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Pacific Internet Limited - Seizing The FutureBy Olaf Rieck & Tom Gleave |
Abstract
Pacific Internet Limited (PacNet), Singapore's second oldest and second largest Internet Service Provider (ISP), signaled a new stage in its development when it appointed Tan Tong Hai as its new CEO in February 2001. In assuming the top position at the NASDAQ-listed company, Tan's mandate was to return PacNet to profitability. Although the six-year old ISP had sustained losses in its initial years of operations, it had become profitable by 1998, as Internet usage began to explode around the world. This trend was short-lived, however, as the number of rivals in the six Asian markets in which PacNet operated began to increase substantially, thus creating significant downward pressure on prices, particularly for residential access services.
After five months on the job, and no longer having to face the possibility that local rival, SingNet, would launch a takeover bid of PacNet, Tan could now focus on guiding the new-economy company through a classic old-economy problem. That is, he had to decide if PacNet should try to capture more of the Internet services-related value chain through vertical integration. If so, he also needed to identify the specific domains in which the company should compete. Concomitantly, Tan needed to determine what markets to prioritize in terms of the company's existing services, as well as any future services.
Teaching Objectives
- To understand the wide range of potential optoins that telecoms-related companies have in developing their businesses.
- To evaluate the merits and drawbacks of adhering to a vertical integration versus a horizontal integration strategy in developing a telecoms-related business.
- To recognise the importance of, and the difficulty in, achieving strategic competitive advantage through product and service differentiation.
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