Use your selected company from Weeks 1-2 for this week’s assessment. (ADT company)
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A primary technique of deeper analysis of an organization is the Porter’s Five Forces Model. This technique is often used when looking at your competitive advantage. Looking at your competitive advantage is important to aligning your operational needs with your business strategies.
Review sources on your company. Analyze the company using Porter’s Five Forces.
Write a 2- to 3-page proposal to the company of your plan to align the operational needs with business strategies based on your analysis. Include the following in your proposal:
o An analysis of the company based on Porter’s Five Forces
o An analysis on the effectiveness of the contingency leadership model the company is currently using
o Recommendation for the following actions:
o Leadership model changes
o Further actions needed to align operational needs with business strategies identified in Week 1
Include and cite 2 resources besides the text.
Format your citations according to APA guidelines.
COMPANY PROFILE
ADT Inc
REFERENCE CODE: 6E17D6C2-FB24-4C14-8387-9A0D724DB63A
PUBLICATION DATE: 10 Jul 2019
www.marketline.com
COPYRIGHT MARKETLINE. THIS CONTENT IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED OR DISTRIBUTED
A Progressive Digital Media business
ADT Inc
TABLE OF CONTENTS
ADT Inc
© MarketLine
Page 2
TABLE OF CONTENTS
Company Overview ………………………………………………………………………………………….. 3
Key Facts …………………………………………………………………………………………………………. 3
SWOT Analysis ………………………………………………………………………………………………… 4
ADT Inc
Company Overview
ADT Inc
© MarketLine
Page 3
Company Overview
COMPANY OVERVIEW
ADT Inc (ADT) is a provider of monitored security, interactive home and business automation and related
monitoring services. It offers home and business security systems and services for video surveillance,
access control, temperature monitoring, burglary monitoring, flood monitoring, fire and smoke monitoring,
carbon monoxide monitoring, and medical alert monitoring. It also offers monitoring centre supported
personal emergency response system (PERS) products and services. The company operates in the US
and Canada, and is headquartered in Boca Raton, Florida.
The company reported revenues of (US Dollars) US$4,581.7 million for the fiscal year ended December
2018 (FY2018), an increase of 6.2% over FY2017. In FY2018, the company’s operating margin was
0.1%, compared to an operating margin of 6.5% in FY2017. The net loss of the company was US$609.2
million in FY2018, compared to a net profit of US$342.6 million in FY2017.
The company reported revenues of US$1,243.1 million for the first quarter ended March 2019, an
increase of 4.9% over the previous quarter.
Key Facts
KEY FACTS
Head Office ADT Inc
1501 Yamato Road
Boca Raton
Florida
Boca Raton
Florida
USA
Phone 1 561 3227235
Fax
Web Address www.adt.com
Revenue / turnover (USD Mn) 4,581.7
Financial Year End December
Employees 19,000
New York Stock Exchange Ticker ADT
ADT Inc
SWOT Analysis
ADT Inc
© MarketLine
Page 4
SWOT Analysis
SWOT ANALYSIS
ADT Inc (ADT) is one of the leading providers of electronic security, interactive home and business
automation and alarm monitoring services. ADT’s strong market position and sales and distribution
channel are its strengths, even as declining profitability could be a cause for concern. Strategic
acquisitions and growing construction industry will provide growth opportunities for the company.
However, intense competition could impact ADT’s business, results of operations and cash flows.
Strength
Market position
Sales and distribution channel
Broad portfolio of products and services
Improving Cash Reserves
Weakness
Declining Profitability
Opportunity
Strategic Acquisitions
Increasing demand: Smart Homes
Positive Outlook for the Global Construction Industry
Threat
Changing Customer Preferences
Lawsuits and litigations
Intense competition
Strength
Market position
ADT has a strong position in the markets in which it operates. It is one of the leading providers of
monitored security, interactive home and business automation and related monitoring services in the US.
ADT also has a strong brand image in these markets. The company serves approximately 7.2 million
customers in the US and Canada. It handles 15 million alarm signals annually and provides support from
around 240 sales and service locations. ADT is one of the market leaders in the residential security and
automation market and small business security and automation market.
