Business Case Study: Yahoo. Inc!
Stakeholders and customer need
Yahoo is a top player in online marketing through advertisement space and portals among other online marketing tools. Later, the company diversified its activities to include music, photo sharing, and blogging. Diversified activities aim at serving the customers' needs. Indeed, in the year, 2012Yahoo was ranked at position three regarding market share and some online visits as illustrated in the figure below.
Figure 1: Internet use traffic data
The company has faced serious management investment challenges that might jeopardize its return of investments and attractiveness to global investors. The dire blunt was felt in 2008 when it laid off its staff because of economic slowdown. Moreover, that Yahoo lost is senior executive leaders led to management upheaval. Additionally, replacing senior executive would cause challenges owing to the change resistance to implementing new goals stipulated by the new management team. For instance, stakeholders were of the opinion that the company should be a technology oriented and not an advertisement venture. Still, the company had many investments in the major international corporations such as Alibaba; however, investment challenges led to a reduction in corporate investments (p. 30-1). Shareholders wrangle and over control of top boards members resulted in the resignation of key executive and board members. These challenges have prompted Yahoo board to embark on replacing the CEO, who was picked from the leading online marketing company Google. Despite that the board has settled on a highly performer turning the company around, corporation culture mix poses a new challenge to the business (p. 30-10) yet. Notably, incorporating Google culture in Yahoo will lead to a conflict of interests; change resistance and agency conflict since a CEO is substantially influential leaders. Additionally, there are too high expectations from the stakeholders such as employees, investors, and Yahoo board. Failure to deliver on these expectations would lead negative perception.
Competition rivalry power
In the case of competition, force is stronger; the company has to make a strategic decision to curb it. Here, Yahoo is facing fierce competition from Google and Microsoft. Indeed, Bing, Microsoft subsidiary, launched in 2009 substantially cut Yahoo market size; however, Google managed to retain its market size and leadership (p. 30-2). As such, Yahoo had to partner with Bing to reduce the competition rivalry because it would lead to huge operation expenses due to marketing expense. Additionally, since the products offered in online marketing are substitutes, Yahoo would have lost brand, and customers had it engaged in price wars. Still, social media platform such as Facebook and Twitter became more desirable and effective in online marketing since their users spend more time on these sites than on other sites. Specifically, users in Facebook spend 405 hours in a month, which translates to 15 percent of the time spent online. On the other hand, users spend 10.6 and 8.6 percent on Google and Yahoo respectively (p. 30-3). Implied, Yahoo had less exposure to potential buyers in comparison to social media. This shrunk its marketing revenue, which explains the partnership with Bing and plans to turn around the company by hiring a new CEO. The emergence and growth of smartphones market also played a part in reducing the influence of Yahoo as an online marketing tool. Notably, Internet connectivity of mobile users led to the growth of social media use; therefore, companies opted to spend their money on sites that prospective customers spend most of their time.
Revolution of online marketing
The future of online marketing has been changing fast and assuming least suspected directions. This was the case when the number of websites grew drastically from 285 million in 2011 to 603 million websites in 2012 (p. 30-3). Web sites opened up the vast arena for online marketing, which lowered the price of content space and portals. Consequently, Yahoo revenues shrunk drastically and it to come up with a strategic plan to remain profitable. Presumably, the board opted to have a new crop of leaders at company helm.
Management
The company has changed its CEOs several times, both permanent and interim (p. 30-6). This has brought upheavals and varied management approaches, which partially explains the challenge of turning it around as was planned. At one instance, its management turned down an acquisition proposal by Microsoft on account of undervaluation (p. 30-5). Still, under of the CEOs it scrapped non-profitable products, sold nonperforming acquisitions and bought others that were projected to generate revenue to Yahoo. Again, Yahoo entered into a search engine partnership with Microsoft (p. 30-7). It is also clear that activists among other investors had due influence in the company that interfered with the independence and autonomy of the topmost management in making strategic decisions.
Market and prospective customers
Yahoo expansion plan in online marketing is coupled with serious challenges. For instance, the prospects in online marketing are gaining strength from Africa due to drastically grow in internet connection. However, Yahoo has a little market share in African countries; this implies that the company would have to invest on platforms and brand awareness. As such, it will consume resources that are already limited by the low stream of income.
Corporate and brand identity
Though Yahoo started as a technology company, most of its income streams from advertisement. This has caused confusion among the employees and attracted varied approach from the executive. Unclear brand identity obscures the vision of a company, which affects company growth and employees’ productivity. Consequently, customers find it difficult to associate with the company products; this has been the challenge in the global expansion of plan of Yahoo. Lastly, the projected sale on Yahoo! Japan will avail liquid cash to the company; however, the board and the management have not availed an investment plan to absorb the free cash. This is critical since the delay in investment decision have adverse effects on returns. As such, the strategic decisions made and those pending need to adhere to certain accepted procedures. The discussion below provides recommendations that will provide alternative approaches to the strategic decision in Yahoo. Inc!
Recommendations
Stakeholders, customer needs and corporate identity
Market expansion
Yahoo management needs to incorporate BCG-Matrix to improve the company’s balance in market expansion and growth through four quadrants. For instance, to ensure that expansion in African market is viable for stakeholders, it is rational to analyze current and expected costs as well as income. Therefore, the current portfolio covering proceeds from sales of nonperforming acquisitions as well as Yahoo! Japan should strategically apply in product development, marketing, and expansion. This will give Yahoo a solid approach in expansion programs to Africa and other developing market globally.
Management and products development
Over time, Yahoo board of members has been changing top management and yielding to pressures from investors. However, frequent change of management leads to loss of corporate direction. As such, it is important to concentrate on grooming inside employees that will assume management position to preserve Yahoo’s corporate culture and e values. Additionally, it will cut lead time in search of leaders from other competing companies. Still, Yahoo has overlooked the role of product development at the expense of management. Addressing company's challenges through diversified approaches is rational. Therefore, there should be more activity in products innovation and development. Notably, product development acts as competition tool and income generating approach. Particularly, superior products establish brand loyalty and create awareness among prospective customers.
Lastly, Yahoo needs to keep pace with the global trends in such ventures as online marketing and technology. This is important in making strategic investments and avoiding sunk capital in nonperforming acquisitions. A combination of the analyzed recommendations will boost the revenues, brand identity and lower the stakeholders as well as employees’ conflict, which will turn the company around.
Reference
Pearce, J. A., & Robinson, R. B. (2015). Strategic Management (14th ed.). New York, NY: McGraw-Hill.
