Case Study -Yahoo
The desire to demonstrate incremental success is at the heart of every business. To achieve growth, businesses need to develop growth strategies, which involve well-informed decisions focused on increasing financial performance. Such strategies emphasize on the application of organizational resources to critical areas for profitable growth. Yahoo has recorded phenomenal growth within the last two decades, providing a whole host of network based services. However, the ushering of the dot com era has presented a serious market problem for Yahoo, following the growth and expansion of rival competitors.
As aforementioned in the case study materials, Yahoo faces serious internal and external challenges that require the development of an effective strategic management approach. However, to turn back to its former glory, the company must assess its long term direction, examines its scope of activities, gain advantage over its rivals, address changes in the business environment, build on its resources and competencies and meet the values and expectations of its stakeholders. This paper presents recommendations that would help yahoo in the development of its strategic management plans with the issues facing their company.
Recommendation 1: Restructure its internal Environment
Resource based strategy views strategic management within the lenses of exploiting the strategic capability of an organization, in terms of its resources and competences, to provide competitive advantage and yield new opportunities. The case study material has revealed that Yahoo possesses a number of internal competencies than most of it rivals. First, it has a well-structured directory and an authenticated business library that can be developed and customized into a new and good source of revenue. Second, capacity to provide customized and contextual advertising is a critical competitive tool. Third, it has a mobile segment with its auxiliary products and effective relationship with third party service providers. Last, Yahoo has a team of employees that have the technical and managerial capacities to support the company towards its goals. However, the internet world is constantly changing and Yahoo must keep up with the changes.
To restructure its internal environment, Yahoo must focus on employee skills improvement; focus on internal operational efficiency, focus on long-term sustained growth, exploit its internal competencies such as its strong customer base and financial strength, and last, develop and implement a differentiated strategy to avoid over-reliance on contextual advertising and offering premium services.
Williams (2008) defines operational skills as key positive attributes that lead to operational efficiency and help in the achievement of organizational goals. These skills comprise of inspiring leadership, operational efficiencies, human skill management and cost leadership. This can be achieved through the development of an enabling internal environment and a greater focus on the people. Yahoo must focus on the development of an internal environment upon which people can contribute to supporting an organizational success. This is because the growth and development of the people and their concerted efforts towards an achievement of a common goal are increasingly taking centre stage in leadership analysis.
For an organization that focuses on growth such as the case of Yahoo, leadership forms one of the most prized and critical element and there is need to attach greatest effort towards the development of enabling environment upon which organizational objectives can be achieved. Employees are the greatest asset of an organization through which organizational objectives and their realization are anchored because strategic management of human skill plays a critical role in enhancing the capacity of the top corporate leaders to support and engage frontline managers (Grant, 2003). Yahoo must seek to attract and retain best talents in order to in order to achieve a long-term direction and gain advantage over its competitors.
Within its internal environment, Yahoo is endowed with a number of privileged assets. Privileged assets are assets owned by a firm, which helps it achieve competitive advantage over its competitors because they are hard to imitate, are owned on basis of law or are limited in existence. The first and foremost distinctive competency of the company is the ability to enable people relate to their passion. This is as per Yahoo’s mission statement and is also reflective in the product portfolio. The company is probably the leader in the industry in terms of the number of services and products that the company offers.
For sustained growth, Yahoo must capitalize on its well-structured and authenticated business library because of their relation to sustained growth, operational efficiencies and competitive advantage. In addition, it must make strategic use of its established brands, efficient distribution channels and stable and large customer base. Yahoo’s distinctive competency of the company is the brand name, which has helped it retain its users despite its consistent problem in bringing new innovative products like its competitors Google and Facebook. The third and most important is the efficiency of Yahoo marketing services and its ability to attract customers and publishers.
Since its beginning the business model of Yahoo has been heavily reliant on contextual advertising and offering premium services. One of the most privileged assets an organization or firm may acquire in the course of business is a loyal, stable and large customer base because the capacity to acquire and retain customer base is a sign of growth and stability. There are only two key sources of competitive advantage for organisations, which include the ability to learn more about the needs of their customers’ faster than the competitors and to turn that knowledge or learning into actions faster than their competitors. To be customer centric therefore means knowing your customers an organization does not only know its customers, but also can turn the knowledge into an asset by meeting their needs and retaining them.
