NEWS CORPORATION CASE STUDY - Essay Example

?NEWS CORPORATION CASE STUDY News Corporation is one of the world’s largest media conglomerates in the world. The Journey began in 1923 with publishing of a local newspaper in Adelaide, Australia by Ruport Murdoch’s father. Currently News Corporation media conglomerate holds diversified media portfolio in many parts of world. NC has existence in six media domains that include Cable Network Programming; Filmed Entertainment; Television; Direct Broadcast Satellite Television; Publishing, and Other (Reuters, 2012). This essay is based on the case study analysis regarding the overall expansion strategies of NC. Based on the information in the case study, it explores corporate level strategies of NC and discusses attempt it undertakes to add value to its overall portfolio. For the purpose, strategy matrixes of Ansoff product and market development matrix and corporate parenting matrix have been applied; analysis and suggestion for improvement has also been provided. Analysis for the criticism on Ansoff product development has also been made part of the essay. News Corporation media conglomerate initiated its journey in 1923 with publishing of a local newspaper The News in Adelaide, Australia by Ruport Murdoch’s father. The corporation continued growth and by year 1980 News Corporation had success in creating country’s only national newspaper The Australian, also two national magazines and 20 Provincial newspapers. Major developments in the journey of NC have landmarks. NC in 1968 expanded beyond its homeland Australia and entered UK with purchase of News of the World and to US in 1973 with purchase of The Express Publishing Company. Since then, journey for constantly increasing global footing is on way. News Corporation attempted first diversification strategy with major shift to US and bought Film Company Twentieth century Fox in year 1984. In 1989 NC entered into satellite broadcasting business in UK. It further expanded to Asia In 1993 acquired STAR TV followed by developing foothold in internet media with acquisition of My Space.com in 2005. NC has been following the technological development at each stage successfully except few exceptions. Its overall strategy has been to size the unanticipated and unique opportunity with agility no matter how much risky the new venture get. It carried strategy of providing customised product. Throughout journey in case study, NC has been managed by Ruport Murdoch. Ruport Murdoch has been described as person with intention to rule the world and so is reflected in the risky moves taken by NC. RM also has been very dominant in guiding the deep down operations and in order to get the positive results he had was free to use his political terms to support his ventures. NC has been successfully leveraging its financial, personnel and knowledge resource to expand and control the business that has international presence in various media related domains. Though financial conditions have had some difficult times but NC has been able to strengthen it with its strategy. The Ansoff (1965) developed strategy matrix using two dimension of development; first product development and other being market development. This matrix gained much popularity in business literature. The matrix with former variable on horizontal axis and latter one vertical axis provided four strategies which are: product development, market development, market penetration and diversification (Cravens and Piercy, 2008). Individually both variables have been given the credit to play crucial role in leading firm’s success; since pioneering study by Stopford and Wells (1972). Moreover, there have been large numbers of studies developing the success stories with strategies developed by combining the two variables in matrix (Constantinides, 2004; Watts, Cope, and Hulme, 1998; Delios and Beamish, 2002) (Constantinides, 2004) The Ansoff matrix being the combination of important variables of international literature has its own success levels; however, four strategies developed with two sided combination of both variables has certain criticism. Shaw and Goodrich (2005) stated that product development and market development are useful whereas the market penetration and diversification has problems. Shaw and Goodrich (2005) further state that market penetration strategy of Ansoff is similar to the one suggested by Dean (1951) who suggested penetrating with new product in new market with high promotion and low cost. This contrast leads to the contradiction with penetration strategy of Ansoff. Moreover, Shaw and Goodrich (2005) question the diversification strategy in the matrix with reasoning that decision of diversification is beyond the domain of marketing department and falls in the domain top/ strategic management; hence shall not be made part of the matrix. Individually, each of the four strategies also has its implications. For instance each strategy has its own success factor without which the strategy would fail; as Ernst (2002) discussed the success factors of New Product development and short comings related to correct identification of these factors would lead to unsuccessful strategy application. Meyer and Tran (2006) while discussing the penetration of multi-national strategies discussed the requirement to adjust the product accordingly and develop capabilities to align with resources that are controlled by local firms. This refers that despite the sound position of firm on its own; it is vulnerable to the conditions posed by local competitors of penetrated market. 