At&t Consumer Products

Objective/Scope

The key requirement of this case is measuring factors of overseas manufacturing strategy, including corporation culture, local environment and culture (United States, Asia, or Mexico), company's and an executive's responsibilities and other aspects of locating plant for telephone answering machines in different places. By analyzing such implemented policies, we may have a general realization of making decisions about pay, benefits, bribery, gender-based hiring, waste disposal, and operating influence in developing countries.

Recommendation

According to the general consideration and analysis, it is best for AT&T to build its telephone answering machine plant in Mexico.

• Lowest Labor Costs

• This is a constant theme throughout the case

• Need to adapt to the new competitive telephone consumer products and stay competitive

• New competition due to several factors – mainly due to creation of the Federal Communications Commission (FCC)

Analysis

        When considering A&T’s culture during the late 1980’s, specifically post divestiture, things were constantly changing. AT&T had been the world’s largest corporation with over $150 billion dollars in assets. AT&T basically had a monopoly in the market for telephone equipment and long distance service. However, with the introduction of the Federal Communications Commission in 1934, whose goal was to regulate the telephone industry, AT&T’s monopoly was about to end.

        This all began with the Carterfone decision in 1968. Up until this point, all telephone sets were owned by the telephone companies and leased to the end user. Most telephone equipment at the time was manufactured by Western Electric, with whom AT&T had recently bought a controlling interest in. AT&T had refused to let non-AT&T devices connect to the AT&T system, specifically the Carterfone. AT&T’s argument was that connecting a non-AT&T device to the AT&T network could harm the health of the overall system. The FCC ultimately ruled in Tom Carter’s favor, allowing non-AT&T devices to be used, however customers had to lease a ‘protective’ device from AT&T to link their non-AT&T device to the AT&T network.

        This was only a short-lived victory for AT&T. Many competitive telephone equipment manufacturers would argue that these ‘protective’ devices acted as a barrier to competition, which validated the argument that A&T was acting as a monopoly in the industry. In 1972 the FCC re-examined its Carterfone ruling, and stated that any equipment could be connected to the A&T network without a protective device so long as it was pre-certified as safe for use on the AT&T network.

In 1982, AT&T and the U.S. Department of Justice announced they had reached a settlement in the long standing antitrust case against the company for monopolizing the market. Although AT&T did not realize at the time, this settlement would forever change the way the company operated. The settlement became known as the Modified Final Judgment. This called for the divestiture of Bell Operating Company by AT&T by January 1, 1984. This effectively ended the monopoly held by AT&T in that they were now barred from offering long-distance service and could no longer manufacture telephone equipment.