Strategic Management at British Sky Broadcasting Group Plc - Case Study Example

Introduction British Sky Broadcasting Group Plc (BSKYB) was a company formed in the year 1990 after the merger between BSB (formed in 1986) and Sky (formed in 1989). The company operates in the lucrative yet sometimes controversial media industry. It is recognised as UK's leader in the pay services sector. The company has over thirteen thousand employees under its wing. In the year 2007, the company generated approximately four point six billion pounds in revenue and had a net income of about four hundred and ninety nine million pounds. (British Sky Broadcasting Group plc, 2006) Its main areas of operation are the United Kingdom and Ireland. The company has established themselves as a reputable company since they have about eight million, two hundred subscribers in total. On top of this the company also has other indirect customers who access the company's channels through other non conventional services such as IPTV and Tiscali services. The company's CEO is Jeremy Darroch and its Chairman is James Murdoch. This company is listed as one of the top one hundred companies in the London Stock exchange and has had to employ key strategic elements in order to remain at that position. (Bosky, 2007) Task 1 Main elements that comprise the strategic magnet model and how they are interrelated The strategic management model is a guide to the creation of a favourable environment that will facilitate prosperity within the organisation. It is an incorporation of all the key elements affecting the business and directing them towards achievement of the organisation's vision. It should be noted that the strategic management model does not do away with other conventional management techniques like planning, reporting, controlling, budgeting and marketing. Most of the times, it looks at these elements through a larger perspective and finds way of relating them to external factors, organisational abilities and overall aims. (Brown & Weiner, 1985) The strategic management model should not be something done in isolation, an effective model is one that takes account of the fact that some of the stakeholders in the specific organisation need to be incorporated into the process. There should be ample communication between these parties so that the organisation can ensure that they leave no stone unturned in the process. Experts have shown that the strategic management model is not a static tool. It is indeed a continuous process because all the external features and organisational qualities considered change with time. Organisations need to keep changing their strategic management model to keep up with current trends. This will go a long way in ensuring that those specific companies stay competitive in this global economy. On top of this, the strategic management model is something that is unique to a specific organisation. This is because each organisation has its own management style, structure, environment, culture and resources. However, this does not eliminate the fact that there are certain similarities that exist between organisations. There are certain obstacles and key questions that have to be addressed in this process and they happen to be common to all organisations. (Brown et al, 1991) The strategic management model does not deal with the present alone; it mainly dwells with the future. It forecasts certain influential forces in the future and uses those forecasts to act as a guideline for day to day operations. Managers should have the ability to influence members of their organisation to take up all the strategic vision of the organisation. These employees should also have the capacity to implement the recommendations made by their chief executive in their daily operations. The Chief executive should take account the fact that some of the structures and the methods of implementing strategy adopted presently will need to be changed as time progresses. The following are the key elements of the strategic management model Source; Fahey, L. et al (1981): Environmental scanning and forecasting in strategic planning: The state of the art; Long Range Planning, 14 (2), 32-39. External analysis The strategic management model begins with an external analysis because this will act as foundation for changes that need to be made within the organisation. On top of this, an external analysis requires that all members of key functional areas be involved. This is because of they take part it will affect the level of cooperation necessary for implementing other components of the strategic management model. (Coates, 1985) An external analysis will involve examination of all the issues that had occurred in the past, present and even the future. It implies a breakdown of all the political, social, economical, legal and environmental issues that affect the company. Management must then examine what the implications of those factors will be to the organisation. For example, the Marks and Spencer Company conducted an external analysis and realised that their consumers were becoming health conscious; this was the reason why it had to provide low-calorie alternatives for its health conscious consumers. (Mecca & Morrison, 1988) Internal assessment An internal assessment is necessary in the process of determining the features used by the organisation in the past to achieve success. This will also incorporate factors used by the organisation currently and in the future to stay ahead in the industry. First the organisation will need to look at its capacity; that is in terms of program operations and management. It will also need to analyse all available resources and this will include; information, technology, money and human resource available to the company. A review of needs within the organisation both in the present and future need to be conducted. Lastly, there should be identification of drawbacks and strengths