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Fairfax Media Limited Situational Analysis Report

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Updated: May 10th, 2019

Overview

In the recent past, Fairfax has made several changes affecting administrative and production techniques. Rumors are rife on the planned closure of the company’s Chullora and Tullamarine printing plants.

Also, the Sydney Morning Herald and Age are to be converted into compact formats. The company has made attempts to reestablish itself as a major player in the industry.

The company has engaged in cost cutting measures such as the planned job cuts that will see approximately 1900 people lose their jobs. The company also plans to sell some of its assets such as the 15% ownership of New Zealand Trade Me website.

All this has been in a bid to put the company in a position where “…..it is within the market operating level” (Byron, 1991: p.23). This is as illustrated by Byron (1991) in his analysis of competitive marketing strategy.

External Environment

While it has generally taken Fairfax a longer time than expected to identify and adapt to the shift brought about by the rise of technology in market- specifically the internet and social media- the company is taking the right steps in the right direction.

The performance of all distributors of information products is currently dictated by technology. Consumption of information has changed both in design and in character. Effective marketing as illustrated by Kotler & Armstrong (2001) relies on a simple principle.

This is the reinforcement of market perception, expansion of the market while at the same time protecting the current market and finally increasing market share (Kotler & Armstrong, 2001).

Fairfax is known to hire the best journalists in the market. Within the organization, these journalists have thrived to give the readers the best in journalism.

However, as good as the journalists are, Fairfax has to realize that the change in consumption patterns has changed the type of information consumed in the market.

While the type of information may not be different from that which catapulted the company to fame, the method of presentation has experienced some kind of revolution (Tayme, 2011).

Competitor Analysis

The Australian newspaper and several of Rupert Murdoch’s news agencies similarly hit by the economic crisis have somehow recovered. Notably, Murdoch stays in touch with the current trends in the market.

The company’s exploits have borne fruits with time. At the moment, Murdoch poses a real threat to Fairfax and its undertakings. Several businesses have also adapted to the internet and social media changes.

While Fairfax espouses principles of future advancements in digital media and its circulation, Murdoch and others have already taken significant steps towards that direction.

Rupert Murdoch announced his plans to introduce ‘metered’ online information while other companies are making efforts to establish their presence in the digital data market (Sharp, 2012).

Market Analysis

Analysts and other business experts have predicted the fall of Fairfax. The recent rise in the price of shares remains the only hope. Many people- including Fairfax management team- prefer not to see the obvious and dwell only on the share price and the improvement it has shown.

The consumers are however wary of a change in the performance of their once trusted and loved media guru. The stories seem not to be exciting enough to a large number of digital media consumers.

If anything, the formats in which the news is presented in digital media generate little interest as compared to print media (Aaker, 2005).

While Fairfax has acknowledged that traditional print media is on the decline and will soon be phased out, the company have made efforts to show the world that it can still effectively deliver in that area.

The view however has been corrupted. The internet and social media is potentially a good solution and a powerful tool in improving sales in print media as well as cushioning other media and services offered by the company.

For Fairfax, the rise of technology- driven- information seemed to be a major blow to the business instead of being a silver lining in the cloud. The figure below is an illustration of the performance of the company in the recent past:

Figure 1: Performance of the Company

An illustration of the performance of the Fairfax company in the recent past

Source: Sharp (2012)

The graph shows the performance of the company a few months before several changes were initiated. Such an illustration does little to improve the image of the company. The slight rise in June 2012 provides a glimmer of hope for an institution that is on a turnaround trend.

The management has objectively focused on this, boosting the hopes of several people in the performance of Fairfax. However, several people would argue that this is a temporary solution to the current economic crisis (Sharp, 2012).

Internal Analysis

Overview

As a result of the family feuds and the constant and blatant wrangles within the management team, Fairfax has from time to time enjoyed its fair share of media publicity. Several journalists in the company have been cited saying that the company is dying.

Different analysts within and without the company have described the recent change of Fairfax board as panic attacks and convulsive moves towards an imminent situation of going under. Some are foreseeing a forced takeover.

