Information and Communication Technology Business: The of Yahoo - Case Study Example

Developments in the role of information and communication technology (ICT) have meant that managers can be faced with unpredictable and fast moving markets. Abstract Globalization supported by the World Wide Web and internet paved the way for the volatile and high velocity markets. In the new digital economy the traditional approaches of strategic planning has little relevance and managers should be well aware of the new strategies that would place the firm successfully in the market. This paper discusses on the understanding of the new strategic thinking, review of the theory and its usefulness of this approach to the specific case for theYahoo.com, the successful internet company. This provides an illustrative example of the IT Company that is highly successful in this new age of digital economy. The study gives the clear picture of the strategic options that were responsible for the success of the company. The particular focus was on the company's organisational strategy, growth strategy and the importance of using the simple, flexible and focused approach to the strategy. Introduction: Globalisation, an increasing impact of deep interrelationship among the countries, companies and individuals supported by the internet and the World Wide Web have changed the speed and volatility of the markets considerably with e-commerce transactions, more available information, low overhead and transaction costs.(Janet Williams,et.al). Due the impact of globalization influenced by the forces like international power structure, density of connections, the changing scenario in the economic field is marked by the high velocity with strikingly non-linear stability. (Eisenhardt et.al2002). The conventional methods of planning the strategies developed in the 80's were complex, when the markets were predictable and stable. The complex strategies were affordable by the companies when the business landscape was simple. With the advent of globalization, the conventional approach of planning the strategies is questioned, as the markets are unpredictable, unstable and the business became more complex. (Eisenhardt et.al2001). The planning of the strategic planners should be such that, in the digital market the conventional strategies should be revived. (Oliver R.W, 2000). With the new situation, the advantages associated with the old strategies, like obtaining the sustained competitive advantage will work. (Porter, 2001). With these volatile situations in the new digital economy, managers should be ready for planning new strategies for an effective position of the firm in the market. The objective of this work is to analyse on the understanding, the applicability of the new thinking of the strategies and, the prospects of developing a new strategy with the judicious mixture of the old and the new strategies. Theories relevant to the above strategies were studied and theoretical approach to one case that is of Yahoo.com the successful internet portal was taken. Internet portal space is usually characterised by the rivalries of intense nature, imitators with non-paying customers, it followed a constantly evolving strategy in the market that would be quite unconventional, if considered on par with the traditional strategies. The present paper discusses on the strategies old and new, digital economy, the contribution of the new strategy to the development, by responding quickly to the highly volatile digital markets. The overview of the focus on the business model, with which Yahoo.com the successful internet company developed, was discussed. The strategies that followed to the success of the yahoo and the efforts of the management to make the theoretical idea, practical to a successful company were also discussed. Strategy, new versus old: The managers are able to identify the current and future value of technology by bringing a frame work of analysis of the players within the industry with the study of the conventional and new business models. (McFarlen, 1984). The study helps to identify the threats and opportunities for the industry for its advantage with reference to competition and aligning strategies synergistically. (Porter et.al 1985). Porter classifies the strategies into three types: low-cost, differentiation and niche market and according to him the firm should follow either lowcost or differentiation. According to Chen (Chen, 2001) the firms should follow all the three strategies. The conventional approaches to strategy are based on assumptions and no longer holds true, with the advent of internet the markets are highly unpredictable and firms that thrive with long term objectives and sustained competitive advantage will not be benefited. (Oliver, 2000, Eisenhardt et.al, 2002). Porter's five forces frame work is a fundamental for the digital markets, and the firms require a different approach of strategy that will be more suitable to the volatile markets. It has been argued that the porter's frame work should be revised in such a way that globalisation, digitization and deregulation are incorporated. (Downes and Mui, 1998). Some argue that the five forces effectively give a convincing analysis of the critical factors in a more complex environment. (Franklin and Fredericks, 2003), and the porter's value chain identifies the strategically relevant activities (Bhatt and Emdad, 2001). Thus, even though the porter's strategic tools are still valid and relevant in today's volatile markets they cannot be applied independently. The new economic field suggests a belief in equilibrium, and a fresh view of the strategy. Donald sull of the Harvard business school gives an analogy of the new economic field with the military, in the military room leaders' fight by locating the defensible positions and fortifying them, in the same way executives plan their strategic positions and defend them in the carefully twined activity systems.