AOL: International Expansion

Group 3 AOL: International Expansion Group Members: 陈嘉颖陈莉娜陈耀梅郭晓莹邹桐

1.1.How would you define the business that AOL is in? Aol(America Online, Inc) is considered as an information provider according to its core business activities. AOL is a leader in interactive services and the nation’s leading Internet service provider(ISP).

Currently, AOL has two major lines of businesses, the Interactive Service Online business and the Netscape Enterprise Solution business organized into four product group: • The interactive properties group operates ICQ, Digital City, MovieFone, Direct Marketing Services(DSD),Spinner Networks Incorporated and so on.

The Interactive Services Group operates the interactive products. • The AOL international group overseas the AOL and CompuServe services outside of the U.S. , as well as the Netscape Online service. • The Netscape Enterprise Group serves Netscape’s enterprise customers and contributes to America Online’s part of the strategic alliance with sun.

1.2.What are the key factors for success(KSFs) in that business? Reasons for the success are as followed: • Pay attention to customer needs, then make Appropriate adjustments on time. • Extensive strategy to meet the currency situation, to focus investment in marketing, customer acquisition, product development.

AOL has expanded internationally through joint ventures. Cooperates with the big companies which are the Tradition intermedia so that it can obtain the successful shortcut. • The Leaders’s(Scott and Greg) sharp economic sense: At company's development stage –-change impossible into possible; At company's restructuring --change foam for the industry. They have been operating on a commercial success, with exceptional strategic vision.

2. What are the main obstacles to international expansion in this business? Is the service mobile, with competitive advantages (FSAs and CSAs) intact?

Main obstacles one of the main obstacles to international expansion is the difficulty in competing with other potential competitors, such as the Freeserve and low-cost ISPs. Another is the challenge of knowledge transfer—more specifically, how to make appropriate portions of AOL’s expertise available to it’s partner ,such as CIC . AOL has proved itself willing to take risks on new market entry methods and new business models.

as I see it ,the service is mobile . Firstly ,AOL has a leading position in interactive services and applications provision market. In 2000, AOL operates two worldwide subscription based Internet online services.

What’s more, through its strategic alliance with Sun Microsystems, it also develops and offers easy-to-deploy, end-to-end e-commerce applications. Besides, AOL can commit additional resources and use competition advantages effectively.

3.1.Why AOL make appropriate portions of AOL’s expertise available and some CIC needs to CIC? AOL make appropriate portions of AOL’s expertise available and some CIC needs to CIC ,because AOL saw the franchise arrange- ment as a chance to use a new business model for international expansion and, furthermore, as an opportunity to begin to learn to develop Chinese software to meet the needs of Chinese consumers.

3.2.Why then make a decision to take the assets in CIC public under the name China.com Corporation (CCC)? Both AOL and CIC came to see China.com’s IPO as a chance to expand their relationship ,so came the decision to take the assets in CIC public under the name China.com Corporation (CCC). Thereby, to strengthen the alignment of their interests.

AOL also saw it as an opportunity to learn how Chinese companies deliver Internet products and services to Chinese customers. From the other perspective, CIC saw AOL’s involvement as an opportunity to learn more from AOL, the world’s most successful Internet company, and as an opportunity to enhance the credibility and the value of the IPO.

4.What are the different foreign entry modes for the service? Their pros and cons? • Joint ventures • In Europe joint venture partners are Bertelsmann AG,AOL Canada,AOL Japan,Mitsui and Nikkei,AOL Australia with Bertelsmann. • Licensing China Internet Corporation (CIC) • Franchising Hong Kong

Joint Venture Pros • Sharing of risk and local in-depth knowledge • Joint financial strength • May be only means of entry • May be the source of supply for a third country Cons • Partners don’t have full control of management • May be impossible to recover capital if need be • Disagreement on third party markets to serve • Partners may have different views on expected benefits

Licensing Pros • Reduced Risk Good way to start in foreign operations and open the door to low risk manufacturing relationships • Business Support Linkage of parent and receiving partner interests means both get most out of marketing effort • Options to buy into partner exist or provision to take royalties in stock. • Capital not tied up in foreign operation

Licensing Cons • Limited form of participation to length of agreement, specific product, process or trademark • Potential returnsmay be lost from marketing and manufacturing • Licence is short because partner develops know-how • Licensees become competitors overcome by having cross tech transfer deals • Requires considerable fact finding, planning, investigation and interpretation.

Franchising Pros • Established Brand and Customer Base • Training. management and technical training • Financial Assistance Some franchisors provide loans and other assistance to help franchisees • Access to Proprietary Methods have access to all the trade secrets • Reduced Risk less risk than starting a business • Ongoing Research and Development

Franchising Cons • Initial Payout Some franchise operations can involve a larger initial costs than that of starting your own business. • Royalty Payments reducing your profit potential. • Limited Creativity/Flexibility • Sole Sourcing • Dependent on Franchisor Success. • False Expectations • No guarantees of success. • Risk.

5. What should AOL do in Hong Kong? • Offer the easiest, most convenient and enjoyable online experience available with unique local content, features and services and state-of-the-art communications tools in addition to simplified access to the Internet. • Develop an advisory board comprised of local experts in the arts, cultural and entertainment fields to nurture the development of unique local Chinese content for Hong Kong users.

Featuring Hong Kong's unique culture, the service should be popular in ethnic Chinese communities worldwide. In addition, distinctively Chinese content such as Fung Shui, Chinese cuisine and recipes, Cantonese pop entertainment, horse-racing forums by famous Hong Kong commentators, and Hong Kong stock market updates will appeal to Chinese culture enthusiasts worldwide. • When the task proved more complicated than initially thought, AOL should refocused its efforts, committed additional resources, and made the franchise model work.

Make a considerable profit by establishing a valuable platform for the global and local advertisers and continue to introduce their new services and productions for this market. • At the same time, AOL should cooperate with their partners, China Internet Corporation and China. com Corporation, in helping fuel Hong Kong's development as a key Internet hub in Asia."

Opportunity& Challenge to come TEAMWORK: 陈嘉颖 P2-6 陈莉娜 P7-10 陈耀梅 P11-13 郭晓莹 P14-19 邹桐 P20-22

AOL: International Expansion