Management of New York Times Company - Case Study Example

Case Study Cover Sheet New York Times Co. Number: Strategic Management MGMT 440 submitted: Name: _______________________________ Student Name Davenport University English 110 Professor John Smith October 15, 2008 Introduction The New York Times Company is one of the most credible media companies that operate in both the print medium and the digital medium. New York Times began operations as a print based journalistic medium but later as the online medium became more popular, New Times explored that avenue by not just creating an online presence for its leading newspaper including New York Times and Boston Times but also buying out existing media groups such as About.com. In the recent years, just like every other print based media, New York Times has been losing its print subscribers to online new media groups such as Google News and Yahoo News. The New York Times suffered a 3% decline in the total revenues. This was attributed to the evolving nature of journalism into new media and the uneven economic conditions that prevail all over the world (The New York Time Company, 2012). The share prices of the company has also fallen down 23% during the last three months and closed at $6.20 on April 16, 2012 (Science, 2012). This is attributed to the fact that advertising revenues have plummeted along with the readership of print based newspapers (Kirchhoff, 2010). The New York Times faces a wide range of competitors from different fronts. In the case of print publications, NY Times and The Globe face competition from The Wall Street Journal, USA Today, The Economist, and The Financial Times. On the online front, the company faces competition from Google News, Yahoo! News, CNN.com, MSNBC.com, Guardian.co.uk, bbc.co.uk, CNet, iVillage and countless others. Recently New York Times, in order to face this challenge has come up with a strategy whereby they intend to diversify their revenues into the digital medium and gaining cost efficiency in all areas. In the print medium, New York Times has cut down the paper size by reducing the width of the paper by 1.5 inches (Press Gazette, 2007). The strategy is also focused on using the strong brand appeal of the company to increase circulation reviews. The last dimension of the strategy is to manage the asset portfolio in such a way that it assists the core operations of the company and also ensures a strong digital presence (The New York Times Company, 2012b). Understanding the changing media and journalism landscape, New York Times Company went through a variety of changes. They limited their online article access to twenty articles per month for normal users and provided unlimited access to digital and print subscribers only. In order to keep the brand recognizable within the web, the company allowed viewers free access to top news online and on social networking and mobile applications (Sulzberger, 2011). Analysis of External Environment Social Factors: The social factors that impact the organization include the changing attitude of the consumers towards print media. More and more consumers are now using the internet for any source of information. Print subscriptions have gone down in the last few decades as consumers are able to access most of the news online. Also consumers find it much easier to browse for news on Google or Yahoo rather than going up to separate print magazines such as NY Times or The Guardian. The younger generation is using social networking websites for most of their news and they even access news through blogs and such channels. Technological Factors: The growing reach of the internet and internet related applications have greatly changed the landscape for traditional media companies. This is a time when media industry is evolving to make best use of the technology. While the internet has been in business and blooming since the last few decades; media companies have also started exploring the world of mobile applications. Users demand and have all the information on their mobile phones even when they are on the go. Technology has led to cut throat competition in the media industry as new media giants such as Google and Yahoo are springing up and vastly spreading their reach. Economic Factors: With the recent recession, the prices of raw materials for print publications have gone up with increase the cost of the product that is going out of demand. The recent recession has also impacted the buying power of the consumers and they are looking for cheap alternatives. The recession also negatively impacted the advertising revenues of the organization as advertisers were forced to cut back on their advertising revenues during recession. Also advertisers are exploring the online media more in comparison with print meida. With the advent of online media, consumers can get free access to news and this poses considerable risk for the organization. Political Factors: Since the freedom of the press in the US was provided at quite an early stage, the media industry does not have to fear for any political pressures that would impact the quality of the content. Also the media industry is free to publish their opinions without any repercussions. The media industry is probably one of the very few industries that benefits from political turmoil or any other catastrophe. It is able to use this for its content so that subscriptions of the paper would go up. Environmental Factors: As New York Times Company is a media organization; it is greatly impacted by any change in the environment. It can bank on changing environmental conditions to lead to an increase in subscriptions. Overview of External Environment: An analysis of the external environment shows that the media industry around the world is evolving at a very rapid pace. In order to keep up with this pace, organizations need to keep abreast of the changes and bring in modifications on a periodic basis. The media industry has the potential to expand its reach through online media but this is hampered by the presence of new media giants. Analysis of Five Forces Model Threat of New Entrants: The threat of new entrants in the market is medium. In the case of online media, the threat is quite high as it is easy to develop an online presence at a relatively cheap cost. However, it takes time to develop credibility in the market but readers want fast news. In terms of print media, the threat of new entrants is low. This is because media entities such as New York Times and News Corp have developed economies of scale and have their own printing press and paper mills which makes it difficult for new entrants to compete unless they have high amount of capital to invest in a venture that is showing declining revenues each year. Bargaining Power of Suppliers: The bargaining power of the suppliers in the case of the media industry is low. This is because entities such as the New York Times have their own printing presses and paper mills and thus are not dependent wholly on the suppliers. Also the supplier products are not differentiated and the media companies compete on the basis of their own content rather than that of the suppliers. The suppliers also cannot connect with the buyers directly since it is the news that adds value to the paper or the digital medium. Bargaining Power of Buyers: The buyers in the