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                                    MIT Sloan       Formatted: Font: Times New Roman
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           Competition in
  TelecommunicationsManagement
Accounting & ControlSpecial Seminar
in International Management – India
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       Economic Analysis of the
  Wireless Hot-Spot MarketThe FMCG
     IndustryBalanced Score cCard
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MIT SLOAN SCHOOL OF MANAGMENT
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        Business Opportunity in                     Formatted: Line spacing: Double
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                                                1
          Economic Analysis in Hot-spot Market



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         Name: Names: Felicia Hu, Karen Kwan, Nhat-So Lam,
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   Derrick Lay, Myat Hnin Oo, Miguel Ferreira, Dokyun Kim,        Formatted: Font: Times New Roman
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Eran Penini, Cheng-Soon Wee, Miguel FerreiraCheng-Soon Wee,       Formatted: Font: Times New Roman

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             Professor: Jerry HausmanT. WeberDr. Gupta
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  Date: October 28December 3, 2003February 17April 12, 2004       Formatted: Font: Times New Roman, Bold
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Executive Summary

To:   Professor Jerry Hausman

From: Dokyun Kim, Cheng-Soon Wee

Date: 10/27/2003                             Formatted: Font: (Default) Times New Roman
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Re:   Combination of WiFi and Cellular

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Introduction                                                                                                            Formatted: Font: (Default) Arial Black, 11 pt,
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Although 802.11x standard existsed since the late 90s, the phenomena of Wi-Fi craze only started to pick up huge        Formatted: Heading 1, Line spacing: Double,
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momentum since at the beginning of late 2001. Currently, Wi-Fi capabilityies areis builtincorporated into has is
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becomeing a standard feature on most notebooklaptop computers and is making its way into increasingly offered           Formatted: Font: (Default) Times New Roman
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in handhelds and other mobile devices as well. As a result, of this Wireless LAN craze, many players haved              Formatted: Font: (Default) Times New Roman
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begun entering the market, beefing up their respective presence at different stages of the Wireless Hot-Spot value
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chain. , Many new middleware applications /software haved been created to further add newextendenhance the              Formatted: Font: (Default) Times New Roman


key capabilities of the Wireless LANWi-Fi such as greater range,so , enhancing tto increasehe availability and

ease of use by the public. but its public availability is not meeting expectations for adoption. However, the           Formatted: Font: (Default) Times New Roman


standard will add new capabilities in the near future, making it suitable for a broader array of applications.


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In this paper, we will focus our analysis on the Service Provider level of one specific part of the Wireless-Hot-

Spot value chain, namely the Service Provider Level. TheOur analysis will be broken down into four parts:


         Overview of the Examine the overall hot-spot market                                                            Formatted: Heading 1, Line spacing: Double,
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         Identificationy of the variousthree groupstypes of hHot-spot players in the marketat the Service Provider

level.


         Perform detailed sScenario and financial analysis ofn the three specific grouptypes of Wireless Hot-sSpot

SService Pproviders. – Wireless ISP, Wireless Aggregators and telco.


         Understanding of the strengtstrength andh, business opportunities of each players and make appropriate

recommendation.


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Ostensibly, 802.11b, or Wi-Fi, is on a roll. The wireless Ethernet standard, which has all but vanquished its rival

specification HomeRF, has focused on diverse applications, such as the following:


• The standard provides a convenient, if still relatively expensive, alternative to wiring homes, particularly those       Formatted: Font: (Default) Times New Roman,
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with notebook computers.


• In schools and on campuses, it facilitates mobile student access.


• In the enterprise, it enables both warehouse applications and white-collar corridor cruisers.


• Physical businesses such as coffee shops and airports can offer Internet access to their customers.                      Formatted: Font: (Default) Times New Roman




Nonetheless, the Wireless Ethernet Compatibility Alliance (WECA), which is responsible for Wi-Fi, now boasts               Formatted: Font: (Default) Times New Roman


at least 142 members. The number of Wi-Fi products in the marketplace has increased from fewer than 50 in July

2001 to 237 as of November 2001. In 2003, WECA expects the number of Wi-Fi–based units to grow from fewer

than three million to more than five million worldwide.




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Nowadays, a lot of wireless solutions such as GSM, GPRS, CDMA 1xEV, WCDMA Bluetooth, and WiFi (802.11x) or                           Formatted: Font: (Default) Times New Roman,
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UltraWideBand that are being deployed or under developmented around the world. Nevertheless, most of these technologies are          Formatted: Font: (Default) Times New Roman,
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currently being and deployed as separately solution used to take advantage of their own advanced technological features without      Formatted: Font: (Default) Times New Roman,
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much integration. However, at the same time, the benefits needs for integrating the appropriate those different solutions            Formatted: Font: (Default) Times New Roman,
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technologies are ever increasing getting bigger as customers continue to demand want greatera flexibilityility,, user-friendliness   Formatted: Font: (Default) Times New Roman,
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easy usability, convenience for their wireless service. and richer experience. The phrase of “one device & one solution” well        Formatted: Font: (Default) Times New Roman,
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describes the developing needs in the coming future. Here,This executive summary we will describe our belief in the wireless         Formatted: Font: (Default) Times New Roman,
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go through a general convergence trend that currently prevails in the wireless industryin the future, , and come up with a new       Formatted: Font: (Default) Times New Roman,
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business opportunity that is highly feasible, and identify thea market needs and business opportunity in the convergence area,       Formatted: Font: (Default) Times New Roman,
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and finally our proposed productand potentials, and recommend our final solutions that aims at addressing the market need in         Formatted: Font: (Default) Times New Roman,
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this growing business segment.                                                                                                       Formatted: Font: (Default) Times New Roman,
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Convergence TrendOverall Wireless Hot-spot Market                                                                                    11 pt
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Ostensibly, 802.11b, or Wi-Fi, hasis experiencing huge growth for the past two years. There are many competitive                     Formatted: Font: (Default) Times New Roman,
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advantages of Wi-Fi access has many competitive advantages over the traditional wireline standard orand                              Formatted: Font: (Default) Times New Roman,
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competingother wireless standards like HomeRF or Bluetooth for in a variety of applications. This has created an                     Formatted: Font: (Default) Times New Roman,
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environment where there is a::                                                                                                       Formatted                                ...
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         Large adoption by public. This allows for mass production volume of equipment, driving hardware prices
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down thus lowering the cost of deployment.                                                                                           Formatted                                ...
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        Deployment by large infrastructure players such as Telcos. The huge adoption of wireless LAN by the

general public had result in mass production volume by various manufacturers, hence driving the price of both the

client devices and base station down significantly over other competitive technologies.


        The large deployment of Wireless LAN setup by many large telcos and infrastructure players, educational

institution encourages the adoption of wireless LAN services by students and general public.


Large push of Wi-Fi by key hardware vendors, like Cisco, to their corporate clients.In the enterprise space, there       Formatted: Heading 1, Line spacing: Double,
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are substantial vendors like Cisco that are pushing this technologies aggressively to its enterprise customers,

causing the adoption by corporate customers to grow sharply over the past two years.


Less restriction and Further driving growth, Wi-Fi benefits from the fact that it is not understrigent controls by the

regulators around the world as in comparisoned to with other wireless technologies (2G, 3G). First of all, 802.11x

standard leverages the unlicensed spectrum (2.4GHz and 5GHz band).


Growth was also aided by the fact that Furthermore, some of the core standards for interoperablility (such as

802.11b, 802.11a, 802.11g, 802.11h, etc) had been finalized by IEEE at the early stage of deployment. This

prevented the situation where manufacturers designed competiting variants of the same technology which would

eventually split the strong market. Growth among a few incompatible products. continues strongly. The Wireless

Ethernet Compatibility Alliance (WECA), which is responsible for Wi-Fi, now boasts at least 142 members. The

number of Wi-Fi products in the marketplace has increased from fewer than 50 in July 2001 to 237 as of

November 2001. In 2003, WECA expects the number of Wi-Fi–based units to grow from fewer than three million

to more than five million worldwide.                                                                                     Formatted: Font: 11 pt, Font color: Black




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Wi-Fi benefits from a favorable With all these positive factors from the technologicaly, regulatory and demand

perspectivesoutlook, giving the characteristics of an important we strongly believe that Wireless LAN is a

potential market. Now, tThe big question, however, is whether such advantages can be translated to the success of

Wireless Hot-Spot markets.


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Industry Trend / Forecast for Wireless Hot-Spot


Public WIFI Hot Spots gained significant momentum over the past twolast year, especially in the US.                               Formatted: Font: Times New Roman



According to InfoTech Trend’s latest report:


         Estimated Hot Spots locations in US (2002) =                                                                             Formatted: Heading 1, Line spacing: Double,
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         Total estimated number = 3,800                                                                                           Formatted: Font: Times New Roman
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         Hot Spots users (US vs. Worldwide):                                                                                      Formatted: Font: Times New Roman



         US hotspot users = 2.7m users (2002), 24.5m users (2007), AGR = 55.4%


         Worldwide hotspot users = 3.9m users (2002), 69.8m users (2007), AGR = 74.9%


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Figure 1 and Figure 2 below show the public hot-spot locations and users growth forecast for the next five years by Gartner

Group (dated Apr 03)




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Figure 1


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The estimate shown in Figure 1 and 2 seems to be on the conservative side. Another research firm, In-Stat/MDR (a sister        Formatted: Font: Times New Roman


company to Wireless Week) expects about 50% higher growth rate compared to than Gartner’s estimate.                            Formatted: Font: Times New Roman
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Hot Spot Value Chain                                                                                                           Formatted: Heading 1, Line spacing: Double




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A study by Gartner (Figure 37) breaks down the Hot Spot Value chain into a few major components. Although most of the press

coverage concerning Hot-spot has been focusing concentrating in on the “Hot spot Operator” component (the main focus of this

report), it is also important to gain deeper understanding in the the oother parts of the value chain as they may be equally

important and lucrative components markets to enter as active participants.in this growing market.


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Figure 37


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The six component of the value chain are:


         Clearing House and Billing – e.g. Aggregator such as iPass, Boingo                                                         Formatted: Heading 1, Line spacing: Double,
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         Back-haul network and VPN – AT&T, Verizon, Level3

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         Hot-Spot Operator – WayPort, Cometa Networks, Boingo, T-mobile


         Systems Integrator / Outsourcer – IBM, HP


         Site Owners – airport, Starbuck


         Branding and user awareness – Atheros, Intel, DLink, Proxim


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It is important to note that eEach component of the value chain is critical for creating an overall, a large-scale hHot-Sspot system     Formatted: Font: Times New Roman
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that is attractive tofor both residentialpersonal and business users. With the exception ofExcept Boingo and some Ttelcos, most          Formatted: Font: Times New Roman
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of the major players in the Hot-Spot business do not have significant involvement in multiple components of the value chain. As
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a result, a partnership model is generally adopted to fill the gaps along the chain. For instance, T-mobile (a Hot-Spot Operator)        Formatted: Font: Times New Roman
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partners with Starbuck (a Site-Owner) and Boingo (a Clearing House) to maximize its overall footprint, which is welcomed by              Formatted: Font: Times New Roman
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most of the hot-spot users. It leverages its own backbone (back-haul network) to support the traffic and IBM’s (systems
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integrator) expertise to design and build the hotspot network for them. Without such partnership and collaboration, it is almost         Formatted: Font: Times New Roman
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impossible to roll out a substantial hot-spot network – even by a major global Ttelco – without incurring prohibitively large
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initial investments. Therefore, in our analysis later on, mMany key drivers ofor the success of wireless hHot-Sspot players              Formatted: Font: Times New Roman
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depends on their leverage generated by key partnerships with players in on other parts of the wireless value chain.                      Formatted: Font: Times New Roman
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Challenge of Wireless Hot-Spot Proliferation


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Despite all the optimistic opinions and forecasts of the Wireless Hot-Spot market by all the research firms like        Formatted: Font: (Default) Times New Roman


Gartner, we foresee that the Wi-Fi players will face great challenges in encouraging wireless hot-spot proliferation

and sustaining a profitable business in the long term.




Particularly aOnce Wi-Fis it moves beyond its current mainstream applications such as casual use, which isemail         Formatted: Font: (Default) Times New Roman


access and web surfing shared Web surfing, Wi-Fiit will faces growth challenges fromon at least three of the

following fronts:




• Surviving and establishing leadership position in a confusing marketplace that comprises a variety of competing       Formatted: Font: (Default) Times New Roman,
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wireless split of the ststandards with similar functionalities.


Competing head-to-end with alternative high end wireless solutions like 3G that offer much greater mobility and

relatively high data access rate.


Creating a viable business model for widespread Wi-Fi deployment across US and around the world to encourage

massive public adoption and growing revenue stream




• Competing on the high end with 3G                                                                                     Formatted: Font: (Default) Times New Roman,
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• Creating a viable business model for public availability                                                              10 pt, Condensed by 0.25 pt
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Figure 4 below showed that a variety of 802.11x standards have evolved quickly over the past one year in order to         Formatted: Font: (Default) Times New Roman,
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address some of the key concerns of the Wi-Fi technology. Besides the range and speed parameters, other key

issues include security, interference with Radar, seamless roaming and quality of service. In order to gain market

share and make Wi-Fi the prevalent standard in the wireless data access technology, the industry had adopted a

high volume, low price strategy from the beginning as its hope to leverage the significant network externality            Formatted: Font: (Default) Times New Roman,
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effect as the tool to sustain the momentum of rapid innovation in this area the long run., (I don’t really understand     Formatted: Font: (Default) Times New Roman,
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what is meant)                                                                                                            Formatted: Font: (Default) Times New Roman



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Figure 4                                                                                                                  Formatted: Font: Arial, 10 pt, Not Bold, Not
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1. Main Hurdles of Hot Spot Proliferation:


There are a few key hurdles acknowledges for Hot-Spot proliferation:                                                      Formatted: Font: Arial, 10 pt, Not Bold, Not
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         Unclear Business model. High price and limited Hot Spots have deterred mass signups. It is – difficult to have an             Formatted: Heading 1, Line spacing: Double,
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attractive and sustainable revenue model, especially as a standalone service (i.e. one location).