Rupert Murdoch has been cited on many occasions saying he intends to acquire some of the key assets of this company.

He is believed to harbor plans of doing away with the Age and Sydney Morning Herald and transform Melbourne and Sydney into one-paper-towns.

The inclusion of Gina Rinehart in the Fairfax shareholders’ register has also been highlighted. The intentions of this inclusion are speculated upon by several people. What the above factors do to the company is define its identity.

To the consumers, the identity of a brand is a major factor when making decisions at this level. It can translate into either positive or negative results. This is irrespective of the product being circulated by the company (Aaker, 2005).

The result is a situation where Fairfax and its internal environment are in essence a hindrance to the success of the marketing strategies that have been put in place.

Internal Capabilities and Core Competencies

Gountas, Mavodo & Mullins (2009) are of the view that the analysis of a business firm’s opportunity should be broken down into several key activities undertaken by the company.

Fairfax identified the right target market very early, and this was not only attractive but very rewarding. The company recorded high growth rates in return.

The dependency on print media was at its peak and advertisement services were only available in this form of medium.

Growth of the internet and its increased use in business has seen a change in this market. What Fairfax failed to recognize is that while the company had settled on this earlier perceived static market, the conditions surrounding that market were also changing. Their operations were made simpler and more accessible.

Fairfax has however tried to adopt several marketing strategies. The reach of the company’s magazine and print media is impressive. With several thought- provoking and creative journalists, Fairfax has managed to cling onto the print media and related products.

Fairfax further established ‘subordinate areas of delivery’ which included the publication of financial, agricultural, regional and even community based newspapers

This strategy can help Fairfax successfully shift from the print media to a digital presentation if handled properly.

The foundation established by Fairfax is one that cannot be eroded easily and if properly harnessed, would definitely become a launching pad for the company’s marketing strategies.

Fairfax boasts of an extensive coverage in terms of ideas and topics and as such, it can effectively adapt to the changes brought about by technology and especially the internet.

Financial Evaluation

The process of implementing changes in media should not be taken as an easy task. With the current situation in the world market and the cost of such changes, Fairfax is set for a more difficult financial year.

Upgrades require extra input especially during the initial stages. The reduction in the number of employees to cut on costs and redundancy may not save the company in the short term.

Retirement benefits and send-off packages for more than 2000 employees will cost the company a fortune. The strategic change adopted by Fairfax is not expected to pick up immediately.

The Problems

Problem 1: Nature of Material

News does not make money for the company. Nobody pays to be informed. It simply generates attention and as such, creates a favorable environment to market products.

With this in mind, Fairfax has made efforts to embrace digital media in the hope that such a concept will work for the company.

However, the problem is that Fairfax’s magazine and newspaper readership may not be similar to that observed in digital media.

According to Johnston, Mehmet & Kristal (2008), the beliefs held by buyers and sellers determine the success of the marketing strategy. The scholars are of the view that it is important for suppliers to identify the belief systems in the market (Johnston et al., 2008).

Fairfax should adopt such a model of marketing to address the current situation. This is given that the company’s prowess in print media is challenged and rivaled by very few in the market. The stories created by the professional team of journalists and carried in the various media outlets are to some extent exciting.

However, they are just exciting to a newspaper or a magazine reader. There is no telling if such a response would be displayed by the audience in the world of technology. It is often believed that reading something from a newspaper does not necessarily feel the same as reading the same content online.

How then does Fairfax intend to prove its relevance in this market that the company is trying to conquer at the moment? Kerin & Peterson (2007) cite several problems that arise when businesses adopt the right marketing schemes in the wrong environment. Such a situation may make the business fail and turn the marketing strategies into worthless ventures.

This is what seems to be happening at Fairfax. While journalists are doing their best to improve the experience of the readers, the environment they find themselves in is not conducive to sell the information.

While formulating its marketing strategies, Fairfax should treat the online market as an entirely new market. New models of marketing should have been adopted. The approach taken by Fairfax seems to have been based on marketing models that are best suited for a ‘growth market’.