Sales and distribution channel
ADT has a well-established sales and distribution channel that includes a mix of direct and indirect
channels. This multichannel model provides unique advantages to the company. It also secures new
customers through authorized dealer program, and to a small extent, through agreements with
homebuilders and related partners. The company’s has around 250 authorized dealers across the US and
Canada. In addition, the company has around 240 sales and service offices throughout the US through
which it provides monitored security and home/business automation system installations and field service
and repair. Further, the company operates six monitoring facilities which provide 24/7 support services.
The well-established multi-channel sales and distribution complements the company’s customer
segments, marketing channels, territories and promotional strategies.
ADT Inc
SWOT Analysis
ADT Inc
© MarketLine
Page 5
Broad portfolio of products and services
ADT offers a broad portfolio of products and services ranging from interactive home and business
solutions to home health services. The monitored security and home, and business automation offerings
of the company include installation and monitoring of residential and business security and premises
automation systems designed to detect intrusion, control access and react to movement, smoke, carbon
monoxide, flooding, fire, temperature and other environmental conditions and hazards, as well as to
address personal emergencies, such as injuries, medical emergencies or incapacitation. In addition, the
company offers a variety of alternate and back-up alarm transmission methods including cellular and
broadband internet. The home business solutions of the company include home security, home
automation, home health, and ADT plus solutions. The business solutions include business security,
business automation, and business bundles. In the health business, ADT provides monitoring center
supported PERS products and services. The health solutions include on-the-go emergency response
system, medical alert basic system, and medical alert plus system. The company also provides customer
service for routine maintenance and the installation of upgraded or additional equipment. The company
offers these services through key brands such as ADT and ADT Pulse.
Improving Cash Reserves
Sufficient cash or assets that are easily convertible to cash provide more flexibility to the firm and reduce
investors’ risk. The increasing cash reserves indicate the company’s ability to obtain debt to finance
acquisitions, capitalize on business opportunities, and meet capital expenditure or other capital
requirements in the future. Such position is favorable enough to meet its short term obligations efficiently.
ADT reported an increase in the cash and cash equivalents in FY2018. The company had US$363.2
million in cash and cash equivalents as of December 2018, as compared to cash and cash equivalents of
US$122.9 million in FY2017, reflecting an increase of 195.5%. As a result, ADT recorded net change in
cash of US$243.3 million in FY2018, as against a net change in cash of US$47 million in FY2017.
Weakness
Declining Profitability
The company’s profitability declined considerably in FY2018. It recorded low operating income and
margins. Its operating margin was 0.06% in FY2018, as against 6.54% in FY2017. The company reported
operating income of US$3 million in FY2018 indicating a decrease of 98.9% over that for FY2017. As a
result, its operating margin declined 647 basis points (bps) over 2017, which may indicate that the
company’s cost management and pricing strategy could be weakening. In FY2018, the company recorded
a fall in its various profitability indicators. The company’s return on equity (ROE) was (14.4%) at the end
of FY2018, as compared to 9.98% in FY2017. Its return on capital employed and return on assets were
0.02%, and (3.56%) in FY2018, as compared to 1.75% and 2% respectively in FY2017. The fall was due
to an increase in operating expenses, owing to which its profitability also declined considerably.
Opportunity
ADT Inc
SWOT Analysis
ADT Inc
© MarketLine
Page 6
Strategic Acquisitions
The company focuses on expanding its operations through several acquisitions. In February 2019, the
company acquired LifeShield LLC, a provider of advanced wireless home security systems. The addition
of LifeShield would enable ADT to enhance its offerings and customer base across the US. In December
2018, the company acquired Red Hawk Fire & Security, a provider of commercial fire, life safety, and
security services. This acquisition would accelerate its growth in commercial security market and could
expand its product portfolio.
Increasing demand: Smart Homes
The strong growth in the smart home market would drive the demand for home automation products of
ADT and enhance its top line in the future. The smart home market has been growing at a robust pace in
the developed countries and is expected to grow strongly due to the regulatory initiatives from various
governments and an increased consumer interest in reducing the energy consumption. According to the
International Housewares Association, the smart home market in the US has entered the mass market
phase of consumer adoption and is expected to reach approximately US$40 billion by 2020. Customers’
intentions to save time, money and energy, and adoption of technology are likely factors for this growth.
