Tribune Interactive operates Essay Example

TI is part of the Tribune Company and as such most of the information is of a marketing nature. Read about factors you should consider to understand the threat in your environment

Techniques and Models used in analysing the case study:

• BCG Growth / Share Portfolio Matrix
• GE Business Screen Matrix
• Industry Analysis
• Strategic Group Analysis
• SWOT Analysis
• Value Chain / Value Network Analysis
• Competitor Analysis
• Functional Capability and Resource Analysis
• Management Profiling
• Macroenvironmental (STEEP) Analysis
• Experience Curve Analysis
• Growth Vector Analysis
• Product Life Cycle Analysis
• S-Curve (Technology Life Cycle) Analysis

Financial Analysis

Strategic Management Inputs

External Environment

The e-commerce arena is extremely volatile as was borne out by the dot-com collapse.

New products are very easy to imitate. Competitors can appear from anywhere in the value chain. One of TI's biggest threats was the loss of advertising. The way that TI earned revenue with its online newspapers was through advertising, as people are not prepared to pay for online newspapers. This meant that TI had to provide a competitive advantage for its

advertisers.

On the positive side TI was faced with some exciting opportunities. TI was a first mover into the e-commerce arena. New products, new technology and the enhancement of interactive media are being introduced to the industry at a rapid pace.2.1.1 Segments of the General EnvironmentTI was extremely good at identifying trends and changes in the external environment.

The fact that they were a first mover is a good indicator of this. In this fast moving arena there are good indicators that their scanning, monitoring, forecasting and assessing was top class.

The Demographic Segment

TI has analysed their demographics into the following areas: Gender, Age, Race/Ethnicity, Income Categories, Education / Profession and Experience with Internet. This analysis is used as a competitive advantage when sitting down with potential advertisers, describing their market and between them they decide where the advertisements need to be placed.The Sociocultural SegmentMore and more people are using the Internet.

People in the younger age categories use the Internet for accessing information. The Tribune Company faced the position that their newspapers, although performing well, could in the future face a decline in readership as the younger generations turned to the Internet to get their news. There was already evidence of this in the loss of advertisements and inserts in their traditional newspapers. Access to the Internet is also becoming easier, through laptops, PDAs and cellphones. The Technological SegmentTI has constantly been at the forefront of technology use in their industry - starting with the use of Story Server (which at that stage was the leader in content delivery) to the development of their own content delivery system, Oxygen. Development of their own system could be considered a

risky decision as this is outside their core competence.

It is an area where companies should consider outsourcing or using off the shelf (OTS) packages. They have, however, lessened the threat by using technologies that are considered to be de facto standards. Also, a mitigating factor is their partnerships with technology leaders such as BEA. Their use of the XML standard and databases will protect their investment in their development.The Economic SegmentAs the natural resources used in paper production diminish, paper production will become more expensive. The Newspaper industry has been affected by high interest rates, inflation and economic recession.

(Kuben where did you get this info from)The Ecological SegmentTI can claim to be eco-friendly as it does not destroy the environment to get its news to its users.The Political / Legal SegmentThe privacy issue is one of the top most talked about issues within the Internet. By providing services to customers, TI has access to a lot of private information. TI needs to reassure its customers (readers) that it will not abuse this information. As its main income is from advertisers, it needs to make firm statements to its users that it will not sell this information to the advertisers. The possibility of governments imposing higher taxes on the paper industry as natural resources diminish is a distinct possibility.

Industry Environment Analysis

Threat of New EntrantsThe threat of new entrants is extremely high as virtually anyone can provide an online service. The switching costs are extremely low (basically nil).

TI has concentrated on providing high quality content. Since consumers expect to get access to newspaper websites free, a new entrant in the market must also offer this service or

there will be no reason to change from one source to another. TI has the advantage of having reputable brands in its stable. and dDistribution is extensive, via advertising through its other sister companies like the television and the newspapers. This offers users access to wider coverage and more value for money. TI has achieved economies of scale through all its online newspapers using the same technology.

