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The News Corporation The Key Strategic Environmental, International and Competitive Issues In order to examine the News Corporation activity, it is very important to have the understanding of all strategic environmental, international and competitive issues affecting the corporation and the economy it operated is. The most efficient way to identify the key strategic environmental factors is to conduct a P. E. S. T. E.
L. analysis. So, the key strategic factors are as follows. The News Corporation is associated with the name of Rupert Murdoch, its founder (Marjoribanks, 2000). It underwent the process of evolution from "a single newspaper to a multi-media, multi-platform global media company" (Mcquade, 2004), and this successful evolution evidently reflects the company's adaptability and agility, and the consistent search for innovations, new ideas, better products, and the new ways of adding value to the company, and to serve the customers in the best possible way.
After two years of losses, by 2003, the News Corporations revenues exceeded A$ 1. 8 bn, and the companys assets were stated as A$ 67. 7 bn (Mcquade, 2004), and, obviously, the companys success has been the result of Rupert Murdoch's strategic choices. As it was claimed by Murdoch in his speech of 1988, the company has no detailed strategic plan in the past few decades, and the expansion was plainly the product of Rupert Murdoch's strategic vision (Mcquade, 2004). From the very beginning, the strategic vision was to become a well-integrated international media company with the agility to seize strategic opportunities when they arise, with the foresight to anticipate challenges and with little patience for conventional wisdom" (Mcquade, 2004). Murdoch's strategic vision as well as his management style allowed him to create the efficient reporting system (the Flash), which was efficient, and allowed Murdoch to attain the highest possible level of control on the company's affairs, thus enabling him to make the best possible strategic decisions. The development of the News Corporation originated from 1923, when Murdoch's father has established a local newspaper, The Times, in Australia. By 1980, the News Corporation has created the Australias only national newspaper, two national magazines, and over twenty provincial newspapers (Mcquade, 2004).
The corporation has also acquired interests in television broadcasting, book publishing, film making, and record production. In 1968 Murdoch purchased the UK-based News of the World Organization (Freedman, 1994). In 1980 the company published the Sun newspaper. In 1981, Murdoch "added to the newspaper stable with the acquisition of Times Newspapers Ltd, publishers of The Times and Sunday Times" (Mcquade, 2004). During the 1980 s, these were the major contributors to the corporations profits. In 1973 the News Corporation has purchased the Express publishing company and started its operation in the U.
S. Further expansion involved acquiring the New York Post (1976), the Star magazine, and the New York magazine (1977) (Chomsky, 2003). As Murdoch spent much time on controlling his business, he also looked outside of the business to the regulatory environment that might constrain his activities (Mcquade, 2004). Media industry is the only industry, whose importance required regulation, as it was believed by the governments. Therefore, the corporation was affected by the national regulatory systems. Murdoch's political friendships have bought him influence in this area" (Mcquade, 2004).
Murdoch has managed to acquire Channel 10 in Melbourne in 1979. It was the year when the Australian government amended the regulations concerning the possibility of a foreign ownership of television stations, from a requirement that an owner be resident in Australia to one requiring only that an owner be an Australian citizen" (Mcquade, 2004). These changes allowed Murdoch to acquire Channel 10, although he was no longer resident in Australia (so-called "the Murdoch amendments"). The early 1980 s were the years of the companys accelerated development, growth and expansion.
In November 1994, the News Corporation Limited was reorganized and re domiciled in the United States (Ferguson, 2004). This strategic expansion was focused mainly on traditional product areas, such as magazines and newspapers, and by 1984 the companys revenues were about A$ 2 bn (Mcquade, 2004). Yet, the mid- 1980 s brought the companys many unexpected challenges, as these were the years of the major geographic and product shift. As it was already mentioned, the News Corporations expansion was focused on the U. S.
CEO wanted to make a vertically integrated global media group, with a place in all parts of that industry from newspapers to television, from magazine to film (Mcquade, 2004). The subsequent years were the years of internationalization, as Murdoch has acquired the film company Twentieth Century Fox (in 1984), and has purchased another six television stations of the Metro media broadcasting group in 1985 (Powell, 1991). By doing this, the News Corporation get an access to studios, and the company was now able to make various films and television programs. Apart from that the company got access to a film library of over 2, 000 titles, and a perfect distribution platform for the content available (Mcquade, 2004).
These opportunities allowed Murdoch to establish the Fox Broadcasting Company and make it the fourth national television broadcasted in the U. S. in the late 1980 s. These were the years of successful expansion. The U.
