Strategic Issues Facing Yahoo

Published: 2019-09-05 07:00:00
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The companys problems were described as strategic in that they would affect the future of the company. For example, the senior vice president describes the organization as lacking a clear long term objective. As a result, they found themselves wanting to invest in everything which results to a lack of differentiation. The company clearly lacked a long-term organization wide objective which the vice-president describes as peanut butter spread too thin on a slice of bread. Additionally, Yahoo Inc. lacked clarity of accountability and ownership which was evident in the redundancy present in the organization. The organizational structure has become overly bureaucratic with far too many employees having overlapping responsibilities and incurring unnecessary costs. The third strategic issue with the company was a lack of decisiveness. With unclear ownership and responsibility policies, decisions were either never made or made too late to have financial impact on the associated projects. The company lacked an organizational objective resulting in a lack of a macro perspective to guide their decisions. All these problems were caused by the insistence on a silo organizational structure where each division and department pursues its objectives independent of other elements in the organization. Inter departmental knowledge and resource sharing was minimal and when it happened, it was to argue over ownership rights. It resulted in the organization playing a reactive role rather than charting their own course.

The SM process of business analysis has three categories namely the strategic position, the strategic choices, and the strategic actions.

Strategic Position

Looking at their assets, Yahoo have a clear advantage over some competitors in that they have a large capital base. Additionally, they have a diversified portfolio of investments especially on online ventures such as Tumblr and Alibaba. However, they have consistently lagged behind in the mobile computing sector with other giants such as Google and Microsoft gaining dominance. Due to their lack of an organized corporate strategy, Yahoos market share has reduced over the years with reduced revenues and stock prices.

Strategic Choices

To give the company a competitive advantage, the Vice CEO proposes several measures designed to counteract their precarious market position. First, he recommends they define clearly what they are and what they are not. Rather than spreading their resources thin, they should have a focused strategy. Second, Garlinghouse suggests redesigning the performance and incentive systems while also holding all businesses accountable for Yahoos position. This would involve recreating senior roles that would have absolute accountability for particular organizational functions. The third recommendation is restructuring the entire business to eliminate the silo-based matrix system. Additionally, they would have to reduce the number of employees in redundant positions.

In recent years, Yahoo seems to have followed Garlinghouses recommendations since they have had major layoffs in the past five years. They have also acquired interests in other internet based businesses such as Alibaba.com and tumblr.com. However, these strategies have not improved revenues as much as was expected which still leaves Yahoo in a precarious situation. Recently, the company decided to cut 15% of its workforce and sell off some of its businesses that were not integral to the core organizational strategy.

External Environment: TUI case study

The PESTEL framework categorizes external environment factors as political, social cultural, technological, environmental and legal.

1: Political

The current rise in terrorism rates has resulted in tighter security restrictions and stringent immigration laws. A terrorist attack at a particular destination results in the Foreign and Commonwealth Office putting it off limits which results in travel insurers refusing to cover tourists if they travel there. Therefore, tourism suffers when there is a prolonged perception of terrorist risk. Taxation policies in various tourist destinations are also likely to play a big factor in the expansion of the tourist industry. Governments promoting tourism via tax exemptions and subsidies will see additional tourism traffic as compared to governments that do not.

2. Economic

On the economic category, exchange rates are the most influential factor as Gallego et al. (2007) concludes that fixed exchange rated encourage tourism. Currently, the Euro is decreasing its gap with the pound sterling which may affect outbound tourism from the European union. Globalization provides businesses with unlimited opportunities for expansion as it has boosted tourism ventures such as travel consulting, travel agencies, resorts, and hotels. With their numerous acquisitions globally and operations in 77 countries, TUI is strategically positioned to take advantage of the growing tourism industry. Economic downturns may also affect tourism in the future. While recessions may slow down tourism due to decreased disposable income, they create more space and a larger market share for the companies that survive. Due to its large scale of operations, TUI can benefit from economies of scale allowing them to cut prices in tough times.

3. Socio Cultural

The target markets lifestyle is a major consideration when designing customized holiday packages. Current statistics show that the median age for tourists has increased to mid to late fifties and travel operators need to respond appropriately. Consumers are also brand conscious. Consumers trust in the companys intangible promise guaranteed by the project name. This is based on past experiences with the brand.

