The analysis of NYT Strategy PDF

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Analysis of the New York Times Strategy

By: Emad Ibrahim

Date: January 06, 2015

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Executive Summary

The New York Times “NYT” is a global media organisation based in United States and its business involves newspapers, digital-content businesses, radio stations and other investments. The organisation has been founded and continuously published since September 1851 and has a 2008 revenue of $ 2.9 billion and 9,346 full-time equivalent employees. NYT’s key operations include The New York Times, Boston Globe, and The International Herald Tribune, About.com as well as several non-print media businesses. In addition, NYT operates several websites, sports network in New England (NYT Annual Report, 2008). The NYT has a strategic focus on delivering high-quality journalism that attracts and engages audience across multiple-platforms and that the organisation invests in creating high-quality journalism to strengthen its global presence as a premier news source. According to the NYT Annual Report (2013), the organisation’s properties have been awarded several industry and peer accolades thanks to its high-quality content and trusted brands. This paper demonstrates the analysis and evaluation of the New York Times strategy and it incorporates the following: •

Analysis and discussing on the core competences and capabilities of NYT using the SWOT analysis technique, Value-Based Model and VRIN analysis in order to identify their effectiveness in supporting the NYT’s success.

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The report outlines and discusses the NYT’s strategic options from 2009 to 2013 and evaluate the strategy implemented by the NYT.

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The paper involves evaluation and monitoring of the NYT’s strategy through application of Porter’s Five Forces model and Balanced Scorecard to identify the efficiency and effectiveness of the organisation’s strategy in achieving its desired goals and results.

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Table of Contents

1.

2.

The NYT’s Core Competences and Capabilities .................................................................... 4 1.1.

SWOT Analysis ................................................................................................... 4

1.2.

Resource-Based Model........................................................................................ 6

1.3.

VRIN Analysis .................................................................................................... 8

The Strategic Options available to NYT............................................................................... 11 2.1.

Restructuring Cost-Base .................................................................................... 12

2.2.

Strategic Investments ........................................................................................ 12

2.3.

Charging-for-Content ........................................................................................ 12

2.4.

Rebalancing NYT’s Business Portfolio ............................................................ 12

3.

The New York Times’s Current Strategic Position .............................................................. 13

4.

Evaluating and Monitoring of the NYT’s Strategy............................................................... 17

5.

4.1.

Porter’s Five Forces’ Model .............................................................................. 17

4.2.

Balanced Scorecard ........................................................................................... 20

References ............................................................................................................................. 22

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1. The NYT’s Core Competences and Capabilities The organisation must possess core competencies to leverage its strategy into competitive advantage where the superior returns are the results of gaining and sustaining competitive advantage through strategy (Rothaermel, 2008). SWOT analysis and Resource-Based Model will enable identifying the NYT’s competencies and capabilities that supported its success.

1.1. SWOT Analysis SWOT is an effective strategic technique for evaluation and managing the internal and external factors that impact on the organisation (Business Link, 2009). SWOT analytical tool enables to identify and evaluate NYT’s Internal Capabilities.

•

High-Quality Journalism:

NYT’s core purpose is “to enhance society by creating, collecting and distributing high-quality news, information and entertainment” (Bates, 2009).

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The company is committed to delivering high-quality journalism as the distinguishing feature of NYT’s offerings to engage quality audiences which consequently attract quality advertisers. NYT has capabilities to bring a high-quality content to the Web and its high-quality journalism has been repeatedly recognized, where in 2007, NYT’s media properties have been awarded three Pulitzer prizes and in 2008, NYTimes.com won eight Webby awards that includes “Best News Site” (NYT Annual Report, 2008). •

Strong Market Share:

NYT has a strong market share over its competitors and considered largest local metropolitan newspaper in US and third largest after The Wall Street Journal and USA Today (NYT Annual Report, 2008). NYT is sold in more than 53,000 retail locations worldwide and available for home-delivery in over 340 markets. NYT is number one among 129 top media properties in reaching US opinion leaders (Erdos and Morgan, 2008). •

Wide geographical operations:

The company's operations are geographically diversified where the IHT is sold in approximately 180 countries while The Times, the Globe and other publications sales cover 90 countries (NYT Annual Report, 2009). NYT’s diversified geographical presence is an advantage to mitigate risks that may arise from concentrated business presence, in addition to enabling to implement expansion plans within operating regions as well as nearby regions. •

Name and brand loyalty:

NYT has earned the trust of its readers and audiences thanks to employing professional journalists for verifying the truth, context and accuracy of news and content (NYT Annual Report, 2008). The company sustains strong brand equity of The Times and The Globe newspapers, which provides an advantage over its competitors while attracting and serving a wide customer-base.