case of the media have a strong power as they have a wide range of media providers to choose from. They can easily switch from one product to another if they perceive a change in price or quality of the product. They also have access to free content and thus New York Times Company has to cut down costs to facilitate its buyers. Threat of Substitutes: The threat of substitutes is the highest in the media industry. This is because the media industry faces competition from both print media and online media. Also with online media gaining popularity, users have switched over to online content that is free of cost. New York Times does not provide free access to its content and thus faces a strong threat of existing users shifting over to substitutes. However, New York Times is able to balance it with its strong brand identity. Rivalry: Rivalry within the media industry is quite high. This is because the high competition and the evolving media industry have led organizations to fight for a strategic position. They have to cut down costs on all fronts while at the same time they hope to attract consumers through improved or new services and products. SWOT Analysis Strength: Probably the biggest strength for the NY Times Company is their strong brand appeal among consumers. Even with a surge of new media companies, NY Times enjoys a credible position as a provider of high quality news and information. Also NY Times has achieved economies of scale being in the business for such a long time. Weaknesses: With the decline in revenues consistently, NY Times Company is losing its strong financial position within the industry. Their plans to expansion have to be curtailed to a certain extent given their losses. Another challenge that the company faces internally is the loss of its CEO and President, Janet Robinson who was working on improving the online presence of the organization. Also the structure of the company as a dual stock structure limits the decision making power to the top echelons of the management and specifically the Ochs-Sulzberger family. Opportunities: The growing online media industry provides both an opportunity and a threat for the organization. The company can hope to increase its brand recognition by developing a strong position in both print and online media. Also the online world allows the organization to increase its reach globally through an online presence and later develop a print presence in a country that shows the greatest potential. The company can also bank on new services such as social media networking and mobile applications to improve its reach to new readers and subscribers. Threats: NY Times Company faces its greatest threat from new media giants such as Google and Yahoo who have pretty much taken over the online media industry. They allow users to view NY Times content without paying for it or benefiting the organization in any way. Print subscription of the magazine has been going down consistently with the advent of the online media and these impacts the financial position of the organization greatly. Also with the increasing costs of raw materials in the unstable economic conditions, NY Times Company faces issues of increased costs at a time when customers are switching to online media. Overview of the SWOT Analysis: The SWOT analysis shows that New York Times enjoys competitive advantage only due to the fact that it has a credible brand identity. Otherwise the evolving media industry has negatively impacted the industry to a great extent. Financial Analysis The financial position of the company is not so strong given the fact the revenues have continued to fall within the last few years. The advertising revenues of the organizations have fallen down considerably due to recession and also because advertisers are exploring new mediums of advertising. Online advertising has gone up and this has benefited the digital division of the organization, more specifically About.com that showed an increase in advertising revenue by 13.8 percent in 2008. But this did not impact on the company’s overall revenues as they declined by 8.9 percent in the same year. The revenues of the organization have been going down consistently since 2004. The decrease in revenue is calculated to be 108.5 million dollars since 2004. NY Times did not show an increase in assets during 2008, however there was an increase in liabilities by 0.5 percent. The organization has also shown an increase in debt-equity ratio over the last decade. The debt equity ratio rose consistently by 1.24 in the last decade with only 2004 being a favorable year when debt equity ratio was the lowest at 0.34. The total equity of the organization has gone down by 734.4 million in the last decade. Recommendations Keeping in view the above analysis and condition of the NY Times Company, the following set of recommendations can be made: 1. Develop a strong position in the online media industry while complimenting it with the print media. NY Times Company should seek to develop collaboration between its print and online media. By synchronizing the two mediums, the company can hope to improve its position as well as its subscribers. The organization has been able to do this to a certain extent by allowing print subscribers to view digital information free of cost; 2. In order to retain its position of a credible information provider, NY Times has to recruit one of the best employees. It should not follow the policies of Gannet Co. Inc, of reducing overhead by increasing layoffs. At this time, NY Times depends on good journalism; 3. The online world is filled with inauthentic information. Google and other media giants connect users to information that is usually not credible. NY Times can develop its position as a credible information source. This could be a source of competitive advantage for an industry that is quickly approaching its maturity stages; 4. NY Times should develop a partnership with Google. Since most users Google information on the net, NY Times can through the partnership request Google to redirect its viewers to the NY Times website when viewers are looking for credible and authenticated information; 5. NY Times can develop its own social media network like News Corporation has developed MySpace. This network would focus on spreading credible information and inviting users from all over the world to provide their opinions on the latest news. It could develop this network for news lovers. References Kirchhoff, S. (2010) The US Newspaper Industry in Transition, Journal of Current Issues in Media and Telecommunications, Vol. 2, pp. 27-51 Press Gazette, 2007, New York Times trims paper size to cut down costs, Retrieved from http://www.pressgazette.co.uk/story.asp?sectioncode=1&storycode=38405&c=1 Science, N. (2012). Forbes Earnings Preview: New York Times Company, Retrieved from http://www.forbes.com/sites/narrativescience/2012/04/17/forbes-earnings-preview-new-york-times-company-3/ Sulzberger, A. (2011) A Letter to Our Readers a bout Digital Subscriptions, Retrieved from http://www.nytimes.com/2011/03/18/opinion/l18times.html The New York Times Company (2012) 2011 Annual Report, Retrieved from http://www.nytco.com/pdf/annual_2011/2011NYTannual.pdf The New York Times Company, (2012b), About the Company, Retrieved from http://www.nytco.com/company/index.html Read More