Yahoo Strategic Management
Short Description
Yahoo Strategic Management...
Description
MRC2213 STRATEGIC MANAGEMENT
Prepared by: Fazarizul Hashidi Bin Mohd Pauzi MR121133
Prepared for: Dr. Mas Bambang Baroto
Contents Introduction................................................................................................................ 1 1.
Vision and Mission Statement..............................................................................2
2.
PEST Analysis....................................................................................................... 3
3.
4.
2.1.
Political, Government and Legal Forces.........................................................3
2.2.
Economic Forces............................................................................................ 3
2.3.
Social, Cultural, Demographic and Natural Environment, Forces...................4
2.4.
Technological Forces...................................................................................... 5
2.5.
PEST Analysis Summary................................................................................. 5
2.6.
Conclusion..................................................................................................... 5
Competitive Analysis............................................................................................ 6 3.1.
Competitive Analysis Summary.....................................................................7
3.2.
Conclusion..................................................................................................... 7
Industry Analysis.................................................................................................. 8 4.1.
5.
6.
7.
Conclusion................................................................................................... 10
Michael Porter’s Five Forces............................................................................... 11 5.1.
Rivalry among competitors – Search Engine Business.................................11
5.2.
Entry of new competitor – Search Engine Business.....................................12
5.3.
Substitute products – Search Engine Business.............................................12
5.4.
Bargaining power of suppliers – Search Engine Business.............................12
5.5.
Bargaining power of buyers – Search Engine Business................................13
5.6.
Conclusion of Michael Porter’s 5 forces........................................................13
List of Opportunities and Threats.......................................................................14 6.1.
Opportunity.................................................................................................. 14
6.2.
Threats......................................................................................................... 15
External Factor Evaluation (EFE) Matrix.............................................................16 7.1.
Opportunities............................................................................................... 16
7.2.
Threat.......................................................................................................... 17
8.
Competitive Profile Matrix (CPM)........................................................................18
9.
Internal Environment Analysis............................................................................19 9.1.
Culture Assessment..................................................................................... 19
9.2.
Yahoo! Management Assessment Analysis..................................................21
9.3.
Yahoo!, Marketing Function Assessment Table.............................................22
9.4.
Financial Condition of Yahoo........................................................................24
10.
Financial Ratio – Time Series Data of Yahoo from 2006 to 2008......................25
11.
Production / Operation Assessment................................................................27
12.
Research and Development............................................................................ 28
13.
MIS Function Analysis...................................................................................... 28
14.
Company Value Chain Analysis (VCA).............................................................29
14.1.
Main Activities........................................................................................... 29
13.2.
Supportive Activities.................................................................................30
14.
List of All Strengths......................................................................................... 30
15.
List of All Weakness........................................................................................ 31
16.
Internal Factor Evaluation (IEF) Matrix (Strength)...........................................32
17.
Internal Factor Evaluation (IEF) Matrix (Weakness).........................................33
18. Yahoo’s Existing Long Term and Short Term Financial Objectives and Strategies................................................................................................................. 34 19.
Yahoo’s Existing Long Term and Short Term Strategic Objectives...................35
20.
Yahoo’s Existing Corporate Level Strategies...................................................36
21. Yahoo’s Existing Company’s Business Level Strategies. (Porter’s Five Generic Strategies)................................................................................................................ 37 22.
Strategy Formulation Tools. (SWOT Analysis)..................................................38
22.1.
Opportunities............................................................................................ 38
22.2.
Threats..................................................................................................... 38
22.3.
Strength.................................................................................................... 39
22.4.
Weakness.................................................................................................. 40
22.5.
SWOT Matrix............................................................................................. 41
23.
Converting into Strategic Terms......................................................................42
23.1.
Corporate Level Strategy..........................................................................42
23.2.
Business Level Strategy............................................................................42
23.3.
Selected Strategy Original Sentences.......................................................43
24.
Space Analysis................................................................................................ 44
24.1.
Factors that make up the space matrix axes............................................44
24.2.
Space Matrix............................................................................................. 46
25.
BCG Analysis................................................................................................... 49
25.1.
Internal-External Analysis.........................................................................49
26.
Grand Strategy Matrix..................................................................................... 50
27.
Final Conclusion of the results of all the strategy analysis..............................51
28.
Strategic Choice.............................................................................................. 52
29.
Quantitative Strategic Planning Matrix (QSPM)...............................................52
29.1.
Outcome of QSPM..................................................................................... 55
30.
Implementing Strategies: New Management Strategy....................................56
31.
Conclusion....................................................................................................... 57
Introduction Yahoo was formed by two Electrical Engineering PHD candidates from Stanford University, David Filo and Jerry Yang. They started Yahoo for personnel interest with no intention to developing it and to become a world recognized search engine. The initial name founded by these 2 people was “Jerry and Yang’s guide to the world wide web” and after which they identified a new name for Yahoo! which is an abbreviation for “Yet another Hierarchical Officious Oracle”. In this report the following methodology will be used to analyze the company’s competitive advantages among other search engine service providers and its potential in the industry.
1. Vision and Mission Statement 2. External Audit ( PEST, Competitive Analysis, Industry Analysis, Porter 5 Forces, EFE and CPM Matrix) 3. Internal Audit ( Internal Analysis, VCA and IFE Matrix) 4. Strategies in Action ( Strategic objectives and existing strategy) 5. Strategy Analysis ( SWOT, SPACE, IE Matrix, Grand Strategy Matrix and QSPM) 6. Strategy Implementation
1. Vision and Mission Statement
5
There is no clear indication for Yahoo vision statement in the case study. However, our suggestion is to use Yahoo’s strategy as a substitute for mission statement. “Yahoo’s powers and delights our communities of users, advertisers, and publishers – all of us united in creating indispensable experiences, and fueled by trust Yahoo! powers and delights”
No 1 2 3 4 5
Components Customer Products & Services Market Technology Survival, growth and
Case Fact of Mission Statement Advertisers and publishers No Data Communities of users No Data Yahoo! powers and delights
6 7 8 9
profitability Philosophy Self-Concept Concern for Public Image Concern for Employees
All of us united and Fueled by trust Creating indispensable experiences Delights our communities of users No Data
Based on the finding from the case study, Yahoo has 6 out of 9 components list, however Yahoo failed to address their standing on how much they value their employees, their far sight of technology and their major product and services offering. Otherwise, they have covered their business makeup and purpose and whom they want to serve and how they want to serve.
2. PEST Analysis 2.1.
Political, Government and Legal Forces
No Case Fact 1 Federal Communication Commission (FCC) adopted flexible access rules for users and wireless resellers in
Opportunities
Threats
√ 6
2
3
conjunction with agency‘s early 2008 wireless spectrum auction. ( Page 206 / Para 4 row 5) Due to changes in legislative requirements concerning technology sharing, patents rights and information security, future expenses and profitability of the companies operating with the industry are harder to predict. (Page 207 / Para 1 row 5) Technical and regulatory makes the projection of its business viability for existing companies difficult (Page 207 / Para 1 row 4)
2.2.
√
√
Economic Forces
No Case Fact 1 Yahoo is the second leading global internet brand and one of the most trafficked internet destination worldwide ( Page 201 / Para 2 / row 3) 2 There are 1.1 billion internet users around the world and 211 million in the USA as of end of 2006 (Page 202 / Para 7 row 1) 3 Economic growth in the USA and the world has slowed amid crisis in housing and credit market ( Page 202 / Para 8 row 1) 4 Rising unemployment and problematic geopolitics to the mix and USA had difficult economic back drop (Page 202 / Para 8 row 4) 5 Although internet related business have perhaps held better than their non-digital counterparts, but have still suffered from macroeconomics malaise.( Page 202 / Para 8 row 5) 6 In 2009, number of internet content and advertisement companies (including Bankrate Inc, Knot Inc… including Yahoo!) reported disappointing financial results and lowered their forward financial outlooks. (Page 202 / Para 8 row 7) 7 Internet media and market research firm comScore Inc, expressed concerns about deceleration in online growth. (Page 202 / Para 8 row 10) 8 Internet advertisement continues to grow though in slower pace ( Page 202 / Para 9 row 4 9 Broadband prices fall (Page 206 / Para 5 row 1)
Opportunities Threats √
√
√
√
√
√
√
√
√ √ 7
10 11
12
13
14
Internet advertisement revenue in USA remain strong, topping $ 23 billion (Page 202 / Para 9 row 1) Even Google Inc, expressed economic related caution in conjunction with its second quarter results (Page 202 / Para 8 row 9) Yahoo operates in the internet products, services and content markets, which are highly competitive and characterized by rapid change, converging technologies and increasing competition. (Page 206 / Para 1 row 1) From its first year of operation as a public company (2004), Google has increased its operating profit to $ 6.7 billion from a modest $ 852 million. ( Page 206 / Para 4 row 9) During 2008, Google had 72% of internet traffic while Yahoo only possessed 17% followed by MSN at 6% and IACI at 4% ( Page 206 / Para 1 row 6)Google had 72% of Internet traffic while Yahoo only possessed 17%. ( Page 206 / Para 1 row 6)
√ √
√
√
√
2.3. Social, Cultural, Demographic and Natural Environment, Forces. No Case Fact 1 Increased recognition that consumers spend more and more of their time online (Page 202 / Para 9 row 5)
2.4.
Opportunities Threats √
Technological Forces
No Case Fact 1 Future innovations and shifts in technology also make long term strategies regarding the internet and software services industry difficult. ( Page 207 / Para 1 row 8)
Opportunities
Threats √
8
2.5.
PEST Analysis Summary
No Pest Analysis 1 Economic Forces 2 Social, Cultural, Demographics and Environmental Forces 3 Political, Government and Legal Forces 4 Technological Forces Total
2.6.
Opportunities 6 1 1 0 8
Threats 9 0 2 1 12
Conclusion
From the case study given, Yahoo has 8 opportunities and 12 threats. From case fact in economy forces, Yahoo has opportunity and threat where in the statement it is stated that internet business have performed better than their non-digital counterparts but on the whole businesses were affected by the economy depression. Internet business has performed better than their non-digital counterparts are an opportunity and economy depression is a threat.
