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AT&T: Twenty Years of Change Case Analysis


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AT&T: Twenty Years of Change Case Analysis

  2. 2. AT&T: 135 Years of Operations1875 1984 2000 1894 1997
  3. 3. AT&T: 135 Years of Operations1875 1984 2000 1894 1997For each Milestone we willconduct: • SWOT Analysis• Porter 5 Forces Model Analysis • Strategy Direction• Technology Environment • Implementation and ControlAnalysis• Regulator Effect Analysis
  4. 4. AT&T: The Begging (1875-1893) 1875 Establishment
  5. 5. AT&T: The Begging (1875-1893)• No Competition Exist • AT&T was incorporated in 1885 as a• Monopoly wholly owned subsidiary of Bell with• Most telephone exchanges are under objective to build and operate long license from Bell Telephone. distance networks. Buyer Power, Low Bargaining Power• High Barrier to entry during the patent life • Bell acquire Western Electric company as time. the first manufacturing firm• Most of the licenses across US are granted to Bell Telephoney
  6. 6. AT&T: Start of Competition (1894-1984) 1875 1894 Patent Expiry
  7. 7. AT&T: Start of Competition (1894- 1984)• In 1904, 6000 new telephone company we • No interconnection between different established. companies• License to operate telephones have been opened to all companies Buyer Power Increased from 285K to 3,317,000• Patent expired in 1894, eliminating the barrier of entry.
  8. 8. AT&T: Start of Competition (1894-1984) New Strategic Direction in 1907  Formulation of the principal that Telephone and its technology would operate most efficiently as a monopoly providing universal services.  Lead to an agreement known as Kingsbury commitment.  In which AT&T provide competitors connection to its
  9. 9. AT&T: Start of Competition (1894-1984) First Regulatory Act  Through a lawsuit filed in 1949  Settlement reached in 1956  AT&T agreed to restrict its activities to the regulated business of the national telephone system and government work.  Therestriction did not influence the rapid development of systems and its steady progress towards its global universal services.
  10. 10. AT&T: Start of Competition (1894-1984) Second Regulatory Act  FCC signaled its interest in more competition allowed competitors to use  some of Bell Labs technologies  Therefore competition established in the general long distance services
  11. 11. AT&T: Start of Competition (1894-1984) Technology Environment  AT&T Bell Telephone Laboratories  Microwave Relay System  Provide alternative to copper wires for long distance, in late 1949  First Comm. Satellite in 1962  Additional Alternative for international comm.  Transition to electronic components  Allowed more powerful and less expensive customer and network equipment.
  12. 12. AT&T: Start of Competition (1894-1984) Corporate Culture  Profits as a way to support and extend monopoly  Cost Control  Customers taken for granted  Sales reps, received straight salaries  Sales reps, were warned not to oversell  Managers were averse to risk
  13. 13. AT&T: Baby Bells (1984-1997) First Divesture 1875 1984 1894
  14. 14. AT&T: Baby Bells (1984-1997) Federal Communications Commission- FCC  1974 Anti-trust lawsuit  Monopoly for the local exchanges  Lawsuit were settled in 1982  AT&T agreed to divest itself from the wholly owned  Bell Operating Companies  Creating Baby Bells  The divest took place in 1984  AT&T retained $34 Billion of the $149 Billion in assets  AT&T retained 373,000 of the 1,009,000 employees.
  15. 15. AT&T: Baby Bells (1984-1997) SWOT at the time of DivestitureStrength Weaknesses• Advanced Technological Assets • AT&T lost its ability to reach almost every consumer in the US by its wires and bills• Enormous positive cash flow • Significant change in corporate culture from Monopoly to• $34 Billion of Assets competitive based company• Going out of Mature Competition segments • Manufacturing Operation challenges from monopoly to• More Focus competitionOpportunities Threats• Emerging technologies as Fiber optic technologies • Long distance telephone services become competitive• Based on the divestiture, AT&T business activities were (market share fall from 90% to 50% from 84 to 96) no longer restricted to regular business of national • Telecommunication act of 1996, allowing baby bells and other telephone system and government work. competitors to compete in long distance • Lose of market share
  16. 16. AT&T: Baby Bells (1984-1997) Change in the Strategic Direction  Diversificationstrategy  Acquisition of other companies through horizontal integration approach
  17. 17. AT&T: Baby Bells (1984-1997) Early 90s Acquisition Wave  1991- Hostile Acquisition of the Computer maker NCR  For $7.4 Billion  Targeting the convergence between communication and computers  1992- Acquisition of the US wireless business, McCaw  For $11.5 Billion  The deal position AT&T as a leading force in the fast growing wireless communication  Giving the company direct access to consumer for the first time in decade.
