Environment analysis of any organization is considered as major tool through which strategies of the organization are formulated, managed, and changed as per requirements. It mainly includes two aspects that are internal and external analysis, and both the analysis are important in terms of ensuring the growth and competitiveness of the organization. This assignment mainly discusses the internal and external environment analysis of the Charter communication, an organization which operates its business in the Cable and telecommunication Industry.
Structure of this assignment mainly includes the Brief description of the Charter communication, industry overview in which organization operates its business, external environment and industry analysis which is improved on the basis of previous assignment. It also discusses the internal environment analysis and literature review on strengths and weakness of the organization, and also the effect of strengths and weakness on the performance and competitiveness of organization. Further, it discusses the SWOT analysis of the organization and at the end brief conclusion is stated in terms of concluding the key facts of the paper.
Charter Communication (CC) was established in 1933 by Barry Babcock, Jerald Kent, and Howard Wood. All three were formed executives of Cencom Cable Television in St. Louis, Missouri. This organization was also incorporated in the Missouri stated in the year 1933.
Presently, CC is the second largest cable provider in USA, as this organization achieved growth with the help of innovation and acquisitions of the properties related to cable. Recently, it completes the transactions with the Time Warner Cable and Bright House Networks. This name of charter comes from the founding of Charter Communications, Inc. in 1993, and even though organization has grown and evolved on number of levels from last two decades, then also roots of this organization is embedded from early days of cable industry (Charter Communications, 2018).
Charter Communication is the fastest growing organization of USA in terms of TV, internet, and voice arena. This organization contributes in the growth of economy of USA and also ensures innovations for their customers so they are able to get the required information and entertainment. The main aim of this organization is to give better products at better value, and they do this by simplifying their offerings and pricings so that it becomes easy for the customers to choose the best products.
In context of achieving these goals, this organization further commits to create jobs in America. CC employs almost 95000 workers, and out of these workers almost 12% are veteran and 45% are people of color. All these employees served almost 26 million customers in 41 states. From the year 2012, CC employed almost 22000 U.S. workers and they aim to hire 20,000 more by the year 2020.
In terms of ensuring that customers are able to access the content of best nature on all those platforms on which they want. Combined organizations make investments of almost $23 billion in technology and infrastructure from the year 2014. The outcomes of these investments are effective in nature, as this organization offers fastest base broadband speed of Telecommunications & cable industry. In next five years, CC focusing on extending the network to almost 2 million new customer locations and also by updating the combined company’s Time Warner Cable and Bright House Networks to be all-digital just like Charter’s network (Charter Communications, 2018).
The industry in which CC operates is highly competitive over decades, and become more competitive in recent years. However it also provides number of new opportunities to the organizations operates its business in this industry.
From last five years, cable providers in the US industry reflect the growth by 0.2% in terms of reaching the revenue of $100 billion in 2018. At the similar time, there are number of business which has been declined by -1.0% and the number of employees has been declined by-1.6% (IBIS World, 2018).
Cable industry traces its base from 1940s, as at that time license is required to broadcast any new TV stations, the proprietors of the appliance store began offerings his rural customers which are basic forerunners for present cable services. 60 years later, almost 85% of American households subscribe to any type of TV-pay services. There are number of peoples which are relying on their local cable companies for basic phone and internet services. Investors hold the choice between the providers of landline and satellite broadcasters. Usually, traditional cable organizations rule in those areas which have high population (Value line, no date).
On the other hand, Telecommunication service market of USA mainly includes the fixed-network services and mobile services, and this had a value of almost 1.4 trillion U.S. dollars in 2017 and this is forecasted to grow almost 1.46 trillion dollars by the year 2020.
From last 15 years, mobile and voice technologies are become more important, as it is expected by market that they gain space on continuous basis in the telecommunication service industry, and this happen because number of mobile connections across the globe might reached to 9 billion by the year 2020 that is almost twice from the statistics of 2009. Another key for CC in this industry is the wireless data, and this can be said because investments related to the wireless data across the globe might reach to 500 billion dollars by the year 2019 (Statista, 2018).
The telecommunication industry of USA disappoints its investors in the year 2017, but it shows the sign of improvements from the fourth quarter of 2017, as this is the time when major stocks of this industry performs well in the market. It must be noted that all four national carriers of this industry gained the postpaid subscribers in the last reported quarter.