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NYT is able to deliver a highly loyal and has repeatedly differentiated its offerings from other competitors through trusted brands and highly-loyal audiences greatly prized by advertisers. •

Strategic Investment Approach:

NYT has focused on strategic investment to develop and expand its business and that the organisation from time to time evaluates its portfolio for the purpose of decisions-making with respect to acquisitions or divestitures of capital assets and different properties. NYT has investments in several joint-ventures that incorporate “49% interest in a Canadian newsprint company, 17.75% interest in NESV, approximately 80% of New England Sports, 49% interest in Metro Boston, 25% ownership interest in quadrantONE, 40% interest in a partnership, Madison, operating a supercalendered paper mill in Maine and 50% of Roush Fenway Racing, a leading NASCAR team” (NYT Annual Report, 2009). •

Research and Development capability:

NYT’s Research and Development is closely aligned with the company’s operating units and operates as shared services across all of its Websites that ensures immediate response and practical work effect. The Research and Development Group enables monitoring changing in media and technology landscape, anticipating consumers’ preference and devise innovative ways of customers’ satisfaction (NYT Annual Report, 2008).

1.2. Resource-Based Model The Resource-Based View provides a model that systematically aids identifying the core competencies of an organisation as this model deems the resources as key superior of organisation performance (Amit and Schoemaker, 1993). Resource-based model enables to identify NYT’s capabilities and provides understanding on how NYT achieved Superior Returns by exploiting its internal resources and capabilities.

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Resources • NYT has High-Quality Journalism. • Ethics in Journalism, Integrity and Credibility. • NYT has the ability to bring a high-quality content to the Web. Capability • NYT’s reach extends nationally and globally. • The organisation has the ability to reach customers across multiple platforms. • NYT distributes news and information over multiple digital platforms, mobile phones and other devices. Competitive Advantage • R&D capability to drive innovation. • Research & Development Ventures.

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•

R&D Group enables monitoring changes in media and technology landscape and anticipating consumers’ preference and devise innovative ways of customers’ satisfaction.

An Attractive Industry • NYT focusses on technological development in order to provide multiple media choices for both advertisers and audiences. • The company exploits new and existing technologies to differentiate its offerings from competitors. Strategy Formulation & Implementation • NYT is using the internet to expand its customer-base and obtain higher market share. • The company has excellent journalism experiences. • NYT invests in digital media startups to support innovation efforts. Superior Returns • The Times iPhone application has had more than one million downloads since its launch in July 2008 (NYT Annual Report, 2008). • NYT has about 75 million monthly page views on mobile due to expansion of its mobile presence and the content became easily accessible (NYT Annual Report, 2009).

1.3. VRIN Analysis VRIN stands for valuable Capabilities (V), Rare Capabilities (R), Inimitable Capabilities (I) and Non-Substitutable Capabilities (N). Barney (1991) argued that when an organisation possesses and exploits valuable, rare, inimitable, and non-substitutable resources and capabilities, it will achieve sustainable competitive advantage and above-average performance. VRIN analysis enables to indicate the characteristics that are strategically important for NYT’s resources to provide competitive advantage and support NYT’s success.

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Valuable Capabilities NYT’s resources are able to bring value to the organisation and thus can be a source of competitive advantage. Rare Capabilities NYT’s resources have to deliver a unique strategy focuses on delivering high-quality journalism which provides competitive advantages in comparison to NYT’s competitors. Inimitable Capabilities NYT’s resources are source of sustained competitive advantages and cannot be copied easily by other competitors and they are costly to be imitated. Non-Sustainable Capabilities NYT’s resources are strategically equivalent valuable resources and can be utilized separately for strategy implementation.

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It is obvious from the conducted analysis that NYT has core competencies and capabilities that supported its success till today as a premier global news source.

The next section of this paper demonstrates the strategic options available to NYT over five years (2009+) that will enable the organisation to overcome the cyclical issues, facing challenging environment within industry and enables NYT to maintain its global presence.

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2. The Strategic Options available to NYT NYT suffered continuous decline in the total revenues comparing with the previous years. The total revenue in 2008 declined by 8% and the organisation made a net loss of $58 million (NYT Annual Report, 2008) as shown in figure-4.

In 2009, NYT has suffered from cyclical issues and environment challenges within the industry with respect to cutbacks in advertisement budgets, declining of print readership, switching of customers to online alternatives and long-term liabilities. NYT needs to implement relevant strategies for five years (2009+) to overcome these issues and strengthen its global presence as a premier news source.

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2.1. Restructuring Cost-Base NYT needs to restructure its cost-base through consolidation of operations, outsourcing of operations, closure of non-core business, process leaning to save costs including lowering manpower costs and implementing digital-content strategy to cope with the changes from print to online alternatives while introducing new services as well as reduction of production cost and newsprint consumption. 2.2. Strategic Investments NYT’s diversified geographical presence could enable to mitigate risks associated with the concentrated business presence and support business expansion nationally and globally. NYT can invest in digital content initiatives to grow online subscription base which will enhance the internet business revenues, in addition to acquisitions of internet businesses to strengthen its liquidity position and in the meantime, the company can obtain sustainable capabilities via merging with giant companies such as Apple and Google. 2.3. Charging-for-Content NYT needs to implement a digital strategy that focusses on expansion of customers’ base to involve younger audiences, rather than the existing customer segment (+65), approaching new sources for revenues including charging-for-content and decreasing advertisement spending. The digital strategy will enable NYT to grow audience online, mobile application and socialmedia which improve business revenues.

