MKT 500 Iridium Case Study

Iridium Company

In the 1990s,responding to concernsthat cell phone coverage isspotty in various parts of the 

country,the Iridiumtelephone systemby Motorola was createdto solve that concern.

This was a telephone that could be used in virtually any part of the world.Unlike conventional 

cell phonesthatrely on signalsfromcellulartowers,the Iridiumphone used a series ofseveral 

dozen low-flying orbiting satellitesthat were stationary in the skies. Callers could access anyone 

at any time, and thosewith Iridiumphones could also be accessed at any time.

Thisfollowing is Motorola’sinitial pressrelease when the systemwas being contemplated in

1990:

“Iridium is a worldwide digital, satellite-based, cellular personal communications 

system primarily intended to provide commercial, rural, mobile service via either 

handheld mobile or transportable user units, employing low-profile antennas, to 

millions of individual usersthroughout the world. The system includes a constellation 

of 77 small, smart satellites in low-earth orbit which are networked together as a 

switched digital communicationssystem utilizing the principles of cellular diversity to 

provide continuous line-of-sight coverage from and to any point on the earth’s 

surface, as well as all points within an altitude of about 100miles.

Service will be available on a country-by-country switched basis as negotiated with 

the individual governments and/or the individual telephone companies. Unlike the 

terrestrial cellular telephone system (i.e., traditional cell phone service), Iridium is 

best suited for areas where the traffic density is low—sparsely populated areas, the 

oceans, and areas where personal communications is just emerging. In these 

emerging markets, Iridium can be used as a primer for the eventual terrestrial 

system.”

Iridiumeventually settled on 66 of those satellites. The concept was great – executives and 

others who always needed to be “in touch” had accessto phone service.Whether one was 

fishing in the remote streams of Alaska or on an oil drilling platformin theGulf of Mexico,the 

Iridiumphone ownerwas always available and thatimportant phone call could easily be made.

The telephone,depending on themodel, cost asmuch as $3,000 and – depending on the 

package for which a subscribersigned up – the cost perminute of phone use ranged from$3 to

$7. Certainly a small investmentwhenmajor decisions needed to bemade and accessto keypeople was paramount.However,thisis notsomething that would work for teenagerswith the 

intentto call ortextmessage friends.

Motorola’sIridiumfolded several years ago, leaving Motorola with a $5Bwrite-off.Whereupon 

Iridiumanticipated 500,000 subscribers, it barely reached 50,000. Saddled in debt and with a 

fleet of aging satellitesin orbit, Motorola decidedto scrub this venture.

Fastforward to the current calendar years. Go to http://www.iridium.com/. Iridium 

Communications Inc. isthe “new” Iridium. See what the companyoffers now. As you surfthe 

web to learnmore about Iridium’s history, note the path the product hastaken insofar as 

corporate ownership.

 

Answer the followingquestions: Why do you suppose thisIridiumproductfailed? What do

you think went wrong? What did Motorola failto consider asthe productmoved fromconcept 

to full commercialization?Whatlessonsrelative to strategicplanning have you learned from 

this case study?