3. Competitive Analysis N o 1
2
3
Case Facts (Strengths) During 2008, Google had 72% of internet traffic while Yahoo only possessed 17% followed by MSN at 6% and IACI at 4% ( Page 206 / Para 1 row 6) In October 2007, Microsoft purchased a 2% stake in social networking firm Facebook Inc, valuing the private company $15 billion. Microsoft has an obvious and strong desire to increase its internet presence ( Page 206 / Para 2 row 7)
Opportunity
Threat √
√
√
9
4
5
6
7
8
9 10
11
N o 1
2
In 2009, Google is in talks with popular microblogging site, Twitter about a possible partnership. (Page 206 / Para 3 row 1) Google has expended well beyond search related function into areas such as e-mail (G-mail), mapping (Google Earth & Maps), Web Based productivity applications (Google Apps), video (Google Finance), a payment services (Google Checkout), a personalized portal offering (iGoogle), a mobile internet software platform (Android) and browser software ( Chrome Google). (Page 206 / Para 3 / row 1) Google’s pursuit of mobile internet opportunity has made it one of the main application providers for Apple Inc’s iPhone. ( Page 206 / Para 4 row 1) Google commands good portion of the revenue in the industry and is a formidable competitor to Yahoo! in particular. From its 1st year of operation as a public company (2004). Google has increased its operating profit to $ 6.7 billion form a modest $852 million. (Page 206 / Para 4 / row 7) AOL LLC, a division of Time Warner Inc, shifted its business model from paid subscription to a free, advertiser-based portal that is similar to those offered by Yahoo Inc and Google Inc. ( Page 206 / Para 5 row 2 & Page 207 / Para 1 row 1) Each company is committed to attract as many visitors (Page 207 / Para 1 row 3 & Exhibit 8) Microsoft‘s $6 billion acquisition of Quantive Inc and advertising solutions company, in Aug 2007 marked an important change. (Page 206 / Para 2 row 1) From its first year of operation as a public company (2004), Google has increased its operating profit to $ 6.7 billion from a modest $ 852 million. ( Page 206 / Para 4 row 9) Case Facts ( Weakness) Microsoft lost out in bidding war for privately held DoubleClick Inc a digital marketing technology and services company. (Page 206 / Para 2 row 3) Time Warner indicated that it might look to sell AOL access business ( Page 207 / Para 1 row 2)
√
√
√
√
√
√ √
√
Opportunity
Threats
√
√
10
3.1. No 1
Competitive Analysis Summary
Competitors Search Engine Service Providers Total
3.2.
Opportunity 2 2
Threat 11 10
Conclusion
The number of threats is more than its opportunity where there are 11 threats and just 2 opportunities. It can conclude that Yahoo needs an excellent strategic plan to continue their business either standalone or sign a deal with new partner like Microsoft if they wish to outnumber Google. Not much data is available in the case study on Yahoo to analyze their present situation and their future expansion plan.
4. Industry Analysis
Type of Product offering
No Case Facts Yahoo! 1 Yahoo owned and operates online properties and services, it also provides its advertising offerings and access to Internet users beyond Yahoo through its distribution network of third party entities, who have integrated its advertising offerings in to their web sites. (Page 201 / Para 2 row 5) 2 Although many of the services Yahoo, provides to users are free, it does charge fees for a range of premium services. (Page 201 / Para 2 row 9) 3 Yahoo !, offering include Yahoo! Groups, Yahoo! Answers and Flickr and are generally provided to users free of charge. (Page 202 / Para 2 row 1) 4 Yahoo! search offering include, Yahoo! Search, Yahoo! Local, Yahoo! Yellow Pages and Yahoo! Maps and available free to users. (Page 202 / Para 2 row 3) 5 Yahoo generates revenue through its Search offerings from search and display advertisement. (Page 202 / Para 2 row 5) 11
6
Yahoo! Communication segment include Yahoo! Mail, Zimbra Mail and Yahoo! Messenger and Yahoo ! generates display advertisement revenues from these offerings. (Page 202 / Para 3 row 1) Microsoft 1 Microsoft Corporation, Google and Time Warner Inc’s America Online business. Each of these firms offer an integrated variety of internet products and services. ( Page 206 / Para 1 row 4 ) Google 1 Google has expanded well beyond search related functions into areas such as e-mail (Gmail), mapping (Google Earth & Google Maps), Web-based productivity Search Engine Utilization applications (Google Apps), video (Google Video and You Tube Inc which Google Service Provider Net Income (Billion) Percentage of Usage Offices acquired in Nov 2006), a finance offering (iGoogle), a mobile Internet software Google 4.23 49.2 70 platform (Android) and browser software (Google Chrome). (Page Yahoo 0.4243 23.8 25 206 / Para 3 row 2) 2 During 2008, Google had 72% of internet traffic while Yahoo only possessed 17% followed by MSN at 6% and IACI at 4% ( Page 206 / Para 1 row 6)
Search Engine Utilization 5 4 3 Revenue (Billion)
2 1 0 20
25
30
35
40
45
50
55
Percentage of Usage
12
Search Engine Utilization
Yahoo, Google & MSN 25 20 15 Revenue in $ Billion
10 5 0 8,000 10,000 12,000 14,000 16,000 18,000 20,000 22,000 Total Number of Employees in Thounsand
Group Map of Revenue & Employee worth Comparison Revenue & Employee Comparison Each Employee Service Provider Revenue ($ Billion) Worth in $ (Million) Google 21.8 19.0 Yahoo 7.21 4.7 MSN (Microsoft) 0.058 4.3
4.1.
Most Trafficked 72% 17% 6%
Conclusion
Based on the two group maps, Google seems to be having the advantage among everyone in the industry. Google has the highest earning as per the exhibit 7 in the case study and the earnings and total usage is corresponding positively as shown in Search engine utilization strategic group map.
13
5. Michael Porter’s Five Forces
5.1. No 1
2 3 4
5 6
7
8
9
Rivalry among competitors – Search Engine Business Case Facts
Google has 72% of Internet traffic while Yahoo only possessed 17% followed by MSN at 6% and IACI at 4%. (Page 206 / Para 1 row 6) Exhibit 7, Google has 42% of search engine utilization compared to Yahoo which has 23.8%. (Page 206 / Exhibit 6) Google’s net income was $ 4.23 billion and Yahoo was $ 424.30 million (Page 207 / Exhibit 7) In October 2007, Microsoft purchased a 2% stake in a social networking firm Facebook, valuing the private company $15 billion. ( Page 206 / Para 2 row 7) Microsoft has an obvious and strong desire to increase its internet presence (Page 206 / Para 2 row 8) Google has expanded well beyond search related functions into areas such as e-mail (Gmail), mapping (Google Earth & Google Maps), Web-based productivity applications (Google Apps), video (Google Video and You Tube Inc which Google acquired in Nov 2006), a finance offering (iGoogle), a mobile Internet software platform (Android) and browser software (Google Chrome). (Page 206 / Para 3 row 2) Google’s pursuit of mobile internet opportunity has made it one of the main application providers for Apple Inc’s iPhone. ( Page 206 / Para 4 row 1) Google commands good portion of the revenue in the industry and is a formidable competitor to Yahoo! in particular. From its 1st year of operation as a public company (2004). Google has increased its operating profit to $ 6.7 billion form a modest $852 million. (Page 206/Para4/ row 7) Google has 20,222 employees globally higher than the employees in the entire internet business industry ( Exhibit 7 / Page 207)
Competitive Force Strong Moderate Weak √ √ √ √
√
√
√
√
√
14
5.2. N o 1
2
3
4 5
Case Facts
The industry has low barrier entry, technical and regulatory makes it easier for new firms to enter the industry. (Page 207 / Para 1 row 4) Due to changes in the legislative requirements concerning technology sharing, patent right and information security, future expenses and profitability of the companies operating within this industry are harder to predict. ( Page 207 / Para 1 row 4) Technical and regulatory makes the projection of its business viability for existing companies difficult (Page 207 / Para 1 row 4) There are 1.1 billion internet users around the world and 211 million in the USA as of end of 2006 (Page202/Para 7 row 1) Internet advertisement revenue in USA remain strong, topping $ 23 billion (Page 202 / Para 9 row 1)
5.3. N o 1
Entry of new competitor – Search Engine Business Competitive Force Stron Moderat Weak g e √ √
√
√ √
Substitute products – Search Engine Business Case Facts
There are top 25 Internet Properties, including Yahoo providing internet search engine services ( Exhibit 8 / Page 207)
Competitive Force Stron Moderat Weak g e √
5.4. Bargaining power of suppliers – Search Engine Business N o
Case Facts
Competitive Force Stron Moderat Weak g e 15
1
No Data Provided in Case Study
5.5.
N o 1
Bargaining power of buyers – Search Engine Business
Case Facts There are top 25 Internet Properties, including Yahoo providing internet search engine services – that buyers can choose ( Exhibit 8 / Page 207)
5.6. No 1 2 3 4 5 Total
Competitive Force Stron Moderat Weak g e √
Conclusion of Michael Porter’s 5 forces Forces Rivalry among competing firm Entry of New Competitor Substitute Products Bargaining power of suppliers Bargaining power of buyers
Strong 9 3 1 1 14
Moderate -
Weak 2 2
The pressure from the competitive forces on Yahoo! is very strong. Yahoo! has many industry players who are competing in the same market segment and providing almost identical product and services to its customers and users. Of all the biggest and toughest competitor is Google. Google has $ 3.8 billion more net income compared Yahoo! which is second largest internet brand. Thus, with the competitive forces analysis, we can conclude that Yahoo is indeed in a highly competitive industry and has to find ways to strategies’ their business if they want to increase their sustainability.
16
6. List of Opportunities and Threats. 6.1.
Opportunity
Opportunities Economic Forces No Case Facts 1 Yahoo is the second leading global internet brand and one of the most trafficked internet destination worldwide ( Page 201 / Para 2 / row 3) 2 There are 1.1 billion internet users around the world and 211 million in the USA as of end of 2006 ( Page 202 / Para 7 row 1) 3 Although internet related business have perhaps held better than their non-digital counterparts, but have still suffered from macroeconomics malaise.( Page 202 / Para 8 row 5) 4 Internet advertisement continues to grow though in slower pace. ( Page 202 / Para 9 row 4 5 Broadband prices fall. (Page 206 / Para 5 row 1) 6 Internet advertisement revenue in USA remains strong, topping $ 23 billion. (Page 202 / Para 9 row 1) 7 Even Google Inc, expressed economic related caution in conjunction with its second quarter results.(Page 202 / Para 8 row 9) Social, Culture, Demography No Case Facts 1 Increased recognition that consumers spend more and more of their time online (Page 202 / Para 9 row 5) Political, Legal and Government No Case Facts 1 Federal Communication Commission (FCC) adopted flexible access rules for users and wireless resellers in conjunction with agency‘s early 2008 wireless spectrum auction. (Page 206 / Para 4 row 5) Technologies Data not available in Case Study
17
6.2.
