Company Critical Analysis: the American Telephone and Telegraph Corporation - Research Paper Example

?Introduction AT&T, is the world’ oldest and the original telecommunications company which launched itself just after the discovery of the telephone instrument by Graham Bell in 1875. Gardiner Hubbard and Thomas Sanders were the two men who partnered with Graham Bell in 1875 by taking care of the financial investment angle. AT&T is the abbreviated form of the American Telephone and Telegraph Corporation and has become the most recognized symbol in America. Established in early 19th Century, Bell’s own company, the ‘Bell System’ was taken over by the American telecommunication giant during the formative years of its establishment and developed into the large, international networking conglomerate as it exists today (Web, AT&T). Launched from New Haven, Connecticut in 1878, AT&T, working under the aegis of the American Bell Company gradually spread its business into all major towns of the country and acquired the assets in their totality from the Bell Company on December 30, 1899. Background of the company (AT&T) and its problem with competitors AT&T partnered with the Western Electric Company during its initial years in business and made innovative discoveries in the field of telecommunications which allowed it to spread the business to all parts of the American Continent. Its innovations and discoveries allowed it to make transcontinental telecommunication feasible. When the Bell Company’s patent expired in 1894, thousands of other operators’ jumped into the fray triggering intense competition and causing a spurt in the number of telephone connections in the US. AT&T has never looked back since then and after decades of monopolistic rule in the American telecommunications industry, it till remains the market leader by foraying and diversifying into technologies which changed with signs of the times. AT&T spread out throughout the world and established offices and manufacturing facilities in major cities of the developed countries. The company has many inventions’ in telecommunication technology credited to its scientists, seven amongst them even winning the Nobel Prize in Physics (Web, AT&T). The invention of the transistor, the telephone dial, push-button telephony, the coaxial cable, mobile telephony, cellular telephone and demonstration of the first television are credited to the company, technologies that revolutionized the electronics industry. The company played pioneering role in the launch of the first telecommunications satellite in the world and the implementation of 911 as a direct emergency helpline within the United States. The first major issue which AT&T faced during its century long dominance in the United States was the settlement of its first federal anti-trust lawsuit in 1913, when it established itself as government sanctioned monopoly by signing a document called the Kingsbury Commitment, divesting itself of the control of the Western Union telegraph company, and paving the way for non-competing independent telephone companies to establish interconnectivity with AT&T services. The company was being directed during this period by its President, Theodore Vail, whose innovative strategies set the trend for the company’s operations for the next seventy years (Web, AT&T). Another anti-trust suit was filed against the company in 1974 when it had to divest itself from local telephone operations in favor of lifting of restrictions on the company as envisaged in the 1956 Consent decree (Web, AT&T). The parent Bell System ceased to exist in 1984 and the company acquired a new logo and renamed itself as AT&T. It forayed into computer business by acquiring NCR computers, which subsequently established itself as an independent company after a decade long liaison. Competition in the telecommunications sector intensified in 1996 after President Bill Clinton signed the telecommunications Act into law which endeavored to eliminate legal and regulatory barriers prevalent in the industry. The company directors reduced subscription rates in populist endeavors to sustain itself, established liaisons with media and internet companies to foray into the fast changing communication technologies emerging due to the spread of the internet. The modern era, particularly during the last two decades, has witnessed emergence of stiff competition for AT&T, within as well as outside the United States. Verizon has emerged as the leading company in wireless voice and data communication with others such as T-Mobile and Sprint Nextel following close on its heels within the US. International competition is being provided by Nippon Telegraph & telephone Corporation (NTT), Vodafone Group, Deutsche Telekom, France Telecom, NTT DOCOMO, and the BT group, to name a few. Besides the wireless telephony sector, the company is in direct competition with other giants in modern media and internet based communication sectors such as broadband and voice over internet (VOIP) telephony services. Interview Review Interviews conducted with insiders reveal the mood prevalent in the company at present. A senior marketing manager with years of experience is of the view that the inbred culture existing in his particular unit, which is located in Saint Louis, Missouri, is responsible for most of its ills. Complacency and over reliance on the fact of its historical dominance have inhibited the employees working under him from seeking and trying new avenues of marketing. The rival companies on the other hand, he feels, are trying all arts’ of the trade to