Customer centric requires organisations to consistently interact with their customers across all networks, collect customer data, analyse it to get insight into customer preferences and behaviour, act to provide these needs in the most effective way so both the customers and the business benefit from the relationship (Grant, 2003). Customer centric therefore consists of aligning the organisation’s resources, responding effectively and efficiently to the ever-changing customer needs and building relationships that are mutually benefiting to both parties. The resources referred to are not restricted to the customer service team or the personnel, but rather, all products and service, all personnel in the firm, operating systems and procedures, and the organisation’s systems have direct impact on the ability of the firm to become customer centric.
Financial strength is an important determinant of the capacity to implement strategic objectives of a company. The assessment of the case study materials reveals that Yahoo is probably the leader in the industry in terms of the number of services and products that the company offers. The possession of financial capacity to undertake organizational activities and programs is not only an important tool for competitive advantage and growth, but a demonstration of capacity to sustain business over a long period time. Yahoo must aim at injecting a large pool of its capital investments in specific target areas with the capacity to achieve high returns on investments. The differentiated strategy has been viewed as the most appropriate path to take in investment decisions because it remains the most viable path in solving the challenge of mixed fortunes, which has marked Yahoo’s profitability trends in the recent past.
Despite the simplicity of the strategy, keen interest for its success lies in comprehensive and detailed analysis of grave issues, a firm must also learn to do business differently in order to attain growth. The investment path chosen by Yahoo will have profound bearings on its cost of debt and the subsequent capital structure.
Recommendation 2: Understand both local and global market needs and develop a long term strategic approach
Yahoo is endowed with a wide range of external competencies such as large market base, which it can use to track and adjust real time. Due to the nature of internet, entry in to the web portal industry is relatively easy but based on the amount of capital, innovative skills and technological knowledge required to attract and maintain a large user base in the web portal industry, the threat of new entrants that can compete directly with Yahoo is quite low. However, competition for the market share amongst the existing companies is very stiff. It is recommended that Yahoo seeks to penetrate the new and emerging markets, create value innovation in its products and develop a long-term strategy which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations.
A number of approaches are available for categorization and of operational business processes in accordance with rate of applicability, and change level required. Williams (2008) observes that, “quality-oriented methods such as business process improvement and activity-based costing mechanisms are intended to yield continuous but incremental improvement that serve the purpose of an organization’s long term objectives.” Continuous improvement through value innovation is a contextual approach of business process improvement whose outcome will lead to incremental improvement for Yahoo.
It is hardly possible to achieve radical and continuous improvement at one go; therefore, Yahoo need to devise ways of harmonising the two different innovation procedures. Radical and continuous innovations apply transversely between business processes but intermittently within a single business process. Hence, there should be a paradigm shift to from the conventional ways of practicing innovation (radical) to practicable innovation (continuous).
In addition, to achieve its long-term strategic intent, the company must focus on the development of its market and adapt to the continuous changes that encompass the internet industry. Market development, as a measure of growth, requires a strong commercialization plan, which revolves around the need to adapt brands to meet local and regional culture and hold onto the cultural changes. This is because of the understanding that branding act as a means of linking items to product line and emphasizes the individuality of product items. This emphasis can only be achieved in instances where products items fit into the local or regional culture of the target market (Hall, Jones, Raffo & Anderton, 2009). This is a competitive advantage that is commonly used by competing firms engaged in the sale of similar or substitute products. In essence, this means that Yahoo outperforms the others in the primary goal of performance-profitability, and as such, acquires the competitive advantage.
A reference back to the branding generic model of firms can be made, where the question of whether firms are branding strategies is cost driven or value added arises. Value added competitive advantage arises in instances where competing firms attach strong cognizance to the value addition of their products before launching their product lines and is an important measure to market development. Yahoo will succeed in its branding strategies better than their rivals do if their products are positioned to capitalize on their unique characteristics of a local or regional group and which, in one or more aspects, their rivals find hard to emulate. This competitive advantage gives it a basis for outperforming competitors because of the value that firms are able to present to the customer and the long-term market development derived from these initiatives (Bonsu & Darmody, 2008).
In order to understand both local and global market needs and develop a long term strategic approach, Yahoo must develop special relationships with firms offering similar or different products. Developing special relationships is a key measure of growth because of the need for expansion of marketing chains. Firms engaged in global businesses require special forms of relationships to gain competitive advantage. Different entry strategies of a firm present a number of benefits that can be easily used to gain competitive advantage. Special relationships developed with other service providers enable firms to avoid substantial cost of delivering their services globally.
