Aol Time Warner Inc. - A Bad Idea From The Start?

EXTERNAL ENVIRONMENT

A. Societal Environment

1. Economic

* Strong competition among internet providers - not able to increase prices(O/T)

* Growing markets, Stage II development for Internet service with Broadband, Cable and DSL(O)

* Business growth, product and service usage (cable, internet, media)(O)

* September 11th disaster(O/T)

* The 'burst' of the Internet bubble(T)

* Corporations' accounting issues(T)

* Slowdown of the economy(O/T)

2. Technological

* Changes in technology - Implementing change of services provided from dialup to broadband can be expensive and require extensive capital resources.(O/T)

3. Political-Legal

* FCC changes and rulings in broadband regulation(O/T)

* Lobbying against broadband service providers(O)

* Cable industry - Regulation vs. Deregulation(O/T)

4. Sociocultural

* "Environmentally friendly products - intangible services(O)

* Demographic changes from specific niche markets to diversified target areas(O)

* Low end services, low consideration for purchase decision making(T)

* Necessity of service for home considered high (internet access, cable) (O)

B. Task Environment

1. Threat of new entrants: Medium

* Internet - a small investment is all that is required for a start up company to operate its own ISP and provide E-commerce solutions.

2. Bargaining power of buyers: High

* Ability to choose substitutes

* Subscriber preferences

3. Threat of substitute products: High

* Same product, different brand, close quality, and lower cost.

* Cable modems - similar high speed service, strong, reliable reputation already being established for service

4. Bargaining power of suppliers: Medium

* Widespread availability of technology (hardware/software)

* Access to materials such as copper networks provided by Bell, AT&T

* Traditional and New distribution channels

5. Rivalry among competing firms: High

* Cable Systems - AT&T Broadband, Cablevision Systems, Direct TV, Cox Enterprise, Comcast.

* Internet - Earthlink, Prodigy, Terra Lycos, Yahoo, Microsoft

* Filmed Entertainment - Vivendi Universal, Viacom, Walt Disney, Sony

* Publishing, Music & Media - Advance Publications, Bertelsmann, Virgin Group, Sony, plus many others.

6. Power of other stakeholders: : High

* Negative publicity of merger could hurt in raising capital from future shareholders

* FCC Regulators

* SEC

* Potential lenders and investors

IV. INTERNAL ENVIRONMENT

A. Corporate Structure

* Multiple business segments -

* Cable systems - AOL, Compuserve, Netscape, AOL Instant Messenger

* Media - CNN, HBO, TBS, TNT, Cartoon Network, WB

* Publishing - Time, People, Sports Illustrated, Entertainment Weekly

* Entertainment - Warner music, Warner Bros. Studios

* Decentralized - from top down

* Two business units - Media & Entertainment Group, and Entertainment & Networks Group.

* Business units headed by Don Logan and Jeff Bewkes (from Time Warner)

B. Corporate Culture

* Internal management