So by them launching Sky Sports they were specifically focusing on a particular type of audience which is obviously very popular and it is something that the population take a huge interest in and no one had done it as yet. “Companies employ this strategy by focusing on the areas in a market where there is the least amount of competition” (Pearson, 1999).
(Organisations can make use of the focus strategy by focusing on a specific niche in the market and offering specialised products for that niche. This is why the focus strategy is also sometimes referred to as the niche strategy) (Lynch, 2003). Therefore, competitive advantage can be achieved only in the company's target segments by employing the focus strategy. BSkyB follows a clear market focus they produce content and programs specific to market and consumers for example when people’s taste changed and they started appreciating movies with specialized content News Corp created a company called Fox Searchlight Pictures without diluting the 20th century Fox Brand.
BSkyB represents a relatively customer focused company, although somewhat product focused, it has spent heavily on knowledge capture, and has developed a sophisticated marketing machine. It has also been extremely careful to develop a platform that caters to the tastes of all its customers, by offering an unprecedented amount of choice and functionality on its platform.
Sustaining Issues
The British television industry is a competitive industry with long-term players such as the BBC. However BskyB has proved to its consumers and to the industry of the immense power and firm hold it sustains. We can understand this by highlighting the advantages it has:
The best selling point and advantage of BSkyB is that they have a great choice of channels available for viewing. Interactive services such as shopping and banking also give them competitive advantage. The sound and picture you receive from digital TV is of a better quality.
BSKYB is a vertically intergraded broadcaster, which means they use “A business strategy in which a company expands its operations to offer similar goods and services at a different point on the supply chain.” (Financial dictionary) which buys TV rights for example sporting events. Apart from some small niche channels BSKB is currently the only provider of sports premium channels. It holds broadcasting rights to the leading football leagues in Britain and Scotland, and has minority stakes in several clubs. They also are owners of Manchester United Football Club. They make some of their own programmes and package programmes from a range of sources into various channels. These are then distributed to its subscribers using its direct to home satellite as well as selling the wholesale to other relaters using different distribution platforms.
Sky Box Office is a good incentive as it offers the subscriber the choice to watch recent movies first on Sky. They are shown as often as every 15 minutes. Viewers can choose up to 20 movies a day. Sky Box Office movies are available at the touch of a button. They are always in stock, there is no need for them to be returned to the video shop and there are no queues such as the pay per view options and the advantage of personalizing an individual’s use such as personal security pins for certain channels i.e. channel x.
Sky has also entered the music category with the same passion it has for sport and other entertainment. Their channels are highly interactive with a unique mix of music, lifestyle and entertainment that reflects on their audience’s.
BSKYB have launched a new ITV gambling channel called Sky Vegas Live.
The channel broadcasts a variety of gambling programmes, including computerised horse racing and a Super Keno draw, with further options, such as virtual dog racing, to be delivered in the coming months. The bets are made through the Sky bet system via their remote controls. Consumers are very demanding in terms of what they want to watch for example many would want to eliminate commercial slots. BSKYB have met the consumers demand by introducing Sky plus, which is big advantage over the terrestrial channels. Sky plus allows channels to be recorded and played back individually. The programmes are stored on the hard drive and can be accessed in the future using the simple on screen menu via the remote control. The viewer can then watch the programmes they have recorded in any order at any time.
2a) Evaluate the rationale and motivation behind TNC’s diversification strategy. Pay particular attention to their decision to diversify into T.V and satellite broadcasting.
The company has 2 stages in my opinion, The First stage- 1980’s. This stage is print based. TNC diversifies in order to get into more attractive business and balance its portfolio. The portfolio logic assumes a role of the centre. These portfolio logics and the role of the centre, make assumptions about the diversity of businesses within a corporate portfolio. This diversity of business has a certain degree of understandinf in some way, and this diversity of business should inform of the role of the centre. Therefore, the strategy that TNC follows is a Related
Diversification “which is strategy development beyond current products and markets, but within the value system or industry in which the company operates”. (Strategic Management, 5th Edition, Lynch R)
TNC also uses vertical backward integration by the acquisition of the printing warehouses, books publishing transport, which are concerned with the inputs into the company’s current business. TNC also uses some horizontal integration by the acquisition of other newspaper and magazine, in order words, activities that are competitive with, or complementary to, a company’s present activities.