ADT is one of the leading providers of home automation products and services in the US and Canada.
The company’s home automation products enable customers to manage security, lifestyle and home,
which include receiving security alerts, adjusting thermostat, controlling appliances and lighting,
controlling customized programs, and locking and unlocking the door, among others.
Positive Outlook for the Global Construction Industry
ADT is likely to benefit from the positive outlook for the global construction industry. According to in-house
research, the global construction output is expected to increase at an annual average growth of 3.4%
during 2019 and 2023 (forecast period). The improvement is entirely owing to acceleration in construction
activity in emerging markets, most notably in China. The construction industry in emerging markets is
estimated to grow at a faster rate than the advanced economies. The average annual growth in emerging
markets is expected to be 4.7% in the forecast period, while advanced economies are estimated to grow
1.7%. The Asia-Pacific region will continue to account for the largest share of the global construction
industry due to large markets such as China, Japan and India. The emerging markets of South-East Asia
are expected to invest heavily in new infrastructure projects, supported by private investment. The Middle
East and African regions are expected to perform better than all other regions in the construction industry
during the forecast period. Large-scale investment in infrastructure projects, mostly related to transport,
will be a key driving force behind the growth in the region. Construction activity across Eastern Europe
and Central Asia also expanded at a rapid pace in 2018, primarily reflecting recovery in a number of
markets, as EU funding was restarted after a hold-up in 2016. Despite weakness in Russia’s economy,
construction is reported to have grown sharply in 2018, and investment in road and rail projects in
addition to a recovery in the oil and gas sector will support a recovery in Russia’s construction output. The
construction output growth in the Middle East and Africa are estimated to grow in the forecast period with
5.9%, followed by Eastern Europe (3.2%), Asia-Pacific (4.4%), Latin America (2.6%), Western Europe
(2.3%) and North America (1.2%).
ADT Inc
SWOT Analysis
ADT Inc
© MarketLine
Page 7
Threat
Changing Customer Preferences
The increasing adoption of bundled services provided by telecommunications service providers might
lead to a decline in the demand for ADT’s services. The growing trend of customers switching to use of
cellular, satellite or internet communications technology in their homes and businesses, and
telecommunications providers may discontinue their land-line services in the future. In addition, many of
the company’s customers who use cellular communications technology for their security and
home/business automation systems use ADT’s products that rely on second generation (2G) cellular
technology. Further, older installed security systems use technology incompatible with the newer cellular,
satellite or internet communications technology, such as third generation (3G) and fourth generation (4G)
networks, and will not be able to transmit alarm signals on these networks. The discontinuation of land-
line, 2G cellular and any other services by telecommunications providers, and the switch by customers to
the exclusive use of cellular, satellite or internet communications technology may require system
upgrades to alternative, and potentially more expensive, technologies to transmit alarm signals and for
systems to function properly. This could increase customer attrition rates and slow new customer
generation. The company may be required to upgrade or implement other new technologies, including
offering to subsidize the replacement of customers’ outdated systems, at ADT’s expense. Any technology
upgrades or implementations could require significant capital expenditures and also divert management’s
attention and other important resources away from its customer service and sales efforts. In addition, any
inability of the company to successfully implement new technologies or adapt existing technologies to
changing market demands and customer preferences may affect its customer base.
Lawsuits and litigations
The company is subject to various claims and lawsuits in the ordinary course of its business. These
lawsuits and litigations may include contractual disputes, employment matters, product and general
liability claims, claims that the company has infringed the intellectual property rights of others, claims
related to alleged security system failures, and consumer and employment class actions. For instance,
securities litigation was filed against the company alleging violation of the Securities Exchange Act of
1934 and SEC Rule 10b-5. Similarly, the company also faces legal actions pertaining to violation of the
California Business and Professions Code and the California Health and Safety Code. Defending against
any of these pending or future actions will likely be costly and time-consuming and could significantly
divert management’s efforts and resources. Any involvement in such legal issues may burden the
company with additional cost impacting the results of operations and cash flows.
