Digital Strategy Key for News Corporation - Case Study Example

? News Corporation In this paper, the researcher has decided to shed light on strategic leadership issues faced by a modern organization. News Corporation, which is a multinational mass media company, has been selected as the sample organization in this paper. There will be two sections in this essay: 1- discussion about the theoretical underpinning of strategic leadership and 2- strategic issues that are facing by the chosen organization. At first, the researcher will try to understand the business matrix of News Corporation so that in latter part of the essay, the researcher can link the concept of strategic leadership to the business portfolio of the selected company. News Corporation has been founded by Rupert Murdoch in the year 1979, and the company is headquartered at New York, NY, USA. The company operates in six business segments such as Cable Network Programming, Television, Direct Broadcast Satellite Television, Filmed Entertainment, Publishing and others (New York Times, 2013). Cable Network Programming division of News Corporation licenses and produces sports entertainment, business news, movies, general entertainment, etc. Filmed Entertainment division of the company offers animated and live-action motion pictures in the form of entertainment to customers. Television division of the company offers both network programming and broadcasting entertainment to customers (New York Times, 2013). Recently, News Corporation has acquired ESPN STAR Sports division through wholly owned subsidiary. According to the annual report published by News Corporation (2012), the company earns annual revenue of more than $30 billion from its global operations. Major entertainment divisions of the company include Fox Entertainment, National Geographic channel, Fox studios, etc. (News Corporation, 2012). The concept of strategic leadership in the form of competitive advantage was probably first identified by Porter (1985 and 1991). Porter (1985) has given the basic framework of ‘outside in’ approach which helps a firm to understand the particular market in terms of macro environmental (political, economical, social, technological, environmental and legal) analysis and industry force analysis. Seminal research work of Michael Porter (1985) has given a 5 force framework which helps a firm to understand the business opportunity in particular market in terms buyer power, supplier power, threat of substitute, entry barrier and competitive rivalry. However, strategic leadership is more important from the competitive advantage perspective. In simple words, it can be said that companies can only achieve strategic leadership if it is able to achieve competitive advantage over other competitors. The question may arise that how a firm can achieve competitive advantage? Well, to answer this question, research scholars such as Barney (1986) has given the Resource Based View (RBV) model. According to Barney (1986), a firm should use its financial and non-financial resources which are valuable, rare, inimitable and non-substitutable in order to archive competitive advantage. Adner and Zemsky (2006) and Kraatz and Zajac (2001) have also found that availability of resources and optimal usage of these resources develop capabilities for firms and using the developed capabilities can help a firm to achieve competitive advantage or better to say strategic leadership. An eminent author has epistemologically created link between performance, strategic leadership and competitive advantage in the following manner; “Sustainable competitive advantage is more probable in firms that achieve sustained superior performance.” (Powell, 2001, p. 879) Discussion about strategic leadership is incomplete without the mentioning the concept of ‘Core Competency’ given by Prahalad and Hamel (1990). These eminent scholars’ duo has suggested that companies can achieve core competency by strategically using its capabilities backed by valuable resources. Optimizing resources and capabilities in particular business operation can help firms to strengthen this very operation which subsequently becomes core competency for the firm. After understanding business face of strategic leadership in changing world, the essay will try to shed light on human face of strategic leadership. Yukl (2010) has identified leaders as the human face of strategic leadership. Careful analysis of research work of Yukl (2010) shows that top management or a particular individual in the organization has to take the stewardship role in order to guide an organization to achieve its business objective. Mintzberg (2004) has pointed out that an organization cannot achieve competitive and leadership position in the industry without the mind and hard work of leaders. Without the presence of leaders, an organization can continue its work but there will not be any direction in its operation (Muller and Turner, 2010). In the light of the above the discussion, the researcher will shed light on strategic issues and options facing News Corporation from both business and leadership perspective. There is no doubt that News Corporation has relished the first mover advantage in the field of vertical integration of media. The company has acquired number of television channels, cable and satellite broadcasting assets throughout the last 10 years in order to create a multiple distribution segments which can help the company to achieve competitive advantage (Roder, 2007). According to Annual report of the company published in 2011, News Corporation has always tried to achieve strategic leadership in terms of realizing economies of scale in operation. For example, in the last 30 years, the company has reduced its dependency on newspaper publishing to business verticals such as cable/satellite network programming, films etc. Decreasing the cost of operation through vertical integration is the major strategic choice and ensuring that each of media distribution channel can support the other. Strategic leadership position of News Corporation is heavily dependent on its ability to create a supportive and conjugated supply chain framework for media content (News Corporation, 2011). In such context, the essay will praise the leadership role of Rupert Murdoch who has decided not only to expand the portfolio of business by entering into unrelated business segment but also controlling the supply chain of the business. Under the leadership quality of Rupert Murdoch, News Corporation established its core competency in the form of production system which is capable of supplying