         Lack of Interoperability and collaboration among large number of Wireless ISPs (WISP). Billing, authentication,

roaming, provisioning and network management are difficult to coordinate across diverse WISPs.


         Security. The main potential customers are enterprise users, for whom security is a high priority. However, not many

hot spots are ready to support services such as VPN. (E.g. many APs right now are not able to support VPN tunnels from big

players like Nortel Contivity without manual customization on the default configurations)                                              Formatted: Font: 11 pt



         Technical challenges. – Sscalability, interference and short battery life.


         New technologies such as 802.16a (WiMAX) and 802.20 adoption in near future may disrupt the existing business

model of WISPs.


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2. Opportunities in the Hot-Spot Market:


All is not bleek however as there remain a series of possible opportunities namely:                                                    Formatted: Font: Arial, 10 pt, Not Bold, Not
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         Aggregator can play a critical role in uniting all the various WISPs so that overall WLAN offerings will be attractive        Formatted: Heading 1, Line spacing: Double,
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enough for many generic users. It has the vital interface to standardize billing / authentication of users from different WISPs

seamlessly.


         Alternative solutions (GPRS or 3G) are expensive to deploy. The pricing is expected to remain high in the near future

in order to recoup the high investment cost. According to Gartner, less than 1% of mobile enterprise users will use GPRS for

laptop connectivity (70% probability) by 2007. As a result, WLAN hot-spots may be a more favorable solution for Ttelcos in the

near term than committing a large amount of capital to roll out a 3G network.
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         Demand from new broadband market. Wi-Fi hot-spot deployment may incur lower capital expenditures than laying

copper for DSL or offering cable services for last mile access and back-haul network. E.g.For example, rRegional and& rrural

ISPs such as Independence Network and MHO Network in Colorado and Prairie iNet in Iowa and Illinois are using Wi-Fi based

solutions to reach into neighborhoods that they cannot serve with DSL. BeamReach is one equipment vendor to work in this

direction. The 802.11x standard is also robust to serve longer distance (in multiple of miles) with the use of directional antennas.


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Gartner predicts that Asia/Pacific will have 38,000 hot spots by                                                                        Formatted: Font: (Default) Times New Roman



2007, with 40 percent located in cafes and restaurants, 32 percent community-based (in parks, libraries


and public buildings), 10 percent in hotels, and less than 0.2 percent in airports (see "Public Wireless


LAN Hot Spots: Worldwide Trends and Forecasts"). Thus Xone's "e-mail over coffee" hot spot location


strategy makes more sense than the airport lounge model that Telstra inherited from SkyNetGlobal.


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WLAN hot spots will only be compelling for enterprises when they are located where enterprises conduct most of                         Formatted: Font: (Default) Times New Roman

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their business. It's not the numberThe total number of hot spots is not the only winning factor in this market. that
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is important — Instead, it's their the location of the wireless hot-spot that is equally important. pivotal. No one                    Formatted: Font: (Default) Times New Roman
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operator is likely to dominate due to these factors. Therefore, , so, in the interests of all parties, hot-spot operators              Formatted: Font: (Default) Times New Roman
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will probably need need tto cooperate and interoperate in order to create widespread awareness and build a
                                                                                                                                       Formatted: Font: (Default) Times New Roman

profitablethe public WLAN hot-spot market. In the following section, we will examine the two major business                            Formatted: Font: (Default) Times New Roman
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model in the wireless hot-spot market and how the wireless aggregator model is trying to exploit these                                 Formatted: Font: (Default) Times New Roman
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fundamental market factors in this capital intensive market and create a potential lucrative business strategy.
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Generally speaking, “Convergence” refers to the trend thatintegration of various wireless technologies and the ability to offer        Formatted: Font: (Default) Times New Roman,
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various wireless services supported under these different technologies as one seamless service. For example, it may refer to           Formatted: Font: (Default) Times New Roman,
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service convergence across different industries like the e with any other types of services such as financial services, broadcasting   Formatted: Font: (Default) Times New Roman,
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services, and even medical services, previously supported using different wireless technologies as one service to end-users            Formatted: Font: (Default) Times New Roman,
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eventually.. This means that anyone can easily access to a specific type of service using the different wireless technologies          Formatted: Font: (Default) Times New Roman,
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/devicesnetwork, wireless solution, and wireless devices or vice versa. Some examples of The followings are a few of major             Formatted: Font: (Default) Times New Roman,
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examples of convergence include: trend.                                                                                                Formatted: Font: (Default) Times New Roman,
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Home application: Remote security, Integration of home appliance and etc.                                                             11 pt
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Business application: Mobile payment, Mobile broadcasting, Mobile health care and etc. seamless wireless data access using            Formatted: Font: (Default) Times New Roman,
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3G and WiFi                                                                                                                            Formatted: Font: (Default) Times New Roman,
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Among many possible opportunities of convergence trend described above, however, we limited our analysis to intra-                     Formatted: Bullets and Numbering
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convergence trend that may create potential business impact within the wireless and consumer electronic industry in order to           Formatted                                   ...
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choose more specific and tangible subject that must occur within the next fivethree years.
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Overview of New Business Opportunity in the Wireless industryThreewo Main Contrasting Business Models in Wireless Hot-           Formatted: Font: (Default) Times New Roman,
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spot Market                                                                                                                      Formatted: Font: 11 pt, Not Bold, Not Italic
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The four main groups of Wireless Hot-spot players:
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         Wireless Aggregator                                                                                                     11 pt, Not Bold, Not Italic
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         Wireless Internet Service Providers (WISP)
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         Telco
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Our analysis will focus on the Wireless Aggregator and WISP, their distinct features, business strategies and competitive        Adjust space between Asian text and numbers

advantages to try capturing the Wireless Hot-Spot Market. We believe that the remaining players like the Telco and Equipment

vendors will play a pivotal role in collaborating with either Wireless Aggregator or WISP to further encourage the mass

adoption of wireless hot-spot initiative.                                                                                        Formatted: Font: 11 pt, Not Bold




1. Description of new product/service and target customerPure WISP Model                                                         Formatted: Font: (Default) Times New Roman,
                                                                                                                                 11 pt


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         The main WISPs in the US are WayPort, Surf&Sip, NetNearU, Boingo, Cometa Networks. The main strategies of               Formatted: Heading 1, Line spacing: Double,
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these WISPs are:                                                                                                                 Formatted: Font: Times New Roman



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         Generally, WISPs Oown the wireless network infrastructure. The WISP typically will incur huge upfront investment                   Formatted: Font: Times New Roman


cost to install and deploy the entire wireless infrastructure either within specific geographical regions, in specific hotel chains,

etc. The WISP will also own the backend infrastructure that handle account provisioning and billing.


         Own the and end-user relationships. The WISP typically handle the customer signup and support.                                     Formatted: Font: Times New Roman



                                                                                                                                            Formatted: Font: Times New Roman



         So far, tThere are many smaller startups (SkyNet Global, Wi-Fi Metro and Airwave) who try to follow this business                  Formatted: Font: Times New Roman


strategy but most of them suffer financial difficulties, and have limited ability to compete with the larger WISP players like              Formatted: Font: Times New Roman


WayPort. Given the competitive nature of this industry, these small players will need monopoly access to critical hot-spot                  Formatted: Font: Times New Roman


locations or a partnership with a major aggregator if they are going to survive in the long-run.


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Agreement with AT&T Wireless: On 28 January 2003, AT&T Wireless announced it would offer GoPort, a high-

speed wireless data service. The company also said it has an agreement with Wayport, a leading Wi-Fi service

provider, to allow roaming on Wayport’s Wi-Fi networks in some U.S. airports and hotels. AT&T Wireless will

offer several per-session pricing options. This deal will benefit Wayport since it will open new sales channels and

validates Wayport’s early grab of lucrative hot spot locations (see “‘Hot Spots’ in North America: Two Early

Leaders Emerge”). It will also help reduce Wayport’s dependence on Boingo Wireless and other aggregators.




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Right now,Currently, most cellular customers primarily subscribe to use Cellularservice mainly for the voice                               Formatted: Font: Times New Roman, 11 pt
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trafficcommunications. Data communications is still unpopular , not for the data transaction ddue to the expensive airtime                 Formatted: Font: Times New Roman, 11 pt
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charge. Furthermore, the data rate across the current 2.5G network is unable to support true multimedia communications. 3G
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network is possible to achieve high data rate but it require astronomical new infrastructure and spectrum investment. On the               Formatted: Font: Times New Roman, 11 pt
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other hand, the emergence of they take advantage of WiFi technology has given Telco some temporary capability to provide ’s
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capability for cheap data transactions for its users via the Wirelessat hotspot. (Ee.g. T-mobile is offering hotspot services
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together with Starbucks and HP in about 1,200 Starbucks places.) Even though telco is selling the WiFi access as a separate                Formatted: Font: Times New Roman, 11 pt
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solution from its cellular service now, we strongly believe that there is a huge market potential and business opportunity to
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integrate these two technologies Seeing this faction in a separate way, we identified the combination of WiFi and Cellular in one          Formatted: Font: Times New Roman, 11 pt
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device or as a seamless wireless service. as a new business opportunity. More specifically, this means thaFor instance: t                  11 pt
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According to the service availability, a A handset with integrated wireless chip enables end-users to automatically switch                Formatted: Heading 1, Line spacing: Double,
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between WiFi and Cellular services easily depending on for the data access needs and receptions at different locations. Or This            Asian text and numbers
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significantly enhances the incentive for end-user to use the data services. users can choose which service they will use based on
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the reception.                                                                                                                             Formatted: Font: Times New Roman, 11 pt
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That is, if someone entered a hotspot area where WiFi is available, he could use cheap WiFi service network for the data access           Formatted: Font: Times New Roman, 11 pt
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with his own handset at a cheap rate. If WiFi is not available or he is traveling in a car, he just will ould pay more and use
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Cellular services network (either 2.5G or 3G) for the data access. Again, this increases the user affordability of the data service        Formatted: Font: (Default) Times New Roman,
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and encourages strong adoption of long term wireless data services.                                                                        Formatted: Font: (Default) Times New Roman,
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Given the features described above, we believe that target customers will be the
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The existing Cellular and PCS service users                                                                                               Formatted                                   ...
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The existing WiFi users


Potentially, some customers who only use a wired internet services.                                                                      Formatted: Heading 1, Line spacing: Double,
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2. Value propositionAggregator Model


1)       The main Wireless aggregators are IPASSass, GRIC and , Boingo, Fiberlink. Currently, IPass and Boingo have                      Formatted: Font: Times New Roman
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slightly different business strategies in approaching the market. However, they share the same common features:                          No bullets or numbering
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2)       Unlike the WISP, In general, the wireless aggregators se players do not own the entire wireless infrastructure. Instead,        Formatted: Font: Times New Roman
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their key strength is the ability to combine various independent hot-spots as one gigantic hot-spot providers and provide                Formatted: Font: Times New Roman
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consistent provisioning, ease of use, customer support and billing services to all independent WISPs and partners.
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         Users from one WISP can roam in the wireless networks of another WISP under the same aggregator.




         The two key features above create a huge competitive advantage for the established wireless aggregators: Major                  Formatted: Font: Times New Roman


advantages of players such as iPass and GRIC:




a.       Ability to out-compete effectively with any large WISP or even telco with large customer base due to its single large           Formatted: Font: Times New Roman
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service providers in term of significant total coverage areas as a whole                                                                 Formatted: Font: Times New Roman


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b.       For IPass and GRIC, they are able Ability to leverage their expertise and experience in operating similar successful        Formatted: Font: Times New Roman


wireline roaming aggregator service operation and deployment experience gained from successfully deploying roaming service           Formatted: Font: Times New Roman


forfor dial-up & wired broadband access                                                                                              Formatted: Font: Times New Roman



                                                                                                                                     Formatted: Font: Times New Roman



         Ability to provide the crucial cross billing and authentication links required for independent Wireless ISPs to work

together as one service.


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On 18 March 2003, T-Mobile and Boingo announced an agreement to co-develop user-facing software and

services. Their partnership will enable customers to access T-Mobile’s wireless LAN (WLAN) broadband

network of “hot spots,” based on the 802.11b specification, and its nationwide GPRS enhanced second-generation

(2.5G) data network. Boingo can offer a client that allows roaming between Boingo and T-Mobile hot spots.

Users will be able to detect and log into other hot spot locations using the same Boingo client to access a wider

range of hot spots (both TMobile and Boingo). However, users will have to register and pay separately for Boingo

and T-Mobile servers. Consequently, this deal enhances ease of use but does not create new cross-revenue                             Formatted: Font: (Default) Times New Roman


opportunities.


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3. Large Telco:                                                                                                                      Formatted: Font: Times New Roman, Not Bold


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         The majority of mobile providers like T-mobile, AT&T Wireless and , Sprint, Verizon have begun their respective hot-        No bullets or numbering
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spot deployment over the past years. , SBC, Korea Telecom
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         Although the dDifferent telcos have adopted different strategies for their hot-spot deployments, . Mmost telcos prefer to        Formatted: Font: Times New Roman
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own part of the network and partner with other large WISP / Aggregator to quickly expand their total coverage zones.                      Formatted: Font: Times New Roman
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         It is important to note that the expertise needed to deploy and maintain wireless voice service using the conventional

2G technologies is vastly different from the skill needed for the high speed wireless data service using Wi-Fi. Hence, tThese             Formatted: Font: Times New Roman


telcos alsohe lack ofthe experience and expertise of deploying and maintaining high-speed wirelessin running high speed data              Formatted: Font: Times New Roman
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networks have caused . Hence, telcos like AT&T Wireless may rely solely on partnerships with large WISP for its initial hot-              Formatted: Font: Times New Roman
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spot service. Furthermore, t
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         Telcos, such as which UT Starcom , operateing in relatively non-matured markets like China (where infrastructure for             Formatted: Font: Times New Roman
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traditional broadband internet access is not established) . Telcos may move straight to using wireless broadband as a means of            Formatted: Font: Times New Roman
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providing last mile broadband access for remote customers.




