Introduction
The proposed memo asked for a strategic analysis of Time Warner Cable and the industry around it. In choosing the preferential approaches for analysis, the recommendation was made to use Michael Porter’s “five forces” framework. Indeed, modern research considers it to be a useful model for analysis. Bruijl (2018) points out that “the five forces framework is an influential and straightforward tool for the identification of certain powers in line with a particular business situation by using the outside-in perspective” (p. 1).
Pádraig (2017) notes that the “five forces” model is used extensively by economists and heads of large corporations. As for the Time Warner Cable itself, it is concerned with multiple segments including video programming, Internet service, and home telephone (Baye & Prince, 2022). The following outline will discuss the company’s positioning in detail.
“Five Forces” Model – Discussion Segment
Entry
Time Warner found a great moment to enter the competition, that is, the 1990s. Although the company was founded in 1968, great success was achieved after Time Warner Inc. acquired Turner Broadcasting Systems in 1996 (Baye & Prince, 2022). In the 1990s, the cable television industry transformed from a monopoly to increased competition (Baye & Prince, 2022). Broadband Internet has also started its rapid development in this decade (Baye & Prince, 2022). Thus, Time Warner’s speed of adjustment greatly applied to the flourishing industries.
Power of Input Suppliers
The major trends in the supply area are the increased competition over the broadcasting of sporting events and the rapid decline of traditional broadcast television. People prefer changing their entertainment habits, and shifting from television to online services, so the suppliers of content (ABC, CBS, Fox, and NBC) are losing their share of viewers (Baye & Prince, 2022). At the same time, there is a great diffusion of different channels for broadcasting sports events, making it hard to collect all the popular sports in one package.
Industry Rivalry
In different areas of Time Warner’s activity, the competition between rivalries has its own shape. There is no severe direct competition between companies in the cable companies industry because everyone has their geographic area (Baye & Prince, 2022). As for the satellite companies, the major competition is the rivalry for exclusive content, especially sports. At the same time, there is great pressure from online streaming services like Netflix and Amazon, which complicates the survival of traditional forms of broadcasting.
Power of Buyers
The major problem for the cable industry when the question concerns consumers is that the interest in having many channels is constantly declining. The problem is not in buyers’ capacities to pay for services but in a pure disinterest to have many uninteresting channels when the online services provide more opportunities. As a result, consumers often downgrade their cable channel subscription to the minimum one with basic channels and use Netflix or other streaming services instead.
Substitutes & Complements
In this segment, it is necessary to have a close look at other alternatives and compare the prices for services. In the sector of Time Warner, there are really close substitutes that may be cheaper than cable television (Baye & Prince, 2022). All these substitutes exist online starting from streaming services and sports game passes and ending with online television. Thus, the market is very sensitive to thriving online complements.
Conclusion
To sum up, the strategic analysis showed some dangerous parallel processes in the market that may severely affect the financial well-being of Time Warner. The established conditions of the market show that the cable industry should adjust to survive in the long term. The solution may be found in the entrance of online space or the creation of lucrative add-on packages with sports in order to make consumers shift from minimum packages to more elaborated ones.
References
Baye, M. R., & Prince, J. T. (2022). Managerial economics and business strategy (10th edition). McGraw Hill.
Bruijl, D., & Gerard, H. T. (2018). The relevance of Porter’s five forces in today’s innovative and changing business environment. SSRN. Web.
Pádraig, B. (2017). An analysis of Michael E. Porter’s competitive strategy: techniques for analyzing industries and competitors. Macat Library.