  18. 18. AT&T: Baby Bells (1984-1997) 2nd Divestiture (Voluntary) into 3 Companies  System and Equipment,… Named Lucent Technologies  Telecom network, switching and transmission equipment and Bell labs  ComputerCompany,… Named NCR  Communication and Services Company,… Named AT&T
  19. 19. AT&T: Baby Bells (1984-1997) Strategy Directions Behind 2nd Divestiture  Lucent Technologies  New company had revenue of $20 Billion and 125,000 Employees  Emergence of New Competitors (cable, RBOCs, mobile firms)  Had many options from where to buy equipments, by placing orders to AT&T, AT&T is  Having insight into competitors plans  Could use profits from the equipment contract against them  NCR  From 1993 to 1996, the computer unit lost $5.9 billion  Forcing AT&T to inject $2.8 billion  The spin-off valued NCR at $3.96 Billion which means that AT&T had lost $10 Billion
  20. 20. AT&T: Armstrong (1997-2000) 1875 1984 1894 199 Armstrong 7
  21. 21. AT&T: Armstrong (1997-2000) Armstrong New Vision  Transforming AT&T from a long distance company to an “any distance” company. From a company that handles mostly voice call to a company that connect you to information in any form that is useful to you– voice, data and video. From a primarily domestic company to a truly global company.
  22. 22. AT&T: Armstrong (1997-2000) New Strategy to Meet the New Vision  Implementing a vision of a Global Company  Integrating cables, wireless and long distance  Implement refocused strategy  Cost-cutting measure to make AT&T the low-cost provider  Cutting the workforce in its long distance business by 15000 to 18000 over two years  Initiating series of Joint ventures and acquisition to broaden the companies scope to areas  data networking, digital voice encryption, broadband cable, video telephone and increase AT&T global reach.
  23. 23. AT&T: Armstrong (1997-2000) Late 90s Acquisition Wave  1998- Acquisition of Teleport Communication Group  For $11.5 Billion  Leading local Teleco. Service provider for Business Customers  It is was attractive because it provide network that is an alternative to regional bells., in which AT&T will save tens of millions of dollars  1999- Acquisition of Telecommunication Inc.  Second largest cable company in the US  For $55 Billion  2000- Acquisition of MediaOne  Large Cable company  For $56 Billion
  24. 24. AT&T: Armstrong (1997-2000) Federal Communications Commission- FCC  After MediaOne Acquisition, FCC gave AT&T 3 choices  Divest 25% stake of MediaOne in Time Warner  Sell Liberty Media Group, a minority stake in Rainbow Media Holding and MediaOne’s Programming Networks  Sell 9.7 million cable subscribers, which was more than half of the company’s current subscribers.
  25. 25. AT&T: Armstrong (1997-2000) Assessment of the Armstrong Strategy  Investment of $115 Billion in cable systems  By 2001 AT&T was only able to upgrade 65% of the cable lines, which matched only 1/5 of AT&T 60 million customer base  AT&T was spending $1200 to add a phone subscriber although new technologies lowered the cost to $700 in 2001.  AT&T did not succeed in striking a deal with other cable providers to lease their lines, which was necessary to broaden AT&T cable telephone customer base.
  26. 26. AT&T: Armstrong (1997-2000) Assessment of the Armstrong Strategy  AT&T core long Distance Business  Was shrinking many analysts expects ten price to drop nearly zero  Long distance business made up 80% of the revenues in 1997 was projected to decrease to 35% by 2002  The Company had not succeeded with the competition with Baby Bell in the local phone
  27. 27. AT&T: Armstrong (1997-2000) Assessment of the Armstrong Strategy  Acquisition of TCI and Media one  Left the company with $64 Billion in debt, making AT&T as the most indebted companies  WorldNet Failure  Internet Service provider WorldNet in few month attract 1 Million Customer and it was growing faster than AOL, when sales began to slow AT&T chose not to make investment. By 2000 WorldNet subscriber base was 2 Million compared to 21 million for AOL.
  28. 28. AT&T: Armstrong (1997-2000) Assessment of the Armstrong Strategy  2000 Revenue  Totaling$16.97 Billion, increase of 3.7%  3rd Quarter earning of 38 cents per share were down 24% compared to same period a year ago
  29. 29. AT&T: Armstrong (1997-2000) Assessment of the Armstrong Strategy  Two areas of Growth were  AT&T wireless  Expected to Grow by 30% in 2000  AT&T high speed services  Sold under the brand Excite@Home, was gaining customers
  30. 30. AT&T: 135 Years of Operations Corrective Actions1875 1984 2000 1894 1997
  31. 31. AT&T: Corrective Actions (2000) 3rd Split in AT&T Life Time  Plan to split the company in 4 parts  AT&T Broadband  AT&T Wireless  AT&T Business Services  AT&T Consumer Services
  32. 32. AT&T: Corrective Actions (2000) Objectives of the Split  Individualcompanies have more flexibility in raising money for repaying debt  Boost company’s stock price by separating various divisions into more easily understood stand-alone businesses
  33. 33. THANK YOUFor More Information and Further DiscussionsAl-Motaz Bellah Alaa Al-AgamawiEmail: magamawi@gmail.comSkype ID: magamawiLinkedin Profile: Profile: