Global Media Industry - Term Paper Example

A Management Report on a Global Media Industry Executive Summary Sky is a leading name in global media industry. They have acquired around 20 years of experience and expertise in the media industry. Sky has achieved success by offering services and products keeping customers viewpoint as a top priority. They have also been able to achieve customer trust in UK by their sustained commitment towards environment, arts, and sports. They have also succeeded in making continuous progress in their industry by providing new service offerings such as Sky + HD, Sky Talk, Broadband services. They have also been able to offer varied assortment of channels in their product offerings. Sky has recently merged with News Corporation which has enabled them to gain financial resources to look for newer business ventures. Their service offering caters to providing sports programs have gained customer choice and preferences. Sky has made conscious effort to train and reward their valuable human resources by providing them needed support. Sky as an organisation has got genuine growth and development opportunities in future. Table of Contents Executive Summary 1 Table of Contents 2 Introduction 3 External Analysis 4 Porters Five force Model 5 SWOT Analysis 8 Macro level 11 Internal Analysis 13 Conclusion 14 Recommendations 15 References 17 Bibliography 20 Introduction The Sky Television and the British Satellite Broadcasting is one of the major players in global media industry. They are operating in the industry for more than 20 years. The company commenced its operation more than 20 years ago with a bunch of powerful ideas (BSkyB, 2009). The headquarters of BSkyB are in Osterley, London and the maximum number of Sky employees are concentrated in UK are located in Scotland. The company has presently over 500 channels in their assortment. There services are varied in content and are spread across genres such as history, arts, religion, and wildlife. They also broadcast latest movies, sports, news programs. They have innovated with Sky + technology which provide customers control as well as flexibility. They have also introduced HD (High Definition) features in their broadcast. Sky has been the chosen broadcaster for around 9.4 million customers. Around 1 in three families in United Kingdom and Ireland prefer Sky. Sky has established itself as a valuable part of day to day life for around 10 million homes (BSkyB, 2009). Sky looks for connecting people with each other, entertain, inspire and excite customers with their high quality content. Sky always likes to keep in mind that Sky is basically a choice; therefore they put customers and their interests at top most priority. They also try to work hard to achieve their trust (BSkyB, 2010). Sky has achieved success by providing affordable products and also exceptional service to the customers. They also are committed towards doing their share for development of community. The company follows a motto of ‘we believe in better’. Sky was the first customer of Astra satellite when it first began its launching of Astra1A in 1989 and this helped Sky to expand its services from 1991 onwards. Also soon after, Sky moved to digital services which had the capacity to hold hundreds of radio channels and television channels. Sky as an organisation though places their customers at a top priority position but they equally seek to achieve operational efficiency. These are attained by lower costs in the supply chain of the company and also by proper administrative functioning. These have helped Sky to reinvest in the specific areas related to customer value addition like customer service, high quality content, and Sky +HD. Sky also recognise the need for doing a responsible business which enables them to achieve sustainable and long term success. Sky as an organisation makes a growing and positive contribution towards the life in United Kingdom and Ireland. They like to continue their success by investing in their reputation and in their brands. The human resources of Sky have contributed significantly to their growth by providing energy, creativity, and commitment (BSkyB, 2009). External Analysis The external analysis of the company or any industry is based upon certain variables. The variables are the policies of the management, the customers, the suppliers, the shareholders, the competitors, the marketing intermediaries and the employees. In this paper, Sky is taken as the base media company along with Virgin Media and BT Media as its main competitors. In the Micro level analysis the variables studied will include the marketing intermediaries, the companies, suppliers and also customers. The global media industry is a competitive industry. Therefore to maintain a sustainable position in this industry Sky has to keep strong outlook of the external factors associated with their business such as the companies and the market on a whole, marketing intermediaries i.e. for Sky it can be combined with customers, and suppliers. A collaborative and coherent relationship between these factors can go a long way in ensuring a sustainable growth in the industry. Sky brings in for their customers a wide spectrum of products which are generally targeted at meeting the communications and entertainment needs of the entire family. Porters Five force Model Porter’s five forces model is very important tool for the management of an organisation to analyse and recognise the important factors associated with the business. This analysis aids the organisation to judge their present condition with respect to the other competitors and also helps them to improve upon their existing planning and business model. In the Porter’s five force model there are five different and very important factors which are analysed. The Bargaining Power of Customers (Buyers) Sky is a leading name in the global media industry. Their primary products and services mainly cater to the needs of the customers. When there are huge numbers of consumer willing to purchase in large quantities then the bargaining power of the consumer increases. In the media and broadcasting industry the bargaining power of customers is high. Switching cost of buyers is quite low as the products that Sky mainly deals with are the television channels. Therefore it requires Sky to provide high degree of customer satisfaction in their programs and shows to attract consumers. The end user of any product is the customers so the consumers play a very important role for the company as because the performance of the company is judged by the number of consumers the more the number of consumer higher is the revenue. In this era of globalization and consumerism, Sky needs to take adequate measures so that bargaining powers of the consumers are kept low and it is the company who can decide over the programs. The Bargaining Power of Suppliers The bargaining power of suppliers in case of Sky is low or moderate. Sky is an established global brand with over 20 years of existence and dominance in their industry. Therefore, Sky as a company commands respect from their suppliers. They are generally not likely to be influenced by one supplier’s demands as their products and services aren’t consigned to only one supplier. Sky has got suppliers from all over United Kingdom. The supplier’s products are mainly undifferentiated. Therefore, the bargaining power of the suppliers is generally lower. The Threat of Substitute Products or Services Threat of substitutes is high for Sky as a company. The media based products that Sky offer generally cater to a varying consumer segment. Therefore, it is not always easy to meet up with the consumers’ tastes and preferences. A company such as the competitors of Sky like Virgin and BT media pose a threat of bringing in substitute offering to the customers which might attract them. A change in trend regarding customers’ choice of viewer ship can also pose a threat to Sky. A company can look to capture a viewer base from Sky by developing service offering which may be liked more by the customers. Sky can look to tackle this scenario by constantly innovating and providing customers with newer products and service offerings. Rivalry against Competitive Firms within the Same Industry Rivalry among the competitors in the global media industry is high. There are number of companies in this industry who provide products and services with almost equal amount of endeavour. The main competitors for Sky are Virgin media and BT. These competitors provide products and also look to derive the similar customer base, and also look to contest directly for the market share. In a recent turn of events in the global media industry News Corporation has brought 61 pc of Sky. This merger will enable Sky to create a ‘world’s leading pay-TV platform’ (Reece, 2010). This will provide new ammunition to Sky in order to compete and also be ahead of competitors. The rivalry among competitors also provide a scenario which leads to price wars, advertising of product offerings, focusing on a particular strategy as described by Porter in his Generic strategies such as cost leadership, differentiation and focus. This competitive rivalry augurs well for the customers as the companies in order to beat the competition try to provide the best for the customers and in turn customers get a value added offering. The Threat of the Entry of New Competitors The threat of new entrants is relatively low or moderate in the industry. The companies like Sky, Virgin, and BT are all leading global players in the industry. They have already established a niche in the industry which is hard for a new entrant to capture. Their consumer segment and also their huge financial capabilities make them provide products and service offerings with relative ease and also they can change more smoothly according to the consumer demand. Economies of scale also provide a barrier to entry for a new entrant. SWOT Analysis Strengths British Sky Broadcasting Group (BskyB) is a leading name in the pay television based broadcast service related providers in United Kingdom and Ireland. They offer programs as well as services through different channels like direct-to-home (DTH), cable operators and also free to air program platform. The company boasts of a large subscriber’s base which helps them earn revenues from advertising and also premium channel related offerings. The other strength area for Sky is its improving operating performance and wide product related portfolio. The improvement in operating performance would benefit Sky by enhancing the investors’ confidence from the group. It also aid in investing in growth based avenues. The wide product portfolio which includes various channels, Sky broadband, telephone service, Sky talk enable them to attract a wider customer base (Datamonitor, 2009). Weaknesses The main weakness area for Sky is their high level of dependence on the United Kingdom market and high leverage. The revenue generation for the company mainly emanates from UK. In recent times, the UK economy is experiencing a slowdown. The industries sources have predicted that the media industry of UK would perform badly with total amount of advertising related spend set to fall by nearly an amount of 6% on a yearly basis. This scenario could impact Sky as they are mainly depended on the UK for their operations. Sky had significant debt related service obligations and high debt in recent years. It could impact their future as due to huge amount of interest related expenses its interest coverage ratio has weakened along with shareholders’ deficit. The high leverage also affects the group by preventing them from making future investments and operating results (Datamonitor, 2009). Opportunities The opportunities for Sky could be the growth of high definition televisions, new service related offerings, and broadcasting rights. By 2013, the HDTV enabled television sets is expected to be around 170 million. The group is relatively well positioned in market to leverage this benefit. It would enable Sky to generate incremental revenue. The new service offerings introduced by the group like their partnership with Universal Music Group to offer digital music service, Sky Player TV, HD set top box, partnership with Microsoft for offering TV by the use of Xbox, Online TV service are all efforts which provides them tremendous opportunity. The acquiring of broadcasting rights of major local and global sporting events like Premier League football, Test, Twenty 20, One day cricket, Golf would help them to increase subscriber base and also advertising revenue (Datamonitor, 2009). Threats Threats for Sky include intense competition, regulations, and also dependence on British Telecom. Sky faces stiff competition in all the markets it operates. The competition in wide spread i.e. from DTH providers, cable operators, terrestrial service providers, internet and telecommunication service providers. There is a possibility of increase in DTT services by 2012 from its existing 75%. Sky faces stiff competition in this aspect from Virgin media, British Telecom, Boxer DTT, and UPC Broadband. This could adversely affect the market share of the group and could also increase the pressure in pricing aspect. Change in any regulation relating to broadcasting segment could affect the group by limiting their ability for competing effectively in their designated market. The Sky group is depended on British Telecom for some of their services such as Sky Talk and broadband connectivity. This dependence could affect the operating performance and service capability of Sky if British Telecom fails in proving timely offering at a reasonable amount of cost (Datamonitor, 2009). Macro level Macro level analysis of Sky can be conducted by using PESTEL analysis. The political aspect is a major issue for Sky. Sky is predominantly depended on the political scenario of United Kingdom. Therefore any change in regulation and planning policy of United Kingdom could force Sky to change their growth plans. The recent governmental change in United Kingdom which has seen ministerial changes could bring in new political challenges for Sky (Firth & Colley, 2006). Economic factors can have a major affect on the growth and progress of Sky. The recent recession led tough economic condition affected Sky. The UK economic scenario has a major influence on the prospects of Sky. Sky’s approach of making careful choices and also spending wisely has helped them to gain new customers along with cost reduction and operational efficiency. The investment in HD of around £130 million would enable them increase their market share in future (Datamonitor, 2009). Socio-cultural support is important in making the product of Sky get its acceptance and build a proper image of the company. The acceptance of the society and cultural influence makes the product a success. The use of internet is world wide known and seen in almost every culture making the product open for global consumers. Societal acceptance of the product and service makes the company success in the market. If the society does not accept the offerings of the company or the image of the company does not prove to be good, the future success and reputation will be in danger (University of Notre Dame, n.d.). Socio culturally, Sky is focused on bringing in positive impact in UK in the areas such as arts, sports and environment. This would enable them to build a more durable and profitable business in the long run. Technologically, Sky has brought in new developments by bringing in Sky + HD, DTH, Broadband facilities and free-to-air services. These technological developments which have made television viewing more enjoyable like 3D TV have enabled Sky to increase profit margin. In future, the HD TV market’s growth prospect would enable Sky to strengthen their position (British Sky Broadcasting Group Plc, 2009). Environmental factors are a key concentrated area for Sky. They are committed towards working for improving the environmental scenario in UK. They seek to contribute towards UK life by undertaking Bigger Picture program. This includes creating healthy environment, making the arts more accessible, and encouraging participation in various sports. They support global ‘Earth Day’ and ‘World Environment Day’ and also try to create environmentally relevant programs. By 2013, Sky would participate in encouraging people to consider cycling by their Skyride program (Datamonitor, 2009). In the legal aspect, the changing and the prevalent regulations and policies in UK affects polices of Sky. Sky as a major player in media industry has a role to obey legal obligations prevent in the country. The terms and conditions, mergers, collaborative business ventures are bounded by legal aspects which generally affects Sky. Internal Analysis