Strategic Management, BSkyB: Mission & Operation - Assignment Example

Strategic management relates about efficacy of a corporation in managing a business to sequentially, systematically and reasonably provide direction for business development. This essay will explicate strategic management in relation to the business management of BSkyB Inc., a leading British entertainment industry by using PESTEL and by interrelating Porter’s five point of analysis in mapping its strength, weaknesses, opportunities and strength (SWOT). BSkyB: Mission & Operation Sky, as a leading entertainment industry, aimed of becoming the first choice for entertainment (BSkyB, 2011). Its strategic mission is to provide quality television of high definition by valuing, connecting, and providing exceptional services to 10 million customers through broadband and phone services (BSkyB, 2011) by positively contributing and sustaining the value creation for customers and shareholders alike (BSkyB, 2011). To achieve this aim, Sky chooses distinguished executive boards with competence and quality expertise (BSkyB, 2011). As an infotainment industry, it provides distinctive HD programs for television using Sky+HD, Sky+, Sky HD, Sky Box, Remote Controls, 3D, Multiroom and Sky Anytime+. These programs are also available via Sky Mobile Tv, Sky Player, and Sky Player on your Xbox (BSkyB, 2011). Through broadband, customers can connect games console, informed on new set up, addresses website and slow connection problems (BSkyB, 2011). SkyTalk improve communication and access for troubleshooting. For its online services, BSkyB have also engineered its online service such as news, reports, chat, community, email, games, photos and ticker (BSkyB, 2011). Customers currently pay services through online (BSkyB, 2011). A customer forum is also built online to bridge concerns. Other Sky sites are Sky Movies, Sky News and Sky sports. the Sky Network developed programs that encompassed arts; embraced environmentalism in its Bigger Picture project; write news, and avail excellent movies, ignition series and games as well (BSkyB, 2011). Customers can shop online whilst earning rewards as part of the incentives. In asserting competitive differential, Sky has its security center, intellectual and patent rights, and developed its complaints code (BSkyB, 2011). These days Sky platform owned more than 500 channels on Sky platform offering various genres of distinct programmes for viewers to satisfy different tastes and interests of people. With the development of broadband and home phone services, choices for more infotainment programs became unlimited (BSkyB, 2011). Sky has a total customer base of 9.9 million from UK and Ireland. It also improved its TV experience. In 2010, HD customers reached 2.95 million. Sky has launched the HD versions of Sky News, ITV1, E4, Syfy, Sky Sports 4, Sky Movies Indie and Hallmark Channel (BSkyB, 2011). Thus, summing it up, they have reached a total of 42 HD channels. And it’s still improving. Part of its effort to improve its value and reliability, Sky has reached opened its online gateway for customers too via Sky Broadband with added feature of Sky Talk that help connect people from distant places (BSkyB, 2011). Subscribers enjoyed unlimited downloads speeds up to 20Mb for £7.50 a month. For moderate internet users, Sky offer free 20Mb broadband and calls service with a monthly usage allowance of 2GB (BSkyB, 2011). With this development, about 1:5 of its customers prefer Sky for broadband and home phone services. Subscriber increased to about 36% compared to last year (BSkyB, 2011). Sky claimed as sensitive to family-based customers and they wanted to fuel passions on infotainment by investing about £1.9 billion in programming to support channels including that of History Channel, Discovery, National Geographic and UKTV (BSkyB, 2011). It commits to produce UK drama, and some adaptations that were acclaimed by media reports; dances to uncover UK’s talents with audition covering 14 cities; as well as shows relating to documentary, sports, and comedy (BSkyB, 2011). It also host US shows; done televised debates of party politics via Sky News to educate electorates about their leaders and encourage them to take part in live analysis (BSkyB, 2011). Sky has also made a business journalism that will discuss British economy (BSkyB, 2011). Sky Movies on the other hand offer 450 different movies per week in 11 channels which cover all genre from blockbusters to cult indie cinema (BSkyB, 2011). In 2010, Sky Movies showed best movies produced by Tom Hanks and Steven Spielberg (BSkyB, 2011). Sky Anytime also provide the most recent while broadband TV service, Sky Player, provide more than 500 movies to watch (BSkyB, 2011). Sky Arts meanwhile highlighted in its four channels relating to artistic passion such as music, ballet, song writing, opera, drama, and