Such a marketing strategy will not help the company grow in the market; on the contrary, it will simply ‘plant’ the company within the market (Gountas et al., 2009).

What makes the situation worse is the fact that online viewership is not as engaging. This means that such a market is quite dynamic and unreliable for the company. Such a market is not suitable for a marketing strategy that seeks to promote a product.

It can only be conquered by a marketer who seeks to create an illusion of need in the consumer. The illusion will keep them coming back for that particular product (Jain, 2004).

Problem 2: More Competition

Closely related to the above problem is the fact that there is stiff competition in the digital market. While advertisements are usually sold by the stories contained in the newspapers they would be placed in, one can currently access free online advertisements.

Online advertisement has been made cheap and even worse is the fact that anyone can essentially provide the service irrespective of whether they are journalists or not. This makes it difficult for Fairfax to attract enough online audience.

The move by several agencies to make the audience pay for the news and information they access from websites is a bold one. Several companies have tried it and are yet to see results.

However, Fairfax seems to have come into the picture a bit late and may not get immediate results. This position is supported by scholars such as Porter (1980).

According to this author, this may be a daunting task that will force the company to make efforts to identify key competitors, their strengths, weaknesses and differences. The reality about internet marketing is that the competitors are numerous and are always changing.

For example, a company may not be a key player in newsprint and magazine but may attract a large audience in digital media. Such a dynamic array of competitors calls for strategic marketing campaigns.

The marketing plan should not attack one competitor only. On the contrary, it should attack all the competitors in a strategic manner (Aaker & Myers, 1987).

Problem 3: Sustainability

The move by Fairfax to digitize its news outlets and embrace technology may have arrived at the appropriate moment. However, some have viewed it as too little too late. To sustain such a move, the company should engage in aggressive marketing campaigns and acquisition of material.

This costs a lot of money. Additionally, restructuring the employees’ roster will in the short term cost the company. The company’s cost cutting and income generating alternatives may cause more financial damage than good.

Recommendations

A critical analysis of Fairfax’s current position indicates that the company is indeed dying. This situation can however be changed if the company adopts the right marketing strategies.

The Australian market is characterized by a large number of digital consumers. However, the consumers are reluctant to pay for what they read online. Fairfax can take advantage of this initial reluctance to pay (Byron, 1991).

The company should make efforts to provide the online audience with captivating news and services and not charging for it. The consumers who are still reluctant to pay for the news will automatically flood to Fairfax. This readership should then be developed and made dependent on the news.

The consumers should be made aware of how much they need these services. Once the dependency is established, a low payment scheme may be introduced. The charges should not be so high as to repel the consumers.

References

Aaker, D. A. (2005). Building strong brands. New York: Free Press.

Aaker, D., & Myers, G. (1987). Advertising management (3rd ed.). New York: Prentice Hall International.

Byron, S. (1991). Competitive marketing strategy: Porter revisited. Marketing Intelligence & Planning, 9(1), 4-10.

Gountas, W. A., Mavodo, F., & Mullins, J. (2009). Marketing strategy: A decision-focused approach (1st ed.). New York: McGraw-Hill.

Jain, S. (2004). Marketing planning and strategy. Mason: Thompson Publishing.

Johnston, D. A., Mehmet, M., & Kristal, M. (2008). The climate for co-operation: Buyer-supplier beliefs and behavior. International Journal of Operations & Production Management, 28(9), 875-898.

Kerin, R., & Peterson, R. (2007). Strategic marketing problems: Cases and comments. Manila: Pearson Education International.

Kotler, P., & Armstrong, G. (2001). Principles of marketing. Ontario: Prentice Hall.

Porter, M. (1980). Competitive strategy: Techniques for analyzing industries and competitors. New York: Free Press.

Sharp, P. (2012). Marketing strategies. New York: Free Press.

Tayme, T. (2011). Competitor analysis and foothold moves. Academy of Management Journal, 55(1), 93-110.

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