Further, it is necessary to understand that this industry is highly capital intensive in nature and because of this any investment in all the tangible, intangible, and real property will ultimately provide advantage to the telecom carriers. This would encourage the telecom operators in terms increasing the investment for capital expenditure (NASDAQ, 2018).
Maximum times, CC competes with the organizations which have very less regulatory burdens, better access to financing, good personal resources, good resources for marketing, favorable recognition of brand name, and also the strong connections with the customers and regulatory authorities. Enhancement of consolidation in the cable industry and also the cancellation of the particular ownership rules give additional advantages to few of their competitors in different ways such as easy access to financing, resources, and other efficiencies. Residential video services of the organization faces the competition from different sources and this includes services related to direct broadcasting satellite and some other organizations also which deliver mobiles, television shows, and other video programming’s over the broadband internet connections to TVs, computers, etc. Residential internet services of the CC face competition from the phone companies’ DSL, FTTH and wireless broadband offerings and also from other companies which offer different form of online services which further includes the wireless and satellite-based broadband services (Charter Communications, 2018).
PESTEL analysis of Charter communications is the strategic tool which is used for evaluating the macro environment of the industry in which organization operates its business. PESTEL mainly includes the political, economic, technological, environment and legal factors which directly or indirectly affects the macro environment of the CC. Further, it discusses the porter five forces in terms of evaluating the industry dimensions for ensuring effective strategy of the organization.
Political Factors- The political factors involves high amount of risk for the telecommunication industry and cable industry. The traditional political factors in terms of telecom industry are the ones which deal with the regulations, networks, licensing, national radio spectrums, and particular nations trade barriers. Usually, it affects the network operators and the effect in this context has been felt less by different equipment’s and service providers. However, few factors work in the favor of this industry such as privatization and deregulations.
FCC imposes number of regulations on the cable and telecommunication industry, and it becomes necessary for CC to comply with these regulations. All these regulations impose additional burden on the organization and in case organization fails to perform then it will face severe complications. Following are the regulations which directly or indirectly affect the performance and competitiveness of the CC-
Each and every regulations stated above restrict the business practices in different forms and it also imposes additional cost on the business.
Economic factors- CC is exposed to the risk associated with the economic conditions of their present and potential customers, the potential financial instability of the customers of the organization and their financial ability in terms of purchasing their products. The role of economic factors is important in terms of the telecommunication industry. Recession hit the telecom sector, as people were cutting down the telecom spending during the recession. Cutbacks related to landlines had grown during the recessions while the growth the cellular services had slowed. After the pass of recession, spending’s related to consumer on telecom is back on track. By 2009, people had stopped cutting down the expenses related to telecom uses. In the year 2016, things becoming good and with the economic revival, as this means that things are changing across the globe.
At the time of general economic downturns, CC faces increased cancellations of their customers or the unfavorable changes in the mix of the purchased products. This further includes the increase in number of homes that mainly replace their video services in terms of internet-delivered which directly impose negative impact on the ability of the organization to attract its customers.
Weak conditions in economy further effects the ability of organization to gain new video subscribers, as it enhance the dependency to the large extent on growth in the area of occupied housing and service. It must be noted that, this is influenced by both local and national economic conditions of USA.
Social Factors- Shared beliefs and attitudes play significant role in the driven the way through which marketers at CC will understand the customers of the given market, and the manner through which these marketers design the marketing message for their consumers. Following are the social aspects which need to be taken care by the CC in terms of avoiding the negative impacts of these factors on the performance and competitiveness of the organization-
Technological conditions- Technology is the factor which affects the industry of cable and telecommunication in fastest way, as it disrupts all the organization operates its business in the stated industries. In case of charter Communication also technology play important role in the growth and competitiveness of the organization, as number of steps are taken by this organization also in terms of dealing with the technological challenges imposed by the industry-
Environment factors- Telecom sectors major contributed in the e-waste every year, as in the light of the level of e-waste generated by both service and equipment providers, it is necessary for the CC to focus on the waste management and reducing the footprint on environment. Large numbers of investors are investing in reducing the intensity of carbon, as there an organization which implements the additional 24 MW of green energy by the year 2025. As they make the direct contribution to the production of e-waste, as CC needs to focus on the recycling of device. This helps in reducing the negative impact on the environment and become the organization more sustainable in nature.
Legal factors- Legal environment in US is strict in terms of both telecom industry and cable industry, as numbers of regulations are imposed on the organization operates in this industry. There are number of legal factors which directly affect the working of CC in this industry, and non-compliance of these factors directly results in severe consequences.