(Eisenhardt,2002). The Yahoo company was thus became highly successful by the managers adopting the modified and constantly evolving strategies that were simple that and applicable in the new digital economy. New theory of strategy: Strategy in the new economic field is simple; the complicated, elaborately planned systems are cumbersome and slow on the new economic field. In the new economic field the situations are uncertain and opportunities are abundant, the managers should jump into these uncertain conditions, grab the opportunity and exploit and drop them if they fail to give the results. The strategy of approach is to benefit by exploiting the confusion from the minimal infrastructure and to emerge as an organisation.( Eisenhardt et.al 2001, Bechtold,1997 ). Simple strategy is to use one or two critical processes of strategy and the rules that guide that particular process. These rules generate the idea of patching the business models to the new opportunities to produce an optimal organisational structure. In the high velocity markets the strategy consists of choosing an excellent team and with their right roles, emerges the good organisation. Organisational strategy is firm and clear at any point of time and has the ability to change quickly, thus the organisational strategy chooses the scale of the business that is specific for the velocity of the particular market. (Eisenhardt et.al, 2002). Companies can employ the "timing rules of synchronization by developing their own temporal strategy by increasing or decreasing the speed in accordance with the availability of the new opportunities. (Eisenhardt and Brown, 1999). The strategy is temporal, and it is the clear understanding of the corporate genes, that is understanding about its products, brands, technology, manufacturing capabilities, geographic locations and so on. Managers exploiting temporal strategy follow unique strategies, like introducing new technology, brand, and enter a new geographic location. (Eisenhardt et.al, 2002). For the highly volatile markets, the sense and respond" approach is highly effective (Bradley and Nolan, 1998). The firms are taking the advantage of the uncertainity and are operating effectively. (Courtney et.al 1997). The effective strategy is thus now to focus on unique ways with simple rules on the modular patching of the business processes to changing market opportunities and evolutionary timing for the ongoing strategic moves. (Eisenhardt et.al, 2002). The yahoo company was successful in the sense that, its approach to the new theories of strategies in the markets was highly practical. The following is the case study of the Yahoo.com; the highly successful internet company with its innovative strategies, in the unpredictable, volatile and high velocity markets. The case study: Yahoo company was founded in 1994 David Filo and Jerry Yang, two Stanford graduate students, it was found, when the internet portal is the strategist's worst nightmare, characterised by the intense rivalries, instant imitators, and customers who are not willing to pay anything. The barriers to the entry are very few, and the founders of the portal do not have rich resources, simply they had a computer and a great idea. Yahoo did not had a clear strategy, and the company began with a catalogue of websites, became a content aggregator, that later became a community of users. It now became a broad network of media, commerce and communication services. It is hard to categorise the yahoo portal on the traditional strategies. The portal is thus successful in evolving new strategies continuously. Business model and strategy: The business models describe a system, how the pieces of business are fit together, and they do not describe on the competition, and dealing with the competition is done by the strategy. (Magretta, Joan,2000) Entrepreneurs always used the grabbing approach which makes them win against the established competitors. The simple rules make the sense in all the kinds of companies large and small in the fast moving volatile markets, this is because, to be successful the companies should capture the unanticipated fleeting markets. Organisational strategy: The company was never in the danger of going bust like other dotcoms, but was not immune to the effects of the economic downturn. These effects were overcome by the organisational strategy adopted by the company. In April 2001, the company announced losses and as a part of reorganisation, the company has cut its employees by 12 percent and the company's eventual pay off of the aquistions in 2000 and 2001 including the employment site hotjobs.com, earned profits and it is now a highly successful IT company.( vault asia,2005) Innovation and growth: Yahoo began with the strategies where the innovation of the product is dominant; despite its stratospheric market cap yahoo went into another direction, the company wanted to exploit content and commerce opportunities but needed a lot of partners. Yahoo in 2000 became the first major internet company to unveil a direct investment plan allowing people to buy the shares without a broker. The company purchased online anywhere, a soft ware company that enables the web pages to be sent to cell phones and personal digital assistants. The company also struck a marketing and distribution deal with the Sprint corporation, through which it delivers e-mail, stock quotes, news and other information to the Sprint PCS users. These agreements along with the one that was announced in 2000 with AT&T, formed the basic elements of Yahoo's Yahoo! Everywhere plan, which has allowed the company to extend its reach beyond the desktop. Simple strategy: Flexibility of the approach: The secret of success to the company like yahoo is the simple strategy; managers of the company knew that the competitive advantage lies in the market confusion. They simply jump to the markets and grab the opportunities, evolve the strategies and become flexible depending on the situations in the market. Rules: It is crucial to write the right rules, and it is important to have the optimum number of rules. The optimal number of rules for a particular company can shift overtime, depending