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Yahoo Corporation HIstory Case Study

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Updated: May 20th, 2020


Founded in the year 1995, Yahoo is one of the largest companies in the world. The company is one of the most famous organizations in the word in terms of the revenue they make in a year. In fact, it is reported to make profits of billions of dollars every year. Although many companies originate from men and women who have been in a certain field for long having many years of experience in a particular profession, the origin of Yahoo or rather the inventors of the company have left the world with wonders. It surprises people upon realizing that only two engineering students founded the corporation in the year 1995. However, the idea was conceived a year earlier by these students while undertaking their electrical engineering degree at Stanford University (Manber, Patel, and Robison 45). The corporation that was initially named as ‘Jerrys guide to the world’ attracts close to a billion people every month with the number described to be growing each day in the over thirty languages that it can be found (Manber, Patel, and Robison 45). Since the transformation into a fully-fledged corporation, there have been a number of changes in the management with each of the Chief Executive officers being faced by new challenges each day.

The most significant parts of Yahoos history are the periods after the year 2001. The years that followed can be grouped into eras. Before this year, the company flourished as the dot-com bubble was in place (Manber, Patel, and Robison 45). The company made record profits in this period with the share prices being highest then for the corporation. However, the period is significant because the bursting of the dot-com bubble brought about challenges as Cohen-Almagor states (67). In the period between 2001 to the present, the corporation has changed the management a number of times. Seven CEOs have served in it since 2001. These CEOs and the periods of service include Marissa Mayer (2012–present), Ross Levinsohn Interim (2012), Scott Thompson (2012), Tim Morse Interim (2011–2012), Carol Bartz (2009–2011), Jerry Yang (2007–2009), and Terry Semel (2001–2007) from current to earliest. For the purpose of discussion in this paper, the periods will be divided according to these CEOs into respective eras. The eras are the Semel era, the Yang era, the Bartz era, and the MTLM (Morse, Thompson, Levinsohn & Mayer) era.

In these eras, there are trends that emerged with resultant effects on the corporation. There were also major competitors in each era, and the corporation performed different in each. The respective leaders also took different measures to ensure that the company stayed relevant in the wake of the arising competition along the various sectors of interest. This paper evaluates these eras discussing the initiatives taken in each, the results achieved with any change, and the performance of the corporation relative to the major competitors at the time.

The Semel era

As described above, this era started in the year 2001 (April 17) when Terry Semel became the CEO of the corporation, and lasted until the mid of the year 2007 (June 18). When Semel was appointed into the corporation in the year 2001, there had been only one CEO before him, and a time had come for the corporation to have a change of guard. Terry Semel had previously worked at Warner Bros for almost 25 years, and the shareholders and the board at Yahoo Corporation thought that He was the right person to steer the corporation away from the problems it was experiencing at the time (Manber, Patel, and Robison 45). Yahoos problems did not stop with the entry of this CEO, and this era had its own share of the problems. It is important that the era be looked into to compare the performance of the corporation with subsequent eras in terms of financial and other avenues.

In the year 2001, the major problems affecting the corporation including the decrease in profit and the fall in share price necessitated a change. This change came in the form of Semel who replaced Tim Google as the CEO. The other major change that Yahoo needed to undertake was to reduce the workforce to maximize on profitability, and that around 12%of the staff was to be laid off (Manber, Patel, and Robison 45). Semel’s major challenge would be in the human resource area. The main problem, however, was the fall in share prices. According to Cohen-Almagor, “…stock prices fell from a January high of $42.88 to a low of $9.09 on October 1 of the same year” (78). This case also led to speculation that the corporation would be involved in a merger with other companies to help it wither the storm (Manber, Patel, and Robison, 46). In this speculation, a French company Vivendi was highly regarded as the corporation of choice for Yahoo to take the merger with (Manber, Patel, and Robison, 46). This taking did not happen. The company decided to go through it alone with the leadership of Semel.

Semel was largely seen as the individual to help the corporation to diversify its market by engaging into the entertainment industry that was thought to be a major source of revenue. Semel brought about a series of changes including a change in the board membership and the human resource. One of the individuals that he recruited was Gary Wilson, a former colleague and executive vice president at Walt Disney (Cohen-Almagor 87). Wilson later recommended Roy Bostock thus bringing into the corporation 38 years of experience in advertising. The stakeholders then gradually began to have faith in the new management and viewed it as the necessary change they needed. This case was seen as a shift from the traditional approach where the technological experts were at the helm of the corporation, and therefore, increased shareholder confidence that the new group of entertainment experts would help the corporation diversify.