On December 2017, FCC introduces new regulations in terms of the broadband internet access providers. It must be noted that, broadband service providers are obliged by the Communications Assistance for Law Enforcement Act (“CALEA”) in terms of configuring their networks in such manner as it facilitates the law enforcement ability of the organization, accurate legal authorization, etc. Further, there two legal methods and both the methods are alternative in nature for carrying the local broadcast television stations on cable systems. Federal must carry the regulations require the cable systems to carry the local broadcast stations (charter Communication, 2017.
Following are the five forces which drives the industry in which Charter Communications operates its business-
Entry of New Competitors Threat- barriers related to market entry are low, as existing carriers had major cost advantages to the new entrants from government institutions and because of this market regulations support the new participants from entering or competing into the market.
Threats of substitute- Threat of substitutes are high in this industry, as each and every product offered by CC face the threat of substitute in the telecom and cable industry. TV broadcasts are substituted by the Netflix, as this can be considered as major threat for the cable connections. Further, voice communications are threatened by the messengers such as Whatsapp.
Bargaining power of buyers- buying power of buyers in this industry is high and this happen because of the increase competition and new entrants. As buyers have number of options and they are not obliged to being loyal to any one organization.
Bargaining power of Suppliers- There is number of suppliers in the telecom industry of USA and because of this bargaining power of these suppliers is low, but few factors are there which gives high power to the suppliers such as innovative technology, good quality, and efficiency in cost.
Existing competition- Another important force is the existing competitors, as there are number of competitors which directly influence the moves the CC such as Comsat. This organization stands on the 1st position of this industry and gives tough competition to its competitors (Charter Communications, 2016).
CC made the headlines in the late may 2015 at the time when it announces its plans to purchase the Time Warner Cable (TWC) for $55 billion. The Stamford, Connecticut-based cable telecommunications corporation on its detector for years, and Comcast Corporation (CMCSA) also failed to acquire this because of these regulatory issues. At this time, charter made the smart move and this deal made the organization 2nd largest cable and internet provider in the United States. Because of this merger, charter gains almost 12 million subscribers in the significant areas such as New York, Dallas, and Los Angeles markets. Through this charter solidified its position and ensure long term growth prospects of the organization. This reflects major strengths of the organization in the industry in which it operates (Charter Communication, 2015).
This acquisition and other initiatives taken by organization directly affect the future performance and provide competitive advantage to the organization. It ensures growth in revenue at the end of decade. Internet service of charter further drives the business of the organization. Further, its strengths are reflected from the boost occurred in the cable properties in Los Angeles and New York City. It must be noted that, both the deals done by the organization includes the profitable sports broadcasting rights.
There are some short term investments and decisions made by the organization also contributes in positive manner for the business, as it allow the organization to offer number of improved services to the customers such as they offers residential and commercial customers a digital voice, data, and telephone package. All these services mainly provide the greater bandwidth and higher definition video. We further think that short term investments in the digital infrastructure ultimately benefit the organization in long run (Friederiszick, 2008.
There are few weaknesses also which affects the profitability and success of the organization in negative manner such as lack of customer satisfaction. Charter communication is the customer center organization, and this is the biggest reason because of which organization needs to focus on its customer service. Poor customer services, hidden costs, and high cost on rental equipment’s and number of complaints which are launched against this organization, and all these complaints directly affects the reliability and trust of customers in negative manner. If these practices are conducted in the similar manner, then it definitely affects the profitability and long term sustainability of the organization in negative manner.
Strengths- There are few strengths of the organization which not only supports the performance of the organization, but also ensures competitive advantage for the organization such as organization has made more interesting deals in the year 2017 such as addition of Bright House Networks and above stated Time Warner Cable. The bright house networks were purchased for $10.5 billion in cash and stock, and result in the enhanced coverage for the Charter in the Midwest and other regions of Florida. On the other hand, later deal ensures the leading position in New York City and alters it into California’s leading cable provider. Strength of the organization further reflects through the short-term investments made by the organization in terms of ensuring best services for the customers (Charter Communication, 2016). All these strengths of the organization ensure competitiveness of the organization and ensure competitive advantage for it over its competitors.
Weakness- Weakness in operations must be considered by the organization while framing its strategies such as low profitability of the organization is the continuous stress for the organization and its shareholders, as this is one of the biggest prospects which adversely affect the portfolio of the organization. Another issue faced by organization is the lack of customer satisfaction, and this is the area which required the focus of the organization on priority basis. Poor services to customers and hidden costs are the major issues faced by the organization, and it is necessary for the organization to resolve these issues on immediate basis (Phadermrod, Crowder & Wills, 2016).
