keep in mind that they should focus more on the use of economic indicators that are procyclic (i.e. GDP, interest rates, employment rate, etc.). Often times, procyclic economic indicators are the ones that can make them easily foretell where the economy is going. Acyclic economic indicators are of no importance since it does not tell much about the status of the economy. Lastly, the top management of both AT&T and Verizon should be wary of countercyclic economic indicators such as unemployment rate. Each time the unemployment rate is high; these two (2) companies should expect lower sales and revenues. References AAII. (2015). The Top 10 Economic Indicators: What to Watch and Why. Retrieved June 16, 2015, from http://www.aaii.com/investing-basics/article/the-top-10-economic-indicators-what-to-watch-and-why Barnes, R. (2015a). Economic Indicators: Consumer Confidence Index (CCI). Retrieved June 16, 2015, from http://www.investopedia.com/university/releases/consumerconfidence.asp Barnes, R. (2015b). Economic Indicators: Producer Price Index (PPI). Retrieved June 16, 2015, from http://www.investopedia.com/university/releases/ppi.asp Fortune. (2015b). 12. AT&T. Retrieved June 15, 2015, from http://fortune.com/fortune500/att-12/ Fortune. (2015a). 15. Verizon. Retrieved June 15, 2015, from http://fortune.com/fortune500/verizon-15/ Fortune. (2013). Fortune 500 2013. Retrieved June 15, 2015, from http://fortune.com/fortune500/2013/wal-mart-stores-inc-1/ Grey, G. (2002). Federal Reserve System: Background, Analyses and Bibliography. New York: Nova Science Publishers Inc. International Labor Office. (2004). Consumer Price Index Manual: Theory and Practice. Geneva: ILO Publication. Ranking the Brands. (2014). Fortune U.S. 500 (100)| 2014. Retrieved June 15, 2015, from http://www.rankingthebrands.com/The-Brand-Rankings.aspx?rankingID=131& Waters, J. (2014, March 29). Prepare to Hang Up the Phone, Forever. Telecom Providers Want an End to the Landline. Retrieved June 16, 2015, from http://www.wsj.com/articles/SB10001424052702303325204579465321638954500 Read More