that will facilitate utilisation of opportunities presented before the organisations. (Marien, 1991) Strategic direction Strategic direction involves the creation of strategic vision. At this level, the company needs to examine what it wants to accomplish in the future. This must be done against the backdrop of the external analysis and internal assessments done previously. Organisations must be aware that not all the issues identified in the latter two sections can be completed all at once. There is a need to identify the most important ones. The basis for this identification is as follows; 1) Effect the strategic issues will have on the organisation 2) the chances of succeeding while implementing those strategic issues 3) time required to implement those strategic issues (Aguilar, 1967) Items that will take precedence are those ones that meet all the three qualities named above. An example in the real world was the Harley Davidson Company based in the United Sates. This company had been performing very poorly during the eighties and early nineties. But after conducting an internal assessment and external analysis, it realised there was a need to adjust its organisational structure, change its marketing strategy and innovate through technology. These were the key issues included in its 'strategic direction identification'. It marketed itself as an American motorcycle manufacturer and consequently secured that market, it also added new product features to their conventional motorcycles and was able to make the tables turn. It is now one of the most recognised companies in the US as result of its strategic direction. (Aguilar, 1967) Strategic Plans The strategic plan is a documented step by step process that will allow the organisation to implement its strategic direction. A company that comes up with a strategic plan will need to do this over a period of fovea or four years. A successful strategic [plan is one that has the following aspects; It must be based on action and must also be flexible, it must be such that it facilitates the utilisation of the key organisational strengths and alleviates the use of weaknesses present. It must also new align to organisational visions and mission. Lastly, strategic plan must be creative considering all the parts involved in the external and internal analysis. This is because for the organisation to maintain their competitive advantage there is anteed to make sure that they have something exceptional to bring to the market. (Brown & Weiner, 1985) Implementation This is the most practical aspect of the strategic plan; it will involve integrating the strategic plan in the day to day activities carried out by the organisation under study. Consequently, there will be a need to ascertain that leaders constantly manage the implementation process. This will involve distribution of resources towards the achievement of the strategic management model. It will also involve organisational restructuring in order to integrate the strategic plan into it. Managers and leaders must make sure that the daily activities take into account the strategic plan. This means that leaders will be required to remind employees about what their efforts have done towards achievement of organisational goals. They need to be motivated to implement this strategic plan through rewards and other forms of recognition. The strategic plan needs to be a driving force for the given organisation. (Neufeld, 1985) Performance evaluation Performance evaluations are normally done in order top assess whether the strategic plan has generated the desired results. Companies need to create a system of monitoring performance. They will also need to communicate feedback to members of the team. Then a review can be done of the effectiveness of organisational strategy. This is where some adjustments can be made. Performance evaluations need to be done continuously, but there should be an annual evaluation too. (Fahey & Narayanan, 1986) Task 2 Key drivers for change in the organisation within its current strategic environment and why the drivers are important One of the major drivers for change in BSYB is Mark Booth. This is because the company had been going through a dry patch before his tenure. There was a need to inject something new in the company to facilitate an upturn of revenue and income generation. The person who spearheaded this change was Booth. He was instrumental to the company because he ensured that the company incorporated one of the most fundament external factors affecting the media industry at that time; that was incorporation of technology into service provision. There was a need for the company to ensure that it stayed on course - in terms of industrial trends. An external analysis indicated that technology was one of the most important factors that needed to be incorporated into their strategic direction. (Benfari, 1995) Booth was one the pioneers of this strategic plan as he realised that Sky had to change from analogue to digital technology. This was not something that would be achieved overnight as it took the CEO the entire length of his tenure to implement and this was still taken up by his successor. Booth ensured that the company's employees were always in tune with the technological aspect of their technological change. He was keen on the introduction of certain tools such as satellites for achievement of his vision. During his tenure, Booth pushed for the introduction of a new generation of satellites that would help in the transition to technological operations in the company. (Corson, 1990) Another driver for change in the organisation was Tony Ball. He took over from Mark Booth in the year 1999. He shared the strategic focus that Ball had and went about achieving this through the emphasis of technology within the company's operations. He was instrumental in ensuring that the transition to digital operation was completed successfully. He was