Organizational Transformation at Hughes Electronics Corporation

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Case Details:

Case Code : BSTR087
Case Length : 17 Pages
Period : 1994 - 2003
Organization : Hughes Electronic Corporation
Pub Date : 2004
Teaching Note :Not Available
Countries : USA
Industry : Electronics & Communication

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Beginning of the Transformation

The mid-1990s saw HEC seriously consider shifting its focus to the telecommunications and media services businesses instead of the defense business. This was because the former businesses were growing rapidly.

There was a strong demand for low cost solutions in the fields of mobile telephony, Internet access, entertainment and business networking and development of communications infrastructure.

Customers were increasingly turning towards satellite and wireless technologies that were fast as well as cost effective.

In 1994, HEC revolutionized the US satellite communication systems industry when it launched DirecTV, a digital direct broadcast satellite television service (also called as Direct-to-home or DTH television).

Under this, HEC transmitted hundreds of channels to subscribers through small receiving dishes (usually 18 inches in diameter). HEC offered these services through a new subsidiary, DirecTV...

The Transformation Nears Completion

The year 2000 marked the last phase in the four year transformation process at HEC. During the year, the company made some more strategic alliances and mergers, sold certain businesses and restructured existing businesses to concentrate entirely on the media and communications business.

Research conducted by HEC revealed demand for telecommunications and broadband services (provided by telecommunication companies, ISPs and business networks) was growing significantly. It also found that while its commercial satellite manufacturing business was languishing, the digital media and wireless communications businesses were growing handsomely (DirecTV had over 8 million subscribers in early 2000).

Thus, in January 2000, HEC sold the space and communications business (HSC) to Boeing for $3.75 billion. This provided the company the much needed cash to fund its growing satellite TV venture DirecTV...

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