         It is important to note the different business strategies pursued by the different major players in the Wireless hot-spot

market and how a symbiosis environment among the different players may emerge as the eventual winning strategies for all the

players in the long run. The subsequent analysis will look into the strategies adopted by specific players in these different groups

and how the future scenario of the Wireless hot-spot market will potential determine their long term success.                             Formatted: Font: Times New Roman



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The previous section had clearly described some of the specific convergence services that we             Formatted: Font: (Default) Times New Roman,
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believe will create a great impact on the wireless industry in the near future. In order to              Formatted: Font: (Default) Times New Roman,
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understand the value proposition of this new business opportunity, we will examine it from two

major perspectives: Carriers’ perspective and Customers’ perspective.




                                                                                                         Formatted: Font: 14 pt




For Cellular and PCS carriers like Verizon, the integration of WiFi and Cellular can complement          Formatted: Font: (Default) Times New Roman,
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carriers’ their service portfolio, provide an additional revenue source, and enable closer               Formatted: Font: (Default) Times New Roman,
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relationships with premium business partners. More specifically, this service allows the carriers        Formatted: Font: 14 pt
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to:                                                                                                      Formatted: Font: 14 pt
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Complement service offering – WiFi has been mostly monopolized by typical WiFi operators                   Formatted: Font: (Default) Times New Roman,
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such as Wayport, Boingo or Network aggregators like Ipass. However, with its strong subscriber              No bullets or numbering, Adjust space between
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base, it is much easier for telco to bundle and integrate the WiFi solution into their cellular             Formatted: Bullets and Numbering
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offerings. With the integrated services, Cellular and PCS carriers are able to increase their

service/product lines, complementing data accessibility. Furthermore, many Wireless Hot-Spot

infrastructure had been deployed by other pure Wireless ISPs. Therefore, the cellular carriers can

easily partner or purchase WiFi capacity from these Wireless ISPs without incurring substantial

infrastructure cost initially. Carriers like T-mobiles are following this strategy and we believe it

will continue to improve similar integration in the next few years.


Increase the data traffic – The cCurrent expensive price plan for data access restrict wide                Formatted                                           ...



adoption rate of makes it difficult for customers to use 2.5G or 3G data services by both home

users and corporate customers. We believe that the Integration of WiFi / and Cellular integration

can givewill encourage customers an opportunity to use data service more frequently than before.

This will increase awareness and stickiness of wireless service, encourageould result in more

increasing the data traffic, and eventually, in turn, provide additional another major revenue

source for the carriers in the long run..

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From the customers’ perspective,                                                                            Formatted: Font: (Default) Times New Roman,
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Also, we we foresee that this integration can provide customers with with greater mobility,                 Formatted: Font: 14 pt
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convenience, and easy access to data communicationservice they always wanted. It is crucial to              Formatted: Font: 14 pt
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encourage the high adoption at the beginning before we can create a good business environment               14 pt
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to encourage more content offering which in turn, will increase overall data traffic in the long run.       Formatted: Font: (Default) Times New Roman,
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Here are more detailed explanations for the customers’ perspectives:                                        Formatted: Font: (Default) Times New Roman,
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Preference for Mobility – The mass adoption of wireless LAN solution by both home users and                Formatted: Font: (Default) Times New Roman,
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corporate users for the past two years has clearly illustrated the strong customer preference for           No bullets or numbering, Adjust space between
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mobility – ability to access data at any places. As compared to wired connection, the wireless              Formatted: Bullets and Numbering
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users can now roam easily around the house, the office or even at a remote places with Wireless

Hot-Spot facilities while continue to maintain a high speed connection. More importantly, by                Formatted: Font: 14 pt



integrating to the cellular service, it enhances the Such mmobility andwill automatically enhance           Formatted: Font: (Default) Times New Roman,
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the user productivity while truly enable ubiquitous data access at affordable variable rate. of each        Formatted: Font: (Default) Times New Roman,
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individual and the ease of accessing data services.                                                         Formatted: Font: 14 pt
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Preference for Convenience – Every device we own can potentially be connected as a
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                                                                                                            14 pt
communication tool in the future. Wireless solution is clearly superior to wired solution in term of        Formatted: Font: 14 pt
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convenience and ease of installation for any communication device. It is extremely cumbersome
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to pull wire across if we need to link up many communication devices across different part of the           Formatted: Font: (Default) Times New Roman,
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house..
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Preference for data communication – More services are moving towards the direction of data                 Formatted: Font: (Default) Times New Roman,
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communication. Even voice service can now be offered via the Voice-over-IP solution. The                    14 pt
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proliferation of wireless hot-spots service during the last two years is a clear example of the need        Adjust space between Asian text and numbers
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for data access by both corporate and residential users.                                                    Formatted: Font: (Default) Times New Roman,
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3. Competitive Landscape and its evolution                                                                  14 pt
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In the short run,Currently, we expect that theis new wireless integration service willould compete          14 pt
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with stand-alone type of service. However, in the long run, we we believe that two technology               Formatted: Font: (Default) Times New Roman,
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drivers would make this opportunity sustainable in the long run.
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a) Our estimate on the competitive landscape                                                                Formatted: Font: 14 pt
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As mentioned earlier, tThere are many different types of standard and applications that supports           Asian text and numbers
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the various types of wireless technologies like- 802.11, 802.15, Wideband CDMA2000, GPRS,                   14 pt
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etc. technologies, and even new emerging technologies such as UltraWideBand.                                Formatted: Font: (Default) Times New Roman,
                                                                                                            14 pt
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All these various wireless technological standards are essentially suitable for serving slightly

different functions purposes and thus they are not directly competing with each otherother at the            Formatted: Font: 14 pt
                                                                                                             Formatted: Font: (Default) Times New Roman,
                                                                                                             14 pt
initial stage. For instance, the Wideband CDMA2002 and GPRS technologies are primarily for                   Formatted: Font: 14 pt
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supporting cellular service and it had extremely sophisticated handoff mechanism to allow users              14 pt
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traveling in car /train can still talk or access to the data services. However, its majorthe downside        Formatted: Font: (Default) Times New Roman,
                                                                                                             14 pt
                                                                                                             Formatted: Font: 14 pt
is the cost ofhigh spectrum cost and hence, the data access charge per minute. On the other hand,            Formatted: Font: (Default) Times New Roman,
                                                                                                             14 pt

it is much cheaper to utilize the high-speed wireless connection with 802.11x technologies                   Formatted: Font: 14 pt
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because it is operating in a non-licensed frequency band and the equipment cost is relatively low.           Formatted: Font: 14 pt
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However, the disadvantage is its ability to support effective handoff across multiple cells.                 14 pt
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Eventually, despite the technologies, what user wants is to allow easy data access and transfer
                                                                                                             Formatted: Font: 14 pt
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wherever they are and at a reasonable charge regardless of technologies. Therefore, there is a               14 pt
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huge potential and synergy if we can create the middleware that allow all these various                      Formatted: Font: (Default) Times New Roman,
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technologies to be integrated and be transparent to the users so that they can seamlessly roam to            Formatted: Font: 14 pt
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the suitable ones as needed.

                                                                                                             Formatted: Font: (Default) Times New Roman,
                                                                                                             14 pt, Not Italic
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b) Two enabling technology drivers                                                                           Adjust space between Asian text and numbers
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We believe that these two technological drivers that are critical in supporting the overall wireless         Formatted: Font: 14 pt



convergence and ubiquitous service in the long run. Without these drivers, it is much harder for

each handset to become true data communication tools and significantly increase its overall

market size.                                                                                                 Formatted: Font: (Default) Times New Roman,
                                                                                                             14 pt, Not Italic



Unique IP address: The growing adoption of IPv6 by various service provider and equipment                   Formatted: Font: (Default) Times New Roman,
                                                                                                             14 pt
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vendors is essential in reaching the goal of ubiquitous service. IPv6 essentially support billions of        No bullets or numbering, Adjust space between
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unique IP addresses so that majority of the electronic devices (from wireless card, television to our        Formatted: Bullets and Numbering


watch) will have unique IP address allocated to them. It is essentially for each device to have

unique addresses so that they can be reached by other devices for communication purposes.                    Formatted: Font: 14 pt



Having an IP address on each handset is the first step towards achieving a true ubiquitous data

service for all electronics.                                                                                 Formatted: Font: (Default) Times New Roman,
                                                                                                             14 pt



Digital Identity: Besides unique addresses, it is crucial to allocate some forms of digital identity

to each person or devices. Despite the convenience of wireless connection, it is crucial to allow

communication or data access by the authorized devices only in order to enhance security and

prevent fraud. With this digital identity, it is also much earlier for provider to support personalized

service such as location-based service based on individual preference.

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Expected Barriers and Recommended SolutionsEEconomic and Strategic Analysis of Key Players                                 Formatted: Font: (Default) Times New Roman,
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Within the Wireless Aggreagator space,s Boingo and iPass                                                                   Formatted: Font: (Default) Times New Roman,
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present themselves as the market leaders.                                                                                  Formatted: Heading 1, Line spacing: Double,
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1. Major Players                                                                                                           Formatted: Font: (Default) Times New Roman



1) Boingo                                                                                                                  Formatted: Heading 1, Line spacing: Double



Boingo is a hybrid between a network aggregator and a WISP. Boingo has a network using 802.11b network with

around 1200 hotspots across the U.S. mainly in large airports and hotel chains. (Wireless Aggregator)Boingo

operates the hotspots. However, unlike other pure WISP, , however cBoingo’s customer boughts actually have to

purchase and own the base station equipmentequipment if they wish to become part of the hot-spot network. For

the site owner, the setup of a Hotspot is simplified with the purchase of Hotspot-in-a-box equipment. The

equipment is pulg and play, requiring the site owner to simply mount unit and plug it into the wired network.

Boingo clients are provided with custom software that minimizes failure when customers switch between various

WISPs.




Boingo operates on the basis of a revenue sharing model with site owner, offering site owners $20 for every new

client signed up and $1 per every connection made at their site. Boingo prices its services for unlimited access at

$39.95 monthly and $7.95 on a per day, per location scheme.


                                                                                                                           Formatted: Font: Times New Roman




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Boingo has key partnerships with Wayport and T-Mobile. The Wayport partnership shows Boingo’s intention to move into the

aggregator arena. The T-Mobile partnership gives Boingo the ability to allow its clients to roam onto both the T-Mobile hotspots

and T-Mobiles 2.5G GPRS based network. However, users will have to register and pay separately for Boingo and T-

Mobile servers. Consequently, this deal enhances ease of use but does not create new cross-revenue opportunities.




iPass


iPass is more of a pure-play network aggregator, having been in this business for many years. With over 14,000 Point-of-                Formatted: Font: Times New Roman
                                                                                                                                        Formatted: Heading 1
Presence (POP) in 150 countries (it provides WiFi services in 14 countries) iPass is poised in a strategy to be a                       Formatted: Font: 11 pt

global aggregator over most network technologies (dialup, wired broadband and Wi-Fi). iPass provide a global

clearing house to combine hotspots and provide consistent provisioning, use, support and billing services, across

different Wireless ISP and network providers. This enhances the user’s experience as it allows a standard to be

kept across all different ISPs and WISPs. To accomplish this, the technology provided by iPass is network

independent.




iPass has a network of 2000 access points, with numerousiPass has a number of partnerships, with such Wayport, Surf

& Sip, FatPort, Cometa Network and STSN (for service in major hotel chains such as Marriott, Ritz-Carlton,

Renaissance, Radisson, Embassy and Hilton)..                                                                                            Formatted: Font: 11 pt



(*** I think the table is not necessary. Just include some of the key points like network size and locations in their respective        Formatted: Highlight
                                                                                                                                        Formatted: Heading 1, Line spacing: Double
section. Try to be concise with the writeup for this part. We don’t want to repeat what we have discussed about the benefit of the      Formatted: Highlight

three groups. Just need to highlight something unique they have done on top of the typical behaviour of their respective groups.)       Formatted: Highlight



The information on both Boingo and iPass is summarized in the table below.                                                              Formatted: Font: Times New Roman


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Company Name          Boingo                                    iPass                                                       Formatted: Heading 1, Adjust space between
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Network type          802.11b                                   Independent, can aggregate over all WISPS                   Formatted Table
                                                                                                                            Formatted: Heading 1, Adjust space between
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Network Size          1200                                      2000 (450 of which in Japan in collaboration with NTT)
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Locations             Airports: LAX, DFW, SJC                   Can provide roaming in 22 coutnries, 14 of which are
                                                                                                                            Formatted: Heading 1, Adjust space between
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                                                                WiFi ready.                                                 Asian text and numbers
                      Hotels: Mariott, Hilton, Wyndham


                      Restaurants


Equipment             Purchased by client ($695)                Varies depending on WISP                                    Formatted: Heading 1, Adjust space between
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                                                                                                                            Asian text and numbers

Revenue Sharing       Yes                                                                                                   Formatted: Heading 1, Adjust space between
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                      $1 revenue for each connection


                      $20 for each client signed through site

                      owner


Price Plan            Unlimited: $39.95/mth (1yr contract)      Varies depending on WISP                                    Formatted: Heading 1, Adjust space between
                                                                                                                            Latin and Asian text, Adjust space between
                                                                                                                            Asian text and numbers

                      As-U-Go: $7.95/day/location                                                                           Formatted: Heading 1
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Investors             New Enterprise Associates                 HAVE TO LOOK UP                                             between Asian text and numbers
                                                                                                                            Formatted: Heading 1, Adjust space between
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                      Sprint PCS
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                      EverCore Ventures


                      Earthlink


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Key Partners        Wayport, T-Mobile              WayPort, Surf & Sip, StayOnline, FatPort, STSN,        Formatted: Heading 1, Adjust space between
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                                                   Cometa (by end 2003)
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primarily Network: 802.11b network                                                                        Formatted: Heading 1, Line spacing: Double
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                                                                                                          (Asian) Korean (Korea), Not Expanded by /
Number of Hot-spot: 1,200 public locations across US (hotel, airport, restaurants)                        Condensed by




Airport: LAX, DFW, SJC


Hotels: Marriott, Hilton, Wyndham                                                                         Formatted: Heading 1, Right: 0", Line
                                                                                                          spacing: Double



Hotspot-in-a-box: encourage signup from site owner as hot-spot provider - $695 to setup -                 Formatted: Font: Not Bold
                                                                                                          Formatted: Heading 1, Line spacing: Double

$1 revenue for each connection and $20 for each successful end customer membership

signup by site owner.