also vital during the acquisition of Sky digital. Here is a short breakdown of how this company CEO was able to achieve this: The Company acquired a new make of the digital orbital called Astral 2 series. It had been placed at its own unique orbital. Afterwards, there was the addition of other satellites such as Euro bird. The latter satellites were helpful in the establishment of Sky digital. Sky digital had the capability of accommodating hundreds of channels both on radio and television. (BSkyB, 2007) Tony Ball also assisted in the process of acquisitions and mergers. This was part of his strategy after the realisation that the media industry was highly competitive and there was a need to have rights over certain services in the media industry in order to out-compete other players. This was achieved through the acquisition of shareholding rights in Freeview. The company had purchased rights to air certain program through free view. Free view was part of ITV digital; a company that was doing relatively well at his time due to the technological era. On top of this, part of his strategy was to improve service provision through addition of some extra features to their product package. He was able to achieve this by launching the top box. This was a service that can be described as digital recording facility. It was in response to the need for consumers to use digital technologies in their video recording endeavours. Tony Ball was an aggressive member of the company because he kept reminding members of his organisation the importance of sticking to their visions. This aggressiveness paid off by changing the company's profit trends. On top of that, there were increased levels of subscribers. This was because of the aggressive marketing campaigns that Ball spearheaded. The innovative product and service packages were also a great determinant of this profit shift. He also made sure that the company did not just rely on one component for their success. He incorporated all the missing elements into the business. (BSkyB, 2007) James Murdoch was another important driver in Sky's strategic plan and strategic implementation process. He did this through emphasising the need for quality. His efforts led to increased subscriber levels in that the company as they had over seven point five million during his tenure. He saw the need to continuously include product content in order to stay ahead of their competitors. This was seen in the acquisition of the dram series '24'. This was a program acquired from Fox and had been aired on one of their main competitor's channels; BBC. With regard to the product improvement strategy, he introduced the program 'Lost', which was acquired from Buena Vista Company. This was a deal that had taken a lot of negotiation and required a considerable investment of the company's financial resources. The product improvement strategy was to be achieved through digital inclusions. Murdoch pushed for the acquisition of Easy net. The company was expected to aid in Sky's network services. Innovation was also seen when the company introduced certain broadband services that would allow consumers the ability to download movies and sporting programs on theirs personal computers. This CEO ensured that BSKYB had exclusive sporting rights and other channels through purchase of ITV stakes. It held seventeen percent of ITV during his tenure. He ensured that there would be greater free-to-air services provided by the company and this placed the company in a category that was way above the rest. (Shah, 2005) Task 3 3 Key strategic decisions facing the company In order to embrace the global economy, there is a need to consider the possibilities of becoming a global satellite company. The company is quite reputable in the United Kingdom; however with the expansion of the European Union, there are more countries that need to be included in the media industry. (Corson, 1990) Companies operating in this sector need to realise that there are certain factors that must not be ignored when dealing with information services. Besides that, there are also other global companies that are competing with the company. The company needs to embrace some of the benefits of globalisation by expanding its markets to other areas outside the UK and even outside Europe. Some suggestions by the media have been given about the possibilities of a merger between BSkyB and DirecTV. The latter company is a satellite Operations Company found in the United States. The media have also suggested that there may be inclusion of another company called Star TV. By doing this, BSkyB will become a global company through satellite televise. But these are simply suggestions. They have been considered by the company but may take time before implementation. The Company has shown their interests in the global market by bidding for NFL programming; something that is uniquely tailored for the US market. (BSkyB, 2006) The second strategic problem affecting the company is the issue of merging product launches with consumer demand. In the endeavour to continuously stay above the rest, the company has been introducing new product packages. One of this was its High Definition Television service. The company's suppliers for this service were Thomson. They were responsible for delivering the Set Top Boxes necessary for the product launch. However of all the forty thousand subscribers who had requested for the product, about seventeen thousand of these subscribers were let own by the company. It was unable to meet their demand and disappointed them by its failure to install the package. This embarrassment tainted the company's image of prompt delivery. Consumer demand for products should be anticipated and incorporated in service delivery. The company is also faced with the need to sieve out some of its product suppliers as some of them might disappoint them in the future. (Ofcom, 2008) The other strategic aspect