The 2nd Stage- 1990’s. This is the time based stage. Once TNC has diversified into the different businesses, they have to find new advantages in order to improve and expand its existing businesses. By improving its businesses, TNC gains competitive advantages. Gets stronger against its competitors. The strategy that TNC follows in this second stage is globalisation with a place in all parts of the industry from newspaper to TV, from magazine to film. TNC’s markets are homogenised and consumer’s needs and preferences are more similar. Therefore, TNC has to diversify in order for them to gain competitive advantages.
The rapid growth of News Corporation and expansion into satellite TV also brought massive loans. During a downturn in the early 90s Murdoch and his media empire had difficulty paying its bills. Many of his American magazine interests were sold to pay off some of the loans and things eventually turned around for Murdoch. News Corporation in its operations given it straddles eight industries, has a huge competitive advantage over its competitors since it can take advantage of the synergies it produces internally, to prop up one of its subsidiaries that is going through a lean time or facing excessive strong competition. “The Chairman Rupert Murdoch has been known to use his vast resources to get what he feels is right for the organization” (Drehle 2007) its size is its main source of its competitive advantage. It is quoted in the London Stock Exchange main board, the NASDAQ and the Australian Stock Exchange. Taking news gathering and dissemination operations as an example, since it has a presence in both print and broadcast media it can use either source to get a story.
b) Demonstrate/discuss how does the NewsCorp’s corporate centre seek to add value.
The corporate centre can add value points in terms of provision of resources, increasing or decreasing investment or changing management in times of poor performance. The corporate centre should also be able to enhance potential between the businesses. For example, if one business is doing well, other business should be able to learn from it. The corporate centre can add value in many ways such as:
- Providing of investment in resources and infrastructure.
- Forecasting innovation, and possibilities in new markets.
- Encouraging collaboration and co-ordination of effort between the corporate members.
- Improving efficiency particularly in the use of infrastructure and other overhead item.
- Providing from experience and knowledge. Some of the corporate centres are market analysts or accountant analysts, which help to the organisation of the corporate.
- Providing of a strong image from which smaller business units can benefit from.
The idea is that by having a clear strategy, the corporate members would have motivation and enthusiasm by providing a sense of destiny and discovery. They will seek to stretch their businesses beyond the day-to-day operations in order to supply the short-term changes of the competitive environment.
There is also a visionary role of becoming more creative and innovative in developing business level strategy.
Rupert Murdock is the corporate centre of TNC. He has a finger in everything the company does. His management is based in an efficient reporting system providing a summary of its operating results. This summary includes the budgeted figures for every aspect of its affairs set against the actual figures from the week and then compared with the same week in the previous year. (The guardian.co.uk) Therefore, TNC is not focused on its profitability. He supports people who are going to promote his business interest. He has a lot of vision as to where that business ought to be going.
Conclusion
TNC currently has a strong financial and strategic position. If we analyse its financial structure, it can be respected for its financial performance before and after 1990’s. As I have mentioned in this report, it is important to have a clear strategy intent in order to increase at the maximum the corporate performance. By linking diversification with vertical backward integration in its 80’s, TNC achieved a positioning in new markets. Diversification created TNC competitive advantages, however, TNC changed its strategy at the right time when its financial performance was not good in order for them to improve and expand. TNC had to create a balance in its businesses units by identifying those that were performing well and help them with those that were not very popular but were going financially well. From its 90’s Globalisation, was therefore, the right strategy that satisfies the changes in the environment. However, behind all of this, there was a strong corporate centre, Rupert Murdoch. He added value points in terms of allocation of resources, investment and change of managements.
Appendix
Exploring Corporate Strategy, 8th Edition, Text and Cases (Gerry Johnson, Kevan Scholes & Richard W.)
Strategic Management, 5th Edition (Lynch R)
The Financial dictionary.
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