Strategic Management - an International Media Company - Assignment Example

Strategic Management - an International Media Company Table of Contents Introduction 1 Broadcasting Business of TNC 2 Generic Strategy of News Corporation 3 Other Strategies Applied by News Corporation: Diversification through Acquisition 5 Reasons behind Diversification Strategy 7 Advantages of Diversification 7 Disadvantages of Diversification 8 Conclusion 8 References 10 Introduction News Corporation is an international media company. They operate in several business areas such as television, cable network, direct broadcast satellite, magazines, newspapers, book publishing and films. The company operates over 25 TV stations. It is one of the leading publishers of English newspaper in the world. Few major markets where it operates are the US, the UK, Australia, Asia, Europe and New Guinea. Recently, the company added more than 36 additional channels in Europe, Latin America and Asia. Consequently, the profit was also recorded to be on rise continuously. Notably, in Italy they have gained popularity by the introduction of ‘Sky Italia’. ‘Sky Italia’ offers digital video recorder, which allows customer to store their favourite movies and television programmes in HD quality. For this reason people are ready to pay for ‘Sky Italia’ (News Corporation, 2009). Broadcasting Business of TNC News Corporation’s television business mainly includes ‘My Network TV’, FOX Entertainment and 27 TV stations. Their revenue comes mainly from advertisements of different sponsors of TV shows. Their main competitors are other TV stations and Cable Programme Networks, which compete for various TV shows, revenues from advertising and that of audiences. Around 15 percent to 18 percent of News Corporation’s total revenue comes from their television business. In the year 2009, their income from television business exceeded 4.6 billion Dollars. There was a decrease by 21% from the revenue generated in the fiscal year 2008 which amounted 1205 million Dollars. One of the reasons for this decline can be stated as the selling of few television stations in the year 2008. The revenues from advertisement also decreased because of weak market conditions (News Corporation, 2009). In the year 2010 News Corporation’s operating income saw an increase by 37% in comparison to 2009. It was recorded at $2.3 billion. All of their significant networks showed notable growth. Their revenues also increased by 8 percent in the year 2010. The revenue in 2010 was $32.8 billion Dollars and the net income was recorded at $2.5 billion Dollars (News Corporation, 2010). The Satellite Broadcasting Television section of News Corporation consists of ‘Sky Italia’. It provides television and broadband services via satellite directly to home. The audio & video quality, interactive programming and better service quality are the major factors of gaining a larger market share in the respective segment. Around 11 percent to 12 percent of the company’s revenue comes from this segment. For instance, in the year 2009 the revenues of ‘Sky Italia’ had increased by 11 million USD. Their number of subscribers also increased to 4.8 million in 2009 compared to 4.4 million in 2008. Consequently, their main competitors are the companies which provide high quality graphics and sound, good entertainment, various broadband internets and DTT (Direct to Home) services to the targeted market (News Corporation, 2009). Generic Strategy of News Corporation The News Corporation has employed various generic strategies that were introduced by Michael Porter. Michael Porter had proposed three strategies in order to increase competitive advantage of a company. These are ‘cost leadership’, ‘differentiation’ and ‘market segmentation’. Considering the current strategies implied in the organisation, i.e. the News Corporation, it can be observed that the company has followed the differentiation and the segmentation strategies according to the Porter’s Generic Model. As stated by Porter, differentiation strategy is highly advantageous in a broad market scope. News Corporation has broadened their market scope by expanding their business from newspapers to cable networks, direct broadcast satellites, magazines, book publishing and films segment. The company also instigated various acquisitions in order to gain a higher level of competitive edge. For instance, by acquiring Fox Entertainment, the News Corporation was able to differentiate their position in terms of network performance. The News Corporation also acquired ‘Worthnet.fox’, ‘Jivox’, ‘VDOPIA’ and ‘Utarget.FOX’ network. These are few of the advertisement networks of News Corporation. However, the company also follows a segmentation strategy, i.e. the company is solely based on the global media industry focussing primarily on the young generation (Athens University of Economics and Business, n.d.). News Corporation commenced their business in the year 1923. In thirty years, they have widely expanded their functions, publishing two national magazines and twenty newspapers. These acquisitions have made the News Corporation financially strong which helped them to expand their business in the US and the UK markets as well. With the assistance of effective strategies, the company managed to become a world leader in its respective sector. It is worth mentioning that News Corporation implied different acquisition strategies in order to expand and grow. They acquired various companies and provided the right to use latest technologies (Stirling University Business Club, 2010). To be specific, the company executed various acquisitions of its competitive firms as its aggressive business strategy. Presently, the company owns the Fox Entertainment which produces and markets movies in the international platform. The company had released several epic movies in the year 2002. Twentieth Century Fox which works under Fox Entertainment of News Corporation has made an exclusive profit of around 473 million USD from the movies such as Ice Age, Planet of the Apes and Star Wars (Murdoch, 1999). It is not only that the News Corporation being the parent company has acquired other global companies but also its subsidiaries acquired several other major players of the industry. For example, The Fox Interactive Media of News Corporation has acquired two internet corporations for enhancing their internet operations. They also acquired one of the popular networking sites MySpace.com. Besides MySpace.com, The Fox Interactive Media acquired Newsroom, a news company of San Francisco and KSolo, a company of New York. It can enhance the customers’ experience and empower the users. According to Michel Arrington, the owner of techcrunch.com, the price of the two organisations bought by Fox Media is approximately 10 million USD each (Rosenbush, 2006). Other Strategies Applied