University of Chicago
Type of paper: Thesis/Dissertation Chapter
The News Corporation
News Corp, a global media-giant had humble origins in Australia. Its success to such a lofty height can be credited to the vision of Rupert Murdoch. He credits the following Critical Success Factors (CFC’s) to be the driving force of the company:
- Change is welcomed.
- Nothing is accepted at face value. Everything is challenged and then redefined from a new perspective.
- Adaptability and agility
- Constantly seeking to enter new avenues, untapped markets. In short, building the franchise.
- A customer orientation. News Corp. relentlessly seeks to satisfy it’s customers in a new and better way.
- Refusal to rest on laurels. News Corp. consistently seeks to improve itself.
Murdoch’s strategies have at times seemed risky and unsuitable. They have gone against market norms. He has put his fingers into too many pies many a time. But more often than not it has yielded fabulous results.
1.2 The Logic behind News Corp’s Strategic Development
The curiosity behind Murdoch’s logic is that there is no logic. He takes things as they come, grabs new opportunities as they come his way. However expansion is definitely part of his vision. But as he expands, he also wants to retain control.
1.2.1 Measures to retain control
- The “Flash” is a weekly document provided to Murdoch which contains the summary of the operating results of every unit
- Other measures to establish control are detailed telephone briefings and unannounced ‘parachuting-in- trips’ to check in on business activities and management.
1.2.2 Political Maneuvering
Murdoch has been accused of political wrangling to attain his ends. He keeps a check on regulations that may impede his empire and gets them changed if they are proving to be a threat. His infamous relations with the Margaret Thatcher and Tony Blair governments are well known. Like a chess master, Murdoch plays with his set of paws, governments, companies, laws and ultimately, people.
1.3 Development of News Corporation since 1980’s
In 1980, News Corp possessed the national newspaper of Australia, The Australian, two national magazines and over 20 provincial newspapers. Interests in book publishing, television broadcasting, film making, record production, farming and transport interests.
1.3.1 Acquisition of U.K Newspapers
This profitability provided the financial backing for the UK based News of the World Organization in 1969. By 1980, Murdoch also held the Sun, the Times and Sunday Times. These acquisitions were viable because The Sun and the News of the World had the largest circulation in the U.K. These newspapers contributed greatly to News Corp.’s profits.
1.3.2 Expansion into the U.S
In 1984, profits of News Corp. were soaring at a$ 2bn. At this point Murdoch took the smart decision to purchase film company Twentieth Century Fox and 6 television stations of the Metromedia Broadcasting Group. These were the basis of the Fox Broadcasting Company.
I feel that this was Murdoch’s best decision to date and paved the way for later successes because Fox was able to contribute a lot in the form of good programming to Murdoch’s later ventures and saved the company a lot of money in the form of in house programming.
This decision created a debt problem for News Corp. because of a U.S law requiring total borrowings not to exceed total assets by more than 10%. Also another law stated that no foreign citizen could hold more than 25% shares of any broadcasting company because of which Murdoch had to become an American citizen. However the pros far out weigh the cons and acquisition of Fox proved to be a competitive advantage for News Corp.
1.3.3 Acquisitions of publishing companies
In the late 1980’s News Corp. acquired US book Publishers Harper & Row and Triangle Publications and the Australian Herald and Weekly Times. These lead to a debt crisis for Murdoch which was only allayed by Murdoch guaranteeing his own personal wealth. This was a very risky move and could have had disastrous results.
1.3.4 Launch of Sky Television
In spite of debt problems on 5th February 1989, Murdoch launched Sky Television, a direct-to-home (DTH) satellite broadcasting television network. Due to the previous sound acquisitions of Twentieth Century Fox and the restructuring of US subsidiaries, SATV could acquire information and entertainment programming from within the group. Keeping assets in mind in spite of the debt issue, I feel this too was a good decision.
However initially subscription was poor and in spite of cost reductions SKTV was making losses. To overcome this, a merger was required.
1.3.5 Merger with British Satellite Broadcasting (BSB)
This proved to be a profitable merger for Sky because its managers retained all senior positions and News co. held majority of shares. Thus it possessed operational and editorial control of the new company.
However this lead to a severe financial crisis in 1990 and no cash flows were available. Thus debt restructuring and flotation of Australian interests took place. This was not in the interests of the company and showed that they were “going in too deep”.
1.3.6 Launch of Sky Sports Channel
This was a great decision of Murdoch because he was able to tap a hidden, potentially rich market segment – middle aged men interested in sports. Sports were ideal for:
- Pay-per-view based programming and,
Also News Corp established an encryption technology through it’s subsidiary News DataCom which made BSkyB a channel “gatekeeper”. This meant that other companies had to buy this technology from BSkyB or develop it themselves which would be very expensive.