2.4. Rebalancing NYT’s Business Portfolio NYT should evaluate its business portfolio on continues basis, make decisions regarding buying or selling capital assets to reduce its costs while enhancing profitability thus improving its financial position. Rebalancing business portfolio will enable managing NYT’s asset portfolio in order to strengthen its core operations while introducing new online services across multiple platforms and divestiture of businesses that constitute cash drain in order to reduce outstanding debt balance including short-term obligations.

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3. The New York Times’s Current Strategic Position NYT planned for consolidations of operations in 2007 and early 2008 as a key area for cost savings, achieving higher earnings and free cash flow. The company lowered the full-time equivalent employees, reduced news coverage by 5%, lowered demand for materials and narrowed the newspapers’ size. The organisation implemented a digital strategy to grow audiences’ online, mobile, social media and reader application products which resulted in internet business revenues of 14% in 2009 versus 12% in 2008 (NYT Annual Report, 2009). NYT was one of the first papers to institute a paywall online as a new source of revenues and offered a new cut-price internet subscription to customers who don't want to access the full contents (The Guardian, 2014). NYT continued with growth of digital subscription base and according to its Annual Report (2013), “the paid subscribers to digital-only subscription packages, e-readers and replica editions totaled approximately 760,000 in 2013 achieving an increase of approximately 19% compared with 2012”. The advertising revenues continue to decline, however total circulation revenues increased in 2012 comparing with 2011 as a result of growth in digital subscription base and advertising revenues in 2013 remained under pressure of ongoing secular trends and economic (NYT Annual Report, 2013)

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NYT’s business, financial condition and prospects were adversely affected since total revenues declined between 2007 and 2013.

NYT began impairing assets in 2006 in a way to generate future cash flow. The total value of assets continue decreasing due to the impairment plan adopted by the company to improve its liquidity position to meet its debts and obligations (NYT Annual report, 2013).

The main problem of NYT’s strategic investment approach is lack of risk management in acquisitions’ decisions since some acquisitions proved not to support NYT’s strategy to

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achieve the expected investment targets, in addition to integration issues of the acquired operations which negatively affected the company’s financial position, for example, acquisition and sale of the Edison, N.J. facility closed in second quarter of 2007 resulting in a net loss of $41.3 million after tax (NYT Annual Report, 2008). The long-term liabilities negatively affected on NYT’s expansion and growth plans which led to impairment several capital assets to improve the liquidity position. However, the company succeeded to reduce its total debts and obligations via implementation of the impairment plan.

Consolidation of operations, divestitures of capital-assets, reduction of staff and compensations adversely affect the company’s capabilities to retain the key talents which may affect the quality of NYT’s offerings.

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In next section of this Report, we will apply Porter’s Five Forces and Balanced Scorecard for evaluation and monitoring of NYT’s strategy to improve the company’s capabilities to cope with the needs for growth and development.

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4. Evaluating and Monitoring of the NYT’s Strategy Strategy evaluation is significant important as it enables identifying the efficiency and effectiveness of organisation’s strategy in achieving its desired goals. Porter’s Five Forces model and Balanced Scorecard will enable to evaluate and monitor NYT’s strategies and improve decision-making which assist the company to continuously improve its capabilities to cope with the needs for growth and development. 4.1. Porter’s Five Forces’ Model Porter’s five forces is an effective technique for strategy formulation via positioning the five forces before strategy implementation as well as enables evaluation and monitoring of these forces that determine industry competition during strategy implementation.

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•

Bargaining Power of Suppliers

Critical Production Inputs As inputs of news production are similar, it is easy to match and mix these inputs and that suppliers have limited bargaining leverage which positively impact NYT and add value. Volume is critical to suppliers Suppliers rely on high volume which gives suppliers low bargaining power in case the producer may reduce the volume and affect the suppliers’ profits and that positively impact NYT. Materials (paper/Ink) Suppliers The secular changes in industry, business closure and low costs of switching business caused reduction in number of suppliers and that bargaining power of suppliers is moderate which positively impact NYT. •

Bargaining Power of Customers

Subscribers Bargaining power of subscribers is high as the customers have multiple ways to obtain news and in the meantime, the switching costs are low. Advertisers Bargaining power of advertisers is high as they have several outlets to advertise their products/materials. Bargaining Leverage NYT provides its customers with high-quality services which deems important for customers and positively affects NYT since these customers end-up with paying more to retain the services. There are large number of customers for both print-news and digital-content while no customer tends to have bargaining leverage which support NYT and add value. •

Intensity of Existing Rivalry

Innovation and Product Differentiation The rivalry among competitors is high where there are several companies for both print ...