Getting Wired: Wal-Mart-America Online and Other Internet Marketing Alliances

question 92

Essay

Getting Wired: Wal-Mart-America Online and Other Internet Marketing Alliances
During the second half of 1999, the number of marketing alliances between major retailers and Internet companies exploded. Wal-Mart Stores, the world's biggest retailer, and Circuit City, a large consumer electronics retailer, announced partnerships with America Online (AOL). Best Buy, the largest U.S. consumer electronics chain, collaborated with Microsoft, which previously had joined with Tandy Corporation's RadioShack stores. Signaling its own strategy of bringing its service to anyone, anywhere, AOL announced in March 2000 partnerships with Sprint PCS and Nokia to help move AOL's service from the desktop to phones, pagers, organizers, and even TVs.
Wal-Mart and AOL
Wal-Mart and AOL have agreed to create a low-cost Web service for consumers who lack access and to promote each other's services. Wal-Mart customers will get software that allows them to set up the service through AOL's CompuServe service. The retailer also will distribute AOL's software with a link to Wal-Mart's Web site, Wal-Mart.com. The Internet access service will be geared to Wal-Mart customers in smaller towns that currently do not have local numbers to dial for online connections. Wal-Mart wants to funnel as many customers as possible to its revamped Web site, which contains a pharmacy, a photo center, and travel services in addition to general merchandise. The alliance gives AOL access to the 90-100 million people who shop at Wal-Mart weekly.
Microsoft, Best Buy, and RadioShack
Through its alliance with Best Buy, Microsoft is selling its products-including Microsoft Network (MSN) Internet access services and hand-held devices such as digital telephones, hand-held organizers, and WebTV that connect to the Web-through kiosks in Best Buy's 354 stores nationwide. In exchange, Microsoft has invested $200 million in Best Buy. Microsoft has a similar arrangement with Tandy Company's RadioShack stores in which it agreed to invest $100 million in Tandy's online sales site in exchange for in-store displays promoting Microsoft products and services. Both Best Buy and RadioShack are major advertisers on MSN and share in the monthly revenue from some of the Microsoft Internet access services they sell through their stores. Best Buy has issued 4 million new shares of common stock to Microsoft in exchange for its investment, giving Microsoft approximately a 2% ownership position in Best Buy. The multiyear pact is nonexclusive.
Circuit City and America Online
AOL and Circuit City entered a strategic alliance to provide in-store promotion of AOL products and services to Circuit City shoppers nationwide, to make AOL Circuit City's preferred Internet online service, and to feature Circuit City as an anchor tenant in AOL's shopping mall. Under the agreement, AOL products and services are displayed prominently in dedicated retail space in Circuit City's 615 stores across the nation. Access to the Internet is available via AOL through dial-up service and developing broadband technologies, including digital subscriber line and satellite, as well as wireless interactive devices. Circuit City is promoting AOL and its in-store offerings in its print and television advertising programs and in other promotional and marketing campaigns. As an anchor tenant on AOL's shopping mall, Circuit City will have access to AOL's more than 32 million subscribers.

-In your judgment, do these alliances deliver real value to the consumer? Explain your answer.

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Definitions:

Deindividuation

A psychological state where an individual loses self-awareness and a sense of individuality, often leading to disinhibited behavior.

Groupthink

A phenomenon that occurs within a group of people, where the desire for harmony or conformity results in an irrational or dysfunctional decision-making outcome.

Implicit Attitudes

Unconscious beliefs or feelings towards people, objects, or concepts that influence one's responses independently of conscious control.

Just-World Phenomenon

The tendency for people to believe the world is just and that people therefore get what they deserve and deserve what they get.