BSkyB was very successful and made the company the most profitable broadcaster in the US. Another triumph for Murdoch!
1.3.7 Development of Fox in the U.S
Another successful strategy was the focus of Fox on regional sports which lead to better advertising opportunities and customization. Later Fox and Tele-Communications Inc., the leading US cable operator established a joint venture to create a global sports television network. This was a profitable alliance because both companies could thus outset costs.
1.3.8 Acquisition of Star TV
Through the purchase of Star TV, News Corp entered the Asia market thus directly increasing its influence. When China passed a paw banning individual ownership of satellite dishes, Star removed BBC World Service from it’s northern Asia channel and also offered the government the opportunity to control satellite programming through it’s decoding technology.
This just goes on to show the adaptability of Murdoch’s strategies to new developments. Acquisition of Star was a profitable venture.
Apart from the debt crisis created by the merger with BSB, I feel that Murdoch’s strategies since the 1980’s fulfill the suitability, feasibility and acceptability criteria on all accounts and his successes to date just go on to prove my claim.
I wish to make the following recommendations to News corp. for the future:
- Murdoch needs to change his management style. He needs to guide senior management at News corp. to be able to function without his constant intervention. He needs to stop, “putting his finger in every pie”.
- I feel that News Corp should now not focus on expansion rather it should work on improving the objectivity and content of its reporting. Critics have accused Murdoch of altering news subtly to suit his ends. He needs to counter this claim.
- Murdoch should declare who the future heir-to-the-throne is soon and then train that person to be able to takeover the firm in the absence of Murdoch. Sans this, the company will fall into disarray without Murdoch.
- News Corp. should also deviate from the dynasty principle. I feel that the future CEO should be one who has the potential to dream, innovate and lead. The qualification required should not be that of son of Rupert Murdoch!
- Lachlan, Murdoch’s elder son should either spin off the New York Post or bring it up to scratch. Just holding on to it because it is Murdoch’s favorite is not a feasible option.
- Employees should be trained to think for themselves and take decisions for the benefit of the company rather than just relying on Murdoch.
- There is a conflict of interest arising in BSkyB caused by CEO James Murdoch’s appointment who is also the younger son of Rupert Murdoch. Shareholders have been previously affected by a conflict of interest when dividends have been suspended to fund some other enterprise. This must be avoided at all costs because the first right to any profits is that of the shareholders.
Strategic alliances , joint ventures , licensing agreements and franchising can be crucial to an organization’s success as long as they are managed effectively .Discuss this using Thornton’s and other case to illustrate your answer .
Strategic alliances, joint ventures, licensing agreements and franchising have always proved to be a great opportunities for companies wishing to built company’s strength, spread cost and risks, achieve economies of scale. It should also be noted that companies strive to work hard in order to effectively manage the strategic alliances, joint ventures and franchising when they engaged in
To achieve success companies should follow these three conditions.
- Asserting strong leadership.
- Accelerating the integration by focusing on the essentials
- Actively managing the cultural dimensions.
Nowadays, we can find many examples of Strategic alliances, joint ventures, licensing
Agreements and franchising some were successful and some were not.
Thornton’s chocolate , Sony Ericson , Strategic Alliance between Northwest Airlines and KLM Royal Dutch Airlines and AutoAlliance International between Ford Motor Company and Mazda are some of the examples of Strategic alliances , joint ventures, licensing agreements and franchising.
If we look into the history of Thornton’s chocolate, we will see that over the years Thornton’s chocolate has increased its number of franchises, introduced new products by contracting with other companies but they have been following some basic rules such has employing a franchise business manager who helps in the setting up the store and over see ongoing operations such as budgeting, product management and merchandising. These activities of Thornton’s chocolate have been contributing in the success of the business.
General Electric is another company that has also been involved in Strategic alliances and joint ventures and because of this it has become one of the biggest company in the world They have products such as water filters ,refrigerators, Energy-Efficient Products and many more . With the ever increasing product portfolio, the company is still effectively operated by taking steps such as downsizing, destaffing, and delayering.
Both the two companies discussed above have one thing in common, they are huge and effective and it is only because of properly managing the various Strategic alliances, joint ventures, licensing agreements and franchising they are involved in.
- Available: http://www.newscorp.com/. Last accessed 27 January 2007.
- News Corp. Company Description. Available: http://www.hoovers.com/news-corp./–ID__41816–/free-co-profile.xhtml. Last accessed 25 January 2007.