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Yahoo Inc.: Competing on the Edge Report

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Updated: Oct 14th, 2021

Executive summary

Comparisons of Yahoo Inc and other web based search engine companies have been made. Yahoo Inc has times been accused of sleeping on the job by failing to utilize the booming of internet technology. As a result, the performance of the company has been wanting over the last five years until it adopted a new business direction as indicated by a new company vision statement. These kinds of strategies demonstrate what is expected of companies competing on the edge. They have to contend with unpredictability in the market usually defined as a borderline between order and chaos.

Introduction

This is definitely one f the most common brand names in the World Wide Web. Since its inception in 1995, the company has registered very impressive growth both in terms of revenue and profits and in company portfolio and product range. In my fulfillment of my module, MGMT20112, I am required to carry out a study of Yahoo Inc about the corporate strategies that the company employs. The company is analyzed from a perspective of competing on the edge. Much of these strategies have been studied in theory in class and therefore this report discusses the corporate strategies in practice at Yahoo Inc and aligns them to the studied corporate strategy models.

In this context, we take Lagnevik (2003) definition of strategy as the business direction adopted by the management in achieving its long and short term objectives as stated in the company’s mission and vision statement.

Industry overview

Internet based companies have increased over the last decade as facilitated by the invention of the World Wide Web and the internet. Companies such as yahoo and Google have become synonymous with the web. Their strong brand names have made it hard to alienate the World Wide Web searching industry from the two main players in the industry. Revenue in this field in predominantly obtained from online advertising due to the wide reach of the web. Technologic growth and product innovativeness in the industry has been the core driver of this industry relying heavily on advertisement for their revenue generation. http://searchenginewatch.com/3630718

As of 2008, the global market search engine market was as shown below

U.S. Core Search Engines by Search Share, July 2008
Core Search Entity June 2008 (%) July 2008 (%) Point Change
Total core search 100.0 100.0 N/A
Google sites 61.5 61.9 0.4
Yahoo sites 20.9 20.5 -0.4
Microsoft sites 9.2 8.9 -0.3
Ask Network 4.3 4.5 0.2
AOL LLC 4.1 4.2 0.1
Notes:
1. Locations include home, work, and universities.
2. Data are based on the five major search engines, including partner searches and cross-channel searches. Searches for mapping, local directory, and user-generated video sites that are not on the core domain of the five search engines are not included in the core search numbers.
Source: comScore, 2008

Adopted from http://searchenginewatch.com/3630718

Company overview

The company was started in 1994 by two students, Jerry Yang and David Filo as a hobby. Headquartered in Sunnyvale, California, it operates in more than 20 markets and regions globally with over 500 million users annually.

Vision statement

After years of restructuring and repositioning in the market to include a variety of services, the company has adopted a new mission statement as “To connect people to their passions, communities, and the world’s knowledge” http://www.searchenginejournal.com/yahoo-googles-mission-statements-do-they-connect/4924/

Mission statement

Lagnevik (2003) defines mission as what an organization views as its role in society or the industry. Yahoo identifies its role as “power and delight our communities of users, advertisers, and publishers – all of us united in creating indispensable experiences, and fueled by trust”. http://yhoo.client.shareholder.com/press/overview.cfm

Values

The website at http://docs.yahoo.com/info/values/ lists the following as the company’s values:

  • Excellence- belief in quality and customer satisfaction
  • Innovation- anticipates the needs and wishes of their market and develops products and services to meet the identified needs and wishes
  • Customer fixation- provide a wide range of quality products and thereby maintain customer loyalty and trust
  • Teamwork- employee empowerment and mutual respect for contribution to the common good
  • Community- impact on community and all stakeholders
  • Fun- dwells on the easy side of life.

Strategic analysis

As an organization with a multinational presence, Yahoo’s scope is wide in terms of the factors that influence or rather determines its position in the market as influenced by a number of factors both internal and external. For internal factors, we assess the company’s organizational culture, company structure, management etc which is best captured by the SWOT analysis. External factors in this case will include political, environmental, legal etc as captured by the PESTLE analysis tool to be discussed later in the paper. Therefore we perform the PEST and SWOT analysis test of Yahoo.

SWOT analysis test

This is an acronym for strengths, weaknesses, opportunities and threats test. Lagnevik (2003) informs us only strengths and weaknesses under this analysis capture the internal environment. Thus we handle strengths and weaknesses as internal environment.

Strengths and weaknesses

Strengths

  • Innovativeness. The company has developed many services such as online games, online personals and other search channels such as Yahoo shopping. This is line with what was introduced in 2004 as creating an internet theme park in the name of Yahoo.
  • Competent management. The fact that Yahoo is able to identify problematic areas in management points to the reason why it out performs its competitors. The hiring of Semel in 2004 as the company’s CEO shows that under the chairmanship of Jerry Yang, the management is able to notice where change is needed most and strategically make the most beneficial option.
  • Wide services range. With the strategy of developing an internet theme park, it has increased product portfolio and thus able to reach a wider market.

The company’s financial strength gives it an upper hand in management and acquisition of resources such as the acquisition of Musicmatch in 2004 for $160 million

Weaknesses

  • The company has been unable to strategically convert its strong brand name into complete dominance in the market.
  • Has failed to horizontally integrate and s form strategic alliances with competing players such as the recent failed negotiations with Microsoft’s MSN. This would lead to increased investor confidence and a larger market share, but the collapse of the talks has ended up hurting the company stocks.
  • Product/service bundling may mean that failure by one product spreads the negative effective to the whole company.