Price Plan:


Unlimited: $39.95/mth (1yr contract)


As-U-Go: $7.95/day/location


Investor: New Enterprise Associates, Sprint PCS, Evercore Ventures, Earthlink


Major Partners:                                                                                           Formatted: Heading 1, Line spacing: Double,
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Network partners:                                                                                         Formatted: Heading 1, Line spacing: Double
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FiberLink: Roaming partnership targeted at the enterprise customer segment                                Formatted: Font: Not Bold


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Earthlink: Provide broadband wireless as a value-added service to all Earthlink customers                           Formatted: Font: Not Bold




T-mobile: roaming agreement                                                                                         Formatted: Font: Not Bold




WayPort – roaming agreement                                                                                         Formatted: Font: Not Bold




Surf & Sip – roaming agreement                                                                                      Formatted: Font: Not Bold




Pronto Network & FatPort                                                                                            Formatted: Font: Not Bold




        Co-brand partners:                                                                                          Formatted: Heading 1, Line spacing: Double,
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        FiberLink and Earthlink
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        Intel: Co-Marketing campaign in Apr 03: includes promotion of “Wireless                                     Formatted: Font: Not Bold



Verification Program”.


Strategy                                                                                                            Formatted: Heading 1, Line spacing: Double



        Own and operate hot-spots. But customer paid for the equipment                                              Formatted: Font: (Default) Times New Roman,
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                                                                                                                    Condensed by

        Moving aggressively into aggregator space by partnership with big players like WayPort.                     Formatted: Heading 1, Line spacing: Double,
                                                                                                                    No bullets or numbering
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        Hotspot-in-a-box offering – leverage on resell model to encourage signup from various site owners of        (Asian) Korean (Korea), Not Expanded by /
                                                                                                                    Condensed by

different size.                                                                                                     Formatted: Font: (Default) Times New Roman,
                                                                                                                    Not Bold, (Asian) Korean (Korea), Not Expanded
                                                                                                                    by / Condensed by
                                                                                                                    Formatted: Font: (Default) Times New Roman,
        Leverage revenue sharing model                                                                              (Asian) Korean (Korea), Not Expanded by /
                                                                                                                    Condensed by
                                                                                                                    Formatted: Font: (Default) Times New Roman,
                                                                                                                    (Asian) Korean (Korea), Not Expanded by /
                                                                                                                    Condensed by


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        Have its own private label client software that is user-friendly – aim to minimize any connection failures

while roaming among the different WISP networks.


        Support most enterprise requirements.


        On 18 March 2003, T-Mobile and Boingo announced an agreement to co-develop user-facing software                   Formatted: Heading 1, No bullets or
                                                                                                                          numbering
and services. Their partnership will enable customers to access T-Mobile’s wireless LAN (WLAN) broadband

network of “hot spots,” based on the 802.11b specification, and its nationwide GPRS enhanced second-generation

(2.5G) data network. Boingo can offer a client that allows roaming between Boingo and T-Mobile hot spots.

Users will be able to detect and log into other hot spot locations using the same Boingo client to access a wider

range of hot spots (both TMobile and Boingo). However, users will have to register and pay separately for Boingo

and T-Mobile servers. Consequently, this deal enhances ease of use but does not create new cross-revenue

opportunities.


                                                                                                                          Formatted: Font: (Default) Times New Roman,
                                                                                                                          (Asian) Korean (Korea), Not Expanded by /
                                                                                                                          Condensed by
                                                                                                                          Formatted: Heading 1, Line spacing: Double,
                                                                                                                          No bullets or numbering
                                                                                                                          Formatted: Heading 1, Line spacing: Double,
2) iPass (Wireless Aggregator)                                                                                            Adjust space between Latin and Asian text,
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Network: Independent of 802.11x network type to aggregate different WISPs                                                 Formatted: Heading 1, Line spacing: Double




Number of Hot-spot: 2000 APs (1500 hotspots and include 450 hotspots in Japan with

NTT)


Location: Global Broadband Roaming (GBR) in 22 countries, 14 of the 22 countries are Wi-

Fi ready.


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Price Plan:


Varies among the different WISPs that signs up as partners.                                                           Formatted: Heading 1, Line spacing: Double,
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Investor: CrossPoint Venture Partners (22%), Accel Partners (16%) and Cisco                                           Formatted: Font: (Default) Times New Roman,
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Partners:


        Roaming partners:                                                                                             Formatted: Heading 1, Line spacing: Double,
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WayPort, Surf & Sip, StayOnline, FatPort, Cometa
                                                                                                                      Formatted: Heading 1, Line spacing: Double



STSN (For hotel chains such as Marriott, Ritz-Carlton, Renaissance, Radisson, Embassy &

Hilton)


Cometa (by end 2003)


Strategy                                                                                                              Formatted: Heading 1, Line spacing: Double,
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Try to leverage on success achieved in the narrowband dialup space. Currently, it has 14,000 Point-of-Presence        Formatted: Font: (Default) Times New Roman,
                                                                                                                      (Asian) Korean (Korea), Not Expanded by /
                                                                                                                      Condensed by
(POP) in 150 countries
                                                                                                                      Formatted: Heading 1, Line spacing: Double


Aim to become the global aggregators for all types of roaming access (dialup, wired broadband, hot-spots)


A global clearing house combining hotspots and provide consistent provisioning, use, support and billing services

across different Wireless ISP and network providers – enhance users experience during to standard login interface

and large coverage areas


In the process of IPO now


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FY2002 Sales: $92m (74.6% growth)


FY2002 NI: $29.8m


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3) Wayport (WISP)


Wayport’s strategy has been to focus on venue owners who serve high-end business clientele, with monthly                             Formatted: Heading 1, Line spacing: Double


revenues of around two million dollars. Wayport operates mainly in hotels (Wyndham and 4 Season), providing wired                    Formatted: Font: Times New Roman
                                                                                                                                     Formatted: Font: Times New Roman
broadband in room and wireless in common areas and meeting rooms, and airports wireless access. It currently provides                Formatted: Font: Times New Roman
                                                                                                                                     Formatted: Font: Times New Roman
service in 525 hotels and 10 airports. As discussed earlier, Wayport is a partner to both network aggregators (Boingo and iPass)

and to numerous Telcos such as Verizon and AT&T wireless. Due to its multiple partnerships with aggregators, Wayport                 Formatted: Font: Times New Roman


attempted to create a standard for aggregatiton by the founding of the PassOne consortium. This initiative however

has not yet been successful. Wayport has also partnered with Intel and McDonald for 75 hotspots in the San Francisco area.           Formatted: Font: Times New Roman


Intel also advertises Wayport’s services on its centrino (mobile processor) laptop products,Number of Hot-spot: 525 hotels

(Wyndham, 4 Season) & 10 airports with Wayport offering 30 day trials.


Wayport’s difficulties stem mainly from a lack of capital (only raised around $102 million from Venture Capital such as Sevin        Formatted: Heading 1


Rosen Fund and New Enterprise Associates) and lack of substantial user base. However, it is estimated more than two million

users are likely to use its service. It prices its services on a day basis between $6.95 and $9.95, on a prepaid basis

where $25 allows three connections, $50 allows 8 and $100 allows 20 connections, on a monthly basis at $29.95

(with one year contract) and $49.95 (with no contract).


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TALK ABOUT ATT wireless, VZ



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Pricing:


$6.95 - $9.95/24hrs (1 location)                                                             Formatted: Font: (Default) Times New Roman,
                                                                                             (Asian) Korean (Korea), Not Expanded by /
                                                                                             Condensed by

$19.95 -$29.95/day across network


Pricing Plans:


$9.95/hotel connection/day                                                                   Formatted: Font: (Default) Times New Roman,
                                                                                             (Asian) Korean (Korea), Not Expanded by /
                                                                                             Condensed by

$6.95/airport/day


Prepaid: $25 (3 connections), $50 (8 connections), $100 (20 connections)


membership: $29.95/mth (1yr contract), $49.95/mth (no contract)




Investor: Raised $102m from VC such as Sevin Rosen Fund and New Enterprise Associates        Formatted: Heading 1, Line spacing: Double,
                                                                                             Adjust space between Latin and Asian text,
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                                                                                             Formatted: Font: Times New Roman
Major Partners:
                                                                                             Formatted: Heading 1, Line spacing: Double


Roaming Partner:                                                                             Formatted: Font: Not Bold
                                                                                             Formatted: Font: (Default) Times New Roman,
                                                                                             Not Bold, (Asian) Korean (Korea), Not Expanded
                                                                                             by / Condensed by
AT&T Wireless, Boingo & iPass.


Alliance with Verizon by end 2003.


Partnership with Intel & McDonald for 75 hotspot at west coast area (SF)                     Formatted: Font: (Default) Times New Roman,
                                                                                             Not Bold, (Asian) Korean (Korea), Not Expanded
                                                                                             by / Condensed by
                                                                                             Formatted: Font: (Default) Times New Roman,
Co-Brand Partner:                                                                            (Asian) Korean (Korea), Not Expanded by /
                                                                                             Condensed by
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Palm – Tungsten C handheld promotion


Centrino as strategic partner. Wayport offers 30-day free trial to Centrino-laptop users;

Intel advertising use of Wayport hotspots.


Strategy                                                                                                               Formatted: Heading 1, Line spacing: Double,
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8 yr old company with 180 workers                                                                                      Formatted: Font: (Default) Times New Roman,
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Create PassOne consortium to create standard for aggregator but not successful so far.                                 Formatted: Heading 1, Line spacing: Double



Lack capital and user-base but have great experience in hot-spot operation and deployment


>2m users likely to use its service. Strategy to focus on venue owners who serve high-end business clientele.


For most hotels, wired broadband in room, wireless in common areas and meeting rooms


About $2m monthly revenue                                                                                              Formatted: Heading 1, Adjust space between
                                                                                                                       Latin and Asian text, Adjust space between
                                                                                                                       Asian text and numbers

                                                                                                                       Formatted: Font: (Default) Times New Roman,
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3) T-Mobile (Telco)                                                                                                    Formatted: Heading 1, Line spacing: Double
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T-Mobile is the Telco that has made the most significant advances into WiFi market. It currently boasts around

2300 Hotspots in hotels, airports and shops (such as Starbucks and Borders), with part of its network inherited

from MobileStar (which it bought out of bankruptcy). It has integrated its billing for cellular and Hotspot allowing

it to leverage its huge user base as a cellular operator.



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T-Mobile partners with Boingo, to allow it to be able to serve clients in Hotels where it had no hardware. T-

Mobile is also the cheapest, providing a monthly $29.99 bill with a 1 year contract, prepaid by the minute services

($50 buys 300 minutes) and a Pay-as-you-go scheme for $0.1 per minute.


                                                                                                                      Formatted: Heading 1, Line spacing: Double,
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        >2,300 public hotspots in hotels, airports, retail shops (Starbucks, Borders)                                 Formatted: Heading 1, Line spacing: Double,
                                                                                                                      No bullets or numbering



                                                                                                                      Formatted: Heading 1, Line spacing: Double




        Bought MobileStar from bankruptcy and integrate it into its overall hot-spot roll out.                        Formatted: Heading 1, Line spacing: Double,
                                                                                                                      No bullets or numbering



        Integrated bill for hotspot & cellular service – use Portal Software – user-friendliness

as user only receive one integrated bill.


        Ability to leverage on its huge user-base to promote this service


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Roaming Partner:                                                                                                      Formatted: Heading 1, Line spacing: Double




        Boingo (resolved its previous dilemma of not having wireless access at any hotel                              Formatted: Heading 1, Line spacing: Double,
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locations)


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Pricing plan:


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         $29,99/mth local (1yr commitment), $39,99/mth national (1 mth commitment)                                                   Formatted: Heading 1, Line spacing: Double,
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         Prepay: $50/300 minutes


         Pay-as-U-go: $0.1/minute (minimum 60m/login)


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6. Scenario Analysis


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This scenario analysis intends to look into two key factors that affect the future of hot-spots and whether Atherosthe likely

winner in this growing market in the long run.


should include hot-spot participation as part of its long term strategy.




Definition:




The two key factors are:




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         Technological integration : Integrated vs. Non-integrated                                                                      Formatted: Font: Times New Roman, Not Bold
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         Customer preference : Pay for Core vs. Pay for Convenience                                                                     No bullets or numbering
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Technology Integration: Integrated                                                                                                      Formatted: Font: Times New Roman, 11 pt



                                                                                                                                        Formatted: Font: Times New Roman



         In this scenario, the cellular, wired and wireless broadband services are able to run as one solution seamlessly. Users        Formatted: Heading 1, Line spacing: Double,
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can choose to use one integrated device to make cellular calls, VoIP, access Internet wirelessly, download music or video clips

across 3G or WIFI hotspots interchangeably depending on locations and the amount of bandwidth needed, all under one service

plan.


         This includes integration at multiple levels, from chipset and equipment to provisioning, authenticating and billing

mechanisms.


         Such integration is achievable by having a multi-function wireless chipset and higher level applications that integrate

the various services together seamlessly. Regardless of solutions chosen by the service provider, such backend integration

should be transparent to the end users.


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Technology Integration: Non-Integrated                                                                                                  Formatted: Font: Times New Roman, 11 pt
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         In this scenario, there is no feasible or cost-effective solution to allow all these technologies to be integrated seamlessly    Formatted: Heading 1, Line spacing: Double,
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without causing great inconvenience for users to switch from one service to another. E.g. the need to switch from 3G to WLAN

hotspot or among the various carrier networks manually without a single sign-on capability.


         No agreed standards to allow such integration – defer standard mass adoption by OEM and end users.


         Aggregation initiative by players such as iPass or Boingo failed to gain widespread support from various carriers.


