Abstract
In the last two decades, the world newspaper industry has faced a number of changes in the business environment, which has affected the performance on the global as well as regional or local levels. On a global scale, the financial perspective of the newspaper industry has faced decreasing performance in terms of profitability. In particular, the advertising section has reduced significantly. Nevertheless, the situation in Hong Kong is relatively different. While the global sales rate and profitability of the newspaper industry have declined in the last twenty years, it is worth noting that Hong Kong is experiencing an increased growth rate in the industry. The purpose of this paper is to analyze the overall performance of the global newspaper industry. It will be compared with the Hong Kong newspaper industry. In addition, the paper will analyze how HKET Group used specific business strategies to sustain growth and evade decline in a competitive and declining newspaper industry.
Which factors have affected the profitability of the newspaper industry in general and in Hong Kong in particular over the last twenty years?
The overall performance of the newspaper industry in the world and Hong Kong
In the last two or three decades, the newspaper industry has faced a number of changes in the business environment, which has affected the performance on the global as well as regional or local levels. Nevertheless, the situation in Hong Kong is relatively different compared to other nations in the world. First, it is important to consider the global performance of the industry in the last two decades. On a global scale, the financial perspective of the newspaper industry has faced decreasing performance in terms of profitability. In particular, the advertising section has reduced significantly. Some studies indicate that advertisement is facing a sharp decline, which will reach about 9% by 2015. For instance, statistics have shown that the income from advertising in the newspaper industry has reduced from 35% to 28% in 2012 and is expected to reduce to 25% in 2015. Apart from advertisement, the annual growth rate for sales has reduced from more than 155 twenty years ago to about 1%, which indicates a flat growth rate (Chan & Farhoodmand, 2007).
Nevertheless, the situation in Hong Kong is relatively different. While the global sales rate and profitability of the newspaper industry have declined in the last twenty years, it is worth noting that Hong Kong is experiencing an increased growth rate in the industry. For instance, studies in the country have shown that the annual revenue obtained from newspaper advertising has grown by more than 7% in the last two decades. However, it is evident that the industry is facing a number of threats, including the emergence of tabloid newspapers, the online version of the old newspaper, and online advertisements.
The key factors affecting the profitability of the newspaper industry in Hong Kong and the World in general
From the case study, it is evident that a number of factors have contributed to the changes experienced in the newspaper industry at the global level as well as in Hong Kong. While some of the factors are economic in nature, the majority of changes are due to changes in the social, cultural, and technological aspects of the modern world.
First, the economic environment has changed drastically over the last two decades. In Hong Kong, there was an economic boom, with most sectors growing rapidly since 1990. In fact, Hong Kong experienced massive economic growth in this period, especially due to an increase in international trade and a focus on industrialization. Multinational and foreign organizations are increasingly invested in the country. In particular, European, American, and East Asian corporations have invested heavily in the country since its independence from Britain in 1997. In addition, the simultaneous growth of the Chinese economy has made an impact on the country’s economy since 1995. Based on these facts, it is possible to analyze the newspaper industry in HK from an economical perspective. For example, as the country enjoyed an increased rate of economic growth, the demand for financial and economic news increased rapidly. This created a strong economic niche for print news. In fact, most of the print newspapers and magazines focused on the economic trend, which provided investors, employers, workers, and international and local organizations with a good source of information on the financial potential of the economy.
Entertainment also played an important role in the rate of growth and development in the country’s newspaper industry in the last two decades. As the economy enjoyed rapid growth, the entertainment sector also enjoyed significant changes. In fact, the presence of foreign companies and communities in the country affected the perception of entertainment.
The political changes in the last two decades have further caused rapid changes in the newspaper industry in HK. For instance, after the exit of the British administration in 1997, HK developed an open door policy with China. The two countries became more politically closer than before, which saw the rapid development of the partnership between them. However, it is worth noting that HK maintained her ties with Britain, Europe, Japan, and the US even after the exit of the British administration. As such, the country had to develop a neutral ground in order to maintain its relationships with the west and the east. As a result, most readers preferred newspapers that looked neutral in their reporting, which favored the readers whose standpoints were aligned to one of the two sides- the West and China.