Other service providers not only help in pushing the product into the market, they also help in developing a cost leadership approach to business management, which are key advantages Yahoo can exploit. In addition, the choices and decisions in investments made are highly influenced by risks and are therefore fully dependent on risk profile. To minimize risks, ensure continuity and extend relationships, it is important to diversify the range of products and services availed to the market. This is because of the need to fulfil contingent of risk management activities and achieve a balanced dynamic portfolio. The underlying factor is that every business is faced with the principal aim of increasing the amount of wealth by making strategic choices that fit into profile risks and improves on the bottom line (Hitt & Ireland, 2008). To attain these objectives and tailor the resources towards growth, Yahoo must develop a clear delineation and paucity of the effects portfolio structure on the returns and risks.
Diversification also enhances relationships in cross-border alliances, which are main sources of incompatibility in the operations of business. Different cultures may generate differences in the operations of businesses in cross-border alliances. These include differences in leadership styles, objectives, reward systems, promotional strategies, governance, strategy and control among other managerial issues. One effect method of minimizing the impact of incompatibility in cross-border alliance is the harmonization of the culture that drives business (Cova & Salle, 2008). This forms the underlying path upon which companies in an alliance may develop uniform approaches strategic decision making, pursue common goals, develop common leadership styles and institute common control mechanisms.
When firms decide to expand their markets globally, they often reap beneficial outcomes as well as face a number of threats. Yahoo will achieve the opportunistic global market share through diversification of its products and markets. Diversification of markets helps in the long term cushioning of risks, especially in the event of stiff competition posed by new entrants in the traditional markets (Gupta, Gupta & Krishnaswami, 2013). Secondly, global operations enable firms to exploit different economic growth rates and scope. This enables a firm to benefit from realization of location and experience curve economies. Yahoo can make this an effective method of wading off competition from home, expanding the markets and pursuing a global imperative.
Yahoo must perpetrate for the challenges of globalization and rapid expansion. Entering culturally-closed markets is often one of the most daunting tasks for most marketing managers. However, with the right entry strategy and skills, it is possible to gain a sizable share of a culturally-closed market. In the absence of trade barriers, the focus should be on understanding the underlying issues of culture that drive such market dominance.
Yahoo has a chance in through strategic mergers and acquisition of firms that have the capacity to push its market expansion strategy. Globalization, market changes, and diminishing resources have led to an increase in mergers in the recent past (Hubbard, 2013). One issue that has been noted in the markets is the mergers with companies in different industries. Yahoo can merge with other service providers because it may want to benefit from the intangible resources of a new partner. These include proprietary process or brand names. In forging a common front, these companies are likely to exist harmoniously in the market and jointly fight competition in their respective industries. Yahoo may also develop better relationships with other companies to share major resources. In merging, they seek to operating synergies that may see them ahead of competition.
An organization’s structures and activities usually will change in the different stages of growth. This will be in response to the changes in the operating environment, both internal and external. The social capital, external networking and coaching needs are more intense and hands on during the early stages of innovative start-ups. The recommendations presented above provide an elaborate path upon which the company can attain its long term direction, examines its scope of activities, gain advantage over its rivals, address changes in the business environment, build on its resources and competencies and meet the values and expectations of its stakeholders.
Bonsu, S., Darmody, A. (2008), Co-creating Second Life – Market-consumer cooperation in contemporary economy, Journal of Macromarketing, 28(4), 355-368.
Cova, B.and Salle, R. (2008). Marketing solutions in accordance with the S-D logic: co-creating value with customer network actors, Industrial Marketing Management, 37, 270–277.
Grant, R. (2003). Contemporary Strategy Analysis: concepts, techniques, applications, 4th edition. Oxford: Blackwell publishing.
Gupta, P.D., Gupta, S. and Krishnaswami, S.S. (2013). Firm growth and its determinants. Journal of Innovation and Entrepreneurship, 2:15-27.
Hall, D.Jones, R.Raffo, C.,and Anderton, A. 2009. Business Studies. Fourth Edition. Pearson Education: Essex
Hitt, M.A. and Ireland, R.D. (2008). Competing For Advantage. Cengage Learning.
Williams, C., 2008. Effective management. 3rd Ed. London: Cengage Learning.
Yahoo 10K.(2011, 12 31).Yahoo 10k Annual Report. Retrieved from http://files.shareholder.com/downloads/YHOO/2120211742x0xS1193125-12-86972/1011006/filing.pdf