Skypes vs at&T Case Study

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Skype versus AT&T and the Future of Telecommunications

By

Nanette Stevens

AL371 Business Policy

Joe Wood

January 15 2013

Introduction/Background Summary

Skype, one of the world’s most famous VoIP (Voice over Internet protocol) service companies, has lead the field since it came out in early 2000s. It is famous for these characteristics: easy, cheap and the voice is clear to the listener. It was founded in 2003 and based in Luxembourg. In 2005 Skype was acquired by EBay. In 2011 Microsoft agrees to buy Skype for $8.5 billion. Analysis of the competition among the VoIP industry segment, especially as it relates to the relationship between Skype and AT&T and the competition between the VoIP market and the land line market found that VoIP is a growing industry in what has historically been predominately a land line telecommunication company such as AT&T. Skype was a little different from AT&T. It offered its customers Voice over Internet protocol, which defined simply, was the transmission of voice traffic over IP-based networks. In other words, it was a telephone via an internet connection. [ (Strickland) ] (P C-226)

The company's Web-based software allows users to make voice and video calls using the Internet. Calls are free when made Skype-to-Skype, and users can make calls to landlines and cell phones at lower rates than traditional phone services. Skype also gets revenue from voice mail and other services, and offers a platform for business communications for small and midsized firms. Skype has offices in the US, Europe, and Asia. More than 80% of sales come from outside the US. In 2009 eBay sold most of the company to a group of investors led by Silver Lake Partners. Skype was acquired by Microsoft in 2011. Problem identification

The lack of regulation made it easier for companies to enter the VoIP market than to enter the telecommunications market. The biggest difference between the competitors is that AT&T uses traditional telephone, which is run through a public switched telephone network (PSTN) and is much more expensive. Skype offers its customers VoIP, which, defined simply, is the transmission of voice traffic over IP-based networks. In other words, it is a telephone through an Internet connection. However, with competition comes a loss of revenue growth in which Skype’s has shrunk from 685% in 2006 down to 37% in 2007. Skype’s president Josh Silverman needs to better understand the reason for this shrinkage and he needs to place more focus on attacking AT&T and other big phone companies. The strategic direction of the Skype must identify the most significant strategic problem. For Skype the main issue internally was mismatch in the relationship between revenue growth rate and company growth rate. The company’s revenue growth rate had begun to flatten in 2007 due to what the company states was cheap international calling rates and user to user calls and videos. [ (Strickland) ] (P C-230) Skype is doing fine under Microsoft ownership. The software giant has kept its hands off their baby. However, the current success isn’t enough to hide the fact that Skype is facing increased competition. Researching Internal and External Factors

Skype has been incorporated into the business world and widely recognized as a valuable business tool to increase productivity and save money. Such uses include: audio and video conferencing with capabilities to record meetings, real time, face to face collaboration internally as well as on a client level, file sharing and transfer during meeting sessions, interviewing potential candidates reducing travel costs, and the ability to be used on Smartphones and iPads. Here is the SWOT analysis

Strengths
* the convenience of the product
* low cost to consumer (can be free in some instances)
* easy access
* development of new features that make it more useful to specific groups * Adaptable...
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