by News Corporation: Diversification through Acquisition Diversification to fresh market can also be termed as one of the expansion strategies of News Corporation in order to attain a certain level of cost leadership in the global market. Their initial business was to publish newspapers and from there they diversified their business towards direct broadcast satellite TV. In case of diversification of TV programme channel, The News Corporation first developed their business from movie channels and than diversified it to sports channels such as ‘Sky Sports’. This acquisition resulted in an increase of one million subscribers within 6 weeks rewarding a stimulated growth to News Corporation (News Corporation, 2010). News Corporation also owns the Satellite TV Company named Sky Italia (SI). It is a popular company of Italy and has almost 4 million subscribers. SI has one third of all the UK direct broadcast TV satellite subscribers and it is also a leading broadcaster of sports, entertainment, movies and news. The News Corporation also acquires 20 percent of the famous TV Broadcast Company of Asia i.e. TATA Sky (News Corporation, 2010). In the year 2010, the News Corporation provided a proposal to acquire the ‘British Sky Broadcasting’ i.e. ‘BSkyB’. However, currently the company owns almost 39 percent of the BSkyB’s share (News Corporation, 2010). Reasons behind Diversification Strategy News Corporation was recognised as a small media and news company until the year 2001. But currently the company holds a position of the market leader in the global industry. They diversified their business to Direct Broadcast Satellite TV and acquired various companies in this concern. Notably, diversifications undertaken by the company can be termed as the major reason for its success and development. Although diversification strategies possess a potential risk, a firm must diversify their activities in due course of time in order to grow and survive. For instance, in the year 2003, News Corporation acquired Direct TV which was recognised to be one of the leading satellite TV providers in America. Consequently, the acquisition rewarded News Corporation, the position of world’s largest satellite provider earning a profit of 6.5 billion USD in the year 2003. Currently the company has 12.6 million customers in the US (Kumar & Madhab, 2004). Advantages of Diversification By diversifying its business, a company can gain efficiency because it can utilise its resources economically. Diversification also increases the marketing power of any company. Company can make extra surpluses which other competing companies are not able to acquire. Diversification can improve the quality of services. For example, News Corporation bought Fox Entertainment which provides the company a broader platform i.e. making movies and films. The sales and distribution can also rise by a good brand name. A renowned brand identity always provides benefit in new market for an organisation. By diversification a company doesn’t need to depend on a single business anymore. If one business is not performing well and making losses, company can recover it with other businesses and thus can control the risk (Scribd, n.d.). Disadvantages of Diversification Diversification to other businesses can also lead to slow growth of company’s original business. Diversification calls for great deal of cost. Merging of company can also incur losses. Certain business units can be subsidised by other units which are already making profit. For example, when the Sky TV of News Corporation experienced loss of almost £10 million / month, the overall profits of News Corporation was also affected. The political and legal restrictions can also be a hindrance of diversification strategy. An acquisition may often result in failure if there is a disparity between the original business of the organisation and diversified business of the organisation. This can also lead to bear huge losses because the company has already spent a large sum of money for acquiring another company (Scribd, n.d.). Conclusion News Corporation is the leading publisher of newspaper and other businesses such as TV, satellite broadcasting and others. It is a ‘diversified international media’ organisation. They have eight segments where it operates. Their operations are mainly situated in the US, Europe, the UK, Asia, Australia and Latin America. Diversity is a significant element of News Corporation’s successful business strategy. Implementing and supporting the diversification process have led the company to develop and grow the business all over the world and achieve long term success. Over the years, News Corporation has enhanced diversity in order to increase the amount of profit. References Athens University of Economics and Business, No Date. Porter's Generic Strategies. Cases. [Online] Available at: http://e-learning.dmst.aueb.gr/mis/Cases/7-Eleven/Case/Porter%27s_Generic_Strategies.pdf [Accessed February 24, 2011]. Kumar, P. & Madhab, T. P., 2004. News Corporation's Acquisition of DirecTV: A Strategic Fit. IBS Case Development Centre. [Online] Available at: http://www.ibscdc.org/Case_Studies/Strategy/Mergers,%20Acquisitions%20and%20Takeovers/MAA0015.htm [Accessed February 24, 2011]. Murdoch, R., 1999. News Corp: Making of a Global Media Business. Casestudies. [Online] Available at: http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy3/News%20Corp-Making%20of%20a%20Global%20Media%20Business.htm [Accessed February 24, 2011]. News Corporation, 2010. New York. Press Releases. [Online] Available at: http://www.newsCorporationcom/news/news_454.html [Accessed February 24, 2011]. News Corporation, 2010. What We Do: Direct Broadcast Satellite TV. Careers. [Online] Available at: http://careers.newsCorporationcom/directbroadcastsatellite.html [Accessed February 24, 2011]. News Corporation, 2010. Annual Report 2010. Letter to Stockholders. [Online] Available at: http://www.newscorp.com/Report2010/letter_to_stockholders.html [Accessed February 24, 2011]. News Corporation, 2009. Annual Report 2009. News Corporation. [Online] Available at: http://www.newscorp.com/Report2009/AR2009.pdf [Accessed February 24, 2011]. Rosenbush, S., 2006. News Corporation's New Net Bets. Bloomberg Businessweek. [Online] Available at: http://www.businessweek.com/technology/content/may2006/tc20060502_678266.htm [Accessed February 24, 2011]. Scribd, No Date. Introduction. Diversification. [Online] Available at: http://www.scribd.com/doc/12376024/Advantages-and-Disadvantages-of-Diversification [Accessed February 24, 2011]. Stirling University Business Club, 2010. Compare and Contrast the Growth Strategies Developed by News Corporation and CRH. Management-Information-and-Control. [Online] Available at: http://su-bc.org/PDF/essays/MGT9A1_Management-Information-and-Control.pdf [Accessed February 24, 2011]. Read More