'American Online Case Study\r'

'Q1: The major(ip) explanations to the reason why AOL was so successful in the commercial online manufacturing comparing to its competitors CompuServe and Prodigy be as follows: · AOL offered the unique and board range of features much(prenominal) as Online Community, Computing and the like, so their assistants are congenerly differentiated · AOL kept good carnal knowledge with its customer because of the easy access to AOL’s online service which only required to have a in the flesh(predicate) computer, a telephone line, and a computer, and also consulted in AOL’s rate structure which was the easiest for consumers to understand and anticipate, relative to its competitors · The bargaining power of AOL with supplier is achieved by devising strategic partnership with American Express, and so on; and completing its acquisitions of cyberspace software product developers, along with AOL’s growing membership base, in order to arm its new interacti ve run constancy by means of pursuing a number of initiatives. · The terror of new enchant is low, since at that place is not much service providers, like AOL, acted as middlemen between thousands of subjectedness providers and millions of customers, which provided lucrative profits prior to 1995.\r\nQ2: There are several crucial permutes happened in the commercial online industry in the year of 1995 and after: · With the advent of the Internet World Wide Web and the entrance of Microsoft Network, content providers had substitution dissemination channels that offered greater checker over their products · Under the background that the migration of proprietary services and content to Web sites, the exclusive offerings of AOL was declining, thus it was credibly reduce the market share of AOL in the industry and subsequently posed negative effect on its profitability · Since everyone with a PC was his/her own publisher, customers would concentrate up for an Intern et on-ramp service provided by another(prenominal) companies and they were tend to use the other companies’ browsing software to surf the world’s database, resulted in the post that content providers were starting to make use of these distribution channels.\r\nQ3. Based on the annual reports and footnotes, AOL’s chronicle policy was to capitalize contributor acquisition be prior to 1995, which in my view, was not promising to be justified in that current ground, for the uncertainty whether ts customers could emigrate to the internet still remained since this would probably affect the growth in its endorser and the profit of its services, although the CFO of AOL attributed the natural selection to the explanation that the period over which the revenue would be received was fellowing with the timing the expense, yet there was a rising gap between the describe income and its tax income, except for a openhanded change in its service quality, these two numbers tolerate a consistent relationship to each other. Q4. The bon ton should shorten the length of amortisation of the acquisition cost instead of extending it. The reason of this assertion are based on the life cycle of the industry which was supposed(a) to be relatively short and because of the constantly changing environment of the commercial online industry with huge uncertainties, which was likely to require conservative accounting policy to reflect the financial figures so as to better match revenues with expense.\r\nNevertheless, AOL even extended the amortization period for its subscriber acquisition cost from about 15 months to 24 months, which made it would be tend to face big risks when customers switched to other online service under uncertainty. Therefore, the company’s response seems to be inconsistent with my view. Q5. If AOL followed the policy of expensing subscriber acquisition outlays rather than capitalizing them, there would be a huge amount of s ubscriber acquisition costs, starring(p) to a comparatively decreasing profit and amplification operating loss in the income statement as well as lower equity in the balance sheet for the last same period or compared to its peers, which might lose the attractive flavor of the accounting figures when it was eager to raise money from the semipublic market so as to pay its bill.\r\n'