Threats
Threats Economic Forces N Case Facts o 1 Economic growth in the USA and the world has slowed amid crisis in housing and credit market ( Page 202 / Para 8 row 1) 2 Rising unemployment and problematic geopolitics to the mix and USA had difficult economic back drop ( Page 202 / Para 8 row 4) 3 In 2009, number of internet content and advertisement companies (including Bankrate Inc, Knot Inc… including Yahoo!) reported disappointing financial results and lowered their forward financial outlooks. ( Page 202 / Para 8 row 7) 4 Internet media and market research firm com Score Inc, expressed concerns about deceleration in online growth. (Page 202 / Para 8 row 10) 5 Yahoo operates in the internet products, services and content markets, which are highly competitive and characterized by rapid change, converging technologies and increasing competition. (Page 206 / Para 1 row 1) 6 Although internet related business have perhaps held better than their non-digital counterparts, but have still suffered from macroeconomics malaise. (Page 202 / Para 8 row 5) 7 From its first year of operation as a public company (2004), Google has increased its operating profit to $ 6.7 billion from a modest $ 852 million. ( Page 206 / Para 4 row 9) 8 During 2008, Google had 72% of internet traffic while Yahoo only possessed 17% followed by MSN at 6% and IACI at 4% (Page 206 / Para 1 row 6) Political, Legal and Government N Case Facts o 1 Due to changes in legislative requirements concerning technology sharing, patents rights and information security, future expenses and profitability of the companies operating with the industry are harder to predict. (Page 207 / Para 1 row 5) 2 Technical and regulatory makes the projection of its business viability for existing companies difficult ( Page 207 / Para 1 row 4) Social, Culture and Demography 1 Data not available in Case Study Technologies N Case Facts o 1 Future innovations and shifts in technology also make long term strategies regarding the internet and software services industry difficult. ( Page 207 / Para 1 row 8) 18
7. External Factor Evaluation (EFE) Matrix 7.1.
Opportunities
Key External Factors Opportunities – Economical Factor Yahoo is the second leading global internet brand and one of 1 the most trafficked internet destination worldwide (Page 201/Para2 / row 3) There are 1.1 billion internet users around the world and 211 2 million in the USA as of end of 2006 (Page202 /Para 7 row 1) Although internet related business have perhaps held better 3 than their non-digital counterparts, but have still suffered from macroeconomics malaise.( Page 202 / Para 8 row 5) Internet advertisement continues to grow though in slower pace. (Page 202 / Para 9 row 4) 5 Broadband prices fall. (Page 206 / Para 5 row 1) Internet advertisement revenue in USA remains strong, 6 topping $ 23 billion. (Page 202 / Para 9 row 1) Even Google Inc, expressed economic related caution in 7 conjunction with its second quarter results.(Page 202 / Para 8 row 9) Opportunities - Political, Legal and Government Federal Communication Commission (FCC) adopted flexible access rules for users and wireless resellers in conjunction 1 with agency‘s early 2008 wireless spectrum auction. ( Page 206 / Para 4 row 5) Opportunities – Technologies 1 Data not available in Case Study Opportunities – Social, Culture and Demographic Increased recognition that consumers spend more and more of 1 their time online (Page 202 / Para 9 row 5) 4
Weight Rating
Weighed Score
0.20
4
0.8
0.09
4
0.36
0.07
1
0.07
0.15
1
0.15
0.04
2
0.08
0.03
3
0.09
0.02
1
0.02
0.04
2
0.08
0.02
4
0.08
19
7.2.
Threat
Key External Factors Threat – Economical Factor Economic growth in the USA and the world has slowed amid 1 crisis in housing and credit market ( Page 202 / Para 8 row 1) Rising unemployment and problematic geopolitics to the mix 2 and USA had difficult economic back drop. ( Page 202 / Para 8 row 4) In 2009, number of internet content and advertisement companies (including Bankrate Inc, Knot Inc. including 3 Yahoo!) reported disappointing financial results and lowered their forward financial outlooks. ( Page 202 / Para 8 row 7)
Weight
Rating
Weighed Score
0.02
2
0.04
0.02
2
0.04
0.04
4
0.16
Internet media and market research firm comScore Inc, 4 expressed concerns about deceleration in online growth. (Page 202 / Para 8 row 10)
0.02
3
0.06
Yahoo operates in the internet products, services and content markets, which are highly competitive and characterized by 5 rapid change, converging technologies and increasing competition.(Page 206 / Para 1 row 1)
0.05
4
0.2
Although internet related business have perhaps held better 6 than their non-digital counterparts, but have still suffered from macroeconomics malaise.( Page 202 / Para 8 row 5)
0.02
1
0.02
From its first year of operation as a public company (2004), 7 Google has increased its operating profit to $ 6.7 billion from a modest $ 852 million. ( Page 206 / Para 4 row 9)
0.05
3
0.15
0.02
4
0.08
0.02
1
0.02
During 2008, Google had 72% of internet traffic while Yahoo 8 only possessed 17% followed by MSN at 6% and IACI at 4% ( Page 206 / Para 1 row 6) Threat - Political, Legal and Government Due to changes in legislative requirements concerning technology sharing, patents rights and information security, 1 future expenses and profitability of the companies operating with the industry are harder to predict. (Page 207/Para1 row5)
20
Technical and regulatory makes the projection of its 2 business viability for existing companies difficult ( Page 207 / Para 1 row 4)
Threat – Technologies Future innovations and shifts in technology also make long 1 term strategies regarding the internet and software services industry difficult. ( Page 207 / Para 1 row 8) Threat – Social, Culture and Demography 1 Data not available in Case Study Total
0.03
1
0.03
0.05
3
0.15
1
2.68
Total weighted score of Yahoo! is 2.68 > average total weighted score which is 2.50. With this we can conclude that Yahoo! still in the strong position. This score indicates Yahoo! is responding in an outstanding way to existing threat and opportunities in the industry. Meaning, Yahoo! is effectively taking advantage of the existing opportunities and minimizes the adverse effect of the external threats.
8. Competitive Profile Matrix (CPM) No
1 2 3 4 5
Key Success Factor Market Capital Quarterly Growth Gross Margin Revenue Net Income
Yahoo Weight Rating Weighted Score
Google Rating Weighted Score
Industry Rating Weighted Score
0.20
2
0.40
3
0.60
1
0.20
0.10
1
0.10
3
0.30
2
0.20
0.10
1
0.10
1
0.10
1
0.10
0.25 0.35
3 3
0.75 1.05
4 4
1 1.40
1 N/A
0.25 N/A
Total 1 2.40 3.40 0.75 Ratings: 1) = Major Weakness, 2) = Minor Weakness, 3) = Minor Strength, 4) = Major Strength Based on the CPM, Google is having the highest rating which 3.40 closer to 4. This is apparent in the case study that, Google is the market leader and Yahoo! is the 2nd most preferred internet
21
search engine. Hence, the number 3.40 shows relative strength of Google in the internet – search engine industry and followed by Yahoo! receiving 2.40.
9. Internal Environment Analysis 9.1. N o 1
Items Value
2
Beliefs
3
Rites
Culture Assessment Companies Within the Industry Yahoo Google Case Facts Case Facts Ethics Yahoo’s code of ethics is Data not available in embedded in its six values, Case Study Excellence, Innovation, Customer Fixation, Teamwork, Community and Fun.(Page 202/Para 5 row 1) Unity Part of Yahoo’s vision & mission statement mentions – All us united in creating indispensable experience and fueled by trust. ( Page 202 / Para 5 row 2) Data not available in Case Study Increase in product offering Yahoo resumed discussion with Microsoft about search and advertising partnership as both firm struggle to compete with Google, but Yahoo rejected the offer from Microsoft (Page 201 / Para 1 row 1) Yahoo offering include Yahoo Group, Yahoo Answer and search offering
Strengt h
Weakness
√
√
Data not available in Case Study Increase in product offering Early 2009, Google in talks with the popular micro-blogging site. (Page 206/Para 3 row 1)
Google has expended well beyond searchrelated functions into
√
√
22
4
5
6
7
8
Rituals
Myths
Symbol
Heroes
Legend s
include Yahoo Search, Yahoo Local, Yahoo Yellow Page & Yahoo Maps are available free to users. Yahoo communication segment include Yahoo Mail, Zimbra Mail and Yahoo Massenger (Page 202 / Para 3 row 1 & Page 2020 / Para 4 row 1) Strategy & Operations Yahoo strategy and operations is to become the starting point for internet users. (Page 201 / Para 3 row 1) Multinational Yahoo has offices in more than 25 countries, province or territories. (Page 201 / Para 2 row 1) Brand Position Yahoo is the second leading global internet brand. (Page 201 / Para 2 row 3) Founders Carol Bartz and Jerry Yang, who developed their interest in internet made them to form an internet –search engine company called Yahoo into a global renown brand Yahoo! ( Page 201 / Para 6 row 1) Data not available in Case Study
areas such as e-mail, mapping, web-based productivity application, video, and you tube.(Page 206 / Para 1 row 2)
Data not available in Case Study
√
Data not available in Case Study
√
Data not available in Case Study
√
Data not available in Case Study
√
Data not available in Case Study
Conclusion
23
Yahoo! has all the good credibility to emerge as an industry leader and to earn the support from its customers to further improve their market expansion.
Companies Within the Industry No
1
2 3 4
5
Items
Planning
Organizing Motivating Staffing
Controlling
Yahoo Case Facts The core of Yahoo’s strategy and operations is to become the starting point for internet users, to become world’s largest advertisers and to deliver industry-leading open platforms that attract developers and publishers Yahoo must buy solutions (Page201/Para 3 row 1) Data not available in Case Study Data not available in Case Study Yahoo! has been extensively reducing its work force because of profit decline. In 2009 they eliminated 675 and 700 at the end of 2009. ( Page 201 / Para 4 row 6) For the 2nd quarter of 2009 cost cutting allowed Yahoo! to post 7% increase in profit up to $ 141.4 million. (Page 201 / Para 4 row 6) In July 2009, Yahoo! closed its third video property, Maven Network based in Cambridge Massachusetts and they plan to close twenty video services, including network site Yahoo! 360 and its Web hosting service Geocites. (Page201/Para5 row 1)
Weakness
Yahoo! Management Assessment Analysis Strength
9.2.
Google Case Facts √ Data not available in Case Study
Data not available in Case Study Data not available in Case Study Data not available in Case Study √
Data not available in Case Study √
√
24
Conclusion Based on the data given, Yahoo is seems to be doing well. However, this happened because of no available data from Google and detailed information of Yahoo! in the case study.