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Customer Preference: Pay for Core                                                                                                         Formatted: Font: Times New Roman, 11 pt
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         In this scenario, customers are willing to pay for only the core services. Here we assume that the core Mobile service           Formatted: Heading 1, Line spacing: Double,
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will continue to be voice related or the basic broadband service. However, exception applies to areas where wired broadband

such as xDSL or cables are not available and wireless broadband are the only alternative.


         Customers are unlikely to pay additional fees for value-added wireless services such as broadband wireless roaming

(for data, music, etc).


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Customer Preference: Pay for Convenience                                                                                                  Formatted: Font: Times New Roman, 11 pt



                                                                                                                                          Formatted: Font: Times New Roman



         In this scenario, customers are willing to pay additional fees and enjoy new value-added wireless services (besides              Formatted: Heading 1, Line spacing: Double,
                                                                                                                                          No bullets or numbering
voice or basic broadband service) that provide greater convenience to end users for both business and leisure purposes – wireless

roaming service,, video conference, online music, VoIP, etc.

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         The mass adoption of these mobile services depends on the exact fee charged to the users. However, such fees are

independent from the basic core services fee currently paid by the same user


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Additional Assumption:                                                                                                                 Formatted: Font: Times New Roman




         Voice networks using technologies such as GSM, GPRS, 3G, and CMDA2000 will not disappear anytime soon. With                   Formatted: Heading 1, Line spacing: Double,
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the large capital investment already in place, all the large telcos will continue to find ways to protect its investment and to

compete more aggressively from multiple angles, e.g. coverage, ease of use, price and new value-added features. The current

active involvement in the hot-spot initiative by many major telcos around the world has shown that they are very concerned

about future competitive technologies and wish to control the progress of such new rollout directly.


         All the scenarios are examined based on a five-year time frame.


         Voice and basic broadband services are considered the core services.


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                                                                                                               Formatted: Heading 1, Left, Line spacing:
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                                                                                                               Not Italic

                       Technology Integration                                                                  Formatted: Heading 1, Left, Line spacing:
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                       Integrated                                                                              Not Bold
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                       I                                                                                       Not Bold
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                                                           III
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                       Telco the likely winner - deploy
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                       hot spots as complementary          Telco and WISPs competing                           Formatted: Font: Times New Roman
                                                                                                               Formatted: Font: Times New Roman
                       service. Pure WISP cannot           /sharing services. Wireless                         Formatted: Font: Times New Roman, Not Bold,
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                       survive alone. Strong partnership   Aggregator play a pivotal role                      Formatted: Font: Times New Roman, 11 pt,
                                                                                                               Not Bold
                       with Wireless Aggregator                                                                Formatted: Heading 1, Left, Line spacing:
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     Consumers                                                                              Pay For            Formatted: Font: Times New Roman
                       II
     preference                                                                                                Formatted: Font: Times New Roman, 11 pt,
                                                                                            Convenience        Not Bold
                                                           IV
                       Telco continues to dominate                                                             Formatted: Font: Times New Roman
     Pay for Core                                                                                              Formatted: Font: Times New Roman, Not Bold,
                       voice, Few data providers to        Perfect World for WISPs                             Not Italic
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                       support small data market                                                               Formatted: Heading 1, Line spacing: Double
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                       Non-integrated                                                                          Formatted: Heading 1, Left, Line spacing:
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Scenario I – Pay for Core and Integrated Technology                                                            Formatted: Font: Times New Roman, 11 pt
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In this scenario, customers do not appreciate the usefulness of non-core voice and broadband services. They are unwilling to pay

additional fee using any value-added wireless service (e.g. wireless data roaming at Hot Spots).




As a small number of business users will pay for such premium services, only a few pure WISPs with great coverage areas, cash

reserves and competitive pricing plans may survive in the long run.




On the other hand, from the technology perspective, many wireless chipset and application vendors had successfully launched

integrated solutions (e.g. an integrated multi-function chipset that operates in 802.11x, CDMA2000, 802.16, UWB etc). Such

solution will allow telcos / large ISPs to offer an integrated service readily in order to create greater competitive advantage

against their competitors. As a result, it is likely that the telco would leverage this technological advancement to diversify its

products into new market segment and become a truly wireless service provider (voice & data).




As this is a highly price-sensitive market, low cost solution that satisfies basic requirement is much more attractive than an

expensive feature-rich product. E.g. a low-cost integrated wireless chipset that support multiple technologies (e.g. 3G, CDMA,

PHS, Bluetooth, WLAN) but lack in funky features such the Super2 G may be a winning product in this market.




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Pure WISP such as WayPort will have to rely on wireless aggregators to resell their hot spot capacity to other big telcos. It is        Formatted: Font: Times New Roman


extremely difficult for pure WISP to generate sustainable business as a standalone wireless data service in this competitive

market. Nevertheless, it is logical for these pure WISPs to roll out a “Universal 802.11” network so that they can support the

largest possible varieties of customers from the various telcos.




Telco is likely to be the winner under this scenario. However, aggregators such as iPass and Boingo play a pivotal role in the

survival of pure WISPs by aggregating their networks as one. This aggregated network with substantial coverage footprints may

be an attractive offering to the telcos as part of their integrated service. Furthermore, there is a potential opportunity for

aggregators to offer an alternative solution with integrated data and voice service via VoIP that works almost as well as

conventional cellular quality. However, this requires nearly perfect collaboration among all the WISPs to create a seamless

network that can support VoIP handoff during high-speed traveling and across multiple borders. Ubiquitous coverage is a key

attraction of cellular service right now and VoIP has to match at least 90% of the existing features at a substantial discount before

users are willing to switch to the new technology. Based on the current trend, it is a scenario will low probability




In conclusion, a low-cost integrated chipset is probably the key to win the carrier market. The overall AP market for hot-spots

will probably be low due to limited players that can survive successfully in the long run.




Scenario II – Pay for Core and Non-Integrated Technology                                                                                Formatted: Font: Times New Roman, 11 pt
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Similar to Scenario I, telcos and WISPs operate in a market with extremely elastic demand for non-core services. Furthermore,

many essential solutions that allow seamless integration of wireless services are not available easily. Therefore, any telco that

plans to enter the new market would expect a much higher implementation cost and may have to operate these wireless services

independently. This creates additional deterrence for telcos to deploy any large-scale hot spot infrastructure in the long run.




Non-integrated wireless solutions create inconvenience to common users. The eventual hot-spot market may be extremely small

and targeting only at sophisticated corporate users. Therefore, only a small number of WISPs will survive to support this small

market




In conclusion, telcos are likely to continue to dominate the voice market. However, the telcos may take potentially much longer

time to roll out a comprehensive solution that integrates voice and data service for their customers eventually. For Atheros, it is

best to not waste any significant effort in the hot-spot market in this scenario.




Scenario III - Pay for Convenience and Integrated Technology                                                                               Formatted: Font: Times New Roman, 11 pt
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This is an ideal scenario for telco and aggregators. Here, most business and residential users appreciate the wireless data access

feature and are willing to pay a price premium to use the services. Furthermore, technological advancement greatly simplifies

the integration task required by the established telco or service providers.




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Pure WISPs with large coverage networks, high QoS and attractive pricing plans can attract enough users to subscribe to its

standalone service. Nevertheless, it is still hard for the standalone service by the pure WISP to compete effectively with the

comprehensive integrated service offered by the telcos. Hence, only the established WISPs that manage to resell its excess

wireless capacity to the telcos may be able to survive successfully under this scenario. Therefore, there will be great incentive for

these WISPs to roll out a “Universal 802.11” network to support the largest possible group of end-users from these various

telcos / wired line ISPs.




Pure WISPs can try to offer integrated service as well independently with the help of technology. However, one critical

component of the integrated feature – mobile voice – is likely to be missing. While VoIP solution may be a good substitute for

static mobile users, it is unlikely to compete effectively with the overall cellular service in the next five years due to technological

constraints.




Potential new revenue stream and availability of great technologies are excellent incentives for telcos to enter this hot-spot

market quickly. 3G deployment is extremely expensive now and in the foreseeable future (license fee and infrastructure cost).

Furthermore, the 3G data rate may be insufficient to meet the future expectation of users when it is deployed eventually.

Therefore, the telcos will likely to leverage the low-cost Hot-Spot solution to meet the new wireless data roaming demand and

complement its current voice offering in the near term before committing huge capital investment in deploying its 3G service.




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As customers are not extremely price-sensitive, telcos may require a more sophisticated multi-function chipset that supports rich

features in order to entice its users to subscribe to the new plans. Hence, in this scenario, there is a huge market for integrated

chipset for telcos and pure WLAN chipsets for WISPs. Entering the hot-spot market in the early stage is critical in establishing a

strong relationship with these major carriers.




Scenario IV – Pay for Convenience and Non-integrated Technology                                                                            Formatted: Font: Times New Roman, 11 pt
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This scenario will be an ideal world for the WISPs. A healthy hot-spot market and the lack of suitable technology for service

integration create great business opportunities for WISPs. The aggressive deployment plans by many WISPs these days indicate

that this is probably the future scenario foreseen by most WISPs now.




Both the telcos and the WISPs compete on level ground from the wireless data roaming perspective. There is less incentive for

the telcos to carry out a massive exercise that introduces competing products with integration complexity and high deployment

cost.




Voice and wireless data are effectively two self-sustainable markets. There is little cannibalization between the telcos and WISPs

in term of sustainable revenue streams. telcos may enter the wireless data roaming market and offer this value-added service to

complement its conventional voice service. However, it is more likely that such service will be offered as a separate solution to

its users rather than a tightly integrated one.




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In conclusion, the fourth scenario will allow the WLAN market for both the AP, gateway and station products to grow at an
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optimistic rate currently projected by the research firms. Atheros may continue its product diversification strategy, but it is        Formatted: Heading 1, Line spacing: Double
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crucial to maintain its leadership position in the pure WLAN market.                                                                   spacing: Double
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Likely Scenario                                                                                                                        Formatted: Heading 1, Line spacing: Double
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                                                                                                                                       Formatted: Font: Times New Roman, Not Bold,
                                                                                                                                       Not Italic
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                         Technology Integration                                                                                        Formatted: Font: Times New Roman, 11 pt,
                                                                                                                                       Not Bold
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                         Integrated
                                                                                                                                       Formatted: Font: Times New Roman, 11 pt,
                                                                                                                                       Not Bold
                                                                                                                                       Formatted: Font: Times New Roman
                         I
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                                                               III                                                                     Formatted: Font: Times New Roman
                         Telco the likely winner - deploy                                                                              Formatted: Indent: Left: 0"
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                         hot spots as complementaryMost likely and WISPs competing
                                                            Telco
                                                   scenario
                                                  Most likely                                                                          Formatted: Font: Times New Roman, 11 pt,
                                                                                                                                       Not Bold
      Consumers          service. Pure WISP cannotscenario /sharing services
                                                                                                                                       Formatted: Heading 1, Left, Line spacing:
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      preference:        survive alone.
                                                                                                                                       Formatted: Font: Times New Roman, Not Bold,
                                                                                                                                       Not Italic

                         II                                                                                                            Formatted: Font: Times New Roman, 11 pt,
                                                                                                                                       Not Bold
                                                                                                   Pay For
                                                               IV                                                                      Formatted: Font: Times New Roman, Not Bold,
                                                                                                                                       Not Italic
      Pay for Core       Telco continues to dominate                                               Convenience
                                                                                                                                       Formatted: Font: Times New Roman
                         voice, Few data providers to          Perfect World for WISPs                                                 Formatted: Font: Times New Roman
                                                                                                                                       Formatted: Font: Times New Roman
                         support small data market                                                                                     Formatted: Heading 1, Line spacing: Double
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                                                                                                                                       Not Italic
                         Non-integrated
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             India liberalized its economic policies in 1991 and started a move towards the adoption of the free-market                  Formatted: Font: (Default) Arial
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economy model from the state-regulated model. In 2001, even though India’s per capita national income was low                            Line spacing: Double, Adjust space between
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(US $340), its purchasing power parity ranked 5th in the world1. Companies need to be aware of this important
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feature of the Indian economy. During the Sloan India trip, it became very apparent that there is great disparity in                     Formatted: Font: (Default) Arial
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income and socio-economic conditions in different parts of India. The India market offers a very complex marketing                       Formatted: Font: (Default) Arial
                                                                                                                                         Formatted: Font: (Default) Arial
arena and companies might have to tailor to specific taste for many different sub-markets. While many
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developments in certain urban parts of the country are good leaps forward, most parts of the rural area remain very
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poor. Another observation is that India is a relatively young country, with a considerable percentage of its
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population below 20 years old. The younger population (especially those in cities) often constitutes a harder                            Formatted: Font: (Default) Arial, Condensed
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customer base to target. Companies in the fast moving consumer goods sector (FMCG), be them multinational                                Formatted: Font: (Default) Arial, Bold,
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corporations like L’Oreal or locally started companies like Godrej need to adopt strategies that take account of the                     Formatted: Font: (Default) Arial, Condensed
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aforementioned factors.                                                                                                                  Formatted: Font: Arial, Bold
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             India has come a long way in mitigating restrictions on import of goods covered under the General                           Formatted: Heading 1, Line spacing: Double,
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Agreement on Tariffs and Trade and in executing its market access commitments made to the WTO in 19952. My
                                                                                                                                         Formatted: Font: 11 pt, Condensed by 0.5 pt,
                                                                                                                                         Kern at 14 pt
first trip to India was very educational and I became especially interested in consumer products that are not
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durable, such as food and beverages, hair products, and skin care.
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                                                                                                                                         pt

