Strategic Position of the News Corporation - Case Study Example

Strategic Position of TNC in 2004 The News Corporation (TNC) is considered as the organization which provides top quality news, sports entertainment around the world. TNC emerged on the world entertainment scene from Australia and soon was recognized as one of the robust organizations in the world within the domain of the media services. A SWOT analysis is considered as an instrumental framework in value based management where strengths, weaknesses, opportunities and threats are analyzed in order to careful evaluate all the possible angles of strategic management. However it is believed that the SWOT may not work stand alone and other methods like PEST may be used to better equip the process. (Valuebasedmanagement.com) A careful SWOT analysis of TNC in 2004 suggest following; 1) Strengths: Probably the greatest strength of TNC was the Rupert Murdoch himself. His personality, his strategic vision and sharp negotiation skills to strike at deals provided TNC the necessary impetus to look for the strategic mergers and acquisitions. As described in the financial statements for the year 2004 that the vision of TNC expanded which provided it the necessary strength to innovate therefore Innovation is the second strength of TNC as for as non-financial indicators are concerned. Thirdly, the incorporation of the company in US was it’s probably the greatest strength. On the financial indicators side, TNC recorded double digit growth in profits, cash flows were improved whereas the revenues though declined but costs have similarly declined too. Lastly the diversification of the products is also one of the strengths of the company. 2) Weaknesses: The greatest weakness of the company is also lies in the fact that the whole group is circled around just one person. The personality of Rupert Murdoch is so powerful and influencing in the affairs of TNC that it seems TNC may not survive after Murdoch. Besides the Risk taking appetite of Murdoch and in result of TNC in making acquisition decisions though may be an aggressive strategy however the same may backfire too thus there is a very subtle weakness within the management style of TNC to have a marginally greater appetite for the risk though despite taking all these risks, the revenues of TNC mostly remained stagnant showing a very subtle failure of the strategies of TNC. It has also been reported that the TNCs management structure is informal with more emphasis on emotions rather than rationality to manage the company. This perhaps too is the weakness of the company to compete in a world where media trends are hard to establish. 3) Opportunities: The year before 2004 saw the entry of TNC into the Asian Market which provided one of the largest customer bases in the world. Secondly due to the diversity of the region, it will be best for TNC to develop the local contents thus giving itself an opportunity to not only get a foothold in the local market but get away with the tough regulations also. 4) Threats: With respect to the diverse nature of the products offered by TNC and its so called geographical diversity, the greatest threat to TNC is the regulatory environment in which it is working. Increasingly entering into the markets through political friendships may create some sort of negative publicity for the TNC too since its competitors may exploit its weaker points to potentially suppress the growth of TNC. Satellite Broadcasting Diversification seems to be the core strategy of TNC as it has evolved over the period of time through sheer risk taking in the projects which might have gone awry for the TNC. Diversification as a strategy seems to working for the companies mainly due to two reasons. (www.bimba.org) One is whether through diversification, organization can achieve the competitive advantages and how attractive the sector or industry can be if entered into. However within the context of TNC this may not seems to be working as the continuous diversification including satellite broadcasting forced it to go for more debt which ultimately raised the risk profile of the company. Secondly diversifications allow the development of conglomerates which force organizations to sometime be in direct conflict with the diverse base of the shareholders. In case of TNC since it was very widely scattered in almost all the continents of the world therefore the continuous the different expectations from the shareholders of those regions. However what is emerging is the fact rather than thinking directly of the benefits which diversification can provide, TNC continued to make acquisitions through diversification mainly due to the personal characteristics of Rupert Murdoch’s personality itself. As described in the very beginning of the case that he was a person who was more than willing to rule the world therefore diversification on the part of TNC seems to be flowing in that direction rather than be strategically targeted at creating value for the shareholders of the conglomerate. Diversification can also be adopted as an opportunity specially by focusing on the related and concentric diversification by refocusing on the core business however TNC in terms of its satellite broadcasting portfolio went on to rather compete aggressively with the competitors rather than helping TNC to focus on the core business of the TNC, Advantages and Disadvantages of Acquisition TNC achieved its diversification through making acquisitions of the firms across the globe. From Australia to India, TNC aggressively followed the opportunities and struck the deals wherever possible. The acquisition as a strategy can be undertaken to achieve synergies in order to get the competitive advantages. When two firms merge in each other, there arises a strong possibility of achieving the economies of scales. Acquisitions can be a powerful tool to achieve growth, enter new markets and expand the range of a firms capabilities. But with the highly competitive market for acquisitions and the correspondingly high acquisition prices, all too often transactions fail to create value for shareholders. Does this mean companies should avoid acquisitions and focus solely on organic growth? If acquisitions are to be part of a companys growth strategy, how can management identify which targets have the potential to more than justify the required investment and create value. Acquisition as a strategy which is either executed in order to make an exit from the market or to achieve the growth which is the case with the TNC. However though acquisition as a strategy can be beneficial however it can also pose significant threats too since the cultural mismatches can be a serious threat to the long term sustainability of the organization. Failure to maintain the cultural diversity after making the acquisition can be lethal as the organization may fail to get advantage of the other benefits mainly due to cultural differences. With respect to the financial results of the TNC it seems that despite aggressive acquisitions, it has failed to achieve consistent growth in its revenues and profits. These figures clearly points towards the lack of strategic vision behind making acquisitions. Since every strategy, in its basic core value, enlist that the shareholders value should increase and the profit of the company is the strongest signal to the external world regarding the performance of the company which is probably not the case with TNC. The geographical diversity, on one hand may have allowed it to enter in many markets however on the other hand it also exposed it to the various risks important being the regulatory risks which may prove detrimental to the long term success of the TNC. Strategic Development Plan From the information provided in the case, It is quite clear that the TNC is clearly surrounding around the personality of just one person therefore the first strategic step which TNC must take is to develop and strong sense of succession planning within the ranks of higher management. Clear succession planning lines shall be determined and persons should be identified who can be groomed and cultured to be more innovate and flexible in their approach. Secondly, TNC need to consolidate itself. It must stop its acquisition adventures as it has been successful in owning most of the media resources of the world therefore now it needs to be consolidated and reshape its focus on its core strengths. Using the TOWS matrix, the greatest strength of TNC is its diversified portfolio which when coupled with the external opportunity of tapping the local language market presence in Asia. Whereas the internal weaknesses can be removed with the help of taking untapped market opporutnies. (mindtools.com).It needs to develop its core strengths in order to consolidate and concentrate. Over the horizon of eight years, the untapped market which still offers a greatest potential to the TNC is Asian market due to its geographical diversity can provide TNC a good market for local channels. Recommendation To sum up the whole issue, I would only consider that TNC must develop succession planning. Its management style is too informal and surrounds around just one person. This personality aura can burst and damage the long term viability of TNC. TNC seems to be following Ansoff’s model’s diversification however that diversification has not been typically in the sense as described in the model (www.learningmarketing.net) however; TNC should use consolidation as a strategic business option. Bibliography mindtools.com. "Using the TOWS Matrix." 2008. www.mindtools.com. 12 March 2008 . Valuebasedmanagement.com. "SWOT Analysis." 2008. Valuebasedmanagement.com. 12 March 2008 . www.bimba.org. "Diversification Strategy." 10 2006. bimba.org. 12 March 2008 . www.learningmarketing.net. "Ansoffs Matrix." 2008. learningmarketing.net. 13 March 2008 . Read More