4. Technology

Rapid developments in technology has resulted in a large number of people having cheap internet access. As a result, majority of sales in the tourism industry are conducted online due to the convenience involved. However, the internet has low barriers of entry allowing newcomers to enter the market.

5. Environment

As the world becomes more environmentally conscious, tourism agencies will have to implement environmentally conscious travelling and lodging policies.

Porters Five Forces Analysis

Potential entrants

Due to the high initial capital costs required to succeed in the tourism industry, it is an effective barrier of entry to newcomers. Additionally, more than 70% of the market is controlled by the top 10 corporations which reduces price retaliation.

Substitutes

Although other entertainment options such as TV and games exist, their experiences cannot be compared to that of travelling. For tourism, there is low product differentiation hence low threat of substitutes.

Suppliers

In cases where companies have a low share in the market, the suppliers have a high negotiation powers. However, the TUI business group currently owns approximately 32% of the European market which creates a threat of backward integration for the suppliers giving them moderate bargaining powers.

Buyers

The buyers in this case have low bargaining power since there is low switching costs to buyers due to the emergence of the internet and lesser substitutes.

Competitive Rivalry

In this aspect, the TUIs industry has moderate competitive rivalry. The high fixed costs of operation favor the large players. TUI is currently the largest tour operator with more than 3500 travel agencies worldwide.

Conclusion

Looking at both the PESTLE analysis and Porters five forces model of business analysis, TUI are strategically located to take advantage of the expected increase in the number of tourist arrivals and departures. This is due to their large size which allows them to enjoy the economies of scale. The low product differentiation and competitive advantage makes their position stable for the foreseeable future though they can invest more in brand marketing to increase their global presence.

Strategic Analysis of Ebay eBay is an e-commerce company providing customers and business sales services via the internet. This business practice using the internet represents a new business model relying on it customers being the organizations product development team, merchandising department and security department. The value in e-bay is created by availing a virtual worldwide market for buyers and sellers and collecting tax on transactions as they take place. With the help of Technology, eBay allows every move of any potential customers to be traced thus sprouting rich information. This happens through listening to customers by keeping up with what they want to sell, buy and how they want to do it. Sellers also get a chance to go for eBay workshops and classes to increase their trading practices via eBay and learn and familiarize with eBay, this practice enables the company governance internally and externally. The eBay system has a source of automatic control in the form of buyers and sellers rating each other on each transaction, creating rules and norms.

eBay does everything possible to stay aware and flexible in the market. Most of its fastest growing new categories emerged from registering seller activity in the area and giving it an improved decision at the required moment. For instance, after realizing a few car sales, eBay created a different site known as eBay Motors in 1999, which came along with special features such as vehicle inspections and vehicle shipping. eBays management revolves around listening, adapting and enabling. Since the Internet has become an area with more competition, eBay has not been well established and stable in the market. In 2005 eBay purchased Skype, which is the Internet telephony organization, with Skype, eBay believes that it can create an unprecedented e-commerce engine, referring to the 2002 purchase of online payment system PayPal that spurred on the business at that time. All the three benefit from network effects, simply meaning that the more the members, the more valuable the company and eBay have to be a world leader in network effects managing.

eBay unveiled a deal with Google In 2006 in the west, making it one of Googles biggest advert customers. This deal was after eBay signed an advertising deal with Yahoo in the East. eBay also signed a deal with Baidu Incorporation, a Chinese web portal purchased by eBay in 2002 and eBay EachNet. Baidu uses PayPal as the preferred payment method on Baidu, EachNet uses Baidu as its main search provider hence promoting PayPal. eBay does not do as well in the East as compared to the West despite its business practices via the internet. In 2006, eBay created eBay Wiki, which enables people to contribute their knowledge of eBay to others. eBay Wiki along with eBay blogs helps to create awareness to the public about eBay. eBays website is cost-free to buyers, but sellers are charged listing and selling fees, this encourages the public to visit and shop from the website. eBay hence has an advantage on the e-commerce practice since they have made partnership with some of the commonly known internet service providers which in turn helps them to market themselves around the world using these service providers that have been in the business much longer compared to eBay, this will in return earn the internet users trust to use the auction site hence flooding the website with internet users and increase business transactions from different people around the world.

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