IntroductionConsumer Household Categorization                                                                                            Formatted: Font: 11 pt, Condensed by 0.5 pt,
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             Our team intends to map out the appropriate strategies for MIT Sloan by using the balanced scorecard                        pt
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Balanced Score Card approach. We divided the exercise into three major sections: (1) Define the Mission                                  Kern at 14 pt
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Statement for MIT Sloan, (2) Devise the strategies to accomplish the mission or value statement and (3) Select                           pt
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the right performance measurement from four perspectivesIn order to better understand the Indian population’s                            Formatted: Position: Horizontal: 7.02",
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1                                                                                                                                        Formatted: Indent: Left: 0"
    “Overview of India’s Consumer Goods Sector”, Ace Global Private Limited, March 2001, www.ice.it/estero2/india/market.pdf p. 6
                                                                                                                                         Formatted: Font: 9 pt
2
    Ibid., p.2                                                                                                                           Formatted: Right: 0.25"
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consumption behavior and trends, we should examine the structure of the Indian consumer households. by the                               Formatted: Font: 11 pt, Condensed by 0.5 pt,
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National Council of Applied Economic Research shows thatOfficially, the Indian population is classified into give                        Formatted: Condensed by 0.5 pt, Kern at 14
                                                                                                                                         pt
groups according to the annual income of household – lower income, three different subgroups of middle income,                           Formatted: Font: 11 pt, Condensed by 0.5 pt,
                                                                                                                                         Kern at 14 pt

and higher income. A more useful categorization of the Indian population was presented by the National Council                           Formatted: Font: 11 pt, Condensed by 0.5 pt,
                                                                                                                                         Kern at 14 pt

for Applied Economic Research. Its methodology uses consumption indicators to classify households3.                                      Formatted: Font: 11 pt, Condensed by 0.5 pt,
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                                                                                                                                         pt
                                                                                                                                         Formatted: Indent: Left: 0", Line spacing:
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Figure 1: The Number of Indian Households (in millions)
                                                                                                                                         Formatted: Indent: Left: 0"
Consumer                Annual Income                                                       Projected                                    Formatted: Font: Bold

Category                in Rs                  1996                  2001                   2007                                         Formatted: Font: 11 pt, Bold

The Rich                Above
                        Rs 215,000             1.2                   2.0                    6.2
The Consuming           Rs 45,000 –
                        215,000                32.5                  54.6                   90.9
The Climbers            Rs 22,000 –
                        45,000                 54.1                  71.6                   74.1
The Aspirants           Rs 16,000 –
                        22,000                 44.0                  28.1                   15.3
The Destitute           Below
                        Rs 16,000              33.0                  23.4                   12.8
TOTAL                                          164.8                 180.7                  199.2
                                                                                                                                         Formatted: Font: 9 pt
Source: NCAER
                                                                                                                                         Formatted: Indent: Left: 0"
“Overview of India’s Consumer Goods Sector”, Ace Global Private Limited, March 2001, www.ice.it/estero2/india/market.pdf p. 7
                                                                                                                                         Field Code Changed
                                                                                                                                         Formatted: Hyperlink, Font: 9 pt
           As we can see, the higher consuming classes (the rich, the consuming, and the climbers) are                                   Formatted: Font: 9 pt
                                                                                                                                         Formatted: Indent: Left: 0"
growing in numbers, while those in the lower consuming classes (the aspirants and the destitute) are
                                                                                                                                         Formatted: Indent: Left: 0", First line: 0.5",
                                                                                                                                         Line spacing: Double
decreasing. This signifies potential growth in the FMCG market.                                                                          Formatted: Font: 11 pt, Bold
                                                                                                                                         Formatted: Font: 11 pt
           Figure 2: Mission Statement:Age Distribution of India Population (in millions)
                                                                                                                                         Formatted: Font: 11 pt
                                                                                                                                         Formatted: Font: 11 pt, Bold
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3
    “Overview of India’s Consumer Goods Sector”, Ace Global Private Limited, March 2001, www.ice.it/estero2/india/market.pdf p. 7
                                                                                                                                         Formatted: Right: 0.25"
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         The mission of the MIT Sloan School of Management is to build the best world-class business

school that develops principled, innovative leaders who improve the world and to generate ideas

that advance management practiceHere, wWe should also look at the age composition of the India                                          Formatted: Font: Bold


population. and find that rRelative to several developed and developing countries, India is a young nation.                             Formatted: Font: 11 pt


In 2001, over 45% of the population is below 20 years old (see Figure 2). The projected percentage for 2006

is close to 42%4. The age distribution of India is one of the reasons that impulse products and leisure-related

consumer products have experienced increased demand in major cities. FMCG companies need to pay

close attention to this age group, which is expected to unlock some new waves of consumer demand.

                                                                                                                                        Formatted: Indent: Left: 0", Line spacing:
                                                                                                                                        Double
         The changing distribution of the age groups for a particular market often impacts demand, and                                  Formatted: Indent: Left: 0", First line: 0.5",
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warrants a strategy that accounts for this factor.

                                                                                                                                        Formatted: Indent: Left: 0"

NOTES: 5 forces, industry IR grid, country diamond, particular segmenets of the goods industry, competitors,
strategy successful or not, innovation, recommendation, risks, and also advertising.                                                    Formatted: Font: 11 pt, Font color: Red

           Figure 2: Age Distribution of India Population (in millions)
                                                                                                                                        Formatted: Indent: Left: 0"

Year                Kids         Children        Adolescents Young                 Mid-aged         Senior          Total
                    age 0-4      age 5-14        age 15-19         Adults          age 35-54        55 and
                                                                   age 20-34                        above
1996                119.5        233.2           90.7              224.0           178.1            88.7            934.2
2001                108.5        239.1           109.0             246.8           207.3            101.7           1012.4
2006                113.5        221.2           122.4             279.1           239.2            118.7           1094.1
Source: “Overview of India’s Consumer Goods Sector”, Ace Global Private Limited, March 2001, www.ice.it/estero2/india/market.pdf
p. 8
                                                                                                                                        Formatted: Font: 11 pt
                                                                                                                                        Formatted: Indent: Left: 0"
                                                                                                                                        Formatted: Indent: Left: 0"
Figure 3: Strategies & MeasurementMarket Penetration of Different Consumer ProductsA Snapshot                                           Formatted: Font: 11 pt
of India                                                                                                                                Formatted: Font: 11 pt
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           4
               Ibid., p.8.                                                                                                              Formatted: Right: 0.25"
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                                                                                                                     Formatted: Indent: Left: 0", Line spacing: 1.5
                                                                                                                     lines

                                       1991                        2000                        2005                  Formatted: Font: 11 pt
                                                                                                                     Formatted: Line spacing: 1.5 lines
         Population                    846 million                 1000 million                1087 million
                                                                                                                     Formatted: Font: 11 pt
         Population                    400 million                 471 million                 480 million
                                                                                                                     Formatted: Line spacing: 1.5 lines
         below 20                                                                                                    Formatted: Font: 11 pt

         Urbanization                  26%                         32%                         33%                   Formatted: Line spacing: 1.5 lines
                                                                                                                     Formatted: Font: 11 pt
         Literacy                      52%                         58%                         65%
                                                                                                                     Formatted: Line spacing: 1.5 lines
         Level
                                                                                                                     Formatted: Font: 11 pt
         *Source: Hindustan Lever Limited Presentation to CLSA Investor Meet, Hong Kong, May 2001, p. 5              Formatted: Line spacing: 1.5 lines
                                                                                                                     Formatted: Font: 11 pt, Not Bold

       Especially in major cities, disposable income has been growing in the past few years. In 1991, the            Formatted: Indent: Left: 0", First line: 0.5",
                                                                                                                     Line spacing: Double

urbanization of India was estimated to be around 26% while in 2005, it was expected to rise to 33%5. Major           Formatted: Font: 11 pt
                                                                                                                     Formatted: Font: 11 pt
cities like Mumbai, Delhi, Chennai, Hyderabad, Ahmedabad, and Bangalore account for most of the upper

strata consumers6. And the Eastern, Northeastern, and Central parts of India possess the largest portion of          Formatted: Footnote Reference
                                                                                                                     Formatted: Font: 11 pt
less developed areas.


A Young Country with Scope for Increased Consumption                                                                 Formatted: Font: 11 pt
                                                                                                                     Formatted: Indent: Left: 0", Line spacing:
       While it is important to note that the countries to be compared have different per capita income,             Double
                                                                                                                     Formatted: Indent: Left: 0", First line: 0.5",
culture, and socio-economic conditions, India’s per capita consumption of the various consumer products,             Line spacing: Double
                                                                                                                     Formatted: Font: 11 pt
food, and beverages are far below those in Brazil, Pakistan, and the US, except for its ice-cream                    Formatted: Font: 11 pt

consumption relative to Pakistan. The numbers in Figures 4a and b give us a very rough idea that there is            Formatted: Font: 11 pt
                                                                                                                     Formatted: Font: 11 pt
still a large potential upside to India’s per capita consumption of perishable consumer goods. Shampoo, an           Formatted: Font: 11 pt

essential personal consumer product, has a per capita consumption of 16 ml in India, relative to Brazil’s 444

ml (over 27 times) and the US’ 1018 ml (over 64 times)7. The scope for increased consumption needs to be             Formatted: Font: 11 pt


taken into consideration as India experiences growing disposable income. In the FMCG market in India,
                                                                                                                     Formatted: Font: 9 pt
there are strong local competitors with large scale and low cost structures as well as the presence of major
                                                                                                                     Formatted: Position: Horizontal: 7.02",
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         5
             Hindustan Lever Limited Presentation to CLSA Investor Meet, Hong Kong, May 2001, p. 5                   Formatted: Normal, Line spacing: 1.5 lines
         6
             Overview of India’s Consumer Goods Sector, p.7, www.ice.it/estero2/india/market.pdf                     Formatted: Font: 9 pt
         7
             Hindustan Lever Limited Presentation to CLSA Investor Meet, Hong Kong, May 2001, p. 7 and 8.
                                                                                                                     Formatted: Right: 0.25"
                                                                                                                55

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multinational corporations including P&G, Colgate, L’Oreal and Nestle. The India consumer products market

demands not only value, but also responds to innovation.                                                             Formatted: Font: 11 pt

         Figure 4a: Per Capita Consumption of Consumer Products (2001)                                               Formatted: Font: Bold

                 Product                                                                                             Formatted: Line spacing: 1.5 lines

                 Category                 India                       Brazil                      U.S.               Formatted Table

                 Personal                 0.5 kg                      1.1 kg                      2.0 kg             Formatted: Line spacing: 1.5 lines

                 Wash
                 Fabric Wash              2.6 kg                      7.2 kg                      13.1 kg            Formatted: Line spacing: 1.5 lines

                 Toothpaste               40 ml                       358 ml                      299 ml             Formatted: Line spacing: 1.5 lines

                 Shampoo                  16 ml                       444 ml                      1018 ml            Formatted: Line spacing: 1.5 lines
         *Source: Hindustan Lever Limited Presentation to CLSA Investor Meet, Hong Kong, May 2001, p. 7              Formatted: Line spacing: 1.5 lines


         Figure 4b: Per Capita Consumption of Selected Food and Beverages (2001)                                     Formatted: Font: Bold

                 Product                                                                                             Formatted: Line spacing: 1.5 lines

                 Category                 India                       Pakistan                    U.S.               Formatted Table

                 Ice Cream                0.98 liter                  1.00 liter                  22.0 liter         Formatted: Line spacing: 1.5 lines

                 Edible Fats              7.7 kg                      12.0 kg                     33.0 kg            Formatted: Line spacing: 1.5 lines

                 Tea                      0.65 kg                     0.95 kg                     2.6 kg (UK)        Formatted: Line spacing: 1.5 lines
         *Source: Hindustan Lever Limited Presentation to CLSA Investor Meet, Hong Kong, May 2001, p. 8              Formatted: Line spacing: 1.5 lines


        The overall value of the India domestic market for consumer products was estimated to be over                Formatted: Font: 11 pt
                                                                                                                     Formatted: Indent: Left: 0", First line: 0.5",
US$27 billion in 2000. It could be broken down into: US$6.2 billion food products sector, US$5.4 billion             Line spacing: Double


household goods sector, and $16.2 billion person products sector. Within the US$27 billion, exports

constituted less than US$10 billion and imports amounted to close to $2.7 billion8. Hindustan Lever, which is        Formatted: Font: 11 pt
                                                                                                                     Formatted: Font: 11 pt
the market leader in many consumer product categories (e.g., #1 in market share of personal wash, hair               Formatted: Font: 11 pt
                                                                                                                     Formatted: Font: 11 pt
care, skin care, ice-cream, and branded tea in 2000) and a strong number 2 in products like oral care, hair

oils, and instant coffee, put together a report that came to the following conclusions. It needed to improve the

profitability of its food business, grow in channels, and be more careful about its brand and marketing

strategies. These could shed some insight into the overall FMCG market. For instance, the Indian food

market is very different in that it has a low share of added-value products due to lack of adequate storage

and road infrastructure (so risks of spoilage, etc.) in many parts of India, much direct consumption                 Formatted: Position: Horizontal: 7.02",
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         8
             Overview of India’s Consumer Goods Sector, p.13, www.ice.it/estero2/india/market.pdf                    Formatted: Right: 0.25"
                                                                                                                56

          Page
of agricultural outputs by farmers, and cooking habits. As a result, historically, India has not been a

particularly good market for added-value food products. But this sector could see some growth in the next

several years. Companies like HL are trying to focus on improving profitability of food products by investing

in new categories, setting up new ways of distributing ice cream, and increasing the margin on more

traditional products like tea9.                                                                                           Formatted: Font: 11 pt


        One way to look at the India market as a good location or not is to use Porter’s Diamond framework.

If we look at input factors, we see that there is low-cost labor in India. On the rivalry side, there are a lot of

relevant players, including both multinational consumer products companies and local players. These two                   Formatted: Font: 11 pt


factors are both favorable for India as a location. However, on the infrastructure side, the quality is still poor,

especially in rural areas. And power supply and telecommunication structures are not very reliable, causing

many multinational corporations to develop their own power resources. Poor infrastructure in the rural areas

constitutes one reason that marketing and distributing consumer goods effectively is a challenge. And the

rural area market is very important for growing the overall India consumer products market. On the market

demand side of the Porter Diamond, we see that even though India has a very big domestic market; due to

the great disparity in tastes and market conditions in different parts of the country, the market is actually very        Formatted: Font: 11 pt


very complex.

