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Sample Case Study on AOL

Case Study on AOL

Potential problems include the following:

  • Online system still subject to busy signals during peak hours of usage
  • AOL may experience difficulty in luring users away from their local ISPs in favor of an AOL account
  • Large number of subscribers may be a hindrance with regard to negative publicity
  • Customer service usually weaker when number of customers increases significantly
  • Transition to information-appliance-based access
  • Global & domestic competition (free and fee-based ISPs)
  • Investing in new services without sufficient knowledge as to how to sell the service
  • European entry without sufficient due diligence of markets

America Online is now a wholly owned subsidiary of AOL Time Warner Inc. Based in Dulles, Virginia, America Online is the world’s leader in interactive services, Web brands, Internet technologies and e-commerce services. The parent company, AOL Time Warner, is the world’s leading media and entertainment company, whose businesses include cable systems, filmed entertainment, television networks, music and publishing, in addition to America Online’s interactive services. However, this case addresses AOL prior to its merger with Time Warner.

There are several threats to AOL’s success as it existed in 1999. Small “Mom & Pop” ISPs (primarily free or low fee-based services) may limit the number if Internet users who are willing to use the AOL service. A financially strong company with PC familiarity (i.e. Microsoft) could pose a threat if they decide to make a bold entry into AOL’s market. Finally, denial of access into high-speed markets could stunt AOL’s growth as more computer users seek to upgrade their connection speed.

On the other hand, there are numerous opportunities that could lessen the potential threats. These include: entrance into the cable modem market; high-speed DSL service through the phone companies; entering the browser market with the Netscape merger; improved online access via tiny “Palm Pilot” computers; Internet availability with smart internet cell phones; and, enticement of non-AOL members to use AOL.com for online transactions.

Strategic Recommendations
Continue developing and refining interactive services. AOL is making it easier and more convenient to do online the everyday things that people do offline, effectively creating a virtual place in which all of the necessities of life may be accomplished quickly and efficiently. Users can get in touch with family and friends, manage busy schedules, monitor finances, shop, and stay informed through news information. AOL should develop and deploy interactive services for point-of-sale consumer devices at retail locations around the world, such as gas stations, convenience stores, restaurants, and entertainment venues, allowing customers to check their email boxes, etc.

Proactive and extensive marketing in “cyberspace”. Numerous advertisers and marketers are making the AOL family of brands a key and rapidly growing part of their marketing mix. For these advertisers, AOL’s brands offer excellent opportunity to bring in shoppers. For the marketers, AOL maximizes the interactive medium’s ability to compress the three steps of marketing: getting attention, providing information, and closing the deal into one convenient step.

Aggressively market international brands. AOL and CompuServe services outside of the U.S. surpassed 3.2 million members in 1999, making AOL the #1 global Internet online service. AOL has penetrated the UK market segment by implementing a subscription free service, meeting the demands of potential members. AOL should expand and establish footholds in multiple countries, e.g. Brazil, Mexico, etc. AOL would position itself as providing convenient easy to use services that are locally oriented in countries around the world.

Potential Questions for Presenters

  1. What factors help explain AOL’s ascendancy to the largest online subscription service?
  2. Why did the experts predict the downfall of AOL? Why did AOL succeed anyway?
  3. What are some of the business challenges facing AOL? How should they confront those challenges?
  4. Do you think that AOL will continue to succeed in online services and E-commerce?
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