on the nature of the business opportunities. When the business landscape becomes less predictable and the opportunities more diffuse, it makes sense to have a fewer rules in order to increase flexibility. Yahoo's how to rules kept the managers organised enough to seize the opportunities. They recognised simple strategies with few rules that guide them to drive through the chaotic markets, thus in a volatile market by following the strategy with simple rules, the advantage comes from seizing successfully the available opportunities. Most managers quickly grasp the concept of focusing on the key strategic processes that will position their companies where the opportunities are promising, they equate the processes with the routines and often miss the simple rules of notation, but they require the rules. Yahoo's managers initially focused their strategy on the branding and product innovation and followed the four product innovation rules. As long as they followed the rules the developers were able to change the products in a way they chose. On a bigger scale by following the simple rules yahoo was highly successful. Thus Yahoo first started as a search engine, and it started getting profits by 1996, the new public company has just 49 employees. By December 2004, the company has 7,600 employees and 3.5 billion dollars of revenue. The users of the yahoo are stuck to it as many other search engines dropped off the radar, because the users are not just logging in for search but they can use the site to access the latest news, financial information, streaming media. The site also offers its registered users personalised web pages, e-mail, chat rooms and message boards. With 25 international sites in 13 languages, and with almost 240 million unique visitors, yahoo is the number one internet brand globally. ( vault asia,2005) Temporal Many companies have timing rules that set the rhythm of key strategic processes. Pacing is one of the simple rules that set simple-rules processes. Pacing is one of the important elements that set simple rules strategies apart from traditional strategies. Timing rules can help synchronise a company with emerging opportunities and to coordinate the various company's parts and capture them. The example as to how the yahoo followed the temporal strategy is described. Yahoo purchased geocities which allowed the company to begin offering paying customers, the capability to create their own websites. The company has bought broadcast.com that gave a leading edge in the multimedia sector and allowed the company to integrate Broadcast streaming into its other web offerings. Through out 1999 and 2000 the company was busy in rolling out new features including an instant messenger, health, entertainment, finance, employment, auctions, radio, shopping, and games channels. There was drop in the listings by 80% by charging service to the users, by 2002 the company made a major move when it acquired the career site the hotjobs.com. and thus became highly successful. (Eisenhardt et.al 2001, vault asia,2005) Responding to the situation: A consistent strategy helps managers rapidly sort through all kinds of opportunities and gain short term advantage by exploiting the attractive ones, it can lead to patterns that build long term advantage. (Eisenhardt et.al 2001). Conclusions: Given the volatile conditions of the newly emerging digital economy, it is extremely important that the managers are made aware of the new ways of strategic thinking that could generate successful positioning in the market, and the yahoo.com has provided us with an illustrative example of how the managers react to the fast changing markets by following simple rules by jumping and grabbing opportunities and using them for the advantage and maintain flexibility by dropping an opportunity when required. References: 1. Bechtold.B.L, (1997) Chaos theory as a model for strategic development, Empowerment in Organisations, vol.5(4)pp. 193-201 2. Bhatt , G.D and Emdad, A.F (2001) An analysis of virtual chain in electronic commerce, Logistics Information Management 1 4(1) pp.78-84 3. Bradley, S.P and Nolan R.L, (1998) Sense and respond, Boston M.A Harvard business school press. 4. Brown, S.L and Eisenhardt.K.M. (1998) competing on the edge: strategy as structured chaos, Boston, MA, Harvard Business School Press. 5. Chen, S. (2001) Strategic management of e-business, Chisester, Wiley 6. Courtney.H, Kirkland.J, and Viguerie.P (1997) strategy under uncertainity, Harvard Business Review, nov-dec pp.66-79 7. Downes and Mui (1998) Unleashing the Killer app:Digital strategies for market dominance, Boston MA, Harvard Business School Press. 8. Earl Micheal ,(2000) Masterin management IT strategy in the new economy, Financial Times, Dec, 18,2000 9. Earl Micheal (1989) Management strategies for information technology, Englewood Cliffs, NJ Prentice Hall. 10. Eisenhardt, Kathleen M. and Brown S.L (1999), Patching: restitching business portfolios in dynamic markets, Harvard business review, May-june pp.71-82. 11. Eisenhardt, Kathleen M., Sull, Donald N., Strategy as simple rules Harvard BusinessReview,(2001)Vol.79(1) 12. Eisenhardt, Kathleen M., Has strategy changed, MIT Sloan Management Review, 15329194, Winter2002, Vol. 43, Issue 2 13. Franklin, P. & Fredericks, J. (2003) The origin of species - competitive advantage,StrategicChange, No.12, pp.137-149 14. Janet Williams1, Michael D. Williams, Gabriel Jacobs. Strategic Thinking in the Networked Economy: An Analysis of Lastminute.com International Journal of Applied Management, 6(1) 15. Magretta, Joan, Why Business Models Matter, Harvard Business Review, 80(5),2000 16. Oliver, R.W. (2000) Real Time Strategy: The Seven Laws of E-Commerce strategy, Journal of Business strategy, Sept/Oct, 8-10 17. Porter, M.E. & Millar, V.E. (1985) How Information gives you competitive advantage, HarvardBusiness Review, July/August 18. Porter, M.E. (2001) Strategy and the Internet, Harvard Business Review, March, pp.62-78 19. " The Fairy Tale" on yahoo: Vault Asia available on line www.asia.vault.com. Read More