Harvard Case - AT&T Wireless: Text Messaging
"AT&T Wireless: Text Messaging" Harvard business case study is written by Vaughan Radcliffe, Mitchell Stein, Michael Lickver. It deals with the challenges in the field of Accounting. The case study is 16 page(s) long and it was first published on : Mar 25, 2011
At Fern Fort University, we recommend that AT&T Wireless implement a comprehensive strategy to capitalize on the burgeoning text messaging market. This strategy should focus on leveraging existing infrastructure, developing innovative services, and aggressively pursuing new customer segments.
2. Background
This case study examines AT&T Wireless's position in the rapidly growing text messaging market in 2003. The company, a leader in the wireless industry, faces the challenge of capitalizing on the increasing popularity of text messaging while managing costs and profitability. The main protagonists are AT&T Wireless executives, who need to determine the best strategy to leverage this new revenue stream.
3. Analysis of the Case Study
Strategic Analysis:
- Porter's Five Forces: The analysis reveals a highly competitive market with strong bargaining power of buyers (consumers) and potential for new entrants. The threat of substitutes is high due to the emergence of alternative communication technologies.
- SWOT Analysis:
- Strengths: Strong brand recognition, existing network infrastructure, established customer base.
- Weaknesses: Limited understanding of the text messaging market, potential for cost overruns, lack of innovative services.
- Opportunities: Growing demand for text messaging, potential for new revenue streams, expansion into new markets.
- Threats: Intense competition, evolving technology, regulatory changes.
Financial Analysis:
- Cost Accounting: AT&T Wireless needs to implement a robust cost accounting system to accurately track the costs associated with text messaging, including infrastructure, network usage, and customer service. This will help in determining the profitability of different text messaging services and making informed pricing decisions.
- Pricing Strategy: AT&T Wireless should consider a pricing strategy that balances revenue generation with customer acquisition and retention. This could include tiered pricing based on usage, bundled packages with voice and data services, and promotional offers to attract new customers.
- Financial Performance Measurement: Key performance indicators (KPIs) such as revenue per user (ARPU), customer churn rate, and cost per message should be closely monitored to assess the effectiveness of the text messaging strategy.
Marketing Analysis:
- Customer Segmentation: AT&T Wireless should identify different customer segments with varying needs and preferences for text messaging. This will allow for targeted marketing campaigns and product offerings.
- Brand Positioning: The company should position itself as a leader in the text messaging market by emphasizing its reliability, security, and innovative services.
- Marketing Channels: AT&T Wireless should leverage a variety of marketing channels, including online advertising, social media, partnerships with content providers, and mobile promotions.
4. Recommendations
- Invest in Infrastructure: AT&T Wireless should invest in upgrading its network infrastructure to handle the increasing volume of text messages. This includes expanding network capacity, improving message delivery speed, and enhancing security measures.
- Develop Innovative Services: The company should develop innovative text messaging services beyond basic communication. This could include personalized content delivery, mobile payments, location-based services, and interactive gaming.
- Target New Customer Segments: AT&T Wireless should actively target new customer segments, such as young adults, businesses, and international markets. This requires tailored marketing campaigns and product offerings to cater to their specific needs.
- Implement a Robust Cost Accounting System: AT&T Wireless should implement a comprehensive cost accounting system to track the costs associated with text messaging. This will allow for accurate cost analysis and informed pricing decisions.
- Develop a Data-Driven Marketing Strategy: The company should leverage data analytics to understand customer behavior and preferences, enabling targeted marketing campaigns and personalized product recommendations.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: Investing in infrastructure and developing innovative services leverages AT&T Wireless's existing strengths and aligns with its mission of providing reliable and innovative communication solutions.
- External Customers and Internal Clients: Targeting new customer segments and developing innovative services directly address the needs of diverse consumers and internal stakeholders.
- Competitors: By developing innovative services and targeting new customer segments, AT&T Wireless can differentiate itself from competitors and maintain its market leadership.
- Attractiveness - Quantitative Measures: The recommendations are expected to generate significant revenue growth and improve profitability, based on market projections and cost analysis.
6. Conclusion
AT&T Wireless has a significant opportunity to capitalize on the growing text messaging market. By implementing a comprehensive strategy that focuses on infrastructure investment, service innovation, customer segmentation, and robust cost accounting, the company can achieve long-term success in this dynamic industry.
7. Discussion
Other Alternatives:
- Focusing solely on cost reduction: This approach could lead to a loss of market share and customer loyalty.
- Ignoring the market: This would result in missed opportunities and a decline in market position.
Risks and Key Assumptions:
- Technology changes: The rapid evolution of technology could render existing services obsolete.
- Competition: Intense competition could erode profitability and market share.
- Regulatory changes: Government regulations could impact pricing and service offerings.
8. Next Steps
- Develop a detailed implementation plan: This plan should outline specific actions, timelines, and resource allocation for each recommendation.
- Conduct market research: Gather data on customer preferences, competitor offerings, and emerging trends in the text messaging market.
- Pilot test new services: Launch pilot programs to test the feasibility and market acceptance of innovative text messaging services.
- Monitor key performance indicators: Track the performance of the text messaging strategy and make adjustments as needed.
By taking these steps, AT&T Wireless can effectively leverage the text messaging market and achieve its strategic goals.
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Case Description
The case examines AT&T's wireless business with focus on its text messaging services. The industry features a high proportion of fixed costs in relation to acquiring spectrum and building a network. Variable costs are relatively low and, in the case of SMS text messages, are very low. Pricing and margins in text messaging have attracted regulatory scrutiny in the Unites States, Canada and elsewhere. The case requires the use of key concepts in cost behaviour, cost volume profit analysis and product costing to understand the nature of the business and the profit margins involve. Many service or high tech businesses exhibit similar cost behaviours and so the case allows students insight into the management of such enterprises.
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