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Unit 1: Introduction to Strategic Management

educating and supporting activity. An increasing number of firms are using strategic management Notes
for the following reasons:
1. It helps the firm to be more proactive than reactive in shaping its own future.

2. It provides the roadmap for the firm. It helps the firm utilize its resources in the best
possible manner.
3. It allows the firm to anticipate change and be prepared to manage it.

4. It helps the firm to respond to environmental changes in a better way.
5. It minimizes the chances of mistakes and unpleasant surprises.
6. It provides clear objectives and direction for employees.

Case Study Star Struck

ridium is named after the 77th element to signify the 77 satellites that were supposed
to beam signals around the world, creating a worldwide mobile satellite telephone
Iservice (MSS). However, things did not work out as planned. Motorola, Iridium's chief
sponsor, has vowed not to invest any more than the $1.6 billions it has already invested
in the venture, unless other investors do so too. Iridium was chasing a very modest goal
in terms of number of subscribers - 27,000 by end of July, from 10,000 at the end of March.
These two events are symptoms of deeper problems within the Iridium network, as people
try to work out what went wrong. Were its estimates of MSS market (between 32 millions
and 45 millions subscribers within ten years) unrealistic? Or, are Iridium's problems due
to poor vision and poor planning? Mobile telephony, in general, has been a growth
market, with subscribers expected to reach 600 millions within the next two years.
MSS providers plan to capture 2.5% of the market by offering handsets that operate as a
land-based cellular phone and a satellite telephone when cellular service is unavailable.
Apart from business executives, other specialized users include truckers, civil engineers,
field scientists, disaster-relief agencies, news organisations, extractive industries, and
geologists. Shipping and aviation, as well as operations in less developed countries, which
lack traditional telephone infrastructure, are also potential markets. Yet Iridium has not
been able to sign up many subscribers. The technology is quite sound - the problem has
been poor forecasting, marketing, production glitches, and some unexpected competitive
moves.
Iridium's market size forecast and value did not materialize. This may be due to several
marketing problems. Iridium's handsets cost more than $3,000, and call charges range
from $2 to $7 a minute. Iridium's handset is large (7 inches), and weighs 1 pound, limiting
its portability. Manufacturing delays at Motorala and Kyocera left customers waiting to
get their telephones. In any case, its marketing partners, Sprint, and Telecom Italia were
not prepared to sell the telephones. Its generic. "schmoozy" and "generic life-style
marketing" (according to John Richardson, Iridium's new CEO) was not suitable for its
specialized target market.

Competitive entry also hurt Iridium's already weak network. Two new entrants to the
MSS market, Global star and ICO have been able to promise the same service at a lower
cost. At a volume of 1 billion minutes per year, for instance, the cost of a minute using
Iridium's system is $1.28, compared to 51 cents a minute for Global star, and 35 cents for

Contd...

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