Opportunities- There is number of opportunities which can be grabbing by the organization in terms of ensuring long term sustainability of the organization such as above stated acquisitions allow the organization to ensure better margins and subsequently better results for its shareholders, as both the deals gives the major market areas to the organization. Further, Charter further make announcement related to its rebranding of residential services in the year 2013, as this allowed the company to ensure substantial reserves in terms of updating its coaxial cable network. With this developed infrastructure and better servicing, organization can ensure best services for their customers and overcome from their weakness.
Threats- Threat of substitute products and existing competition is high for the organization, and relevant steps must be taken by the organization for managing both the threats in effective manner. As each and every product offered by CC face the threat of substitute in the telecom and cable industry such as TV broadcasts are substituted by the Netflix, as this can be considered as major threat for the cable connections. Further, voice communications are threatened by the messengers such as Whatsapp (Value line, 2015).
Conclusion
After considering the facts of this paper, it can be said that this organization becomes the leader in the telecommunication and cable industry because of its effective strategies, as it conducts the effective evaluation of its internal and external factors in terms of enhancing its performance and gain competitive advantage for itself. Presently, CC is the second largest cable provider in USA, as this organization achieved growth with the help of innovation and acquisitions of the properties related to cable. Recently, it completes the transactions with the Time Warner Cable and Bright House Networks. Because of this merger, charter gains almost 12 million subscribers in the significant areas such as New York, Dallas, and Los Angeles markets. Through this charter solidified its position and ensure long term growth prospects of the organization. This reflects major strengths of the organization in the industry in which it operates. There are some short term investments and decisions made by the organization also contributes in positive manner for the business, as it allow the organization to offer number of improved services to the customers such as they offers residential and commercial customers a digital voice, data, and telephone package.
There are few weaknesses also which affects the profitability and success of the organization in negative manner such as lack of customer satisfaction. Charter communication is the customer center organization, and this is the biggest reason because of which organization needs to focus on its customer service. CC is unprotected to the risk related with the economic circumstances of their present and potential customers, the potential financial instability of the customers of the organization and their financial aptitude in terms of purchasing their products. In the year 2016, things becoming good and with the economic revival, as this means that things are changing across the globe. At the time of general economic downturns, CC faces increased cancellations of their clienteles or the unfavorable changes in the mix of the purchased products.
References
Charter Communications, (2016). Annual Report 2016. Retrieved from https://ir.charter.com/static-files/766daee3-5ff2-410d-b535-193acc66bcd5.
Charter Communications, (2017). Annual Report 2017. Retrieved from https://ir.charter.com/static-files/1446750d-6d85-4e23-8746-37e56a565e81.
Charter Communications, (2018). About Charter. Retrieved from https://newsroom.charter.com/company-profile/.
Charter Communications, (2018). About Us. Retrieved from https://policy.charter.com/about/.
Fratzscher, M., Lo Duca, M. and Straub, R., 2017. On the international spillovers of US quantitative easing. The Economic Journal, 128(608), pp.330-377.
Friederiszick, H.W., 2008. Analyzing the relationship between regulation and investment in the telecom sector.
Hosein Rezazadeh Mehrizi, M. and Pakneiat, M., 2008. Comparative analysis of sectoral innovation system and diamond model (the case of telecom sector of IRAN). Journal of technology management & innovation, 3(3), pp.78-90.
IBIS World, (2018. Cable Providers Industry in the US. Retrieved from https://www.ibisworld.com/industry-trends/market-research-reports/information/broadcasting-telecommunications/cable-providers.html.
NASDAQ, (2018. U.S. Telecommunications Industry Outlook – March 2018. Retrieved from https://www.nasdaq.com/article/us-telecommunications-industry-outlook-march-2018-cm937417.
Phadermrod, B., Crowder, R. M., & Wills, G. B. (2016). Importance-performance analysis based SWOT analysis. International Journal of Information Management.
Statista, (2018). Telecommunication services – Statistics & Facts. Retrieved from https://www.statista.com/topics/2665/telecommunication-services/.
Value line, (2015). Charter Communications: A Short SWOT Analysis. Retrieved from https://www.valueline.com/Stocks/Highlights/Charter_Communications__A_Short_SWOT_Analysis.aspx#.W_koITgzbIV.
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