External Threats to MCI

The most significant external threats to MCI have to do with competition and reputation. Three distinct threats can be identified.

Competition on products. The fact that MCI's finances have been under control of bankruptcy officials has meant that the company has not been able to devote resources to new-product development. Emerging out of Chapter 11 "make[s] a healthy balance sheet a priority over running the company's business" (Knight, 2003). Consequently, competitors may be better positioned than MCI to introduce new and better products or exploit new opportunities.

Industry overcapacity. Telephone-industry deregulation in 1983 and the high-tech telecommunications industry boom of the 1990s transformed the telephony marketplace. But the enormous rise in the number of businesses and individuals with wireless, cellular, and wired telephone networks was far overmatched by the installation of equipment. Knight sums up the problem:

There are thousands of miles of fiber-optic cables buried in the ground that have never even been hooked up. Thousands of computers and switches to handle phone calls and Internet traffic are sitting idle. Many of the companies that laid that cable and bought that hardware have gone out of business, but the networks they built are still there. As long as all that excess capacity exists, it will be difficult for any companies in [the] business to make reasonable profits (Knight, 2003).

Unfavorable publicity. The fact that the reason for MCI's res

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he latter. Leaving aside scandal, evidence of MCI's laxity on to R&D is in "massive challenges related to growing revenue and integrating its complex set of assets cobbled together through almost 70 acquisitions" (Weber, 2003). Industry analysts are quoted as saying that MCI's "back office," or fulfillment and record-tracking operations, "is far behind its competitors'. The new MCI must make significant strides in areas such as automated provisioning just to keep up with the competition" (Weber, 2003). Thus MCI's plans to roll out multiple products are problematic. Voice-over Internet Protocol (IP), Internet gateways linking public Frame Relay and ATM networks to MCI's private IP networks, IP-based and traditional Centrex service and support, and IP service to small- and medium-sized businesses are all announced rollouts for 2003 (Weber, 2003). Add to this that MCI's new CEO, Michael Capellas, who formerly headed Compaq, has no background in the telecom business model. Weber cites an analyst's opinion that Capellas is inclined to "think[] along the lines of the computer as the network" (Weber, 2003). And Knight (2003) cites bankruptcy statistics showing that about 50% of all companies reorganized under Chapter 11 do not make it.

Category: Business - E