Performance of ITV1 Through the Firms Strategic Analysis - Research Paper Example

Abstract The strong pressures in the global market have adversely affected the operations of firms in all industries. In the TV industry of UK similar trends have appeared. Still, it seems that the potentials of the industry to face market turbulences are high. This fact is verified through the case of ITV1. The specific broadcaster has a key position in the TV industry of UK. Still, recent failures in regard to the firm’s strategies have led to doubts as of the appropriateness of these strategies. The strategic analysis of ITV1 using the SWOT model has helped to identify the potentials of ITV1 within the UK TV industry. It is suggested that the firm’s strategic planning process is updated in regard to certain of its points. In general, the firm’s current strategic planning process can be characterized as well organized; it is because of this fact that severe losses in regard to the firm’s equity have been avoided. Table of contents Abstract 2 1.0 Introduction 4 2.0 Literature Review 4 3.0 Methodology 7 4.0 Findings – SWOT analysis 8 4.1 Strengths 8 4.2 Weaknesses 9 4.3 Opportunities 9 4.4 Threats 10 5.0 Analysis and discussion 11 6.0 Conclusion 11 7.0 Recommendations 12 References 13 Appendices 16 1.0 Introduction The evaluation of a firm’s strategic decisions can be a challenging task. Using theoretical models that have been already tested can help managers to develop credible assumptions in regard to the strategic positioning of their organization. Of course, it is always possible that the findings do not reflect the actual performance of the organization or its ability to face market challenges. The use of a high range of data for assessing the findings of the firm’s strategic analysis can ensure that the performance of the organization in strategic planning and implementation will be effectively measured. Current paper focuses on the strategic decisions of ITV1, an important competitor in the British TV industry. As explained below, the particular organization has been able to face effectively the market pressures, as related to the global crisis. The strategic choices of the organization seem to be the key tools for the stabilization of the firm’s performance. A SWOT analysis has been developed for showing the potentials of the organization to face the challenges that have appeared in its internal and external environment. It is revealed that, in the long term, the prospects of ITV1 are significant, despite the delays that have occurred in the realization of the organization’s plans. 2.0 Literature Review SWOT analysis is commonly used for the evaluation of a firm’s strategic decisions, both in regard to its internal and external environment. In the context of the SWOT analysis, four different aspects of the organization’s environment are explored: ‘a) strengths, b) weaknesses, c) opportunities and d) threats’ (Griffin 2011, p.68). The first two categories refer to the internal organizational environment, while the last two are related to the firm’s external environment (Griffin 2011, p.68). Similar approaches have been used in order to explain the necessity of SWOT analysis as a tool for the strategic analysis of modern firms. According to Griffin (2011), the SWOT analysis is a valuable theoretical framework at the level that it emphasizes on both the firm’s internal and external environment, offering a clear view of the firm’s capabilities and challenges (Griffin 2011, p.68). Moreover, Hill and Jones (2009) note that the SWOT analysis proposes specific actions that a firm should take in order to improve its performance: ‘to identify opportunities, to evaluate the threats, to emphasize on its strengths and to eliminate, as possible, its weaknesses’ (Hill and Jones 2009, p.19). In regard to the value of SWOT analysis, Henry (2008) notes that the particular framework can be more effective ‘in the context of a competitive environment than in a general environment’ (Henry 2008, p.61). It is implied that in non-competitive business environments the SWOT analysis could not be easily developed since no market pressures would exist, a fact that would minimize the value of certain of the elements of SWOT analysis. At the next level, Kaufman et al. (2003) claim that the SWOT analysis seems to be more effective ‘in the strategic planning process’ (Kaufman et al. 2003, p.262). The use of the specific framework in other phases of the strategic decision making process, as for example the implementation phase, is not rejected. However, it can be assumed that if it is used after the completion of the strategic planning process, the SWOT analysis would not have the power to contribute in the improvement of a firm’s strategies, at least not at high level. If a firm’s strategies have already developed and implemented, the alteration of a firm’s strategies according to the findings of the SWOT analysis would be more difficult than if such initiative would have taken place during the strategic planning process. Morrill (2007) also supports that the SWOT analysis can be more valuable if it is used ‘early in the strategic planning process’ (Morrill 2007, p.163). Still, the potential use of the SWOT analysis later, for example during the implementation or the monitoring of a firm’s strategic plans is not rejected. Rogers, Finley and Galloway (2001) note that the SWOT analysis can be effective not only in regard to the firm’s current strategic choices, but also in regard to its future plans, ‘as anticipated based on the current strategies of the organization’ (Rogers, Finley and Galloway 2001, p.99). This means that the SWOT analysis can be used as a tool to predict any potential challenge that the firm is expected to face if it continues to use similar strategies as its current ones. In