Reorganizing AT&T: From Vertically Integrated to Customer-Centric Organization (A)
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Case Code: BSTR077 Case Length: 15 Pages Period: 1876 - 2003 Pub Date: 2003 Teaching Note: Not Available |
Price: Rs.400 Organization: AT&T, Department of Justice (US) Industry: Telecom, Countries : USA Themes: Corporate Restructuring |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Break-Up of Bell System
Once the decision to divest was made in 1982, AT&T moved rapidly to complete the reorganization by January 1984. In just 20 months, it completed the Herculean task of segregating about one million employees and assets of $150 billion among itself and the BOCs. AT&T reorganized itself by adopting a matrix structure with market segmentation overlapped by functions. AT&T, after the break-up, was established as a separate, unregulated company to sell equipment and long-distance communication and information services.
It was broadly divided into AT&T Communications and AT&T Technologies(Refer Exhibit III). AT&T Communications comprised of all long-distance telecommunication services of the old AT&T. AT&T Technologies comprised of Bell Labs (R&D), AT&T International (overseas sales), AT&T Information Systems (domestic marketing of telecom products, computers and other related services to businesses), AT&T Network Systems (supplies network telecommunications products), AT&T Technology Systems (produced integrated circuits, power systems & optoelectronic components) and AT&T Consumer Products (sold and leased telephones and other telecommunications products through retailers)...
AT&T - After The Break-Up
Soon after the break-up, AT&T had to quickly revise its strategies because of rapidly changing customer preferences and intensifying competition from long-distance telecom companies such as MCI, ITT Long Distance, Skyline and GTE Sprint. AT&T also faced major problems in marketing its products.
Although sales people were aggressive and contacted key customers as often as once a week, many customers remained unimpressed. According to one customer, "They are still marketing under the old concept. Which is, we're the only one in the market and you got to do business with us." AT&T's management decided to respond by streamlining operations and speeding up product development. AT&T also began to lay more emphasis on marketing, both directly and indirectly through retailers such as Sears Roebuck & Co. The company also attempted to revamp its HR strategies to make employees independent and customer-responsive, not waiting for headquarters to give them instructions...
The Acquisition of NCR
During the early 1990s, with increasing competition in AT&T's long-distance communication business, the company decided to diversify into other related lines of business in an attempt to lower its dependence on its traditional sources of income.
In spite of its earlier failures, AT&T's management decided on further expansion in their computer business. This expansion was an attempt to realize the synergies that the management believed existed in integrating the computing and communications businesses. In 1990, Allen became AT&T's Chairman and CEO. He started looking for a computer company that AT&T could acquire. AT&T identified the Dayton-based NCR Corporation (NCR), a company which reported a profit of $400 million on $6 billion revenues in fiscal 1990. NCR was particularly strong in open systems, especially computers running on UNIX, and its customers were concentrated in the banking and retailing sectors - sectors that AT&T felt might also profit from more investments in telecommunications...
AT&T Till The Mid-1990s
Apart from the NCR acquisition, AT&T made other efforts to strengthen its overseas presence through several joint ventures. For instance, the company formed joint ventures with British Telecommunications(1991) and Italtel(1989) to produce and market telecommunication products in Europe.
AT&T also began to leverage on its technology and huge financial muscle to gain access to a few of the world's toughest telecom markets like Japan and European countries. In 1991, AT&T's hard-hitting commercials and sales efforts helped in slowing the erosion of its market share to a certain extent. Apart from focusing on the computer business, AT&T also paid attention on the emerging wireless markets. In 1993, AT&T announced a merger with McCaw Cellular Communications, the largest provider of cellular service in the US. The acquisition was later renamed AT&T Wireless. In spite of its renewed focus on international operations, AT&T suffered operating losses in Europe, Japan and other units outside the US during the period 1992-95...
Exhibits
Exhibit I: Bell System (Pre Break-Up)
Exhibit II: Important Events in Bell System's History
Exhibit III: AT&T (Post Break-Up)
Exhibit IV: AT&T's Changing Logos
Exhibit V: Changing Structure of Telecom Industry in the US (1895-1995)
Exhibit VI: Financial Performance of AT&T (1985-1995)
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