Intense competition
The company operates in highly fragmented securities systems market in the US , which is intensively
competitive. The company competes with a number of major firms and thousands of smaller regional and
local companies. The fragmentation of the industry is primarily due to low entry barriers and the
availability of wholesale monitoring. The major competitors of the company within the security systems
market are Monitronics International, Vivint, Comcast and AT&T. The company experiences competitive
pricing pressures on installation, monitoring and service fees. The company also faces competition from
ADT Inc
SWOT Analysis
ADT Inc
© MarketLine
Page 8
improvements in Do-It-Yourself (DIY) or self-monitoring systems which enable customers to monitor and
control their environments without third-party involvement through the internet, text messages, emails or
similar communications. In addition, the changing technologies, leading to the potential new entrants into
the markets intensify the competitive environment. ADT also competes with cable and
telecommunications companies that are expanding into the monitored security industry and are bundling
their existing offerings with monitored security services. Continued pricing pressure or improvements in
technology and shifts in customer preferences towards self-monitoring or DIY could adversely impact
ADT’s customer base and/or pricing structure and have a material adverse effect on its business, results
of operations and cash flows.
Copyright of ADT Inc SWOT Analysis is the property of MarketLine, a Progressive Digital
Media business and its content may not be copied or emailed to multiple sites or posted to a
listserv without the copyright holder’s express written permission. However, users may print,
download, or email articles for individual use.
COMPANY PROFILE
ADT Inc
REFERENCE CODE: 6E17D6C2-FB24-4C14-8387-9A0D724DB63A
PUBLICATION DATE: 15 Nov 2019
www.marketline.com
COPYRIGHT MARKETLINE. THIS CONTENT IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED OR DISTRIBUTED
A Progressive Digital Media business
ADT Inc
TABLE OF CONTENTS
ADT Inc
© MarketLine
Page 2
TABLE OF CONTENTS
Company Overview ………………………………………………………………………………………….. 3
Key Facts …………………………………………………………………………………………………………. 3
SWOT Analysis ………………………………………………………………………………………………… 4
ADT Inc
Company Overview
ADT Inc
© MarketLine
Page 3
Company Overview
COMPANY OVERVIEW
ADT Inc (ADT) is a provider of monitored security, interactive home and business automation services.
The company offers home and business security systems and services for video surveillance, access
control, temperature monitoring, flood monitoring, fire and smoke, carbon monoxide monitoring, and other
environmental conditions and hazards. It also offers personal emergency response system products and
services, maintenance and installation services. ADT serves owners of single-family homes, retail
businesses, medical offices, financial institutions, food and beverage service providers, and professional
service providers, among others. The company distributes products directly and also through a network of
distributors across the US and Canada. ADT is headquartered in Boca Raton, Florida, the US.
The company reported revenues of (US Dollars) US$4,581.7 million for the fiscal year ended December
2018 (FY2018), an increase of 6.2% over FY2017. In FY2018, the company’s operating margin was
0.1%, compared to an operating margin of 6.5% in FY2017. The net loss of the company was US$609.2
million in FY2018, compared to a net profit of US$342.6 million in FY2017.
The company reported revenues of US$1,283.7 million for the second quarter ended June 2019, an
increase of 3.3% over the previous quarter.
Key Facts
KEY FACTS
Head Office ADT Inc
1501 Yamato Road
Boca Raton
Florida
Boca Raton
Florida
USA
Phone 1 561 3227235
Fax
Web Address www.adt.com
Revenue / turnover (USD Mn) 4,581.7
Financial Year End December
Employees 19,000
New York Stock Exchange Ticker ADT
ADT Inc
SWOT Analysis
ADT Inc
© MarketLine
Page 4
SWOT Analysis
SWOT ANALYSIS
ADT Inc (ADT) is one of the leading providers of security, interactive home and business automation and
alarm monitoring services. ADT’s strong market position, improving cash reserves and sales and
distribution channel are its strengths, even as declining profitability could be a cause for concern.
Strategic acquisitions and growing construction industry will provide growth opportunities for the
company. However, intense competition could impact ADT’s business, results of operations and cash
flows.
