External Analysis of AOL Essay
One of the opportunities of AOL is their chances of acquiring small niche companies which will enable them to expand their market portfolio and products and services offered to the market. The acquisition gives the opportunity for the company to have diversified market needs which also enhances the company’s marketability.
Since AOL has been left by some of its competitors, specifically in line with their ability to target online advertising, the acquisition of the company to small niche companies can enable the company to have a platform with which it can provide both its own and inventory from the network of these small companies which will also enhances the value for the advertisers (Estrin, 2007). 2. Nurture current aggressive international growth campaign initiated in 2007
The company has also the opportunity to reach and provide online services for clients in the international market due to their initiation of international growth campaign in 2007. the international growth campaign of the company gave the opportunity for AOL to enhance market niche and open more avenues and channel to be able to reach international clients. As part of their international growth campaign, the company has been able to expand to 38 countries.
Through this the company
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For instance, AOL broadband users will continue to have commercial free programming which will encourage the users to level up to pricier high-speed internet access (D’Cruz, 2005). In addition, it also provides the company the effort by the online giant to generate additional sources of revenues through the use of sophisticated advertising network. 4. Cost cutting initiative: downsizing US operations Another opportunity for the AOL market is with regards to their cost cutting initiative to downsize operations in the United States.
Since the company is aware that they are able to establish themselves well in the United States, the initiative to downsize their operations and cut cost will provide opportunity in a way that the company may have more financial resources to expand their segments to global market. The ability of the management to lower the cost may pave the way for a more intensive research and development project in terms of advance technology and be able to use these resources to enhance competitive advantage and position of the company in the market place, specifically the online market.
THREATS 1. Dial-up internet business rapid demand decline With the advent of advance information communication technology and the emergence of broadband technology, AOL is facing major threats with regards to getting subscribers for dial-up services, which in turn serve a major threat for the performance of this service portfolio. Accordingly, the growth of broadband over wireless, satellite, DSL, cable and dial-up has eliminated these clean lines of separation which throws major industry into a competitive market which has injured competitors small and large (McClure, 2003).
It can be said that dial-up internet services has been considered to be not conventionally capital-intensive, and the market entrants of this kind of industry have low barriers. In this regards, the threat for AOL is that there must be a rapid decline of demand of dial-up connection of the future because of so many companies that supplies it. Or, the entrants of broadband market may serve as a threat since there are customers who will mostly avail broadband services than dial-up. 2. Competitor takeover threats (Yahoo, Google, et. ) AOL has been in the industry with major competitors such as the Yahoo and Google.
With the growth and competitive advantage of these major companies, AOL is faced with the threat of takeover by the larger industries. If this happens, AOL will face major issues and problems with regards to their competitive position in the market. In addition, takeover of Yahoo and Google or other companies like Netscape may post some issues and conflicts for AOL. The threat of hostile takeover may happen, especially when Yahoo and Google would want to gain more and larger profit than the cost of the acquisition (Subramanian, 2003).
In this regard, the company should be able to do every means of protecting AOL from takeover threats. 3. Post-merger constrained innovation capabilities Another threat to be considered is the limitation of innovation capabilities of the company because of post-merger. Post-merger integration can post a huge and very risky endeavor; hence, the company may not be able to give enough attention to their innovation capabilities which will affect their overall performance in the marketplace.
Post-merge also hinders innovation capabilities because, the company may have hesitations providing financial resources to research and development projects because their decisions are bounders with the merger activities. For instance, in AOL, the company’s decision to merge should be fully challenges before industries decide to go ahead, specifically given the average performance of the returns as well as the risk linked with the potential outcomes. 4. Failure to upgrade product suit in line with competitors
Another threat of the company is with regards to the failure of the company to upgrade their product portfolio in line with the competitors. Since, there are many companies in the internet market that provide innovative products and services, AOL may be left behind the competition if they are not able to comply with the needs and demands for technological advancement. In addition, if the company will not be able to provide innovative products to their clients, there is a tendency that loyal customers may change their brands to find the most suitable products for their changing needs.
With this, the performance of the company will be affected and their competitive advantage is also impacted by these factors. 5. Google’s JV with DELL Another threat challenging AOL is the joint venture of two global and multinational companies like Google and Dell. Being one of the largest technology industries, Dell holds the power in this kind of market and if its ventures with Google, the market of Dell will be expanded posting major threat of companies like AOL and others.
The joint venture will let both companies expand their market portfolio and reach more audience which may largely affect how business is done in this kind of industry. This joint venture is also a threat since there is a tendency that the research and development of both companies will be able to generate innovative and competitive products in the marketplace, disallowing AOL and other industries to have a better competitive position. Joint venture can create bigger and better company that will make it more difficult for other industries to compete well and effective.
D’Cruz, C. A. (2005). Strategic Analysis Tools for High Tech Marketing. Florida: Xodus, Business & Technology Solutions, Inc. Estrin, M. (2007). With TACODA in Tow, Will AOL Dominate? Online available http://www. imediaconnection. com/content/15952. asp. Retrieve November 28, 2008. McClure, D. P (2003), Internet Service Providers In the 21st Century. A white paper addressing the changing role of the Internet Service Provider in the emerging Internet supply chain. US Internet Industry Association