Internal environment is a very important part of organisational success. In the internal analysis, the resources of a company i.e. their internal capabilities and core competencies along with their financial, human resources, intellectual or intangible resources, and physical resources can be analysed. The management’s leadership, culture and competency also come into this analysis. The core competency and capability of Sky is their varied offerings, putting the need of customers first, creating choice among consumers, ability to see the bigger picture, making talent people shine. They have been able to provide products which meet the need of the entire family. They have also diversified into providing Broadband, Sky Talk and many other services. From the value chain perspective, the human resources, technological aspects play a vital role for Sky. The need for technology in their offerings is at a maximum level. Therefore, a coherent support of these internal resources is a must. Operations and marketing of new service offerings also are a key factor for Sky. The financial resources enable a company like Sky to pursue their chosen strategy. The recent merger of Sky with News Corporation will increase their capability of increasing financial resources. They have also been able to maintain and increase their consumer base and also resources in the time of recession. It shows their financial capabilities. The human resources are intangible but they are a main contributing factor for the success of Sky. Recognising and developing talent resources have been a major venture for Sky. To train their talent pool they have introduced Sky Leadership Certificate and Diploma. It helps them in change management and team building. They also recognise and reward their human resources by conferring the with annual Team Sky awards. In terms of physical resources, Sky has a wide variety of offerings and services which are provided in collaboration with other partners like BT (British Sky Broadcasting Group Plc, 2009). Conclusion Sky as a major player in the global media industry has a very realistic and growth prospect oriented future opportunity. The global media industry is expected to grow to $1.8 trillion in the year 2010. The broadband households will be around 433 million globally (Metrics 2.0. Business & Market Intelligence, 2010). By 2014, the global media industry is likely to have a valuation of around $873.5 billion at an increase of 15.8% since the year 2009. Sky needs to identify the potential user and buyer of their product. The global media industry was estimated to be $754.5 billion in 2009. It is estimated to cross $ 873.5 billion. The broadcasting segment is found out be the main source of revenue to the media companies (Bharat Book Bureau, 2010). The company needs to find the opportunity in up coming years and need to tap the new use of technology that will enhance their product and ultimately benefit everyone. There is huge opportunity in the international market as the use of internet is growing rapidly. Traditionally, the access of internet was through computers but now it is available from the mobile too. There lays the opportunity as more research and development is required in this segment. The company that would use enhanced technology in making this segment more available and effective may gain advantage over others. The market is growing more in the use of mobile phones and technology, so is the use of internet facility in the device. The HDTV and related value added service will also help Sky to achieve the desired success. Recommendations Sky has been merged with News Corporation in recent past. The merger will provide Sky the necessary financial backing to look for more viable growth strategies (Reece, D., 2010). The new strategies can be developed by following Ansoff’s Product or market expansion matrix. In the market penetration aspect of the matrix, Sky can look to acquire new customers by adding to their offered assortments. They can also look to add more value to the existing customers. The value addition will help Sky to retain the existing customers and attract new customers. Product development can also be introduced in future where Sky can look to offer more products on the line of Sky Talk and HD featured TV offerings to the customers. Market development can also be a viable option as Sky can look to merge with Asian companies and try to develop a market of viewers in the Asian market. Sky has been mainly stagnant in the UK region, therefore this will provide them growth and development prospect. The Diversification in to newer service offerings can also be tried by Sky. They have relatively successfully offered services in the internet, broadband aspects. Therefore, they can further look to diverse in technology based fields as they have acquired competency in developing technology based products. References BSkyB, 2009. Creating Choice. Annual Review 2009. [Online] Available at: http://annualreview.sky.com/what-sky-is-about/creating-choice.htm [Accessed August 23, 2010]. BSkyB, 2009. Overview. Annual review 2009. [Online] Available at: http://annualreview.sky.com/overview.htm [Accessed August 23, 2010]. BSkyB, 2010. Our mission. About Sky. [Online] Available at: http://corporate.sky.com/about_sky/what_we_do/our_mission.htm [Accessed August 23, 2010]. BSkyB, 2009. Chief Executive’s Statement. Annual review 2009. [Online] Available at: http://annualreview.sky.com/ceo-statement.htm [Accessed August 23, 2010]. British Sky Broadcasting Group Plc, 2009. Annual Review 2009. 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