1.Why did the strategic plans adopted by companies like Level 3, Global Crossing, and 360 Networks fail?2.The managers who ran these companies were smart, successful individuals, as were many of the investors who put money into these businesses. How could so many smart people have been so wrong?3.What specific decision-making biases do you think were at work in this industry during the late 1990s and early 2000s?4.What could the managers running these companies have done differently that might have led to a different outcome?5.Do you think the firm is living up to its mission, vision, values, and goals? What evidence do you have to support your conclusion?6.Can you find any evidence that managers at the organization might have made any significant strategic errors over the last decade? If they have, what role did poor planning, a lack of planning, or decision-making traps play in these errors? MNAB 3323CASE ANALYSIS 1: BOOM AND BUST IN TELECOMMUNICATIONSIn 1997 Michael O'Dell, the chief scientist at WorldCom, which owned the largest network of "Internet backbone" fiberoptic cable in the world, stated that data traffic over the Internet was doubling every hundred days. This implied agrowth rate of over 1,000 percent a year. O'Dell went on to say that there was not enough fiber optic capacity to goaround, and that "demand will far outstrip supply for the foreseeable future."Electrified by this potential opportunity, a number of companies rushed into the business. These firms included Level3 Communications, 360 Networks, Global Crossing, Qwest Communications, WorldCom, Williams CommunicationsGroup. Genuity Inc., and XO Communications. In all cases the strategic plans were remarkably similar: Raise lots ofcapital, build massive fiber optic networks that straddled the nation (or even the globe), cut prices, and get ready forthe rush of business. Managers at these companies believed that surging demand would soon catch up with capacity,resulting in a profit bonanza for those that had the foresight to build out their networks. It was a gold rush, and thefirst into the field would stake the best claims.However, there were dissenting voices. As early as October 1998 an Internet researcher at AT&T Labs named AndrewOdlyzko published a paper that debunked the assumption that demand for Internet traffic was growing at 1,000percent a year. Odlyzko's careful analysis concluded that growth was much slower-only 100 percent a year! Althoughstill large, that growth rate was not nearly large enough to fill the massive flood of fiber optic capacity that wasentering the market.Moreover, OdlyzkO noted that new technologies were increasing the amount of data that could be sent down existingfibers, reducing the need for new fiber. But with investment money flooding into the market, few paid any attentionto him. World- Com was still using the 1,000 percent figure as late as September 2000. As it turned out, Odlyzko wasright. Capacity rapidly outstripped demand, and by late 2002 less than 3 percent of the fiber that had been laid in theground was actually being used! While prices slumped, the surge in volume that managers had bet on did notmaterialize. Unable to service the debt they had taken on to build out their networks, company after company tumbledinto bankruptcy–including WorldCom, 360 Networks, XO Communications, and Global Crossing. Level 3 and Qwestsurvived, but their stock prices had fallen by 90 percent, and both companies were saddled with massive debts.

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Answered: 1.Why did the strategic plans adopted…

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter6: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 16E: Break-even analysis for a service company3 Sprint Corporation (S) is one of the largest digital...