Its financial power and size is an entry barrier to new entrants.Bargaining Power of SuppliersAs the number of suppliers to TI would be low this does not really offer much of a threat. The one possible threat, from technology suppliers, has been circumvented by TI developing its own content servers. This would, however, have been a relatively low threat.

Bargaining Power of BuyersThe true buyers are those that are purchasing advertising slots. This threat is relatively high as it is easy for the advertisers to switch to other content suppliers. Clients to TI have the advantage of extensive audience reach since TI has both local and national websites ands well as cross advertising in the other media of television and newspaper, making it easier for clients to have access to their target audience through one stop shopping.Threat of Substitute ProductsThe actual newspapers and other websites such as Yahoo, etc are not only competitors but also substitutes for the websites of TI.

TI has countered these by using the vast resources at its disposal and offering more services and features on their websites. Where they felt they could not compete effectively, they acquired a company or bought significant shares so that they could use the already specialist and best practices harnessed from

the acquisition. They see this as part of their investment in R;D. In a very strategic partnership, TI now supplies all headlines and news articles for Yahoo. When a user clicks on a headline they are taken to one of TI's sites.

Intensity of Rivalry among CompetitorsThere is evidence of strong rivalry amongst competitors. TI's staff have been poached by other companies. The other competitive forces also indicate a high level of rivalry.Tribune Company's influence spans the country; from Los Angeles to New York, and Miami to Seattle, connecting consumers to Tribune brands every day. With a reach into virtually every major market, competitors will only be able to compete if they can offer a more comprehensive information source or a greater wealth of online media opportunities. What has happened is that, through acquisitions and mergers the market is dominated by three players.

This oligopoly will have reduced the intensity of rivalry amongst competitors, reducing it to the rules followed by most oligopolies.2.2 Internal Environment"Few firms can consistently make the most effective strategic decisions unless they can change rapidly."3 The Tribune Company has a history of innovation so moving into new technologies, products and industries is a natural progression. There is backing and direction from the senior management which always helps in a successful strategy.

TI needed to create value in an extremely competitive and rapidly changing arena, as discussed in the external environment section. "In the current competitive landscape, core competencies, in combination with product-market positions, are the firm's most important sources of competitive advantage."

Resources, Capabilities, Core Competencies and Competitive Advantages

Tangible ResourcesTI, being part of the Tribune Company, has access to major financial resources. Senior management have

committed themselves to the direction and strategy of TI so one can deduce that they backed it with the Tribune Company's financial resources. This is evidenced by the acquisitions and mergers that took place. There is evidence that the organizational resources were structured correctly and this will be discussed further in the Structure and Control section. Its technological resources are evidenced by the development of their state-of-the-art online publishing platform.Intangible ResourcesTI's human resources were of high quality.

TI hired people with skills that were pertinent to the new medium. Owen Youngman, of the Chicagotribune.com, hired reporters whose main responsibility was to produce online content. He termed these people "digital journalists" due to their specific expertise in the new medium.

Further evidence of the high quality was the fact that companies such as Sun Microsystems, AOL and Microsoft were poaching staff from TI. TI's innovation resources were high as they had a history of innovation. Its reputational resources were also high especially given its brand.Capabilities"The glue binding an organization together, capabilities emerge over time through complex interactions among tangible and intangible resources." As TI has good tangible and intangible resources, added with their experience, one can deduce that they have good capabilities.Core CompetenciesThe evaluation of the resources is done by using the VRIO test (Functional Capability and Resource Analysis).

This means that the firm's resources are measured against its value, rareness, inimitability and the capability of the organisation to take advantage of valuable, rare and inimitable resource. After evaluation it seems as if most of the resources are competitively valuable. It would be difficult to find any resource that is rare. The staff and technology, however, are imitable. The

human resources, due to changes and lack of career management, can and have been poached. On the flip side staff can be poached from other companies.

Its investment in a number of online recruitment agencies gives it access to new staff.

Competitive Advantages

Online Experience - TI was an early leader in adopting interactive technology to build compelling and exciting websites that provide value for customers and advertisers alike.

