Murdoch Family Business Analysis - Essay Example

Murdoch Family Business Analysis Contents Introduction to the family business 3 Analysis of current challenges faced by the family business 5 Recommendation for Parallel Planning Process 7 Other potential ideas and interventions as a consultant 13 References 16 Introduction to the family business The Murdoch Family Business is an international media business with a present net worth of USD 660 billion. The current owner of the Murdoch Family Business, Rupert Murdoch is an international media tycoon who is the chairman of two famous companies, 21st Century Fox and News corp. which control the major part of the assets of Rupert Murdoch. The Murdoch Family Business is of Australian origin because the family belongs to Melbourne, Australia and is one of the most renowned family businesses across the globe. The Murdoch Family Business has been run by five generations of the Murdoch family. The business was originally set up in the year 1828 by two emigrants of Scottish origin into Australia in 1828 viz. Reverend James Murdoch and Helen Murdoch. The members of this family are prominently known as the international proprietors in the world of media. The family business is especially popular in the United States of America, United Kingdom and Australia. Some of the members of the Murdoch family have also carved a niche of themselves in the area of clergy, military and arts in Australia. The Murdoch Family Business is highly reputed for its business legacy and because it has been a highly successful and completely family controlled business which has been managed in an impressive manner over the generations of the functioning of the business empire (Page, 2003).Currently, the Murdoch Family Business holds stakes in a number of companies and corporations in the arena of media including News Corporation, the Times of London, and Sunday Times, 21st Century Fox and The Herald and Weekly Times Limited. The Murdoch Family Business is mainly concentrated on the mass media and entertainment industry either through the direct ownership companies or through stakes in internationally acclaimed entertainment and media companies. The different companies under the control of the family operate in various verticals of the mass media and entertainment sector. As per a report by Forbes in 2007, Rupert Murdoch was the 73rd ranked billionaire in the world who has a net worth of USD 9.1 billion as of 2007 (Forbes Magazine, 2007). By 2013, Rupert Murdoch went on to become the 33rd richest individual in the United States of America and the 91st richest individual in the world. From 2007 to 2013, the net worth of Rupert Murdoch as the owner of the Murdoch family business rose form USD 9.1 billion o USD 13.4 billion. Also, in 2013, Rupert Murdoch and the family were ranked as the 33rd most influential family in the world. The fortune of the Murdoch Family Business is identified to be inherited in nature and growing at an accelerated level. The Murdoch family business has been extremely successful in the United States of America and Australia through the functioning of the various businesses und rte family name like New York Post, Fox Film Studio. Chicago Sun times as well as other media businesses for cable news and broadcasting networks and stakes in popular media and entertainment companies like DirecTV. The Murdoch family business is now concentrating towards becoming more competitive and sustainable in the global mass media and entertainment industry by entering into the arenas of online media development. To achieve this long term objective of the business, the current owner of the Murdoch family business, Rupert Murdoch, has bought the social network website, MySpace in 2013 for USD 580 million. The stock prices of the main holding company of the Murdoch family business which is News Corp. has been increasing by 15% after the acquisition of MySpace which signifies higher rates of success and competiveness of the family business in the coming years of its operations. The media and entertainment industry is a high profit generating industry. The investments required in this industry are high because of which new entrants in this segment are likely to face strong entry barriers. However, the global media and entertainment industry is already an intensely competitive and concentrated segment in which the key leading players claim the major parts of the market shares and compete in an extremely aggressive manner. Also, the emergence of the online functioning of the various business processes has lead to the creation of unique challenges and obstacles for the businesses functioning in the mass media and entertainment industry which are also being faced by the Murdoch family business. Analysis of current challenges faced by the family business The media and entertainment industry is undergoing a major transformation in the recent years due to the high level of digitalization of the functions of the businesses operating in this segment. The global media and entertainment segment is led by emerging trends and challenges related to digitalization, mergers and acquisitions, vertical and horizontal integrations across the industry and globalization of the various units of media entities and media conglomerates (Shawcross, 2001). The digitalization of the media contents have started to pose diverse opportunities, threats as well as challenges for the companies operating in this segment. The Murdoch family business is also facing the brunt of the new challenges evolving in the media and entertainment segment. The increased level of digital counterfeit products published across the internet and the infringement of basic copyrights are major challenges that are being faced by the business in the last few years (Harcourt, 2006). The hacking of information available in the internet and the use of immoral and illegal constructs to pursue information contents by media channels and companies are other major concerns for the business in the process of ensuring continued success and growth. The increasing level of competition and the pressure to compete on an international platform are also the key challenges that are being experienced by the Murdoch business in the last few years. The company is also being threatened by the intellectual property and copyright infringement issues which make it necessary to set up suitable mechanisms of monitoring and managing the contents of the media as published by the company in the digital and virtual world (Dover, 2013). The media and entertainment landscape has significantly changed after the digital revolution and has started including diverse range of players and entities including the storage service providers, telecom service providers, physical as well as digital content managers and