8 also refers to the firm’s aim to develop new market is also vulnerable on the strength of local competitors of new market. Hence, both these strategies are more prone to the conditions prevailing in the new market than their own strengths. Example of this is the failure of IKEA in Japan in first round of globalisation while success in the second round of entry (Stolba, 2009). There is also large number of factors upon which success of diversification strategy is dependent (Piercy, 2009). Challenges of diversification strategy are of multiple magnitudes as compare to other strategies. In other three strategies, one of the variables (product or market) is similar whereas this corner strategy takes business in the new domain. More importantly, factors such as economic downturn, lack of marketing knowledge of new domain and the cost of entering in new market is much high (Bishop, 1995). Declining demand in any industry cannot be easily countered and escaped with diversification that has itself has high level of difficulties (Bishop, 1995). News Corporation in its journey in time frame of the case study has employed all four strategies of Ansoff .The time line of NC has been discussed below with its respective strategy: 1. 1923 the business started with the local newspaper in Australia. 2. 1968- NC adopted market development for its publishing business and entered UK 3. 1973 NC again developed new market for its publishing business and entered US. 4. 1970’s characterize market penetration in UK with local newspaper. 5. By 1980’s NC had penetrated further in Australian market of its publishing segment with a national newspaper, 20 local newspapers and 2 magazines. 6. In 1980, NC had penetrated in UK with local newspapers that shared main contribution in profits. 7. 1984 characterize with diversification (related diversification) in US with entering into broadcasting business with acquisition of Film Company. This was major shift in product and geographical perspective. 8. 1985, it further adopted diversification and bought television channels in US. This was also related diversification as it provided support to NC in broadcasting its film content. 9. In 1989 again diversification was adopted with moving into UK’s broadcasting with satellite television. It was again related diversification as it had already entered the domain of television and well as UK market. 10. 1992, penetration within UK’s satellite television with product enhancement of Sky movie to Sky Sports. 11. Mid 1990’s it penetrated in UK with satellite broadcasting with respect to product enhancement and variations of local, national, news channels etc. 12. Mid 1990’s also was the penetration era in US with similar tactics it applied in UK and expanded with sports, local and then national level broadcasting. 13. With penetration going on in its already existing market, NC expanded its footing in Asia within Asian satellite television market in 1993 and acquired STAR. 14. In similar year 1993 to expand, it again employed penetrations strategy using its success recipe of narrow casting. 15. In 1990’s to establish its dominance in media, it developed market in Asia for its film segment and acquired Chinese movie. 16. During 1990’s NC continued to penetrate more and more in US and UK. Attempts included news channel for its television broadcasting industry with respect to product development and introduced news channel for fox. 17. In 1996, its attempted to develop market for satellite in US failed due to discrepancy with cable operators and withdrew from alliance with Echo Star Satellite Company. 18. 2003, however, NC succeeded in intent to establish its standing in US satellite domain and acquired Hughes Electronics and DTV. This added much to its financial muscles. 19. In 2005, following the technological advancement it again went into diversification and acquired MySpace; internet based social entertainment destination. This diversification was again related diversification as it had now gathered sizeable experience in various media domains. 20. In 2006, market for internet based entertainment medium was further developed in Hong Kong. Overall timeline refers that NC aimed to dominate the media industry. It avails opportunity defined as ‘unanticipated and unique opportunity” and then consistently follows expansion across; aligned to what RM stated in 2006 annual report. It’s all diversifications are in medium that has some relatedness and the success recipe for its attempts has been “Be global, act local” or narrow casting in order to capture market that itself attract heavy wallet advertiser (Johnson, Scholes, and Whittington, 2008). Though it has been successful in most of its attempts in times of the case study, the success ingredient has some discrepancy. The success recipe of narrow casting is has mainly been supported by adopting any mean that can benefit to it business. For instance, its support to Margaret Thatcher in 1979, left wing politicians etc. Moreover, its global expansion beyond the regulations on media by Monopolies and Mergers commission, way it gained control over the news segment in Asian market are all evidences of strong support it leverage from its connection. Evaluation of its successes and present dominance has clearly witness what one analyst said that RM wants to rule the world. There also arises question about if without this would NC would have been there where it stands today. Hence, with this foothold across globe the firm shall put certain focus ongoing through right ways in strategy implementation (Johnson, Scholes, and Whittington, 2008). Also it gives no clue of how long this cabled broadcasting would be continues against the internet based entertainments. It core business of publishing that is striving hard for survival against the technological advancement didn’t witness any attempt to strengthen, after entering US and UK. The corporate parenting Matrix allows the exploration of fit between the corporate resources and the strategic business units KSF’s. Identification of these fits lead to the provision of resources