Companies Within the Industry N o 1
2
3
Items
Planning
Customer Analysis Selling product / Services
Yahoo Case Facts The core of Yahoo’s strategy and operations is to become the starting point for internet users, to provide must buy solutions for the world’s largest advertisers and to deliver industry-leading open platforms that attract developers and publishers. ( Page 201 / Para 3 row 1) Part of Yahoo’s code of ethics – Customer Fixation ( Page 202 / Para 6 row 3) Yahoo, together with it’s owned and operated online properties and services; it also provides advertising offerings and access to internet users beyond Yahoo through its distribution network of 3rd party entities. (Page 201 / Para 2 row 5)
Weakness
Yahoo!, Marketing Function Assessment Table. Strength
9.3.
Google Case Facts √ Data not available in Case Study
√ Data not available in Case Study Data not available in Case Study
√
25
Yahoo Owned and operated site increased 19% from 2006 to 2007 and increased 10% from 2007 to 2009. ( Page 205 / Exhibit 3) 4
5
6
Product & Services Planning
Yahoo offering include Yahoo Group, Yahoo Answer and search offering include Yahoo Search, Yahoo Local, Yahoo Yellow Page & Yahoo Maps are available free to users. Yahoo communication segment include Yahoo Mail ( Page 202 / Para 3 row 1) Yahoo & Microsoft struggle to compete with Google. ( Page 201 / Para 1 row 4)
Pricing
Yahoo generates revenue by providing marketing services to advertisers across hundreds of web sites. Although many of the services Yahoo provides to users are free, it does charge fee for a range of premium services. ( Page 201 / Para 2 row 7) Yahoo has offices in more than 25 countries
Distributio n
Google has expanded well beyond search related functions into areas such as email (Gmail), mapping (Google Earth & Google Maps), Web-based productivity applications (Google Apps), video (Google Video and You Tube Inc which Google acquired in Nov 2006), a finance offering (iGoogle), a mobile Internet software platform (Android) and browser software (Google Chrome). (Page 206 / Para 3 row 2) Data not available in Case Study
Data not available in Case Study
√
√
√
Conclusion From the assessment, Yahoo! has all the properties to emerge and to be the market leader in the internet search engine industry. However, they have to expand like what Google has done. They should explore on how they can be part of major android and smart phone manufacturers so that they can use Yahoo as the mobile Internet software platform just like how Google has done. 26
Companies Within the Industry N o 1
2
3
4
5
6
7
Yahoo Case Facts Yahoo!’s full year revenue in 2008 exceeded by $ 2.2 billion compared to 2007, despite the weakness in overall advertising. (Page 204/Para 1) Net Income of Yahoo in 2008 was $424,298 million which is 77% lesser compared to their 2006 net income (Page 203/Exhibit 1) Yahoo!, posted 78% in 1st Qtr 2009 profit decline and reacted by eliminating 675 more jobs on top of 2,500 job cuts in 2008 ( Page 201 / Para 4 row 1) Yahoo! advertising business is also deteriorating rapidly as the firm’s overall revenue fell by 13% in the 2nd quarter of 2009. Yahoo! IPO in April 1996 with total employee – stock raise to high of $ 120 in 2000 but for most 2009 it has been trading under $ 14. ( Page 202 / Para 2 row 1) Yahoo! lost 1% in rich media revenue, 1% in sponsorship and 2% in percent in 2008. (Page 202 / Para 6 row 1) Yahoo! has market capital of $18.29billion compared to Google which has $ 100.13 billion. (Page 207 / Exhibit 7)
Weakness
Financial Condition of Yahoo Strength
9.4.
Google Case Facts √ Data not available in Case Study
√ Data not available in Case Study √ Data not available in Case Study
Data not available in Case Study
√
Data not available in Case Study
√
Data not available in Case Study
√
Google had $ 100.13 billion market capital.(Page 207 / Exhibit 7)
√
Conclusion
27
Yahoo Financial was in bad shape because they were losing out to Google tremendously. This is because of they are not innovate and the way the operate their business unlike Google. Yahoo!, has to improve their product marketability and brand loyalty in order to gain market leader ship.
10. Financial Ratio – Time Series Data of Yahoo from 2006 to 2008 Items
The assessed company Yahoo FY06
The assessed company Yahoo FY07
The assessed company Yahoo FY08
Strength
2.78 2.65
√ √
2%
√
Current Ratio Quick Ratio
2.54 2.40
Debts to Total Asset Ratio Debt to Equity Ratio Long Term Debt to Equity Ratio Times Interest Earned Ratio
8%
Liquidity Ratio 1.41 1.33 Leverage Ratio 7%
10%
9%
3%
√
9.5%
1%
3%
√
No Data
No Data
No Data
N/A
Activity Ratio N/A
N/A
7.14
5.73
5.03
0.56
0.57
0.53
√
7.78
7.02
6.81
√
50.24
53
54
58% 18%
Profitability Ratio 59% 14%
58% 9.5%
Inventory Turnover Fixed Asset Turnover Total Asset Turnover Accounts Receivable Turnover Average Collection Period Gross Profit Ratio Operating Profit Ratio
Weakness
√
√
√ √
28
Net Profit Margin Return on Total Asset Return on Stockholders Equity Price Earnings Ratio
12% 6.5%
9.5% 5%
6% 3%
√ √
8%
7%
4%
√
26.92
25.53
41.38
√
Growth Ratio Sales 100% 108% 112% √ Net Income 100% 88% 44% √ Earnings Per 0.52 0.47 0.29 √ Share Dividend Per No Data No Data No Data Share No data given on the share price of Yahoo, since in the case study on page 202 /Para 2 row 3 its mentioned that Yahoo share has been trading under $ 14, hence a fix price of $12 is used to calculate the PE/Ratio. Conclusion Over financial performance based on time series data, Yahoo is in good shape but intensive competition from Google has snatched major chunk of the market share. Also, PE Ratio show their value is overpriced especially in 2009. Based on the case study, Google PE ratio is 23.86 and industry P/E ratio is 18.87 which far to lower compared to Yahoo. Yahoo should look into this if they want to increase in investment.
29
1 2
3 4 5
Items
Companies Within the Industry Yahoo Case Facts
Process
Data not available in Case Study Capacity Due to changes in legislative requirement concerning technology sharing, patent rights and information security, future expenses and profitability of the companies operating within this industry are harder to predict. ( Page 207 / para 1 row 5) Inventory Data not available in Case Study Workforce Data not available in Case Study Quality The core of Yahoo’s strategy and operations is to become the starting point for internet users, to provide must buy solutions for the world’s largest advertisers and to deliver industry-leading open platforms that attract developers and publishers. (Page 201/Para3 row 1)
Google Case Facts
Weakness
N o
Strength
11. Production / Operation Assessment
Data not available in Case Study
Data not available in Case Study
√
Data not available in Case Study Data not available in Case Study
Data not available in Case Study
√
Conclusion The reason Yahoo become a non-manufacturing is because of the company do not have a enough production criteria in this assessment.
30
12. Research and Development No Case Facts 1
Strengt h
Weakness
Data not Available in Case Study
Conclusion There is no case fact given in the case study to analyze Yahoo MIS Function.
13. MIS Function Analysis No 1 2 3 4 5 6 7
8 9
Items All Managers Use MIS to make decision CIO / Director of MIS MIS Data are updated regularly Effectiveness of MIS Password The strategist familiar with the MIS rivals MIS user friendly
Companies Within the Industry Yahoo Google Case Facts Case Facts Data not available Data not available in Case Study in Case Study Data not available Data not available in Case Study in Case Study Data not available Data not available in Case Study in Case Study Data not available Data not available in Case Study in Case Study Data not available Data not available in Case Study in Case Study Data not available Data not available in Case Study in Case Study Data not available Data not available in Case Study in Case Study
All users of MIS understand the Competitive advantage of MIS MIS Training is provided Data not available in Case Study The MIS continually Data not available being improved in Case Study
Strength Weakness
Data not available in Case Study Data not available in Case Study
Conclusion There is no case fact given in the case study to analyze Yahoo MIS Function.
31
14. Company Value Chain Analysis (VCA) 14.1. No 1 2 3
Main Activities. Items
Supplier / Raw Material Process / Production Product Product or type of Services Offered
Companies Within Industry Yahoo! Case Facts Data not available in Case Study Data not available in Case Study
Product Segment – Yahoo! Groups
Yahoo generates revenue by providing marketing services to advertisers across hundreds of web sites.(Page 201 / Para 2 row 9) Yahoo! Groups – offering, Yahoo! Answers and Flickr – generally offered free of charge
Product Segment – Yahoo! Search
Yahoo! Search, - offering, Yahoo! Search, Yahoo! Local, Yahoo! Yellow Pages and Yahoo! Maps
Product Segment – Yahoo! Communication Revenue Generation
Yahoo! Mail, Zimbra Mail and Yahoo! Messenger
4 5
Distribution Marketing
5
Marketing
13.2.