theatre (BSkyB, 2011). These new programs rendered Sky Arts an innovation award in a Broadcasting Press Guild Awards and the specialist channel of the year award at the Broadcast Digital Awards (BSkyB, 2011). For sports enthusiasts, Sky aimed to provide depth of high-quality and innovative coverage for fans of football, cricket, rugby, golf and other sports, including schools athletics, womens cricket, angling and water polo (BSkyB, 2011). A website skysports.com was also launched online which hit 17.5 million users (BSkyB, 2011). The site has an added Sky Sports iPhone app as interactive window for score and sports updates (BSkyB, 2011). This technological innovation cost £500 million to build Europes leading HD service and 3D TV or Sky 3D services (BSkyB, 2011). Living up to its promise as a platform for innovation, the Sky+HD box will also provide access to our new video-on-demand service, Anytime+, thanks to its built-in broadband connectivity (BSkyB, 2011). Launching later this year, Anytime+ will offer thousands of hours of entertainment, documentaries, movies, comedy, drama and the arts - all available to download direct to the Sky+HD box for viewing on-demand (BSkyB, 2011). As part of its advocacies, Sky limit travels, use energy efficiently and adapts to renewable energy (BSkyB, 2011). They targeted to reduce CO2 emissions (tonnes/£m turnover) at 25% by 2020 and by making their buildings 20% more energy efficient (BSkyB, 2011). Sky also supports sports activities for youths to positively change lives. In its business management, Sky have achieve a relatively good level of growth based in its revenue, operating profit, adjusted earnings per share and adjusted cash flows (BSkyB, 2011). Sky developed 10 environmental KPIs. They have reached a customer base of 9.860 million covering residential and commercial direct-to-home (DTH). Its churn has achieved 10.3% DTH customers who reinstated their subscription (BSkyB, 2011). Its Sky+ HD Penetration reached 30% or an added customer of 1.6 million (BSkyB, 2011). Recently, there are 21% from 16% total DTH customers taking any of our TV products and both a Sky Broadband and a Sky Talk product, which means that the company has achieved a high level of customer loyalty (BSkyB, 2011). Sky’s Average Revenue Per User (ARPU) reached £508 while its adjusted operating profit achieved £ 855 in 2010. Sky also reported that its adjusted profit after tax pegged at 31.1%p + 20% (BSkyB, 2011). Its adjusted free cash flow or cash generated from operations reached £626 million in 2010. Its total shareholder return also increased from 30.9% to 41% (BSkyB, 2011). PESTLE Analysis PESTLE analysis means political, economic, social /cultural trend, technological trends, legal and environmental factors. It is used as business environmental scan to know the external macro environment that is influencing business operations (Mindtools, 2011). PESTLE Factor DESCRIPTIONS Political The Government has recognized the media and entertainment industry as the fourth estate that is fundamentally supported with constitutional rights to freedom of expressions, freedom of information and freedom to enhance and uphold national culture. This business is helpful for popularization, preservation of arts and culture. Economic Sky platform possessed more than 500 channels on the Sky platform offering various genres of distinct programmes. It achieved level of growth based on revenue, operating profit, adjusted earnings per share and adjusted cash flows. Sky developed 10 environmental KPIs. They have reached a customer base of 9.860 million covering residential and commercial direct-to-home (DTH). Their churns have achieved 10.3% DTH customers who reinstated their subscription. Its Sky+ HD Penetration reached 30% or an added customer of 1.6 million. Recently, there are 21% from 16% total DTH customers taking any of our TV products and both a Sky Broadband and a Sky Talk product, which means that the company achieved a high level of customer loyalty. Sky’s Average Revenue Per User (ARPU) reached £508 while its adjusted operating profit achieved £ 855 in 2010. Sky also reported that its adjusted profit after tax pegged at 31.1%p + 20%. Its adjusted free cash flow or cash generated from operations reached £626 million in 2010. Its total shareholder return also increased from 30.9% to 41%. The company is susceptible to fluctuations forex exchange rates and underwenr budget cut operational spending. Social Recently, people is currently adaptive of technological change and are controlling their choices of shows and reports. They are currently users of HD, broadband and online forms in accessing shows and infotainment for knowledge accumulation and ure leisure. Sky increased their number of channels by showing distinct movies, tv shows and programs. Technological Information technology will likely