This case was presented in summer 2007 and revolves around the changing landscape of high speed Internet during the mid-1990s. Rogers Communications had to decide if it was going to enter the market and, if so, how would it enter the market.
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MBA 610 Marketing Management Case Study
1. Rogers Communications, Inc. The Wave Case Analysis Prepared by: Samy Gennaoui Amos Tsay William Wong Hongyan Xiao Mark Bundang For: MBA 610 August 8, 2007
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4. Main Issues Facing Rogers In November, 1995, Rogers Communications, Inc. was poised to become the world’s first cable television company to sell high speed access to the Internet over its cable lines. Named Rogers WAVE, the project would take Canada’s largest television and cellular telephone operator into an unfamiliar and unpredictable market. 1 st Decision to make Rogers Communications, Inc. must decide whether or not to proceed with the plan to provide a service of high speed access to the Internet over its cable lines. 2 nd Decision to make If Rogers decides to proceed with the launch of such a service, then the company must then decide the details of this launch: target a niche or mainstream market .
8. External Environment Analysis Opportunities Threats Becomes important when Rogers expands into Business segment Computer Jocks and the Aware are amazed by speed of cable connection and are willing to pay $50/month ADSL technology will need 3 to 5 years before commercialization – Potential First Mover’s Advantage for Rogers Participation of other companies in development of cable Internet 70% computer penetration foreseen by 2000 / Internet users doubled yearly New Internet contents/applications are more rewarding at high speed Neophytes see Internet as just entertainment and are not willing to pay higher rates before experiencing. ADSL expected to be faster than cable internet. Bell can cross-subsidize its new services and cause major price competition. It also has major brand recognition T-1 is a more competitive technology in commercial segment 163 existing ISPs in Canada with experience.
9. Important Environmental Factors Two sides to every coin Technology and regulations are allowing convergence of Cable TV, Telephone, and Computing Major Opportunity Potential for Rogers to become “full service” network and compete with Bell in their market Major Threat Satellite TV and telephone companies allowed to offer cable TV – Potential for companies like Bell and DirecTV to compete with Rogers in its own market .
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11. Alternatives Status Quo No implementation of cable internet across Rogers' network for now . Offer cable access to the Internet as a Service to a Niche market Offer cable access to the Internet as a Service to a Mainstream market Cable Internet Decision 1 2 3
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16. Recommendation and Rationale Profitability Required Capital Protection of existing customer base Growth potential A B C D Decision Criteria Service to a Mainstream market 3
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18. Financial performance of Rogers Communications, Inc. Revenue Net Income (loss) Loss trend ’92 to ‘95 Net Loss = decrease of 57% Revenue growth overall = 130% Capital Exp’s = increase of 46%
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20. Recommendation and Rationale Service Launch 1 st Decision to make Does Rogers provide the service or not Required Capital A Profitability B Protection of existing customer base C Growth potential D
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22. Estimated 1 st Year Financials for Newmarket launch of WAVE 70% computer penetration foreseen by 2000 / Internet users doubled yearly Opportunities 160 (1% of 16,000) 800 (5% of 16,000) Recurrent Costs = $272,000 (independent of # of customers) Expected penetration: Mainstream: 5% at $30/month Niche: 1% at $50/month Conservative forecast: New users are likely to pay more than $30/month in the future
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24. Recommendation and Rationale Mainstream 2 nd Decision to make Target a niche or mainstream market Required Capital A Profitability B Protection of existing customer base C Growth potential D
25. Recommendation and Rationale Evaluation of Alternatives based on Decision Criteria Status Quo Niche product Mainstream product Rating Scale 1 to 5 for each criterion (1 = poorest rating; 5 = best rating) 11 12 15 Sum of ratings (max 20) 1 2 3
26. Recommendation and Rationale 1 2 Evaluation of Alternatives based on Decision Criteria Status Quo Niche product Mainstream product Rating Scale 1 to 5 for each criterion (1 = poorest rating; 5 = best rating) 11 12 15 Sum of ratings (max 20) 3
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28. Timeline JAN ‘96 JUL ‘96 JUL ‘97 JAN ‘99 Offer cable internet in Newmarket and a few selected locations across Ontario and BC Jan ’96 (launch) Upon success of launch in initial locations, use revenues (and secured future revenues) obtained to finance progressive launch in other selected locations Jul ’96 (6 mos.) Continue expansion to have a coverage spread across Ontario and BC Jul ’97 (18 mos.) To be prepared against launch of ADSL , cable internet should be accessible to most of Roger’s cable subscribers Jan ’99 (3 yrs)
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30. Control Responsible staffs Approaches Types of Control Purpose Plan Project Manager (coordinate financial, sales and technical managers) Pricing Strategy, Product offering Evaluate achievement of forecasts Profitability Financial Manager Financial analysis, Sales-to-expense ratios Examine the real time financial situation Efficiency Sales Manager Sales force, Advertising, Sales promotion Evaluate and improve impact of marketing expenditures Field Progress Technical Manager Installation, Customer service center Examine the progress of installations and service support Assign a project manager reporting to V.P. Marketing
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32. Conclusion Offer Cable Service and How Main Issue Analysis of Internal Competencies and Environmental Factors 1st Status Quo, Niche, or Mainstream 2nd Launch to Mainstream in Newmarket 3rd Progressive Growth in Ont and BC 4th Established as a Full Service Provider before Bell Finally
37. Advantages of cable access over other forms in the market Comparison of Data Transmission Rates Analog – 28.8 Kbps Digital – 128 Kbps 1.54 Mbps 500 Kbps Increasing Relative Access Rates Comparison of Installation/Modem Costs Decreasing Cost ($)