Strength
Market position
Sales and distribution channel
Improving Cash Reserves
Weakness
Declining Profitability
Opportunity
Strategic Acquisitions
Increasing demand: Smart Homes
Positive Outlook for the Global Construction Industry
Threat
Changing Customer Preferences
Lawsuits and litigations
Intense competition
Strength
Market position
ADT has a strong position in the markets in which it operates. It is one of the leading providers of
monitored security, interactive home and business automation and related monitoring services in the US
and Canada. The company is also one of the largest full-service companies with national footprint offering
residential and commercial monitored security. It serves approximately 7.2 million customers in the US
and Canada; and handles 15 million alarm signals annually and provides support from around 240 sales
and service locations in the US and Canada.
Sales and distribution channel
ADT has a well-established sales and distribution channel that includes a mix of direct and indirect
channels. This multichannel model provides unique advantages to the company. It also secures new
customers through authorized dealer program, and to a small extent, through agreements with
homebuilders and related partners. The company has around 250 authorized dealers across the US and
Canada. The company operates 12 monitoring facilities which provide 24/7 support services.
Improving Cash Reserves
Sufficient cash or assets that are easily convertible to cash provide more flexibility to the firm and reduce
ADT Inc
SWOT Analysis
ADT Inc
© MarketLine
Page 5
investors’ risk. The increasing cash reserves indicate the company’s ability to obtain debt to finance
acquisitions, capitalize on business opportunities, and meet capital expenditure or other capital
requirements in the future. Such position is favorable enough to meet its short term obligations efficiently.
ADT reported an increase in the cash and cash equivalents in FY2018. The company had US$363.2
million in cash and cash equivalents in FY2018, as compared to cash and cash equivalents of US$122.9
million in FY2017, reflecting an increase of 195.5%.
Weakness
Declining Profitability
The company’s profitability declined considerably in FY2018. It recorded low operating income and
margins. Its operating margin was 0.06% in FY2018, as against 6.54% in FY2017. The company reported
operating income of US$3 million in FY2018 indicating a decrease of 98.9% over that for FY2017. As a
result, its operating margin declined 647 basis points (bps) over 2017, which may indicate that the
company’s cost management and pricing strategy could be weakening. In FY2018, the company recorded
a fall in its various profitability indicators. The company’s return on equity (ROE) was (14.4%) at the end
of FY2018, as compared to 9.98% in FY2017. Its return on capital employed and return on assets were
0.02%, and (3.56%) in FY2018, as compared to 1.75% and 2% respectively in FY2017. The fall was due
to an increase in operating expenses, owing to which its profitability also declined considerably.
Opportunity
Strategic Acquisitions
The company focuses on expanding its operations through several acquisitions. In February 2019, the
company acquired LifeShield LLC, a provider of advanced wireless home security systems. The addition
of LifeShield would enable ADT to enhance its offerings and customer base across the US. In December
2018, the company acquired Red Hawk Fire & Security, a provider of commercial fire, life safety, and
security services. This acquisition would accelerate its growth in commercial security market and could
expand its product portfolio.
Increasing demand: Smart Homes
The strong growth in the smart home market would drive the demand for home automation products of
ADT and enhance its top line in the future. The smart home market has been growing at a robust pace in
the developed countries and is expected to grow strongly due to the regulatory initiatives from various
governments and an increased consumer interest in reducing the energy consumption. According to the
International Housewares Association, the smart home market in the US has entered the mass market
phase of consumer adoption and is expected to reach approximately US$40 billion by 2020. Customers’
intentions to save time, money and energy, and adoption of technology are likely factors for this growth.
ADT is one of the leading providers of home automation products and services in the US and Canada.
The company’s home automation products enable customers to manage security, lifestyle and home,
which include receiving security alerts, adjusting thermostat, controlling appliances and lighting,
ADT Inc
SWOT Analysis
ADT Inc
© MarketLine
Page 6
controlling customized programs, and locking and unlocking the door, among others.