increase its sales. There is also growing awareness on the use of technology for research, communication, social networking, linkaging and leisure. Sky launched the HD versions of Sky News, ITV1, E4, Syfy, Sky Sports 4, Sky Movies Indie and Hallmark Channel. It has reached a total of 42 HD channels. Legal The company will observe commercial laws, business laws, labor laws, forex trading risk management, environmental laws, and on policies relating to global expansion and trading. The company must also observe the National Minimum Wage law, taxation and other related regulatory permits. Environment In observance to climate change and environmental concern They targeted to reduce CO2 emissions (tonnes/£m turnover) at 25% by 2020 and by making their buildings 20% more energy efficient. They also campaign for climate change, join with WWF and the State Government of Acre, Brazil in environmentalism-- helping protect three million hectares of rainforest. Moreover, Sky supports sports activities for youths to help them achieve positive change in life. This is also in consonance to policies legislated by governments relating to environmental protection and youths empowerment. Pointer’s Five Forces of Analysis and SWOT analysis This analysis help analyze the competitive leverage of the Sky company. It’s a tool that is compatible with PESTLE and SWOT analysis to help strategize the option of the company to distinguish the opportunities and strengths (BusinessBalls, 2011) This can be gleaned in a figure shown below: Source: Porter, 1980. Supplier bargaining power is perceived high when market is dominated by large suppliers and there is absence of definitive input. In case suppliers customers are fragmented, such meant low bargaining power and the switching cost between suppliers are high. It is also possible that suppliers can undergo merging to benefit more from integration (Recklies, 2001). Positive integration gives economies of scale for supplier. On one hand, the buying industry hinder supplying industry in their development by non-acceptance of new product and buying industry has no low barriers to entry (p. 2). As such, buying industry face high pressure on margins from suppliers and the buyer’s relation with suppliers may decrease strategic options for the company (p. 2). Recklies (2001) explicated that customers’ bargaining power can compel demands on margins and volumes. Bargaining power is perceived high whenever there is concentration of buyers, supplying industry comprises large number of small operators and supplying company function with high fixed costs (p. 2). Customers with low margins are price sensitive and can potentially produce the product themselves (p. 3). Meanwhile, the threat of new entrants is possible due to competition. Entrant companies can change the business climate that may affect market shares, prices and customer loyalty, hence cause adjustments for players (p. 3). Such threat is dependent on economies of scale, investments and cost advantages of players based on curve effects of operation with depreciated assets. Customers’ loyalty to brand and protection of patents or licenses proved as protection against entrant’s threat. Threat to substitute happens when alternative products with cheaper fees are of better performance, thus attract significant figure of the market and reduce the sales (p. 4). Threat to substitute is determined by customer’s loyalty to brand, great relationships, switching costs, relative price for performance and the current trends (p. 4). Competitive rivalry happens when there is intensified competition that may affect prices, margins, and level of profitability. Competition is high when number of players increase, adopt similar strategies, low market growth rates and barriers fro exit are high SWOT Analysis, on the other hand means Strengths, Weaknesses, Opportunities and the Threats a business may confront. It helped analyze conditions in competitive market (Mindtools, 2011). It helps find opportunities and craft strategies where a company is threatened and held vulnerable (Mindtools, 2011). SWOT will look into the advantages, presents options where to improve, identify opportunities for improvement. The table below will explicate BSkyB using Porter’s five forces analysis that is translated in a SWOT instrument. SWOT TOOLS DESCRIPTION Strength Sky has clear vision, mission and goals. It has its blueprint of action. It has investors and loyal customers. Sky adapted new technology in infotainment production It advocated for climate change and therefore makes its business likable. It was variety of channels and is meeting the variety of choices of its customers. BSkyB defined its market dominance. It reduced its bargaining power by excellently doing its supply chain management, developed increasing dependency and loyalty of customers to their products, excellent knowledge