NewsCorp's Strategy - Case Study Example

1. Any business context is dynamic and some changes are inevitable but the need to keep pace with these changes is key to the success of any serious business. Rupert Murdoch emphasised on the need for consistency in the approach of NewsCorp’s strategy where they would be positioned to seize any strategic opportunities when they arise. Unlike other businesses which are guided by the notion of strategic planning, NewsCorp’s strategy put more emphasis on flexibility where the organisation would be readily able to adopt the changes to ensure consistent profitability. It can be noted that one weakness with strategy formulation which is avoided by Murdoch is that it is comprised of a calculated approach which is fixed towards attaining a goal in business (Mintzberg 2000). It is not flexible which may result in business loosing revenue after failing to keep pace with unprecedented changes that may take place in the market. The use of expansion strategy is one major determinant that ensures revenue generation for NewsCorp. During the early 80s, the organisation expanded to USA and the purchase of the UK based News of the World greatly contributed to its operations. During this period, the UK subsidiary was the major contributor to NewsCorp’s profits. From this scenario, it can be seen that the expansion strategy is very effective with regards to sustainable flow of revenue. It also acquired the Twentieth Century Fox as well as six television channels in US and was also into film. However, it can be noted that this expansion drive in USA had certain implications whereby the revenue generated as well as profits increased but the debts through bank loans also increased. The entry into satellite broadcasting in 1989 in UK heralded another era which marked NewsCorp’s financial turning point. Whilst it improved the distribution of the products, it required subscriptions and it did not fair quite well in that regard given that it attracted fewer subscribers yet it had spent quite a fortune on the investment programme. The radical expansion drive has got its own risks and disadvantages especially in the event that there is limited cash flow to sustain all the operations. An economic crisis that cuts across the whole country for instance would not spare the company. In such a crisis, it would be difficult to easily access short term loans from the bank as they would also be facing the unprecedented challenges. The cash drain problem in 1990 greatly affected NewsCorp viability given that it could not access short term loans whilst it was struggling to pay maturing debt. However, Murdoch’s ability to develop a critically and commercially acclaimed programming in satellite broadcasting marked the beginning of NewsCorp’s financial success. Indeed, satellite broadcasting was being launched in the USA and there was need to design programming that would captivate the interests of the majority viewers and Murdoch had expertise in this regard. After successfully designing programming which appealed to the majority viewers, he went on to acquire more distribution channels. Unlike the situation in UK which resulted in satellite broadcasting attracting fewer subscriptions, the American experienced entrenched the company as a force to reckon with given that it had dominated the largest market in the media industry. The success in US markets meant global success and this strategy worked as the company was from this point able to sustain other operations from the revenue generated from the US markets. The penetration of the Asian markets also gave the corporation financial stability in that it was able to tailor its programming to suit the interests of the targeted consumers who were not English speakers. Murdoch termed this narrowcasting, whereby customised programmes are designed to meet the needs of the intended audiences though they may be fewer in numbers. That strategy promoted a steady growth in advertising which in turn generated the much needed revenue for the company. The acquisition of myspace.com, an internet based business entity further witnessed a growth of revenue generated by NewsCorp. It as well used the strategy of narrowcasting which is a form of competitive advantage over other rival competitors. The aim of establishing media business is profit oriented hence there would be need to have strategies that would translate into financial gains. Whilst other critics may say that the expansion strategy is risky, it is one of the ways an organisation can entrench itself in the market by customising programming which is specifically targeted at even minority audiences. Keeping pace with technological advancements is one method of ensuring financial growth as more and more consumers are always switching to the latest technology as a way of trying to get the best programming that satisfy their needs. Keeping pace with technological advancement gave impetus to the success of NewsCorp financially though it encountered some difficulties along the way. 2. Murdoch played a pivotal role it the development of strategy during the case period. He embarked on a global expansion drive during the early 1980s. NewsCorp expanded to USA during this period and the purchase of the UK based News of the World greatly contributed to its operations. The year 1984 saw a major shift of geographical and products offered by NewsCorp as it acquired the Fox Company which was into film. It also acquired television stations in US which was a major step towards diversification of its operations apart from concentrating on print media alone like what it did during the early years of their operation in business. For instance, it can be noted from the case study that the operations from the UK based media houses greatly contributed to the revenue which was generated by NewsCorp. Venturing into global markets is advantageous in that some markets have potential to grow to an unlimited extent which will also contribute to the total amount of revenue that is generated by the organisation. Murdoch greatly contributed to the strategy of NewsCorp when he decided that they