All the services provided to the users are for free, however, they generate revenue through its search offering from display advertising (Page 202/Para3 row 5) Yahoo! Search generates revenue through its search offering from search and display advertisement. ( Page 202 / Para 1 row 6) Yahoo! Communication generates revenue through display advertising revenues from these offering. ( Page 202 / Para 3 row 1) Data not available in Case Study Yahoo! lost 1% in rich media revenue, 1% in sponsorship and 2% in classified ads in 2008 as compared 2007. (Page 202 / Para 6 row 1). Although they had increase of revenue in 2008 compared to 2007, it was because of growth in the entire internet business rather than shift to Yahoo! (Page 202 / Para 6 row 2) Revenue generated by Yahoo! marketing activities has always being increasing between 8% from 2006 to 2007 and 4 % from 2007 to 2008.(Page 205 / Exhibit 3)
Supportive Activities 32
No Item 1 2 3
Culture Management Financial
4 5
Production Advertisemen t
Companies With Industry Yahoo! - Case Facts Case Facts are in Company’s Culture Assessment Table Case Facts are in Management’s Assessment Analysis Case Facts are in Financial Condition of Yahoo and Financial Ratios Analysis Case Facts are in Production and Operation Assessment Data not available in Case Study
14. List of All Strengths N o 1 2 3 4 5
6 7 8 9
10 11 12
Case Facts Yahoo! IPO stock rise to high of $ 120 in 2000. (Page 202 / Para 2 row 1) Yahoo is the second leading global internet brand and one of the most trafficked internet destination worldwide ( Page 201 / Para 2 / row 3) Yahoo’s code of ethics is embedded in its six values, Excellence, Innovation, Customer Fixation, Teamwork, Community and Fun. (Page 202 / Para 5 row 1) Part of Yahoo’s vision & mission statement mentions – All us united in creating indispensable experience and fueled by trust. ( Page 202 / Para 5 row 2) Vast product offering -Yahoo offering include Yahoo Group, Yahoo Answer and search offering include Yahoo Search, Yahoo Local, Yahoo Yellow Page & Yahoo Maps are available free to users. Yahoo communication segment include Yahoo Mail, Zimbra Mail and Yahoo Messenger (Page 202 / Para 3 row 1 & Page 2020 / Para 4 row 1) Yahoo has offices in more than 25 countries or territories. (Page 201 / Para 2 row 1) For the 2nd quarter of 2009 cost cutting allowed Yahoo! to post 7% increase in profit up to $ 141.4 million. (Page 201 / Para 4 row 6) Part of Yahoo’s code of ethics – Customer Fixation ( Page 202 / Para 6 row 3) Yahoo, together with its owned and operated online properties and services; it also provides advertising offerings and access to internet users beyond Yahoo through its distribution network of 3rd party entities. (Page 201 / Para 2 row 5) Yahoo!’s revenue in 2008 exceeded by $ 2.2 billion compared to 2007, despite the weakness in overall advertising. (Page 204 / Para 1) Revenue generated by Yahoo! marketing activities has always being increasing between 8% from 2006 to 2007 and 4 % from 2007 to 2008.(Page 205 / Exhibit 3) The core of Yahoo’s strategy and operations is to become the starting point for internet users, to provide must buy solutions for the world’s largest advertisers and to deliver industry-leading open platforms that attract developers and publishers. (Page 201 / Para 3 row 1).
15. List of All Weakness 33
N o 1
2
3 4 5 6 7 8
9 10 11 12 13 14 15 16 17
Case Facts Yahoo resumed discussion with Microsoft about search and advertising partnership as both firm struggle to compete with Google, but Yahoo rejected the offer from Microsoft (Page 201 / Para 1 row 1) In July 2009, Yahoo! closed its third video property, Maven Network based in Cambridge Massachusetts and they plan to close twenty video services, including network site Yahoo! 360 and its Web hosting service Geocites. (Page 201 / Para 5 row 1) Net Income of Yahoo in 2008 was $ 424,298 million which is 77% lesser compared to their net income in 2006 ( Page 203 / Exhibit 1) Yahoo!, posted 78% in 1st Qtr 2009 profit decline and reacted by eliminating 675 more jobs on top of 2,500 job cuts in 2008 ( Page 201 / Para 4 row 1) Yahoo! advertising business is also deteriorating rapidly as the firm’s overall revenue fell by 13% in the 2nd quarter of 2009. Yahoo! IPO in April 1996 with total employee – stock raise to high of $ 120 in 2000 but for most 2009 it has been trading under $ 14. ( Page 202 / Para 2 row 1) Yahoo! lost 1% in rich media revenue, 1% in sponsorship and 2% in percent in 2008. (Page 202 / Para 6 row 1) Yahoo offering include Yahoo Group, Yahoo Answer and search offering include Yahoo Search, Yahoo Local, Yahoo Yellow Page & Yahoo Maps are available free to users. Yahoo communication segment include Yahoo Mail. ( Page 202 / Para 3 row 1) Google has 72% of internet traffic while Yahoo only possessed 17% followed by MSN at 6% and IACI at 4%. ( Page 206 / Para 1 row 6) Lower Current Ratio Lower Quick Ratio Lower Operating Profit Margin Ratio Lower Net Profit Margin Ratio Lower Return on Total Asset Lower Return on Stockholder Equity Ratio High Price Earnings Ratio ( Over Valued) Yahoo & Microsoft struggle to compete with Google. ( Page 201 / Para 1 row 4)
16. Internal Factor Evaluation (IEF) Matrix (Strength) No
Key Internal Factor
Weight
Rating Weighted Score 34
Strength 1 The core of Yahoo’s strategy and operations is to become the starting point for internet users, to provide must buy solutions for the world’s largest advertisers and to deliver industry-leading open platforms that attract developers and publishers. (Page 201 / Para 3 row 1). 2 Yahoo!’s full year revenue in 2008 exceeded by $ 2.2 billion compared to 2007, despite the weakness in overall advertising. (Page 204 / Para 1) 3 For the 2nd quarter of 2009 cost cutting allowed Yahoo! to post 7% increase in profit up to $ 141.4 million. (Page 201 / Para 4 row 6) 4 Revenue generated by Yahoo! marketing activities has always being increasing between 8% from 2006 to 2007 and 4 % from 2007 to 2008.(Page 205 / Exhibit 3) 5 Yahoo is the second leading global internet brand and one of the most trafficked internet destination worldwide (Page 201 / Para 2 / row 3) 6 Yahoo, together with its owned and operated online properties and services; it also provides advertising offerings and access to internet users beyond Yahoo through its distribution network of 3rd party entities. (Page 201 / Para 2 row 5) 7 Vast product offering -Yahoo offering include Yahoo Group, Yahoo Answer and search offering include Yahoo Search, Yahoo Local, Yahoo Yellow Page & Yahoo Maps are available free to users. Yahoo communication segment include Yahoo Mail, Zimbra Mail and Yahoo Messenger (Page 202 / Para 3 row 1 & Page 2020 / Para 4 row 1) 8 Yahoo has offices in more than 25 countries, province or territories. (Page 201 / Para 2 row 1) 9 Part of Yahoo’s code of ethics – Customer Fixation (Customer Centric) ( Page 202 / Para 6 row 3)
0.10
4
0.40
0.10
4
0.40
0.06
3
0.18
0.06
3
0.18
0.06
3
0.18
0.02
2
0.04
0.06
2
0.12
0.02
1
0.02
0.02
1
0.02
17. Internal Factor Evaluation (IEF) Matrix (Weakness) N Key Internal Factor o Weakness
Weight Ratin g
Weighted Score
35
1
2
3
4 5
6
7 8 9
Yahoo resumed discussion with Microsoft about search and advertising partnership as both firm struggle to compete with Google.(Page 201 / Para 1 row 1) In July 2009, Yahoo! closed its third video property, Maven Network based in Cambridge Massachusetts and they plan to close twenty video services, including network site Yahoo! 360 and its Web hosting service Geocites. (Page 201 / Para 5 row 1) Google has 72% of internet traffic while Yahoo only possessed 17% followed by MSN at 6% and IACI at 4%. ( Page 206 / Para 1 row 6) Yahoo & Microsoft struggle to compete with Google. ( Page 201 / Para 1 row 4) Net Income of Yahoo in 2008 was $ 424,298 million which is 77% lesser compared to their net income in 2006 ( Page 203 / Exhibit 1) Yahoo! advertising business is also deteriorating rapidly as the firm’s overall revenue fell by 13% in the 2nd quarter of 2009. Yahoo! lost 1% in rich media revenue, 1% in sponsorship and 2% in percent in 2008. (Page 202 / Para 6 row 1) Yahoo!, posted 78% in 1st Qtr 2009 profit decline. ( Page 201 / Para 4 row 1) Yahoo! IPO in April 1996 with total employee – stock raise to high of $ 120 in 2000 but for most 2009 it has been trading under $ 14. ( Page 202 / Para 2 row 1) Grand Total (Strength + Weakness)
0.10
4
0.40
0.07
3
0.21
0.07
3
0.21
0.07
3
0.21
0.06
3
0.18
0.05
3
0.15
0.05
3
0.15
0.01
2
0.02
0.02
1
0.02
1
3.09
Conclusion From the IFE Matrix analysis, Yahoo score 3.09 which is higher than average (2.50). It shows that the company has internal strength to compete with its major competitors. But they have to improvise their existing strategy either by merging with the existing industry players to diversify and in the same time it can increase their market share.
18. Yahoo’s Existing Long Term and Short Term Financial Objectives and Strategies. N o
Financial Objectives
Remark s
36
1
2
Short Term
Sustainable Increase revenue revenue 5% growth in 2009
Larger profit margin
Increasing operating margin by 10% in 2009
Yahoo! posted 78% 1st Qtr 2009 profit decline and reacted by eliminating another 675 jobs. (Page 201 / Para 4 row 1) 1st Qtr of 2008, Yahoo! revenue dropped 13% to $ 1.58 billion. (Page 201 / Para 4 row 3) Yahoo!’s online advertising business is also deteriorating rapidly as the firm‘s overall revenue fell 13% in 2nd Qtr of 2009 compared to prior year. (Page 201 / Para 4 row 5) That 2nd Qtr 09, Yahoo! managed to post 7% increase in profit up to $ 141.40 million through their aggressive cost cutting measures. ( Page 201 / Para 4 row 5) In 2009, Yahoo! closed its third video property, Maven networks, based in Cambridge, Massachusetts, and they plan to close twenty video services, including its social network site Yahoo! 360 and its Web hosting service Geo Cites. ( Page 201 / Para 5 row 1) Yahoo! IPO stock rose to the high $ 120 in 2000 and dropped to $ 14 for most of 2009. (Page 202 / Para 2 row 1) Yahoo! lost 1% in rich media revenue, 1% in sponsorship and 2% in classified ads in 2008 as compared to 2007. (Page 202 / Para 6 row 1) Yahoo!’s search revenue increased by 3% in 2008 compared to 2007 due to growth in the entire internet business rather than a shift to Yahoo. (Page 202 / Para 6 row 3) Yahoo! net income dropped by 44.44% in 2008 compared to 2007 even though their revenue increased by 3%. ( Page 203 / Exhibit 1) Yahoo!’s Operating Profit Margin in 2006 was 15% but in 2007 the operating profit margin drop to 10%. In 2008 its operating profit margin was 0.0017%
Unsuccessful
Long Term
Successful
Case Facts
√
√
√
√
√
√
√ √
√
√
37
3
Shareholde r value
Increase Yahoo’2 EPS in 2009 was 0.29 which is less by EPS by 15% 0.18 compared EPS in 2008. Yahoo’s EPS has in 2009 decreased by 39% in 2009 compared to EPS of 2008.