addition, Madura (2007) explains that the SWOT analysis can be effective both for firms that are already well established in the market and for firms that have just entered the market (Madura 2007, p.206). Particular reference should be made to the benefits of the SWOT analysis. It should be noted though that these benefits seem to be differentiated according to a firm’s market position and the conditions of the market, for example the competition, the performance of the national economy and so on. The most important benefit of the SWOT analysis is that it offers to strategic planners the chance to identify the organization’s weaknesses and align the firm’s strategies accordingly, ensuring that the implementation of these strategies will be completed successfully (Morrill 2007, p.163). At the same time, the SWOT analysis promotes collaboration, at the level that the analysis of the firm’s environment using the above framework requires the cooperation of the strategic planners and the support of employees at lower level of the organizational hierarchy (Bamford and West 2010, p.137); the latter have a key role in the provision of information necessary for analyzing the firm’s environment (Bamford and West 2010, p.137). In any case, the SWOT analysis can help a firm to avoid major risks in its daily operations, as aligned with its strategies (Verardo, 1997) and to increase its competitiveness towards its rivals (Daft and Marcic, 2010). However, in order for the SWOT analysis to enhance the organizational performance, it needs to be appropriately supported by the organizational leader (Needham, 1999) and to be based on a high range of data, so that the credibility of its findings is secured (Waters, 2006). 3.0 Methodology The methodology used in this paper has been divided into two parts: at a first level, a research over the news published in regard to the particular business has been conducted. The online databases of newspapers have been searched so that articles that are related to the performance and the strategies of ITV1 are retrieved. Emphasis is given on recent articles, i.e. articles published during this year. In this way, the current status of the organization, as of its strategies and its market position, is identifiable. At the next level, the most recent annual report of the organization, the annual report of 2011, has been reviewed; the figures and information retrieved are used in this paper for supporting the arguments developed in regard to the firm’s strategic positioning. A recent report presenting the performance of the firm in 2012, up to now, has been also used, as appropriate, for identifying any potential changes in the firm’s strategic decisions and performance between the years 2011 and 2012. All the above findings are used for developing a SWOT analysis of ITV1 as a key competitor in the TV industry of UK. 4.0 Findings – SWOT analysis 4.1 Strengths As an element of the SWOT analysis, the strengths of an organization are related to the organization’s most important capabilities and tools, as they are involved in the achievement of organizational goals (Griffin 2011, p.68). One of the firm’s major strengths is its ability to keep its profits high, despite the market pressures. In 2011, the firm’s total revenues reached the £2,432 million, compared to £2,325m of 2010, which is an important increase taking into consideration the strong market pressures (Graph 4 Appendices). Particular reference should be made to the important increase in the firm’s profits from UK productions and international productions (Graph 5 Appendices), as this increase has been achieved in 2011, compared to 2010. During the first six months of 2012 the revenues of ITV1 have been increased by a percentage of 34% (Sweney July 26, 2012). The above increase was highly related to the performance of the firm’s shows department (Sweney July 26, 2012). Moreover, the revenues of the firm from advertising have been declined only by ‘2% in October and November’ (Spanier 2012); this decrease has been considered as low taking into consideration the market pressures and the global crisis (Spanier 2012). The market has welcomed the positive signs of the firm’s growth (Sweney July 26, 2012). In this context, the firm’s share price has achieved an increase of 8%, as reported on Thursday, the 26th of July 2012 (Sweney July 26, 2012). In November 2012 ITV1 announced ‘a major revamp of the brand’ (Sweney 16 November 2012); the cost of the above project is expected to be high (Sweney 16 November 2012). Still, the specific project has been considered as necessary in order for the competitiveness of the firm to be enhanced (Sweney 16 November 2012). As noted in the firm’s annual report for 2011, employee engagement is of critical value for the organizational success (see Graph 1, Appendices). The last three years the level of employee engagement tends to achieve a continuous growth (Graph 1). At the same time, the firm’s online revenues from 2009 to 2011 have achieved a significant growth (Graph 2 Appendices), a fact showing the effectiveness of the firm’s strategic choices. 4.2 Weaknesses Managers in ITV1 have tried to enhance the performance of the firm’s morning show, as this part of the firm’s program is critical for the standardization of organizational profits. In this context, changes have been made on the firm’s morning show; however, the responses of the public to the particular efforts have been rather negative (Bull 2012). Moreover, recently the firm had to agree to pay a total of £125,000 as damages to Lord McAlpine (Sweney 2012), for having mentioning his name, by mistake, when announcing the names of politicians that have been found to be alleged for committing a crime (Sweney 2012). At this point, reference should be made to the firm’s inability to achieve a high growth in regard to the family share of broadcast (Graph 3 Appendices). 