Aol Time Warner Inc. – A Bad Idea From The Start?
Essay Preview: Aol Time Warner Inc. – A Bad Idea From The Start?
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EXTERNAL ENVIRONMENT
A. Societal Environment
Economic
Strong competition among internet providers – not able to increase prices(O/T)
Growing markets, Stage II development for Internet service with Broadband, Cable and DSL(O)
Business growth, product and service usage (cable, internet, media)(O)
September 11th disaster(O/T)
The burst of the Internet bubble(T)
Corporations accounting issues(T)
Slowdown of the economy(O/T)
Technological
Changes in technology – Implementing change of services provided from dialup to broadband can be expensive and require extensive capital resources.(O/T)
Political-Legal
FCC changes and rulings in broadband regulation(O/T)
Lobbying against broadband service providers(O)
Cable industry – Regulation vs. Deregulation(O/T)
Sociocultural
“Environmentally friendly products – intangible services(O)
Demographic changes from specific niche markets to diversified target areas(O)
Low end services, low consideration for purchase decision making(T)
Necessity of service for home considered high (internet access, cable) (O)
B. Task Environment
Threat of new entrants: Medium
Internet – a small investment is all that is required for a start up company to operate its own ISP and provide E-commerce solutions.
Bargaining power of buyers: High
Ability to choose substitutes
Subscriber preferences
Threat of substitute products: High
Same product, different brand, close quality, and lower cost.
Cable modems – similar high speed service, strong, reliable reputation already being established for service
Bargaining power of suppliers: Medium
Widespread availability of technology (hardware/software)
Access to materials such as copper networks provided by Bell, AT&T
Traditional and New distribution channels
Rivalry among competing firms: High
Cable Systems – AT&T Broadband, Cablevision Systems, Direct TV, Cox Enterprise, Comcast.
Internet – Earthlink, Prodigy, Terra Lycos, Yahoo, Microsoft
Filmed Entertainment – Vivendi Universal, Viacom, Walt Disney, Sony
Publishing, Music & Media – Advance Publications, Bertelsmann, Virgin Group, Sony, plus many others.
Power of other stakeholders: : High
Negative publicity of merger could hurt in raising capital from future shareholders
FCC Regulators
Potential lenders and investors
IV. INTERNAL ENVIRONMENT
A. Corporate Structure
Multiple business segments –
Cable systems – AOL, Compuserve, Netscape, AOL Instant Messenger
Media – CNN, HBO, TBS, TNT, Cartoon Network, WB
Publishing – Time, People, Sports Illustrated, Entertainment Weekly
Entertainment – Warner music, Warner Bros. Studios
Decentralized – from top down
Two business units – Media & Entertainment Group, and Entertainment & Networks Group.
Business units headed by Don Logan and Jeff Bewkes (from Time Warner)
Corporate Culture
Internal management