Strategic Plan for AOL Term Paper

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Strategic Plan for AOL

What is the meaning of progress? In general it means that the group of individuals or organization is being able to keep pace with the changes that keep coming in with time. AOL was a very large and important unit in the Internet services before the broadband access concepts came in. Today, their technology is backdated and they are trying to come in with new technology. At the same time, in a race it is very difficult to make up once you have fallen back. That is the problem, and it is unlikely that they will ever become a leader of Internet any more. Just as they had absorbed a number of other organizations earlier -- Netscape, Compuserve, ICQ, Digital City and Moviefone -- they will also be absorbed by another organization as they still have a relatively large number of subscribers. They had gone into a very attractive merger with Time Warner, but that has not led AOL to any great success.

Environment Analysis

Internal Environment

It is clear that the problem of this organization is with technology and it has to evaluate which technology, if developed will yield benefits for the company. Thus the need to streamline the entire operations of the organization on the Internet was probably clear not only in terms of removing inefficient groups, but the organization has also been very conscious about recruiting staff that are likely to give results. One such person recruited is John McKinley, the former Chief Technology Officer for Merrill Lynch and GE Capital. He was appointed as Chief Technology Officer and President AOL Technologies. The role that he has taken up is that of chief technology strategist for the company and is in charge of directing the activities of the company as it moves into different areas of broadband, wireless and premium services. Apart from that he is in charge of managing the teams in charge of product engineering, network infrastructure and data centers, internal business systems and computing. He has experience in this as he had been the Executive Vice President and Head of Global Technology and Services at Merrill Lynch. This was also a large organization with 14,000 employees. He was the individual in charge of planning and launch of online trade offerings from Merrill Lynch and those were considered to be the best in class from other organizations like SmartMoney and Gomez. (AOL Names John McKinley as Chief Technology Officer and President, AOL Technologies)

The change of personnel is now reflecting in terms of acquisition and starting of new services from the organization. On August 4 of the current year, the company has announced that it has taken over Xdrive, Inc., and this company is a leading provider of online storage and back up. The costs of the taking over were not mentioned. The company was a private company earlier, founded in 1999 is headquartered in Santa Monica, California. The company will also operate as an independent unit under the Digital Service business unit of the new owners and continue to be based in the same area. The company manages an online, centralized storage platform which provides the subscribers with access to and protection of all their digital assets, and the protections are irrespective of the location used to access the Internet. Xdrive is the provider of secure storage, storage safety and security, and automatic back up of all assets. These can be in the form of music, pictures or video. (America Online, Inc. Announces Acquisition of Xdrive, Inc.)

As late as a couple of days back, on August 16th, 2005, the company started a new unit called AOLMobile.com. This is a personalized mobile portal that helps individuals to learn about, buy and use mobiles. They are undoubtedly the most prevalent of wireless communications and content services. The attempt is to meet the needs of members of AOL, users of AIM and all mobile users. The facilities in the site make it possible for the user to customize the presentation in a manner that will suit the phone number and service provider that they use. (America Online Inc. Launches AOLMobile.com)

Thus it is clear that AOL is trying to develop technology, and obviously they have to develop technology in areas that will make their services more popular to the users. Let us remember that America Online had started with a small base as Quantum Computer Services in 1985 and developed to having 22 million subscribers to its dialed up online base. Many other companies had merged with AOL and these were Netscape, Compuserve, ICQ, Digital City and Moviefone. None of these companies had much of assets or retained successes in the personal computers field. AOL was doing well in the stock market as it had the highest number of dial up consumers. This is what caused the share price go much beyond reality. The buyers of shares were betting speculatively on the earnings capacity and previous price growths of the share. (Assessing the Millennium Merger)

The Federal communications Commission also attached a number of conditions to the merger and these led to a lot technical experimentation. The new company had to go through an open access trial in Columbus, Ohio while the rivals of AT& T. Broadband had then just completed a trial in Boulder, Colorado and were planning another trial in Massachusetts. These are events that kept happening one year after the merger had taken place between AOL and Time Warner. (More than meets the eye) The merger was based on the idea that the benefits from broadband would be available to both the companies, but the technology itself was not ready. Then the question comes as to what was the hurry for both to agree to the merger? Regarding the question of long-term objectives, there were clearly no accepted objectives at the time the merger took place. Today the objective should be to attain technological development so that the shareholders can get a reasonable return on their investment. The situation that AOL is now makes it clear that it has no future if it continues with its former technological position. The facilities that it is talking about are probably no longer attractive to customers and the company itself is probably not liked by the group of customers who would be interested in dealing with AOL.

2) External Environment

It is important to understand the nature of organization that AOL was -- it was fundamentally an organization trying to become a dominant player among the initial users of Internet. There were a lot of organizations that were started, and among the many organizations that existed, only a few are in a good position now -- Microsoft is surviving due to their strength in the software field, Yahoo is surviving as an organization for servicing e-mail requirements, Google is servicing search and data collection requirements. All these are servicing the market for the individual user, which is distinct from the group or corporate users. Presently the importance is for the use of broadband services. AOL was a big name among the users of personal computers, but its market is collapsing as the main method for its connection with users was dial up through telephone. (AT& T, AOL Time Warner prepare for platform, services battle)

While this is very good theory and planning on video or paper, the fact remains that AT& T. has been the dominant force in getting cables inside American homes. They have been so strong that even the American government had to cut them up in six pieces to remove their monopoly position. Broadband access also requires getting a cable inside the house, and technically it is possible to carry both broadband signals and telephone lines in one cable. The reach was also true for AOL TV and broadband enhanced PC service. They were trying to get into all cable markets which were held by Time Warner or others. The goal was clearly to service customers no matter what system of access they were using according to the AOL spokeswomen Wendy Goldberg.

This was made impossible by AT& T. As they tied up with quite a few of the cable operators. This compelled AOL to concentrate on DSL and satellite options. The satellite option became available quite early and DSL was available in many markets of Bell Atlantic and SBC Communications markets to previously existing AOL customers. At the same time, AT& T. also got onto the game and said that it will offer local phone and high-speed data services through fixed wireless facilities in areas where it does not have an affiliation with local phone companies. This was also seen in the acquisition of Media One Group, which is a cable company by AT& T. With this new company, AT& T. was in a position to cover about 25% of United States households through its cable. (AT& T, AOL Time Warner prepare for platform, services battle) Thus it is clear that the fight was to get hold of…[continue]

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