establish themselves. Openness to changing requirements within the industry and capability to adapt has been suggested by him as the likely solution to overcome such drawbacks. He is of the opinion that the current belief among his staff that the dwindling revenues can be overcome by new pricing plans and offering lucrative bundle of services to the clients is entirely wrong. The fundamental changes in the market as well as technology, such as the spread of the internet and revolutions in electronic handheld devices are the real factors which have posed new problems for AT&T. Another senior manager has emphasized that the company intends to maintain its dominance in the communications field by focusing upon mobile broadband services. According to him, the company has already accelerated its program on its LTE network, which will provide the company with tools to create faster 4G services for Smartphone users. This buildup has been envisaged to be completed by the year 2013. In the current year (2011) AT&T will be launching 20 4G devices, some of them running on the currently popular android platform. Analysis of the resources and capabilities of AT&T The hallmarks of AT&T’s success have been the exploitation of available technology and the identification of the need to establish means of rapid communication in a rapidly industrializing country which dominated the world throughout the twentieth century. The founders of the company realized the importance of Graham Bell’s discovery and utilized the new found technologies and electricity to innovate and develop need based technologies over the span of the last century. They utilized cutting edge technologies to gain advantage over any rivals that surfaced during the period and expanded their operations worldwide. The company initially focused on the microenvironment by establishing long range communication facilities within the United States using innovative technologies and then shifted their focus onto the microenvironment by establishing international domains and marketing telephony technologies and equipment worldwide. The customer’s always remained the primary focus of the company within the country and it manipulated their needs by offering them better facilities and concessions as and when the occasion demanded. Appropriate backing of its strong technology and human resource base helped the company to maintain its leadership over the years. AT&T’s acquisition of associated companies such as the Western Electric and NCR were well timed and they were allowed to go independent as and when the occasion presented itself. It overcame the two anti-trust suits filed against the company in an amiable fashion and gained from these minor obstacles due to the sheer weight it carried with its financial superiority and cutting edge innovations. Strategic restructuring of the company into three separate entities in 1995 viz. ATT, Lucent Technologies &, NCR, and the acquisition of MediaOne in 2000 were vital landmarks which strengthened the local as well as global presence of the company (Web, AT&T). Similarly the management’s timely decisions to divest the companies which could encumber its operations due to changes in government policies, such as the Telecommunications Act of 1996 were most appropriate. The decisions display the great foresight of the management which remained ever vigilant of its goals. Competitive Analysis Porter’s generic strategies are fundamental for comprehending how organizations create competitive advantage. A variation of his differentiation strategy, the unlimited resources model is useful for the analysis of sources of advantage. These 'arenas of competition' have been described as: 1. The timing and knowledge advantage, and 2. The deep pockets advantage. AT&T has used its well established infrastructural advantage to enter arenas of competition where it can assume almost monopolistic superiority. It switched from its primary business of long distance communication to mobile broadband and internet based communication services, which its managers identified as the new arenas in the business. The unlimited resources model utilizes a large base of resources that allow an organization to outlast competitors by practicing a differentiation strategy. An organization like AT&T, which has abundant resources can manage risk and sustain losses more easily as compared to fresh entrants into new arenas. With its major stress on innovation as the company's driving force, it is highly likely that it can sustain its competitive advantage in the future. (Picture Courtesy: http://www.mindtools.com/pages/article/newSTR_82.htm) AT&T has focused its attention on placing their product with a differentiation strategy. The firm intends to capture the niche market of broadband communication by developing new products and platforms for running them, as well as by focusing on particular segments in the market i.e. the large consumer base of internet telephony and broadband, which its managers have identified as the future niche market. Presently, under the stewardship of Randall L. Stephenson, the company has identified its primary business as one for providing Smartphone’s, next-generation TV services to its loyal customers within the US and technical knowhow to global players in the telecom sector. The company reported consolidated revenue of $ 123 billion in the year 2009 (Web, AT&T). The company still enjoys the status as a Fortune 500 company being a contributor to the top 30 stocks which determine the Dow Jones industrial average. The company has acquired leadership status