• Established Brands - the newspaper and television websites build on the reputation of the Tribune Company's well know media brands, which have a reputation of being a trusted source of local and national news and information.
• Rich Content - TI draws from the Tribune Company's enormous media network to provide up-to-date, relevant and useful content such as breaking news, entertainment, classifieds etc.
• Promotion Ability - By using the television and publishing assets to enable economies of scale and cost effective marketing of the dot-com brands to local and national audiences.
• Scale and scope - market penetration via the more than 37 branded websites across the country.Value Chain Analysis"Value chain analysis allows the firm to understand the parts of its operations that create value and those that do not." TI essentially provides services to its customers.

The value chain was developed using a manufacturing environment. Although not impossible it is a lot more difficult to use in a service industry. "It is not only difficult to assign and analyze activities in terms of the five generic primary value chain categories, but the resulting chain often obscures rather than illuminates the essence of value creation." In essence we are looking for the value creation when using the value chain. Stabell and Fjeldstad

believed that the value chain was but one of three generic value configurations, the other two being the value shop and the value network."The value network models firms that create value by facilitating a network relationship between their customers using mediating technology.

"This description fits TI very well. The customers are the advertisers and the readers of the online newspapers. The mediating technology is the Internet. The main value creation logic is in the linking of customers. In TI's case this is achieved by the base of readers who are exposed to the advertisements from the advertisers.

TI has 11 daily online newspapers countrywide and its network reaches more than 7 million unique visitors per month. This enables advertisers to reach a huge national audience. The primary activities in a value network are: Network promotion and contract management. This activity involves the inviting of potential customers to join the network, who is allowed to join and the management of contracts. TI cross-advertises its services in the various online newspapers and on television.

Everyone is invited to read the online newspapers. The Tribune Company already had relationships with advertisers and advertising houses so this would have been extended to the online newspapers. Contracts for the online newspapers could have been an extension to existing contracts. TI allows advertisers to target their audience. Service provisioning. This involves the activities with establishing, maintaining and terminating links between customers and billing for value received.

TI has options of demo-targeting and behavioural-targeting for advertisers. The number of ways that TI could bill for value received are many. There are many ways in which TI could, and probably does, measure this value. Evidence of clicks

vs. applications and viable prospects vs.

completed applications are available from one of their success stories, General Motors. Network infrastructure operation. This involves the activities of maintaining and running a physical and information infrastructure. The activities keep the network in an alert status, ready to service customer requests. TI's state-of-the-art online publishing platform allows speedy delivery of breaking news to users across TI's network of news and informational web sites.

The load time of web pages has improved from 13 to 3 seconds. Load time is critical to keeping users online. The extensive database allows access to more news stories and multimedia content to users, producers and editors of news content.As can be seen by applying the value network, major value creation is identified that might otherwise have been missed.

This is not to say that one could not identify this using the value chain.

Strategy Formulation

Business Level Strategy

A firm's customers are the foundation of a successful business-level strategy. Customers are examined using three issues: who, what and how. In evaluating the "who", TI essentially has two diverse sets of customer groups, namely; the users (readers) of the online newspapers and the advertisers.

As to who is the most important, one can say that neither can exist without the other. The advertisers are the ones, however, that pay the bills. The users' needs (the "what") are for quality content. The advertisers' needs are to reach its identified target markets.

The core competencies used ("how") for the users is the quality of the online journalists. Technology and reach are used for the advertisers.TI has adopted a strategy of differentiation. One could say that each online newspaper follows a strategy of focused differentiation.

TI applies the differentiation in content when addressing the needs of its readers.

Through its state-of -the-art platform TI has created a differentiated product. The publishing platform creates standard advertising units and positions, including sponsorship opportunities, enabling advertisers to reach TI's national audience. TI has performed extensive segmentation exercises and understands the demographics of its readers, the affinity groups and the incremental reach when combined with its newspaper print component. TI's technology uses centralised database technology which allows advertisers, in conjunction with TI, to help plan the advertising campaigns.

