Business-Level and Corporate-Level Strategies
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Analysis of the business-level strategies for Time Warner Company
Business level strategy is the low level strategy applied to a division within an organization or corporation Beard & Dess, 1981.
These strategies are mostly decided by managers in the for the specific division. Business level strategies are focused satisfying the customer preferences and needs for the organization to make profits. Business level strategies give actions that should be taken in order to provide value to the customers, and help the organization to have a competitive advantage over its competitors. These strategies exploit core competencies in individual products. Business level strategy deals with an organization’s position within the industry as compared to its competitors. This strategy is applicable to organizations that have different businesses which are treated as SBU’s ().
The main concept of SBU is identification of the discrete and independent market segments that are served by the organization. Since each market segment has its own distinct environment, there is need to create a SBU for each segment. For Time Warner, the company operates in television, film and publishing. For each of these, the market nature of the market is different in terms of competition, customers, and channels for marketing. Therefore, Time Warner needs to have a different strategy for each of its market segment. This means that each individual SBU will have to set its own strategies.
There are three generic strategies found in are cost leadership, focus, and differentiaton.
1.0 Cost leadership
Cost leadership strategy is aimed at having a lower production cost than the competitors “Parent power,” 1994.
Time Warner having the facilities for producing television series and films using state of the art equipment, and studios has helped the company to lower its production costs thus ensuring that the company can price its products near its competitors. With the reduction in production costs the company earns more gross profits.
Time Warner via Warner Bros. has been a premier in its television series, and this has made it the leading primetime programming supplier to broadcast networks. This differentiation has given the company the competitive edge over its competitors. The company has created the impression in its customer’s minds that they have unique series and programs. Because of this differentiation, the company is able to price its programs higher than its competitors.
Time Warner has always been in the entertainment industry. By remaining focused on this industry, the company is able to serve its customers better. Focusing on one segment has given Time Warner the knowledge and understanding of its market segment and customers, and this is reflected in its products.
The business level strategy that will ensure Time Warner remains successful in the long-term is focus. This is because with continually remaining focused on the entertainment industry and providing its customers with premier programs, the company is guaranteed to succeed. Too much diversification has caused problems to the company in the past.
Analysis of the corporate-level strategies for Time Warner Company
deals with how a company creates value in all its different business units. This strategy addresses a company’s entire strategic scope. This includes the company deciding on the products or markets to compete in, and the geographical areas to operate. Corporate level strategy also handles resource allocation process in all its business units, mergers and acquisitions, and financial structure of the company. These strategic decisions are made by the company’s board of directors. Corporate strategies identify how each individual business unit creates synergy and adds to the company’s overall competitive advantage. The long-term direction for any company is represented by its corporate strategies. It addresses the following acquisition, diversification, and new business formulation.
1.0 Acquisitions and mergers
Since its establishment Time Warner has made strategic acquisitions to strengthen itself in the entertainment industry. For example in January 1989 it finalized the acquisition of Lorimar-Telepictures, which was a television syndication and production firm. This was a strategic acquisition aimed at strengthening the company’s presence in the television industry and giving Time Warner a competitive advantage over its competitors. Time Warner itself was formed out of a merger between Warner Communications and Time Inc. which was announced in March 1989. The acquisition of Turner Broadcasting System relaunched Time Warner back in the cable television industry. This acquisition has seen the company dominate the cable television industry by providing exclusive content to its viewers.
Diversification allows a company to participate in markets that are outside its core business, which might offer potential to the company for some substantial growth. Though diversification is a risky thing for a company, Time Warner ventured into a new business model when it was purchased by AOL. The idea behind this acquisition was for Time Warner to tap into AOL in order to reach deeper into people homes. AOL, on the other hand, would use Time Warner’s cable lines in the delivery of Time Warner branded books, music, magazines, and movies. This diversification did not materialize as AOL was hugely affected by the and the 2001 economic recession. There were many other problems faced with the merger, like lack of synergy in the various Time Warner divisions which were considered independent. Eventually Time Warner had to spin off AOL to be an independent company separate from itself, to ensure that the company (Time Warner) regains its profitability.