S. internationalization allowed the company to increase its profits, but it has also increased the companys debt levels. In order not to breach private bank loan agreements (total borrowings to exceed new assets by not more than 10 %), and not to conflict the U. S.
law, according to which foreign citizens were not allowed to hold more than 25 % of any company with a broadcasting license, Murdoch became a U. S. citizen in 1985. The News Corporation remained an Australian corporation until 2004, when the company's CEO decided to make it American. In addition, among all international issues, there were changes related to liberalization and deregulation of the national broadcasting oligopolies and monopolies.
These changes also had impact on the News Corporation, as the company had to adopt the most efficient strategy. Similar to any other company, the News Corporation has faces the necessity to think and act environmentally, - in the ways able to protect the environment. Rupert Murdoch, CEO of the News Corporation has entered the fast-growing cadre of corporate leaders pressing for climate action (Little, 2007). In 2007 the News Corporation has announced launching an initiative that aims both to reduce the News Corporation's emissions, and a set of promises to include climate messaging into the content and programming of the corporation's holdings. As it is claimed by Murdoch, the company faced a need not only to revolutionize the climate change message in the companys activities, but rather the need to make it vivid, dramatic and fun, in order to inspire the population to change their behavior concerning the most important environmental issues. According to the promises, the company decided to reduce its carbon footprint 10 % by the year 2012 through the use of renewable energy and the company's energy efficiency efforts (Little, 2007).
The News Corporation plans to become carbon-neutral by 2010, as it plans to purchase emission offsets from such projects like wind farms in India, and some other initiatives. The company considers that although their carbon footprint is extremely high, their target group, the audience comprising of hundreds of millions viewers, is the most favorable ground for change, as the audience's carbon footprint is 10, 000 times higher than the corporation's. These changes in the companys strategy represent the most dramatic changes concerning its environmental policy, as Rupert Murdoch previously was known for his most conservative politics on environmental issues. Rupert Murdoch decided to change his strategy, as the companys advertisers were consistently asking the News Corporation for the ways to reach the audience on this issue. In addition, Murdoch considers that addressing environmental issues along with the companys new climate strategy will held them to reduce energy costs, and help the companys executives to recruit top talent, and provide a chance to deepen their relationships with the viewers, readers, and web users (Little, 2007).
Apart from that, the News Corporation plans new green programming on the motorcycle and car cable network SPEED, the channel dedicated to climate change on MySpace, the new program "Preserve Our Planet" on the National Geographic Channel, and some other initiatives that will allow the company retain its positions on the media market. The News Corporation Strategic Position In 2004 In order to analyze and evaluate The News Corporations strategic position in 2004, it is necessary to explore it both internally (looking at the financial ration, balances shit, debt & equity ratio, profitability ratio, etc. ), and externally (using Porters Five Forces to analyze). So, The News Corporations strategic position in 2004 was rather strong. By 2001 the situation for the News Corporation was weak (Chomsky, 2003). In 2001 the company has reported losses that made up about A$ 746 million dollars due to changes in accounting policy, resulted in a one-off pre-tax charge to profit of A$ 1, 07 m with an associated tax benefit of A$ 421 m in the fiscal year 2001 (Mcquade, 2004).
This change in the accounting policy was dictated by the desire to ensure continued consistency with the generally accepted U. S. accounting principles for producers and distributors of the companies. This kind of change could be a predatory change towards making the company the American one; however, it could also be an attempt to "secure investor confidence in the wake of the raft of corporate scandals in 2001 (Mcquade, 2004). Yet, there was an assumption that the News Corporations executives wanted to facilitate tax efficiency. Due to this assumption the companys publicly disclosed finances were considered with a scepticism.
The company and its subsidiaries paid only 6 % corporate tax within the period of 1994 - 1998. Yet, the company's tax was claimed to be 25. 8 percent of the News Corporation's overall profit on ordinary activities by 2003. In 2002 the News Corporation has faced more significant losses (about A$ 12 bn) (Mcquade, 2004). The major reason for these losses comprised of three factors. First of all, the corporation was forced to write down the case of American footbal, motor racing, and baseball contracts, which were signed when the advertising was more boisterous. The second factor was related to the investments made by the company I a German business Kirsch Media by the News Corporation, and Kirsch PayTV by BSkyB, which were worthless, when the German company became bankrupt.