Technological development in HK played an important role in the growth of the newspaper industry in the last two decades. For instance, the emergence of the internet in the late 1980s and early 1990s made significant impacts on the newspaper industry. For example, the internet made it possible for people and organizations to access news within a short time and from a wide source. In addition, the internet made it possible for new companies to develop online blogs and web pages meant for information sharing. It is also worth noting that the internet made information sharing easy and effective, which allowed many people to communicate freely through the new medium. Thus, newspaper companies were forced to rethink their marketing and operational strategies, especially because young readers were preferring internet-based news. This trend caused the print companies to lose their young readers, which complicated the future. Therefore, they were forced to establish online versions of their print versions. Eventually, they were able to tap the benefits associated with online media and added them to the profits obtained from the print version. Thus, most companies that accepted the new technology improved their performance, while those that were reluctant to change faced financial problems.
Question 2: The HKET Group grew through a strategy of diversification and differentiation. To what extend did the strategy of the Group follow the key imperatives of a blue ocean technology?
Response
The Hong Kong Economic Times Group (HKET Group) provides a good example of newspaper companies that attempted to implement advanced strategies to sail through the competitive and dynamic economic environment in the last two decades. The group was formed in 1988 as a writer of the HK Financial times (HKET). In fact, it was formed at the time of the economic boom in the country, which implies that the demand for newspapers was rapidly increasing every year (Chan & Farhoodmand, 2007). In addition, it was the first financial newspaper in the country written in the Chinese language in a similar format as the Financial Times. Within a period of three to five years, the newspaper had dominated the financial and business news industry both in Hong Kong and in China. It became the most famous newspaper for its quality content as well as effective marketing strategies. It has been serving the HK community through the inclusion of various business and economic aspects such as a section on housing, real estate, small business, agriculture, and blue-chip sectors. In addition, it readily accepted and used an IT platform, including an online version that makes it easy for customers to access information within a short time, regardless of their location. The main question is to determine how the company responded to the challenges of moving from the old model (print media) to incorporate a new model based on internet technology and at the same time remain active in the print industry (Chan & Farhoodmand, 2007).
A diversification and differentiation strategy seems to be the most correct answer to this question. This strategy provides evidence of the extent to which the company has used the Blue Ocean strategy to diversify and differentiate its business model to fit two different industries at the same time and within the same space. It is evident that the company’s strategy was able to propel it through an economic challenge, which posed various pitfalls. By developing a flexible and scalable business model, the company was able to modify its business with changing economic, technological, and financial environments.
First, the company started as a print service, providing business news in the print version. It was initially produced once per week when it was launched in 1988. in addition, it focused on business news and became the first newspaper to provide clear paginations in the country. Moreover, its initial editing and publishing policy was relatively strict, emphasizing mainly the accurate, impartial, formal, and professional format, with few political news and gossips.
However, with increasing social, technological, and political changes in the country, it was evident that readers were preferring a wide range of information even in cases when business and economic news were involved. It was also clear that if the company continued in its rather rigid model of editing and publishing, it was set to lose its market position. In addition, a few years after it was launched, the internet technology emerged, alongside its dynamism and features that allowed people to access news within the shortest time possible. Thus, diversification was no longer an option but the only way to retain the company in business.
Therefore, the company started diversifying its business model. First, it launched an online version of the print material. It recognized the advantages of the internet boom as an opportunity for increasing its presence, coverage, market, and profitability. This diversification turned out to be an advantage because it was able to retain the young generation of readers who appreciated and preferred the online version while maintaining the older generations that preferred the print version. Secondly, diversification was observed when the company decided to include socioeconomic and political-economic news in both versions. As more and more readers appreciated the political and economic freedom, the demand for news in all fields increased. With both online and print versions, the company was able to obtain the benefits of diversification.
The company involved differentiation strategy by ensuring that its newspaper was a distinguished product that was available in English and Chinese, online and print, and also with financial news incorporated with social and political aspects of the economy. While other newspapers concentrated on one of these fields, HKE had more versions and covered more fields, making it the most preferred and dominant newspaper in the country.
Conclusion
This analysis reveals the factors that made HKE sustain growth and profitability when the global newspaper industry was declining. The company developed a Blue Ocean strategy through both differentiation and diversification. These strategies allowed the company to capture the new demand in the market by addressing the needs of new and unaddressed groups of customers such as online and multilingual readers, foreigners, business, social and political enthusiasts, and other groups.
Reference
Chan, Y., & Farhoodmand, A. (2007). Hong Kong Economic Times Group: Diversification and differentiation. POON series, Asia Research center Journal, 2(1), 1-30.