During this era, the major competitor that the company had was Google. The new changes that would help it compete with Google include the number of new directors who had knowledge on the entertainment and advertising industry (Sartain 93). Most of the changes that they implemented were men to give Yahoo an upper hand in this competition. One of the areas that the two were competing in is the search over the internet, and Yahoo wanted to win the war on this front. To achieve this goal, Semel and the new directors instituted a series of changes. Overture services was contracted to help the corporation establish and strengthen its market position in the search ad technology at a cost of $1.3 billion in the ear 2003 (Manber, Patel, and Robison 45).

Overture services were the leading company in this sector of search ad technology. They were thought to be capable of completing this task. However, it emerged a year later that Google was ahead in the competition with Yahoo in this sector (Sartain 95). Market analysts found out that the superior technology that Google used gave it a “40% price advantage for every ad ‘clicked’ with this hurting the competition with Yahoo” (Yahoo! Inc. V. Licra 359). Some of the market analysts also observed, “Google made 4.5 cents to 5 cents with every click while Yahoo only averaged 2.5 to 3 cents” (Sartain 96).

The competitive advantage that Google had in the ‘ad sector’ brought about a disparity of roughly $1 billion in revenue, and Yahoo under Semel had to work fast to counter this (Segev and Niv 25). In a response in this sector, Yahoo launched the Panama project that was supposed to be “an all-out assault on Google’s superiority” (Kuei-Jung et al. 254). In this project, Yahoo would place text, voice, and video ads that were related to a search result next to it in the search findings (Cohen-Almagor 79). The project experienced some hurdles, among them being the longer than expected time to implement and a rise in the budgeted cost of the project. The installation process also brought about delays in the services and interruptions. This case is reported to have affected the quality of services offered by Yahoo (Cohen-Almagor 79). A combination of these problems ensured that Google had the upper hand in the ad competition. During the installation, Google maintained its lead in this sector earning Billions of dollars compared to Yahoo, which was spending more than planned in the project by employing more staff to handle the transition.

Despite the poor competition achieved in this era, the corporation under Semel managed to gain in international investments. In the year 1996, the corporation had entered the Japanese market and launched a joint venture with a Japanese computer and software provider-Softbank (Manber, Patel, and Robison 48). This was a significant focus of the corporation during Semel’s era, and the venture is reported to have brought Billions in terms of assets and dividends. At the end of the year 2010, the Japanese branch is said to have generates “$61million in dividend payment to Yahoo for that year alone, with the company being worth $8 billion” (Cohen-Almagor 79). This helped Yahoo to focus away from the domestic competition with Google and generate the needed revenue.

The same era was marked with other international investments in countries such as China. As Sartain states, “in 2005 Yahoo broadened its Asian holdings by acquiring a 43% stake in the Alibaba Group, a Chinese online forum for business to business sales” (97). This is reported to have aided the corporation in the harsh economic times, and with the 2007 IPO that led to a rise in value of Alibaba, Yahoo gained about $401 million (Manber, Patel, and Robison, 49).During Semel’s tenure, the corporation adopted a divergent leadership style from the traditional one. The CEO was responsible for the major appointments in the board even appointing the former workmates. This role is described as propelling Yahoo from a technology-based corporation to one that is entertainment based.

The strategic directions that the company had adopted over the last ten years before Semel also changed. The company began to take more advanced measures in its competition with Google and started expanding its international presence in all sectors. Diversification was the major achievement by Semel and his team. The organizational structure however remained the same as it was before Semel. The board members and the shareholders represented this case. The number of employees in the corporation also grew significantly from 3500 from when Semel joined the corporation to over 12,000 when he resigned in the year 2007 (Cohen-Almagor 78). This case can be attributed partially to the strong human resources that Semel introduced together with the work of Sartain achieved when working in the corporation (Cohen-Almagor 79). The organizational culture changed significantly, as the organization grew and established branches and companies outside of the United States.

In general, Samel was the entertainment expert that Yahoo needed to steer it away from the crisis experienced around the year 2000 when the dot-com bubble burst. The company had begun experiencing mixed results, and profitability was not feasible at the existing rate. Semel brought a series of changes to the corporation that enabled it to achieve the targets set by the board and the original owners. As discussed, the only area that Semel was not successful initially was dealing with the competition that Google posed in the ad sector. This challenge is due to the complexity of the solutions that were targeted for implementation such as the Panama project (Segev, and Niv, 23).

The Yang era

Semel era ended when he left the CEO post to one of the founders of the corporation, Jerry Yang in 2007 and took up the leadership of the board (Wendt 317). The organization continued with the same trend in all avenues as established by Semel’s leadership. This change of guard at the organization took it back to the technological center that it was before the entry of Semel. In a letter addressed to Semel by the board after his resignation, he was thanked for the positive change that he had introduced into the company ever since his appointment. Among them was the record growth in the company shares and the market value. The employee increase from 3,500 when he took over to over 12000 employees at the time was also noted. Jerry Yang was also stated to be best suited to run the organization based on the past he had with it and as a cofounder (Segev and Niv 23). It was believed that Yang provided “phenomenal strategic, technical, product, and market leadership. He has developed important relationships with major business partners around the globe” and was, therefore, suited for the post (Segev, and Niv, 27).