The third factor was explained by a fall in the share price of two other investments made by the News Corporation (Gemstar TV Guide, and Stream). To a certain extent the price war between the Sun and other newspapers in Great Britain, was also conductive to the reduction of the News Corporation's revenues. Although some of these problems could be called unforeseeable, as it was difficult to foresee the loss of the value of the sports contracts, the investments in German businesses and two other companies were mainly Rupert Murdoch's fault, as it was him, who insisted on the BSkyBs investment against the wishes of the BSkyBs CEO. Yet, after the years of losses the company has managed to obtain profits in 2003. The News Corporation has made another acquisition, as it acquired DirecTV and established Sky Italia, a new Italian venture, thus obtaining two million new subscribers and high profit potential. Murdoch transferred the News Corporation's stake in DirecTV to Fox Entertainment Group along with $ 4. 5 bn of debt and associated interest payments (Mcquade, 2004) and strengthening the companys strategic position by 2004.
In order to explore the News Corporations strategic position externally, it is appropriate to use Porters Five Forces: The Threat Of New Entrants: Low (The media industry is consolidated, and the smaller players on the market are getting bought out by the media giants, such as the News Corp. The desire to establish a new media company will be obviously met by failure, as the company will face difficulties with no partnership with some other company. Finally, it is virtually impossible for a newcomer to start small and develop organically to become a competitor to such media giant, like the News Corporation) Bargaining Power of Buyers: Medium (there are multiple buyers comprising of the advertisers, who purchase time from the media corporation (i. e. product placement or commercials); The buyers also purchase movies, music, magazines and newspapers, books, or services such as internet and cable access. The bargaining power of the buyers, therefore, comes from the entertainment and the customer's expectation of the quality of media products and services rendered.
In case the quality is low, the customers will refuse purchasing what the Corporation offers to them. The advertisers have some power in purchasing airtime for ads, but it is the Corporation that is able to demand what they want to charge for their airtime); Bargaining Power of Suppliers: Low (Although some of the News Corporations suppliers are independent production companies, they comprise the insignificant part. The Corporation has its own production companies that are unable to increase their power (Evans, 1983). The News Corporation has a lot of in-house production, and the lions share of the media content is internally supplied by these companies); Threat of Substitute Products: High (The big media companies usually offer their customers very similar products and services in various categories (i. e, music, television, books, magazines, newspapers, and movies are the substitutes for each other themselves. Yet, the audience has the option to choose the products and services from these categories.
For example, the news television channels have the same headlines, and the newspapers generally have the same, thus also being conductive to the rivalry between the existing media companies); Rivalry Among Existing Companies High (The products offered by corporation are usually easily substitutable, thus leading to the extremely high level of competition among the media companies operating in the market. The media companies compete for the market share to have more possibilities to increase their profits (for example, they can charge more for the advertising on their channels, as these channels are high in the list among the audience). Conclusion and Recommendations There are still a few unresolved issues in Murdoch's empire due to Murdoch's investment strategies, some issues with the newspapers, repeals of cross-ownership restrictions in the media industry, to mention a few. The case study sought to address the key strategic, environmental, international, and competitive issues that have resulted in The News Corporations development. Therefore, these observations lead to the following recommendations. Evidently, the News Corporation should reexamine its investment strategies, especially in relation to its distribution presence in the U.
S. , and to choose a different approach. Next, it may consider the option of tackling the deteriorating economics of its two key businesses network television and newspapers. The News Corporation should reexamine its approach to the recent repeals of cross-ownership restrictions in the industry on the companys competitive position v. other media magnates in order to retain its position in the future as a stock market leader. Bibliography Chenoweth, N. (2001). Virtual Murdoch: Reality wars on the information highway.
London: Server & Warburg. Chomsky, N. (2003). Hegemony or Survival: Americas quest for global dominance. New York: Metropolitan Books. Evans, H. (1983).
Good Times, bad Times. London: Weidenfeld & Nicholson. Ferguson, N. (2004). Colossus: The price of Americas empire. New York: The Penguin Press.
Freedman, C. (1994). Citizen Murdoch: a case study in the paradox of economic efficiency. Kensington: Uni. Of NSW, School of Economics.
Little, A. G. (2007, May 9). Thinking Outside the Fox. Retrieved November 3, 2007, from web Marjoribanks, T. (2000). News Corporation, technology and the workplace: global strategies, local change.
Melbourne: Cambridge University Press. Mcquade. (2004). The News Corporation - Case Study. University of Strathclyde. Powell, D. (1991). News on news: A report on how News Corporation Limited covers itself.
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