                                                                                                                          Formatted: Indent: Left: 0", Line spacing:
                                                                                                                          Double
Drive Market Expansion through New Channels and Geographies                                                               Formatted: Font: 11 pt, Bold


The Tricky Rural Market

        The rural population in India spans across different parts of the country and in close to 600,000                 Formatted: Indent: Left: 0", First line: 0.5",
                                                                                                                          Line spacing: Double
villages. In the rural area, there are over 3.8 million retail outlets (which could take the form of a hut, a shack,

a stall, or a store). Rural consumers’ expenditure is highly correlated to agriculture output, which is affected

by monsoons and other factors. These consumers tend to be highly sensitive to price and thus prefer small



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         9
             Hindustan Lever Limited Presentation to CLSA Investor Meet, Hong Kong, May 2001, p. 29-32.                   Formatted: Right: 0.25"
                                                                                                                     57

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consumption packages10. Historically, there has also been a tendency towards discounting intangible

benefits and more functional product attributes for the rural buyers.

        Multinational corporations know that they need cheaper products for the rural buyer. The other key

thing is that word of mouth spreads fast within a village. “If one consumer is not happy, the entire village will

know and the company can then kiss that market goodbye,” commented Godrej’s Ghatak.11 What this

means is that in addition to the product and its pricing, companies need to be careful about how the customer

is serviced. A bad customer experience can be spread quickly by word of mouth in a village. The India                    Formatted: Font: 11 pt


market saw less than 1% of organized retail for consumer products. Even for the food products market

specifically, organized retail was responsible for less than 1.5% of it in 200112. Organized retail might be             Formatted: Font: 11 pt
                                                                                                                         Formatted: Font: 11 pt
growing especially for the upmarket customers, but it remains a relatively small portion of overall retail.              Formatted: Font: 11 pt

Consumer product companies realize that they need to pay attention to the potential growth of organized

retail for urban, more upscale customer segments, but that they need to foster good relationships with the               Formatted: Font: 9 pt
                                                                                                                         Formatted: Font: 11 pt
dispersed retail outlets and good word of mouth in the rural areas (for example, by promoting a pleasant

buying experience in individual outlets).                                                                                Formatted: Font: 11 pt
                                                                                                                         Formatted: Font: 11 pt
Be Sensitive to Fast-Growing Products that Can Be Unique to India or Parts of India:                                     Formatted: Font: 11 pt, Bold
                                                                                                                         Formatted: Indent: Left: 0", Line spacing:
The Example of Fairness Cream                                                                                            Double
                                                                                                                         Formatted: Font: 11 pt, Bold
        According to some studies, “fairness products” which can range from skin lightening cream,
                                                                                                                         Formatted: Font: 11 pt
bleaching agents to sunscreen, make up close to 40% of India’s entire cosmetic industry’s profits. Hindustan             Formatted: Font: 11 pt, Bold
                                                                                                                         Formatted: Font: 11 pt
Lever – producer of the Fair & Lovely line – has about 50% of the market share.13 Fairness cream and                     Formatted: Indent: Left: 0", First line: 0.5",
                                                                                                                         Line spacing: Double
others are more popular in Asia than other parts of the world. The rise of various highly exposed beauty                 Formatted: Font: 11 pt
                                                                                                                         Formatted: Font: 11 pt
queens provides some aspirational images of the beautiful women in India. Ranging from Miss Universe
                                                                                                                         Formatted: Font: 11 pt
1994’s Sushmita Sen and Miss World 1994’s Aishwarya Rai to the more recent Miss Universe 2000’s Lara                     Formatted: Font: 11 pt
                                                                                                                         Formatted: Font: 9 pt
Dutta and Miss World 2000’s Priyanka Chopra, these particularly tall, thin, and honey-colored skin beauties              Formatted: Position: Horizontal: 7.02",
                                                                                                                         Relative to: Page, Vertical: -0.35", Relative to:
represent an aspirational beauty to many Indian women who do not look like that and who spend a lot of their             Paragraph
                                                                                                                         Formatted: Tab stops: 1.06", Left

         10                                                                                                              Formatted: Font: 9 pt
            Overview of India’s Consumer Goods Sector, p.8-10, www.ice.it/estero2/india/market.pdf
         11
            us.rediff.com/money/2004/apr/03spec1.htm                                                                     Formatted: Font: 9 pt
         12
            Overview of India’s Consumer Goods Sector, p.12, www.ice.it/estero2/india/market.pdf                         Formatted: Right: 0.25"
                                                                                                                    58

          Page
time working in harsh conditions. There are many historical and social reasons that give rise to the

importance of beauty queens in the marketing of consumer goods. The beauty queens are often

spokesperson for cosmetics as well as other consumer products like soaps and toothpaste. The beauty

pageants themselves are also sponsored, such as the Palmolive Femina Miss India and Colgate Gel Miss

Body Beautiful14. Clearly, consumer products companies in cosmetics and toiletries need to play the game                Formatted: Font: 11 pt
                                                                                                                        Formatted: Font: 11 pt
of the market’s marketing ties with beauty queens and the trend of fairness products. Another fast growing

category in the India market is hair color. Figure 5 shows a selection of hair coloring products at Godrej.             Formatted: Font: 11 pt
                                                                                                                        Formatted: Font: 11 pt
         Figure 5: Hair Products of Godrej
                                                                                                                        Formatted: Font: 11 pt, Bold
                                                                                                                        Formatted: Font: Bold
                                                                                                                        Formatted: Font: Bold




                                                                                                                        Formatted: Font: Bold
The Example of Package Innovation for Soda                                                                              Formatted: Indent: Left: 0"
                                                                                                                        Formatted: Font: 11 pt, Bold
        In the India market, we see small bottles of Pepsi and Coke, mainly for reasons for affordability. In
                                                                                                                        Formatted: Font: 11 pt
                                                                                                                        Formatted: Indent: Left: 0", First line: 0.5",
the US, we also see the recent development of smaller packages -- 6-pack and 18-pack 8-oz cans of Pepsi,                Line spacing: Double
                                                                                                                        Formatted: Font: 11 pt
for instance, in Q1 2004. Dave Burwick, SVP and CMO of Pepsi, said that the smaller package (in the US)
                                                                                                                        Formatted: Font: 11 pt
“appeals to light users and offers portion controls for kids” so that parents can put an 8-oz can in a lunch box        Formatted: Font: 11 pt
                                                                                                                        Formatted: Font: 11 pt
for their kids15. Even though we see a similar development toward an introduction of smaller containers for
                                                                                                                        Formatted: Font: 9 pt
                                                                                                                        Formatted: Position: Horizontal: 7.02",
soda, it happened in India and the US for very different reasons. Consumer goods marketers would make a                 Relative to: Page, Vertical: -0.35", Relative to:
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         13                                                                                                             Formatted: Font: 9 pt
            Bollywood from Beyond: Beauty Queens and Fairness Creams. www.popmatters.com/columns/lal/03128.shtml
         14
            Ibid.                                                                                                       Formatted: Font: 9 pt
         15
            2004 HBS Marketing Conference, Sprangler Auditorium, April 17, 2004.                                        Formatted: Right: 0.25"
                                                                                                                   59

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big mistake if they believe that simply replicating western strategies in India would work. They need to

carefully deal with the India market in its own terms.

Adopt Marketing Strategies for Local Implementation                                                                   Formatted: Font: Bold
                                                                                                                      Formatted: Font: 11 pt, Bold
        Marketing takes many forms in India, especially because things like TV penetration is not as high as          Formatted: Indent: Left: 0", Line spacing:
                                                                                                                      Double
that in many countries. During the India trip, there were a lot of outdoor advertising, whether in the form of        Formatted: Font: 11 pt
                                                                                                                      Formatted: Indent: Left: 0", First line: 0.5",
billboard ads or just logos and ads plastered over individual stalls. As for indoors, there is also quite a           Line spacing: Double
                                                                                                                      Formatted: Font: 11 pt
popular use of showcases of products, such as the one shown below for razors at a domestic airport.
                                                                                                                      Formatted: Font: 11 pt
         Figure 6: Showcase of Razors for Advertising Purposes                                                        Formatted: Font: 11 pt
                                                                                                                      Formatted: Font: Bold
                                                                                                                      Formatted: Line spacing: Double




        FMCG companies, in coping with the complex needs and less-developed, though, growing media                    Formatted: Indent: Left: 0", First line: 0.5",
                                                                                                                      Line spacing: Double
penetration of India, need to find marketing strategies that suit the local needs. For example, billboard and

product showcase are marketing mechanisms that we have seen in our trip.                                              Formatted: Font: 11 pt


        In conclusion, the Indian consumer goods market has a lot of market potential because of low

penetration and consumption level. India is also a very young country in terms of its population composition

and thus has interesting opportunities in categories like leisure-related and lifestyle products. However,

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companies need to be very adaptive in understanding and satisfying local needs, marketing, and distribution

challenges of the complex and diverse market.                                                                        Formatted: Font: 11 pt


         In order to achieve the goal stated in the mission statement, we leverage the balanced score                Formatted: Font: 11 pt
         cardscorecard approach to break down our analysis into four main perspectives, namely the                   Formatted: Line spacing: single
         Financial, Customer, Internal Process and Learning & Growth perspectives. Each perspective will             Formatted: Font: 11 pt
         be evaluated individually to understand the linkage and synergies. Furthermore, the appropriate
         measurement will be applied to each strategy so that we can quantify and measure the
         effectiveness of each strategy we intend to pursue and how the firm can react effectively to all the
         critical strategy issues. With this in mind, we may be able to devise a more comprehensive
         compensation package that may address a variety of issues from the different perspectives.
                                                                                                                     Formatted: Indent: Left: 0"

Some of the key strategies are:                                                                                      Formatted: Font: 11 pt

    Financial                                                                                                        Formatted: Bullets and Numbering

        Maximizes Sloan endowment fund: Although Sloan is not a profit-maximizing organization, it is
        crucial for Sloan to have a substantial endowment fund to carry out project, attract top talents and
        expand its operation strategically in order to achieve the goal stated in the mission statement.


                                                                                                                     Formatted: Font: 11 pt

    Customer                                                                                                         Formatted: Bullets and Numbering



         Here, we try to examine the core of MIT Sloan strategy which targets at the customer value
         proposition. Our customers include potential student, existing students, alumni and employers.
         Some of the key strategies are our ability to enhance and maximize the following attributes:
        quality of Sloan education,                                                                                  Formatted: Bullets and Numbering

        quality of students/ peers in Sloan
        reputation of the program
        relationship with employers and key industries players
        employment rate
        relationship with alumni
        reimbursement and scholarship available to students


    Internal Process                                                                                                 Formatted: Bullets and Numbering

                                                                                                                     Formatted: Indent: Left: 0"

In order to achieve our goals to fulfill the key customer value proposition, certain internal process within Sloan   Formatted: Font: 11 pt

needs to be re-evaluated so that they are totally aligned.                                                           Formatted: Position: Horizontal: 7.02",
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Some key goals here are:                                                                                           Formatted: Font: 11 pt

       attract top professors and teaching staffs from various key fields of business                              Formatted: Bullets and Numbering

       Create flexible environment that support a good balance of research and teaching.                           Formatted: Font: 11 pt

       Strengthen our Career Development Office capability in pulling in more good companies and
       developing strong program in supporting students’ recruitment needs
       Enhance the overall facilities and IT capability of the school. This includes reading space, meeting
       rooms, social areas, IT facilities, etc
       Increase marketing initiative to further enhance the branding and reputation of the school
       Support adaptable syllabus that meets the fast-evolving market and student needs.
       Create formal program to develop a strong alumni network


   Innovation and Learning process:                                                                                Formatted: Bullets and Numbering

                                                                                                                   Formatted: Indent: Left: 0"

This perspective examines some of the key items that we need to tackle (usually a long term effort) so that        Formatted: Font: 11 pt

we can continue to support the internal process successfully over a long period of time.




These key items are:                                                                                               Formatted: Font: 11 pt

       flexible and competitive compensation package that attracts both academic professors and excellent          Formatted: Bullets and Numbering

       teaching staffs from the industry
       recruit top-tier industry leader from various field as teaching staffs
       support more media /main stream publicity and publication (besides conventional academic
       publication)
       culture to foster stronger Sloan identity and sense of belonging
       culture to work closely with student to continue fine-tuning the curriculum and activities.