3.0 New business formulation
The acquisition of Turner Broadcasting System relaunched Time Warner to the premier and lucrative business of cable television. This new business has ensured that Time Warner has remained successful and continues to create more premier programs which ensure it leads the pack. By using affiliates to deliver its content, Time Warner has also ensured that the content it produces is delivered to many people.
Analysis of the competitive environment
Time Warner’s main competitor is the Walt Disney Company. Walt Disney leads in terms of revenue in the media and entertainment conglomerate, with Time Warner coming second. The two companies have the same target markets for their cable and film productions. Time Warner has remained competitive by providing its viewers with award-winning, and breath taking programs like Boardwalk Empire, True Blood, and Game of Thrones. The market that both companies participate in is very competitive in that the customers do not want to receive the same programming that has always been there, the customers want to see television as an art form.
With continual change in the customers’ expectations and the rising costs involved in producing the television shows and films, the companies need to invest in state of the art studios and reduce their production costs while coming up with breath taking programs and films. The Walt Disney Company has one of the best known and largest studios in Hollywood.
Walt Disney Company has been forced to expand its divisions within the company to ensure that it delivers to its target market. One of the corporate strategies that the company had to implement was the addition of mature content within its programming. This was not typical of its flagship programs which are typically family-oriented. This strategy was aimed at getting a share of the mature content viewership which it had been losing. The change in its corporate strategy was to gain and be able to compete with its closest competitors. Diversifying itself from been just an animation company and owning various television and cable networks, has made Walt Disney very much diversified in the programming it provides to its customers. The company is able to handle viewers in all ages and family settings. To reduce its production costs, the company uses its huge studios for production purposes, and this helps it remain profitable.
Time Warner, on the other hand, leverages on its wide array of premier programming, which is delivered to its customers by the company’s affiliates. The company sells broadcasting rights to its affiliates, and this is what generates most of its income. Having attempted to diversify using AOL and failed, Time Warner has had to stick to what the company knows best.
The company most likely to succeed in the long-term will be Time Warner, this is because it has a wide array of primetime television programming and it has many affiliates who prefer to showcase its programs. Though, it might not have achieved the revenues its competitor has, Time Warner is rising slowly, and it will eventually lead the pack. Ensuring that it listens and delivers the programs that attract viewers, will be its key goal and remaining focused in the entertainment industry like it has done by spinning off divisions that are focused elsewhere will ensure that the company remains focused.
Slow-cycle and fast-cycle markets
In slow-cycle markets, the choice would have been The Walt Disney Company. This is because the company has immense resources in terms of studios and workforce. This makes competitive pressures to not readily penetrate into the company Williams, 1992.
Walt Disney has been well-known and holds a monopoly in the industry, as it is mostly focused in providing family entertainment. This has endeared it to its viewers and ensured that it will always have a place in the industry. Slow cycle markets allow a company to maintain its competitive advantage for a long time. This has been the case with Walt Disney. It launches products and exploits them. By the time there is any counteraction from competitors the company already has another product to launch.
In fast-cycle markets, Time Warner would be the choice. The company has been adapting to the market changes and is delivering innovative programs to entertain its customers. This continuous innovation has ensured that Time Warner is always a step ahead in the industry. The company launches new programs frequently and by the time the rivals counter attack, it uses one of its advantages to maintain its competitive advantage. This continuous leveraging of its competencies and advantages allows the company to launch counterattacks before its advantage get eroded.
Beard, D.W., & Dess, G.G. (1981). Corporate-Level Strategy, Business-Level Strategy, and Firm Performance. The Academy of Management Journal, 24(4), 663-688. doi: 10.2307/256169
Parent power. (1994). [Article]. Economist, 333(7883), 90-90.
Williams, J.R. (1992). How Sustainable is Your Competitive Advantage? California Management Review, 34(3), 29-51. doi: 10.2307/41167422