Some strategic illusions suffered at AT

1
Some strategic illusions suffered at ATT

• Larger scale is better...
• but diseconomies from bureaucracy
• Vertical integration is good...
• but may promote inflexibility in fast evolving
  markets
• Easy to create synergies in related businesses
• but these often exist only on paper depends on
  the direction and speed of technological evolution

2
Did ATT have a bad strategy?

• Not clear whether the plan was poor
• IBM and ATT made large bets that failed, but NEC
  and Fujitsu have made the same bets that are
  paying off
• but what about implementation
• did Allen fail to implement the strategy well?
• did the size of ATT prevent Allen from
  successfully guiding the ship?
• should ATT have shed businesses more quickly
  when it was clear that things were not working
  out?

3
What is the role of the board?

• Did the board fail in its fiduciary duty?
• Should it have let Allen hand-pick successor?
• Did it act too late in replacing the executive?
• At least a 6.5 billion loss related to NCR
• Over 40 billion in other acquisitions and
  restructuring over 8 years
• If shareholders own the company, why didnt
  they rebel?
• Ownership may not necessarily mean control.
• How does the situation at ATT compare to
  Beatrice?
• The day Allen was replaced, ATT stock rose
  5--3 billion in market capitalization--and has
  been slowly rising since.

4
How should a firm think about its non-market
strategy?

• Political and legal strategies can be effective
  in supporting a firms profitability
• How would the competitive dynamics of the long
  distance market have changed if the FCC did not
  continue to regulate ATT rates?
• What would have happened if ATT had convinced
  the Congress to keep long distance and local
  services separate markets?
• Would a different auction procedure for PCS
  licenses have put ATT into a more competitive
  position?
• What will happen if the 8th Circuit and D.C.
  Circuit courts rule in favor of the local Bell
  companies and make ATTs entry into the local
  markets much more costly?
• How should a firm think about its non-market
  strategy?
• How should the lobbying and litigation effort be
  organized?
• How should the firm allocate resources to these
  activities?
• How should the firm integrate its nonmarket
  strategy into its competitive strategy?