In June 2013, United States Cellular Corporation (U.S. Cellular), a publicly traded company providing telephone and wireless services, sold a portion of its wireless spectrum and almost 10% of its customer base for $480 million. The management team decided to declare a special dividend and return all proceeds of the sale to investors, resulting in a $5.75 dividend per share. There were many options that the management team of U.S. Cellular could have chosen for the $480 million, ranging from capital expenditures to support their growing long-term evolution (LTE) business, investments to streamline the operations of the company, or investments in customer acquisition and retention capabilities to support the remaining customer base. So how did the company make this decision? Was it a mistake? Could the management team have used Porter’s Five Forces to make a better decision?
You may not have even considered using Porter’s Five Forces to support a finance decision because the Five Forces model is a market assessment and economic profit framework. However, the influence of finance decisions on economic profit through invested capital and weighted average cost of capital (WACC), coupled with the unintended consequences that could arise from capital constraints, make Porter’s Five Forces an excellent addition to your decision-making tool kit.
How well are you applying Porter’s Five Forces to make informed finance decisions for your company? The Accenture Academy course Applying Porter’s Five Forces to Finance Decisions
will present you with a set of tools and a method to help you apply Porter's Five Forces more rigorously in your current role while dealing with typical finance decisions. Through this course, you will explore finance decisions, link them to economic profit, and assess the decisions with Porter’s Five Forces, practicing a technique to help you make better finance decisions.
By exploring various finance decisions such as capital structure, dividend policy, share repurchases, and debt repayment, you can experience the flexibility of the model. You can apply Porter’s Five Forces to finance decisions regarding the raising of capital from investors and the return of capital through dividends, share repurchases, and debt repayments. Additionally, you can explore a framework and apply it in each of these cases to give you some practical application of return on invested capital (ROIC) and Porter’s Five Forces.