Positive Outlook for the Global Construction Industry
ADT is likely to benefit from the positive outlook for the global construction industry. According to in-house
research, the global construction output is expected to increase at an annual average growth of 3.4%
during 2019 and 2023 (forecast period). The improvement is entirely owing to acceleration in construction
activity in emerging markets, most notably in China. The construction industry in emerging markets is
estimated to grow at a faster rate than the advanced economies. The average annual growth in emerging
markets is expected to be 4.7% in the forecast period, while advanced economies are estimated to grow
1.7%. The Asia-Pacific region will continue to account for the largest share of the global construction
industry due to large markets such as China, Japan and India. The emerging markets of South-East Asia
are expected to invest heavily in new infrastructure projects, supported by private investment. The Middle
East and African regions are expected to perform better than all other regions in the construction industry
during the forecast period. Large-scale investment in infrastructure projects, mostly related to transport,
will be a key driving force behind the growth in the region. Construction activity across Eastern Europe
and Central Asia also expanded at a rapid pace in 2018, primarily reflecting recovery in a number of
markets, as EU funding was restarted after a hold-up in 2016. Despite weakness in Russia’s economy,
construction is reported to have grown sharply in 2018, and investment in road and rail projects in
addition to a recovery in the oil and gas sector will support a recovery in Russia’s construction output. The
construction output growth in the Middle East and Africa are estimated to grow in the forecast period with
5.9%, followed by Eastern Europe (3.2%), Asia-Pacific (4.4%), Latin America (2.6%), Western Europe
(2.3%) and North America (1.2%).
Threat
Changing Customer Preferences
The increasing adoption of bundled services provided by telecommunications service providers might
lead to a decline in the demand for ADT’s services. The growing trend of customers switching to use of
cellular, satellite or internet communications technology in their homes and businesses, and
telecommunications providers may discontinue their land-line services in the future. In addition, many of
the company’s customers who use cellular communications technology for their security and
home/business automation systems use ADT’s products that rely on second generation (2G) cellular
technology. Further, older installed security systems use technology incompatible with the newer cellular,
satellite or internet communications technology, such as third generation (3G) and fourth generation (4G)
networks, and will not be able to transmit alarm signals on these networks. The discontinuation of land-
line, 2G cellular and any other services by telecommunications providers, and the switch by customers to
the exclusive use of cellular, satellite or internet communications technology may require system
upgrades to alternative, and potentially more expensive, technologies to transmit alarm signals and for
systems to function properly. This could increase customer attrition rates and slow new customer
generation. The company may be required to upgrade or implement other new technologies, including
offering to subsidize the replacement of customers’ outdated systems, at ADT’s expense. Any technology
upgrades or implementations could require significant capital expenditures and also divert management’s
attention and other important resources away from its customer service and sales efforts. In addition, any
ADT Inc
SWOT Analysis
ADT Inc
© MarketLine
Page 7
inability of the company to successfully implement new technologies or adapt existing technologies to
changing market demands and customer preferences may affect its customer base.
Lawsuits and litigations
The company is subject to various claims and lawsuits in the ordinary course of its business. These
lawsuits and litigations may include contractual disputes, employment matters, product and general
liability claims, infringement of intellectual property rights of others, claims related to alleged security
system failures, and consumer and employment class actions. The company may face legal actions
pertaining to violation of the California Business and Professions Code and the California Health and
Safety Code. Defending against any of these pending or future actions will likely be costly and time-
consuming and could significantly divert management’s efforts and resources. Any involvement in such
legal issues may burden the company with additional cost impacting the results of operations and cash
flows.
Intense competition
The company operates in highly fragmented securities systems market in the US , which is intensively
competitive. The company competes with a number of major firms and thousands of smaller regional and
local companies. The fragmentation of the industry is primarily due to low entry barriers and the
availability of wholesale monitoring. The major competitors of the company within the security systems
market are Vivint, Comcast and AT&T. The company experiences competitive pricing pressures on
installation, monitoring and service fees. The company also faces competition from improvements in Do-
It-Yourself (DIY) or self-monitoring systems which enable customers to monitor and control their
environments without third-party involvement through the internet, text messages, emails or similar
communications. In addition, the changing technologies, leading to the potential new entrants into the
markets intensify the competitive environment. ADT also competes with cable and telecommunications
companies that are expanding into the monitored security industry and are bundling their existing
offerings with monitored security services. Continued pricing pressure or improvements in technology and
shifts in customer preferences towards self-monitoring or DIY could impact ADT’s customer base and/or
pricing structure and have a material adverse effect on its business, results of operations and cash flows.
Copyright of ADT Inc SWOT Analysis is the property of MarketLine, a Progressive Digital
Media business and its content may not be copied or emailed to multiple sites or posted to a
listserv without the copyright holder’s express written permission. However, users may print,
download, or email articles for individual use.