One of the problems that Yang inherited was the competitive problem with Google, and this threatened to deny the organization profits from local engagements. However, the competition was least of his worries, as he faced more immediate problems shortly after his appointment. Seven months after promotion of Yang at the helm of Yahoo, Microsoft made a bid to buy Yahoo (Cohen-Almagor, 79). The previous CEO had expected this offer by Microsoft though Microsoft claimed that he ignored the overtures that they presented to him. As Cohen-Almagor states, “the initial offer totaled $44.6 billion, or $31 a share and represented 63% premium on the stock price which closed on January31st at $19.18, or $25.63 billion market cap” (67).

The step by Microsoft to attempt the bid of Yahoo was interpreted differently by many and including the CEO himself. A number of reasons were provided with most shareholders claiming that the move was aimed at countering Google dominance in the search and software markets (Cohen-Almagor 79). The competition between Google and Yahoo was closely observed by Microsoft, and was a major cause of the bid made by them. Steve Ballmer, the CEO of Microsoft at the time, was optimistic of the partnership between the two corporations, and his idea was to expand the markets for both the companies (Wendt 317). As Segev and Niv state, Ballmer offered extra attention to the possibilities in joint R&D, “knowing that Yahoo was looking to streamline the processes” (34). As a result, the deal would ensure that both corporations saved more than a billion dollars after a combination of their R&D (Wendt 317).

The offer by Microsoft was not the first that had been made to Yang, but was the first one to be officially done. The other offers that Microsoft had done were unofficial. The board members have only approached Yang independently. The relationship that existed, therefore, between the CEO of Microsoft and Yang and these unofficial offers can be said to have prompted the offer. The technology sector was abuzz with information and speculation about the offer, and analysts, bankers and bloggers got their share of the moment. The offer caused speculation that Google would “intervene and help Yahoo fend off Microsoft by combining the search capabilities” (Poe 39). This speculation became real when the CEO of Google at the time Eric Schmidt attempted to convince Yang about the idea, but the results were not positive, as the talks did not bear any fruit.

The speculations that rotated around the sale of yahoo and the merger with Google and Microsoft reached a high when in the period; some of the people began thinking of dissolution of the corporation’s entities (Fielding 521). There were also talks of giants such as AT&T, Time Warner and Comcast “making a counterbid for the same organization, with some other avenues suspecting a breakup of Yahoo and sale of lesser entities” (Fielding 512). Yahoo News, Yahoo sports, and Yahoo Finance were some of the valuable components that people suspected that they had to be split from the main organization to be sold to other industry players to boost the financial status of the organization (Cohen-Almagor 75). Some of the companies that were thought to be the possible beneficiaries include ESPN, the New Corp, and the Wall Street Journal, and these would buy the components to expand their dominance in their respective fields.

Yang, however, managed to counter and evade the crisis by rejecting the offer made by Microsoft. According to the letter written by Yang explaining the reason for turning down the offers, the bid “substantially undervalues Yahoo including our global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earning potential, as well as our substantial unconsolidated investments” (Fielding 517). The bid by Microsoft marked the biggest challenge in this era. There were remnant speculations that the future of the corporation would be dogged by such bids and counterbids. The issue also gave an opportunity for bloggers and other analysts to discuss the corporation’s future, with most of them placing their bets upon a possible partnership between Yahoo and Microsoft (Wendt 317).

Despite this apparent problem facing Yang’s era, the remnant financial problems before his tenure were still present and proving to be hard to deal with. At the time of the bid by Microsoft, Yahoo’s shares were performing poorly in the stock market. They are said to have been trading at $34 per share, which is the lowest that they had been in a period of more than a year (Sartain 96). In the same year, the market capitalization was $47.4 billion dollars representing the poorest performance for a long time (Poe 37). Under Yang, Yahoo set to improve the investor confidence after the rejection of the offer made by Microsoft, as most of the investors had a bad feeling about the move.

The corporation also set a three-year plan that was aimed at cementing the relationship with its partners and shareholders (Kuei-Jung et al. 256). Some of the suggestions made include the proposed increase of net revenue from that of $5.1 billion obtained in the year 2007 to around $8.8 billion for the year 2010 (Cohen-Almagor 98). Yang also suggested an improvement in output in the advertising sector. One of the targets made was to decrease the advertisement revenue gap that existed between the corporation and Google with this attempt being justified by the widening gap of 60% in revenue between the two (Poe 37).