√
19. Yahoo’s Existing Long Term and Short Term Strategic Objectives
1
2
3
Long Term
Short Term
Market Share Growth
Increase Market Share by 2%
New Improved Product Development Increase Yahoo’s Offices Globally
Getting New Improved Product to Market Annually Increase number of employees to cater the needs of Internet Users
Remarks
Case Facts
Yahoo has resumed discussion with Microsoft about search and advertisement partnership as both firms struggle to compete with Google. (Page 201 / Para 1 row 1) Yahoo together with its owned and operated online properties and services, it also provides its advertising offerings and access to internet users beyond Yahoo through its distribution network of 3rd party entities, who integrated its advertising offering into their Web sites.(Page 201/Para2 row 4) Yahoo generates revenues by providing marketing services to advertisers across hundreds of Web Sites. (Page 201 / Para 2 row 7)
Unsuccessful
Strategic Objectives
Successful
N o
√
√
√
Data not available in Case Study
Data not available in Case Study
38
20. Yahoo’s Existing Corporate Level Strategies
1
2
3 4
5
Defensive Strategies
Case Facts
Yahoo has resumed discussion with Microsoft about search and advertisement partnership as both firm struggles to compete with Google. ( Page 201 / Para 1 row 1) Market Yahoo together with its owned, operated online properties and Penetration services, it also provides its advertising offerings and access to internet users beyond Yahoo through its distribution network of 3rd party entities, who integrated its advertising offering into their Web sites.(Page 201 / Para 2 row 4) Yahoo generates revenues by providing marketing services to advertisers from hundreds of Web Sites.(Page201/ Para 2 row 7) Vast product offering -Yahoo offering include Yahoo Group, Yahoo Answer and search offering include Yahoo Search, Yahoo Local, Yahoo Yellow Page & Yahoo Maps are available free to users. Yahoo communication segment include Yahoo Mail, Zimbra Mail and Yahoo Messenger (Page 202 / Para 3 row 1 & Page 2020 / Para 4 row 1) Market Yahoo has offices in more than 25 countries, province or Development territories. (Page 201 / Para 2 row 1) Retrenchmen For that 2nd Qtr, aggressive cost cutting allowed Yahoo to post t 7% increase in profit up to $ 141.4 million, but they laid off another 700 employees to end with 13,000 employees. ( page 201 / Para 4 row 5)
Unsuccessful
N o
Successful
Remarks
Horizontal Integration
Divestiture
In July 2009, Yahoo closed its 3rd video property, Maven Network, based in Cambridge, Massachusetts. ( Page 201 / Para 5 row 1) Yahoo plans to close twenty video services, including social network site Yahoo 360 and its Web hosting services GeoCities. ( Page 201 / Para 5 row 2)
√ √
√
√
√
√
√
√
21. Yahoo’s Existing Company’s Business Level Strategies. (Porter’s Five Generic Strategies) 39
Cost Leadershi p Type 2
Case Facts
Although many of the services Yahoo provides the users are free, it does charge fees for a range of premium services. ( Page 201 / Para 2 row 8) Yahoo search’s services are free to users and are often the starting point for users navigating the internet and searching for information. Yahoo generates revenues through its search offering from search and display advertising. (Page 202 / Para 3 row 3) Yahoo communications segments generate revenue display advertising revenues from these offering. (Page 202 / Para 2 row 1)
Unsuccessful
Name of Strategy
Successful
Remarks
√
√
√
Conclusion of Yahoo’s existing strategies. Corporate Level
Business Level
Horizontal Integration
Market Penetration
Cost Leadership Type 2
Market Development
Retrenchment
Divestiture
22. Strategy Formulation Tools. (SWOT Analysis) 22.1. No O1 O2
Opportunities
Case Facts Yahoo is the second leading global internet brand and one of the most trafficked internet destination worldwide ( Page 201 / Para 2 / row 3) There are 1.1 billion internet users around the world and 211 million in the USA as of end of 2006 ( Page 202 / Para 7 row 1) 40
O3
O4 O5 O6 O7 O8
O9 O1 0
Although internet related business have perhaps held better than their non-digital counterparts, but have still suffered from macroeconomics malaise.( Page 202 / Para 8 row 5) Internet advertisement continues to grow though in slower pace (Page 202 / Para 9 row 4 Broadband prices fall (Page 206 / Para 5 row 1) Internet advertisement revenue in USA remains strong, topping $ 23 billion . (Page 202 / Para 9 row 1) Increased recognition that consumers spend more and more of their time online. (Page 202 / Para 9 row 5) Federal Communication Commission (FCC) adopted flexible access rules for users and wireless resellers in conjunction with agency‘s early 2008 wireless spectrum auction. (Page 206 / Para 4 row 5) Even Google Inc, expressed economic related caution in conjunction with its second quarter results (Page 202 / Para 8 row 9) Yahoo resumed discussion with Microsoft about search and advertising partnership as both firm struggle to compete with Google. (Page 201 / Para 1 row 1)
22.2. N o T1 T2 T3 T4 T5
T6
T7 T8 T9
Threats
Case Facts Economic growth in the USA and the world has slowed amid crisis in housing and credit market.( Page 202 / Para 8 row 1) Rising unemployment and problematic geopolitics to the mix and USA had difficult economic back drop ( Page 202 / Para 8 row 4) Even though internet related business have possibly held better than their non-digital counterparts, but still suffered from macroeconomics malaise.(Page 202/Para 8 row 5) Internet media and market research firm com Score Inc, expressed concerns about deceleration in online growth. (Page 202 / Para 8 row 10) In 2009, number of internet content and advertisement companies (including Bankrate Inc, Knot Inc including Yahoo!) reported disappointing financial results and lowered their forward financial outlooks. ( Page 202 / Para 8 row 7) Due to changes in legislative requirements concerning technology sharing, patents rights and information security, future expenses and profitability of the companies operating with the industry are harder to predict. (Page 207 / Para 1 row 5) From its first year of operation as a public company (2004), Google has increased its operating profit to $ 6.7 billion from a modest $ 852 million. ( Page 206 / Para 4 row 9) Technical and regulatory makes the projection of its business viability for existing companies difficult ( Page 207 / Para 1 row 4) Future innovations and shifts in technology also make long term strategies regarding the internet and software services industry difficult. ( Page 207 / Para 1 row 8) 41
22.3. N o S1
S2 S3 S4 S5 S6
S7
S8 S9
Case Facts The core of Yahoo’s strategy and operations is to become the starting point for internet users, to provide must buy solutions for the world’s largest advertisers and to deliver industry-leading open platforms that attract developers and publishers. (Page 201 / Para 3 row 1). Yahoo!’s full year revenue in 2008 exceeded by $ 2.2 billion compared to 2007, despite the weakness in overall advertising. (Page 204 / Para 1) For the 2nd quarter of 2009 cost cutting allowed Yahoo! to post 7% increase in profit up to $ 141.4 million. (Page 201 / Para 4 row 6) Revenue generated by Yahoo! marketing activities has always being increasing between 8% from 2006 to 2007 and 4 % from 2007 to 2008.(Page 205 / Exhibit 3) Yahoo is the second leading global internet brand and one of the most trafficked internet destination worldwide ( Page 201 / Para 2 / row 3) Yahoo, together with it’s owned and operated online properties and services; it also provides advertising offerings and access to internet users beyond Yahoo through its distribution network of 3rd party entities. (Page 201 / Para 2 row 5) Vast product offering -Yahoo offering include Yahoo Group, Yahoo Answer and search offering include Yahoo Search, Yahoo Local, Yahoo Yellow Page & Yahoo Maps are available free to users. Yahoo communication segment include Yahoo Mail, Zimbra Mail and Yahoo Messenger (Page 202 / Para 3 row 1 & Page 2020 / Para 4 row 1) Yahoo has offices in more than 25 countries, province or territories. (Page 201 / Para 2 row 1) Part of Yahoo’s code of ethics – Customer Fixation (Customer Centric) ( Page 202 / Para 6 row 3)
22.4. No W 1 W 2 W 3 W 4 W
Strength
Weakness
Case Facts In 2008 Yahoo rejected the offer from Microsoft (Page 201 / Para 1 row 1) In July 2009, Yahoo! closed its third video property, Maven Network based in Cambridge Massachusetts and they plan to close twenty video services, including network site Yahoo! 360 and its Web hosting service Geocites. (Page 201 / Para 5 row 1) Net Income of Yahoo in 2008 was $ 424,298 million which is 77% lesser compared to their net income in 2006 ( Page 203 / Exhibit 1) Yahoo!, posted 78% in 1st Qtr 2009 profit decline. ( Page 201 / Para 4 row 1) Yahoo! advertising business is also deteriorating rapidly as the firm’s overall revenue fell 42
5 W 6 W 7
by 13% in the 2nd quarter of 2009. Yahoo! IPO in April 1996 with total employee – stock raise to high of $ 120 in 2000 but for most 2009 it has been trading under $ 14. ( Page 202 / Para 2 row 1) Yahoo! lost 1% in rich media revenue, 1% in sponsorship and 2% in percent in 2008. (Page 202 / Para 6 row 1)
22.5.
SWOT Matrix
43
44
23. Converting into Strategic Terms 23.1.
Corporate Level Strategy.
No 1
Type of Strategy Horizontal Integration
2
Market Penetration
3
Retrenchment
4
Divesture
23.2.
Business Level Strategy.
No 1
Type of Strategy Cost Leadership Type 2
2
Differentiation
23.3.
Alternative Strategies SO3 SO4 WO1 ST2 SO1 SO2 ST3 WO3 ST1 ST5 WT3 ST4
Alternative Strategies ST4 ST5 WO4 WT3 ST2 WT1 WT2 ST1
Selected Strategy Original Sentences.
