Case Report: at&T: Twenty Years of Change

Topics: Competition, Bell System, Strategic management Pages: 6 (1787 words) Published: November 18, 2008
Case Report: AT&T: Twenty Years of Change
AT&T Case depicts the history of 130 years old giant company, which served its customers in telecommunications area. From its foundation by Graham Bell in 1875 to the restructuring decision in 2000, the company had many key events to be studied in terms of several strategic management point of views. This paper mainly focuses on external environment issues and corporate-level strategies. Analysis with respect to Corporate-Level Strategy

After the foundation of the Bell Telephone Company in 1875, the company diversified its business via the acquisition of Western Electric Company. With this vertical integration BTC had the opportunity to create wealth while transferring its corporate skills. Additionally, acquisitions of many licences also provided BTC huge market power. These horizontal integration enabled BTC to create economies of scope and enabling of operational relatedness. Another significant driving force of the company was the Bell laboratories, which continiously generated know-how and technology. These generated know-how and technology were the key corporate skills to be transferred to other divisions of BTC (First satellite etc.)

However, the monopoly status of the company caused many filed law suits, which finally led to the divestiture of the firm. After the divestature AT&T and the regional Bell operating companies, AT&T lost most of its market share and customers, due to competition and loss of its competitive advantage, namely the ability to reach its wires and bills to every American house. Consequently, since the company was still a huge cash generating company, it decided to diversify into new sectors. Indeed it took over the computer maker NCR, McCaw, some other companies to be able create synergy on account of diversification.

Nonetheless, this attempt failed and only limited synergies could be established. Hence, a second divestiture - a restructuring – became a requisite. Therefore AT&T spent $4B for restructuring including the spin-off of Lucent Company and NCR. Considering from the point of corporate-level strategy, it was impossible for AT&T to be successful with Lucent, since none of the AT&T’s competitors would buy contracts from Lucent due to privacy issues.

Additionally, AT&T failed to create synergy with taking over the NCR computer company. Since the integration of the operations failed, the firm lacked the operational relatedness. Moreover, transfer of corporate skills – if there were any – did not become beneficiary for AT&T. In fact, in the NCR case a serious management error in terms of the integration was apparent: “the corporate clash [ in NCR ] resulted in confusion, complacency, and loss of direction” since AT&T intervened the management starting from the third year of take-over.

In 1997, Michael Armstrong appointed as the CEO of AT&T. Armstrong’s vision was to transform AT&T “from a long distance company into an ‘any distance’ company. Indeed, he took many actions to diversify the company. This diversification was a related constrained one, where the company expected to created operational and corporate relatedness.

As a result of this policy a local telecommunication provider (TCG) was acquired. However the most crucial category of diversification was on the area of cable division: An acquisition and a merger with two cable companies led AT&T to have a dominant position in this sector.

Nevertheless, on account of the inabilities to spread as forecasted, the company did not manage to earn above-average returns. Moreover, the long distance business – the dominant business of AT&T- lost its competitive position on the market. Likewise, the wrong decisions such as not to chose invest in marketing for WorldNet was due to the created management blur of too much diversification. Finally, according to a new restructuring policy AT&T broke-up into four baby AT&T companies.. Anaylsis With Respect to the External Environment...
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