theatrical, distributing cable & satellite content, publishing news paper, books and magazines and many other activities in equal efficiency (News Corporation, 2011). According to annual report published by News Corporation in 2012, vertical integration was necessary for them in order to create leadership position in media industry where content and format of distribution changes in periodic manner. Gunther (2003) has pointed out that News Corporation’s decision to U.S. satellite markets through acquisition of DirecTV was signal of strategic objective of the organization. News Corporation acquired DirecTV in order to penetrate into highly profitable market and cooperate with content providers in order to decrease the content price. It has been already been discussed that News Corp has always changed its strategy in terms of vertical and horizontal integration in order to keep pace with changing world. However, the world has changed in last 5 years in terms of digital revolution and companies like News Corp cannot deny this fact. Priem and Butler (2001) and Tang and Liou (2010) have rightly argued that capabilities of a company have to be dynamic in order to help the firm maintain its competitive position in changing world. Same is the case for News Corporation, the company has to change its business direction and invest its resources in order to enter digitalization of content. Chessell (2010) has reported that the company is facing strategic challenges in order to transform its age old content driven business portfolio. The company has admitted that they are still working on digital content issue and they are facing challenges to maintain their profit margin in TV and film entertainment segment in the internet era (Chessell, 2010). Recently the company has started charging customers for its online content in the form of its online newspaper content such as The Times of London, The Australian etc. However, the company is still in dilemma regarding whether to adopt online subscription based model or not. Chessell (2010) has reported that the company is facing major challenge in terms of creating right digital strategy for both its print medium and content driven entertainment. The company had unsuccessfully negotiated with European and British regulators in order to buy more than 50% stake of BSkyB. Chessell (2010) has rightly pointed out that, News Corp is still in dilemma to adopt the social networking sites as content medium which is hampering their growth strategy. In 2012, News Corp reported that it would separate the entertainment division from publishing business (Jannarone, 2012). The split was purely strategic in nature because it was becoming difficult for the company to maintain its broad collection of assets contributed by its large portfolio of business (Jannarone, 2012). It was challenge for the company to align the core values of their business with both its business segment and it had become increasing complex to maintain tradeoffs between entertainment division and print segment. Presently, entertainment division of News Corp include Fox News Channel, Fox broadcast network and Fox News Channel while the publishing division contains HarperCollins book publishing, Wall Street Journal and Times of London. Some analysts have pointed out that the split was part of the News Corp’s strategic move to separate its digitalized subscription based online print business. For example, the company has started asking readers of their print segment to subscribe for reading the full content and also offering different types of subscription schemes in order to increase choice availability of customers. In the internet era, customers can download movies and broadcasting programs using open source technology such as Torrentz.com without paying a single penny hence demand for paid entertainment section of News Corp is decreasing. Now, this is a challenge for News Corp to maintain the margin for its entertainment division. Harsh fact is that there are no known formulae available for the company to change the consumption pattern of customers or preference for open sourcing. In such context, News Corp has decided to diversify its entertainment division in order to decrease its dependency on movie segment. The company recently acquired 49% of the Yankees Entertainment and Sports (YES) Network in order to increase their penetration in sports entertainment which is the most sought after segment in media world (Gustin, 2012). Important thing is that, rise of piracy and internet based alternatives has cornered the growth of print news paper, TV shows and movie business but old fashioned TV sports remain untouched by the internet based substitute. Hence sports entertainment has emerged as lucrative option for media companies. The deal between News Corp and YES is valued at $3 billion and the deal will help the company to achieve strategic leadership position for three reasons such as, 1- gaining 50% stake in YES will help News Corporation to become leader in regional sports network of USA, 2- The deal will give the opportunity to further diversify into North American sports entertainment segment and 3- the deal will bolster the strategic positioning as competitor for Entertainment and Sports Programming Network (ESPN) in the cable sports segment (Gustin, 2012). It is evident from the above discussion that News Corporation has used some of the well known strategic framework such as outside in approach, core competency and resource capability development and generic strategic frameworks in order to achieve leadership position in the industry. Strategic orientation of the company can be depicted in the following manner; Company Generic Strategy Growth Strategy International Strategy Resource & Capabilities Core Competency News Corporation Cost leadership strategy in most of the cases but the company has recently started using focused differentiation strategy in order to increase its penetration further in sports entertainment segment. Merger and Acquisition of small and focused companies in order to enter into new business segment. Mainly transnational strategy in the form of franchising and establishing strategic partnership with domestic players Financial resources in the form Assets, capital etc and technological resources. Entertainment business with more than 20 subdivision and regional segment; hence it can be said that large business portfolio to channelize the loss is major strength for the company. (Source: Author’s Creation) Reference Adner, R. and Zemsky, P. A., 2006. 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