During this era, it is true to say that the partnerships that were developing were aimed at improving the competition between the corporation and her partners. The failure for them to materialize indicated a growing desire for independence displayed by the corporation under the leadership of Yang. Yang’s leadership of the corporation can be described as being judicious and controversial, but some of the factors that may have enabled him to deal with some of these issues include his background in the industry and his role in the foundation of the company. The company is described to have taken a strategic direction under him, with the most prominent being the implementation of some of the policies developed by the administration that preceded him. He is described as having a plan and vision for the organization, and this he designed in terms of years (Manber, Patel, and Robison 45).

The organizational structure is also described to be similar to the one under Semel with the only difference being in the leadership styles adopted. There is a reported decrease in the number of human resource working for the organization during the tenure of Yang, which was meant to improve on the performance while reducing the operating costs (Poe, 37).This measure and the leadership style adopted are described as contributing to a better organizational culture than that seen under Semel.

This era lasted only two and a half years, but the literature indicates the challenges that the corporation was faced with under Yang. The corporation announced the resignation of Yang as the CEO on November 17 2008 to allow the end of the era. Yang officially stepped down in January the following year. The person who was appointed was Carol Bartz who was seen as the best person in the intended change of direction for the corporation (Fielding 517). The Bartz era was then in place and would last up to the year 2011. This era will be discussed below.

The Bartz era

Following the problems that recurred under the CEO Jerry Yang and Semel in the previous years, Yahoo decided to adopt a change in policy to ensure there is maintained competitiveness in the industry. For the purpose of fulfillment of this goal, the corporation appointed Carol Bartz to be the CEO on January 13, 2009 after Jerry Yang resigned (Kuei-Jung et al. 254). The corporation and the whole industry including Yahoo’s shareholders were exited and optimistic of the new appointment, and everybody was full of praises for the new CEO based on her achievements (Manber, Patel, and Robison 45). Bartz previously served as the executive chair in another corporation in the same industry, and this is Autodesk.

The move to appoint Bertz was aimed at enabling the company to improve its competition with Google and analyze any relations that would be possible between it and Microsoft. Some of the competencies that allowed the organization to choose Bertz as the successor of Yang included the experience that she had in cutting cost and streamlining process (Fielding 517). She would face an organization that had so many problems and other factors in the industry to deal with, and her approaches to them would determine the success or legacy that she would create at the organization.

Despite the early enthusiasm that was displayed by everybody, the tenure was rocky and full of controversies, and was not different from the predecessors (Kuei-Jung et al. 255). Some of the industry players began by questioning her suitability to run the corporation with others indicating that her experience was inadequate to head a firm of that magnitude (Kuei-Jung et al. 255). As Cohen-Almagor states, “the common critique was that her experience with Autodesk was not geared towards the consumer-oriented search and advertisement businesses that made up Yahoo” (47). Others claimed, “Yahoo did not need an applied systems person-it needed a consumer product executive. However, the corporation was attracted to Bartz’s proven ability to cut spending and make operations more efficient” (Kuei-Jung et al. 250).

Some of the controversies that Bertz was involved in include the deals made with Microsoft and Alibaba. As Cohen-Almagor states, “a ten-year search deal between Microsoft and Yahoo supplanted Yahoo’s own Panama project, launched to better target and better place advertisements with Yahoo users’ search results” (78). Bertz deal with Microsoft meant that Microsoft would be the provider of search and advertising technology to Yahoo. According to Fielding, “ while Yahoo continued to sell its own ad space to keep 88% of the revenue, the data used to determine the ad placement and drive profitability resided with Microsoft” (517). This case resulted in an increase in the search revenues for both corporations. As a result, Microsoft became the number two in the search industry just behind Google. Some of the bloggers and the industry players show the move by the companies as only benefiting Microsoft, as they were the main determinants in the relationship since they held the data used in the search.

The main action that marked the toughest challenge during the reign of Bartz as the CEO of the corporation was the relationship with Alibaba Group. The controversy was about the subsidiary of the Group Alipay, which was a lucrative online payment site “serving Alibaba’s Chinese commercial sites including Alibaba, a venue for Business-to-business sales, Alibaba cloud computing, Taobao and Yahoo China” (Cohen 60). The chair of Alibaba in the year 2010 transferred Alipay from the control of Alibaba to that of a company that he privately owned, and this move subsequently meant that the company was beyond the reach of Yahoo ownership claims (Manber, Patel, and Robison, 45). As Cohen-Almagor states, “the loss of such a lucrative asset riled Yahoo investors, who accused Bertz of ignoring the relationship with the Alibaba Group, being blindsided by the Aliplay transfer, and squandering potential revenue” (98).