distributor. Intellectual property managers and media content developers. The key challenge for the companies like Murdoch business is to optimize the resources and assets available in the business and family and create changes in the existing traditional business model so that the company becomes capable of competing in the contemporary media and entertainment industry by negating the emerging challenges and capitalizing on the increasing demand levels for media content across a variety of platforms. The integration of new digital and physical systems while ensuring the profitability and revenue generation is not compromised with remains the most prioritized need for the Murdoch business in the present situation of the global mass media and entertainment industry. The phone hacking allegations faced by Rupert Murdoch in the year 2005 was one of the major challenges that were faced by the company. In 2007, the main company of the Murdoch family business, New Corporation was accused of engaging in illegal activities like police bribery, phone hacking and exercising an inappropriate level of influence for gathering publishing contents (Ellison, 2010). This led to a certain degree of damage for the well established reputation of the Murdoch family and the business. However, the investigations continued after the allegation led to the result that the charges put on the company were not proved. Consequently, in February 2015, the United States Department of Justice announced its results of the investigation into the case and gave the final verdict that the phone hacking charges against Murdoch businesses newspapers published in London were not backed up by enough evidence due to which any of the companies under News Corporation, including 21st Century Fox would not be prosecuted. Recommendation for Parallel Planning Process A parallel planning process is a process commonly used in entrepreneurship in which the parallel stages which are encountered or experienced by a family business are integrated and streamlined so as to ensure maximum profitability and sustainability for the business. These stages include the business culture, family values. Business vision and family vision, human capital and resources, financial capital and resources, participation strategy of the family members, business strategy for the family business, family agreements, board of directors and family meetings. The development of the parallel planning process is necessary to understand the future challenges and opportunities and develop the necessary business plans and business strategies to ensure the success and sustainability of the whole business in the future years. The parallel planning process uses an analysis of the different stages and factors of entrepreneurship and family business to form the final business and corporate strategies of the businesses (Figure 1). Figure 1: Development of family plans and business strategies to grow and sustain the business The parallel planning process involves the consideration of five main structural factors to develop a strategic plan for a business (Figure 2). Figure 2: Structural elements of parallel planning process. The parallel planning process can be applied to the case company, Murdoch family business to understand the key structural issues and find the ways for developing the most suitable management plan for the future. It can be understood that the business aspect of the Murdoch family business is very strong. The company has remained highly profitable and successful over the decades of its existence, has high capital market value and is also seen as a lucrative investment option for high profile investor groups, especially in the United States of America and Australia. Effective and flexible strategies like the delegation of responsibilities among the different family members in the most value adding manner, the development of skills and proficiency among the family members participating in different verticals of the business have enabled the development of a robust family business (Chenoweth, 2001). . The parallel planning process as developed for the Murdoch family business is explained as follows. This planning process is developed with the aim of ensuring business success as well as family harmony in the context of the Murdoch family. Agreeing on the shared values of the family The Murdoch family should focus on analysing the core family values so that the influence of these values on the business management can be adequately recognised and managed. Since the values of a family are the most significant influencers of the strategies, visions and governance of a family business, therefore, the recognition and review of these values on a periodic basis is mandatory for developing a benefit reaping management plan for the business. The values of the Murdoch family include honouring, working hard, establishing communication and strong family and business relationships and take necessary risks in the business. The culture of the business is developed accordingly in which the members of the business focus on developing the diversified units of the family business which results in collaborative functions and ensures the long term success and achievements on a personal as well as business frontier. Developing the business and family visions The goal of the Murdoch family is to develop a highly profitable and competitive global business out of their family business. The goals of the members of the Murdoch family have already been achieved to a great extent. However, in order to continue achieving the business objectives in a dynamic external business environment, the management of the company has to first develop a vision and the strategic objectives as to what strategic direction must be followed by the business to ensure maximum success and growth. This should be employed by understanding how the family can use the available resources and capabilities like financials, employees etc. to generate a pre defined level of profit in the business. The Murdoch family should call regular meetings for developing strategies and understanding the role and achievements of each of the members functioning in the family business. The goal of the current owner of the Murdoch Family Business, Rupert Murdoch seems to be able to pass on an established and strong business on to the next generation of the Murdoch family. Planning the business strategies and family participation The family governance of the Murdoch business is a trend setter for the family business. The Murdoch family has been able to manage the business in a very efficient manner through an excellent family governance structure employed in all levels and units of the Murdoch family business (McKnight, 2010). The decision making format for Murdoch family business is the most efficient one