The fact that this technology and its associated competitive advantage can be imitated should not be of too much concern to TI. As they currently form part of an oligopoly, the very nature of their size means that they should always retain the majority of their advertisers. They do need to constantly monitor their competitors.Applying customer segmentation analysis and Ansoff's Matrix, we can see that TI has applied all four strategies: market penetration, market extension, product development and diversification. TI has numerous internal strengths with a few internal weaknesses. There are numerous environmental opportunities with a number of major environmental threats.

Using SWOT analysis, two strategies emerge; the opportunities with the strengths support an aggressive strategy and the threats with the strengths support a diversification strategy. TI has been extremely aggressive by developing new products, extending its market by acquiring companies, penetrating its markets and diversifying into a number of new products and markets. Using the 3 x 3 Growth Vector Market Analysis shows just how aggressive TI was. We can find examples to fit each of the nine cells.We could be excused for thinking that TI's approach was

a shotgun approach. There is, however, a common thread that runs through all the SBUs.

The majority of them receive their main income from advertising. Even the e-commerce sites have a major element of advertising built into their sites. It is this core competence that is carried throughout TI.TI should use either the BCG Growth / Share Portfolio Matrix or the GE Business Screen Matrix in determining where money should be spent or divesting products which are not providing value.

Competitive Rivalry and Competitive Dynamics

TI faced competition from traditional arenas such as those that it had been in competition with for many decades.

These were the traditional newspapers that had entered the online newspaper arena. These companies had high market commonality and high resource similarity. We can assume that these companies had very similar strengths and weaknesses. Each would probably be a first mover in certain areas. We know that TI considered itself to be a first mover, .so Ccompetitive advantage would have been be short lived as each imitated the other.

TI was, however, facing new competitors from different areas. Owen Youngman of TI stated that TI was facing "competitors who had never been on his radar screen". TI found itself in competition with the likes of Microsoft who had developed a group of web sites called Sidewalk. This was a significant threat to the online ventures of Chicagotribune.com.

TI was also facing competition from the likes of AOL, Yahoo and Exite.TI would have had to perform different competitor analyses in order to understand the competitive behaviour of these "non-traditional" competitors. TI's response was to concentrate on the quality of its content. TI developed Metromix which was far superior

to Microsoft's Sidewalk in terms of content and focus on the Chicago market. TI was uncertain as to whether users would prefer the more comprehensive online newspaper to Yahoo-type short takes on newsworthy events.

They responded to this threat by entering into a joint venture with Yahoo to be the supplier of the Yahoo-type short takes on newsworthy events. Links to TI online newspapers provided the comprehensive cover.TI operates in a fast-cycle market so any competitive advantage can be imitated quickly. They should expect that the development of its state-of-the-art platform, Oxygen, will be imitated and probably improved upon in a relatively short space of time. The one strength that TI has that is a lot more difficult to imitate is their quality of content. This, combined with their brand equity, gives them a sustainable competitive advantage.

Corporate-Level Strategy

"When a firm chooses to diversify beyond a single industry and to operate businesses in several industries, it uses a corporate-level strategy of diversification."The Tribune Company has adopted this approach and so has TI. Although one could argue that TI is in the interactive media industry; the e-commerce, online newspapers, interactive websites and television are all industries on their own. There is, however, enough commonality for the businesses within TI to share resources.

This would mean that TI would adopt either a related constrained diversification strategy or a related linked diversification strategy. There is evidence of both strategies. There are standard departments for TI and, with the introduction of their new technology, all SBUs are using the same technology. In the kind of industries that TI operates in, there would be a lot of knowledge sharing. Achieving both sharing and

corporate relatedness is a rare capability which can create diseconomies of scale.

Ironically, examples of failures are in the same industries that TI operates in.There are a number of examples where TI has diversified. The entrance into the e-commerce arena is an example of diversification. This diversification of new products into new markets shows the diversification strategy according to Ansoff's Original Product-Market Matrix.There are a number of motives for TI diversifying, including sharing activities and transferring core competencies, thereby achieving economies of scope. Probably the biggest motive for TI is that of market power.

