TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES

1338 Arlegui Street, Quiapo Manila

COLLEGE OF ENGINEERING
DEPARTMENT OF INDUSTRIAL ENGINEERING

CASE STUDY
FOR
XM SATELLITE RADIO INC.

SUBJECT:
STRATEGIC PLANNING

SUBMITTED BY:
CORONACION, Cleofe
GANGGAY, Michelle

SUBMITTED TO:
ENGR. ADREAN MANALO
Time Context

Satellite Radio is a product that has not proven its value to market players.  XM had a

good plan to enter the market, but through timing and publicity of competitors, such as Sirius,

the plan has become involuntarily rushed.  XM is now forced to change their whole marketing

scheme due to Sirius’ entry into the market.  They are being forced to shadow Sirius so they will

not fall behind.  This has brought even more problems to the original marketing plan. 

 XM Satellite Radio was founded in 1992 as a subsidiary of American Mobile Satellite

Corporation.  Like our satellite TV industry predecessors, XM saw the first problem would be to

obtain the required FCC license and accompanying dedicated radio frequency band for this new

service. Another huge problem XM has to overcome is producing the extensive up-front capital

needed to get the business started, which Sirius had already taken care of.  Along with

producing this capital, is the reality that XM needs a leap of faith from potential investors to

provide a high enough return for this kind of speculative investment.  This problem involves XM

providing a network for this market to show the awareness of value the product will provide.

This is hard for XM because people do not know about Satellite Radio in general and its benefits

over the AM/FM radio industry.  It is hard to show these benefits over the AM/FM industry,

when it is one of the main channels XM wants to partner with in order to advertise and

revolutionize the radio industry.  XM Satellite Radio will have the challenge of getting customers

to pay for a service that has been and still is free.   

XM recognizes that there are two possibilities in order to solve this problem. Although,

within these two possibilities XM also sees many other future problems they need to solve.  The

first possibility is to have a radio service that would target each niche segments such as truckers
and classical musical lovers.  The problem with this possibility is that XM believes it will attract

too small of a customer base in order to grow and have positive returns.  The second possibility

is for XM to setup a mass market service.  But, this will need to be supported with mass market

products, appropriate price points and also relying on the average customer to pay for the

service.  XM quickly realizes both possibilities are going to have many barriers to overcome to

be successful, knowing that Sirius has already established part of the market.  XM is running out

of time and they know it.    XM also does not plan to manufacture, hold inventory, or sell

radios/receivers.  XM plan to establish partnerships with already known AM/FM radio

broadcasts frequencies, hoping they will adapt their future receivers to except XM broadcasts

as an additional feature.  The problem with this is getting the radio industry to believe that

XM will deliver high product volume from the beginning and to invest immediately.   From here

XM will get manufactures to generate chipsets for the radio stations in order to get the satellite

feed. Basically the problem is XM is putting the egg before the chicken, hoping their idea will

interest a large part of the market early, and in turn providing XM with an oligopoly.  XM

realizes it will be hard for the radio industry to develop new product projects because of limited

resources in terms of personnel and capital.   

The problem lies in the fact that the radio industry is basically in the Sales decline  stage

of the product lifecycle where as XM Satellite Radio is in the introduction stage of the product

lifecycle.  XM is looking for ways in which to introduce their product to the market, but the

radio industry is basically trying to stay alive.  It will be difficult to create a good partnership due

to self-interest conflictions.  Along with these conflicts, XM is dealing with other types of new

and present technology that may take away their market share.  XM will have to compete
with products such as MP3 players, pre-existing CD’s and Cassettes as well as

already established car audio equipment that are associated with this market.  From the

problems discussed, XM realizes every aspect of their product is very risky because lack of

awareness, their product lifecycle, timing, and the competitive advantage Sirius has already

imposed on them.

Central Problem

Current and Prospective Competitors 

• Sirius Satellite Radio

This brand is very similar in price ($9.95 per month subscription fee) and content (64 channels,

all commercial free). It has been very popular in the media, and has had extensive press

coverage.  This in turn, makes Sirius a better known product.  They have been a publicly

traded company since September 1994, and have also raised $446 million in capital through

stock and bond offerings. They also offer everything that XM plans to offer to its customers. 

  

• Traditional Radio

This current concept is free, thereby constricting potential customers to XM radio.  As long as

there is a free form of radio, there will most likely be people that won’t pay for XM. Traditional

Radio only offers a homogenous shallow play lists. They provide a high/medium audio quality

which also works into XMs favor.  They also provide fixed and mobile receivers, but they do not

have the range of XM. 

• Satellite TV and Cable TV

        This competitor provides a wide choice of safe play lists. There audio quality is very high.

They only offer a fixed receiver, but its range can go anywhere. 

• Internet Radio

Internet radio only offers a homogenous shallow play lists with medium audio quality.

They also only offer a fixed receiver, but its range can too go anywhere. 