   With these key strategies and goals in mind, we apply the appropriate measurement on each item so that          Formatted: Indent: Left: 0.25"

   the result can be quantified and tracked over the long run. These measurements are summarized in the
   table below:




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         Financial Perspective

         Goal                                                Measures
         maximize endownment fund                            Average donation per alumni
                                                             Grant per faculty
                                                             ROI of endownment /year
                                                             average time to donation by student




         Customer Perspective

         Goal                                                Measures
                                                             benchmark with other top schools on different major subjects/ ranking / feedback from
         quality of education                                alumni after x years
         quality of peers                                    acceptance rate
         reputation                                          various ranking, yield, survey from peers and recruiters
                                                             number of recruiters to school /student, number of jobs/students, number of lead per
         strong relationship with employer / industry        CDO staffs
                                                             number of events held for /by alumni, number of alumni as volunteers, number of active
         strong relationship with alumni                     alumni
         reimbursement and scholarship available             Percentage of tuition fee actually paid by student / year
                                                             Percentage of students employed 3 month before / after/ at graduation, job satisfaction
         employment rate                                     of alumni after x years




         Internal Business Perspective

         Goal                                           Measures
         attract top professors and teaching staffs     number of professors /staffs that won top awards in their own fields
         flexible balance teaching & research           ratio of research oriented professor vs teaching oriented staffs
                                                        number of repeated /new firm to Sloan , number of fortune 500 firms, number of
         CDO relationship with recruiter                (successful) leads / CDO staffs.
         enhance overall facilities and technology      total investment in IT / facility /student / year, survey of student satisfaction on facility
         increase marketing initiative                  amount investment in brand marketing, number of visiting professors to / from Sloan
         adaptable syllabus responsiveness to market    survey from recruiters about the relevance of curriculum to their job need in respective
         concrete formal program to help develop strong number of events held for /by alumni




         Innovation and learning Perspective

         Goals                                               Measures
         competitive compensation package for both
         research staff and teaching staff                   benchmark with top schools
         recruit non-academic top notch leaders as           number of academic /teaching staff ratio
         encourage more media / main stream                  amount of money invested / survey from employer and alumni about reputation
         culture to foster stronger sloan identity and       survey with current sloanies and alumni
         work closely with student / recruiter to finetune   survey with alumni and recruiters about the strength of curriculum to market needs
                                                                                                                                                         Formatted: Indent: Left: 0.58", Adjust space
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Compensation
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Financial Analysis:Rapid enterprise user uptake and revenue growth will depend on ongoing                                                                Formatted: Font: 11 pt, Condensed by 0.25 pt

deployment of new hot spots, which will require significant extra capital.
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AT&T Wireless benefits from a foothold in the market and joins other mobile network operators such as T-
Mobile, which owns and operates the largest hot spot network in North America, and Sprint, a passive
investor in Boingo Wireless.                                                                                            Formatted: Font: 11 pt, Condensed by 0.25 pt


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Through its ownership of the backhaul infrastructure, billing and customer relationships, and opportunities for
telecommunications product bundling, Telstra has the opportunity to build a business model that is simpler
and more profitable than a typical small WLAN startup (see "The Wireless LAN 'Hot Spot' Value Chain").
With revenue of A$19.1 billion and a net profit of A$3.7 billion for the 2001 fiscal year, it also has the financial    Formatted: Font: 11 pt, Condensed by 0.25 pt
strength to rapidly roll out many more hot spots if it chooses.
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Despite its value proposition and competitive advantage, there are a few of expected barriers. Here are the
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examples of those barriers                                                                                              or numbering, Adjust space between Latin and
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The main impediment of massive wireless adoption across different sections is primarily due to lack of killer          numbers
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applications that will induce users to pay a premium price for such wireless communication. Many of the new
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data services like MMS or location based services have not received overwhelming response since they                    Formatted                                           ...
were launched. For instance, it is still expensive for cellular provider to offer Wireless LAN as a separate            Formatted: Font: (Default) Arial, 11 pt

service from its conventional cellular service.                                                                         Formatted: Line spacing: 1.5 lines, Adjust
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The primary reason is theThe great complexity of lack of integration among the two services, from billing,
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security, authentication, to operation support has also deterred many carriers from rushing into this                   Bold, Not Italic

integration initiative. A bad integration can easily lead to lower QoS and create a negative impact to the              Formatted: Normal, Line spacing: 1.5 lines
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carrier’s reputation..
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Recommended Solutions                                                                                                   numbers
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User experience in terms of QoS and Consistency
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Responding to these expected barriers and market needs, our solution is solution is
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A Middleware software Solution that aims at providing data exchange at a higher layer platform (above the               Formatted: Font: (Default) Arial, 11 pt
physical and MAC layer) that so that allows different devices operating at different standards canto                    Formatted: Line spacing: 1.5 lines, No bullets
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communicate among one another without having to change the fundamental wireless technologies. The key                   Asian text, Adjust space between Asian text and
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success factors of this platform solution are: will have two major functions:
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        Content-awareness capabilities: abilityand Able to differentiate between the different services or              Formatted                                           ...
device that gain the communication right across the different wireless networks and be charged differently,             Formatted                                           ...
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Seamless handoff and seamless identity exchangeflow and authentication among the different                          Formatted: Font: 11 pt
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technologies – For instance, for a handset to access the wireless LAN network, reach the unique electronic           Italic
devices at home (e.g. DVD recorder), gain access to it with proper identity authentication and activate the          Formatted: Bullets and Numbering

recording function. The authentication can be in the form of digital certificate, unique IP address, etc.            Formatted: Font: 11 pt
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The key to success of this proposal is theTransparent to ability to separate its dependency on lower layer          Italic

technologies:. Many providers carriers and service providers have deployed different technologies for                Formatted: Font: 11 pt
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specific uses and it is too expensive for them to throw away existing infrastructure simply to adopt this new
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service. However, it is much more attractive proposals to the providers if they can install this middleware          Formatted: Font: (Default) Arial, 11 pt
solution on top of existing infrastructure that allow it to do more, provide more product differentiation,           Formatted: Font: 11 pt

enhance its ability to do customized billing and pricing and support all these applications as one service to        Formatted: Font: (Default) Arial, 11 pt
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customers.
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Potential Markets of Our ProductsOther potential market of our Product                                               space between Asian text and numbers

There are two potential markets of our products: Besides its ability to meet the growing need in the Cellular        Formatted: Font: 11 pt, Not Bold, Not Italic
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sector, this product can also be used in the huge
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1. Telco – ability to integrate wireless LAN to Cellular service. They can have different charge for data            Bold, Not Italic
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access on the same device. For example, any requirement for large bandwidth download can rely on the
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cheap Wireless LAN access using the same device whereas the same users may be willing to pay a higher
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price for data access if he is on the move. Nevertheless, this provides more choices for consumer and                space between Latin and Asian text, Adjust
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enables Telco to exercise better price discrimination. This indirectly will encourage higher usage of these          Formatted: Font: (Default) Arial, 11 pt
new services and have them hooked on these great services.                                                           Formatted: Font: 11 pt



2. cConsumer electronic sector. – For instance, the hi-fi, television, DVD players and computer can be linked        Formatted: Font: (Default) Arial, 11 pt

up seamlessly. One DVD player can be wirelessly linked to multiple televisions in the house easily without           Formatted: Font: 11 pt
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the hassle of pulling cable around. Companies like Sony may be very interested in this kind of new
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advancement to its premium product. Again, we believe that as each consumer electronic becomes a                     Formatted: Font: (Default) Arial, 11 pt
communication device with its own IP address, we will be able to leverage our experience in the wireless
industry and customize our product to meet the communication needs of these electronic devices. The
fundamental principle is very similar and we are very optimistic about its market potential.
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Conclusion                                                                                                           Formatted: Position: Horizontal: 7.02",
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Despite the fact that the sustainability of hot-spot market in the long run is still unclear at this stage, we                Formatted: Font: 11 pt

believe that Telco and the wireless aggregator will be the likely winner in this wireless hot-spot race. Unlike               Formatted: Font: (Default) Arial, 11 pt
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the conventional wireline or mobile industry, not a single player dominates the entire value chain of this
industry. Furthermore, as a result of different expertise offered by different groups of wireless players, a
partnership model is more likely to occur in the short run in order to minimize redundancy capacity and
service deployment time while creating win-win situation for all the players in this industry now. Collaboration
is the key to avoid price competition and encourage strong adoption rate of this excellent service that will
benefit customers tremendously if a full-scale nationwide deployment is materialized.




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Ubiquitous service is a HUGE market in the long run. The proposal here only covers one sub-level of the                       Formatted: Font: 11 pt

entire value chain. Furthermore, we believe that most part of the value chain (from providing the ubiquitous                  Formatted: Indent: Left: 0", Line spacing: 1.5
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service to service integrator) to support this initiative are not fully exploited. Therefore, there are still a lot of
rooms for growth and business opportunities.We believe that compensation should be linked to performance
in order to align the incentives and strategy, and to minimize the principal agent problem. For MIT, there are
3 different categories of employees with different functions and objectives. These include faculty,
administration, and Career Development Office staff.
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Faculty Compensation                                                                                                          Formatted: Font: 11 pt, Not Bold
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For faculty, we have distinguished two sub categories. Having a balance of research oriented faculty and                      Formatted: Font: 11 pt

teaching oriented faculty was a goal we believe MIT Sloan should aim for. With this goal, we believe that                     Formatted: Line spacing: 1.5 lines
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there should be two different pay for performance systems established. In stead of having a minimum                           lines
required teaching hours or minimum research grant that must be achieved by all faculty members, the school                    Formatted: Font: 11 pt

should make a distinction between two categories and hire the best in each. Systems should be in place to
promote communication and collaboration between the two groups. In either case, there should be a base
pay plus bonus based on performance. The higher the proportion of bonus percentage relative to base pay,
the more incentives there are to perform accordingly.
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For research oriented faculty, performance measurement should be linked to dollar amounts of grants                           lines
secured, number of publications widely recognized journals and periodicals, and number of conferences                         Formatted: Position: Horizontal: 7.02",
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attended or participated are some of the items that are easier to measure. There should also be                               Paragraph
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qualitative items that will be measured subjectively by supervising faculty or staff. These include the quality
of research and how it relates to promoting the institution and student knowledge.
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For teaching oriented faculty, there are certain measurements in place already such as the survey which                 Formatted: Indent: Left: 0", Line spacing: 1.5
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students take at the end of each semester. It is also important that the faculty seek for publications and
external recognition.
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CDO Staff Compensation                                                                                                  Formatted: Font: 11 pt, Not Bold
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In order to achieve the goal of building and maintaining strong relationships with companies and recruiters as          Formatted: Font: 11 pt

well as facilitating students to get the jobs they want, the CDO staff should be rewarded by a compensation
scheme that aligns their interests with the interests of students and recruiters. A considerable portion of the
CDO staff’s compensation has to be dependent on their individual as well as their department’s performance.
We envision a compensation package consisting of a base salary and a bonus portion that will be awarded
only if there is outperformed. The bonus is based on the following factors: (1) aggregately speaking number
of job offers per student (versus top 10 benchmark b-school’s average); number of companies recruiting at
school; number of repeat companies recruiting at Sloan (i.e., a company that has returned); number of new
companies recruiting at Sloan; number of Fortune 500 companies recruiting at Sloan; and (2) individually,
number of job lead generated by the specific CDO staff member; number of successful job lead generated by
the specific CDO staff (i.e., successful match with a student) [hopefully this will incentives the CDO staff to
spend more time on individual students’ needs and concerns].
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The measure of number of job offers per student is benchmarked against business schools; so that the                    Formatted: Indent: Left: 0", Line spacing: 1.5
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influence of the macro-economic factor is taken into account. One of the factors – the number of repeat
companies recruiting at Sloan – tries to take into account the horizon problem. We want the CDO staff to
focus not just on getting recruiters to hire Sloan student for this year, but also in the future. The measure of
the number of Fortune 500 companies recruiting at Sloan would provide a rough measure for “quality
control”, making sure that the CDO staff is bringing in recognized and powerful organizations. We
understand that there might be focus on bigger companies, but we hope that problem is solved in putting in
the number of successful job leads as a measure as well; and for students who are interested in
entrepreneurship and working for start-ups, the CDO staff member would be recognized for generating and
matching such a job lead as well. And the number of successful job lead generated by the CDO staff
member would provide positive incentives for him or her to spend time on individual student’s career                    Formatted: Position: Horizontal: 7.02",
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strengths and needs.                                                                                                    Paragraph
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Administrative Department                                                                                                Formatted: Font: 11 pt, Not Bold
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In the proposed balanced scorecard system, a portion compensations should be linked to the performance                   Formatted: Font: 11 pt

so that the department or the individual will focus on what has to be done to achieve the overall strategy of            Formatted: Line spacing: 1.5 lines
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the firm, or in this case, the university. In a department as diverse as the administrative, where the jobs range        lines
from secretarial work such as printing and pouring coffee to running the entire MBA program and where each
director has a different set of job to perform, each individual should be measured individually based on the
goals of his job and how it relates to the overall strategy of the company. This department can be on an
individual basis also because it is a small department in which overlapping responsibilities hardly occur. If
they do occur, then they should be grouped together as an entity.
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This entity should then have a list of metrics that measures the performance of his job. The amount of
compensation that is linked to this performance also depends on the level of responsibility. Take Margaret
Andrews for example. As the program director of the MBA program, she is responsible for the overall
performance of the entire MBA program, meaning that her performance is a sampling of all four areas of the
Balanced Scorecard- Financial, Customer, Internal, and Learning- using measures such average donations
per alumni to maximize the amount of endowment, rankings and feedbacks for quality of education, and
student feedbacks and surveys that gauge the culture for fostering a stronger Sloan identity and belonging.
Here, certain measures are more preferable than others depending on the weakness of Sloan and the
controllability Margaret over certain measures. It might be better for the CDO to control employment rate then
having Margaret have control over it. Given her high position, maybe up to 100% of her annual salary (or the
market rate) can be given to her.                                                                                        Formatted: Font: 11 pt, Condensed by 0.25 pt

Effectiveness

We think this scorecard would have mixed effectiveness at an institution like MIT. Unlike a for-profit                   Formatted: Font: (Default) Arial, 11 pt

organization, which has the single goal of returning value to investors, an academic institution like MIT often          Formatted: Line spacing: 1.5 lines, Adjust
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has multiple objectives. These objectives could be social, political, as well as financial. These objectives can         space between Asian text and numbers

often collide with one other. For example, a project that may please the customers (ie. students) may not be
financially feasible. In contrast, all objectives in a for-profit company eventually lead to the ultimate goal of
increasing profits.


In addition to the multiple objectives that the organization as a whole possesses, different constituencies
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within the organization may value certain elements of the scorecard over others. For example, the                        Relative to: Page, Vertical: -0.35", Relative to:
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board of trustees may hold more of a financial perspective, the students more of a customer perspective, the
administration more of an internal business perspective, and the faculty more of an innovative/learning
perspective. With so many different constituencies, each valuing different components of the scorecard, and
each responsible for enforcing different metrics of the scorecard, conflicts will necessarily occur.
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Another hindrance to the effectiveness of the scorecard is the slow pace of change that occurs at large               text, Adjust space between Asian text and
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institutions like MIT. If the scorecard finds some element of the institution inadequate, affecting change can
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often be a slow and tedious. Process Without relatively expedient ways of enforcement, the effectiveness of           space between Latin and Asian text, Adjust
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the scorecard is greatly reduced.


In conclusion, although the balanced scorecard is a good way to force top management to concentrate on
the most important measures, its effectiveness at MIT is necessarily compromised by the very nature of
academic institutions. It sets the strategy and vision for the institution, and assumes that people will adapt
their behaviors as necessary to realize the vision. However, the diversity of goals, stakeholders, and power
concentrations within MIT challenge this assumption. Thus, the balanced scorecard may be more suited to
for-profit organizations than academic ones like MIT.                                                                 Formatted: Font: 11 pt




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