according to the parallel planning process. The decision making process of the business includes the delegation of significant responsibilities and ensuring that every family member participating in the management of the business has a say in the final business and corporate decision making. No single member of the family is entitled to take an authoritative stance and take the business decisions alone without the consent of the other members. Thus, a delicate balance between the correct levels of empowerment and collaboration are maintained in managing the family business of Murdoch. The company should further pave the ways for active participation and involvement but avoid delegating higher responsibilities to people on the basis of their position in the family hierarchy. Instead the business should be managed by ensuring that the members are given the roles and responsibilities in the business according to the level of proficiency and expertise that they are carrying with them so that maximum value can be added to the functionality and management of the business Making appropriate levels of capital investments The Murdoch family business focuses on exploiting the available resources and capabilities of the business for earning long term value for the company. The company should analyze the level of investment in financial as well as human capital that should be done for creating a strong support system for the future success of the business. The financial investment levels should be decided by analyzing and comparing the dividends versus the reinvestment options and the human capital investments should be decided on the basis of the governance processes and family leadership skills. Murdoch family should cite the commitment of the family for investing suitably as a means of supporting and sustaining the spectacular growth and profitability of the company. The legacy strategies should not always be taken up as a rule. Instead, the Murdoch family should try to consider the internal and external situations of the business and act accordingly. An aggressive growth strategy of the Murdoch business should be coupled with suitable capital investment levels to explore new opportunities for the business. Governing the business and family to ensure continued success The main areas of conflict within a business that is managed by a big family lies in control, capital, career, culture and connection. The Murdoch family business is a large enterprise which is managed by a family legacy with a huge number of members of the family participating in the management of the business. . As such, the scope of conflicts among the various members becomes very high. The different members may have different opinions, career goals, and connections among each other which can lead to conflicts of interests. However, in order to remain successful, the company has to ensure that conflict management is done in the most capable way. This can be done by integrating and aligning the personal goals and individual cultures of the family members with the cultures and objectives of the business as a single functioning unit. Issues like succession planning and delegation of responsibilities should be taken up in an explorative and insightful manner so that the code of conduct and values of the family are maintained in a harmonious way. Also, the Murdoch family business should focus on integrating the formal and informal means of carrying the business activities and taking business decisions so that the most robust management plan for the business can be developed. Other potential ideas and interventions as a consultant Figure 3: Family business models The Murdoch family business follows the family business models of professional family and cooperation in which the family members are engaged in managing and governing a complex business. The Murdoch family business is a giant business in which the business complexities are much more as compared to the family complexities. The business experiences high level of growth and also has ample opportunities and resources for growing in the future. The decisions of the business are taken by a well defined family and governance structure which ensures that the most suitable level of coherence and interventions are achieved in the business functions and decisions (Davis, 2014). Figure 4: Types of roadblocks faced by a family business The major roadblocks that may be faced by a family business are the family roadblocks, institutional roadblocks and the market roadblocks (Figure 4). In the case of the Murdoch family business, the level of family roadblocks is lowest. The only family roadblock remains in the conflict of interests that may arise among the diverse members participating in the management of the business. However, this has been managed efficiently by the family since many years. The institutional roadblocks for the business are multiple and varied in nature and pose the maximum threats for the business. The external environment in the media and entertainment industry is shifting in a dynamic manner and is becoming more complex due to institutional factors like property rights, increasing competition levels, regulations and deregulations and corruption which can negatively impact the business to a great extent. In order to negate these kinds of institutional and market roadblocks, the Murdoch family business should develop the most effective entrepreneurship and family business management skills and set up higher degree of compliance at both the market and institutional levels. The Murdoch family business should focus on effective succession planning process in order to protect the future growth and success of the business. References Chenoweth, N., 2001. Rupert Murdoch, the untold story of the worlds greatest media wizard. New York: Random House. Davies, N., 2014. Hack Attack: How the Truth Caught Up with Rupert Murdoch. London: Chatto & Windus.  Dover, B., 2013. Ruperts Adventures in China: How Murdoch Lost A Fortune And Found A Wife. London: Mainstream Publishing. Ellison, S., 2010. War at The Wall Street Journal: How Rupert Murdoch Bought an American Icon. Melbourne: Text Publishing. Forbes Magazine., 2007. The world’s billionaires: Rupert Murdoch. [Online]. Available at http://www.forbes.com/lists/2007/10/07billionaires_Rupert-Murdoch_639W.html. [Accessed on 2 April 2015]. Harcourt, A., 2006. European Union Institutions and the Regulation of Media Markets. New York: Manchester University Press.  McKnight, D., 2010. Rupert Murdochs News Corporation: A Media Institution with a Mission. Historical Journal of Film, Radio and Television, 30(3), pp 303–316. Page, B., 2003. The Murdoch Archipelago. London: Simon and Schuster. Shawcross, W., 2001. Murdoch: the making of a media empire, 3rd Ed. New York: Simon and Schuster. Read More