Barriers of Competition 

• XM radio is relatively unknown product

• Sirius beat them to launch already gaining a large portion of the satellite radio marketshare

Statement of objectives

 Objectives

XM’s objective is to establish strong foundation by building brand recognition and gain a

large part of the market before the competition.  We will prove to the market that XM is the

leader in Satellite radio by paving the way for new technology.  

XM will do this through a strong blend of Advertising, Publicity, Sales Promotion,

and Personal Selling.  XM are promoting to consumers to give them the feeling they

are buying cutting edge technology.  XM want their customers to feel they are not just buying a

radio service, but purchasing the future.  This way we are able to get around the hard wired
negative perception consumers hold on advertising.  Communications will be sought more to

reach and impact more than frequency.     

• XM plans on targeting 18-60 year old  

-commuters  

-truck drivers  

-RV owners  

-workplace listeners (factories) 

 -business travelers  

-frequent listeners of am and talk radio/sports 

-construction workers 

-outdoorsman 

-non mainstream music lovers

S.W.O.T. Analysis 

 Identification of major strengths, weaknesses, opportunities and threats     

 External environment

 Threats 

• Sirius Satellite Radio 

• Total Satellite failure 

It would take at least 6 months to launch a backup satellite, costing investors and confidence in

the product 
• Rapidly changing technology could leave Satellite Radio to be an obsolete service Company  

    

 Opportunities 

• Exclusive broadcasts for athletic leagues such as Major League Baseball and NASCAR

• Possibility in the future to extend service outside of North America

• Possibility of an agreement between XM and Sirius to develop radios using a common

technical standard

Internal environment

  Strengths 

• All music channels are excepted to be commercial-free, with limited commercials on news,

sports, and talk channels

• Lack of competition in the market, because the FCC has only granted two licenses for satellite

production

• Brand name is associated along with AM/FM

• High quality frequency ranging across the United States

• Clear digital sound

• Offers fixed and mobile receivers for consumers

• Redundancy in satellites to ensure quality for customers

Weaknesses 

• XM has yet to decide how it will clearly differentiate itself from Sirius, its major competitor
• XM has yet to decide how to decide how it will implement its marketing plan

• Extremely high insurance costs

• Our monthly service fee could be unattractive to potential customers

• Since it is a new product it may be difficult to attract new investors

     

Alternative Courses of Action

Product Class 

• New unsought product

-XM believe that their product needs extensive informative promotion in order for potential

consumers to understand its value.  

- XM’s product will lose its unsought status and will become a heterogeneous shopping

product, due to the fact that AM/FM, Satellite TV, and other forms of Digital Radio have already

been established. 

- XM radio will have to differentiate itself from Sirius because of the lack of competition in the

Satellite Radio Market.   

New Product Development Requirements 

• XM will create an overall Research and Development Task Force

- This is essential in for any business in staying competitive in the market. 

Specification of Core Physical Good and Service 

- XM Satellite receivers will allow consumers to easily listen to a variety of music, talk and sports

at their own desire.  This basically allows consumers to listen to what they want when they

want without worry of interruption from commercials or loss signal 

-  Qualities we plan to implement: 

• Hard drive to store a list of your favorite songs and alerts you when they are playing on

different stations 

• Easy to use graphical interface 

• Multi-adaptable receiver that can be used in home, car, or other environments- jogging,

camping, etc. 

• Water resistant cover  

• High quality head set  

• Scrolling text that shows songs in advance for all each station 

• Memory that stores your favorite stations accessible with a push of a button 

• Variety of Customer preference face plates to be sold individually

Supporting Customer Service Needed 

• Email and phone service that will handle all inquires and trouble shooting problems with

devices or service 

• Online Forum for customer support and discussion of product 

-if used wisely this could innovate existing product 

 Branding 

• Brand name will be placed on all receivers 

• Brand name will be scrolled upon start-up, during usage (every hour), and at switch off

• Family branding will be established through placing XM logo on all related accessories and

packaging

Packaging 

• XM will provide packaging that will include the color scheme of black, red, and yellow.  This

will help to further differentiate our product from Sirius.  

• The package will consist of a plastic square container with the XM logo protruding from the

box.

Final decision

XM’s ideal market exposure will be best reached through a mix of intensive and

selective distribution. By distributing the product to those who will give it special attention such

as Best Buy and Circuit City and The Wiz consumers will better be able to determine XM’s

advantages and why it is a value purchase. By added distribution through Wal-Mart, Target, and

Meijer, XM will be able to provide more convenience to consumers who might not otherwise be

able to reach a store like Best Buy.

XM’s biggest issue seems is not getting the product to the consumer, but getting the

consumer to the product. XM need to develop a brand identity so that consumers will relate

quality audio with XM, and see XM’s competitors as obsolete.

http://en.wikipedia.org/wiki/XM_Satellite_Radio

http://www.bnet.com/company/xm+satellite+radio+inc.

http://arstechnica.com/old/content/2002/07/xm-radio.ars