4.3 Opportunities On September of 2012 the firm’s licence has been renewed (Brown 2012). In this context, the firm will be able to broadcast for the following 10 years (Brown 2012). The renewal of the firm’s licence is of critical value for the broadcaster, securing the continuation of the organization’s operations in the next decade. Moreover, in 2013 the ad revenues of ITV1 are expected to increase (Sweney 13 November 2012). The limited decrease of the firm’s ad revenues in the third quarter of 2012 has been related to a unique event, the Olympic Games, that was presented in BBC and which attracted the interest of most viewers in UK (Sweney 13 November 2012). In any case, the ad revenues of ITV1 are significantly supported by the ads published in Sunday newspapers (Sweney 27 February 2012). In 2013 when no similar event will exist, the broadcaster’s ad revenues are expected to be significantly increased (Sweney 13 November 2012). It should be noted that in August of 2012 ITV1 bought ‘So television, the production company of Graham Norton’ (Deans and Sweney 2012); the deal reached the £17 million (Deans and Sweney 2012), an amount that it is not high if taking into consideration the benefits expected. Indeed, through the above deal, the firm’s potentials to develop its own productions are significantly increased. Moreover, the firm’s performance seems to be standardized, despite the financial crisis; in a recent interim report it was proved that the firm’s revenues for the first 9 months of 2012 have been increased, compared to the same period of 2011 (Graph 6 Appendices). 4.4 Threats The major threat for the organization seems to be the technology. The radical expansion of Internet as a tool of communication has gradually led to the decrease of the power of television and to its replacement, slowly, by the Internet (Graham 2011). Another threat would be the continuous decrease of the ad revenues, a problem that it is expected to be controlled in the near future. At the same time, the continuous increase of the costs of TV productions has resulted to severe pressures for the TV Industry (O’Halloran 2012). Indeed, in a recent report it is revealed that the revenues of TV industry in UK have been declined, while an increased demand has been noted for broadcasters that offer a ‘multi-channel option’ (O’Halloran 2012). 5.0 Analysis and discussion As explained above, the SWOT analysis is commonly used for identifying the performance of an organization in regard to its strategies. In the case of ITV1, the firm’s strategic analysis using SWOT has led to the following assumptions: a) the firm has the potentials to achieve a long-term growth. The acquisition of a production company, in August of 2012 (Deans and Sweney 2012), will help the firm to secure its market position and achieve a higher profitability, as indicated in the firm’s recent financial results, for 2012 (Graph 6 Appendices); b) the TV industry in UK shows signs of continuous growth, despite the global crisis (O’Halloran 2012). The firm’s prospects, as a key competitor in the TV industry of UK, are expected to be significant; c) The firm has recently started an extended revamp of its brand (Sweney 16 November 2012), a project that it increases the chances for the firm’s growth from now on, d) The firm’s licence was renewed in September (Brown 2012); for the next 10 years the firm’s operations, at least in terms of licence are not threatened. The above facts lead to the assumption that the firm’s strategic choices up to now have been effectively developed, at the level that major failures have been avoided. In the future a similar approach would be used so that the firm’s performance is standardized. 6.0 Conclusion The current performance of ITV1, as revealed through the firm’s strategic analysis, can be characterized as quite effective. It has been proved that the firm’s success in its industry is closely related to its strategic decisions. At this point, the following issue should be discussed: are the weaknesses of the firm and the threats that currently faces stronger than its strengths and the opportunities of the external environment? If considering the findings of the SWOT analysis, as presented above, a negative answer should be given. Indeed, it seems that the firm’s performance is standardized even if the future profits of the organization cannot be considered as guaranteed. A series of measures should be taken, as indicatively suggested below, so that the organization’s profitability is improved. 7.0 Recommendations One of the major challenges that ITV1 has to face is the change in market trends, as indicated in the increase of the use of Internet and the social media as means of communication and marketing. The growth of the company in the long term would be secured only if certain strategies would be developed: a) introduction of schemes for supporting the community; the firm should further improve its relationship with the public; b) emphasis on shareholders’ rights and benefits; the firm should improve its relationship with its shareholders; c) increase of the firm’s presence in the Internet and the social media; features such as options for watching a program or for entering one of the social media sites would be available to the public. 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Appendices Graph 1 – Employee engagement in ITV1 (Source: 2011 Annual Report, p.10) Graph 2 – Online Revenues for ITV1 (Source: 2011 Annual Report, p.18) Graph 3 – Family Share of Broadcast (Source: 2011 Annual Report, p.14) Graph 4 – Financial Highlights for ITV1 (Source: 2011 Annual Report, p.32) Graph 5 - Financial Highlights for ITV1 (Source: 2011 Annual Report, p.34) Graph 6 – Financial Highlights (Source: 2012 Interim report, p.2) Read More