Level of Strategy Original Alternative Strategies Business Level Strategy Cost Leadership Gain market share and position in the best place (Type 2) Corporate Level Strategy Horizontal Negotiate a deal with Microsoft to increase foothold in the Integration USA and Globally Market Sign up deal with smart phone manufacturers to include
Code ST5
WO1 ST1 45
Penetration Retrenchment Divesture
Yahoo a preferred search engine Increase service and product promotion via multiple channels to increase sales to prevent retrenchment Outsource non-core activity
WT1 WT3
Cost Leadership Type 2
Business Level
Horizontal Integration Market Integration
Corporate Level
Retrenchment
24. Space Analysis 24.1.
Factors that make up the space matrix axes
Internal Strategic Position Financial Position Yahoo’s revenue from 2007 to 2008 increased by 3.4% to $7.2 billion. But net income decreased by 35.7% to $ 424 million. (Page 201 / Para 2 row 2)
External Strategic Position Stability Position Yahoo operates in the Internet products, services and content markets, which are highly competitive and characterized by rapid change, converging technologies and increasing competition. ( Page 206 / Para 1 row 1) 46
Liquidity Ratio Current ratio is > 1 , except dropped a 1.13 in 2007 compared to 2006 but regain by 1.37 in 2008 Quick ratio is > 1 in 2006 and 2008, but dropped by 1.07 and regain by 1.32 in 2008. Leverage Ratio: Debt to total asset ratio decreased from 8% in 2006 to 2% in 2008 Long term debt to equity ratio decreased from 9.5% in 2006 to 3% in 2008 Activity Ratio: Fixed asset turnover ratio for was good 2006 reading 7.14 but dropped by 2.11 and ending with 5.03in 2008 Total asset turnover ratio is low at 0.56 from 2006 and ended with 0.53 in 2008 Profitability Ratio: Gross profit margin is within 59% to 58%, this shows cost of revenue is in the region of 40% of the sales generated. Operating profit ratio decreased from 18% in 2006 to 9.5% in 2008. Net profit margin in 2006 was 12% and decreased by 50% to end at 6% in 2008. ROA decreased by 3.5% from 2006 to 2008 ROE decreased by 50% from 2006 ending at 4% in 2008 EPS has decreased from 0.52 in 2006 to 0.29 in 2009 Price earnings ratio was 41.38 in 2009 Competitive Position Yahoo, together with its owned and operated online properties and services; it also provides advertising offerings and access to internet users beyond Yahoo through its distribution network of 3rd party entities. (Page 201 / Para 2 row 5) Vast product offering -Yahoo offering include Yahoo Group, Yahoo Answer and search
Internet advertising continues to grow, albeit slower pace. (Page 202 / Para
Add rising unemployment and problematic geopolitics to the mix and we have a difficult economic back drop to say least. (Page 202 / Para 8 row 4) Future innovations and shift in technology also make long term strategies regarding the Internet and software services industry difficult. ( Page 207 / Para 1 row 8)
Each company in the industry is committed to attract as many visitors (as Exhibit 8 demonstrates) as possible. ( Page 207 / Para 1 row 3) Although internet –related business have perhaps held up better than their non-digital counterparts, they have still suffered from macroeconomics malaise. ( Page 202 / Para 8 row 5)
Industry Position This trend confirms marketers increased recognition that consumers spend more and more of their time online.( Page 202 / Para 9 row 5)
Internet advertising revenues in the united states remain strong, topping $23 billion, 47
offering include Yahoo Search, Yahoo Local, Yahoo Yellow Page & Yahoo Maps are available free to users. Yahoo communication segment include Yahoo Mail, Zimbra Mail and Yahoo Messenger (Page 202 / Para 3 row 1 & Page 2020 / Para 4 row 1) Yahoo is the second leading global internet brand and one of the most trafficked internet destination worldwide ( Page 201 / Para 2 / row 3) Yahoo has offices in more than 25 countries, province or territories. (Page 201/Para 2 row 1)
Yahoo! sites has 140,080,000 unique visitors sharing the same number as Google ( Page 207 / Exhibit 8) The core of Yahoo’s strategy and operations is to become the starting point for internet users, to provide must buy solutions for the world’s largest advertisers and to deliver industryleading open platforms that attract developers and publishers. (Page 201 / Para 3 row 1).
24.2.
according to the 2008 Internet Advertising Revenue Report, released by Interactive Advertising Bureau and PricewaterhouseCoopers LLP (Pwc). (Page 202 / Para 9 row 1) Federal Communication Commission ( FCC) adopted flexible access rules for users and wireless resellers in conjunction with the agency’s early 2008 wireless spectrum auction. (Page 206 / Para 4 / row 4) As broadband prices fall, ISPs are pursuing new business strategies, such as bundling Internet access with voice and video services. ( Page 206 / Para 5 row 1) The industry, due to its low barrier entrytechnical and regulatory –makes the projection of its business viability for existing companies difficult. (Page 207/ Para1 row 4) There are 1.1 billion internet users around the world and 211 million in the USA as of end of 2006 ( Page 202 / Para 7 row 1)
Space Matrix
No Financial Position (FP) Yahoo’s revenue from 2007 to 2008 increased by 3.4% to $7.2 billion. But net 1 income decreased by 35.7% to $ 424 million. (Page 201 / Para 2 row 2) Liquidity Ratio 2 Current ratio is > 1 , except dropped a 1.13 in 2007 compared to 2006 but regain by 1.37 in 2008 Quick ratio is > 1 in 2006 and 2008, but dropped by 1.07 and regain by 1.32 in 2008. Leverage Ratio: 3 Debt to total asset ratio decreased from 8% in 2006 to 2% in 2008 Long term debt to equity ratio decreased from 9.5% in 2006 to Activity Ratio: 4 Fixed asset turnover ratio for was good 2006 reading 7.14 but dropped by 2.11
Ratings 1
1
1
3 48
5
6 7
and ending with 5.03in 2008 Total asset turnover ratio is low at 0.56 from 2006 and ended with 0.53 in 2008 Profitability Ratio: Gross profit margin is within 59% to 58%, this shows cost of revenue is in the region of 40% of the sales generated. Operating profit ratio decreased from 18% in 2006 to 9.5% in 2008. Net profit margin in 2006 was 12% and decreased by 50% to end at 6% in 2008. ROA decreased by 3.5% from 2006 to 2008 ROE decreased by 50% from 2006 ending at 4% in 2008 EPS has decreased from 0.52 in 2006 to 0.29 in 2009 Price earnings ratio was 41.38 in 2009 Price earnings ratio was 41.38 in 2009 Growth Ratio Sales started 100% in 2006 and ended up at 112% in 2008, each year sales increase by 8% in 2007 and 3% in 2008 Net Income ended in 2008 at 44%, each year net income decreased by 12% in 2007 and 35.7% in 2008.
Total No Stability Position ( SP) Yahoo operates in the Internet products, services and content markets, which 1 are highly competitive and characterized by rapid change, converging technologies and increasing competition. ( Page 206 / Para 1 row 1) 2 Internet advertising continues to grow, albeit slower pace. (Page 202 / Para 3 Add rising unemployment and problematic geopolitics to the mix and we have a difficult economic back drop to say least. (Page 202 / Para 8 row 4) 4 Each company in the industry is committed to attract as many visitors (as Exhibit 8 demonstrates) as possible. ( Page 207 / Para 1 row 3) 5 Although internet –related business have perhaps held up better than their nondigital counterparts, they have still suffered from macroeconomics malaise. (Page 202 / Para 8 row 5) 6 Google has 72% of Internet traffic while Yahoo only possessed 17% followed by MSN at 6% am IACI at 4%. (Page 206 / Para 1 row 6) 7 Future innovations and shift in technology also make long term strategies regarding the Internet and software services industry difficult. ( Page 207 / Para 1 row 8) Total No Competitive Position ( CP) Yahoo, together with it’s owned and operated online properties and services; it 1 also provides advertising offerings and access to internet users beyond Yahoo through its distribution network of 3rd party entities. (Page 201 / Para 2 row 5)
3
1 3
13 Ratings -4
-3 -4 -4 -3
-1 -3
-22 Ratings -2
49
2
Vast product offering -Yahoo offering include Yahoo Group, Yahoo Answer and search offering include Yahoo Search, Yahoo Local, Yahoo Yellow Page & -2 Yahoo Maps are available free to users. Yahoo communication segment include Yahoo Mail, Zimbra Mail and Yahoo Messenger (Page 202 / Para 3 row 1 & Page 2020 / Para 4 row 1) 3 Yahoo is the second leading global internet brand and one of the most -1 trafficked internet destination worldwide ( Page 201 / Para 2 / row 3) 4 Yahoo has offices in more than 25 countries, province or territories. (Page 201 / -2 Para 2 row 1) 5 Yahoo! sites has 140,080,000 unique visitors sharing the same number as -2 Google.( Page 207 / Exhibit 8) 6 The core of Yahoo’s strategy and operations is to become the starting point for -3 internet users, to provide must buy solutions for the world’s largest advertisers and to deliver industry-leading open platforms that attract developers and publishers. (Page 201 / Para 3 row 1). Total -12 No Industry Position ( IP) Ratings This trend confirms marketers increased recognition that consumers spend more 5 1 and more of their time online.( Page 202 / Para 9 row 5) 2 Internet advertising revenues in the united states remain strong, topping $23 billion, according to the 2008 Internet Advertising Revenue Report, released by 4 Interactive Advertising Bureau and PricewaterhouseCoopers LLP (Pwc). (Page 202 / Para 9 row 1) 3 Federal Communication Commission (FCC) adopted flexible access rules for 4 users and wireless resellers in conjunction with the agency’s early 2008 wireless spectrum auction. (Page 206 / Para 4 / row 4) 4 As broadband prices fall, ISPs are pursuing new business strategies, such as 3 bundling Internet access with voice and video services. ( Page 206 / Para 5 row 1) 5 The industry, due to its low barrier entry-technical and regulatory –makes the 3 projection of its business viability for existing companies difficult. ( Page 207 / Para1 row 4) 6 There are 1.1 billion internet users around the world and 211 million in the 7 USA as of end of 2006 ( Page 202 / Para 7 row 1) Total 26 SP Average : -22 ÷ 7 = -3.14 CP Average : -14 ÷ 6 = -2.3 Directional vector coordinates
IP Average : 26 ÷6 = 4.3 FP Average : 13 ÷ 7 = 1.86 X- axis -2.3 (+ 4.3) = 2 Y –axis -3.14(+1.88) = -1.26 Yahoo should choose competitive strategy
Conclusion
50
The result of SPACE Matrix situated in Competitive area. The following are the chosen strategies:
Horizontal Integration Market Penetration Market Development Product Development
25. BCG Analysis BCG Matrix is that it draws attention to the cash flow, investment characteristics and needs of an organization’s various divisions. Also, there is no industry growth rate data given in the case study, hence, this test cannot be conducted.
25.1.
Internal-External Analysis.
Total Revenue from FY06 –
Revenue (%)
Total Profit from FY06
Profit %
EFE
IFE
51
FY08 ($) 20,603,455
– FY08 ($) 1,835,689
100
100%
3.08
3.10
The Strategy chosen based on the Internal – External (IE) Matrix Horizontal Integration Market Penetration Market Development Product Development
26. Grand Strategy Matrix Y axis refer to revenue growth of the assess company (Yahoo), there are no data of the competitors’ revenue growth in the case study. Therefore, we cannot determine if Yahoo’s revenue growth is bad, moderate or rapid because there is no industrial standard. However, as stated in Strategic Management Concepts and Cases (David, 2013) firms whose annual growth in sales exceeds 5% could be considered to have rapid growth. As for Yahoo, the revenue growth in 2008 in comparison to 2007 was at 3%, thus we can conclude it was a slow market growth. X axis refer to Yahoo CPM result. CPM
Yahoo 2.40
Google 3.40
Industry 0.75
Average: 2.40 + 3.40 + 0.75 = 6.55 = 2.18 52
3
3
Base on the given findings, Yahoo is in the strong competitive position since its CPM is 2.40 > 2.18 competitive averages.
