GOES FAR EAST

Presented by:-Shray JaliLM Thapar School Of Mgmt

Roadmap of the Presentation

Founded in 1985 as Quantum Computer Services

Offered online services to Commodore business machines

WWW came along almost 12 years later

Company grew at a steady pace

Acquired MapQuest in 2000

AOL Inc.- history

Business unitsBusiness Unit Type of Business Members Access Acquired　 or

Developed

AOL Internet Online Service 19,000,000 Subscription Developed

CompuServe Internet Online Service 2,000,000 Subscription Acquired

Netscape Netcenter Internet Portal 17,000,000 Free Acquired

AOL Instant Messenger Web-based

communication

Service

25,000,000 Free Developed

ICQ Web-based

communication

Service

50,000,000 Free Acquired

Digital City local online content

provider

4,300,000 core Free Partnership

AOL MovieFone Movie Guide and

Ticketing

Service

150,000,000

hits in 1998

Free Acquired

Spinner Networks

Internet Music provider 2,000,000 core Free Acquired

Started its international expansion with Germany in 1994

Company expanded to Australia, Brazil, Canada, France, Japan, UK, Sweden and Hong Kong

All the joint ventures have been undertaken with a partner in local market

In Japan, AOL chose Mitsui & company (largest and oldest trading company)

International expansion

Only 33 % of households have PC, and only 18 % of households connected online

The number of online households is expected to grow significantly

PC growth in double digits from last 3 years

The high connecting cost has been recognized as primary barrier

Lower access charge are expected to reduce this barrier

Internet in japan

Niftyserve19%

Biglobe7%

DTI7%

AOL Japan3%

Compuser

ve1%

others63%

Market share of isps

Revenue per category (1999)

Subscriptions69%

Ads, Com-

merce and other21%

Enterprise Solutions10%

AOL50%

Mitsui & co.40%

Nikkei10%

Feb 1996

Strategy to enter into japaN

Founded in 1941

More than 60000 employees in 60 countries

Known as the most traditional trading company

Mitsui’s strength was in Facilitating large transactions for commodity type products

Core competency in import, export and financing

Mitsui had all the connection and money required

Mitsui & co. japan

JAPAN

Strategic alliance

AOL40%

Mitsui & co.13%

Nikkei4%

DoCoMo42%

The marketing strategy initially employed was based on the strategy that was successful in US

Mitsui hired all the local employees in marketing department

The marketing strategies wereBundlingMagazine insertsDirect mailTake-one

MARKETING AT AOL JAPAN

Pre-installed AOL software on each PC

X free hours of free trial of internet

AOL tried same strategy in Japan and tied up with 15 manufacturers

Partnership with DoCoMo, planned to use internet via i-mode cellular phone

bundling

To shrink wrap each magazine with a CD

In Japan, magazine companies are tough to do business with

AOL issued its own magazine, when there is major software upgrade

Magazine Inserts

Very much successful in US but not in Japan

Lack of available mailing listMailing cost is much more in

Japan as compared to US

DIRECT MAIL

Software CD put on display in places, where potential customers might congregate

Computer store Softmap

Hit rate for take one’s is much higher than direct mail or magazine inserts

Co-Branding

Take-ones

In 3 years, AOL Japan’s market grown over to 3 percent

Annual growth of new subscribers is 10 to 15% over two years

AOL Japan looking at 3 different ways to increase their market shareLower access charge to capture a new

subscriberTake advantage of technology changes and

new emerging markets (NTT DoCoMo)Buy other ISPs

Future prospects

Was Mitsui the best partner for AOL to enter the Japanese market?   If so, why?   If not, who (or what

kind of company) would make a better partner?   Why?

They did not have the structure to deal with a global internet giant

Shared partnerships with media entertainment, telecommunication and multimedia companies

NTT DoCoMo would have been a better option which spun off Nippon telephone and telegraph in 1992 and had the resources and customer base to help AOL Japan become a successful JV

Do you think the current JV structure should continue into the foreseeable future?

Previous mishaps and blunders

John Barber should have ensured More diversified employee base Use of different marketing strategies in USA &

Japan Increased Marketing Efficiency

Take-over small-to-midsize ISPs which constitute the 63% of market share

Partnership with DoCoMo to increase the subscribers

What structural impediments did AOL face in the Japanese market that did not exist in the US market? What actions

should AOL take to overcome these obstacles?

Bundling- Japanese PC Manufacturers were more active in the ISP business (Fujitsu-NiftyServe)

Magazine Inserts- Customer Hit Rate per Yen was low

Direct Mails- higher mailing costs and no proper mailing lists

Take-ones- co-branding and expensive

Make specific recommendations as to what you think AOL should do to capture additional market share in each of the three areas mentioned:

Lower the cost of yen/new subscriber; Capitalize on watershed events; Buy other ISPs

Lower the cost of yen/new subscriberPromotional activities in schools and collegesLoyalty cardsSubsidized rates for commonly accessed

websites

Capitalize on watershed eventsLive TV with 3GWi-Fi and Wi-Max

Buy other ISPsValue the assets of company with largest

subsribers

Now that AOL has partnered with NTT DoCoMo, will it be successful in Japan or is it too late?

Thank you!