In an industry where the threat of new entrants is high, achieving market power helps to erect entry barriers.Applying the Product Life Cycle Analysis we realize that printed news has reached the mature phase in its life cycle. As the population ages and more people become au fait with technology, there is a stark reality that the printed form of news will decline. The product has been repackaged and presented in the electronic form using the latest technology. Content is available online on Personal Computers (PC's), via mobile Personal Digital Assistants (PDA's) and cellphones. Delivering news via PDAs and cellphones will generate a new S-Curve.

The New York Times has already adopted this new strategy and offers it for free to its customers.In the electronic format, the product has re-positioned itself on the product life cycle curve and entered a growth phase.Since the printed form of the product is in its mature phase, PLC analysis theory suggest that "product modification"10 and "modification of the marketing mix" as strategies to sustain sales of printed news in this mature market. We note that TI has successfully

implemented both the aforementioned strategies. The distribution channel, which is one of the 'marketing mix' elements, was changed by being distributed electronically.

Product modification has taken the form of layering, which guides an online reader from one level to the next.Using Experience Curve Analysis we can see where TI has used the causal factors to influence their strategy.

• Learning: Due to the dynamic and extremely competitive e-commerce industry, TI could not afford to grow their competencies through a process of repetitive activities such as editing web content using conventional technologies and processes. The investment in various ventures such as AOL brought the mind set of being a player in the e-commerce arena. AOL's marketing techniques helped Tribune Company's decision making.

The investments in NewMedia companies were seen as their form of R&D and as an avenue for learning how to operate efficiently.

• Specialisation: TI built a team of reporters whose primary responsibility was to produce online content. This was done to reflect the need to change the old ways of gathering, validating and presenting. These "digital journalists" could focus on their tasks and ensure maximum productivity. The online editors, print editors and reporters indicate specialisation in their respective fields of expertise and focus.
• Product design and production process improvements: TI's use of technology and innovation ensured many operational enhancements. TI's implemented a state-of-the-art production technology to its 11 daily newspaper Web sites. Oxygen provided improvements in speed and extensive database content.Technology provided:o readers with access to vast amounts of information in easy to use formatso online paper's ability to provide in-depth coverage of electionso enabled reporters to report in non-traditional innovative ways
• Scale Economies: TI's consolidation of
  

the four newspapers and seventeen television stations and Internet businesses was conducted to enable TI to achieve economies of scale (EOS) and develop new products for the online environment more rapidly. TI achieved EOS by using Oxygen - it automated content sharing among all the sites and created standard advertising placements for national advertisers throughout the network.

Using the Grand Strategy Selection Matrix, one can see that TI's focus was both externally and internally oriented. In order to maximise its strengths, from an external focus, TI has applied horizontal integration. They have acquired

online newspapers such as latimes.com and newsday.

com. To overcome its weaknesses, from an internal focus, TI has diversified into new markets (vertical integration), especially in the e-commerce arena.Using the Model of Grand Strategy Clusters reveals similar results. The industry that TI is in is one of rapid market growth. TI applied strategies from a weak and a strong competitive position.

Looking at the cell for rapid market growth and weak competitive position one sees two strategies that TI have applied: horizontal integration and diversification. From a rapid market growth and strong competitive position, TI has applied vertical integration. The implementation of these strategies has already been discussed above. As far as restructuring is concerned, the R&D function has been centralised. TI implemented a state-of-the-art platform for all of its online newspapers.

This definitely gives it economies of scale as well as creating a competitive advantage.

International Strategy

There is no evidence of an international strategy at present. In the way that Tribune Company has acquired companies there is no reason that, if they were to further diversify into new markets, they could not set their sights on similar companies in an international market.

Cooperative Strategy

Once again using the Grand Strategy Selection Matrix and the Model of Grand Strategy Clusters we will look at the cooperative strategies TI applied.To maximise strengths from an external point, TI used a number of joint ventures. The joint venture with BEA was in order to strengthen their technology. The joint venture with Yahoo is strategic in that Yahoo was seen as a competitor. Yahoo now uses headlines and news stories from TI. Any link to a news story leads the reader to one of TI's

sites.

With a rapid market growth and strong competitive position, TI would have applied the same strategy; joint ventures.