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You have just been hired by the Board of Directors as President of one of the most highly regarded microelectronics and telecommunications companies in the world. You are the first President to have been hired by this group who would be referred to as an outsider (did not come up through the ranks of the company). Actually, your previous association had been with an organization with extensive background in the computer related field.
The opportunity with this prestigious company comes from their critical situation that the company �has hit the wall.� Bits and pieces of the below information has been made public by articles and quarterly analyst calls but as yet no one has summarize the influences or causes as presented below. This circumstance has been growing for quite some time but has come to this point due to three major influences and circumstances:
� Per the Executive V. P. of Marketing �The dogs are no longer eating the dog food.� Interpretation: The company has �loaded� up the RBOCs (research the term) with second level generation of telecommunication gear. Third year generation has been developed and introduced into the European market and is rapidly being accepted and implemented into the telecommunications infrastructure with high consumer acceptance. The RBOCs are behind in their introduction within the U.S. due to the large capital expense that comes with deployment. These RBOCs are deeply in debt with extensive liabilities to the manufacturers of the second tier generation of telecommunicates gear. The company decides to �play the strategy� of delaying the introduction of Third Tier generation in the U.S. because the RBOCs have been their bread and butter of the last 20 years.
� A major joint venture has been under both development of product and services and is within the early stages of deployment. This product and services are satellite cellular and the associated satellite network. This complex infrastructure and network would allow people to call literally anywhere on the planet by tapping into a complex celestial network of satellites. The venture team has done extensive research to access the market and supposedly it is there. Also, the venture team has had access to world-class expertise and overcome seemingly insurmountable hurdles including the launching of 163 satellites into space to provide the satellite network. But, there were some fundamental flaws in the strategy. This $6 billion in investment (included the company for 19%) and other large investors including some Middle East, Asia and Orient governments as well as firms and �high� investor individuals. But the financial model has some issues that �dove tail� into both the Business Plan and the Marketing Plan. One of these was the consumer was not comfortable carrying a handset in a briefcase (this element had been easily overcome in the late 80s when cell phones were first introduced with a dedicated and aggressive engineering plan to continually reduce the size of the hand set down to the point that could be carried in pocket or purse) but for the satellite hand set this engineering design curve was not practical due to the required size of the battery technology available at this time. For instance, the earlier tower to tower cell phone (introduced in the late 80�s) commonly referred to as the �brick� was reduced to 8 ounces and less than 5 inches over a period of two years. Thus, this engineering design flaw presented a contrast to the Business Plan and Marketing Plan which had aggressive customer acceptance and related to customer growth and corresponding revenue growth. Another issue, as stated above, was the satellite hand set required a very large battery due to the power need to source a satellite thus adding to the weight issue. (Therefore, a large variance to the Business Plan due to Production plan�s assumptions related to product design). Another issue was the individual placing the call and receiving the call needed to be in rural or remote locations due to the multiple frequencies �waves� that were present in densely populated areas. (Again, a variance to the Business Plan due to Production plan�s assumptions related to product design). And another issue was the excessive cost of the hand set, the rate for the subscription to the network and lastly the huge cost of an individual call restricted the market to those who could approve such a luxury. These were in contrast to the pricing model that was within the Marketing plan and the Financial Plan. The pricing model was built on the traditional cost curve as well as pricing would begin reducing as volume and economies of scale were realized. And last but not least and the largest issue that finally forced the venture into bankruptcy was the company (with only 19% ownership) but due to over confidence in the success of the project which included executive risk taking decisions as well as the company being �cash rich� at the time Guaranteed the Bonds for the venture when the second round of funding ran into resistance from both current investors and prospective future investors during the second round of funding for the venture. This was huge variance to the Business Plan, Financial Plan and model which included different and less dependent economic and finance assumptions on the part of the 19% owner. For instance, bonds were never in the original Business Plan, Financial Plan or Financial model and the guarantying of the bonds were never presented in any Plan or Model even the adjusted and/or amended Plans. When the third round of investing arrived all investors balked and �headed for the hills� with the resulting venture being forced into bankruptcy.
� The semiconductor sector of the company had never been a major contributor of introductory new products into the market place and had always been viewed as a �me too� as having products which were introduced into the market place after a leading edge competitor had already introduced the products. Thus, the Research and Development function was not noted for its creativity and innovativeness. As a result, the company�s competitive advantage in this array of products and services were historically classified and ranked as number six or less in the industry. However, this sector had been the company most economical and profitable and positive in cash flow for the company through the late 50s, 60s, 70s and early 80s until the introduction of the cellular products. At this junction the semiconductor sector was having trouble being profitable and had begun a retention strategy including a draft white paper proposal of a �spin off.� Their product innovation is considered so limited that the cellular product line does not use their product. Instead they use a competitor.
1) Immediately prepare an action plan with immediate implementation dates to quickly address the crisis that the company is facing which is a total disaster and threatens the continuance of the company as �an ongoing concern.� This is be presented to the Board by Sunday, February the 24 at 11:59pm
2) Prepare an operational plan which the company will immediately begin implementing next week after the Board reviews and/or approves your action plan.
3) Both action plan and operational plan must ensure that the selling price of the stock quickly stops its �free fall� and stockholders again have confidence in the investment in the company�s stock.
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