on accounting on supplier’s costs and methods, providing rewards and value to loyal customers, and cut power intermediaries by building direct communication with customers through its online services. SkyB has developed its distinct brand image through intellectual property rights and increase its scales of operations. It has direct relations with suppliers and distributors and has strong allies. Weaknesses There were infotainment program that has no advertisements. It has to face economic and political pressures. It has high operating costs with variegated channels to maintain and fees for artists of caliber are expensive. Managing human resources entails serious concern on performance management and periodic conduct of appraisal to monitor performance progress. Retaliatory tactics to those who are infringing its rights, may mean legal actions that are costly. The company may resort to buy out competition and need to disperse forces to focus on different programs and segments. Opportunities Being owner of an industry, it can earn a lot for advertisement, marketing and in producing shows. It can educate electorates during election period by airing programs relating to political debates of contenders. Environmental and youth empowerment campaign is drawing customers’ supports and therefore increasing its advertisement and marketing rates as well as its customer loyalty rates. Advancement of technology can save operating costs and makes its shows more appealing to customers. It has also developed its online sites, thus making its presence more felt worldwide for venture opportunities. People are sensitive to changing lifestyles, social patterns and technological advancement. Threats It has to compete with other existing tv, movie and infotainment industries. Fluctuation of forex exchange rate can affect its economic capabilities. Economic uncertainty poise problems to operating costs. Technological damages and repairs needs to be seriously done overtime. Conclusion Sky must fundamentally bank on its vision, mission and goals as well as on excellent blueprint of action. With defined market dominance, BSkyB must reduced its bargaining power by excellently doing its supply chain management, further increase dependency and loyalty of customers to their products, maximize excellent knowledge on accounting on supplier’s costs and methods, providing rewards and value to loyal customers, and cut power intermediaries by building direct communication with customers through its online services. The SWOT, 5Pointers and Pestle analyses are indeed helpful instrument to for business performance appraisals and helpful as an input in business planning (Ilgen & Feldman, 1983) It helped monitor developments of corporations based on standards and by systematically evaluating expectations and objectives and delegation of responsibilities and tasks (Ilgen & Feldman, 1983). It also help strategize the company contextualized on macro and micro-economic conditions and to encourage the company to sustain its performance appraisals review to assess its motivation, attitude and behavioral development despite challenges to attune these to corporate aims, and to develop positive relationships between management and staff (Ilgen & Feldman, 1983). Corporate managers should decide the extent accountabilities are reflected in job responsibilities because this is central in performance appraisals. Following those findings, Sky must endeavor to sustain its positive contribution to infotainment industry and must address all issues and concerns accordingly specially those weaknesses and threats. It must improve its operational expenses and financial transactions to ensure that investments will not go into wastes SkyB has developed its distinct brand image through intellectual property rights and increase its scales of operations. It has direct relations with suppliers and distributors and has strong allies to sustain profitability. It must sustain its positive growth in performance and strive more for distinction and leverage. As an instrument for communication, it must educate broadly its customers not only in culture and arts but also in economic and politics. Following its strong network, BSkyB enhance the effectiveness of the company in its marketing and in drawing more customers. It will boost its reputation and market value. Competitive pricing of their services as infotainment industry keep them above from rival companies, thus boosting their market leadership. The company’s marketing strategy showed profitability as one of its major strength coupled with quality machinery and performance of employees based on standard. Thus, the leverage of company base. The company may have its own operational, extensive and expensive operation, but all these can be improved better to meet objectives. 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