Overview of the Central Problem
Amid frequent and massive layoffs, the new Chief Executive Officer, Marissa Mayer, is charged with the responsibility of restoring the technological mammoth company to its former glory. The company has had its fair share of leadership wrangles owing in large to shareholder dissatisfaction with the operations and performance of the company. By the year 2012, the company had a total of six layoffs, the latest round rendering 2,000 of its staff jobless. The CEO is faced with the challenge of steering the operations of the business such that they yield impressive returns to meet both its operational needs as well as its capital expenditure needs.
The company has had incidences of proxy fights where some shareholders are opposed to the business strategies of the incumbent management. Notable was Carl Icahns bid to oust the board as it was opposed to the sale of the company to its rival, Google Inc. Daniel Loeb, controlling a 5.8 percent shareholding in the firm, instigated proxy proceedings where he sought the support for the board to compel the companys management to focus on its core business of media rather than adopting expansionary strategies. The new CEO, Mayer, has the tricky mandate of ensuring that shareholders aspirations and the direction the firm takes are well balanced. Her strategies should impress the board so as to avert any possible proxy fights (Nieva, 2016).
It is against this backdrop that the new CEO should adopt viable strategies that will see the company post impressive results to sustain its operational as well as development needs and to compete favorably with its rival technology companies("Yahoo To Improve Profitability and Accelerate Growth By Sharpening Focus", 2016).
Analysis of the Strategic Alternatives
Several strategic options could be adopted by the new CEO to address the problems facing Yahoo Inc. The CEO could adopt to change the culture prevailing in the organization. Organization culture plays a vital role in the success of a business. Yahoo has a reputation where its managers, as well as executives, are somewhat relaxed and easy, not anticipating changes that might come up in the industry. As such, they adopt a reactionary approach to new developments which take them by surprise. Often times, decisions taken under such circumstances are not all-encompassing as most aspects of the situation at hand will not be considered (Manjoo, 2015).
Under the stewardship of the new CEO, Yahoo could concentrate on its core business in order to realize its objectives. The company could choose to concentrate on maximizing returns from its consumer segment business, its search business as well as the digital communications segment. The company will gain expertise and specialization by focusing on its core business units rather than spreading its portfolio to other segments. For this reason, the company signed a contract with Microsoft in 2009 where it would benefit from the search engine technology provided by Microsoft in exchange for a 12 percent in search revenues.
The CEO could choose to concentrate on expansionary strategies where her managerial efforts are geared towards steering the business in exploring other business opportunities apart from its core business units. The company could, for instance, opt to breed a team of experts charged with the responsibility of developing search technologies instead of outsourcing it to Microsoft. This would, however, be met with resistance from some quarters of shareholders and board members, as had previously been experienced. This should however not deter the CEO from pursuing her strategies because she is charged with the mandate of ensuring that the company makes sufficient revenue (Nieva, 2016).
Mayer should overhaul Yahoo corporate culture to realize the strategic goals for the company. Changing an organization culture that had been practiced for ages is a daunting task and will likely be met with stiff resistance from some of the employees. The CEO should, therefore, go about this tactfully and diplomatically so as to woo the employees. Yahoo culture is reputed for being easy, and its executives lack a proactive approach to tackling emerging trends and issues. Leading by example will be a good start towards the transformation of deeply entrenched cultures. The CEO, for instance, offered smart phones to all employees upon taking office as well as offering free meals at the cafeteria.
The CEO could also adopt a strategy to simplify the portfolio of the company. This can be done by shedding off some of the business units and remaining with those that give the company a competitive advantage as well as putting the company name on the map. This strategy will increase the rate of product innovation and improvement. The new structure will comprise of a matrix where search, mail, and Tumblr products will be the vertical whereas News, Sports, Finance and Lifestyle will form the support functions. For the search segment, mobile search has turned out to be the most viable opportunity to invest in. the company should, therefore, direct most of its resources into search mobile devices as it will help in the sustenance of long-term growth. Yahoo Mail, being the majorly used communication tool of the company should be revamped such that its speed is boosted and additional features incorporated to make it user-friendly.
Efficient resource alignment: in order to invest wisely and manage the vast resource portfolio, the CEO should instigate some cost saving measures. To achieve this, some employees need to be laid off as well as the closure of some of its global branches. These moves are aimed at strengthening the future position of the company. The five foreign branches located in Dubai, Milan, Buenos Aires, Madrid and Mexico City need to be shut down to have a lean workforce that is easy to manage as well as save on costs. The highly skilled and experienced employees need to be retained as they will be valuable assets for the company (Manjoo, 2015).