Alibaba’s chairperson also offered to but Yahoo’s shares from the company at a cost of $10 billion. He stated that the move to remove the company from Yahoo’s control was to endure that they complied with the operating license for Alipay as an electronic payments platform thus avoiding punishment by the Chinese government (Manber, Patel, and Robison 56). According Sartain, “…Jack Ma, the chairman of Alibaba, was effectively trying to remove potential Alipay earnings from Yahoo stakeholders” (96). This attempt caused a scandal for Bartz, and had the most significant effect on her service as the CEO of the corporation. After a long period of strained relations going for months, an agreement was agreed upon, which involved sharing the revenue from Alibaba (Kuei-Jung et al. 250).

As Cogburn states the agreement held, “should Alipay go public, Alibaba and hence Yahoo, would receive a payment of between $2 billion and $6 billion, depending on the success of the IPO” (30). An IPO was however unlikely, as the Chinese government was not likely to allow it. Alipay, however, went ahead and received the desired incense, and remained separate from Alibaba (Kuei-Jung et al. 250). This scandal led to some of the investors selling their shares in the corporation with other claiming to have lost confidence in the management of Bartz. One of the most influential investors, David Einhorn, according to Kuei-Jung et al. sold his shares claiming, “this is not what we signed up for” (250).

Carol Bartz was dismissed from the leadership of the corporation on Septembers 6 2011 by the Yahoo board. This was a hasty decision by the board, and no succession plan was in place to ensure there was continuity even after her departure. This move “served to alienate Yahoo shareholders farther and eroded confidence in the board” (Kuei-Jung et al. 250). However, the misfortunes that begot her were because of the prevailing market conditions and the resolution of members that were beyond her control.

Her leadership style is one that encouraged a departure from the past that was represented by Yang and Semel, and this meant that the corporation was on a growth. However, her leadership style also cost her job since she allowed a more independent running of the subsidiary companies that led to the Alibaba crisis. The strategic directions that she made for the corporation include the introduction of newer and more efficient ways of improving the revenue, and the deal with Microsoft, which boosted Yahoo’s fortunes. She, however, maintained the organizational structure that was characteristic of the previous administrations.

Her experienced in the previous companies and the positions that she held before the job at Yahoo also helped her in the interaction with the employees, and this is described as propagating a more goals oriented organizational culture (Manber, Patel, and Robison 56). The dismissal of Carol Bertz means the end of an era for the corporation. This was then followed by a series of short-lived appointments in the same docket, and the reason for the frequent change is the lack of planning and the discordance that existed in the board after bertz’s departure. The CEOs that followed her propagated a series of changes, and these will be looked at in a group.

The MTLM (Morse, Thompson, Levinsohn & Mayer) era

This era is the most recent in Yahoos turbulent history. It saw the most frequent change in leadership of the organization in the least number of years. After the dismissal of Carol Bartz on September 2011, the shareholders started questioning the frequent change of CEOs with no change in the market performance3 and specifically the share price. The corporation had changed its CEOs with four of them running it in as many years. Some of the concerns raised included the stepping down and replacement of the board of directors and the board members in general and replacement with members who had expertise in the field and especially in the ad and internet technology.

The corporation through the board named Tim Morse who was the chief financial officer as the new interim CEO to replace Bartz. Morse served for only a period of four months and some of the problems that Bartz was experiencing were inherited by him. The main issue that continued to dominate was the case of Alibaba and Alipay. The shareholders continued with their call to have the manager’s step down and the board reconstituted. Their argument was that the frequent change in CEOs was not of any use to the corporation and the problem was not in the personalities in the office themselves but in the leadership structure in general. They, therefore, called for a total reconstitution of this leadership. Under Morse, the corporation also started reorganizing itself to become profitable and reduce the costs that were being incurred through unnecessary expenses. To do this issue, the organization had to conduct a major layoff in all the branches and to ensure the costs are met for this. However, Morse’s stay at the leadership was only for a short time, and no major decisions could be made on behalf of all the shareholders. The corporation then named the former PayPal president Scott Thompson as the new CEO on January 4 2012 (Cohen-Almagor 67).

Thompson represented the change that Yahoo intended to make to enable it regain its lost glory. Most people believed that this was the person to turn back the misfortunes of the corporation based on the success that he had experienced at the top of the management of PayPal. Thompson was serious as observed in the manner in which he got to work in the organization after the appointment. His major actions in the leadership position were to perform a major employee cut to reduce the expenses incurred through some of them. Rumors indicated that the new CEO would perform a major staff cut, and this led to the resignation of a number of leaders such as Yahoo Labs head, the head of advertising sciences and Andrei Broder who served as the Vice President of computational advertising and chief scientist of the advertising product group (Segev and Niv 23). However, these rumors came to life when the corporation announced a major staff cut. Thompson oversaw the departure of around 2,000 employees of the corporation worldwide, and this represented about 14% of the existing 14,100 employees (Manber, Patel, and Robison 57). As Cohn states, “this move would save Yahoo over 370 billion dollars every year when the layoffs would be completed at the end of the year 2012” (32).