The strategy chosen from Grand Strategy Matrix (Quadrant IV)
Related Diversification
27. Final Conclusion of the results of all the strategy analysis. SWOT Matrix
SPACE MATRIX
IE MATRIX
GRAND MATRIX
53
1. Horizontal Integration 2. Market Penetration 3. Retrenchment 4. Divesture
1. Horizontal Integration 2. Market Penetration 3. Market Development 4. Product Development
1. Horizontal Integration 2. Market Penetration 3. Market Development
1. Related Diversification
28. Strategic Choice After conducting all the analysis, we finally can conclude that best strategy chosen or suitable for Yahoo’s future business growth is:1. Horizontal Integration 2. Market Penetration
29. Quantitative Strategic Planning Matrix (QSPM) Strategy Alternatives Key Factors Opportunities ( External Factors) Yahoo is the second leading global internet brand and one of the most trafficked internet destination worldwide ( Page 201 / Para 2 / row 3) There are 1.1 billion internet users around the world and 211 million in the USA as of end of 2006 (Page 202/Para7 row 1) Although internet related business have perhaps held better than their non-digital counterparts, but have still suffered from macroeconomics malaise.( Page 202 / Para 8 row 5)
Weight
0.15 0.09 0.02
1 Horizontal Integration AS TAS
2 Market Penetration AS TAS
3
0. 45
2
0 .30
4
0. 36
4
0 .36
1
0. 02
2
0 .04
54
Internet advertisement continues to grow though in slower pace. ( Page 202 / Para 9 row 4
0.02
Broadband prices fall. (Page 206 / Para 5 row 1)
0.04
Internet advertisement revenue in USA remains strong, topping $ 23 billion. (Page 202 / Para 9 row 1) Even Google Inc, expressed economic related caution in conjunction with its second quarter results.(Page 202 / Para 8 row 9) Federal Communication Commission (FCC) adopted flexible access rules for users and wireless resellers in conjunction with agency‘s early 2008 wireless spectrum auction. ( Page 206 / Para 4 row 5) Increased recognition that consumers spend more and more of their time online (Page 202 / Para 9 row 5)
0.07 0.02
0.04
0.08
3
0. 02 0. 08 0. 21
3
0 .04 0 .12 0 .21
-
-
2
0 .04
-
-
3
0 .12
4
0. 32
4
0 .32
1 2
Sub Total
2 3
1.46
1.55
Threat Economic growth in the USA and the world has slowed amid crisis in housing and credit market ( Page 202 / Para 8 row 1) Rising unemployment and problematic geopolitics to the mix and USA had difficult economic back drop. (Page 202 / Para 8 row 4)
0.04 0.04
In 2009, number of internet content and advertisement companies (including Bankrate Inc, Knot Inc. including Yahoo!) reported disappointing financial results and lowered their forward financial outlooks. ( age 202 / Para 8 row 7)
0.04
Internet media and market research firm comScore Inc, expressed concerns about deceleration in online growth. (Page 202 / Para 8 row 10)
0.04
Yahoo operates in the internet products, services and content markets, which are highly competitive and characterized by rapid change, converging technologies and increasing competition. (Page 206 / Para 1 row 1)
0.05
Although internet related business have perhaps held better than their non-digital counterparts, but have still suffered from macroeconomics malaise.( Page 202 / Para 8 row 5)
0.02
From its first year of operation as a public company (2004), Google has increased its operating profit to $ 6.7 billion from a modest $ 852 million. ( Page 206 / Para 4 row 9)
0.05
During 2008, Google had 72% of internet traffic while Yahoo only possessed 17% followed by MSN at 6% and IACI at 4% ( Page 206 / Para 1 row 6)
0.06
2
0. 08
1
0 .04
2
0. 08
1
0 .04
-
-
-
-
3
0. 12
1
0 .04
4
0. 20
3
0 .15
-
-
1
0 .02
-
-
3
0 .15
4
0. 24
3
0 .18
55
Due to changes in legislative requirements concerning technology sharing, patents rights and information security, future expenses and profitability of the companies operating with the industry are harder to predict. (Page 207 / Para 1 row 5) Technical and regulatory makes the projection of its business viability for existing companies difficult ( Page 207 / Para 1 row 4) Future innovations and shifts in technology also make long term strategies regarding the internet and software services industry difficult. ( Page 207 / Para 1 row 8)
0.02
0.03
0.08
1
0. 02
-
-
1
0. 03
1
0 .03
3
0. 24
1
0 .08
1. 01
Sub Total Strengths (Internal Factor) The core of Yahoo’s strategy and operations is to become the starting point for internet users, to provide must buy solutions for the world’s largest advertisers and to deliver industryleading open platforms that attract developers and publishers. (Page 201 / Para 3 row 1).
0.11
Yahoo!’s full year revenue in 2008 exceeded by $ 2.2 billion compared to 2007, despite the weakness in overall advertising. (Page 204 / Para 1)
0.09
For the 2nd quarter of 2009 cost cutting allowed Yahoo! to post 7% increase in profit up to $ 141.4 million. (Page 201 / Para 4 row 6)
0.06
Revenue generated by Yahoo! marketing activities has always being increasing between 8% from 2006 to 2007 and 4 % from 2007 to 2008.(Page 205 / Exhibit 3)
0.06
Yahoo is the second leading global internet brand and one of the most trafficked internet destination worldwide ( Page 201 / Para 2 / row 3) Yahoo, together with it’s owned and operated online properties and services; it also provides advertising offerings and access to internet users beyond Yahoo through its distribution network of 3rd party entities. (Page 201 / Para 2 row 5) Vast product offering -Yahoo offering include Yahoo Group, Yahoo Answer and search offering include Yahoo Search, Yahoo Local, Yahoo Yellow Page & Yahoo Maps are available free to users. Yahoo communication segment include Yahoo Mail, Zimbra Mail and Yahoo Messenger (Page 202 / Para 3 row 1 & Page 2020 / Para 4 row 1)
0.06
0.02
0.06
Yahoo has offices in more than 25 countries, province or territories. (Page 201 / Para 2 row 1)
0.03
Part of Yahoo’s code of ethics – Customer Fixation (Customer Centric) ( Page 202 / Para 6 row 3)
0.01
0.7 3
4
0. 44
4
0 .44
4
0. 36
3
0 .27
-
-
-
-
3
0. 18
4
0 .24
3
0. 18
4
0 .24
2
0. 04
3
0 .06
2
0. 12
4
0 .24
1
0. 03
4
0 .12
-
-
1
0 .01 56
1 .35
Sub Total
1 .62
Weakness Yahoo resumed discussion with Microsoft about search and advertising partnership as both firms struggle to compete with Google.(Page 201 / Para 1 row 1) In July 2009, Yahoo! closed its third video property, Maven Network based in Cambridge Massachusetts and they plan to close twenty video services, including network site Yahoo! 360 and its Web hosting service Geocites. (Page 201 / Para 5 row 1) Google has 72% of internet traffic while Yahoo only possessed 17% followed by MSN at 6% and IACI at 4%. (Page 206 / Para 1 row 6) Yahoo & Microsoft struggle to compete with Google. ( Page 201 / Para 1 row 4) Net Income of Yahoo in 2008 was $ 424,298 million which is 77% lesser compared to their net income in 2006 ( Page 203 / Exhibit 1) Yahoo! advertising business is also deteriorating rapidly as the firm’s overall revenue fell by 13% in the 2nd quarter of 2009. Yahoo! lost 1% in rich media revenue, 1% in sponsorship and 2% in percent in 2008. (Page 202 / Para 6 row 1)
0.1
0.07
0.07 0.07 0.06 0.05 0.05
Yahoo!, posted 78% in 1st Qtr 2009 profit decline. ( Page 201 / Para 4 row 1)
0.02
Yahoo! IPO in April 1996 with total employee – stock raise to high of $ 120 in 2000 but for most 2009 it has been trading under $ 14. ( Page 202 / Para 2 row 1)
0.01 Sub Total
Total Scores
29.1.
4
0. 40
4
0 .40
-
-
4
0 .28
3
0. 21
4
0 .28
3
0. 21
4
0 .28
-
-
3
0 .18
3
0. 15
4
0 .20
3
0. 15
4
0 .20
2
0. 04
4
0 .08
-
-
-
-
1 .16 4.98
1 .90 5.80
Outcome of QSPM
Base on WSPM, we can conclude that the best corporate level strategy to use to gain market leadership is Market Penetration.
Original Sentences: N o 1
Case Facts ( Original Sentences) SO1- Improve service marketing to increase product position among the internet users to 57
2 3 4 5
increase market leadership SO2- Entice more advertisers to use Yahoo as a marketing solution.(O2,O3,O4,S4,S7) ST3- Increase R&D continuously to produce new offering to users. ( T8,T9,S2,S5,S7,S8) WO3- Focus marketing development in USA ST1 - Sign up deal with smart phone manufacturers to include Yahoo a preferred search engine
From SWOT matrix, business level strategy chosen was Cost Leadership (Type 2) No 1. 2. 3. 4.
Case Facts ( Original Sentences) ST4- System development from 3rd world countries. (T3,T5,T6,T8,S3,S5,S7,S8) ST5- Gain market share and position in the best place. ( T1,T2,T4,T5,T6,T7,S4,S5,S6) WO4 - Reduce service charge to increase revenue ST2 - Buy over small and weak internet service providers for lower price to increase
5.
market leadership WT3 - Outsource non-core activity
30. Implementing Strategies: New Management Strategy.
Business Level
58
31. Conclusion Yahoo have potential to growth if they use the new implementing strategies as mention previously although they are in the competitive industry. Moreover based on the case study given, they are the second most preferred Internet search engine after Google and in America, they are the most popular Internet site. Yahoo was having financial difficulties during 2006 to 2008 was due to slow global economic growth. Moreover in 2008, Yahoo recorded lowest net income ever since 2006, because they right of Goodwill impairment charges $ 487 million despite slow economy growth. Otherwise, they would have recorded a better net income compared the past two years. Market penetration, product development and market development become three main elements which Yahoo! need to focus to further attract more customers, generate more profits and expand the business. Overall, Yahoo! is in a strategic position to maintain its market share and position in the U.S and International markets. Further innovations are to further sustain in the market as one of the major player in the industry.
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