Specific strategic action plans to implement
The following are the specific action plans that could be adopted to improve the performance of the company:
Investing in research and development:
The technological industry is one of the most dynamic and competitive. For a company to sustain innovation shocks and the danger of being obsolete, it is imperative that it should invest heavily in research and development so as to anticipate customer needs as well as emerging market trends. Research and development enable a company to know what the customer needs in terms of the product as well as the product specifications. To achieve this, the company needs to have a proactive team to gather consumer information, listen to customer complaints and foresee emerging and new trends in the market and effectively respond to them ("Making sense of it all (Yahoo!)", 2009).
Merging: the company can opt to merge with another firm within or outside the industry so as to gain competitive advantage. To command a bigger market, Yahoo could, for instance, merge with its rival partner Microsoft. In so doing, the companies can enjoy a bigger market share and pose a real threat to other rivals. Mergers also have the advantage of leveraging on the knowledge, skills and expertise of the employees of the two companies where the best skills are combined to achieve the best performance. The skill gap, in case it exists will be leveled where skills deficiency from one firm is cancelled out by the other firm whose employees have the required skills and expertise (Hof, 2007).
Reduction of operations: in an effort to curb ballooning operational costs, the company ought to close some of its operations to remain with a lean and strong business. Yahoo should re-strategize and focus more on its core business so as to get itself back on the path to recovery. This can be achieved through selling some of the companys business and reinvesting the proceeds into the core business units to further strengthen it. The company could further improve on its core business units through the hiring of professionals who will steer the firm on the right path.
Restructuring the business: the company should consider restructuring its operations such that there are clear reporting lines and distinction of roles. Its current corporate structure creates loopholes for interference of managerial operations from the stakeholders as well as the board members. The board has a right to check on the performance of the management; it should not, however, exert undue influence to the management to take a certain course of action which might not be for the best interest of the company and its stakeholders. With the need to have a lean company, restructuring of various functions of the company is inevitable.
Outsourcing its sales and marketing function: to save on costs, the company needs to outsource its marketing function, especially on its overseas operations. The overseas agencies have a better understanding of their local markets and can, therefore, prescribe a more informed course of action. These agencies understand the political, economic as well as the social dynamics prevailing in these regions. The in-depth market information offered by these agencies will be of great importance in helping the technology giant to make products that suit the needs of its consumers as well as anticipate emerging needs in these markets. The current marketing strategy adopted by the firm with regards to its foreign operations is to combine a sales team composed of staff from its foreign operation as well as external sales force from these foreign operations (Kim, 2016).
Acquiring a strategic investor: the financial performance of the giant technological firm have not been very impressive. The company has received a various buy out bids from some of its rivals owing to the poor results that almost led to its sale. Within a span of seven years (from 2001-2007), the company has had a total of six CEOs. This constant change of management has been due to the failure of the management to deliver on the objectives set. For this reason, the company should seek a strategic investor to pump in the much-needed capital to enable the company run smoothly and absorb losses that might be incurred without takeover threats from rival companies.
Kim, E. (2016). Yahoo CEO Marissa Mayer plans to fight activist investors who want her fired. Business Insider. Retrieved 17 May 2016, from http://www.businessinsider.com/yahoo-ceo-marissa-mayer-wants-to-stay-ceo-a-year-from-now-2016-3
Manjoo, F. (2015). Marissa Mayers Plan for Yahoo Takes Hold. The Question Now Is Time..Nytimes.com. Retrieved 17 May 2016, from http://www.nytimes.com/2015/01/22/technology/personaltech/marissa-mayers-plan-for-yahoo-takes-hold-the-question-now-is-time.html?_r=0
Nieva, R. (2016). Marissa Mayer unveils make-or-break plan for Yahoo. CNET. Retrieved 17 May 2016, from http://www.cnet.com/news/yahoo-fourth-quarter-2015-earnings-marissa-mayer/
Yahoo To Improve Profitability and Accelerate Growth By Sharpening Focus. (2016). Yahoo Finance. Retrieved 17 May 2016, from http://finance.yahoo.com/news/yahoo-improve-profitability-accelerate-growth-213000875.html
Making sense of it all (Yahoo!). (2009). Strategic Direction, 25(7). http://dx.doi.org/10.1108/sd.2009.05625gad.002
Hof, R. (2007). Back to the future at Yahoo. Strategic Direction, 24(1). http://dx.doi.org/10.1108/sd.2008.05624aad.002
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