America online – A Case Study Essay Example
America online – A Case Study Essay Example

America online – A Case Study Essay Example

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  • Pages: 4 (1077 words)
  • Published: December 30, 2017
  • Type: Case Study
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The Internet revolution in the 90's can be attributed to America Online's growth history. The company was named Control Video Corporation in the early 80's and was founded to provide online services specializing in video games. It was reorganized in 1985 by James Kimsey and Steve Case and was bannered under the name Quantum Computer Services. It aims to customize online services for leading computer companies. Four years later, a deal with Apple Computer never pushed thru and Quantum ended up introducing the software service it designed for Apple under the name America Online. In 1991, Quantum changed its name to America Online and went public in 1992. The growth in members and subscribers was mainly because of its so-called "effective promotional strategy" which they mail out massive number of diskettes with free trial offers.

Its CEO, Steve Cas


e who had thought that it would be a good idea to make the power of the Internet available to the average consumer, made the expansion of AOL in the early 90's possible. He initiated agreements with leading companies to provide AOL with content for its service. By the time they reach 1 million subscribers, they began offering members Internet and World Wide Web access and kept on flooding the market with diskettes. From 1995-1996,AOL increased its membership globally by launching AOL Germany, AOL UK, AOL Canada, and AOL France. And in a span of 15 years, AOL had entered more than 100 international markets in Europe, Asia, Latin America, and Australia.

AOL endured setbacks by directing to growth-at-any-cost and charged ahead strategy, good promotional approach, fixed-rate pricing and upgrading systems. They had also entered into strategic alliances a

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part of its international strategy to acquire the resources necessary to provide local content in each specific country market. AOL's future will depend on their ability to enhance online experience and interactivity by improving services and to adapt for the needs of their rapid growing members.

Over the years, AOL has become one of the leading providers of Internet services worldwide offering e-mails, tracking stock portfolios, sending instant messages, Internet access and other online services.

"To build a global medium as central to people's lives as the telephone or television...even more valuable." Is indeed concise but still deficient taking into account the nine components of a mission statement. A probable mission statement would be:

The AOL Mission is to consistently provide high quality products and

services to satisfy Internet users worldwide as part of their daily lives, and give them the power to communicate, to converge, and to encourage responsibility and social awareness. And to ensure that the employees maintain their high level of commitment, the company will provide quality improvements in accordance with the requirements of the international quality system standard.

The company's goal in the year 2000 includes:

1. Being able to offer its services worldwide

2. Realizing its mission of building "a global medium as central to people's lives as the telephone or television...and even more valuable."

AOL's most evident strategy is to attract new subscribers by developing new product; and investing in modems, servers, and other equipment needed to operate and expand its online network capability. They continue reaching Internet users worldwide through suitable company merging and strategic alliances.

Steve Case's tenure as CEO and Chairman significantly made AOL lucrative. Making AOL an essential part of everyday life made him

one of the most famous and important top executives in the United States. Exhibiting a low-key, non-egotistical management style with AOL executives and employees transformed AOL into what many observed was the most powerful force in cyberspace. Case's centralized decision-making, dedicated planning, and recruitment of highly experienced executives gave AOL a much more effective management.

When Case took over as CEO, AOL has only 250,000 subscribers and 250 employees. AOL used aggressive marketing strategy in soliciting new members and it lowered monthly fees well below what other online services offered. And they began mailing out huge amount of diskettes with free trial offers. This strategy was used drastically to increase the number of members.

While earning a considerable amount of financial resources from new subscribers, AOL 's marketing expenses ballooned from $ 731 million in 1995 to $ 808 million in 1999. AOL engaged in an accounting practice whereby the large portion of the solicitation cost of new subscribers was treated as a capital investment rather than a current expense; it then depreciated these "capital investments" over the next 12 to 18 months. An approximate $275 million was classified as capital investment for the acquisition efforts of subscribers in 1996. A moved by AOL to change the amortization for subscribers acquisition cost from 12 months and 18 months to 24 months increased the company's reported earning in 1996 by $48 million. By this practice the company minimized its loss in 1995 to $35.8 million instead of $84.5 million as quoted in Business Week. It only shows that despite the fact that AOL generates a big expense in their marketing expenditures they have a highly efficient financial program

in minimizing their loss.

AOL offered a wide variety of Internet service, from text messaging to email. A rapid increased in its subscribers due to aggressive marketing almost caused AOL to collapse. Users were abruptly disconnected and congestion in line almost took an hour to log back in during peak hours. With this development, Case issued an apology letter and made investments by acquiring companies and continued to develop software for network improvements.

Through the company's acquisition of different companies, AOL constructs a high capacity of advance multi-media experience, improving software performance and network service. With this, AOL produces a newer version of their product instantaneously. They allocate almost all their acquired resources to product enhancement and development. Thus they make themselves more competitive thru innovation and by progressively improve the quality of their service.

AOL uses digital environments as well as traditional formats to connect to its members worldwide. Through the acquisition of Time Warner's broadband cable resources and satellite television capabilities. AOL delivers online content at a greater speed possible than a regular telephone lines. The mergence of the two companies evidently increased the scope of their territory.

In summary, AOL's noticeable strength is in management, marketing, and finance and information system. The company needs to continually improve their service in accordance to their growing number of members. With their acquisition of numerous companies, AOL must give their members a much more innovated product and improve services to cope up with the increasing number of Internet provider in the world market.

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