Aol Goes Far East

MKTG 410

Week 6

Case Study

AOL Goes Far East

1. 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?

Mitsiu being an established company in Japan, had the expertise and history to become a joint venture, but not with AOL. Even though the company is well established as an MNC in 60 countries and respected by Japanese corporations and consumers for their goods and services. (Kotabe) The companies' product portfolio did not possess the familiarity to deal with internet technology and ISP even though they had a technology department. They had the ambition to join in with AOL but did not have the structure to deal with a global internet giant. Jack Davies led expansions in Canada, France, Germany, Hong Kong, Latin America and Sweden. All of these joint ventures, shared partnerships with media entertainment, telecommunication and multimedia companies, which increased AOL's net income. (Kotabe) Mr. Davies when identifying potential JV candidates should have sought a Japanese company with mutual interests as an internet service provider with internet capabilities to include technology. Instead of looking at Mitsiu's history Jack Davies should have researched NTT DoCoMo, which spun off of Nippon telephone and telegraph in 1992. The company was a better candidate to accommodate AOL. This would have saved AOL millions, instead of failing miserably with Mitsiu. NTT DoCoMo had the resources and customer base to help AOL Japan become a successful joint venture.

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

No, I do not think so, with the events that occurred and the blunders that happened. John Barber should have ensured that he had a more diversified employee base. Instead when Mitsiu president elects taking control of AOL Japan, Mr. Barber should have sent the president to the AOL in Fairfax, Virginia and offered to get him some training with company executives. AOL started their expansion over the globe. Teams that consist of consultants, coaches, instructors and management are sent out to start the center, to hire and train initial employees in all aspects of the AOL call centers. AOL forming its alliance with NTT DoCoMo did help the JV structure and help AOL Japan move forward, but still most of the control of the company was by the 4 Japanese partners . AOL should have been given the chance to recruit the top management positions instead of having one person overseeing the whole operation. John Barber would have had success if he had a marketing team consisting of American and Japanese employees working together to infiltrate the Japanese market. AOL's biggest shortcoming is caveats in AOL Japan. The company lost their majority equity stake by creating a JV with a general merchandising company. When NTT DoCoMo joined with 100 million and AOL was no longer a 50 % partner. AOL should have stayed in complete control of the operation to protect its propriety.

3. 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?

One of the main structural impediments is that Japan did not have the internet resources available upon starting the joint venture with AOL. Technologically, the ISP was not setup to handle the potential clientele of the Japanese market. Even though computers, networks, and servers are made cheaper in the Far East than in the United States, the connectivity lagged behind significantly. A connection speed equal to 1970 in the United States was available at a cost that was greater than other companies. Another problem at the time American Marketing executives had extensive training compared to the Japanese in the internet service provider corporations. Out dated AOL software was used due to the lack of connectivity. In the United States AOL was using the 4.0 version while in Japan AOL version 1.1 and 2.0 DOS version was offered. (Marshall) Another problem was there were not enough AOL employees stationed in Japan to help Mr. Barber market the product. The bundling was a good idea at first but when the computer companies in Japan offered their own ISP's AOL faced another complication. The magazine inserts though successful in the United States was disappointing in Japan. The direct mail failed because of the lack of mailing lists that pinpointed the desired customer base, and the mailing costs in Japan are much higher then in the United States. The Take - One was a little more successful but the computer stores would promote AOL with Pokemon or Tarzan, which caused problems at the AOL support lines. (Kotabe)

4. 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 Ґ/new subscriber; Capitalize on watershed events; Buy other ISPs.

AOL Japan, to capture additional market share needs to do the following:

 The marketing department needs to do more research