Company Selection & Research Question
During the 1990s, most Fortune 1000 firms in the United States have engaged in downsizing (Kets de Vries & Balazs, 1997). Further, the trend appears to be continuing. The ardent positions on each side of the downsizing phenomenon justifies the interest in downsizing as a research focus. Because the American Telephone & Telegraph Company (AT&T) is a giant corporation and because the company is highly profitable, questions arose in relation to both motivations and possible outcomes when the company announced a massive downsizing initiative in 1995 that involved the elimination of 40,000 jobs (Norris, 1995). These questions motivated the selection of AT&T as the company for the focus of research on the downsizing issue.
During the 1990s, threats have emerged in AT&T's external environment in the form of likely new laws, probable competition new rivals, and rapid changes in technology (Arnst, Spiro, & Burrows, 1995). The company also faces a threat within its in its internal environment in what AT&T management view as laggard performance in comparison with the company's major competitors ("AT&T's Three-Way Split," 1995). These factors were major motivations for the company's decision to initiate a downsizing strategy. AT&T management was beginning to become aware of some of the symptoms of decline that precede the collapse of major corporate institutions (Luffman, Lea, Sanderson, & Kenny, 1996).
Long-distance telephone service contributes approximately $45 billion in annual revenues to AT&T. These revenues represent more than half of the company's total annual revenues. Further, AT&T's operating profit margin on long-distance telephone service is 42 percent. Obviously, any changes in the competitive structure of the telecommunications industry demands that AT&T act decisively to protect the highly profitable long-distance service business. In the absence of a strategic change by AT&...