from corporate parent to the SBU that adds value to SBU (Alexander, Campbell, and Goold, 1995). This value leveraging can be in either or combination of the following forms: restructuring that change skills within the corporate; corporate parent lend resource support to its SBU’s adding value by sharing resource; this sharing also leads to synergy management between the corporate parent and the SBUs and among SBUs through transfer of competence etc; and overall portfolio management including decision making regarding the expansion, acquisition, diversification as well as shutdown etc (Hill and Jones, 2005). Fit between the parent and SBU can fall in five categories that include heartland (best fit), edge of heartland (few characteristics fit), Allien territory (no fit), ballast (little fit exists but no or least value addition), value trap (parent couldn’t provide the SBU’s key success factor although has high opportunities but has fit carries high risk) (De Wit & Meyer, 2004). (Alexander, Campbell, and Goold, 1995) NC with its core business of publishing learned characteristics that brings acceptance among masses. NC further added strength to it on successful ventures in publishing in US and UK. KSF for Fox Films and television is content acceptance. NC had good insight and resources about content acceptance of mass but not specific to film and TV. Hence, these mediums were in ballast corner. However, combined resources of parent and two SBU’s led both of them to edge of heartland and then with moved towards heartland. This similar mechanism is then followed throughout it expansion across the case study timeline. Since all diversifications are related, therefore, throughout it didn’t have any SBU in Alien territory. Moreover, it also didn’t have any SBU in value trap. Initially, Sky channel landed in value trap as Sky movie was paid subscription content as against the entire free content of NC. Results were low subscriptions; hence, low revenues and losses. The free content KSF for the movie channel was at low end. However, timely strategy to take up the sports channel opportunity picked the Sky SBU from value trap and brought it to edge of heartland and later turned to heartland. This SBU revolutionised the entire sports as well finances for NC and developed to provide resources to other SBUs. Its other SBU’s later shared resource of content KSF. Moreover, publishing leveraged financial support to expand, then so did Sky and its internet business is also expected to follow same trend. In same duration it also increased its debt in multiple and had to get debt restructured. It also undertook restructuring of Sky channel and back off decision from EchoStar that was having discrepancy of aligning the fit in former case and hurdle to leverage resources in latter one. News Corporation’s corporate level strategy analysis opened up many avenues of knowledge. Using Ansoff product market development strategy it explored the way corporation make expansion decision that can add value to its overall portfolio. Moreover, it provided that expansions based on core competency provide considerable support in establishing foothold in any domain. Application of Corporate Parenting Matrix also provided insight about the attempts of successful firms in developing value generating fits between SBU and corporate; or even can make otherwise decision to dissolve. List of References Alexander, M., Campbell, A., and Goold, M. (1995). Parenting advantage: the key to corporate level strategy. Available from http://www.adlittle.com/downloads/tx_adlprism/1995_q2_08-12.pdf [Accessed 2 November 2012] Bishop, P. (1995). Diversification: some lessons from the UK defence industry. Management Decision, vol. 33, no. 1, pp.58 - 62 Constantinides, E. (2004). Strategies for surviving the Internet meltdown: The case of two Internet incumbents. Management Decision, vol. 42, no. 1, pp.89 - 107 Cravens, D.W. and Piercy, N.F. (2008) Strategic Marketing, 9th Edition, Cambridge: McGraw-Hill Publishing Co. De Wit, B. & Meyer, R (2004) Strategy: Process, Content, Context, 3rd Edition, Andover Hants.: Thomson Learning Delios, A., and Beamish, P. (2002). Geographic Scope, Product Diversification and the Corporate Performance of Japanese Firms. Available from http://ssrn.com/abstract=305349 [Accessed 1 November 2012] Ernst, H. (2002). Success Factors of New Product Development: A Review of the Empirical Literature. International Journal of Management Reviews, vol. 4, no. 1, pp. 1–40 Hill, C.W.L., and Jones, G.R. (2005) Strategic Management: An Integrated Approach. 7th Edition, Boston: Houghton Mifflin Johnson, G., Scholes, K. and Whittington, R. (2008) Exploring Corporate Strategy: Text and Cases, 8th Edition, Harlow: FT Prentice-Hall Johnson, G., Scholes, K. and Whittington, R. (2008) Exploring Corporate Strategy: Text and Cases, 8th Edition, Harlow: FT Prentice-Hall Meyer, K., and Tran, Y. (2006). Market penetration and acquisition strategies for emerging economies. Long Range Planning, vol. 39, no. 2, pp. 177-197 Piercy, N. (2009) Market-Led Strategic Change, 4th Edition, Oxford: Butterworth-Heinemann Ltd. Reuters. (2012). News Corp. (NWSA.O). Available from http://www.reuters.com/finance/stocks/companyProfile?rpc=66&symbol=NWSA.O [Accessed 1 November 2012] Shaw, E., and Goodrich, K. (2005). Marketing Strategy: from the history of a concept to the development of a conceptual framework. CHARM. Available from http://faculty.quinnipiac.edu/charm/CHARM%20proceedings/CHARM%20article%20archive%20pdf%20format/Volume%2012%202005/265%20shaw%20goodrich.pdf [Accessed 2 November 2012] Stolba, A. (2009). Ikea’s failure and success on the Japanese market. Available from http://pure.au.dk/portal-asb-student/files/7566/Afhandlinger [Accessed 1 November 2012] Stopford, J. 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