in providing IP-based communication services to domestic as well as global clients, particularly in the fields of mobile broadband networks, Wi- Fi networks and the entertainment industry, primarily providing facilities for content delivery on three popular interfaces, the phone, TV and computer which have gained popularity in recent times. Industry Evolution The last decade brought forth new challenges for the United States and rest of the world which has yet to recover from the economic downtrend witnessed due to political as well as social events. AT&T however, continued to be aggressive in its strategies although it had to reduce its workforce. The then AT&T’s Chairman and Chief Executive, David Dorman declared an all out war with other regional phone companies and cable operators (USA Today, 2004). After pulling the plug AT&T’s 100 years old consumer long distance business, the company shifted its focus onto internet telephony and wholesale long-distance communication. Focusing exclusively on big business customers, Dorman intended to make an annual saving of $ 1 billion by catering to the big business customers, who at that time accounted for 75% of the company’ total revenue (USA Today, 2004). The company also indulged in downsizing its workforce and outsourcing work internationally in an effort to economize. The Communications Workers Union of America (CWA) protested this decision (Miller & Johnson, 2005). The downsizing and shifting the focus from its primary business activities were considered bad decisions by the traditional loyalists who believed that these decisions went against the core business activities of the company. However, business strategists’ believed that these decisions were imminent as the country had to reorient its direction in order to survive in the challenges brought forth by the spread of IT infrastructure all over the world (USA Today, 2004). Verizon took this opportunity to woo the American consumer and gradually stepped into the shoes of the largest telephone operator in the US, relegating AT&T to the second spot. AT&T despite the skepticism was able to garner attention as a result of this strategic decision, which was one of the underlying motives, according to Dorman (USA Today, 2005). The company focused its attention on wireless communication, broadband and VoIP (Voice over Internet Protocol), which its mangers had identified as the next big thrust in communication technologies. Dorman had inherited a company fast dwindling in its resources after the financial downtrend in 2002 and was at risk of being considered as just another telecommunications company in the business despite its adequate financial reserves (Black, 2003). The immediate decision taken by Dorman was to cuts costs as the revenues fell. The company boasts itself to be a ‘company of people innovating for people’ and has developed corporate governance guidelines and a code of ethics with which it intends to sustain itself as well as stay as a leader in its business ventures worldwide. The governance guidelines stress upon the importance of a common set of expectations from the directors as well the lower functionaries in its hierarchy and sets clearly defined qualifications for fulfilling the posts besides determining the requirements expected off them. The code of ethics has been prepared in accordance with the statutes of the Securities and Exchange Commission & the New York Stock Exchange (Web, AT&T). Recommendations AT&T has dominated the telecommunications sector for the major part of the last centuries and has faced hurdles only during the last two decades when it tried to diversify into new arenas, relegating its original business to a secondary status. This resulted in Verizon gaining a clear advantage in telephony. However, with the company’s strong financial backbone and well developed infrastructure, it can afford to experiment with newer technologies developed within the last two decades. Consumers are relying more on the internet and mobile devices for their day to day business communications and AT&T has made the right decision by foraying into this business on a large scale. The company’s strategic goals presently focus primarily on changing with signs of the times and developing technologies abreast with the development of IT infrastructure. Its core competency lies in providing hardware as well as software due to its well established R&D wing as well as continuous reliance on innovation. Their plan to launch a multitude of popular and affordable products for mass marketing is an exercise in the right direction. References AT&T Company Information, Retrieved July 19, 2011 from: http://www.att.com/gen/investor-relations?pid=5711 AT&T Inc. (T) Competitors, Retrieved July 19, 2011 from: http://www.nasdaq.com/screening/viewcompetitors.asp?symbol=T&selected=T Black, J. (2003). Can AT&T Uncross Its Wires?. BusinessWeek Online, N.PAG. Retrieved from EBSCOhost. The History of AT&T, Retrieved July 20, 2011 from: http://www.corp.att.com/history/ Leslie, C. (n.d). AT&T rings in a new business strategy. USA Today. Retrieved from EBSCOhost, July 19, 2011 Milestones in AT&T History, Retrieved July 20, 2011 from: http://www.corp.att.com/history/milestones.html Miller, J & Johnson,C (2005). Workers, Customers Pay the Price for More Bad Business Decisions by AT&T, Retrieved July 20, 2011 from: http://www.cwalocal4250.org/news/binarydata/ID%3D477.pdf Porter's Generic Strategies Choosing Your Route to Competitive advantage, Retrieved July 20, 2011 from: http://www.mindtools.com/pages/article/newSTR_82.htm Read More