strategic management analysis on level 3

7/30/2019 Strategic Management analysis on Level 3

1/18

LEVEL 3 COMMUNICATIONS

M Khairul Alam 062 070 030Mubina Akhter 063 447 530Farah Deeba 071 728 030M Arefin Hossain 072 504 030Samiha Tasnim Rahman 101 0341 030


2/18

INTRODUCTION

Level 3 Communications is a fiber optic networkproviding company that was established to build

high capacity fiber optic network and attractingdemand from major users of fiber optic networks,including corporations, internet service providers likeAOL and other telecommunications companies.


3/18

COMPANY BACKGROUND

Crowe established the company to build a state ofthe art fiber optic network called Level 3

Funded by wealthy investors including Crowe,

Walter Scott Jr. (Omaha based constructionbillionaire)

In 1998 the company went public and startedbuilding fiber optic network


4/18

THE LEVEL 3 NETWORK

Level 3 set built the first international network in the world

to be continuously upgradeable and fully optimized for

Internet Protocol.

The network was constructed with multiple conduits

which is a critical capability in an era of rapid

technological change.

Completed in 2001, Level 3s network today operates as

one of the worlds newest and most advanced

telecommunications platforms. Level 3 operates multi-conduit metropolitan networks

in 36 cities in Europe and North America.

The company also has more than 70 data centers across

the U.S. and Europe providing state of the art technical

space where its customers can gain direct connectivity


5/18

PRODUCTS AND SERVICES

Internet Protocol (IP) services

Managed modem dial-up services

Broadband transport

Voice over IP (VoIP) services

Private packet-switched services

DSL Aggregation

Colocation

Metropolitan and intercity dark fiber


6/18

CONTINUED

The company is one of the largest providers ofwholesale dial-up service to Internet ServiceProviders (ISPs) in North America.

Level 3 is also the primary provider of Internetconnectivity for millions of broadband subscribersthrough its cable and DSL partners.

Based on the amount of Internet traffic on Level 3s

IP backbone, Level 3 is among the largest Internetcarriers in the world.


7/18

STATE OF THE INDUSTRY

The Telecommunications industry has experienceda perfect storm over the past fouryears

Technological advancements and the effects ofregulatory changes have dramatically shifted thecompetitive landscape

With financial distress came numerous bankruptcies,accounting improprieties and accusations ofseveral industry executives that have shaken

investors and customers confidence in the industry Oversupply remained a problem as weaker players

restructured through the bankruptcy process orwere rescued by financial buyers


8/18

SWOT ANALYSIS

Strength :

Supply Chain

Economies of Scale

Unique Products Technology


9/18

Weakness:

Work Inefficiencies

High Debt Burden

Bad Acquisitions Acquisition Integration


10/18

Opportunities:

Infrastructure Spending

More Innovation

New Products, Services International Expansion

Data Services


11/18

Threats:

Bad Economy Hurts Growth Potential

Intense Competition Limits Opportunities

Government Regulation Volatile Revenue

Substitute Products


12/18

PORTERS FIVE FORCES

Threat of new entrants to an industry HIGH

When companies like 360 networks, Global Crossing, QuestCommunications, WorldCom move into the industry they willgain market share & rivalry will intensify

The position of existing firms UUNet, Level 3 could have beenstronger if there were barriers to entering the market

If barriers to entry are low then the threat of new entrantswill be high, and vice versa


13/18

PORTERS FIVE FORCES (CONTD.)

Bargaining power of suppliers LOW

As far as there are a number of telecommunication firms in a

market then suppliers have low bargaining power

Suppliers are often unable to exercise their power

Sell their products at a lower price to firms


14/18


Bargaining power of customers HIGH

Fiber-optic network users are few in range

The purchases a significant proportion of output of anindustry

They possess a credible backward integration threatthatis they threaten to buy the producing firm or its rivals

Network Corporations and other can choose from a widerange of supply firms

They find it easy and inexpensive to switch to alternativesuppliers


15/18


Threat of substitute products LOW

The extent to which the price and performance of thesubstitute can match the industrys product

The willingness of customers to switch

Customer loyalty and switching costs


16/18

Degree of competitive rivalry HIGH

Price wars (competitive price reductions),

Investment in innovation & new products

Intensive promotion (sales promotion and higher spendingon advertising)


17/18

STRATEGY USED BY LEVEL 3

Level 3's new strategy is to combine its sprawlingnetwork with two powerhouses of softwaredistribution. It can then in theory offer big

companies delivery of commercial softwarepackages, asset management and softwarelicensing, all in a digital format.

The acquisitions of CorpSoft and SoftwareSpectrum--the No. 2 and No. 3 software distributorson the market


18/18

CONCLUSION

Level 3 continued investments in infrastructure tobecome a world-class communications provider, andwon the trust of the world's most sophisticatedcommunications companies. Level 3s bankers began

approaching the management team with suggestionsthat Level 3 could raise money in the convertible andsenior secured debt markets. With this guidance fromthe bankers, management saw an opportunity to issue

debt to refinance a portion of the 2008 maturities. Thebad news is that heavyweights like Dell Computer andIBM are Level 3's new competitors.

strategic management analysis on level 3

Documents