Reorganizing AT&T: From Vertically Integrated to Customer-Centric Organization (B)|Business Strategy|Case Study|Case Studies

Reorganizing AT&T: From Vertically Integrated to Customer-Centric Organization (B)

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Case Details:

Case Code : BSTR078
Case Length : 15 Pages
Period : 1876 - 2003
Organization : AT&T, Department of Justice (US)
Pub Date : 2003
Teaching Note :Not Available
Countries : USA
Industry : Telecom

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Dorman's Dilemma

Occupying the top position at AT&T, Dorman faced several challenges. The major one was to stop the company's declining revenues and bring AT&T back onto the growth path. AT&T's revenues had fallen by 10.4% to $37.8 billion in the fiscal ending December 2002.

The company's operating income had nosedived 44% to $4.36 billion for the same period (Refer Exhibit V). By early 2003, AT&T faced fierce competition from local exchange carriers - the RBOCs that were quickly entering into the long distance communication business. The RBOCs provided 'all-distance' services in 35 states in early 2003, and planned to offer the same service in all the 50 states in the US by 2003-end. In the voice services that constituted 80% of AT&T's operating income, the company faced aggressive price competition from RBOCs, resulting in loss of market share. According to industry analysts estimates, the RBOCs were expected to capture 28 million residential long-distance customers constituting 40% of the market by the end of 2003...

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Reorganization in 2003

Against the backdrop of all these concerns, in April 2003, Dorman announced the reorganization of AT&T. The reorganization aimed at serving the company's customers quickly by expediting decision-making process (Refer Table I).

After the spin-off of AT&T Wireless and AT&T Broadband, the company had only two divisions left - AT&T Business and AT&T Consumer. The reorganization would reduce the layers of management between the CEO and the line workers from 14 to 7. Dorman felt that several layers of management had made AT&T lethargic and unresponsive to the needs of customers. Dorman described the reorganization as a long-term exercise, and said it was not just prompted by AT&T's poor financial condition. He said that it was a part of the holistic organizational strategy of AT&T to transform its culture by laying less emphasis on business functions and designing a unique horizontal leadership structure. Dorman said, "We've benchmarked ourselves against the best companies in the world and aligned our resources squarely against our top priorities...

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Exhibit I: AT&T Corporation - Stock Price Chart (1994-2003)
Exhibit II: AT&T's Breakup (1995)
Exhibit III: The Telecommunications Act (1996)
Exhibit IV: Organization Structure of AT&T (2001)
Exhibit V: Financial Performance of AT&T (1996-2003)

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