facing the company is dealing with its limitations adequately and still remaining ahead of all the others. One of these limitations is the issue of legal regulations. Because BSKYB operates in the United Kingdom, it needs to play by industry regulator Ofcom. Ofcom's purpose is to ensure that there is airplay within the media industry. This challenge was seen in the acquisition of football rights and also in certain mergers the company has been undertaking. Football rights have been one of the major contributor's to BSkyB's success. The company has been broadcasting the British Premier league with much success. However, Ofcom questioned the validity of this monopoly. It claimed that this goes against the rules of competition and this could present future problems for the company if the exclusive football rights are taken away. In line with this, the company's twenty percent ownership of ITV was also questioned by Ofcom and is still subject to scrutiny currently. The company needs to watch out for these legal requirements and plan ahead for them. (BSkyB, 2007) Task 4 Strategic options for change, their benefits and concerns Among the key decisions facing the company is the issue of going global in the future. (Boulding, 1989) There are three options that the company could take to deal with this issue. The first option is that the company could adopt is entering the global economy through joint ventures. A joint venture is a type of market entry strategy that permits development and technology sharing. The main benefit of the latter technique is to get the right political associations that will facilitate favours to be achieved. It is usually appropriate when; resources, market power and size of the associate are small in comparison to the industry leaders. If BSKYB can merge or have a joint venture with any company which is still junior in the US and then enhances its market power, it can be able to meet the needs in that region. The main issues that will need to be sorted out during the discussions of joint venture are; agreement periods, ownership and control, pricing methods, local firm capabilities and technology transfer. (Aguilar, 1967) The second avenue that BSkyB could choose is through Strategic Partnerships. The company could decide to partner with companies that offer complementary products. This could be done by identification of certain viable markets like the US and then identification of a company that provides services similar to that company's but not exactly what the company provides. For example, the company could merge with advertising companies so that it could tap on advertising revenue in that location. (Benfari, 1995) The other avenue available for the company is through foreign direct investment. The company could decide to take its services-as they are-directly to a foreign market without dealing with other local service providers in that country of destination The best route for the company or the recommended method is through joint ventures. This is because when a company partners with another foreign company that has already been in operation in a foreign market, then they will acquire previous clients in that company. They will also have the knowledge and resources necessary to make it in that foreign market without putting in too much effort. Conclusion BSkyB is an ideal example of a company that has succeeded in its field of specialty through utilisation of the strategic management model. The company identified external constraints such as technological demand and a need for product innovation; it made this part of its strategic direction and implemented this plan. Consequently, the company increased its subscribers and increased revenue generation. (Aguilar, 1967) Reference: Aguilar, F. (1967): Scanning the business environment; New York: Macmillan. Benfari, R. (1995): Changing Your Management Style; New York: Lexington Books Boulding, K. (1989): Nature of Power; Sage Publications Inc Brown, A. & Weiner, E. (1985); Supermanaging: How to harness change for personal and organizational success; New York: Mentor Brown, L. et al (1991): Saving the planet: How to shape an environmentally sustainable global economy; New York: W. W. Norton and Co. British Sky Broadcasting Group plc (2006): Results for the twelve months ended 30 June, retrieved from http://library.corporate-ir.net/library/10/104/104016/items/166570/PR_280706.pdf accessed on 19th April 2008 BSkyB (2007): Rupert Murdoch BSkyB Chairman To Step Down; retrieved from http://www.news.sky.com/ accessed on 19th April 2008 Coates, J. (1985): Issues identification and management: The state of the art of methods and techniques; a report done by Electric Power Research Group Corson, W. (1990): Global ecology handbook; Boston: Beacon Press Fahey, L. et al (1981): Environmental scanning and forecasting in strategic planning: The state of the art; Long Range Planning, 14 (2), 32-39. Fahey, L. & Narayanan, V. (1986): Macro environmental analysis for strategic management; New York: West Publishing Company Marien, M. (1991): Scanning: An imperfect activity in an era of fragmentation and uncertainty; Futures Research Quarterly, 7 (3), 82-90. Mecca, T. & Morrison, J. (1988): Pathways to the Future: Linking environmental scanning to strategic management; Community College Review, 15, 4, 35-44 Neufeld, W. (1985): Environmental scanning: Its use in forecasting emerging trends and issues in organizations; Futures Research Quarterly, 1, 39-52 Ofcom (2008): Completed acquisition by British Sky Broadcasting Group PLC of a 17.9% shareholding in ITV PLC; retrieved from http://www.ofcom.org.uk/ accessed on 19th April 2008 Shah, S. (2005): Minister Takes on Murdoch over Sky stake in ITV; The Independent, 2007-02-27 Subject: from admin Status: New Dear there must be the picture in the middle of the essay, but it's corrupt. Can you please upload it once more Thanks in advance, sincerely, Monica Read More