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The Fall of a Company

In: Business and Management

Submitted By criley87
Words 1032
Pages 5
The Fall of a Perceived Rising Company
BUSN 422
Wednesday, May 21, 2008

The Fall of a Perceived Rising Company In the early 1990’s, cell phones were just beginning to emerge as the revolutionary technology. This new way of portable communication was sure to be an enormous hit with society. In the late 1990’s, Iridium wanted a piece of the action. Iridium was a “mobile communication network that allowed any kind of phone transmission (voice, data, fax, and paging) via a system of satellites” (Crawford and Di Benedetto 404-405). This system, composed of 66 satellites and many ground stations, claimed to reach any destination in the world. The Iridium phone also boasted to be able to not be obstructed by tall building or mountains, have all-digital technology, and could be compatible with many local services. However, despite of all these claims of a great phone, the company “filed for chapter 11 bankruptcy on August 13, 1999 with $1.5 billion in outstanding debt” (Iridium files Chapter 11). Through research, it has been found that there were two significant areas of weakness that Iridium could have done better to help the company survive. Iridium entered the cell phone market with absolutely no price advantage and they also targeted the wrong market for their service. Iridium made the mistake of entering an increasingly saturating market with cell phones. The initial cost to build the entire Iridium system was roughly $5 billion. This starting figure already had the company in a hole of debt before it ever took off. Also, the “initial price for a handset purchase was $3,000 with user charges that ranged from $1.10 to $7.00” (Crawford and Di Benedetto 404-405). Taking those figures in account, the Iridium handset was more expensive than a cheap cell phone at that time by twenty fold. The reason the prices...

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