The competition in the industry was growing at the tie Thompson was the CEO, and Facebook became a force to reckon with. Disagreements between the two organizations developed over lawsuits. As Cohn states, “Yahoo under Thompson filed a lawsuit against Facebook over an alleged infringement of 10 patents where the former made a response that involved a countersuit against the corporation” (32). Some of the measures that Thomson attempted to put in place include the recognition of the client as the corporation’s priority. This strategy was emphasized in the circulars and memos that were sent by his office to the various employees at various levels (Cogburn 30). Thompson also tried to carry out major reorganizations on the organization, with the main areas that were affected being technology aspect, the consumer divisions and the regions (Manber, Patel, and Robison 59). These changes were designed to take effect from the first day of March in the same year. The shareholders were expectant of these changes.

In the consumer group area, the consumers were recognized as the main priority of the organization and the branches, and the constituent groups of commerce, media and commerce were further reconstituted (Cohen-Almagor 90). In the case of the regional groups, the advertisers were the main clients recognized who were reconstituted into three regions, which are Americas, EMEA and APAC. The technology group was also reconstituted to offer the most the most support to the other two groups, and the constituent groups are Central technology and Core platforms (Fielding 519).

Like with the previous CEOs, Thompsons was also faced by a controversy that was unique to his position at the top of the management. This was in the educational background that he had indicated in his biography. The main controversy raised by a member of a constituent company who had been trying to gain membership in the corporation’s board of directors was that Thompson erroneously indicated that he held a degree in accounting and computer science from the Stonehill College (Cohn 533). Upon further investigations, the degree in computer science was found to be inexistent at the institution at the time of his graduation (Le Menestrel, Hunter, and Henri-Claude 136). The board constituted a three-member committee to investigate the matter and the procedures followed during Thompson’s appointment. Ten days later, this led to the appointment of a new CEO who would temporarily represent and manage the corporation.

As Kuei-Jung et al. state, “Ross Levinsohn was on May 13, 2012 appointed by the board as the interim CEO of the corporation, marking the end of the five month reign of Thompson” (250). The service of Levinsohn in the corporation lasted only a month and no major change in the organizational structure other than the changes effected by Thompson took place. The board appointed a new CEO only a month later, and the lucky person was Merissa Mayer, a former executive at Google who had also served as the corporate director at Wal-Mart (Manber, Patel, and Robison 58). This change in management was effective starting July 17 of the same year, and represented the largest number of CEOs that the corporation has had in a period of a year. Mayer took over the organization to become the youngest head of a company in the Fortune 500 list and once again the shareholders expressed enthusiasm that the new leader would propel the corporation to a brighter future (Le Menestrel, Hunter, and Henri-Claude 138).

As noted above, the MTLM era had a significant change in the leadership styles based on the number of CEOs and executive leaders that were changed within a short period of time. The company experienced diversity in the leadership styles, and this can be observed in the leadership qualities displayed by the acting CEOs at this era. Although it lasted a period of only three years and counting, significant decisions and changes were made. The strategic direction of the company also changes with the introduction of leaders such as Thompson and Mayer, and this is said to have boosted the performance of the corporation and in effect the confidence displayed by the shareholders (Le Menestrel, Hunter, and Henri-Claude 139). One of the most significant causes of the changes in the era is the introduction of Thompsons, and he had the most effect on the direction the organization was to take over the next few years even after the incident leading to his dismissal.

The human resource has undergone a number of changes in this era, and the most significant as indicated above is the laying off of a significant proportion of the employees to pave way for efficiency and productivity. These changes were mainly effected and envisioned by Thompson and later carried on by the subsequent CEOs, and the corporation is still undergoing structural reorganization. The main changes that were meant to improve on the efficiency of e organization were also affected by Thompson, and he represents the biggest influence to the organization in this era even with the short duration of stay. The changes brought about a change in the corporate culture, with the frequent change in the leadership being the main cause of concern over the future of the corporation. Based on the above case study, Yahoo has undergone a series of reforms and challenges along its history, and this are indicative of the existing business challenges in other organizations of its size and magnitude. In order to understand the challenges and the measures taken in this corporation, it is important to make an analysis of this case with the appropriate theories being discussed.

Case analysis

The case study clearly shows the trends that Yahoo has had for the period beginning 2001. The marked characteristics are the frequent changes in the management in this period and the fluctuation in the share price and market performance. As Kuei-Jung et al. claim in his theories on organizational performance that the performance and stability of an organization are dependent on the prevailing market conditions and or how well an organization is able to deal with these conditions (250). In Yahoo’s case, the prevailing conditions saw the corporation make a number of mistakes which resulted in the frequent changes in the management.