PESTLE analysis

This analysis tool is an acronym for political, economic, socio-cultural, technologic, legal and environmental factors that influence business decisions and have an impact on an a organization’s competitiveness. All these factors comprise the external environment together with opportunities and threats.

Political factors

The company operates in many countries exposing it to varying political climates that have varying degrees of influence on company strategy.

Economic factors

The fact that the company has a wide market favors it due to economies of scale in developing products and services for a large market.

Global economic growth is favoring internet and web accessibility in developing markets.

Socio-cultural

Adoption of the web as a social networking system increases the market reach of yahoo and the industry as a whole.

Fashion trends are delegating some functions to internet based companies such as shopping online and making friends.

Technologic

  • Invention of the broad band connection increases the market share of Yahoo and the industry as a whole
  • Increased availability and access to internet connection in developing and underdeveloped countries is creating new markets for the company

Legal factors

Moral and ethical concerns considerations in web use and access of unauthorized sites

Environmental

Increased environmental awareness has increase the role of companies and expenditure of corporate social responsibilities towards environmental conservation

Opportunities and threats

Opportunities

  • Increased accessibility of the net and the world web around the globe
  • Increased us online advertising by firms
  • High technologic growth rate gives room for product innovation and improvement

Threats

  • The decline in the World Wide Web industry
  • Nature of the market in that it is unpredictable
  • Fierce competition from other players

Strategic fit

With the Yahoo operating in the above environment, the company has managed to adopt strategies that minimize the company’s weaknesses and manages the treats while at the same time making use of opportunities presents and building their growth around their strengths to turn them into key competences that will add on the company’s competitive advantage.

Product innovation has centered on both fun and serious matters as shown by games music and other forms of entertainment. Again, Yahoo is marketing itself as a valid search engine to challenge Google Inc. This goes a long way in helping the company achieve its vision.

Competing on the edge

Competing on the edge can generally be said to be competing in an industry where room for product and service variation is minimal but any variation in product or service has a very high impact on the performance of the organization as a whole http://66.102.9.132/search?q=cache:W4jWbAGxcjsJ:www-rcf.usc.edu/~fulk/545/structured_chaos/structured_chaos.ppt+competing+on+the+edge&hl=en&ct=clnk&cd=3. Lagnevik (2003) says that competing on the edge implies that the involved market is subject to unpredictable change and the ability to keep on changing and inventing products/services adds on a firm’s competitive advantage. He says that the strategies adopted by players in such a market gain on the rather elusive edges by keeping pace with time as dictated by fashion and technology and other externalities and shaping a semi-coherent direction for the organization. The emphasis on semi coherent in this type of market is because market research studies do not give exact figures or show the true picture of the market situation due to time factor. Therefore, competing on the edge refers to making of competitive strategies that are sparing based on available data which is considered ordered and speculated situation that is not definitively expounded hence referred to as chaos. In the search engine industry, the preferences or the consistency in items or information searched do not follow a specific patter hence in chaos as it is not ordered like in other cotemporary markets. http://socrates.berkeley.edu/~iir/cohre/conf-edge.html.

Yahoo and Fable

According to the case study on Yahoo, the growth that the company has achieved in the last several years is attributed to the hiring of Semel who restored the organization from a slacking path to a path of momentous growth. According to the case study on Fable, the idea is seeking something and introducing it into the organization. New items or resources are in the case identified as new employees, new markets and even new customers. From the Yahoo case study, the idea of introducing a Semel into the company was very beneficial. This confirms what the Fable case study shows that introduction of something new in an organization re-energizes the company and puts it back into the growth path again. Semel had no prior knowledge of the World Wide Web industry but Jerry Yung “surprised” stakeholders by bringing someone new with no prior experience in the industry. His appointment according to the Yahoo case study was met with a lot of criticism by stakeholders at a time when the company was losing its market share. Other employees were not even happy with the ideas and management systems introduced by Semel.

With the entry of Semel in Yahoo, no employees are reported to have been sucked but only a bit of reorganization with the stepping down of Filo as president. This is another similarity with the Fable case. In the Fable case, a new employee of products in added on top of the existing one with no major product or services being scraped. New services added help in making the older services even look more attractive. Semel was added to Yahoo on top of existing employees who in turn added other services into the organization without discarding the existing products and services. He went on and added music downloading and other online personals to the already existing product/service portfolio at Yahoo. The result was that the company registered impressive. In actual sense we can say that Semel aligned Yahoo’s business with emerging market opportunities the way Colley, Jacqueline, and Hardie, (2004) propose.

The Yahoo case does not fit well with the case of Midas. This is because Midas’ model proposes the use of experienced staff in providing continuity between past successful strategies in certain projects and future projects where success is crucial. In the Yahoo case, growth and specifically growth of 15% in Sunnyvale was mainly attributed to the strategies adopted by Semel as there is no reference made of employees existing before Semel’s entry.

References

  1. Colley, J., Jacqueline, L. and Hardie, R. (2004) Corporate strategy, (New York, MaGraw Hill)
  2. Brown, S. and Eisenhardt, K.(1998), Competing on the Edge: Strategy as Structured Chaos, (New York: Harvard Business School)
  3. Lagnevik, M. (2003), The dynamics of innovation clusters, (London, Edward Elgar)
  4. Lapier, Terrence (1998), Competition, Growth Strategies, and the Globalization of Services, (London, Routledge)
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