should venture into satellite broadcasting. Indeed, after having realised that there were technological changes taking place with regards to information dissemination, venturing into satellite broadcasting was very strategic as it would give the organisation competitive advantage in the modern day technological world. For instance, broadcasting used to be done using terrestrial technology but satellite broadcasting improved the distribution channels and it could reach a wider geographical sphere compared to the traditional method of disseminating information. It is against this background that keeping pace with technological advances is very strategic since it would give the company competitive advantage whereby it will not simply lag behind other technologically advanced organisations. NewsCorp found itself entangled in intense competition in the US media market in the early 1990s where the struggle was for dominance in the market. Indeed the ultimate prize was the control of the 200-million plus single-language media market in the US. Success in this feat would mean economies of scale and it also meant that it was the only way of creating a world wide brand after success in this market. However, Murdoch had the expertise in this area where he immensely contributed in the development of the most critically and commercially acclaimed programming. The strategy of sports led programming was regarded as key to commercial success and NewsCorp’s fox group became a dominant player by accumulating stake in numerous regional sporting cable networks. It was successful through stitching together the regional sports channels thus outbidding the competitors in the process. Fox was also able to offer its advertisers a customised package of regional advertising that could reach an audience that was larger than its principal competitors. In this regard, it was able to broadcast to 98% of existing US network. The success story in the US led NewsCorp to maximise the potential of its production capabilities across its entire global operations. It moved into Asia in 1993 with the acquisition of satellite television company STAR TV. However, the diversity of the region at first posed a challenge where local languages were needed to make an impact out of the English speaking elites. Murdoch succeeded in this challenge by what he termed ‘narrowcasting.’ It only required the customization of the broadcast content to the different markets across Asia, similar to the way Fox was developed in the USA. This strategy is very effective in winning the consumers in diversified markets where there are a variety of languages spoken which translates into meaning that different groups of people have different tastes hence the need to segment the market where people with similar interests and needs are grouped together (Strydom 2004). Segmenting the market allows the service provider to identify the needs of different people therefore gain knowledge about how to satisfy their needs. Murdoch also took a leading role when he initiated the acquisition of the business myspace.com. This is a social networking site that is reportedly generating a lot of revenue for NewsCorp. Indeed, the internet is believed to offer new opportunities in communication where it is seen as efficient and relatively cheaper compared to other forms of disseminating information. In this regard, it can be noted that technological changes continue to offer competitive changes in the media industry. The digital technology is taking center stage during the contemporary period and it can be noted that Murdoch greatly contributed in strategy formulation by keeping up pace with the latest technological developments. 3. One key unresolved issue for the future of NewsCorp is the aspect of shareholding. For a big and reputable organisation like NewsCorp, it would be naïve for it to be controlled by one individual person. A close analysis of the shareholding structure shows that Murdoch himself is all too powerful to appoint the CEO on his own. Under normal circumstances, appointments to such influential positions are determined by the board which offer recommendations and set out the term of office. By virtue of appointing his own children, it shows that he still wholly own the company which is not a healthy situation especially for such a big company. A company as big NewsCorp should be listed as public company where Murdoch if he so whish may have a fair percentage of shareholding to avoid the cases of monopolisation like what is the case here. Whilst the company seen growing at the moment, the chances of collapse would very high in the face of financial constraints. A listed company would not be easily affected by financial crunch in the short term as major decisions would be determined by the board not individuals. Another unresolved issue is that of management structure which is seen as too informal. The success of many organisations is often determined by the management structure. The management is responsible for making decisions that affect the running of the company and there ought to be proper planning to ensure that the company remains viable. It would be folly for such a big company to operate as a private entity whilst there would be many people with interests in that organisation. It would be recommended that NewsCorp should go public where a board would be put in place with regards to the structure of the shareholding. Whilst the company has been flourishing during all its years in operation, precautions always need to be taken in case of the unprecedented financial crunch that may leave the company grounded. A public company has the advantages that it can be listed on the stock exchange where shares are sold accordingly. The advantage is that many people would have stakes therefore interests in the company and would always strive to see the best results out of the organisation. References Aidan McQuade (2007), The news Corporation, University of Strathclde Mintzberg H. (2000), The rise and Fall of Strategic Planning, Pearson Education Limited. Strydom J. (2004), Marketing, 3rd Edition, Juta & Co Ltd, SA Read More