The corporation is described as engaging in internal and external corporate venturing in the case of the corporations and subsidiaries that it opened throughout the world in this period. An example is Alibaba in the Asian region, and this benefited the corporation when the competition back home was stiff with Google. As Kuei-Jung et al. state, “corporate venturing includes the various methods for creating, adding to, or investing in new business” (250). It is also evident that the CEOs that served in the corporation over the period discussed displayed differing corporate entrepreneurship and innovation levels, which includes different types of management practices.

Most of the CEOs were corporate entrepreneurs, and according to Kuei-Jung et al. “corporate entrepreneurs want freedom, access to corporate resources, are goal oriented and self-motivated and also respond to corporate rewards and recognition” (250). These kinds of entrepreneurs are also described as being able to set goals that are time based and easily achieved. The appointed CEOs also differed in the time orientation, the skills, and attitude towards the corporation, and this determined their overall performance at the corporation.

The human resource policies in the corporation were also of focus in the period that is studied above, and the most apparent of the policies was demonstrated in the hiring and dismissal methods that were employed in the post of the chief executive officers. Some of the practices that are described to be sources of encouragement in the entrepreneurship and can determine the performance of an institution or organization include the management of the human resource policies. As Le Menestrel, Hunter, and Henri-Claude state, the recruitment and selection practices in an organization are important (140). Yahoo is described to be dependent on both internal and external candidates during the hiring process. Although this is in most cases beneficial to an organization, the corporation experienced both success and disappointments due to these practices.

The selection criteria for the CEOs was based on a number of characteristics, and these, though described to be working for the previous work places, did not seem to work for the corporation. For an organization to be successful, it must practice performance appraisal, and this must also involve all the employees (Le Menestrel, Hunter, and Henri-Claude 141). Some of the theorists agree that organizations should engage in balanced individual-group orientation in the performance appraisal, “with emphasis on the long-term performance of the organization and based on the project life cycle” (Le Menestrel, Hunter, and Henri-Claude 140).

A number of researchers have conducted studies on similar corporations showing how they deal with their human resources and the problems that they face. Some of the researchers grouped the companies that they studied depending on the existing entrepreneur orientation that they displayed (Le Menestrel, Hunter, and Henri-Claude, 142). Several factors were required to do this, and significant differences were found based on them (Le Menestrel, Hunter, and Henri-Claude 142). Yahoo is a representation of the corporations with an entrepreneur orientation that is unique, and that does not recognize the input of the employees and their independence.

In the areas of competition, the corporation was able to advance new methods of enduring competitive dominance over the other institutions. However, in the area of ad and internet search, the organization did not seem to gain in the gap that existed and still exists between it and Google (Le Menestrel, Hunter, and Henri-Claude 142). As Sartain states, an organization should be able to put in place measures that improve on the competitiveness and the market performance. One of the factors that are of importance is the subduing of the competitors. Some of the trends that are evident in the course of the short history presented in the case study include the frequent number of CEOs that the cooperation has had within the short period, and the nature in which the shareholders responded. Some of the other industry trends that affected the cooperation include the emergence of more competitors and introduction of competitive services by their rivals. Google is described as offering a great competition to the organization, and this is of significance in the trends.

The other competitor that emerges as a cause of concern for the organization is Microsoft Corporation, and its interest in the internet and search business as well as the ad sector made competition stiffer. The bids made by the corporation to buy Yahoo and some of its key components only represented the nature of this competition. Each of the decisions that the respective3 made based on the challenges they faced is a representation of the management practices they liked and were ready to practice. The managerial practices and the management framework of the cooperation were also deduced from the management characteristics of the CEOs and the decisions they made.

As Le Menestrel, Hunter, and Henri-Claude state, the management structure of an organization is a major determinant of the success in the various avenues and businesses that it engages in (140). Yahoo’s competitiveness since the year 2001 as discussed above has been variable, but in general, the performance was dismal compared to the era before the bursting of the dot-com bubble (Le Menestrel, Hunter, and Henri-Claude 137). Subsequently, the employees are reported to be on the receiving end of the poor returns experienced, and there are a number of layoffs that took place. As Le Menestrel, Hunter, and Henri-Claude state, another key to the success of an organization is the nature of treatment of her employees, and one can expect poor performance in an organization where the rights of employees are no respected or they are not effectively consulted in decision-making (139).

An organization that is keen on being successful in any sector should ensure that it maintains the best brains in the organization and prevent their departure from within its rank. As Le Menestrel, Hunter, and Henri-Claude posit, one can achieve this by encouraging entrepreneurship and rewarding the innovation experts within the workforce (140). One way of rewarding the employees is the provision of better working conditions and remuneration. Yahoo is reported to have lost very important individuals from within the workforce, and this is related to the management decisions that were undertaken. These were not pleasant for the employees. They, therefore, ended up joining rival companies such as Microsoft Corporation and Google. This could have been avoided if the employees were given a fair hearing and their opinions listened to.

The board members that served in the corporation within the period that the case study covers are said to have contributed to the crisis (Bilal 34) because of their poor decision making that made the organization to get CEOs that were not suited to run the organization. Some of the shareholders are said to have lost confidence in the corporation based on these decisions, and as discussed above, some of them ended up selling their shares in the organization (Jia 65).These factors are said to have led to the dismal performance of the corporation compared to the competitors in similar fields of trade.


A number of recommendations are possible from the case study and on the discussion on the same. In the leadership style, the board members should have ensured a fair process of selecting the CEOs and ensured that he shareholders are allowed to participate in the process. The selection process should also be open, and once the CEOs are within the organization, they should have been allowed to make independent decisions concerning the matters affecting the organization. The executive members selected should also have been chosen from within the organization to ensure that the skills and competencies within it are nurtured.

In the strategic direction, Yahoo Corporation should have entered into an early agreement with Microsoft to counter the growing competitive advantage enjoyed by Google in the ad business. This would have enabled it to be in a better position in the competition, and allowed a fair playing ground. Another strategic direction that the corporation should have taken is to sell off all the shares in Alibaba after the scandal. This would have left it with less expenses. The organizational structure existing in the organization was not a bad one, and the only change that should have taken place is the restructuring of the management board and division of the organizational management into smaller administrative bodies for ease of administration.

The corporate culture may have cost the organization its reputation and profit. In fact, it should have been changed. The mass layoff of employees served to reduce the morale and confidence of the remaining workers and though this may have increased the profits from the organization, the overall effect was negative. The organization should have avoided the mass layoffs. Some of the measures that the top management team to replace Mayer’s team should do include the promotion of a new leadership style where the employees and the clients are the focus of the organization. This would motivate them and ensure positive output. The strategic directions would be to strengthen the parallel dealings that the organization has embarked on, and mainly ensure that the other component businesses are profitable. This would also involve the buying of smaller businesses to increase the market share.

The organizational structure would be altered to ensure that the management controls only a small proportion of the decisions, with the major decisions being made by the shareholders. The corporate culture would remain unchanged, but the human resource practices would have to be reconstituted to ensure that the employees get a say in the decision-making. These recommended changes would ensure that the organization stabilizes and reverts to profitability and efficiency. Some of the other recommendations that are necessary in the corporation include a change in the organizational culture to permit the audit of systems that have failed in the past.

Based on the frequent hiring and firing of CEOs and the Boards, decision to lay off some of the staff, the organization lacks an appropriate organizational culture, one of the factors and issues that prominently presents in the whole process is the competition within the organization and in the leadership. Some of the CEOs that served here in the period discussed are said to have left due to the inability to deliver results, and some of the reasons for the lack of change is the reserved nature of the board members. The organization should, therefore, carry out a change in the membership of the board to include members who demonstrate competence in the fields that Yahoo is in. Most of the board members are not competent in any of the areas that yahoo offers services including the internet and search services. This is a major hindrance, as they do not understand the processes hence becoming a contributing factor to the poor performance during the period.

Some of the other possible changes include the addition of salaries to promote the employees and attract others in the same profession and line as the corporation. As Kuei-Jung et al. state, the performance of the employees is proportional to the motivation they get at the workplace and the most significant source of motivation is the remuneration at the place of work (254). Another thing that needs to be changed is the competitive structure that is in place at the organization. The main competitors, Google and Microsoft seem to have the upper edge in the competition in their respective fields. For Yahoo to maintain its performance and position itself as a force in the market to reckon with, it needs to have the right structures in place, and this means being first in innovation and technology. This will ensure it performs well in the competition.


In conclusion, Yahoo Corporation has had a turbulent history, and the period between the years 2001 to present saw the largest number of CEOs being changed by the board. In the case study, the periods between these years have been divided into eras depending on the CEO that served at the time. The longest serving of them is Terry Semel who served in the years between 2001 and 2007. Ion all the eras, the CEOs were faced with unique challenges that would enable them demonstrate their leadership qualities and the organizational culture that existed.

Among the factors represented in the case study include the key trends that are evident in this period, the key competitors that yahoo faced in the period and how the corporation performed compared to them. In the eras described, the corporation is said to have taken a number of initiatives in a several areas, among them the leadership style, strategic directions, organizational structure, human resource practices, and corporate culture. These have been explored and a description of the significance in the influence on the corporation was also explored. The recommendations made reflected on the changes in these areas that would have made the corporation to be more successful.

Works Cited

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Le Menestrel, Marc, Mark Hunter, and de Bettignies Henri-Claude. “Internet E-Ethics In Confrontation With An Activities’ Agenda: Yahoo! On Trial.”Journal Of Business Ethics 39.1/2 (2002): 135-144. Print.

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